Appendix 4E For personal use only
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Appendix 4E - Page 1 Appendix 4E Preliminary Final Report For the year ended 30 June 2013 Ansell Limited and Subsidiaries ACN 004 085 330 For personal use only
Transcript of Appendix 4E For personal use only
Appendix 4E - Page 1
Appendix 4EPreliminary Final Report
For the year ended 30 June 2013
Ansell Limited and Subsidiaries
ACN 004 085 330
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Appendix 4E - Page 2
Appendix 4EPreliminary Final Report
For the year ended 30 June 2013Ansell Limited and Subsidiaries
ACN 004 085 330
Results for Announcement to the Market% $m
Revenue from ordinary activities up/(down) 10.0% to 1,340.0
Profit from ordinary activities after taxattributable to members up/(down) 5.2% to 136.8
Net profit for the period attributable to members up/(down) 5.2% to 136.8
Dividends (distributions) Franked amount pershare
Dividend 22.0 ¢ Nil
Record date for determining entitlements to the dividend
Net Tangible Asset backing2013 2012
$m $m
Shareholders' Equity attributable to Ansell Limited shareholders 816.6 706.7Less Intangible Assets 583.1 389.6Net Tangible Assets 233.5 317.1
No. Shares No. SharesTotal fully paid ordinary shares on issue (millions) 130.6 130.7Net tangible asset backing per ordinary share $1.79 $2.43
Sales of $1,340.0 million compared to last year's $1,218.3 million.
Net profit attributable to members $136.8 million compared to last year's $130.0 million.
Earnings per share of 104.6¢ compared to last year's 99.1¢.
A dividend of 22.0¢ per share unfranked has been declared payable on 26th September, 2013.
Refer accompanying Press Release for additional commentary.
Amount per share
5th September 2013
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Ansell Limited and SubsidiariesAppendix 4E
Preliminary Final Report for the year ended 30 June 2013
Appendix 4E - Page 3
Compliance statement
1 This report has been prepared in accordance with AASB Standards, other AASB authoritative pronouncementsand Urgent Issues Group Consensus Views or other standards acceptable to ASX.
2 This report, and the accounts upon which the report is based, use the same accounting policies.
3 This report does give a true and fair view of the matters disclosed.
4 This report is based on accounts which have been audited.
5 The entity has a formally constituted audit committee.
Signed: .................................................................................. Date 20 August, 2013.Company Secretary
Name: C M Cameron
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FINANCIAL REPORT 2013
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Report of the Directors This Report by the Directors of Ansell Limited (‘the Company’) is made for the year ended 30 June 2013. The information set out below is to be read in conjunction with the: • Remuneration Report appearing on pages 17 to 36 • Notes 23 and 25 to the financial statements, accompanying this Report. DIRECTORS AND SECRETARY The names and details of each person who has been a Director of the Company during or since the end of the financial year are: • Glenn L L Barnes (Chairman) • Magnus R Nicolin (Managing Director and Chief Executive Officer) • Ronald J S Bell • John A Bevan • L Dale Crandall • W Peter Day • Annie H Lo (appointed 1 January 2013) • Marissa T Peterson • Peter L Barnes (retired 22 October 2012)
Particulars of the qualifications, experience and special responsibilities of each Director, as at the date of this Report, and of their other directorships, are set out on pages 6 and 7. Details of meetings of the Company’s Directors (including meetings of Committees of Directors) and each Director’s attendance are also set out on page 3. The Company Secretary is Craig Cameron, B Bus (Acc), CA, who was appointed to that position in January 2008. Mr Cameron joined the Company in 1984, and has an accounting, finance and tax background. He has held senior positions in the Corporate Head Office, including the position of Group Chief Accountant. PRINCIPAL ACTIVITIES The activities of the Ansell group of companies (‘the Group’) principally involve the development, manufacturing and sourcing, distribution and sale of gloves and protective products in the industrial and medical gloves market, as well as the sexual health and well-being category worldwide. Ansell operates in four main business segments: Medical, Industrial, Specialty Markets and Sexual Wellness. OPERATING AND FINANCIAL REVIEW The Operating and Financial Review for the Group for the financial year is set out on pages 8 to 16, and forms part of this Report. STATE OF AFFAIRS During the year the Company continued to progress the seven strategies that have been identified to accelerate growth and create increased shareholder value. The Operating and Financial Review provides additional information on the Company’s seven growth strategies. Other than set out in the Operating and Financial Review no significant changes occurred in the state of affairs of the Group during the financial year. LIKELY DEVELOPMENTS Likely developments in the operations of the Group are referred to on pages 15 and 16 of this report. In the opinion of the Directors, the disclosure of any further information about likely developments in the operations of the Group has not been included in the report because disclosure of this information would likely result in unreasonable prejudice to the Group.
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SIGNIFICANT EVENTS SINCE BALANCE DATE The Directors are not aware of any significant matters or circumstances that have arisen since the end of the financial year that has affected or may affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. DIVIDENDS AND SHARE BUY-BACK The final dividend of 20.5 cents per share (unfranked) in respect of the year ended 30 June 2012 was paid to shareholders on 21 September 2012. An interim cash dividend of 16 cents per share (unfranked) in respect of the half-year ended 31 December 2012 was paid to shareholders on 20 March 2013. A final dividend of 22 cents per share (unfranked) in respect of the year ended 30 June 2013 is payable on 26 September 2013 to shareholders registered on 5 September 2013. The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2013 and will be recognised in subsequent financial reports. During the year the Company bought back 223,376 shares at a cost of $3,475,095 as part of the on-market share buy-back program that was announced on 13 February 2013. This buy-back program expires on 12 February 2014. Details of unissued shares under option at the date of this Report and shares issued during or since the end of the financial year as a result of the exercise of options are set out in Note 6 to the financial statements, which accompany this Report. INTERESTS IN THE SHARES OF THE COMPANY The relevant interests of each Director in the share capital of the Company, as at the date of this Report, as notified to the ASX Limited pursuant to the Listing Rules and section 205G of the Corporations Act 2001, were:
1.
G L L Barnes 21,178
R J S Bell 7,223
J A Bevan 676
L D Crandall 16,662
W P Day 10,850
M T Peterson 11,293
M R Nicolin 20,042 1. Beneficially held in own name or in the name of a trust, nominee company or private company.
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DIRECTORS’ MEETINGS The following table sets out the number of Directors’ meetings (including meetings of Board Committees) held during the financial year and the number of meetings attended by each Director.
Board Audit and
Compliance(1)
Risk(2)
Nomination, Remuneration and
Evaluation
Held Attende
d Held Attended
Held Attended Held Attended
G L L Barnes 9 9 3 3 7 7
R J S Bell 9 9 7 7
J A Bevan 8 8 3 3 2 2
L D Crandall 9 9 4 4 1 1 2 2
W P Day 9 9 4 4 1 1
A H Lo 5 5 1 1 1 1
M T Peterson 9 9 4 4 1 1
M R Nicolin 9 9
P L Barnes 3 3 3 3
Held – Indicates the number of meetings held while each Director was a member of the Board or Committee. Attended – Indicates the number of meetings attended during the period that each Director was a member of the Board or Committee. A meeting of a special Board Committee comprising P L Barnes and M R Nicolin was convened on 14 August 2012 in relation to the review and lodgement of the 2012 Financial Report and the 2012 Full Year Results Announcement. A meeting of a special Board Committee comprising G L L Barnes and M R Nicolin was convened on 13 February 2013 in relation to the review and lodgement of the Half-Year Results announcement, Reports and financial statements for the six months ended 31 December 2012. Audit and Risk Committee meetings were generally attended by all other Directors. The Business Process Transformation Committee, comprising M T Peterson (Chair), G L L Barnes and W P Day met five times during the year. The activities of the Business Process Transformation Committee were absorbed into the Risk Committee following its establishment in June 2013. (1) The Audit and Compliance Committee operated during the year as the Audit and Risk Committee, prior to the establishment of the Risk Committee as a standing Committee of the Board in June 2013. (2) The Risk Committee was established in June 2013 and, as such, only met once during the year.
CORPORATE GOVERNANCE The Board of Ansell Limited believes that a strong corporate governance framework helps to under pin a strong Company. Ansell’s corporate governance policies and practices are set out in the Corporate Governance Statement to be included in our Annual Report. This Statement sets out the extent to which Ansell’s policies and practices comply with the requirements of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATIONS Group entities are subject to environmental regulation in the jurisdictions in which they operate. The Group has risk management programs in place to address the requirements of the various regulations. From time to time, Group entities receive notices from relevant authorities pursuant to local environmental legislation. On receiving such notices, the Group evaluates potential remediation or other options, associated costs relating to the matters raised and, where appropriate, makes provision for such costs.
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The Directors are not aware of any material breaches of Australian or international environmental regulations during the year. The Board monitors compliance with the Group’s environmental policies and practices, and believes that any outstanding environmental issues are well understood and are being actively managed. At the date of this Report, any costs associated with remediation or changes to comply with regulations in the jurisdictions in which Group entities operate are not considered material. INDEMNITY Upon their appointment to the Board, each Director enters into a Deed of Access, Indemnity and Insurance with the Company. These Deeds provide for indemnification of the Directors to the maximum extent permitted under law. They do not indemnify for any liability involving a lack of good faith. Since the date of the previous Report of the Directors, Mrs Annie H Lo upon her appointment to the Board on 1 January 2013, entered into a deed on the same terms as those entered into by each Non-Executive Director. No Director or officer of the Company has received the benefit of an indemnity from the Company during or since the end of the year. Rule 61 of the Company’s Constitution also provides an indemnity in favour of officers (including the Directors and Company Secretary) of the Company against liabilities incurred while acting as such officers to the extent permitted by law. In accordance with the powers set out in the Constitution, the Company maintains a Directors’ and officers’ insurance policy. Due to confidentiality obligations and undertakings of the policy, no further details in respect of the premium or the policy can be disclosed. AUDITOR INDEPENDENCE The Directors received the Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001, as follows:
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: The Directors of Ansell Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2013 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Gordon Sangster Partner
Melbourne
20 August 2013 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“ KPMG International” ), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
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NON-AUDIT SERVICES During the year, the Company’s auditor, KPMG, was paid the following amounts in relation to non-audit services provided by KPMG: Taxation and Other Services $ 47,000 Other Assurance and Advisory Services $ 146,000 The Directors are satisfied that the provision of such non-audit services is compatible with the general standards of independence for auditors imposed by, and do not compromise the auditor independence requirements of, the Corporations Act 2001 in view of both the amount and the nature of the services provided and that all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the Auditor. ROUNDING The Company is a company of the kind referred to in Australian Securities and Investments Commission Class Order 98/100, dated 10 July 1988 and, in accordance with that Class Order , unless otherwise shown, amounts in this Report and the accompanying financial statements have been rounded off to the nearest one hundred thousand dollars. This Report is made in accordance with a resolution of the Board of Directors made pursuant to section 298(2) of the Corporations Act 2001 and is signed for and on behalf of the Directors.
G L L Barnes Director
M R Nicolin Director Dated in Melbourne this 20th day of August 2013.
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DIRECTORS GLENN L L BARNES, B Ag Sc (Melb), CPM, FAMI, FAIM, FAICD, SF Fin, FRSA, Appointed Non-executive Director in September 2005 and Chairman in October 2012. Member of the Nomination, Remuneration and Evaluation Committee. Current Directorships: Chairman of Australian Unity Limited. Mr Barnes has over 20 y ears of governance experience in banking and f inancial services, business information, consumer goods and the not-for-profit sector. He was involved in the packaged goods, banking and financial services sectors for over 30 years, as an executive, business leader and Director in Australia, New Zealand, the United Kingdom, United States of America, Republic of Ireland, Japan and China. The Board considers Glenn Barnes to be an independent Director. RONALD J S BELL, BA (Strathclyde) Appointed Non-executive Director in August 2005. Chairman of the Nomination, Remuneration and Evaluation Committee. Current Directorships: Director of The Edrington Group. Mr Bell is an experienced international consumer industry executive with a background of over 30 years in highly competitive global branded products. He is a former President of Kraft Foods, Europe and served as Executive Vice President of Kraft Foods Inc. and br ings to the Board broad general management and marketing skills particularly in the European and North American markets. The Board considers Ronald Bell to be an independent Director. JOHN BEVAN, BCom
Appointed Non-executive Director in August 2012. Member of the Audit & Compliance Committee and Nomination, Remuneration and Evaluation Committee.
Current Directorships: Executive Director of Alumina Limited.
Mr Bevan is currently the Chief Executive Officer and Executive Director of Alumina Limited and brings to the Board extensive international business experience. Prior to joining Alumina Limited in June 2008 he had a long career with the BOC Group Plc where he was a member of the Board of Directors and held a variety of senior management positions in Australia, Korea, Thailand, Singapore and the UK.
The Board considers John Bevan to be an independent Director.
L DALE CRANDALL, CPA, MBA (UC Berkeley) Appointed Non-executive Director in November 2002. Member of the Audit & Compliance Committee, Risk Committee and Nomination, Remuneration and Evaluation Committee. Current Directorships: Director of Bridgepoint Education Inc. Mr Crandall has a background in accounting and finance and is a former Group Managing Partner for Southern California for Price Waterhouse. He was formerly President and Chief Operating Officer of Kaiser Foundation Health Plan and Hospitals in the USA. The Board considers Dale Crandall to be an independent Director. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
W. PETER DAY, LLB, MBA (Monash), FCPA, FCA, GAICD. Appointed Non-executive Director in August 2007. Chairman of the Audit & Compliance Committee and member of the Risk Committee. Current Directorships: Chairman of Orbital Corporation Limited and Director of SAI Global Limited and Federation Centres Limited, Mr Day was formerly Chief Financial Officer for Amcor Limited for seven years and has also held senior executive positions with, Bonlac Foods, the Australian Securities & Investments Commission, Rio Tinto, CRA and Comalco. He has a background in finance and general management across diverse industries. The Board considers Mr Day to be an independent Director
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ANNIE H LO, BSc (Bus Adm), MBA (Eastern Michigan) Appointed Non-executive Director on 1 January 2013. Member of the Audit & Compliance Committee and Risk Committee. Mrs Lo was formerly the Chief Financial Officer of Johnson & Johnson’s Worldwide Consumer and Personal Care Group. She retired from this role in late 2011, having spent over 20 years in executive roles with Johnson & Johnson.
Mrs Lo has significant experience in directing business expansion across the Asia Pacific region and globally as well as in managing healthcare business challenges and regulatory processes
The Board considers Annie Lo to be an independent Director MARISSA T PETERSON, BSc (MECH), MBA (Harvard), Hon Doctorate (MGMT) Appointed Non-executive Director on 22 August 2006. Member of the Audit & Compliance Committee and Chair of the Risk Committee. Current Directorships: Chair of Oclaro Inc. and Director of Humana Inc. Mrs Peterson retired from executive roles in mid-2006, having spent the previous 18 years with Sun Microsystems in senior executive positions. S he has extensive experience in supply chain management, manufacturing & quality, logistics & distribution, customer advocacy, and leadership development. The Board considers Marissa Peterson to be an independent Director. MAGNUS R NICOLIN, BA, MBA (Wharton) Managing Director and Chief Executive Officer since March 2010. Prior to joining Ansell, Mr Nicolin, a Swedish citizen spent 3 years with Newell Rubbermaid Inc., most recently as President, Europe, Middle East, Africa and Asia Pacific. Prior to that he spent seven years with Esselte Business Systems Inc. where in 2002 he l ed the leveraged buy-out of Esselte from the Stockholm and London S tock Exchanges. Following the buy-out he became the Chief Executive Officer of Esselte. Mr Nicolin has also held senior management positions with Bayer AG, Pitney Bowes and McKinsey & Company. Mr Nicolin holds an MBA from the Wharton School of the University of Pennsylvania and a BA from the Stockholm School of Economics. As an Executive Director, Magnus Nicolin is not independent.
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Operating and Financial Review
US$ commentary
In keeping with past practice, the Company reports in Australian dollars, however United States $ (“US$”) is the currency in which the global business is managed. The discussions contained in the Operating and Financial Review reflect the US$ results, which can be found in Note 32 of the Financial Statements.
For 2013/14 Ansell Limited will be converting its reporting currency to US$ with further details to be provided in the Annual Report..
Overview Ansell has endured a difficult external environment to post a significant year on year improvement in its financial results. Sales are up strongly, with a large contribution from acquisitions, as is profitability measured both in terms of Earnings before Income and Tax (“EBIT”) and earnings per share (“EPS”). The Group was pleased to announce the acquisitions of Comasec, Hercules, Preferred Surgical Products (“PSP”) and Guangzhou that all settled during the year. Whilst increasing gearing, the strong operating cashflows particularly in the second half, assisted in priming the balance sheet for further growth.
As alluded to above, Ansell encountered flat trading conditions in its two largest markets of EMEA and North America, with the latter also impacted by adverse customer sentiment from the prior year ERP issues. This was despite service levels being much improved during 2012/13. Government austerity measures also saw a focus on reduced healthcare and military spending in many jurisdictions whilst mining and construction sectors also softened in key markets. Foreign exchange translation effects dampened reported sales as well as adversely impacting EBIT.
Despite these headwinds, the group achieved an 11% year on year improvement in EBIT to $170.5 million and grew EPS by 5% to 106.5 cents. A focus on process improvements in manufacturing, prudent cost control, raw material price reductions and acquisition performance all contributed.
Ansell’s four Global Business Units are described below:
GBU Description of Activities Medical Medical is organised into 3 segments.
1. Surgical and exam gloves. 2. Healthcare Safety Devices covering a wide range of perioperative safety
devices that enhance protection for healthcare workers and patients. 3. Active infection Protection that encompasses gloves, but will also be
expanded to a wider portfolio with active infection protection technology. Industrial Industrial provides hand and upper arm protective solutions for a range of
industrial applications and is organised around the following market segments: 1. Automotive 2. Machinery and equipment 3. Chemical; and 4. Life sciences
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Specialty Markets
Specialty Markets focus on the following segments: 1. Specialised application specific gloves for Oil, Gas/Mining, Construction,
and First Responder. 2. Specialised retail gloves for DIY and Gardening 3. Product adjacencies such as clothing, suits and fall protection. 4. Specialised gloves for the Food processing Industry.
Sexual Wellness
The Sexual Wellness GBU provides consumers worldwide with high quality condoms, lubricants, feminine hygiene products and vibrating devices. The GBU also supplies many major government and social marketing organisations’ global contracts.
The GBU’s operate globally in four major regional segments:
• Asia Pacific • Europe, Middle East and Africa (“EMEA”) • Latin America and Caribbean (“LAC”) • North America
Financial Performance
Sales Sales revenue of $1,373 million was up 9% on last year, with acquisitions accounting for $131.7 million. Growth excluding acquisitions on a constant currency basis was 1% and reflected range rationalisation and the flat trading conditions referred to above.
Sales performance by GBU was as follows:
• Medical was down 2% to $349.5 million. Strong growth of 16% was achieved in the synthetic surgical and 11% in Surgical Safety categories but was not enough to counter the planned reduction in unprofitable Natural Rubber Latex exam volumes. PSP made a small contribution of approximately $1.9million, but was largely offset by adverse exchange rate impacts. Reduced governmental healthcare spending in key jurisdictions also impacted this segment.
• Industrial grew by 12% to $563.6 million, predominantly due to the acquisition of Comasec, which operates in both the Industrial and Specialty Markets GBU’s. Overall, the impact of weak manufacturing in key markets has negatively impacted growth. Sales of our Hyflex brand were subdued, with Alphatec and TNT growing more strongly. However we are excited about our new product launches that are expected to make a solid contribution in F’14. Whilst these were planned for launch during the year, capacity constraints at our plants caused some delays in their launch. Further plant investments including dedicated pilot testing lines are expected to improve these capacity constraints going forward.
• Specialty Markets grew 30% to $230 million driven by the acquisitions of Comasec and Hercules coupled with a full year contribution from Trelleborg Protective garments. The Household gloves category fell due to lower pricing driven by lower input costs whilst military spending cuts in key markets has seen the Military category fall significantly.
• Sexual Wellness was up 5.6% to $229.7million, which would have been 8% except for foreign exchange translation impacts. The increases were driven by impressive growth in branded products such as SKYN. Further adding to the top line was the launch of amele® in Australia and Orgazmax across Australia, Poland and France.
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Regionally, the North American business continued to be impacted by a subdued trading environment. In addition, although the system is now stable, negative customer sentiment stemming from the Fusion ERP warehousing problems of 2011/12 persisted. Sales suffered as a result, although the last quarter was far more encouraging. The EMEA region saw modest underlying growth after normalising for acquisition and foreign currency effects, primarily as a result of weak European industrial output and lower pricing on commodity products such as household and exam gloves. LAC grew strongly due to the Hercules acquisition and also in Mexico following the launch of our new warehouse. Asia Pacific growth came primarily from the Sexual Wellness improvements and strong growth in South East Asia Industrial and Medical whilst the Australian mining and industrial sectors softened.
Profit Gross profit after distribution expenses (“GPADE”) improved as a percentage of sales to 37.7% from 36.5% last year. A great deal of effort has been put into improving manufacturing processes via our “Lean” improvement initiative and SKU rationalisation programs. Additionally, lower raw material costs also helped, however offsetting impacts were encountered in the form of higher labour costs, energy costs, and foreign exchange losses of $2.7million.
Selling, General and Administration costs increased as a percentage of sales to 25.3% from 24.3% due to higher spending on sales and marketing activities, Guardian hand protection solutions and new product research and development.
As advised, EBIT grew a pleasing 11% to $170.5 million, whilst EBIT as a percentage of sales was up marginally on the prior year to 12.4%. The EBIT contribution by GBU is as follows:
GBU profitability
2013 2012 2013 2012 2013 2012 Business Segments
Sales Sales EBIT EBIT EBIT/ sales %
EBIT/ sales %
Industrial 563.6 504.1 92.0 83.7 16.3% 16.6% Medical 349.5 356.4 41.1 39.5 11.8% 11.1% Sexual Wellness 229.7 217.3 34.2 33.2 14.9% 15.3% Specialty Markets 230.0 177.5 11.7 7.2 5.1% 4.1% Total Business Segments
1,372.8 1,255.3
179.0 163.6 13.0% 13.0%
Corporate costs (8.5) (10.4) 0.6% 0.8% EBIT 170.5 153.2 12.4% 12.2%
Commentary on GBU profitability
• The Industrial GBU profit growth came through tight cost control, improved manufacturing efficiencies, lower raw material prices and the Comasec acquisition.
• Medical profit growth was largely driven by raw material price reductions, while reduced sales of low margin exam gloves improved gross margins.
• Sexual Wellness grew modestly, with EBIT margins falling as a result of significant sales marketing expenditure in growing SKYN and costs incurred in closing a condom packaging facility in North America.
• Specialty Markets grew largely as a result of the Hercules and Comasec contributions, which were offset to an extent by lower pricing on Household gloves and the decline in demand in the military category.
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Regional performance is summarised below:
2013 2012 2013 2012 2013 2012 Regional Segments
Sales Sales EBIT EBIT EBIT/ sales %
EBIT/ sales %
Asia Pacific 280.4 267.9 65.0 64.0 23.2% 23.9% EMEA 572.3 478.4 70.7 62.6 12.4% 13.1% LAC 101.2 82.8 14.0 10.4 13.8% 12.6% North America 418.8 426.2 29.3 26.6 7.0% 6.2% Total 1,372.8 1,255.3 179.0 163.6 13.0% 13.0% Commentary on Regional Profitability
• Asia Pacific grew sales primarily due to Sexual Wellness (refer above) but EBIT margins fell, partly due to additional sales and marketing expenditure in Sexual Wellness and soft conditions in Australia’s mining and manufacturing sectors.
• EMEA profitability grew significantly year on year due to tight cost control and the impact of the Comasec acquisition. However margins fell slightly due to subdued manufacturing sectors in Europe and lower pricing on Household gloves.
• LAC grew strongly mainly due to growth in Mexico and Brazil, whilst Hercules also assisted albeit only for the second half.
• North America EBIT profits and margins improved as it continued to optimise its processes following the ERP difficulties of F’12. Whilst the closure of a North American condom packaging plant adversely impacted earnings in the current year, margins still need to improve further.
Net Financing costs
Net financing costs increased 114% to $10.7 million ($5.0 million in 2011/12) primarily due to acquisition funding.
Taxation Expense
Income tax expenses increased to $16.5 million due to higher profitability. Deferred Tax Asset (“DTA”) recognition and Non-Operating Tax Items (“NOTI”) reduced tax expense by $9.7 million (2011/12: $9.8 million). The effective tax rate, excluding DTA and NOTI impacts, was 16.4% (2011/12: 14.8%).
Profit after Tax and Earnings per share
Profit after Tax and EPS both improved by 5 per cent to $139.2 million and 106.5 cents respectively.
Foreign Exchange Ansell has a substantial global footprint and as such, is exposed to exchange rate impacts from both a translational and transactional perspective. The group manages its transactional exposures via its hedging program, which is explained in Note 24 to the Financial Statements. The current year again saw volatility in foreign exchange markets, with the group being impacted by a broadly stronger US$ in particular. This had the effect of reducing the reported sales results by approximately $19.7 million, as the major revenue currencies contracted in value (i.e. Euro, Australian $).
As indicated above, the impact on EBIT was a loss of $2.7 million.
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Dividends & Share buyback The total dividend for 2012/13 of AUD 38 cents per share is up 7% on 2011/12’s AUD 35.5 cents.
Future dividends will be declared in US cents a share. Shareholders will be formally notified of this change and be offered the opportunity to have their US$ dividend converted to and paid in another currency.
In February 2013, an on market share buyback was announced, which resulted in 223,376 shares being bought back during the year at a total cost of $3.6 million (AUD$3.5 million). The impact of the share buyback on EPS was immaterial.
Working Capital, Cashflow management and Financing Operating cashflows improved to $130.4million from $98.4 million, largely through an emphasis on improving working capital management. Recent acquisitions are weaker than Ansell’s existing business in this area and improvements are targeted to bring them to Ansell standards. This will be achieved via greater rigour in credit and collection, SKU rationalisation, improved forecast accuracy and improved supplier relationships.
Cash used in Investing activities rose significantly to US$242.3 million with the four recent acquisitions (Comasec, PSP, Guangzhou and Hercules) costing US$208.6 million. Payments for property, plant & equipment of $39.8 million were made to increase Plant Capacity and invest in new infrastructure such as the new Science and Technology Centre in Sri Lanka.
Cash proceeds from the sale of property, plant & equipment related primarily to the sale the Jissbon warehouse in China and was down approximately $4 million compared to the prior year.
During the year, new long term debt totalling $142.5 million with maturities ranging from 8 to 12 years was issued. At June 30, 2013, the company had $305.3 million of cash and $165 million of available unused facilities, with the average maturity of drawn debt being 4.8 years.
Ansell’s Seven Growth Strategies Ansell has previously identified seven growth strategies that it is pursuing in order to achieve its objectives. The following is intended to provide an update on the progress in achieving these strategies.
1. Target defined verticals within the GBU and Regions Over the last two years, Ansell’s acquisition strategy has primarily focussed on Industrial and Specialty Markets via the conclusion of the Comasec, Hercules and Trelleborg transactions. These have been supported this year with a strong emphasis on New Product development. Acquisitions in the Medical GBU have, via Sandel and PSP, targeted hospital safety devices and perioperative products, whilst innovation is seen as a driver of active infection control. The Sexual Wellness GBU has targeted its spending on growing the Branded condom categories into new regions augmented by a small acquisition in China.
2. Accelerate Innovation During the year, the group has expanded its Science & Technology Centre in Colombo, Sri Lanka, whilst also continuing to invest in its facility at Shah Alam, Malaysia. The investments included expanded line capacity to undertake testing of prototypes of new products. All in all Ansell launched 48 new products in F’13 – up fourfold on the average of prior years. Some of the new product launches in each GBU are summarised below.
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Industrial GBU has launched a number of Hyflex gloves including:
• Hyflex 11-927 a three quarter dipped oil repellent glove with AnsellGripTM technology. • Hyflex 11-818 a light weight, high durability multi-purpose glove. • Hyflex 11-840 glove provides extreme durability and superior fit for precision handling
in abrasive applications • Hyflex 11-515 a high visibility glove with improved fit and ergonomic characteristics
where cut and abrasion resistance properties are important.
These are intended to build on the highly successful Hyflex 11-518 glove that was released in 2011/12. The next generation of Hyflex gloves are expected to offer further points of differentiation which will assist in overcoming the soft trading conditions experienced during 2012/13.
Medical GBU
• The Gammex® Nitrile Antibacterial product is a nitrile based ambidextrous glove with an antimicrobial coating (PHMB) applied to the exterior surface of the glove. The aim of the product is to reduce Hospital Acquired Infection risks in nurse/doctor to patient interactions.
• Microtouch Denta Glove Nitrile delivers state of the art hand barrier protection to dental professionals around the world and is synonymous with quality, superior comfort and fit.
Specialty Markets
• ActvArmr Cold Weather FR Impact Glove is a first to market cold weather flame resistant glove, providing insulation and a waterproof barrier that will be available for the Oil, Gas & Mining segments.
• ActvArmr TouchTech Flyers Glove is a flame resistant Aviators glove for combat • Versatouch and Polar Bear have been released for use in the Food segments and
provide enhanced comfort and fit leveraging Ansell’s patented zonal knit technology.
Sexual Wellness
• Manix Orgazmax studded condoms, a major technological innovation creating texture on the condom exponentially larger than anything we’ve ever made, presented in innovative packaging and given a bold emotional name.
3. Manufacturing and Supply Chain efficiencies The group has sought to improve its manufacturing processes by the adoption of Lean manufacturing principles. With an emphasis on eliminating duplication and minimising the physical product movements, Lean as a principle has encouraged a culture of continuous improvement to embed itself into our operations area. As a result, the productivity improvements delivered by manufacturing are up significantly against annual productivity historically.
Supply chain efficiencies are being pursued throughout the business, most notably in our Malaysian consolidation warehouse. As we grow in this important region, Malaysia’s strategic importance as both a manufacturing and procurement hub is anticipated to continue.
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4. Implement best market practice to build the Ansell franchise and core Brands such as HyFlex, Gammex, ActivArmr and SKYN
This strategy continues the rationalization of non-core brands, with all new products launched under core brands. Ongoing investments are made to drive the adoption, awareness and improved relevance through improved design, visibility and impact of our core brands.
5. Emerging Markets During the year, the group has seen emerging markets grow to represent approximately 27% of group revenue up from 25% of sales in 2011/12. Acquisitions added to this growth with the Hercules acquisition based out of Sao Paolo in Brazil, being an exciting addition to our Specialty Markets offering. In addition, the Guangzhou acquisition in China, continues to entrench Ansell’s growing position in China’s Sexual Wellness market.
The group is also continuing to invest in personnel in terms of additional headcount and training to build local knowledge and promote customer intimacy.
We have also launched a range of brands including Edge and Medigrip, which are aimed specifically at emerging markets.
6. Streamline and Improve Core processes The ERP difficulties experienced during 2011/12 are now largely behind us. The North American platform is stable with the local activities of recent acquisitions such as Comasec and Trelleborg fully integrated onto the Oracle IT system. Furthermore, the group is continuing to invest in ERP systems as it works toward implementing SAP into its EMEA Industrial and Specialty Markets businesses. Preliminary design and testing is well advanced, and the go live date is anticipated to occur during the first half of F’14.
7. Leverage Strong Balance Sheet and Cashflow With $208.6 million spent on acquisitions, Ansell still has a considerable capacity to grow as evidenced by its operating cashflow generation of around $130 million for the year. In addition, the group has invested in expanded manufacturing and research facilities as already discussed. Further investments to increase capacity are planned. In addition, the group will continue to explore attractive investments that fit the relevant criteria we require for growth.
Risk The risk management processes are summarised in the corporate governance statement of The Annual Report. Below are specific risks identified and mitigated by management and considered by the Board during the year.
Operational Risk Ansell’s risk management framework provides for the production of a group risk matrix, which sets out Ansell’s top risks and the steps taken to mitigate those risks. These risks are rated on the basis of their potential impact on the Group as a whole after taking into account current mitigating actions. Listed below are some of the top risks faced by the group, however Investors should be aware that there are other risks not listed below associated with an Investment in Ansell.
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Systems and Technology
Ansell relies on the continuing operation of its Information technology platforms. Interruption, compromise or failure of these platforms could affect Ansell’s ability to service its customers effectively. The Group has completed a first wave of improvements in North America and is in the process of upgrading its IT systems in part of its European operations.
Emerging Markets Instability
The Group is continuing to expand its presence in emerging markets. Instability in those markets is possible and could arise from geopolitical, regulatory or other factors beyond the Groups control.
Major incident at a significant manufacturing site
The group has a diverse and expansive manufacturing footprint. However financial losses stemming from a natural disaster, civil or labour unrest, terror incident, major fire or other incident are possible.
Acquisitions
It is possible that the Group’s acquisitions could underperform against their initial business case following their integration into the Group.
Foreign Exchange Risk The group’s foreign exchange risks and strategies are detailed in Note 24 to the Financial Statements.
Outlook Ansell’s forward planning considers both the 2014 budget and its long range plan. The long range plan involves the execution of its 7 growth strategies as outlined above with the budget being more targeted to specific areas. Some of these initiatives by GBU are as follows:
Industrial
• Continue to integrate the Comasec business in accordance with the acquisition business case.
• Successfully grow the recent New Product launches whilst optimising the portfolio and the 3 core brands HyFlex, AlphaTec and TNT.
• Further expand manufacturing capacity to facilitate growth and eliminate bottlenecks in the supply chain.
Medical
• Support recent new product launches, whilst focusing on further New Product Development and commercialisation primarily under the Gammex brand.
• Focus on emerging market support particularly in the Medigrip range. • Dedicated sales model for the Safety Device products from the Sandel and PSP
ranges. • Further expand manufacturing capacity, particularly in the Synthetic Surgical
segment
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Specialty Markets
• Successfully grow the recent New Product launches whilst optimising the portfolio of ActivArmr branded innovative solutions
• Pursue an improved model for the Retail products such as the DIY and gardening gloves
• Integrate the Hercules and Comasec businesses whilst further growing the Clothing category.
• Drive growth in the Food channel through multiple launches of innovative VersaTouch branded product.
Sexual Wellness
• Continue to invest in new product development in “mother brand” categories. • Continue growth of the SKYN product range in China and other priority markets such
as Brazil, Poland, France and the USA.. • Expand plant capacity as we expand further into Japan, India and Turkey.
In addition, the group will explore process improvement opportunities as it seeks to optimise its ERP investments to more accurately service our customer’s needs.
Global economic factors are expected to continue having a dampening effect particularly in EMEA and Asia Pacific, despite a more positive trend from North America and LAC.
The group is looking forward to yet another successful year in 2013/14.
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REMUNERATION REPORT
The Directors of Ansell Limited present the Remuneration Report prepared in accordance with section 300A of the Corporations Act for the Group for the year ended 30 June 2013. This Report, which has been audited by KPMG, forms part of the Report of the Directors.
This remuneration report outlines Ansell’s remuneration philosophy and strategy together with details of the remuneration information of key management personnel (KMP) in accordance with the requirements of the Corporations Act.
For the purposes of this report the Board has determined that in addition to the Non-executive Directors, the KMP of the Group comprise the members of the leadership team, listed below, who have the authority and responsibility for planning, directing and controlling the activities of the Group. The use of the term Senior Executives in this report is a reference to direct reports of the CEO.
Table 1 – Key Management Personnel
Non-executive Directors
Glenn L L Barnes Ronald J S Bell John Bevan L Dale Crandall W Peter Day Annie H Lo (appointed 1 January 2013) Marissa T Peterson Peter L Barnes (retired 22 October 2012) CEO and other key management personnel
Magnus R Nicolin Managing Director& Chief Executive Officer (CEO) Peter B Carroll President & General Manager Sexual Wellness GBU Scott R Corriveau President & General Manager Industrial GBU Thomas Draskovics President & General Manager Specialty Markets Steve Genzer Senior Vice President Operations Rustom F Jilla Senior Vice President & Chief Financial Officer (CFO) (ceased employment 15 April 2013) (1) Anthony Lopez President & General Manager Medical GBU (1) As announced to the market during the year, Mr Neil Salmon was appointed as CFO, effective 15 July 2013 and as such full details of his remuneration will be
included in the Company’s 2014 remuneration report. Mr Francois Le Jeune acted as CFO during the period between Mr Jilla’s resignation and Mr Salmon’s appointment, however was not a member of the key management personnel during this period.
Remuneration Philosophy and Strategy
Our remuneration philosophy is designed to provide a link between the achievement of our strategic objectives and executive reward. It is designed to reward, motivate and retain the Company's executive team, with market competitive remuneration and benefits, to support the continued success of our businesses and the creation of shareholder wealth.
We continue to adapt our remuneration framework to the changing external environment, as well as our growth and performance goals and our desire to recognise the contribution of our people. We are constantly working to make our remuneration structures clearer, more transparent, and applicable to all our people.
Accountability to shareholders is very important at Ansell and we are committed to simple and transparent reporting
At Ansell, remuneration for the CEO and Senior Executives is determined by reviewing what is generally paid for similar roles in similar businesses in the relevant geographic location. This is not a simple matter given that Ansell is an international company made up of a diverse group of executives working in a range of different countries. Furthermore, their responsibilities extend beyond their own geographic location.
The principles of Ansell's executive remuneration strategy, frameworks and programs are designed to:
• Apply a pay for performance philosophy that directly links executive reward to the achievement of individual results and the strategic goals and overall performance of the Group;
• Align remuneration to business outcomes that deliver value to shareholders;
• Balance incentives to appropriately reward superior performance in the short term and sustained performance over the long term;
• Drive a performance culture by setting challenging objectives and ensuring that executives are remunerated in a way that recognises and rewards individual performance; and
• Ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent.
We remunerate the CEO and Senior Executives using a combination of fixed and variable plans, with a greater emphasis on variable performance-based plans. Performance metrics are carefully selected to ensure alignment with business objectives.
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Remuneration Governance
The Board is ultimately responsible for determining the remuneration strategy and structure and quantum of remuneration for the executives of the Company that supports and drives the achievement of Ansell’s strategic objectives. The Nomination, Remuneration and Evaluation (NRE) Committee is responsible for reviewing and recommending to the Board the remuneration policy, strategy and structure for Ansell’s Board, the CEO and Senior Executives. Where appropriate, the Committee seeks and considers advice from independent external remuneration advisers. The Committee has in place a process of engaging and seeking advice from external remuneration advisers and ensures remuneration recommendations in relation to key management personnel are free from undue influence by management.
Aon Hewitt has been engaged by the Committee in accordance with this structure to provide advice and recommendations in respect of key management personnel. During the 2013 financial year the following key services were provided by Aon Hewitt:
• Benchmarking of Board, CEO and key management personnel remuneration; • Advice and assistance to review key management personnel remuneration arrangements; • Advice and assistance to review the CEO remuneration arrangements; • Advice and assistance with the Remuneration Report • Ad-hoc advice as requested
Aon Hewitt has provided a declaration to the Committee confirming that the recommendations provided on key management personnel remuneration arrangements were made free from undue influence from any member of the Company's key management personnel and the Board is satisfied of this having regard to the processes and structure in place. The fees paid to Aon Hewitt for their advice and remuneration recommendations were $53,978.
As part of the Board's commitment to maximising the performance of the Company and shareholder wealth, executive performance is assessed annually against agreed performance objectives set at the commencement of the relevant financial year. So far as practical, objectives aim to be Specific, Measurable, Achievable, Relevant and Time bound ('SMART').
The NRE Committee considers that a robust performance review system is essential in ensuring a strong link between remuneration and performance. The performance of the Chief Executive Officer is reviewed by the Non-executive Directors of the Board. The performance of the Chief Financial Officer and all other senior executives is reviewed by the Chief Executive Officer and overseen by the NRE Committee and the Board.
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SECTION 1 Company Performance and Link to Reward
The link between company performance and executive reward is provided by:
I. Requiring a significant portion of executive remuneration to vary with short-term and long-term performance of the Company;
II. Applying challenging financial and non-financial measures to assess performance; and
III. Ensuring that these measures focus executives on strategic business objectives that create shareholder wealth
The following graph shows the performance of Ansell’s share price compared to the S&P/ASX200 Accumulation Index over the period 1 July 2008 to 30 June 2013. The Ansell share price has outperformed the S&P/ ASX200 Accumulation Index reflecting the strength of Ansell as a world leader in providing superior health and safety protection solutions and the success of the Company’s growth strategies.
Ansell has a strong track record of providing solid Earnings per Share growth which is considered to be a driver of the creation of shareholder wealth and a strong track record of providing steady reliable dividend growth.
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The table below summarises key indicators of the performance of the Company and relevant shareholder returns over the period from 2009 to 2013. In reviewing these indicators it should be recognised that the Company’s predominant global currency is the US dollar, the Company’s global businesses are managed in US dollars and the majority of the senior executives operate out of the Company’s operational headquarters located in the USA and therefore are paid in US dollars. Further details of how remuneration outcomes for FY2013 were aligned with some of these performance indicators are detailed in the relevant annual incentive and long-term incentive sections below Table 2 – Key indicators of Company Performance and Shareholder Return
2009 2010 2011 2012 2013
Sales (US$m) 1,002.9 1,086.2 1,206.9 1,255.3 1,372.8
Sales (A$) 1,352.1 1,230.6 1,219.8 1,218.3 1,340.0
Segment EBIT (US$m) 107.3 127.3 136.9 153.2 170.5
Segment EBIT (A$m) 142.4 143.1 138.8 149.4 167.2
Profit Attributable (A$m) 121.4 119.4 122.7 130.0 136.8
Share Price at 30 June (A$) 8.77 13.13 14.16 13.20 17.63
EPS – US$ cents 66.3 79.7 91.6 101.4 106.5
EPS – A$ cents 89.2 89.6 92.4 99.1 104.6
Full-year dividend (A$) 0.28 0.305 0.33 0.355 0.38
Total Shareholder Return(1) % pa (4.8) 48.4 7.8 (6.5) 32.9
(1) Total shareholder return, is broadly, a measure of the return to shareholders provided by movements in the Company's share price plus any dividends paid in respect of the relevant financial period.
Over the period from 1 July 2008 to 30 June 2013:
- the compound growth in total shareholder return (movement in the Company's share price plus dividends received was 15.7 per cent
- the compound growth rate in earnings per share (EPS) in US dollars has been 10.0 per cent
- the compound growth in full-year dividend has been 7.2 per cent
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SECTION 2
NON-EXECUTIVE DIRECTORS’ REMUNERATION
A. Policy The table below sets out the key principles relating to Non-executive Directors’ remuneration.
Principle Comment
Aggregate Board and Committee fees are approved by shareholders
The current aggregate fee pool for Non-executive Directors of $1,250,000 was approved by shareholders at the 2010 Annual General Meeting.
(Note: Some benefits are payable outside of the shareholder-approved cap – refer table 3 for details)
Remuneration is structured to preserve independence whilst creating alignment
To preserve independence and impartiality, no element of Non-executive Director remuneration is linked to the performance of the Company. However, to create alignment between Directors and shareholders, the equivalent of at least 10% of gross annual fees must be invested to acquire Ansell shares at market value.
Since the end of the 2013 financial year the has Board reviewed and subsequently revised the rules, now requiring Non-executive Directors to invest an appropriate percentage of gross annual fees to acquire Ansell shares at market value, to achieve a shareholding of 2 times annual Board fees within a period of 10 years.
Fees are set by reference to key considerations
Board and Committee fees are set by reference to a number of relevant considerations including: • responsibilities and risks attaching to the role of Director • time commitment expected of Directors • fees paid by peer companies • independent advice received from external advisers • the global nature of our businesses (to ensure that the Directors' fee attracts and retains the best international directors)
No retirement benefits No additional benefits are paid to Non-executive Directors upon their retirement from office (i.e. only contributions to applicable superannuation funds during their term of office).
Regular reviews of remuneration
The Board periodically reviews its approach to Non-executive Director remuneration to ensure it remains in line with general industry practice and best practice principles of corporate governance.
Element of 2013 Remuneration Framework
Fees Fees are not linked to the performance of the Company so that independence and impartiality is maintained. Directors are required to invest a minimum of 10% of their gross fees in acquiring shares on market, and may elect to invest a higher proportion.
As a result of our on-going review of the market competitiveness of our fees to attract and retain the best international directors available and as part of the Board’s succession planning, we propose to ask shareholders for an increase in the maximum fee pool available at the 2013 Annual General Meeting.
Other fees/benefits Directors are permitted to be paid additional fees for special duties, including fees paid for serving on ad hoc projects or transaction focused committees.
Post-employment Superannuation contributions are made at a rate that satisfies the Company’s statutory superannuation obligations. No additional retirement benefits are paid.
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B. Components of remuneration
Reflecting the Board’s focus on long term strategic direction and corporate performance rather than short term results, remuneration for the Chairman and other Non-executive Directors is structured with a fixed fee component only. To reflect the global representation that exists in the composition of the current Board (which includes both US and UK resident directors), directors are paid in their local currency based on exchange rates agreed by the Board at the beginning of the financial year. No changes were made to the underlying Australian dollar Non-executive Director fee levels during the year. The table below summarises the components of Non-executive Director remuneration. Table 3 – Elements of Non-executive Directors remuneration
Element Description Included in the shareholder approved cap?
Board fees: Yes
Chairman A$242,500
Other Directors A$97,000 / US$97,000 / £61,780
Committee fees: Yes
Chair of the Audit and Compliance Committee
A$24,250 / US$24,250 / £15,445 (2.5 times the Committee fee)
Chair of the Nomination, Remuneration and Evaluation Committee and Chair of the Risk Committee
A$19,400 / US$ 19,400 / £12,356 (2 times the Committee fee)
Committee member A$9,700 / US$9,700 / £6,178 (10% of the Board fee)
Travel allowance A$10,000 / US$10,000 / £6,369 Yes
Superannuation Superannuation contributions are made on behalf of the Non-executive Directors at a rate of 9%, which satisfies the Company's statutory superannuation obligations.
Yes
Other fees/benefits Non-executive directors are permitted to be paid additional fees for special duties or exertions, including fees paid for serving on ad hoc projects or transaction focussed committees which, for the 2013 financial year, included the Business Process Transformation Committee. The fees payable to the Chair and members of this Committee are the same as those payable to the Chair and members of the Nomination, Remuneration and Evaluation Committee.
No
In addition, Directors are also entitled to be reimbursed for all business related expenses, including travel expenses as may be incurred in the discharge of their duties.
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C. Remuneration of Non-executive Directors
Table 4 – Non-executive Directors remuneration
2013 Fees(1) Superannuation Total contributions $ $ $
G L L Barnes 247,030 - 247,030
R J S Bell £85,446 £2,368 £87,814 J A Bevan 111,016 9,991 121,007
L D Crandall US$141,208 US$3,713 US$144,921 W P Day 131,250 11,812 143,062
A H Lo 65,157 1,969 67,126
M T Peterson US$144,527 US$3,923 US$148,450
P L Barnes(2) 89,776 5,490 95,266 (1) Includes amounts payable to the members of the Business Process Transformation Committee - M T Peterson (Chair), G L L Barnes and W P Day. (2) retired 22 October 2012
2012 Fees(1) Superannuation Total contributions $ $ $ P L Barnes 270,023 15,775 285,798
G L L Barnes 148,349 - 148,349
R J S Bell £84,688 £2,283 £86,971
L D Crandall US$140,730 US$3,763 US$144,493
W P Day 126,400 11,376 137,776
M T Peterson US$145,972 US$3,860 US$149,832
(1) Includes amounts payable to the members of the Business Process Transformation Committee - M T Peterson (Chair), G L L Barnes and W P Day.
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D. Non-executive Directors' Share Plan
The table below contains details of the shares acquired during the year on behalf of the Non-executive Directors out of their after-tax fees through participation in the Non-executive Directors’ Share Plan.
Shares are acquired quarterly on the ASX at the prevailing market price and are registered in the name of the Director, but are subject to a restriction on dealing until the Director ceases to hold office.
Shares were purchased on market (at no discount) on behalf of the Directors in September 2012 (at $15.62 per share), December 2012 (at $15.46 per share), March 2013 (at $15.73 per share) and June 2013 (at $18.40 per share).
Table 5 – Number of shares acquired by Non-executive Directors in the 2013 financial year
G L L Barnes 1,383
R J S Bell 774
J A Bevan 676
L D Crandall 813
W P Day 801
M T Peterson 834
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SECTION 3
CEO AND SENIOR EXECUTIVE REMUNERATION
A. Policy The diagram below illustrates the key aspects of the Company’s remuneration policy for Senior Executives, including the CEO. The Remuneration policy is designed to:
Forfeiture and Claw-back
Ansell’s incentive plans provide for unvested awards to be forfeited in the event of fraud, gross misconduct or the material misstatement of the financial statements by executives and allow clawback of vested awards in those circumstances. Element of 2013 Remuneration Framework Fixed remuneration Fixed remuneration is based on the executive’s responsibilities, performance, qualifications,
experience and location. In setting fixed remuneration reference is made to Ansell’s peers in similar sized companies, in similar industries operating in similar jurisdictions. During the year salary increases across the Company were relatively modest at an overall average of 3%. The fixed remuneration for the majority of the executive leadership team, including the CEO, was increased by 3%.
Annual incentive Participation in the Company’s annual short-term incentive program gives executives the opportunity to earn a cash bonus if they achieve performance targets based on annual growth in sales revenue, EBIT, profit attributable, maximising plant performance, improving free cash flow and agreed personal objectives. The Annual incentive puts a portion of executive remuneration ‘at risk’ and encourages the achievement of the company’s shorter term strategic objectives.
Long-term incentive Participation in the Company’s long-term incentive arrangements gives executives the opportunity to achieve a cash award and allocation of shares on vesting of performance share rights, subject to the achievement of performance targets based on earnings per share growth over a rolling three-year period. The long-term incentive is designed to link Senior Executive reward with the creation of shareholder value.
During the year, the Board introduced a ‘gateway’ condition which must be met before any
awards can vest. The gateway require a minimum level of return on equity (which is measured against the Company’s weighted average cost of capital) to ensure that our capital is being
Create shareholder value
Reward, motivate and retain key executives
Be flexible enough to reflect local market conditions
Pay for performance Total remuneration set by reference to local geographic market at:
• 62.5th percentile for target performance • 75th percentile for stretch performance
Fixed remuneration At-risk STI At-risk LTI
25 - 50%
Based on: • Market rate for job skills • Job requirements; and • Individual performance
50 - 75% (at target levels of performance)
Targets linked to: • Individual; • Business unit; and • Corporate performance
Challenging and transparent targets linked to the creation of shareholder value
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employed efficiently and earnings growth is translating to shareholder value. The Board also reviewed the EPS growth targets and determined that the appropriate growth
targets over the 3 year performance period for the long-term incentive grant in 2013 were: Threshold 7% per annum EPS growth Target 8% per annum EPS growth Stretch 12% per annum EPS growth ______________________________________________________________________________________________
Post-employment Executives may be entitled to post-employment benefits, depending on the circumstances in
which their employment is terminated.
The following chart sets out the average remuneration mix for Senior Executives, including the CEO, for the achievement of target performance during FY2013:
B. Components of remuneration
I. Fixed remuneration
Fixed remuneration comprises base salary plus contributions to superannuation and pension plans in accordance with relevant legislation or as contractually required and is set to attract and retain executives.
Base salary, which is expressed in local currency, is set having regard to an individual’s responsibilities, performance, qualifications, experience and location and having regard to the market rate for a comparable role.
II. At-risk remuneration Annual incentive Table 6 – Summary of the 2013 short-term incentive plan
What is the STI and who participates?
The annual short-term incentive program (STI) is a cash-based plan that involves linking specific targets with the opportunity to earn incentives based on a percentage of base salary for senior executives,
Why does the Board consider the STI to be an appropriate incentive?
The STI is designed to put a large proportion of annual executive remuneration 'at-risk’ against meeting targets linked to Ansell’s annual business objectives.
What is the maximum amount executives can earn under the STI?
In relation to members of the senior executive team, this comprises an amount equal to 50% (100% for the CEO) of their fixed annual remuneration for target performance, and up to 100% (200% for the CEO) of their fixed annual remuneration for performance that is well in excess of target performance.
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What are the performance conditions for the STI?
Performance measures for 2013 were based on a mix of improvement across Ansell Limited, the GBU’s and the Regions in sales revenue (sales), earnings before interest and tax (EBIT), plant performance, free cash flow and, for the CEO and CFO with more direct responsibility for overall corporate performance, profit attributable to shareholders (Profit Attributable).
In addition, the performance of each senior executive was assessed against key strategic objectives specific to their role and responsibilities, as determined by and agreed with the CEO (and, in the case of the CEO, by the Non-executive Directors).
The hurdles were set so that achievement of the internal financial goals (business plan) and personal objectives result in 100% of the award being earned.
Vesting under the STI commences at threshold levels (50% of the STI target levels), which were set at 95% of the 2013 business plan goals. Additional incentive payments were available for performance exceeding target objectives.
Why were these performance conditions chosen?
The Board considers these performance measures to be appropriate as they are aligned with the Company’s objectives of delivering profitable growth and improving shareholder return. In addition, executives have a clear line of sight to the targets and are able to affect results through their actions.
Who assesses performance and when?
The NRE Committee assesses performance against the conditions in respect of the CEO and makes a recommendation to the Board. The CEO assesses the performance against the conditions in respect of other senior executives and makes recommendations to the NRE Committee. Performance against the hurdles is determined, and incentives paid, following the completion of the audit of the accounts for the financial year.
To what extent were performance conditions met during the year?
In a challenging global trading environment the Company produced strong US dollar results with sales increasing by 9%, EBIT increasing by 11% and Profit Attributable increasing by 5%. The Industrial GBU and the Specialty Market GBU achieved solid growth at the sales line with the Medical GBU achieving good growth at the EBIT line. Free cash flow was very strong at $128 million up from the previous year’s $97.2 million. The level of performance achieved in respect of the 2013 STI performance measures was as follows: • Sales – the internal targets for Ansell Limited sales were not met and GBU sales targets were not met in the majority of cases, however the internal target for EMEA Region sales was met between threshold and target and LAC Regions sales achieved its stretch target. • EBIT – the internal target for Ansell Limited EBIT was met between threshold and target, the Industrial GBU EBIT target was achieved between threshold and target and the Medical GBU achieved its stretch target. Region EBIT targets were met in the majority of cases between threshold and stretch.
• Profit Attributable – the internal performance target was achieved between threshold and stretch.
• Plant Performance - the internal performance targets were not met.
• Free Cash Flow - the stretch internal performance target was achieved.
Specific information relating to the STI payable for target performance and the percentage of the target awards achieved in respect of the Key Management Personnel is set out in Table 7.
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Table 7 – Annual incentive payments provided in relation to the 2013 financial year for Key Management Personnel pursuant to the Company’s STI plan
Percentage of Percentage of Value of award Value of award target award target award at target level(1) achieved(2) achieved forfeited
M R Nicolin US$850,000 US$521,900 61.4% 38.6%
S R Corriveau US$182,500 US$103,204 56.5% 43.5%
T Draskovics US$140,000 US$57,470 41.0% 59.0%
S Genzer US$170,000 US$89,675 52.7% 47.3%
A Lopez US$170,000 US$200,685 118.0% -
P B Carroll $213,500 $127,673 59.8% 40.2% (1) Target award is the level at which achievement of the performance measures would result in 100% of the incentive being earned. (2) The value of grants provided under the STI plan during the year is set out in this table. The minimum value of the STI, if the performance targets had not been
satisfied, would have been nil.
Long-term incentive During 2012 the NRE Committee reviewed Ansell’s long term incentive plan, which since 2009 had operated as a cash-based plan. The cash plan was introduced to simplify the long term incentive arrangements and to create a plan that was sufficiently flexible to reflect local market conditions and allow for consistency of arrangements for executives, given the global nature of the Company’s businesses. The NRE Committee recommended and the Board approved a change in the long term incentive arrangements to include an equity based component for senior executives for the 2013 financial year to more closely align senior executive ‘at risk’ remuneration with the creation of long term shareholder value.
This new long term incentive plan operated by way of a grant of performance share rights to the Chief Executive Officer, for which approval was obtained at the Company’s 2012 AGM and an equal proportion of cash and performance share rights for other members of the Executive Leadership Team and senior management with a grading designation of Vice President and above.
In addition, the NRE recommended a gateway vesting condition be introduced into the plan. As a result the Board determined that in addition to the achievement of predetermined compound annual earnings per share growth targets, the 2013 long-term incentive plan would introduce a new gateway condition based on the Company’s return on equity performance, similar to the condition applying to the vesting of the CEO Special Long Term Incentive Plan.
Company EPS - US$ cents performance over the last 5 years
2009 2010 2011 2012 2013
EPS - US$ cents 66.3 79.7 91.6 101.4 106.5
Table 8 – Summary of the 2013 long-term incentive plan
What is the LTI and who participates?
The LTI plan is an element of the Company’s remuneration strategy. The LTI plan links senior executive reward with ongoing creation of shareholder value through the grant of performance share rights (Rights) and cash awards, subject to performance conditions which underpin sustainable growth in shareholder value. The LTI plan is structured to align executive reward with Company performance and shareholder value. Participation in the Company’s LTI arrangements is only offered to executives who are able, or have the potential, to influence shareholder value.
How is the amount of the LTI grant determined?
The long term incentive grant, under the LTI plan, provided to Senior Executives is designed to be the equivalent of 60% - 100% (200% for the CEO) of their fixed annual remuneration for target performance and up to 120% - 200% (400% for the CEO) of their fixed annual remuneration for stretch performance. Other executives are offered grants representing a lower proportion of their fixed annual remuneration.
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What equity instruments are granted under the LTI?
Under the LTI plan, the CEO received an annual grant of Rights, for which approval was obtained at the Company’s 2012 AGM. Other members of the Executive Leadership Team and senior management with a grading designation of Vice President and above receive 50% of their long term incentive in the form of Rights, while the balance of their incentive is cash based. For the remainder of the senior management team participating in the incentive plan their incentive will continue to be cash based.
Details of the grants made to Key Management Personnel during the 2013 financial year are set out in Tables 9 & 10.
What are the key terms of the Rights and cash awards granted under the LTI?
Rights are granted at no cost to the participant. Each Right granted will entitle the participant to one ordinary share in the Company, subject to the satisfaction of performance conditions set by the Board in respect of the grant. Cash awards that are granted will vest subject to satisfaction of performance conditions set by the Board in respect of the grant.
Grants under the Plan are tested over a three-year performance period.
If the relevant performance conditions are satisfied at the end of the performance period, then:
- the rights will vest automatically and shares in the company will be allocated to the participant; and
- the cash awards will vest automatically and payment of the cash award will be made to the participant.
What are the performance conditions for the Rights and cash awards granted in the 2013 financial year?
During the year, the Board approved a ‘gateway’ condition to the LTI plan which is designed to require a minimum level of return on equity (which is measured against the Company’s weighted average cost of capital) to ensure that our earnings growth is translating to shareholder value.
The ‘gateway’ must be satisfied before any LTI awards may vest. The EPS ‘performance’ condition will determine the level of vesting of the LTI awards.
If either the ‘gateway’ condition or the threshold level of the performance condition is not satisfied, the Rights and cash awards will lapse.
Condition
‘Gateway’ condition Requires Ansell’s return on equity (ROE) at 30 June 2015 to be at least 1.5 times the Company’s Weighted Average Cost of Capital (WACC).
‘Performance’ condition Based on growth in the Company’s earnings per share (EPS) over the 3 year performance period.
The percentage of the Rights and cash award grants which vests at particular EPS growth rates is as follows:
EPS growth Rights and cash award grant that vest (%)
Threshold (7% per annum CAGR)
25%
Between threshold and target Sliding scale from 25 to 50
Target (8% per annum CAGR) 50
Between target and stretch Sliding scale from 50 to 100
Stretch or above (12% per annum CAGR)
100
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The Board selected US93.9 cents EPS (being the underlying EPS for the 2012 financial year - reported EPS excluding the impact of deferred tax asset adjustments) as the base EPS for the 2012 financial year (Base Point).
Accordingly, in order for the Rights and cash awards to vest, underlying EPS of US115.0 cents (Threshold) will need to be achieved at the end of the three year performance period. Stretch performance would require underlying EPS of US131.9 cents to be achieved at the end of the three year performance period.
The Board will exclude the effect of net changes in capital when measuring EPS performance. This ensures the Company’s capital management program of share buy-backs will not influence performance against these targets. The Board may vary the performance conditions to take account of the effect of any material business acquisition or divestment and any exceptional non-operating items that may occur during the performance period.
Why were these performance conditions chosen?
The Board selected EPS as a performance measure for vesting of the Rights and cash awards on the basis that it:
• is a relevant indicator of increases in shareholder value; and
• is a target that provides a suitable line of sight to encourage and motivate executive performance.
What happens in the event of a change of control?
The Board has discretion to determine if the Rights and cash awards will vest in the event of a change of control.
What happens if the executive ceases employment during the performance period?
Where a participating executive ceases employment with the Company any unvested Rights and cash award will lapse, except where employment ceases due to death, disability or other exceptional circumstances with the approval of the Board, in which case the Board has a discretion to determine that the cash award will vest on a pro-rata basis (having regard to performance up to cessation of employment).
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As part of its remuneration strategy, the Company made the following Rights and cash award grants during the year to senior executives. Table 9 – LTI equity grants made to Key Management Personnel during the 2013 financial year pursuant to the Company's LTI Plan.
Maximum No. of Rights value of Rights granted(1) granted(2)
M R Nicolin 259,080 US$3,442,546
S R Corriveau 27,359 US$363,535
T Draskovics 19,542 US$259,667
S Genzer 25,405 US$337,571
A Lopez 25,795 US$342,753
P B Carroll 19,328 $250,104
(1) The grant of Performance Share Rights (Rights) was made to the CEO on 22 October 2012 in accordance with a resolution passed at the Company's 2012 Annual General Meeting. Grants of Performance Share Rights (Rights) to Senior Executives were made on 21 October 2012 in accordance with a resolution of the Nomination, Remuneration and Evaluation Committee. The grants made during the year constituted 100% of the grants available for the year. As the Rights only vest on satisfaction of the performance conditions, to be tested at the end of the 2015 financial year, none of the Rights detailed above were forfeited during the year. Details of the relevant performance conditions are set out in Table 7.
(2) The value per Right was calculated as A$12.94. The assumptions used in the calculation of this value are set out in Note 23 to the financial statements accompanying this Report. The minimum total value of the grant, if the applicable performance conditions are not met, is nil in all cases.
Table 9 - Summary of equity awards under the LTI
Held at Held at Granted Vested Forfeited 30 June 1 July 2012 during year during year during year 2013
M R Nicolin Rights - 259,080 - - 259,080
S R Corriveau Rights - 27,359 - - 27,350 T Draskovics Rights - 19,542 - - 19,542 S Genzer Rights - 25,405 - - 25,405 A Lopez Rights - 25,795 - - 25,795 P Carroll Rights - 19,328 - - 19,328
Former Executive
R F Jilla(1) Rights - 39,210 - 39,210 -
(1) Ceased employment effective 15 April 2013
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Table 10 – LTI cash award grants made to Key Management Personnel during the 2013 financial year pursuant to the Company’s LTI Plan
Value of cash award at Stretch level(1)
S R Corriveau US$350,000
T Draskovics US$250,000
S Genzer US$325,000
A Lopez US$330,000
P B Carroll $244,110
(1) Stretch award is the level at which achievement of the performance measures would result in 100% of the incentive being earned.
Previous long-term incentive arrangements 2011 [due for testing at the end of the 2013 financial year]
In the 2011 financial year the Company had a cash-based LTI plan. Cash awards under the LTI plan are subject to a three-year performance period that was tested at the end of the 2013 financial year. During the performance period the Company was required to achieve specific EPS performance measures in order for the awards to vest and executives to become entitled to the cash grant.
The cash awards are subject to performance measures based on the growth in the Company’s EPS over the performance period. The Board selected US69.5 cents EPS, (being the underlying profit for the 2010 financial year - reported earnings per share excluding the impact of deferred tax asset adjustments) as the base EPS for the 2011 financial year (Base Point).
The target EPS growth rate was 5% per annum compound, measured from the Base Point to the end of the 2013 financial year. This equates to a target EPS of US80.5 cents.
The stretch EPS growth rate was 10% per annum compound, measured from the Base Point to the end of the 2013 financial year. This equates to a stretch EPS of US92.5 cents.
The reported EPS for the 2013 financial year was US106.5 cents which represented a compound annual growth rate of 10.1 per cent since 2010. The underlying EPS for the 2013 financial year was US100.5 cents which represented a compound growth rate of 13.1 per cent, exceeded the stretch EPS target of US92.5 cents therefore the cash grants vested at the stretch level.
2012 [due for testing at the end of the 2014 financial year]
In the 2012 financial year the Company had a cash-based LTI plan. Cash awards under the LTI plan are subject to a three-year performance period that will be tested at the end of the 2014 financial year. During the performance period the Company is required to achieve specific EPS performance measures in order for the awards to vest and executives to become entitled to the cash grant.
The cash awards are subject to performance measures based on the growth in the Company’s EPS over the performance period. The Board selected US81.3 cents EPS, (being the underlying profit for the 2011 financial year - reported earnings per share excluding the impact of deferred tax asset adjustments) as the base EPS for the 2012 financial year (Base Point).
The target EPS growth rate is 7% per annum compound, measured from the Base Point to the end of the 2014 financial year. This equates to a target EPS of US99.6 cents.
The stretch EPS growth rate is 10% per annum compound, measured from the Base Point to the end of the 2014 financial year. This equates to a stretch EPS of US108.2 cents.
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CEO Special Long Term Incentive Plan As approved by shareholders at the 2010 Annual General Meeting, the Managing Director and Chief Executive Officer has been allocated 129,730 performance rights pursuant to the CEO Special Long Term Incentive Plan. These rights are intended to align the CEO’s interest with shareholders over the longer term.
The rights were granted in 2 tranches, with 20% of the total allocation to vest at the completion of 4 years (30 June 2014) and the balance of 80% to vest after 5 years (30 June 2015), subject to the performance condition being met.
The applicable performance condition is that Ansell’s Return on Equity (ROE) in each of financial years 2014 and 2015 must equal at least 1.5 times Ansell’s Weighted Average Cost of Capital. The Board has selected this performance target as the Board believes ROE to be a strong long term measure of how efficiently the capital employed in the business has been used to generate earnings growth which should translate to an appropriate level of return for shareholders. If the performance condition applicable to a tranche is not satisfied, the performance rights will lapse.
The Board believes that it is important that the CEO’s interests are aligned with those of shareholders. The grant of performance rights, each entitling the CEO to an ordinary share in the capital of Ansell Limited upon satisfaction of the performance condition, means that a significant amount of his remuneration will be determined by reference to the value of Ansell shares at the end of the applicable vesting periods.
As the performance condition is not tested until 2014, no part of the CEO Special Long Term Incentive Plan vested (or lapsed) during the financial year.
CFO Special Incentive Plan In order to align the incoming Chief Financial Officer’s interest with those of shareholders and to compensate him for deferred employment incentives from his previous employer that Mr Salmon forfeited in joining Ansell he has been allocated 30,130 performance rights on the same terms to those granted to the Managing Director and Chief Executive Officer.
The rights were granted in 2 tranches, with 14,917 performance rights to vest at the end of the 2014 financial year and the remaining allocation to vest at the end of the 2015 financial year.
The applicable performance condition is that Ansell’s Return on Equity (ROE) in each of financial years must equal at least 1.5 times Ansell’s Weighted Average Cost of Capital. The Board has selected this performance target as the Board believes ROE to be a strong long term measure of how efficiently the capital employed in the business has been used to generate earnings growth which should translate to an appropriate level of return for shareholders. If the performance condition applicable to a tranche is not satisfied, the performance rights will lapse.
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C. Remuneration of Key Management Personnel
2013
Details of the remuneration provided to Key Management Personnel are set out in the following table Table 11 – Key Management Personnel Remuneration
Base Salary
Short-term Post employment Long-term Long-term
Total
Proportion of total remuneration performance
related Annual
Incentive Non-salary
benefits(1) Superannuation
contributions(2) Cash Based(3)
Share Based(4)
M R Nicolin(5) US$847,019 US$521,900 US$128,484 US$213,804 US$1,696,917 US$628,590 US$4,036,714 70.5% S R Corriveau(5) US$362,654 US$103,204 US$389,271 US$78,531 US$602,717 US$57,401 US$1,593,778 47.9% T Draskovics(5) US$273,667 US$57,470 US$4,948 US$52,279 US$291,778 US$41,002 US$721,144 54.1% S Genzer(5) US$337,667 US$89,675 US$4,406 US$71,224 US$595,779 US$53,301 US$1,152,052 64.1% A Lopez(5) US$338,917 US$200,685 US$75,110 US$63,664 US$384,945 US$54,124 US$1,117,444 57.2%
P B Carroll(6) A$421,962 A$127,673 A$35,360 A$68,761 A$442,754 A$41,642 A$1,138,152 53.8%
Former Executive(7) R F Jilla US$362,405 - US$30,281 US$88,991 - - US$481,676
Total Remuneration – key management personnel US$2,522,329 US$972,934 US$632,500 US$568,493 US$3,572,136 US$834,418 US$8,580,908 A$421,962 A$127,673 A$35,360 A$68,761 A$442,754 A$41,642 A$1,138,152
(1) Includes the cost to the Company of cash benefits such as motor vehicle, executive expatriation and relocation allowances, executive insurance and sign-on bonuses of US$50,000 for A Lopez. (2) Includes contributions to USA benefit or non-qualified pension plans and to an Australian superannuation fund, as applicable. (3) Includes amounts provided in respect of the Company's cash based long term incentive plans. (4) Amount provided in respect of the Company's share based long term incentive plan, including the CEO's special long term incentive plan (5) USA-based officers paid in US$. The average exchange rate for the 2013 financial year was US$1.02686 = A$1.00. (6) Australian-based officer paid in A$. (7) Ceased employment effective 15 April 2013.
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2012
Details of the remuneration provided to Key Management Personnel are set out in the following table.
Table 11 – Key Management Personnel Remuneration
Base Salary
Short-term Post employment Long-term Long-term Other Benefits
Total
Proportion of total remuneration performance
related Annual
Incentive Non-salary
benefits(1) Superannuation
contributions(2) Cash Based(3)
Share Based(4) Termination
Payment(7)
M R Nicolin(5) US$856,731 US$580,140 US$102,927 US$305,791 US$1,547,454 US$240,000 US$3,633,043 65.2%
R F Jilla(5) US$463,024 US$224,453 US$29,614 US$134,827 US$806,281 US$1,658,199 62.1%
S Corriveau(5) US$345,000 US$200,000 US$129,268 US$74,857 US$498,201 US$1,247,326 56.0%
T Draskovics(5) US$163,461 US$95,219 US$2,655 US$27,806 US$123,596 US$412,737 53.0%
S Genzer(5) US$337,500 US$150,516 US$142,844 US$84,186 US$325,000 US$1,040,046 45.7%
A Lopez(5) US$247,500 US$71,961 US$150,820 US$22,713 US$110,000 US$602,994 30.1%
P B Carroll(6) A$406,850 A$253,671 A$35,360 A$91,434 A$340,730 A$1,128,045 52.7%
Former Executive(7) W Heintz €217,176 €44,846 €47,575 €155,572 €2,229,771 €2,694,940
Total Remuneration – key management personnel US$2,413,216 US$1,322,289 US$558,128 US$650,180 US$3,410,532 US$240,000 US$8,594,345 A$406,850 A$253,671 A$35,360 A$91,434 A$340,730 A$1,128,045 €217,176 €44,846 €47,575 €155,572 €2,229,771 €2,694,940
(1) Includes the cost to the Company of cash benefits such as motor vehicle, relocation and housing allowances, executive insurance and sign-on bonuses of US$75,000 for S Genzer and US$120,000 for A Lopez. (2) Includes contributions to USA benefit or non-qualified pension plans, European pension plans and to an Australian superannuation fund, as applicable. (3) Includes amounts provided in respect of the Company's 2010, 2011 and 2012 cash based long term incentive plans. (4) Amount provided in respect of the CEO's special long term incentive plan (5) USA-based officers paid in US$. The average exchange rate for the 2012 financial year was US$1.03236 = A$1.00. (6) Australian-based officer paid in A$. (7) Ceased employment effective 31 October 2011. The termination amount provided for payment to Mr Heintz as part of his cessation of employment was made in accordance with Belgian labour law and his pre-2009 contract of employment. F
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D. Service agreements
The remuneration and other terms of employment for the CEO and other Senior Executives are covered in formal agreements or letters of offer. Each of these agreements makes provision for a fixed remuneration component, performance-related annual cash incentive (as described above), other benefits, and participation, where eligible, in the Company’s long-term incentive arrangements (as described above).
Chief Executive Officer
The Employment Agreement entered into with the CEO:
• does not specify a fixed term of employment;
• provides that the Company may terminate the CEO’s employment upon giving 12 months’ notice or payment in lieu, and may terminate immediately in the case of wilful misconduct;
• provides that in certain circumstances, such as a material diminution of responsibility or the CEO ceasing to be the most senior executive of Ansell, the CEO may be entitled to a payment equivalent to 12 months' base salary;
• requires the CEO to give the Company at least six months’ notice of resignation; and
• in order to protect the Company’s business interests, prohibits the CEO from engaging in any activity that would compete with the Company for a period of 12 months following termination of his employment for any reason.
The Employment Agreement entered into with the CEO has been drafted to comply with the new legislative provisions of the Corporations Act regarding the payment of benefits on termination.
Other Key Management Personnel - Current executives
S Corriveau and T Draskovics are assumed to be employed ‘at will’. As such, their respective service agreements do not specify a fixed term of employment. These executives are, in general, eligible for payments upon termination (other than for gross misconduct) equal to 12 months’ base salary plus certain other contractual entitlements. These executives would typically be expected to give the Company four weeks’ notice of resignation.
P Carroll is an Australian-based executive, and is employed under a service agreement of unlimited duration. The Company may terminate Mr Carroll's employment by making a severance payment equal to 12 months' base salary, other than termination for cause.
Each of the service agreements for these senior executives were entered into prior to the amendments to the Corporations Act regarding the payment of benefits on termination, which came into effect on 24 November 2009.
S Genzer and A Lopez, who are based in the USA, are employed ‘at will’ and as such, their service agreement does not specify a fixed term of employment, however the agreements has been drafted to comply with the new legislative provisions of the Corporations Act regarding the payment of benefits on termination.
The Board believes that the termination conditions agreed with the CEO and other senior executives are reasonable and mutually beneficial for the Company and the executives involved.
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Table of Contents: Page
Income Statement …………………………………………………………………………………………………… 2Statement of Comprehensive Income ……………………………………………………………………………… 2Balance Sheet ………………………………………………………………………………………………………… 3Statement of Changes in Equity …………………………………………………………………………………… 4Cash Flow Statement ………………………………………………………………………………………………… 6Notes to the Financial Statements: ………………………………………………………………………………… 7
Note: 1 Summary of significant accounting policies …………………………………… 72 Operating Segments ……………………………………………………………… 133 Total revenue …………………………………………………………………… 154 Profit before income tax ………………………………………………………… 155 Auditors' remuneration ………………………………………………………… 156 Issued capital and reserves ……………………………………………………… 167 Income tax ……………………………………………………………………… 178 Dividends paid or declared ……………………………………………………… 179 Cash and cash equivalents ……………………………………………………… 18
10 Trade and other receivables ……………………………………………………… 1811 Inventories ……………………………………………………………………… 1812 Current assets - other …………………………………………………………… 1913 Investments .……………………………………………………………………… 1914 Property, plant and equipment …………………………………………………… 1915 Intangible assets ………………………………………………………………… 2116 Deferred tax assets ……………………………………………………………… 2217 Trade and other payables ………………………………………………………… 2318 Interest bearing liabilities ………………………………………………………… 2319 Provisions ……………………………………………………………………… 2520 Retirement benefit obligations …………………………………………………… 2621 Deferred tax liabilities …………………………………………………………… 2822 Expenditure commitments ……………………………………………………… 2823 Ownership-based remuneration schemes ………………………………………… 2924 Financial risk management ……………………………………………………… 2925 Key management personnel disclosures ………………………………………… 3426 Notes to the Statement of Cash Flows …………………………………………… 3927 Acquisition of businesses and subsidiaries ……………………………………… 4028 Related party disclosures ………………………………………………………… 4129 Particulars relating to subsidiaries ……………………………………………… 4230 Parent entity disclosures ………………………………………………………… 4431 Earnings per share ……………………………………………………………… 4432 US Dollar Financial Information ………………………………………………… 45
Director's Declaration …………………………………………………………………………………… 49Independent Audit Report ……………………………………………………………………………… 50
Ansell Limited and SubsidiariesFinancial Statements - 30 June 2013
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Consolidated Income Statementof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012Note A$m A$m
RevenueTotal revenue 3 1,340.0 1,218.3
ExpensesCost of goods sold (778.4) (718.1)Distribution (60.4) (59.7)Selling, general and administration (334.0) (291.1)
Total expenses, excluding financing costs (1,172.8) (1,068.9)Net financing costs 4 (10.5) (4.9)
156.7 144.5 7 (15.9) (11.5)
140.8 133.0
Profit for the period is attributable to:
Ansell Limited shareholders 136.8 130.0
4.0 3.0
140.8 133.0
Earnings per share is based on profit attributable to Ansell Limited shareholders
cents centsBasic earnings per share 31 104.6 99.1 Diluted earnings per share 31 104.2 98.9
Consolidated Statement of Comprehensive Incomeof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012A$m A$m
Profit for the period 140.8 133.0
Other comprehensive incomeItems that will not be reclassified to profit or loss:Actuarial loss on defined benefit pension /post retirement health benefit plans (3.7) (8.1)Change in fair value of financial assets (3.3) (0.9)Tax benefit on items that will not be reclassified to profit and loss 2.5 2.6 Total items that will not be reclassified to profit or loss (4.5) (6.4)Items that may subsequently be reclassified to profit or loss:Net exchange difference on translation of financial statements of foreign operations 23.5 (2.6)Net movement in effective hedges for year 4.2 (5.3)Tax (expense)/benefit on items that may subsequently be transferred to profit or loss (1.3) 3.0 Total items that may subsequently be reclassified to profit or loss 26.4 (4.9)Other comprehensive income for the period, net of tax 21.9 (11.3)
Total comprehensive income for the period 162.7 121.7
Attributable to:Ansell Limited shareholders 157.5 119.2 Non-controlling interests 5.2 2.5
Total comprehensive income for the period 162.7 121.7
The above consolidated income statement and consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Profit before income tax Income tax expense
Profit for the period
Non-controlling interests
Profit for the period
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Consolidated Balance Sheetof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012Note A$m A$m
Current AssetsCash on hand 9 0.5 0.7 Cash at bank and on deposit 9 328.8 245.1 Cash assets - restricted deposits 9 3.7 3.5 Trade and other receivables 10 253.2 184.7 Derivative financial instruments 24 10.7 6.8 Inventories 11 280.0 212.5 Other 12 15.6 10.0
Total Current Assets 892.5 663.3
Non-Current AssetsTrade and other receivables 10 3.3 2.1 Investments 13 3.0 4.0 Property, plant and equipment 14 201.1 150.6 Intangible assets 15 583.1 389.6 Deferred tax assets 16 130.5 119.5 Other 21.9 19.2
Total Non-Current Assets 942.9 685.0
Total Assets 1,835.4 1,348.3
Current LiabilitiesTrade and other payables 17 217.3 154.8 Derivative financial instruments 24 18.2 18.1 Interest bearing liabilities 18 97.0 16.7 Provisions 19 54.5 49.5 Current tax liabilities 23.2 14.3
Total Current Liabilities 410.2 253.4
Non-Current LiabilitiesTrade and other payables 17 10.8 5.0 Interest bearing liabilities 18 485.5 284.2 Provisions 19 19.5 20.0 Retirement benefit obligations 20 21.0 17.7 Deferred tax liabilities 21 34.9 29.6 Other 20.2 17.6
Total Non-Current Liabilities 591.9 374.1
Total Liabilities 1,002.1 627.5
Net Assets 833.3 720.8
EquityIssued capital 6(a) 861.0 862.2 Reserves 6(b) (84.8) (109.0)Retained profits/(accumulated losses) 40.4 (46.5)
Total equity attributable to Ansell Limited shareholders 816.6 706.7
Non-controlling interests 16.7 14.1
Total Equity 833.3 720.8
The above consolidated balance sheet should be read in conjunction with the accompanying notes.For
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Consolidated Statement of Changes in Equityof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012A$m A$m
Total Equity at the beginning of the financial year 720.8 677.6 Total comprehensive income for the period attributable to:Ansell Limited shareholders 157.5 119.2 Non-controlling interests 5.2 2.5
Transactions with owners as owners attributable to Ansell Limited shareholders:Conversion of Executive Share Plan shares to fully paid and exercise of options 2.3 0.9 Share buy-back (3.5) (32.6)Share-based payments reserve 1.3 0.2 Dividends (47.7) (44.9)
Transactions with owners as owners attributable to non-controlling interests:Dividends (2.6) (2.1)
Total Equity at the end of the financial year 833.3 720.8
Share CapitalBalance at the beginning of the financial year 862.2 893.9 Transactions with owners as owners:Conversion of Executive Share Plan shares to fully paid and exercise of options 2.3 0.9 Share buy-back (3.5) (32.6)
Balance at the end of the financial year 861.0 862.2
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement of Changes in Equity (continued)of Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012A$m A$m
ReservesShare-Based Payments ReserveBalance at the beginning of the financial year 36.6 36.4 Transactions with owners as owners:
Charge to the income statement 1.3 0.2 Balance at the end of the financial year 37.9 36.6
Hedging ReserveBalance at the beginning of the financial year (10.6) (8.3)Comprehensive income for the period:
Net movement in effective hedges 2.9 (2.3)Balance at the end of the financial year (7.7) (10.6)General ReserveBalance at the beginning of the financial year 9.5 8.9 Transfer from retained profits/(accumulated losses) 0.5 0.6 Balance at the end of the financial year 10.0 9.5
Foreign Currency Translation ReserveBalance at the beginning of the financial year (133.2) (131.1)Comprehensive income for the period:
Net exchange differences on translation of financial statements of foreign operations 22.3 (2.1)Balance at the end of the financial year (110.9) (133.2)Transactions with Non-Controlling InterestsBalance at the beginning of the financial year (10.7) (10.7)Balance at the end of the financial year (10.7) (10.7)Fair Value ReserveBalance at the beginning of the financial year (0.6) - Comprehensive income for the period:Change in fair value of financial assets (2.8) (0.6)Balance at the end of the financial year (3.4) (0.6)
Total Reserves at the end of the financial year (84.8) (109.0)
Retained Profits/(Accumulated Losses)Balance at the beginning of the financial year (46.5) (125.2)Transfer to reserves (0.5) (0.6)Comprehensive income for the period:
Net profit attributable to Ansell Limited shareholders 136.8 130.0 Actuarial loss on defined benefit pension /post retirement health benefit plans net of tax (1.7) (5.8)
Transactions with owners as owners:Dividends paid (47.7) (44.9)
Balance at the end of the financial year 40.4 (46.5)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement of Cash Flowsof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012Note A$m A$m
Cash Flows Related to Operating Activities
Receipts from customers 1,309.0 1,210.4 Payments to suppliers and employees (1,166.7) (1,097.9)Net receipts from operations 142.3 112.5 Income taxes paid (15.2) (17.3)
Net Cash Provided by Operating Activities 26(a) 127.1 95.2
Cash Flows Related to Investing Activities
27 (201.2) (43.9)Payments for property, plant, equipment and intangible assets (39.0) (36.6)Payments for investments (1.8) (4.9)Proceeds from sale of property, plant and equipment 7.7 9.3
Net Cash Used in Investing Activities (234.3) (76.1)
Cash Flows Related to Financing Activities
Proceeds from borrowings 428.0 291.0 Repayments of borrowings (188.7) (221.0)Net proceeds from borrowings 239.3 70.0 Proceeds from issues of shares 2.3 0.9 Payments for share buy-back (3.5) (32.6)Dividends paid - Ansell Limited Shareholders (47.7) (44.9)Dividends paid - Non-controlling interests (2.6) (2.1)Interest received 7.5 6.8 Interest and financing costs paid (16.3) (12.1)
179.0 (14.0)
Net increase in cash and cash equivalents 71.8 5.1 Cash and cash equivalents at the beginning of the financial year 249.3 242.5 Effects of exchange rate changes on the balances of cash and cash equivalents held inforeign currencies at the beginning of the financial year 11.9 1.7
Cash and Cash Equivalents at the End of the Financial Year 26(b) 333.0 249.3
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Payments for businesses, net of cash acquired
Net Cash Provided by/(Used in) Financing Activities
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Notes to the Financial Statements1. Summary of Significant Accounting PoliciesGeneralAnsell Limited ("the Company") is a company domiciled in Australia. The Company and its subsidiaries (together referred to as the "Group") is aglobal leader in protection solutions. The Group is a for-profit entity and designs, develops and manufactures a wide range of hand and armprotection solutions, clothing and condoms and is organised around four Global Business Units:
Industrial GBU : hand and upper arm and body protective solutions for the industrial market Medical GBU : surgical and examination gloves for healthcare professionals and patients Sexual Wellness GBU : condoms, lubricants and devices Specialty Markets GBU : protective gloves and clothing for markets outside of traditional manufacturing environments
Statement of ComplianceThe financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards adopted bythe Australian Accounting Standards Board ("AASB") and the Corporations Act 2001. The financial report of the Group also complies withInternational Financial Reporting Standards and interpretations adopted by the International Accounting Standards Board.
The consolidated financial statements were authorised for issue by the Board of Directors on 20 August 2013.
Basis of AccountingThe financial report is presented in Australian dollars and on the historical cost basis except that assets and liabilities in respect of derivativefinancial instruments and available-for-sale financial assets are stated at their fair value.The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in thefinancial report and Directors' Report have been rounded off to the nearest hundred thousand dollars, unless otherwise stated. A summary of thesignificant accounting policies of the Group are disclosed below. The accounting policies have been applied consistently by all entities in the Group.
Changes in Accounting PoliciesPresentation of transactions recognised in other comprehensive incomeThe Group has applied the amendments to AASB 101 Presentation of Financial Statements as outlined in AASB 2011-9 Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income. The amendment only relates to disclosure and has had no impacton consolidated net income or earnings per share. The revised disclosure requirements have been applied retrospectively to the Statement of OtherComprehensive Income. The Group is now required to separately disclose those items of other comprehensive income that may be reclassified toprofit or loss in the future from those that will never be reclassified to profit or loss.
Classification and measurement of financial assets and financial liabilities.The Group has elected to early adopt AASB 9 Financial Instruments (2009 and 2010) effective 1 July 2012 which has resulted in any changes in thefair value of financial assets being recognised in other compehensive income and reflected in the fair value reserve in equity. Previously impairmentcharges in respect of such financial assets would have been recognised in profit or loss.
New Standards and Interpretations not yet adoptedA number of new standards, amendments to standards and interpretations are effective for financial years beginning after 1 July 2012 and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidatedfinancial statements of the Group.
Principles of ConsolidationThe financial statements of the Group include the Company being the parent entity, and its subsidiaries.The financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at balance date and the results of all subsidiariesfor the year then ended. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly,to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Results of subsidiaries are included in theincome statement from the date on which control commences and continue to be included until the date control ceases to exist.
The effects of all transactions between entities in the Group are eliminated in full. Non-controlling interests in the results and equity of subsidiariesare shown separately in the income statement and balance sheet respectively.
Foreign Currency TransactionsTransactions in foreign currencies are recorded at the rate of exchange ruling on the date of each transaction. At balance date, amounts payable andreceivable in foreign currencies are converted at the rates of exchange ruling at that date with any resultant gain or loss recognised in the incomestatement except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.
TranslationThe financial statements of overseas subsidiaries are maintained in their functional currencies and are converted to the Group's presentationcurrency as follows: assets and liabilities are translated at the rate of exchange as at balance date income statements are translated at average exchange rates for the reporting period which approximate the rates ruling at the dates of the
transactions all resultant exchange differences are recorded in the foreign currency translation reserve.
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Notes to the Financial Statements1. Summary of Significant Accounting Policies (continued)Translation (continued)On consolidation, exchange differences arising from borrowings and any other currency instruments designated as hedges of investments in overseassubsidiaries, are transferred to the foreign currency translation reserve on a net of tax basis where applicable. When an overseas subsidiary is sold thecumulative amount recognised in the foreign currency translation reserve relating to the subsidiary is recognised in the income statement as part ofthe gain or loss on sale.
Revenue RecognitionRevenues are recognised at fair value of the consideration received net of any goods and services tax (GST).
Sales RevenueSales revenue comprises revenue earned (net of returns, discounts and allowances which are accrued at expected levels as sales occur) from theprovision of products to entities outside the Group. Sales revenue is recognised in the income statement when the significant risks and rewards ofownership have been transferred to the buyer.
Interest IncomeInterest income is recognised as it accrues.
Financing CostsFinancing costs include interest, amortisation of ancillary costs incurred in connection with the arrangement of borrowings and other related charges.
Income TaxIncome tax in the income statement for the periods presented comprises current and deferred tax adjusted for income tax over/under provided inprevious years except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. The estimatedliability for income tax outstanding in respect of the period's operations is included in the balance sheet as a current liability. Deferred tax isprovided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition ofgoodwill and goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that are not part of a business combination and donot affect either accounting or taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reversein the foreseeable future.
In jurisdictions where unbooked tax losses exist, regular reviews are undertaken of the past trading history and projected future trading performanceof the operations in these jurisdictions as part of the determination of the value of any deferred tax asset that should be reflected in the accounts inrespect of such losses. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available againstwhich the asset can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or when the liabilityis settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
Trade Debtors and Other ReceivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, lessan allowance for impairment. The collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are writtenoff to the income statement. An allowance for impairment is established when there is sufficient evidence to indicate that not all amounts due willbe collected.
InventoriesStock on Hand and Work in ProgressStock on hand and work in progress are valued on the basis of the lower of cost and net realisable value. The methods generally adopted throughoutthe Group in determining costs are:
Raw Materials and Other StockActual costs, determined on a first in, first out basis or standard costs approximating actual costs.
Finished Goods and Work in ProgressFinished goods and work in progress are valued at standard costs which approximate actual costs and include an appropriate allocation ofmanufacturing overheads where applicable.
Obsolete and slow moving stocks are written down to net realisable value where such value is below cost. Net realisable value is determined on thebasis of each inventory line's normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted toestablish net realisable value.
InvestmentsSubsidiariesAll investments are valued at the lower of cost and recoverable value. Dividends and distributions are brought to account in the income statementwhen they are paid by the subsidiary.
OtherIncludes quoted and unquoted equity instruments. These investments are initially recorded at cost and subsequently measured at fair value and anychanges are recognised in other comprehensive income and reflected in the fair value reserve in equity.
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Notes to the Financial Statements1. Summary of Significant Accounting Policies (continued)Property, Plant and EquipmentAcquisitionItems of property, plant and equipment are initially recorded at cost and depreciated as set out below. The cost of property, plant and equipmentconstructed by the Group includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a workingcondition for its intended use.
Depreciation and AmortisationDepreciation and amortisation is generally calculated on a straight-line basis so as to write off the net cost of each item of property, plant andequipment, excluding land, over its estimated useful life.
The expected useful lives in the current and prior years are as follows:
Freehold buildings 20 - 40 yearsLeasehold buildings The lesser of 50 years or life of leasePlant and equipment 3 - 20 years
Depreciation and amortisation rates and methods are reviewed annually for appropriateness.
LeasesOperating lease payments are expensed as incurred on a straight-line basis over the term of the lease.
Recoverable Amount of Non-Current Assets Valued on the Cost BasisThe carrying amounts of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverableamount at balance date. An impairment loss is recognised whenever the carrying amount of a non-current asset exceeds its recoverable amount. Theimpairment loss is recognised as an expense in the income statement in the reporting period in which it occurs.
The recoverable amount of a non-current asset is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, theestimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount isdetermined for the cash generating unit to which the asset belongs.
Impairment losses, other than those in respect of goodwill, are reversed through the income statement when there is an indication that theimpairment loss may no longer exist.
Intangible AssetsGoodwill and Brand NamesGoodwill on acquisition is measured at cost being the excess of the cost of the acquisition over the fair value of the Group's share of the netidentifiable assets acquired. Goodwill is not amortised. Brand names are initially recorded at cost based on independent valuation at acquisition date(which equates to fair value). Based on the nature of the major brand names acquired by the Group, which are international brands that benefit fromcompetitive advantages due to technology, innovation and product development, it is not possible to make an arbitrary assessment that these brandnames have a finite useful life, quantifiable in terms of years except where such brands are subject to licensing agreements covering a finite period. Brand names subject to a licensing arrangement are amortised over the life of the arrangement. No amortisation is provided against the carryingvalue of those brand names not subject to a licensing arrangement as the Group believes that the lives of such assets are indefinite at this point.
Goodwill and brand names are reviewed annually, or more frequently if events or changes in circumstances indicate that their carrying values may beimpaired, and are carried at cost less accumulated impairment losses.
For the purposes of impairment testing, goodwill and brand names are allocated to cash generating units (which equate to the Group's reportablebusiness segments i.e. Industrial, Medical, Sexual Wellness and Specialty Markets) upon acquisition. Acquired businesses can readily be allocated toone of the business segments on the basis of products manufactured and/or marketed. Such manufacturing and marketing operations tend to covermore than one geographical region. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwilland brand names relate. Where the recoverable amount of the cash generating unit is less than the carrying value, an impairment charge to goodwill and/or brand names is recognised in the income statement. An impairment loss in respect of goodwill is not reversed.
Development and Software CostsCapitalised development and software costs are amortised over a three to ten year period.
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Notes to the Financial Statements1. Summary of Significant Accounting Policies (continued)PayablesTrade and Other CreditorsTrade and other creditors are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Group.
Interest Bearing LiabilitiesInterest bearing liabilities are initially recognised at fair value less attributable transaction costs. Subsequent to initial recognition interest bearingliabilities are stated at amortised cost. Any difference between the cost and redemption value is recognised in the income statement over the periodof the liability using the effective interest method.
Employee EntitlementsWages, Salaries and Annual LeaveLiabilities for employee entitlements to wages, salaries and annual leave represent the amount which members of the Group have a presentobligation to pay resulting from employees' services provided up to the balance date calculated at undiscounted amounts based on expected wage andsalary rates that will be paid when the obligation is settled and include related on-costs.
Long Service Leave and Post-retirement Health Benefits The liability for employee entitlements to long service leave represents the present value of the estimated future cash outflows to be made by theGroup resulting from employees' services provided in the current and prior periods. Post retirement health benefits are subject to annual actuarialreviews.
The liability is calculated using estimated future increases in wage and salary rates including related on-costs, expected settlement dates based onturnover history and medical cost trends and is discounted using rates attaching to national government securities at balance date, which mostclosely match the terms of maturity of the related liabilities.
Retirement Benefit ObligationsCertain members of the Group contribute to certain defined benefit and defined contribution superannuation plans maintained to providesuperannuation benefits for employees. The defined benefit plans generally provide benefits based on salary in the period prior to retirement. Thedefined contribution plans receive contributions from members of the Group and the Group's legal or constructive obligation is limited to thesecontributions.
A liability or asset in respect of each defined benefit superannuation plan is recognised in the balance sheet and is calculated by estimating theamount of future benefit that employees have earned in return for their service in the current and prior periods. This benefit is discounted todetermine its present value and the fair value of plan assets is deducted. The present value of the defined benefit is based on expected futurepayments calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage andsalary 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 andcurrency that match, as closely as possible, the estimated future cash flows.
Actuarial gains or losses are taken to other comprehensive income and all expenses related to defined benefits plans are recognised in employee related expense in the income statement. Contributions to defined contribution plans are recognised as an expense as they become payable.
Share-based PaymentsThe fair value of Performance Rights granted to the Chief Executive Office on his appointment in March 2010 and to senior executives under the2013 Long Term Incentive Plan is recognised as an employee benefit expense with a corresponding increase in equity over the vesting period.
ProvisionsA provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrificeof economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.
A provision is determined by discounting the expected future cash flows required to settle the obligation at a pre-tax rate that reflects currentmarket assessments of the time value of money and the risks specific to the liability.
Rationalisation and restructuringProvisions for rationalisation and restructuring are only recognised when a detailed plan has been approved and the restructuring has eithercommenced or been publicly announced, or firm contracts related to the restructuring have been entered into. Costs related to ongoing activities arenot provided for.
Accufix pacing lead related expenses and insurance claimsThe Group provides for certain specifically identified or obligated costs when these amounts are reasonably determinable.
DividendsA provision for dividends payable is recognised in the reporting period in which the dividends are declared.
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Notes to the Financial Statements1. Summary of Significant Accounting Policies (continued)DerivativesThe Group uses derivative financial instruments, principally foreign exchange and interest rate related, to reduce the exposure to foreignexchange rate and interest rate movements.
The Group has adopted certain principles in relation to derivative financial instruments: derivatives may be used to hedge underlying business exposures of the Group. Trading in derivatives is not undertaken; derivatives acquired must be able to be recorded in the Group's treasury management systems, which contain extensive internal controls; and the Group predominantly does not deal with counter-parties rated lower than A- by Standard & Poor's or A3 by Moody's Investors Service.
The Group follows the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financialinstruments, as it does in relation to other financial assets and liabilities on the balance sheet.
On a continuing basis, the Group monitors its future exposures and on some occasions hedges all or part of these exposures. The transactions whichmay be covered are future net cash flows of overseas subsidiaries, future foreign exchange requirements and interest rate positions.
These exposures are then monitored and may be modified from time to time. The foreign exchange hedge instruments are predominantly up to 12months' duration and are used to hedge operational transactions the Group expects to occur in this time frame. From time to time minormismatches occur in the forward book, however these mismatches are managed under guidelines, limits and internal controls. Interest rate derivativeinstruments can be for periods up to ten years as the critical terms of the instruments are matched to the underlying borrowings.
Derivative financial instruments are recognised initially at fair value and subsequently remeasured to their fair value at each reporting date. The fairvalue of forward exchange contracts, foreign exchange options and interest rate swap contracts is determined by reference to current market rates for these instruments.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and continues to satisfythe conditions for hedge accounting, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (1) hedges ofthe fair value of recognised assets or liabilities (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its riskmanagement objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inceptionand on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective inoffsetting changes in fair values or cash flows of hedged items.
Fair value hedgeChanges in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with anychanges in the fair value of the hedged asset or liability that are attributable to the hedged risk.
Cash flow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in thehedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Gains or losses that are recognised in the hedging reserve are transferred to the income statement in the periods when the hedged item will affectprofit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability,the gains or losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount ofthe asset or liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer meets the conditions forhedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity remains in equity until theforecasted transaction is ultimately recognised in the income statement. When a hedged transaction is no longer expected to occur, the cumulativegain or loss that was reported in equity is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accountingChanges in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the incomestatement.
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Notes to the Financial Statements1. Summary of Significant Accounting Policies (continued)Issued CapitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, netof tax where applicable, from the proceeds. When shares are repurchased, the amount of the consideration paid, including directly attributablecosts, is recognised as a deduction from equity.
Earnings per ShareBasic earnings per share (EPS) is calculated by dividing the net profit attributable to Ansell Limited shareholders for the reporting period, afterexcluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares of the Company,adjusted for any bonus issue and share split.
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after-tax effect of financing costs associated with dilutive potentialordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, bythe weighted average number of ordinary and dilutive potential ordinary shares adjusted for any bonus issue.
Accounting Estimates and JudgementsThe preparation of consolidated financial statements in conformity with Australian generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reportedperiod. The estimates and associated assumptions are based on historical experience and various factors that are believed to be reasonable underthe circumstances and are reviewed on an ongoing basis. Actual results could differ from these estimates.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in theperiod of the revision and future periods if the revision affects both current and future periods.
The key estimates and assumptions that may have a significant impact on the financial statements are as follows:
Current asset provisionsIn the course of normal trading activities, management uses its judgement in establishing the net realisable value of various elements of working capital – principally inventory and accounts receivable. Provisions are established for obsolete or slow moving inventories and bad or doubtfulreceivables. The actual level of obsolete or slow moving inventories and bad or doubtful receivables in future periods may be different from theprovisions established and any such differences would affect future earnings of the Group.
Property, plant and equipment and definite life intangible assetsThe Group’s property, plant and equipment and intangible assets, other than indefinite life intangible assets, are depreciated/amortised on astraight line basis over their useful economic lives. Management reviews the appropriateness of useful economic lives of assets at least annuallyand any changes to useful economic lives may affect prospective depreciation rates and asset carrying values.
Impairment of goodwill and brand namesThe Group tests whether goodwill and brand names are impaired at least annually, or more frequently if events or changes in circumstancesindicate that their carrying values may be impaired, in accordance with the accounting policy on Intangible Assets. The policy requires the useof assumptions in assessing the carrying values of cash generating units.
These assumptions are detailed in Note 15.
Income TaxThe reviews undertaken to determine whether a deferred tax asset should be recognised in jurisdictions where unbooked tax losses exist and inassessing the recoverability of booked tax losses, involve the use of judgement and estimates in assessing the projected future tradingperformances of relevant operations.
These judgements and estimates are subject to risk and uncertainty hence there is a possibility that changes in circumstances will alterexpectations which may impact on the amount of the deferred tax asset in respect of tax losses recognised on the balance sheet. In suchcircumstances the carrying amount of this asset may require adjustment resulting in a corresponding credit or charge to the income statement.
Defined Benefit Superannuation PlansVarious actuarial assumptions are utilised in the determination of the Group's defined benefit superannuation plan obligations.These assumptions are detailed in Note 20.
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Notes to the Financial Statements2. Operating Segments The Group comprises the following main operating segments:Industrial GBU : hand and upper arm and body protective solutions for the industrial market Medical GBU : surgical and examination gloves for healthcare professionals and patientsSexual Wellness GBU : condoms, lubricants and devicesSpecialty Markets GBU : protective gloves and clothing for markets outside of traditional manufacturingenvironments
2013 2012 2013 2012A$m A$m A$m A$m
Operating SegmentsIndustrial 550.0 489.0 90.2 81.3Medical 341.2 346.0 40.6 38.6Sexual Wellness 224.2 210.9 33.6 32.2Specialty Markets 224.6 172.4 11.7 7.1
Total Operating Segments 1,340.0 1,218.3 176.1 159.2Corporate costs (8.9) (9.8)Earnings before Interest and Tax (EBIT) 167.2 149.4Net interest expense and other financing costs (10.5) (4.9)Profit before Income Tax 156.7 144.5Income tax (15.9) (11.5)Profit for the period 140.8 133.0Non-controlling interests (4.0) (3.0)
Total Consolidated 1,340.0 1,218.3 136.8 130.0
Regional InformationAsia Pacific 273.7 259.8 63.7 62.0Europe, Middle East and Africa 558.6 463.7 69.7 61.0Latin America & Caribbean 99.2 80.5 13.8 10.2North America 408.5 414.3 28.9 26.0
Total Regional Information 1,340.0 1,218.3 176.1 159.2
2013 2012 2013 2012A$m A$m A$m A$m
Operating SegmentsIndustrial 474.6 335.3 103.2 100.7Medical 302.1 284.2 75.9 81.5Sexual Wellness 224.8 200.0 41.6 33.6Specialty Markets 290.8 123.2 60.4 22.9
Total Operating Segments 1,292.3 942.7 281.1 238.7Corporate assets/liabilities 210.1 156.3 721.0 388.8Cash 333.0 249.3 - -
Total Consolidated 1,835.4 1,348.3 1,002.1 627.5
Regional InformationAsia Pacific 306.3 242.3 101.8 95.0Europe, Middle East and Africa 225.7 143.1 90.4 52.6Latin America & Caribbean 63.8 33.1 24.4 5.6North America 177.7 191.9 64.5 85.5Goodwill and brand names 518.8 332.3 - -
Total Regional Information 1,292.3 942.7 281.1 238.7
External Revenue Segment Result
Assets Employed Liabilities
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Notes to the Financial Statements2. Operating Segments (continued)(a) Corporate CostsRepresents costs of the Statutory Head Office and part of the costs of the Corporate Head Office.
(b) CashCash also includes Accufix Pacing Leads restricted deposits.
(d) Regional InformationThe allocation of Operating Revenue and Operating Results reflect the geographical regions in which the products are sold to external customers.Assets Employed (excluding goodwill and brand names) are allocated to the geographical regions in which the assets are located. Asia Pacific - manufacturing facilities in Malaysia, Thailand, India and Sri Lanka and sales activity. Europe, Middle East and Africa - manufacturing facilities in Lithuania and Portugal and sales activity. Latin America and Caribbean - manufacturing facilities in Brazil and sales activity. North America - manufacturing facilities in USA and Mexico and sales activity.
(e) Country of DomicileThe Company's country of domicile is Australia. The Operating Revenue and Assets Employed for the Australian trading operations (reportedwithin the Asia Pacific region) are as follows:
2013 2012A$m A$m
Operating Revenue 131.3 137.8 Assets Employed 63.4 60.6
2013 2012A$m A$m
(f) Operating Segments' Capital ExpenditureIndustrial 14.1 11.8 Medical 7.7 8.8 Sexual Wellness 4.7 2.4 Specialty Markets 3.3 2.6
(g) Operating Segments' Depreciation Industrial 7.0 5.2 Medical 8.1 8.4 Sexual Wellness 3.1 3.0 Specialty Markets 2.7 1.3
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Notes to the Financial Statements3. Total Revenue
2013 2012A$m A$m
Revenue from the Sale of Goods 1,340.0 1,218.3
Total Revenue 1,340.0 1,218.3
4. Profit Before Income Tax 2013 2012A$m A$m
Profit before income tax has been arrived at after charging/(crediting) thefollowing items:
Net Financing CostsInterest expense 15.2 9.7 Other financing costs 2.8 2.0 Interest income (7.5) (6.8)Total Net Financing Costs 10.5 4.9
DepreciationBuildings 1.3 1.5 Plant and equipment 19.2 15.8
AmortisationLeasehold land and buildings 1.8 1.2 Brand names 0.1 - Capitalised development costs 1.7 1.6 Capitalised software costs 3.8 1.8
Research and Development CostsExpensed as incurred 12.9 10.7
Net Bad Debts Expense (0.1) (0.3)
Amounts Set Aside to/(Released from) Provision for:Impairment of trade debtors (0.9) (0.7)Rationalisation and restructuring costs (0.5) (0.3)Insurance claims (0.9) 0.1
Employee Related ExpensesWages and salaries 194.8 165.6 Increase in provision for employee entitlements 11.2 10.6 Defined contribution superannuation plan expense 8.5 8.1 Defined benefit superannuation plan expense 1.5 1.5 Equity settled share-based payments expense 1.3 0.2
Net Foreign Exchange Loss/(Gain) 2.7 (4.8)
Gains Arising from Sale of Property, Plant and Equipment (3.8) (8.1)
Operating Lease Rentals 24.8 21.1
Write-down in Value of Inventories 2.2 2.3
5. Auditors' Remuneration2013 2012
A$'000 A$'000Audit and review of the financial reports:Auditors of Ansell Limited and Australian entities - KPMG 1,122 1,088 Other member firms of KPMG 1,631 1,606
2,753 2,694 Other services:Other audit and assurance services Other member firms of KPMG 146 114 Taxation and other services Other member firms of KPMG 47 58 Total other services 193 172 Total auditors' remuneration 2,946 2,866
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Notes to the Financial Statements6. Issued Capital and Reserves(a) Issued Capital
2013 2012A$m A$m
Issued Capital
130,617,963 (2012 - 130,656,668) ordinary shares, fully paid 861.0 862.2 67,900 (2012 - 67,900) Executive Share Plan shares, paid to 5 cents - -
Total Issued Capital 861.0 862.2
Movement in shares on issueOrdinary SharesBalance at 1 July 130,656,668 133,011,550 Conversion of Performance Rights and exercise of options 184,671 97,812 Buy-back/cancellation of shares (223,376) (2,452,694)Balance at 30 June 130,617,963 130,656,668
Executive Share Plan SharesBalance at 1 July 67,900 67,900 Balance at 30 June 67,900 67,900 The Company does not have authorised capital or par value in respect of its issued shares.
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders'meetings. In the event of winding up of the Company ordinary shareholders rank after all other shareholders and creditors and are fully entitledto any proceeds of liquidation.
Share Buy-backOn 15 August 2011 the Company announced an on-market buy-back program of up to 5 million shares to be completed within 12 months.Under this program, a total of 2,452,694 shares were bought back during the previous year. No further buy-backs were made under this programin the current year. This program has now ceased.On 13 February 2013 the Company announced a further on-market buy-back program of 2 to 3 million shares. Under this program 223,376shares have been bought back during the year.
Executive Share PlanDuring the financial year, no amounts outstanding on existing Executive Plan shares were paid (2012 - nil). Shares allotted under the PacificDunlop Executive Share Plan (which was discontinued in 1996) have been paid to 5 cents per share. Refer to Note 23 Ownership-basedRemuneration Schemes for details of the price payable for shares issued under this plan.
OptionsAs at the date of this report 64,415 (2012 - 249,086) unissued shares in the Company remain under option.
(b) ReservesNature and purpose of reserves Share-based paymentsThis reserve is used to record the value of equity benefits provided to employees as part of their remuneration under the Ansell Limited StockIncentive Plan, the CEO Special Long Term Incentive Plan and the 2013 Long Term Incentive plan. Refer to Note 23 Ownership-basedRemuneration Schemes for further details of these plans.
Hedging This reserve records the portion of the unrealised gains or losses on cash flow hedges that are deemed to be effective.
GeneralIn certain jurisdictions regulatory requirements result in appropriations being made to a general reserve. The amount in the general reserve isavailable for release to retained profits/(accumulated losses).
Foreign currency translationThe foreign currency translation reserve records the foreign currency differences arising from the translation of the financial statements offoreign operations where their functional currency is different to the presentation currency of the Group, as well as the translation ofborrowings or any other currency instruments that hedge the Company’s net investment in a foreign operation. Refer to Note 1 Summary ofSignificant Accounting Policies.
Transactions with non-controlling interestsRepresents the excess paid over the fair value of assets acquired as a result of the purchase of additional equity in non-wholly-owned subsidiaries.
Fair value reserveThis reserve records the cumulative net change in the fair value of financial assets.
Number of Shares
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Notes to the Financial Statements7. Income Tax
2013 2012A$m A$m
Prima facie income tax calculated at 30% (2012: 30%) on profit before income tax 47.0 43.4
Investment and export incentive allowances (2.8) (2.5)Net lower overseas tax rates (2.6) (2.4)Utilisation/recognition of previously unbooked tax losses* (25.2) (20.6)Reversal of valuation allowance against deferred tax asset - (5.4)Other permanent differences (0.5) (1.0)
Income tax expense attributable to profit before income tax 15.9 11.5
Income tax expense attributable to profit before income tax is made up of:Current year income tax 16.1 26.5 Deferred income tax attributable to: Increase in deferred tax liability 3.3 2.7 Increase in deferred tax asset (3.5) (17.7)
15.9 11.5
* Includes additional net booked tax losses of $7.8 million (2012 $4.3 million).
2013 2012A$m A$m
Income tax benefit/(expense) recognised in other comprehensive income
Actuarial loss on defined benefit pension /post retirement health benefit plans 2.0 2.3 Change in fair value of available for sale financial assets 0.5 0.3 Movement in effective hedges for year (1.3) 3.0
1.2 5.6
8. Dividends Paid or Declared2013 2012A$m A$m
Dividends PaidA final dividend of 20.5 cents per share unfranked for the year ended 30 June 2012 (June 2011 -19.0 cents unfranked) was paid on 21 September 2012 (2011 - 21 September 2011) 26.8 25.3
An interim dividend of 16.0 cents per share unfranked for the year ended 30 June 2013 (June 2012 -15.0 cents unfranked) was paid on 20 March 2013 (2012 - 14 March 2012) 20.9 19.6
47.7 44.9
Dividends DeclaredSince the end of the financial year the Directors have declared a final dividend of 22.0 cents per share unfranked, for the year ended 30 June 2013.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2013 and will berecognised in subsequent financial reports.
Dividend Franking AccountThe balance of the dividend franking account as at 30 June 2013 was nil (2012 - nil).
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Notes to the Financial Statements9. Cash and Cash Equivalents
2013 2012A$m A$m
Cash on hand 0.5 0.7 Cash at bank 86.9 60.8 Short term deposits 241.9 184.3
329.3 245.8 Restricted deposits 3.7 3.5 Total Cash and Cash Equivalents 333.0 249.3
Restricted deposits represent cash set aside (under Court orders) to cover the provisions established to address any remaining liability of membersof the Group for claims arising with respect to the Accufix Pacing Lead (refer Note 19 Provisions - Provision for Accufix Pacing Lead relatedexpenses).
10. Trade and Other Receivables2013 2012A$m A$m
CurrentTrade debtors 286.9 209.8 Allowance for impairment (9.9) (7.1)Provision for rebates and allowances (35.5) (27.5)
241.5 175.2 Other amounts receivable 11.7 9.5 Total Current 253.2 184.7
Non-CurrentOther amounts receivable 3.3 2.1 Total Non-Current 3.3 2.1 Total Trade and Other Receivables 256.5 186.8
The reconciliation of allowance for impairment - trade debtors is presented below:2013 2012A$m A$m
Balance at the beginning of the financial year 7.1 10.5 Amounts credited to the income statement (0.9) (0.7)Amounts utilised for intended purposes - (2.8)Amounts from businesses/entities acquired 2.7 - Net exchange differences on translation of foreign operations 1.0 0.1 Balance at the end of the financial year 9.9 7.1
11. Inventories2013 2012A$m A$m
Raw materials 46.5 23.7 Work in progress 19.7 13.8 Finished goods 213.8 174.9 Other stock - 0.1 Total Inventories 280.0 212.5
Inventories recognised as an expense 773.6 716.9 For
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Notes to the Financial Statements12. Current Assets - Other
2013 2012A$m A$m
Prepayments 12.5 7.2 Engineering spares 3.1 2.8 Total Current Assets - Other 15.6 10.0
13. Investments2013 2012A$m A$m
InvestmentsOther investmentsAt fair value 3.0 4.0 Total Investments 3.0 4.0
14. Property, Plant and Equipment2013 2012A$m A$m
(a) Freehold LandAt cost 14.0 12.6
(b) Freehold BuildingsAt cost 57.6 45.0 Provision for depreciation (30.4) (21.2)
27.2 23.8
(c) Leasehold Land and BuildingsAt cost 61.7 43.9 Provision for amortisation (22.5) (17.1)
39.2 26.8
(d) Plant and EquipmentAt cost 459.8 339.1 Provision for depreciation (347.4) (263.2)
112.4 75.9
(e) Buildings and Plant under constructionAt cost 8.3 11.5
Total Property, Plant and Equipment 201.1 150.6
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Notes to the Financial Statements14. Property, Plant and Equipment (continued)ReconciliationsReconciliations of the balances for each class of property, plant and equipment are set out below:
2013 2012Note A$m A$m
Freehold LandBalance at the beginning of the financial year 12.6 12.8 Additions through entities/businesses acquired 27 0.9 - Disposals/Write-downs (0.5) - Net exchange differences on translation of foreign operations 1.0 (0.2)Balance at the end of the financial year 14.0 12.6
Freehold BuildingsBalance at the beginning of the financial year 23.8 25.0 Additions 0.1 - Additions through entities/businesses acquired 27 3.1 - Disposals/Write-downs (1.7) - Transfer from buildings and plant under construction 0.8 1.1 Depreciation (1.3) (1.5)Net exchange differences on translation of foreign operations 2.4 (0.8)Balance at the end of the financial year 27.2 23.8
Leasehold Land and BuildingsBalance at the beginning of the financial year 26.8 25.5 Additions 1.8 0.4 Additions through entities/businesses acquired 27 8.1 - Disposals/Write-downs (1.1) (0.8)Transfer from buildings and plant under construction 2.4 2.2 Amortisation (1.8) (1.2)Net exchange differences on translation of foreign operations 3.0 0.7 Balance at the end of the financial year 39.2 26.8
Plant and EquipmentBalance at the beginning of the financial year 75.9 72.1 Additions 7.8 5.6 Additions through entities/businesses acquired 27 14.8 1.1 Disposals/Write-downs (0.6) (1.0)Transfer from buildings and plant under construction 23.6 12.4 Depreciation (19.2) (15.8)Net exchange differences on translation of foreign operations 10.1 1.5 Balance at the end of the financial year 112.4 75.9
Buildings and Plant under constructionBalance at the beginning of the financial year 11.5 5.5 Additions 23.2 21.6 Additions through entities acquired 27 0.1 - Transfers to property, plant and equipment (26.8) (15.7)Net exchange differences on translation of foreign operations 0.3 0.1 Balance at the end of the financial year 8.3 11.5
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Notes to the Financial Statements15. Intangible Assets
2013 2012A$m A$m
Brand NamesAt costBalance at the beginning of the financial year 107.4 104.1 Additions through entities acquired - 4.1 Amounts written off to the income statement (0.2) - Net exchange differences on translation of foreign operations 1.8 (0.8)Balance at the end of the financial year 109.0 107.4
Provision for amortisation and impairmentBalance at the beginning of the financial year - - Amortisation 0.1 - Balance at the end of the financial year 0.1 - Written down value of brand names at the end of the financial year 108.9 107.4
GoodwillAt costBalance at the beginning of the financial year 357.2 315.8 Additions through entities acquired 159.8 36.6 Net exchange differences on translation of foreign operations 37.7 4.8 Balance at the end of the financial year 554.7 357.2
Provision for amortisation and impairmentBalance at the beginning of the financial year 132.3 128.2 Net exchange differences on translation of foreign operations 12.5 4.1 Balance at the end of the financial year 144.8 132.3 Written down value of goodwill at the end of the financial year 409.9 224.9
Development costsAt costBalance at the beginning of the financial year 17.9 13.5 Expenditure capitalised in the current period 6.2 4.3 Previously capitalised costs charged to the income statement (5.3) - Net exchange differences on translation of foreign operations - 0.1 Balance at the end of the financial year 18.8 17.9
Provision for amortisation and impairmentBalance at the beginning of the financial year 7.7 6.1 Accumulated amortisation on previously capitalised costs charged to the income statement (5.3) - Amortisation 1.7 1.6 Balance at the end of the financial year 4.1 7.7 Written down value of development costs at the end of the financial year 14.7 10.2
Software costsAt costBalance at the beginning of the financial year 48.9 39.9 Additions 6.1 9.0 Net exchange differences on translation of foreign operations 0.2 - Balance at the end of the financial year 55.2 48.9
Provision for amortisation and impairmentBalance at the beginning of the financial year 1.8 - Amortisation 3.8 1.8 Balance at the end of the financial year 5.6 1.8 Written down value of software costs at the end of the financial year 49.6 47.1
Total Intangible Assets 583.1 389.6
Amortisation chargeThe amortisation of brand names, development and software costs is recognised in selling, general and administration costs in the incomestatement.
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Notes to the Financial Statements15. Intangible Assets (continued)Impairment testing of Goodwill and Brand NamesGoodwill and brand names are tested for impairment annually, or more frequently if events or changes in circumstances indicate that thecarrying values may be impaired. For the purposes of impairment testing, goodwill and brand names are allocated to cash generating units (CGUs), which equate to the Group'sreportable business segments, i.e. Industrial, Medical, Sexual Wellness and Specialty Markets upon acquisition.Carrying amount of goodwill and brand names allocated to each of the CGUs:
2013 2012A$m A$m
Industrial 187.1 130.4 Medical 100.7 89.3 Sexual Wellness 90.2 82.3 Specialty Markets 140.8 30.3
518.8 332.3
The recoverable amount of the CGUs has been determined based on a value in use calculation utilising five-year cash flow projections based onbudgets for the next financial year as approved by the Board and internal forecasts for the 2015/2016 and 2016/2017 financial years. A zerogrowth rate has been assumed for the subsequent two years. The terminal value is based on the cash flows for year five and a zero growth rate.The pre-tax discount rate applied is 10% (2012 - 10%) which equates to the Group's pre-tax weighted average cost of capital.
The results of the impairment testing indicated that the value in use of each of the CGUs was in excess of the carrying value of its netoperating assets (inclusive of goodwill and brand names) and no impairment charge was necessary.
16. Deferred Tax Assets2013 2012A$m A$m
Deferred tax assets arising from:Deductible temporary differences 54.3 52.5 Accumulated tax losses 76.2 67.0
130.5 119.5
Deferred tax assets are attributable to the following:
2013 2012A$m A$m
Trading stock tax adjustments 8.6 8.2 Provisions 26.1 25.8 Accruals 6.7 7.4 Plant and equipment and capital allowances 0.9 0.8 Capitalised development costs 12.0 10.3 Accumulated tax losses 76.2 67.0
Total Deferred Tax Assets 130.5 119.5
The Group has not recognised the tax value of deferred tax assets in respect of trading tax losses of $64.4 million (2012 - $86.4 million) and$153.5 million of capital losses (2012 - $153.2 million). Deferred tax assets in respect of these losses have not been recognised as it is notprobable that future taxable profits will be available against which these losses can be utilised.
Details of the movement in the balance of deferred tax assets are as follows:
2013 2012A$m A$m
Balance at the beginning of the financial year 119.5 98.1 Over provision of prior year balance 1.8 0.3 Amount credited to the income statement 3.5 17.7 Net exchange differences on translation of foreign operations 5.7 3.4
Balance at the end of the financial year 130.5 119.5
An increase in deferred tax assets of $1.2 million was recognised in comprehensive income during the year (2012 - increase of $5.6 million).
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Notes to the Financial Statements17. Trade and Other Payables
2013 2012A$m A$m
CurrentTrade creditors 182.8 136.1 Other creditors 34.5 18.7 Total Current 217.3 154.8 Non-CurrentOther creditors 10.8 5.0 Total Non-Current 10.8 5.0
Total Trade and Other Payables 228.1 159.8
18. Interest Bearing Liabilities2013 2012A$m A$m
CurrentLoans repayable in: Canadian dollars 10.3 9.6 Indian rupees 1.3 1.3 US dollars 85.4 5.8 Total Current 97.0 16.7 Non-CurrentLoans repayable in: Euros 232.4 80.5 US dollars 253.1 203.7 Total Non-Current 485.5 284.2
Total Interest Bearing Liabilities 582.5 300.9
The Group has revolving credit bank facilities of US$425 million and Euro 50 million and Senior Notes of the equivalent of US$200 million.The US$425 million (US$226.3 million drawn down) matures on various dates between 20 December 2013 and 14 December 2017. Of theEuro 50 million, Euro 27.5 million matures on 24 November 2014 (fully drawn down) and Euro 22.5 million (Euro 17.5 million drawn down)matures on 25 May 2015. The Senior Notes for US$70 million and Euro 101.5 million mature between 6 June 2020 and 10 May 2025. Thesefacilities can be accessed by certain Australian, US and European subsidiaries.
There are a number of financial covenants attaching to the bank and note facilities including restrictions on the level of borrowings ofnon-guarantor subsidiaries and ensuring certain financial ratios are maintained. If any breaches of these covenants occur all monies outstandingunder the facility become immediately due and payable. The Company is in compliance with all covenants. The interest rates for thesefacilities are determined based on market rates at the time amounts are drawn down.
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Notes to the Financial Statements18. Interest Bearing Liabilities (continued)The following table sets out details in respect of Interest Bearing Liabilities at 30 June.
Interest Rate Financial Year 2013Nature and Currency of Borrowing % p.a. of Maturity A$m
Bank Loans Canadian dollars 2.47 2014 10.3Euros 2.02 2015 14.0Euros 2.03 2015 7.0Euros 2.06 2015 14.0Euros 4.71 2015 38.7Euros 4.81 2015 3.5Euros 2.05 2016 12.7Indian rupees 12.59 2014 1.3US dollars 1.74 2014 5.4US dollars 3.85 2014 16.2US dollars 3.88 2014 1.6US dollars 4.15 2014 21.5US dollars 4.20 2014 16.2US dollars 4.62 2014 10.8US dollars 4.75 2014 5.4US dollars 4.87 2014 5.4US dollars 4.25 2015 26.9US dollars 1.79 2016 53.9US dollars 4.76 2016 10.8US dollars 1.65 2017 33.9US dollars 3.76 2017 19.9US dollars 2.64 2018 32.3
Other Loans Euros 3.37 2020 42.1Euros 3.52 2022 50.2Euros 2.21 2023 50.2US dollars 0.28 2014 2.9US dollars 3.75 2020 21.5US dollars 4.05 2025 53.9
Total Interest Bearing Liabilities 582.5
Interest Rate Financial Year 2012Nature and Currency of Borrowing % p.a. of Maturity A$m
Bank Loans Canadian dollars 2.45 2013 9.6Euros 2.28 2015 6.2Euros 4.71 2015 34.1Euros 4.81 2015 3.1Indian rupees 13.20 2013 1.3US dollars 1.74 2014 10.0US dollars 1.75 2014 6.0US dollars 1.99 2014 4.9US dollars 3.76 2014 18.5US dollars 3.85 2014 4.9US dollars 3.88 2014 1.5US dollars 4.15 2014 20.0US dollars 4.2 2014 15.0US dollars 4.62 2014 10.0US dollars 4.87 2014 4.9US dollars 5.82 2014 4.9US dollars 2.04 2014 4.9US dollars 1.62 2015 31.4US dollars 4.25 2015 24.8US dollars 2.15 2016 2.0US dollars 3.85 2016 10.0US dollars 4.78 2016 10.0
Other Loans Euros 3.37 2020 37.1US dollars 0.20 2013 5.8US dollars 3.75 2020 20.0
Total Interest Bearing Liabilities 300.9
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Notes to the Financial Statements19. Provisions
2013 2012A$m A$m
CurrentProvision for employee entitlements 47.6 41.4 Provision for rationalisation and restructuring costs 1.4 1.9 Provision for Accufix Pacing Lead related expenses 3.6 3.4 Provision for insurance claims 1.9 2.8 Total Current 54.5 49.5 Non-CurrentProvision for employee entitlements 19.5 20.0 Total Non-Current 19.5 20.0 Total Provisions 74.0 69.5
Reconciliations of the carrying amount of each class of provision, except for employee entitlements, are set out below:2013 2012A$m A$m
Provision for rationalisation and restructuringBalance at the beginning of the financial year 1.9 2.2 Amounts credited to the income statement (0.5) (0.3)Balance at the end of the financial year 1.4 1.9
Provision for Accufix Pacing Lead related expensesBalance at the beginning of the financial year 3.4 3.3 Net exchange differences on translation of foreign operations 0.2 0.1
Balance at the end of the financial year 3.6 3.4
Provision for insurance claims Balance at the beginning of the financial year 2.8 2.7 Amounts charged/(credited) to the income statement (0.9) 0.1
Balance at the end of the financial year 1.9 2.8
Provision for rationalisation and restructuring costsThis provision covers a variety of matters predominantly relating to the sale of businesses and former subsidiaries and is regularly reviewed in lightof issues that have been settled or new events that have arisen during the reporting period.
Provision for Accufix Pacing Lead related expensesThis provision is to meet the costs of patients associated with the monitoring and (where appropriate) explantation of Accufix Pacing Leadsand for legal costs in defence of claims made in respect of the Accufix Pacing Leads. This provision is covered by cash required to be set asideby the Courts (refer to Note 9 - Cash and Cash Equivalents - Restricted deposits).
Provision for insurance claims Corrvas Insurance Pty. Ltd. and Corrvas Insurance (Singapore) Pte. Ltd. are entities authorised by their respective jurisdiction's regulatoryauthority to operate as captive insurance companies for Ansell Limited and its subsidiaries. This provision comprises current open claimswhere the reserves are set for the total estimated costs of individual claims that have not been fully paid out and 'Incurred but not reported'(IBNR) claims.
In Australia, the provision is required to be supported by a "Liability Valuation Report" prepared by an actuary approved by the AustralianPrudential Regulatory Authority. In Singapore, captives are exempted from undertaking an actuarial assessment of their insurance liabilitiesand are not required to lodge such a report with the Monetary Authority of Singapore (MAS). In line with MAS regulations, the IBNRestimates are in accordance with a policy approved by the Board of Corrvas Insurance (Singapore) Pte. Ltd.
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Notes to the Financial Statements20. Retirement Benefit ObligationsCertain members of the Group contribute to defined benefit and defined contribution superannuation plans maintained to providesuperannuation benefits for employees.
The following sets out details in respect of defined benefit plans.
(a) Balance sheet amounts 2013 2012A$m A$m
Present value of accumulated defined benefit obligations 71.8 65.7 Fair value of defined benefit plan assets (50.8) (48.0)Net liability in the balance sheet 21.0 17.7
Certain members of the Group are obliged to contribute to the various superannuation plans as a consequence of legislation or Trust Deeds;legal enforceability is dependent on the terms of the legislation or the Trust Deeds.
(b) Reconciliations of benefit obligations and plan assets2013 2012A$m A$m
Present value of accumulated defined benefit obligationsBalance at the beginning of the financial year 65.7 62.8 Current service cost 2.3 1.8 Interest cost 2.1 2.5 Contributions by plan participants 0.1 0.1 Actuarial losses 4.7 5.7 Taxes and expenses paid (0.1) (0.2)Settlements (2.7) (4.2)Benefits paid (6.5) (3.3)Acquired entities 0.7 - Exchange rate changes/other movements 5.5 0.5 Balance at the end of the financial year 71.8 65.7
Fair value of plan assetsBalance at the beginning of the financial year 48.0 50.4 Expected return on plan assets 2.9 3.0 Actuarial (losses)/gains 1.0 (2.4)Contributions by employer 4.4 3.5 Contributions by plan participants 0.1 0.1 Taxes and expenses paid (0.1) (0.2)Settlements (2.7) (4.4)Benefits paid (6.5) (3.3)Exchange rate changes/other movements 3.7 1.3 Balance at the end of the financial year 50.8 48.0
(c) Categories of plan assets
The major categories of plan assets are as follows:2013 2012
Equity securities 61% 58%Fixed interest securities 30% 32%Property 2% 3%Other 7% 7%F
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Notes to the Financial Statements20. Retirement Benefit Obligations (continued)(d) Amounts recognised in the income statement
2013 2012A$m A$m
Current service cost 2.3 1.8 Interest cost 2.1 2.5 Settlements - 0.2 Expected return on plan assets (2.9) (3.0)
Total expense recognised in the income statement 1.5 1.5
The expense is recognised in the following line within the income statement:2013 2012A$m A$m
Selling, general and administration 1.5 1.5
Actual return on plan assets 3.9 0.6
(e) Amounts recognised directly in accumulated losses2013 2012A$m A$m
Actuarial loss recognised for the year in other comprehensive income (3.7) (8.1)
Cumulative actuarial loss in other comprehensive income (22.0) (18.3)
(f) Principal actuarial assumptions
The principal actuarial assumptions used (expressed as a weighted average) were as follows:2013 2012
Discount rate 3.3% 3.9%Expected return on plan assets 6.0% 6.1%Future salary increases 3.8% 3.9%
Expected return on plan assetsThe expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocationof assets to each class. The returns used for each asset class are net of any investment expenses.
(g) Historic summary2013 2012 2011 2010 2009A$m A$m A$m A$m A$m
Defined benefit plan obligation 71.8 65.7 62.8 72.0 69.0 Plan assets (50.8) (48.0) (50.4) (51.6) (43.0)Deficit 21.0 17.7 12.4 20.4 26.0
Experience adjustments (gain)/loss - plan liabilities 0.2 (0.3) 0.6 0.1 0.3Experience adjustments loss/(gain) - plan assets (1.3) 2.5 (1.9) (6.7) 17.4
The Group expects $2.0 million in contributions to be paid to its defined benefit plans during the year ending 30 June 2014.
(h) Defined contribution superannuation plans2013 2012A$m A$m
Contributions to defined contribution plans during the year 8.5 8.1
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Notes to the Financial Statements21. Deferred Tax LiabilitiesThe tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:
2013 2012A$m A$m
Depreciation on plant and equipment adjustments 6.1 4.6 Amortisation of intangible assets 25.3 22.4 Other 3.5 2.6
Total Deferred Tax Liabilities 34.9 29.6
Details of the movement in the balance of deferred tax liabilities are as follows:2013 2012A$m A$m
Balance at the beginning of the financial year 29.6 25.7 Over provision of prior year balance (0.8) - Amount charged to the income statement 3.3 2.7 Net exchange differences on translation of foreign operations 2.8 1.2
Balance at the end of the financial year 34.9 29.6
22. Expenditure Commitments2013 2012A$m A$m
(a) Capital expenditure commitmentsContracted but not provided for in the financial statements:Plant and equipment 3.0 4.1
3.0 4.1
Payable within one year 3.0 4.1
(b) Operating Lease commitmentsFuture operating lease commitments not provided for in the financial statements and payable:Within one year 4.9 3.3 One year or later and no later than five years 16.4 11.4 Later than five years 6.7 11.0
28.0 25.7
The Group leases property under operating leases expiring from one to fifteen years. Leases generally provide the Group with a right ofrenewal at which time all terms are renegotiated.
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Notes to the Financial Statements23. Ownership-based Remuneration SchemesAnsell Limited Stock Incentive PlanThe Company had previously operated the Ansell Limited Stock Incentive Plan under which options, Performance Share Rights (PSRs) andPerformance Rights (PRs) were granted to employees. The final grant of PRs and options under this plan (granted in 2008) were subject to a three-year performance period that was tested at the end of the 2010 financial year.
CEO Special Long Term Incentive PlanAt the time of his appointment the Managing Director and Chief Executive Officer was allocated 129,730 PRs pursuant to the CEO SpecialLong Term Incentive Plan. The number of rights granted was determined by dividing the target remuneration value of US$1,000,000 by thevalue of the rights, which was determined based on Ansell's average share price over the 5 days preceding the announcement of Mr. Nicolin's formal appointment to the role.
2013 Long Term Incentive PlanThe above plan involves the granting of PSRs to the Managing Director, other members of the Executive Leadership Team and Vice Presidents.
In accordance with the disclosure requirements of Australian Accounting Standards remuneration includes a proportion of the fair value of PRs andPSRs granted or outstanding during the year. The fair value is determined as at grant date and is progressively allocated over the vesting period forthese securities. The amount included as remuneration in respect of PSRs (as disclosed in the Remuneration Report and Note 25 Key ManagementPersonnel Disclosures) is not related to, or indicative of, the benefit that individual executives may ultimately realise should the PSRs vest.
The fair value of PSRs is calculated at grant date. The fair values and the factors and assumptions used in determining the fair values of the PSRsapplicable for the 2013 financial year are as follows:
Share Price Risk FreeGrant Vesting Fair on Interest Dividend
Instrument Date Date Value Grant Date Rate Yield
PSRs 10/8/2012 30/6/2015 $12.94 $13.90 N/A 2.5%
The PSRs are subject to a gateway condition and a performance condition. As the hurdles within these conditions are all non-market basedperformance hurdles the valuation excludes the impact of performance hurdles.
Options - GenerallyAs at the date of this report 64,415 unissued ordinary shares in the Company remain under option.
Discontinued Executive Share PlanThe Company (when it was Pacific Dunlop Limited) historically operated the Pacific Dunlop Executive Share Plan ("Executive Plan") which wasdiscontinued in 1996.
Shares issued under the Executive Plan to selected employees ("Executives") were paid up to five cents and were subject to restrictions for a period. While partly paid, the shares are not transferable, carry no voting rights and no entitlement to dividends (but are entitled to participate in bonus orrights issues as if fully paid). The price payable for shares issued under the Executive Plan varies according to the event giving rise to a call beingmade. Once restrictions ceased the price payable upon a call being made is the lesser of $10.00 ($2.50 for issues prior to 13 September 1991) andthe last sale price of the Company's ordinary shares on ASX Limited.
The number of Executive Plan Shares (ordinary plan shares paid to five cents) as at balance date are shown in Note 6 Issued Capital and Reserves.
The market price of the Company's shares as at 30 June 2013 was $17.63.
24. Financial Risk ManagementAnsell has a range of financial policies designed to enable management to ensure financial risk (including foreign exchange and interest rateexposure) does not negatively affect the Group's results. This is achieved as follows:
(a) Foreign Exchange RiskThe Group is exposed to a number of foreign currencies however the predominant operating currency is the US dollar (US$). As such the Group hasdetermined it appropriate to manage its foreign currency exposure against the US$. On this basis the Company manages its two types of exposuresas follows:(i) TranslationAt 30 June and 31 December each year, the Group translates its accounts from US$ to Australian dollars (A$) for statutory reporting purposes inAustralia. No foreign exchange contracts are taken out as these are non-cash journal entries.(ii) TransactionMajor revenue and cost currency net cash flow exposures are predominantly hedged back to US$ on a 12 to 18-month rolling basis so as to reduceany significant adverse impact of exchange rate fluctuations on the earnings per share guidance provided by the Company to the market.
The Group undertakes a range of derivative financial instruments, which can be defined in the following broad categories:(i) Forward/Future ContractsThese transactions enable the Group to buy or sell specific amounts of foreign exchange or financial instruments at an agreed rate/price at aspecified future date. Maturities of these contracts are predominantly up to one year.
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Notes to the Financial Statements24. Financial Risk Management (continued)(a) Foreign Exchange Risk (continued)(ii) Foreign Exchange OptionsThis is a contract between two parties, which gives the buyer of the put or call option the right, but not the obligation, to transact at aspecified exchange rate. The Group typically uses a combination of bought and sold options, generally for zero cost, to hedge foreigncurrency receivable and payable cash flows predominantly out to one year. Some options include knock out barrier levels, however under alloption structures the Group's minimum foreign exchange rate is known.
(b) Interest Rate RiskThe Group has the broad aim of managing interest rate risk on its debt by setting a minimum level of interest rate risk days (the weightedaverage term of all interest rates in the portfolio) and a minimum fixed/floating interest rate ratio. The Group enters into interest rateswaps that enable parties to swap interest rates (from or to a fixed or floating basis) for a defined period of time. Maturities of thecontracts are principally between one and ten years.
Prior to the beginning of each year, the Group calculates its Financial Budget for the upcoming year using an updated set offinancial assumptions and management's view of the marketplace in the coming financial year. The Group forecasts interest ratesfor all debt repricing and new financing.In this context interest rate risk is the risk that the Group will, as a result of adverse movements in interest rates, experience:
Unacceptable variations to the cost of debt in the review period for which the Financial Budget has been finalised; and Unacceptable variations in interest expense from year to year.
It is recognised that movements in interest rates may be beneficial to the Group.Within the context of the Group's operations, interest rate exposure occurs from the amount of debt repricing that occurs in anyone year.
The exposure to interest rate risk and the effective weighted average interest rate for interest bearing financial liabilities are set outbelow:
Weighted AverageEffective Interest 1 year 1 to 2 2 to 5 > 5 Total
Rate Floating or less years years years% A$m A$m A$m A$m A$m A$m
2013Bank and other loans 2.5% 360.3 4.3 - - 217.9 582.5 Effect of interest rate swaps* 0.7% (207.1) - 48.5 208.8 (50.2) -
153.2 4.3 48.5 208.8 167.7 582.5
2012Bank and other loans 2.3% 236.7 7.2 - - 57.0 300.9 Effect of interest rate swaps* 1.2% (161.7) - 92.0 69.7 - -
75.0 7.2 92.0 69.7 57.0 300.9 * Represents notional amount of interest rate swaps.
A separate analysis of debt by currency can be found at Note 18 - Interest Bearing Liabilities.
The table below shows the effect on profit for the period and equity, if interest rates had been 10 per cent higher or lower with all other
variables held constant, taking into account all underlying exposures and related hedges. A sensitivity of 10 per cent has been selected as
this is considered reasonable given the current level of both short-term and long-term US$ interest rates.
2013 2012 2013 2012A$m A$m A$m A$m
If interest rates were 10% higher with all other
variables held constant - - 0.2 0.3
If interest rates were 10% lower with all other
variables held constant - - (0.2) (0.3)
(c) Credit RiskThe credit risk on financial assets (excluding investments) of the Group, is the carrying amount, net of any provision for impairment,which has been recognised on the balance sheet.
The Group minimises concentrations of credit risk by undertaking transactions with a large number of customers and counter-parties invarious countries.
The Group is not materially exposed to any individual customer.
Fixed Interest repricing in:
Profit for the period Equity
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Notes to the Financial Statements24. Financial Risk Management (continued)(c) Credit Risk (continued)
The carrying amount of the Group's financial assets represents the maximum credit exposure. The Group does not hold any collateral.The Group's maximum exposure to credit risk at the reporting date was:
2013 2012A$m A$m
Trade and other receivables 256.5 186.8
The ageing of the Group's trade receivables is detailed below:
2013 2012 2013 2012A$m A$m A$m A$m
Within agreed terms 239.2 180.3 - - Past due 0-60 days 29.3 17.5 0.3 0.5 Past due 61-90 days 4.5 2.9 0.8 0.2 Past due 91 days or more 13.8 9.1 8.8 6.4
Total 286.8 209.8 9.9 7.1
(i) Credit Risk by MaturityThe following table indicates the value of amounts owing by counter-parties by maturity. Based on the policy of not having material overnightexposures to an entity rated lower than A- by Standard & Poor's or A3 by Moody's Investors Service, the risk to the Group of counter-partydefault loss is not considered material.
2013 2012 2013 2012 2013 2012 2013 2012A$m A$m A$m A$m A$m A$m A$m A$m
Term:0-6 mths 0.4 - - - 3.9 4.6 4.3 4.6 6-12 mths 0.1 0.3 0.8 - 4.5 0.4 5.4 0.7 1-2 yrs - - - 1.5 - - - 1.5 2-5 yrs - - 1.0 - - - 1.0 -
Total 0.5 0.3 1.8 1.5 8.4 5.0 10.7 6.8
(ii) Historical Rate RolloversIt is the Group's policy not to engage in historical rate rollovers of forward exchange contracts except in circumstances where the maturity datefalls on a bank holiday. In these instances, settlement occurs on the next trading day.
(iii) Hedges and Anticipated Future TransactionsThe following table shows the Group's deferred losses that are currently held on the balance sheet and the expected timing of recognition as revenueor expense:
2013 2012 2013 2012A$m A$m A$m A$m
Unrealised LossesDeferredLess than 1 year 2.0 - 1.5 4.6 1-2 years 2.2 3.5 0.1 - 2-5 years 0.8 5.1 - - > 5 years 0.3 - - -
(d) Fair Value The Directors consider that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value with theexception of the derivative financial instruments detailed in the table below.
Refer to Note 1 Summary of Significant Accounting Policies for accounting policies in respect of the carrying values of financial assets andfinancial liabilities.
Interest Rate Foreign Exchange
Related Contracts Contracts Options Total Foreign Exchange Interest Rate Foreign Exchange
Carrying amount
Gross Trade Provision forReceivables Impairment
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Notes to the Financial Statements24. Financial Risk Management (continued)(d) Fair Value (continued)
The following table displays:
(i) Face ValueThis is the contract's value upon which a market rate is applied to produce a gain or loss which becomes the settlement value of the derivativefinancial instrument.
(ii) Credit Risk (derivative financial instruments)This is the maximum exposure to the Group in the event that all counter-parties who have amounts outstanding to the Group under derivativefinancial instruments, fail to honour their side of the contracts. The Group's exposure is almost entirely to banks. Amounts owed by the Groupunder derivative financial instruments are not included.
(iii) Net Fair ValueThis is the amount at which the instrument could be realised between willing parties in a normal market in other than a liquidation or forced saleenvironment. The net amount owing to financial institutions under all derivative financial instruments would have been $7.5 million (2012 - $11.3million owing to financial institutions) if all contracts were closed out on 30 June 2013.
2013 2012 2013 2012 2013 2012A$m A$m A$m A$m A$m A$m
Foreign Exchange ContractsPurchase/Sale Contracts: - US dollars 22.6 10.9 0.3 0.3 0.2 0.3 - Australian dollars 16.9 9.8 0.1 - - (0.1) - Malaysian ringgits 36.9 12.6 - - (1.4) (0.6) - Thai baht 6.1 12.8 - - (0.2) (0.4) - Sri Lankan rupees 22.1 18.7 0.1 - (0.1) (3.6) - Other currencies 13.1 16.3 - - (0.1) (0.2)
Foreign Exchange Options - Euro/US dollars 210.2 62.3 4.7 2.6 1.6 2.4 - Australian dollars/US dollars 9.9 11.1 0.8 0.1 0.8 0.1 - Canadian dollars/US dollars 12.2 14.9 0.3 0.4 0.3 0.3 - Pounds sterling/US dollars 4.0 2.8 0.1 0.1 0.1 - - US dollars/Mexican peso 16.5 21.0 0.4 0.4 - (0.7) - US dollars/Malaysian ringgits 78.5 34.5 1.1 0.8 (0.9) (0.1) - US dollars/Thai baht 37.8 13.9 0.3 0.2 (1.2) (0.1) - US dollars/Sri Lankan rupees 15.6 - 0.3 - - - - Other currencies 22.4 14.0 0.4 0.4 (1.3) -
Interest Rate ContractsInterest Rate Swaps: - Euro 119.0 37.2 - - (1.4) (1.7) - US dollars 242.3 164.3 1.8 1.5 (3.9) (6.9)
Total 886.1 457.1 10.7 6.8 (7.5) (11.3)
(iv) Fair Value HierarchyThe table below analyses financial instruments carried at fair value, by valuation method. The different methods have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
2013 2012 2013 2012 2013 2012 2013 2012A$m A$m A$m A$m A$m A$m A$m A$m
Derivative financial assets - - 10.7 6.8 - - 10.7 6.8 Available for sale financial assets 2.6 3.6 - 0.4 0.4 3.0 4.0
Derivative financial liabilities - - 18.2 18.1 - - 18.2 18.1
In order to determine the fair value of the financial instruments, management used valuation techniques in which all significant inputs were based on observable market data.
Face Value Credit Risk Net Fair Value
Level 1 Level 2 Level 3 Total
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Notes to the Financial Statements24. Financial Risk Management (continued)
(e) Liquidity RiskLiquidity risk is the risk of an unforeseen event or miscalculation in the required liquidity level that may result in the Group foregoing investmentopportunities or not being able to meet its obligations in an orderly manner, and therefore give rise to poor investment income or to excessiveborrowing costs.The Group seeks to reduce the risk of:(a) being forced to exit derivative financial instrument positions at below their real worth, or(b) finding it cannot exit the position at all, due to lack of liquidity in the market
by:(a) dealing only in liquid contracts dealt by many counter-parties, (b) dealing only in large, highly liquid and stable international markets, and(c) ensuring maturity risk days (the weighted average term of all maturity dates in the portfolio) remain within a specified range.The following table sets out the contractual maturities of the Group’s financial liabilities into relevant maturity groupings based on the remainingperiod at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flowscomprising principal and interest repayments.
TotalCarrying ContractualAmount Cash Flows
0-1 1-2 2-5 > 5A$m A$m A$m A$m A$m A$m
Trade and other creditors 228.1 228.1 217.3 0.8 10.0 - Bank and other loans 582.5 669.0 113.9 117.0 158.2 279.9
Total 810.6 897.1 331.2 117.8 168.2 279.9
Trade and other creditors 177.9 177.9 172.9 1.3 3.7 - Bank and other loans 300.9 327.7 23.4 111.5 129.8 63.0
Total 478.8 505.6 196.3 112.8 133.5 63.0
(f) Foreign Currency RiskThe Group operates internationally and is exposed to foreign currency risk arising from various currency exposures.Foreign currency risk arises from future commercial transactions and recognised assets and liabilities in a currency that is not the operatingcurrency of the Group. The Group's operating currency is the US$.The Group mitigates this risk by using foreign currency contracts, natural hedges and/or foreign currency options.As at 30 June the exposure to foreign currency risk from the Group's primary trading currency (US$) is:
2013 2012A$m A$m
Net payable in non-US$ reporting entities 22.0 35.8
The following table demonstrates the estimated sensitivity to a 10 per cent increase/decrease in the US$ exchange rate, with all other variablesheld constant, on profit for the period and equity.
2013 2012 2013 2012A$m A$m A$m A$m
10% increase in US$ exchange ratewith all other variables held constant: (0.2) 4.7 6.9 (4.2)
10% decrease in US$ exchange ratewith all other variables held constant: (0.7) (1.9) (0.2) 2.5
(g) Commodity Price RiskAnsell is a significant buyer of natural rubber latex and a range of synthetic latex products. It purchases these products in a number of countriesin Asia, predominately Malaysia, Thailand and Sri Lanka. The Group is not active in hedging its purchases on rubber exchanges but can, fromtime to time, buy from suppliers or brokers at a fixed price for up to several months into the future.
Net Payable
Profit for the period Equity
Contractual Maturity (Years)
2013
2012
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Notes to the Financial Statements25. Key Management Personnel Disclosures This note is to be read in conjunction with the Remuneration Report.
Key Management Personnel
The following were Key Management Personnel of the Group during the financial year:
Non-Executive Directors
Peter L Barnes Chairman (retired 22 October 2012)Glenn L L Barnes Chairman (appointed 22 October 2012)Ronald J S BellJohn A Bevan (appointed 1 August 2012)L Dale CrandallW Peter DayAnnie Lo (appointed 1 January 2013)Marissa T Peterson
Executive Director
Magnus R Nicolin Managing Director and Chief Executive Officer
Other Key Management Personnel
Peter B Carroll President & General Manager, Sexual Wellness GBUScott Corriveau President & General Manager, Industrial GBUTom Draskovics President & General Manager, Specialty Markets GBU Steve Genzer Senior Vice President, Operations & SupplyRustom F Jilla Senior Vice President and Chief Financial Officer (ceased employment 15 April 2013)Anthony Lopez President & General Manager, Medical GBU
Key Management Personnel Remuneration2013 2012
A$ A$
Short term benefits 5,658,379 6,146,983Post-employment benefits 662,714 820,936Share-based payments 854,232 232,477Long term cash based incentives 3,921,448 3,846,003Termination payment - 2,890,176
11,096,773 13,936,575
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Notes to the Financial Statements25. Key Management Personnel Disclosures (continued)Details of Remuneration
Directors of Ansell Limited
Details of the remuneration of all Directors of Ansell Limited is set out in the following tables:
2013 Post-employment Benefits
Share-based Payments
Long term Incentive
Cash salary and fees
Cash bonus Non- salary benefits
Superannuation Contributions
Performance Share Rights and
Performance Rights
Cash based Total
A$ A$ A$ A$ A$ A$ A$Non-executiveP L Barnes 89,776 - - 5,490 - - 95,266 G L L Barnes 247,030 - - - - - 247,030 R J S Bell 131,109 - - 3,633 - - 134,742 J A Bevan 111,016 - - 9,991 - - 121,007 L D Crandall 137,514 - - 3,616 - - 141,130 W P Day 131,250 - - 11,812 - - 143,062 A Lo 65,157 - - 1,969 - - 67,126 M T Peterson 140,746 - - 3,820 - - 144,566 ExecutiveM R Nicolin (CEO andManaging Director) 824,862 508,248 125,123 208,211 612,147 1,652,528 3,931,119
Total 1,878,460 508,248 125,123 248,542 612,147 1,652,528 5,025,048
2012 Post-employment Benefits
Share-based Payments
Long term Incentive
Cash salary and fees
Cash bonus Non- salary benefits
Superannuation Contributions
Performance Rights
Cash based Total
A$ A$ A$ A$ A$ A$ A$Non-executiveP L Barnes 270,023 - - 15,775 - - 285,798 G L L Barnes 148,349 - - - - - 148,349 R J S Bell 129,946 - - 3,503 - - 133,449 L D Crandall 136,319 - - 3,645 - - 139,964 W P Day 126,400 - - 11,376 - - 137,776 M T Peterson 141,396 - - 3,739 - - 145,135 ExecutiveM R Nicolin (CEO and 829,875 561,955 99,701 296,205 232,477 1,498,947 3,519,160 Managing Director)
Total 1,782,308 561,955 99,701 334,243 232,477 1,498,947 4,509,631
Short term Benefits
Short term Benefits
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Notes to the Financial Statements25. Key Management Personnel Disclosures (continued)
Details of Remuneration (continued)Other Key Management Personnel
Details of the remuneration of each of the other Key Management Personnel of the Group are set out in the following tables:
2013Post-
employment Benefits
Share-based Payments
Long term Incentive
Other Benefits
Cash salary and fees
Cash bonus Non-salary benefits
Superannuation Contributions
Performance Share Rights
Cash based Termination Payment
Total
A$ A$ A$ A$ A$ A$ A$ A$P B Carroll 421,962 127,673 35,360 68,761 41,642 442,754 - 1,138,152 S Corriveau 353,168 100,504 379,088 76,477 55,899 586,951 - 1,552,087 T Draskovics 266,508 55,967 4,819 50,911 39,929 284,146 - 702,280 S Genzer 328,834 87,329 4,291 69,361 51,907 580,194 - 1,121,916 R F Jilla 352,925 - 29,489 86,663 - - - 469,077 A Lopez 330,051 195,435 73,145 61,999 52,708 374,875 - 1,088,213
Total 2,053,448 566,908 526,192 414,172 242,085 2,268,920 - 6,071,725
2012Post-
employment Benefits
Share-based Payments
Long term Incentive
Other Benefits
Cash salary and fees
Cash bonus Non-salary benefits
Superannuation Contributions
Performance Share Rights
Cash based Termination Payment
Total
A$ A$ A$ A$ A$ A$ A$ A$P B Carroll 406,850 253,671 35,360 91,434 - 340,730 - 1,128,045 S Corriveau 334,185 193,731 125,216 72,510 - 482,584 - 1,208,226 T Draskovics 158,337 92,234 2,572 26,934 - 119,722 - 399,799 S Genzer 326,921 145,798 138,366 81,547 - 314,812 - 1,007,444 W J Heintz 281,498 - 58,128 61,666 - 201,649 2,890,176 3,493,117 R F Jilla 448,510 217,417 28,686 130,601 - 781,007 - 1,606,221 A Lopez 239,742 69,705 146,092 22,001 - 106,552 - 584,092
Total 2,196,043 972,556 534,420 486,693 - 2,347,056 2,890,176 9,426,944
Short term Benefits
Short term Benefits
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Notes to the Financial Statements25. Key Management Personnel Disclosures (continued)Equity InstrumentsOptions, Performance Rights (PRs) and Performance Share Rights (PSRs) granted as compensation In previous years the Company operated the Ansell Limited Stock Incentive plan under which options were issued to employees. At the time of his appointment the Managing Director and Chief Executive Officer was allocated 129,730 PRs pursuant to the CEO SpecialLong Term Incentive Plan. Under the 2013 Long Term Incentive plan PSRs were granted to the Managing Director, other members of the Executive Leadership Team andVice Presidents.
Movement in Options, PRs and PSRs on issue
The movement in the number of options, PRs and PSRs over ordinary shares of Ansell Limited held, directly, indirectly or beneficially, by eachof the Key Management Personnel, including their related parties, is as follows:
2013Held at
1 July 2012PSRs granted
during the yearOptions
exercised/PRs/ PSRs vested during
the year
Options/PRs/PSRs lapsed/
forfeited during the year
Held at 30 June 2013
Options not yet exercisable
OptionsKey Management PersonnelP B Carroll 12,500 - (1,132) - 11,368 - S Corriveau 22,222 - - - 22,222 - T Draskovics - - - - - - S Genzer - - - - - - W J Heintz 22,667 - (22,667) - - - R F Jilla 48,222 - (48,222) - - - A Lopez - - - - PRsDirectorM R Nicolin 129,730 - - - 129,730 PSRsDirectorM R Nicolin - 259,080 - - 259,080 Key Management PersonnelP B Carroll - 19,328 - - 19,328 S Corriveau - 27,359 - - 27,359 T Draskovics - 19,542 - - 19,542 S Genzer - 25,405 - - 25,405 R F Jilla - 39,210 - (39,210) - A Lopez - 25,795 - - 25,795
2012
Held at 1 July 2011
PSRs granted during the year
Options exercised/PRs/
PSRs vested during the year
Options/PRs/PSRs lapsed/
forfeited during the year
Held at 30 June 2012
Options not yet exercisable
OptionsKey Management PersonnelP B Carroll 12,500 - - - 12,500 - S Corriveau 22,222 - - - 22,222 - T Draskovics - - - - - - S Genzer - - - - - - W J Heintz 22,667 - - - 22,667 - R F Jilla 102,444 - (54,222) - 48,222 - A Lopez - - - - - - PRsDirectorM R Nicolin 129,730 - - - 129,730
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Notes to the Financial Statements25. Key Management Personnel Disclosures (continued)Equity Instruments (continued)Movements in sharesThe movement in the number of ordinary shares of Ansell Limited held directly, indirectly or beneficially, by each of the KeyManagement Personnel, including their personally related entities during the 2013 financial year is as follows:
Held at Purchases (a) Sales/Other Held at 1 July 30 June2012 2013
DirectorsP L Barnes 26,773 556 (27,329) - G L L Barnes 16,221 4,957 - 21,178 R J S Bell 6,449 774 - 7,223 J A Bevan 676 - 676 L D Crandall 15,849 813 - 16,662 W P Day 6,549 4,301 - 10,850 A Lo - - - M T Peterson 10,459 834 - 11,293 M R Nicolin 10,000 10,042 - 20,042
Other Key Management PersonnelP B Carroll 15,607 1,977 - 17,584 S Corriveau 19,421 5,144 - 24,565 T Draskovics - - - - S Genzer - - - - R F Jilla 224,957 5,849 (230,806) - A Lopez - - - -
The movement in the number of ordinary shares of Ansell Limited held directly, indirectly or beneficially, by each of the KeyManagement Personnel, including their personally related entities during the 2012 financial year is as follows:
Held at Purchases (a) Sales/Other Held at 1 July 30 June2011 2012
DirectorsP L Barnes 24,755 2,018 - 26,773 G L L Barnes 15,260 961 - 16,221 R J S Bell 5,556 893 - 6,449 L D Crandall 14,922 927 - 15,849 W P Day 5,656 893 - 6,549 M T Peterson 9,495 964 - 10,459 M R Nicolin 10,000 - - 10,000
Other Key Management PersonnelP B Carroll 28,000 2,607 (15,000) 15,607 S Corriveau 21,489 3,932 (6,000) 19,421 T Draskovics - - - - S Genzer - - - - W J Heintz 40,507 - (22,164) 18,343 R F Jilla 268,249 6,708 (50,000) 224,957 A Lopez - - - -
(a) Includes shares purchased on market pursuant to the Non-executive Directors' Share Plan.
Service AgreementsThe Company has no service agreements with the Non-executive Directors. Refer to Section 3D of the Remuneration Report for details of serviceagreements with the Managing Director and other Key Management Personnel.
Other Transactions with specified directors and specified executivesFrom time to time, Key Management Personnel of the Company or its subsidiaries, or their personally related entities, may purchase goods fromthe Group. These purchases are on terms and conditions no more favourable than those entered into by unrelated customers and are trivial ordomestic in nature.
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Notes to the Financial Statements26. Notes to the Statement of Cash Flows(a) Reconciliation of Net Cash Provided by Operating Activities to Profit for the period
2013 2012A$m A$m
Profit for the period 140.9 133.0
Add/(less) non-cash items:Depreciation 20.5 17.3 Amortisation 7.4 4.6 Impairment - trade debtors (0.9) (0.7)Share-based payments expense 1.3 0.2
Add/(less) items classified as investing/financing activities: Interest received (7.5) (6.8)Interest and financing costs paid 16.3 12.1 Gain on sale of investments, property, plant and equipment (3.8) (8.1)
Net cash provided by operating activities before change in assets and liabilities 174.2 151.6
Change in assets and liabilities net of effect from acquisitions and disposals of subsidiaries and businesses: Increase in trade and other receivables (31.0) (5.0)Increase in inventories (32.6) (19.5)Increase in other assets (14.5) (5.1)Increase/(decrease) in trade and other payables 41.7 (2.6)Decrease in provisions/other liabilities (13.1) (7.9)Decrease in retirement benefit obligations (1.2) (2.9)Increase in provision for deferred income tax 4.4 3.9 Increase in future income tax benefit (9.5) (15.8)Increase in provision for income tax 1.5 2.5
Other non-cash items (including foreign currency impact) 7.2 (4.0)
Net cash provided by operating activities 127.1 95.2
(b) Components of Cash and Cash Equivalents
For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at banks and investments in moneymarket instruments, net of outstanding bank overdrafts. Refer to Note 9 for Cash and cash equivalents, at the end of the financial year,as shown in the Statement of Cash Flows.
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Notes to the Financial Statements27. Acquisition of Businesses and SubsidiariesThe individually material acquisitions made during the year are as follows:
ComasecEffective 1 October 2012 Ansell acquired 100% of the issued capital of Comasec SAS and it subsidiaries ("Comasec"). Comasec is a significantparticipant in the European Personal Protective Equipment Glove market and has manufacturing operations in Portugal and Malaysia and apresence in North America. It specialises in gloves for chemical protection, food handling, cut protection, mechanical protection, dry box andthermal protection. The acquisition of Comasec will strengthen Ansell's existing Industrial and Specialty Markets businesses. Related acquisitioncosts of $0.4 million have been expensed during the year and included in Selling, general and administration expenses in the Income Statement.
In the nine months to 30 June 2013 Comasec contributed revenue of $88.4 million and profit of $3.7 million to the Group's results. If theacquisition had occurred on 1 July 2012, estimated consolidated revenue would have been $1,375.7 million and estimated consolidated profit forthe year would have been $139.0 million.
The following fair values of the identifiable assets and liabilities of Comasec as at acquisition have been determined on a provisional basis:
A$mProperty, plant and equipment 24.6Intangibles 9.8Inventories 27.8Trade and other receivables 30.4Trade and other payables (10.2)Provisions and other liabilities (15.2)Net identifiable assets acquired 67.2Goodwill on acquisition 62.1Consideration paid 129.3
Hercules Equipamentos de Protecao LtdaEffective 1 January 2013 Ansell acquired 100% of the issued capital of Hercules Equipamentos de Protecao Ltda ("Hercules"), a privately heldBrazilian company, located in Sao Paulo. Hercules is a leading manufacturer of Personal Protective Equipment in Brazil with a plant locatedoutside Sao Paulo and wide distribution across Brazil. Its product lines include turn-out gear for Military and First Reponders, molten metalprotection garments, fall protection equipment and gloves. The acquisition will enable Ansell to better serve several strategic veriticals(Construction, Military and First Reponders, Mining and Oil and Gas) and at the same time strengthens Ansell's presence in one of the world'smajor emerging markets. In addition to the initial consideration paid a potential earn-out payment exists which is tied to profit growth in thefirst year of ownership. Related acquisition costs of $0.6 million have been expensed during the year and included in Selling, general andadministration expenses in the Income Statement.
In the six months to 30 June 2013 Hercules contributed revenue of $15.2 million and profit of $1.1 million to the Group's results. If theacquisition had occurred on 1 July 2012, estimated consolidated revenue would have been $1,363.1 million and consolidated profit for the year would have been $140.9 million.
The following fair values of the identifiable assets and liabilities of Hercules as at acquisition have been determined on a provisional basis:
A$mProperty, plant and equipment 2.3Cash and cash equivalents 0.5Inventories 6.5Trade and other receivables 6.3Trade and other payables (2.8)Bank and other loans (0.9)Provisions and other liabilities (10.3)Net identifiable assets acquired 1.6Goodwill on acquisition 76.9Consideration paid/payable 78.5Consideration paid in cash 68.6Contingent consideration payable 9.9F
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Notes to the Financial Statements27. Acquisition of Businesses and Subsidiaries (continued)Ansell also made a number of minor acquisitions during the year being the purchase of the outstanding 80% of the issuedcapital of Guangzhou Kangwei Trading Co Ltd (a China distributor of Sexual Wellness products) effective 1 November 2012and substantially all of the assets of Preferred Surgical Products L.L.C. (a US product and technology company withinnovative solutions in infection prevention) effective 31 December 2012.
The total cost of these acquisition was $3.8 million resulting in goodwill on acquisition of $10.0 million. In addition to theoriginal consideration paid for the Preferred Surgical Products business a potential earnout exists which is tied to revenue andearnings growth over a three year period. The combined contribution of the two acquisitions to consolidated revenue andprofit for the period were $4.2 million and ($0.5) million respectively.
If both acquisitions had occurred at 1 July 2012 estimated consolidated revenue for the year would have been $1,349.1 millionand estimated consolidated profit for the period would have been $140.6 million.
Trelleborg Protective ProductsThe acquisition of the Trelleborg Protective Products business ("TPP") was completed on 2 May 2012. As at 30 June 2012the fair value of the identifiable assets and liabilities acquired was determined on a provisional basis. The acquisition accountingfor TPP was completed during the current year resulting in a reduction in goodwill on acquisition of $3.1 million and anincrease in brand names of $3.1 million. Comparative values have been adjusted for the recognition of the brand names.
Sandel Medical SolutionsThe acquisition of Sandel Medical Solutions was completed in July 2011. The purchase agreement included a contingentconsideration payable quarterly based on the maintenance and growth in sales of specified products for a five year period. Anamount representing the fair value of this contingent consideration was recorded as a liability at 30 June 2012. A review ofthe performance of the business since acquisition and current projections indicate that it is unlikely that the full value of theexisting liability will be required. As a result an amount of $1.9 million has been reversed to the Income Statement during thecurrent year and included as a reduction to Selling, general and administration expenses.
28. Related Party Disclosures(a) Subsidiaries
Ansell Limited is the parent entity of all entities detailed in Note 29 Particulars Relating to Subsidiaries and from time to timehas dealings on normal commercial terms and conditions with those entities, the effects of which are eliminated in theseconsolidated financial statements.
(b) Key Management PersonnelDisclosures relating to Key Management Personnel are set out in Note 25 Key Management Personnel Disclosures.
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Notes to the Financial Statements29. Particulars Relating to Subsidiaries Country of Beneficial Interest
Incorporation 2013 2012% %
Ansell Limited AustraliaAnsell Healthcare Japan Co. Ltd. Japan* 100 100 Ativ Pac Pty. Ltd. Australia 100 100 BNG Battery Technologies Pty. Ltd. Australia 100 100 Cliburn Investments Pty. Ltd. Australia 100 100 Corrvas Insurance Pty. Ltd. Australia 100 100 Dexboy International Pty. Ltd. Australia 100 100 Dunlop Olympic Manufacturing Pty. Ltd. Australia 100 100 FGDP Pty. Ltd. Australia 100 100
PSL Industries Pty. Ltd. Australia 100 100 Nucleus Ltd. Australia 100 100
Lifetec Project Pty. Ltd. Australia 100 100 Medical TPLC Pty. Ltd. Australia 100 100 N&T Pty. Ltd. Australia 100 100
Nucleus Trading Pte. Ltd. Singapore* 100 100 THLD Ltd. Australia 100 100
TNC Holdings Pte. Ltd. Singapore* 100 100 TPLC Pty. Ltd. Australia 100 100
Societe de Management Financier S.A. France* 100 100 Olympic General Products Pty. Ltd. Australia 100 100 Pacific Dunlop Finance Pty. Ltd. Australia 100 100 Pacific Dunlop Holdings (China) Co. Ltd. China* 100 100
Ansell (Shanghai) Commercial and Trading Co., Ltd. China* 100 100 Pacific Dunlop Linings Pty. Ltd. Australia 100 100 P.D. Holdings Pty. Ltd. Australia 100 100
P.D. International Pty. Ltd. Australia 100 100 Ansell Canada Inc. Canada* 100 100 Ansell Commercial Mexico S.A. de C.V. Mexico* 100 100 Ansell Korea Co., Ltd. Korea* 100 100 Ansell Lanka (Pvt.) Ltd. Sri Lanka* 100 100 Ansell (Middle East) JLT UAE* 100 100 Ansell Perry de Mexico S.A. de C.V. Mexico* 100 100 Ansell Protective Solutions Singapore Pte. Ltd. Singapore* 100 100 Ansell Services (Asia) Sdn. Bhd. Malaysia* 100 100
Ansell Ambi Sdn. Bhd. Malaysia* 100 100 Ansell (Kedah) Sdn. Bhd. Malaysia* 100 100 Ansell (Kulim) Sdn. Bhd. Malaysia* 100 100 Ansell Medical Sdn. Bhd. Malaysia* 75 75 Ansell N.P. Sdn. Bhd. Malaysia* 75 75
Ansell Malaysia Sdn. Bhd. Malaysia* 75 75 Ansell Shah Alam Sdn. Bhd. Malaysia* 100 100
Ansell Specialty Markets Participacoes Ltda Brazil* 100 -Hercules Equipamentos de Protecao Ltda Brazil* 100 -
Ansell (Thailand) Ltd. Thailand* 100 100 CE Gloves (India) Limited India* (a) 100 (a) 100Corrvas Insurance (Singapore) Pte. Ltd. Singapore* 100 100 Fabrica de Artefatos de Latex Blowtex Ltda. Brazil* 100 100 Medical Telectronics N.V. Netherlands Ant.* 100 100 Pacific Dunlop Holdings (Europe) Ltd. U.K.* 100 100
Ansell GBU Services (Europe) N.V. Belgium* 100 100 Ansell Healthcare Europe N.V. Belgium* 100 100
Ansell GmbH Germany* 100 100 Condomi Erfurt Produktions GmbH Germany* 100 100
Ansell Italy Srl Italy* 100 100 Ansell Medikal Urunler Ithalat Ihracat Uretim ve Ticaret A.S. Turkey* 100 100 Ansell Norway AS Norway* 100 100 Ansell Protective Solutions AB Sweden* 100 100 Ansell Protective Solutions Lithuania UAB Lithuania* 100 100
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Notes to the Financial Statements29. Particulars Relating to Subsidiaries (continued) Country of Beneficial Interest
Incorporation 2013 2012% %
Ansell Rus LLC Russia* 100 100 Ansell S.A. France* 100 100 Ansell Spain SL (Sociedad de Responsabilidad Limitada) Spain* 100 100 Comasec SAS France* 100 -
Ampelos International Malaysia Malaysia* 100 -Ansell Industrial & Specialty Gloves Malaysia Sdn. Bhd. Malaysia* 100 -Comasec GmbH Germany* 100 -Comasec Holdings Ltd. U.K.* 100 -
Marigold Industrial Ltd. U.K.* 100 -Comasec Italia Srl Italy* 100 -Marigold Industrial Inc. Canada* 100 -Marigold Industrial Gloves Iberia SL Spain* 100 -Marigold Industrial Portugal Portugal* 100 -Marigold Industrial USA Inc. USA* 100 -N.V. Comasec Benelux s.a. Belgium 100 -
Medical Telectronics Holding & Finance (Holland) B.V. Netherlands* 100 100 Unimil Sp. z o.o. Poland* 100 100
Ansell UK Limited U.K.* 100 100 Pacific Dunlop Holdings (Singapore) Pte. Ltd. Singapore* 100 100
JK Ansell Ltd. India* 50 50 Ansell (Hong Kong) Limted. Hong Kong* 100 100 Pacific Dunlop Investments (USA) Inc. USA* 100 100
Ansell Brazil LTDA Brazil* 100 100 Ansell Edmont Industrial de Mexico S.A. de C.V. Mexico* 100 100 Pacific Dunlop Holdings (USA) LLC. USA* 100 100
Ansell Healthcare Products LLC. USA* 100 100 Ansell Sandel Medical Solutions LLC. USA* 100 100
Ansell Protective Products Inc. USA* 100 100 Ansell Hawkeye Inc. USA* 100 100
Pacific Chloride Inc. USA* 100 100 Pacific Dunlop Holdings Inc. USA* 100 100
Pacific Dunlop USA Inc. USA* 100 100 TPLC Holdings Inc. USA* 100 100
Accufix Research Institute Inc. USA* 100 100 Cotac Corporation USA* 100 100
Pacific Dunlop Finance Company Inc. USA* 100 100 PDOCB Pty. Ltd. Australia 100 100
Ansell Medical Products Pvt. Ltd. India* 100 100 Suretex Ltd. Thailand* 100 100
Latex Investments Ltd. Mauritius* 100 100 Suretex Prophylactics (India) Ltd. India* 100 100
STX Prophylactics S.A. (Pty.) Ltd. Sth Africa* 100 100 Wuhan Jissbon Sanitary Products Company Ltd. China* (b) 90 (b) 90
Guangzhou Kangwei Trading Co Ltd China* 100 -Shanghai Feidun Trading Company Ltd. China* 100 100 Shenyang Yipeng Trading Company Ltd. China* 100 100 Wuhan AnJie LuPu Trading Company Ltd. China* 100 100
PD Licensing Pty. Ltd. Australia 100 100 PD Shared Services Pty. Ltd. Australia 100 100 PD Shared Services Holdings Pty. Ltd. Australia 100 100 Siteprints Pty. Ltd. Australia 100 100
S.T.P. (Hong Kong) Ltd. Hong Kong* 100 100 Pacific Dunlop Holdings N.V. Netherlands Ant.* 100 100
Pacific Dunlop (Netherlands) B.V. Netherlands* 100 100 The Distribution Group Holdings Pty. Ltd. Australia 100 100
The Distribution Group Pty. Ltd. Australia (c) 100 (c) 100The Distribution Trust Australia 100 100
Union Knitting Mills Pty. Ltd. Australia 100 100 Xelo Pty. Ltd. Australia 100 100
Xelo Sacof Pty. Ltd. Australia 100 100
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Notes to the Financial Statements29. Particulars Relating to Subsidiaries (continued)* Subsidiaries incorporated outside Australia carry on business in those countries.(a) Owned 74.9 per cent by P.D. International Pty. Ltd. and 25.1 per cent by Suretex Prophylactics (India) Ltd.(b) Owned 49.2 per cent by P.D. International Pty. Ltd. and 40.8 per cent by Pacific Dunlop Holdings (China) Co. Ltd.(c) The trustee of The Distribution Trust is The Distribution Group Pty. Ltd. The beneficiary of the trust is Ansell Limited.
30. Parent Entity DisclosuresAs at the end of and throughout the financial year ending 30 June 2013, the parent company of the Group was Ansell Limited.
2013 2012A$m A$m
Result of the parent entityProfit for the period 85.1 103.0Other comprehensive income (2.2) 0.8 Total comprehensive income for the period 82.9 103.8
Financial position of the parent entity at year endCurrent assets 593.1 503.7Total assets 2,348.4 2,246.0
Current liabilities 1,240.4 1,171.8Total liabilities 1,240.7 1,173.6
Total equity of the parent entity comprising:Issued capital 861.0 862.2Reserves 34.6 37.5Retained profits 212.1 172.7Total Equity 1,107.7 1,072.4
The consolidated Group has a net current asset position of $482.3 million (2012 - $409.9 million) which the parent company controls. As at30 June 2013, the parent company has a net current liability position of $647.3 million (2012 - $668.1 million). The Directors will ensure thatthe parent company has, at all times, sufficient funds available from the Group to meet its commitments.
Parent entity guaranteeThe parent entity guarantees the debts of certain subsidiaries that are guarantors under the Group's revolving credit bank facility.
31. Earnings per Share2013 2012
A$m A$m Earnings reconciliation
Net profit 140.8 133.0 Net profit attributable to non-controlling interests 4.0 3.0 Basic earnings 136.8 130.0
Diluted earnings 136.8 130.0
Weighted average number of ordinary shares used as the denominatorNumber of ordinary shares for basic earnings per share 130.7 131.2 Effect of partly paid Executive Plan shares, options and PRs 0.6 0.2 Number of ordinary shares for diluted earnings per share 131.3 131.4
Partly paid Executive Plan shares, options and PRs have been included in diluted earnings per share in accordance with Accounting Standards.
Earnings per share cents centsBasic earnings per share 104.6 99.1Diluted earnings per share 104.2 98.9
No. of Shares (millions)
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Notes to the Financial Statements32. US Dollar Financial InformationThe following US dollar financial information is provided as additional information for the Company's shareholders. This information is aconvenience translation only and has been prepared using the Accounting Policies described in Note 1.
Translation of amounts from Australian dollars to US dollars in the Income Statement, Statement of Cash Flows and Operating Revenue andOperating Result within the Operating Segments have been made at the average of the 8.00 am mid buy/sell rate for Australian dollars as quoted byReuters on the last working day of each month for the 13-month period June 2012 to June 2013.
Translation of amounts from Australian dollars to US dollars in the Balance Sheet and Assets Employed and Liabilities within the OperatingSegments have been made at the 8.00 am mid buy/sell rate for Australian dollars as quoted by Reuters, on Friday 28 June 2013, at US$0.92845 = A$1 (30 June 2012 US$1.00415 = A$1).
Consolidated Income Statementof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012US$m US$m
RevenueSales 1,372.8 1,255.3 ExpensesCost of goods sold (793.5) (735.9)Distribution (61.9) (61.5)Selling, general and administration (346.9) (304.7)Total expenses, excluding financing costs (1,202.3) (1,102.1)Net financing costs (10.7) (5.0)Profit before income tax 159.8 148.2 Income tax (16.5) (12.1)Profit for the period 143.3 136.1 Non-controlling interests (4.1) (3.1)
Profit attributable to Ansell Limited shareholders 139.2 133.0
2013 2012US cents US cents
Earnings per share is based on profit attributable to Ansell Limited shareholders
Basic earnings per share 106.5 101.4 Diluted earnings per share 106.1 101.2
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Notes to the Financial Statements32. US Dollar Financial Information (continued)Consolidated Balance Sheetof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012US$m US$m
Current AssetsCash on hand 0.5 0.7 Cash at bank and on deposit 305.3 246.1 Cash assets - restricted deposits 3.4 3.5 Trade and other receivables 235.1 185.6 Derivative financial instruments 9.9 6.8 Inventories 260.0 213.4 Other 14.4 10.0 Total Current Assets 828.6 666.1 Non-Current AssetsTrade and other receivables 3.1 2.1 Investments 2.8 4.0 Property, plant and equipment 186.7 151.2 Intangible assets 541.4 391.2 Deferred tax assets 121.2 120.0 Other 20.1 19.3 Total Non-Current Assets 875.3 687.8 Total Assets 1,703.9 1,353.9 Current LiabilitiesTrade and other payables 201.8 155.5 Derivative financial instruments 16.9 18.2 Interest bearing liabilities 90.1 16.8 Provisions 50.6 49.7 Current tax liabilities 21.5 14.4 Total Current Liabilities 380.9 254.6 Non-Current LiabilitiesTrade and other payables 10.0 5.0 Interest bearing liabilities 450.7 285.4 Provisions 18.1 20.1 Retirement benefit obligations 19.5 17.8 Deferred tax liabilities 32.4 29.7 Other 18.8 17.7 Total Non-Current Liabilities 549.5 375.7 Total Liabilities 930.4 630.3
Net Assets 773.5 723.6
EquityIssued capital 799.4 865.8 Reserves (78.9) (109.6)Retaine profits/(accumulated losses) 37.5 (46.7)Total Equity Attributable to Ansell Limited Shareholders 758.0 709.5 Non-controlling interests 15.5 14.1
Total Equity 773.5 723.6
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Notes to the Financial Statements32. US Dollar Financial Information (continued)Consolidated Statement of Cash Flowsof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012US$m US$m
Cash flows Related to Operating Activities
Receipts from customers 1,344.2 1,249.6 Payments to suppliers and employees (1,198.0) (1,133.4)Net receipts from operations 146.1 116.2 Income taxes paid (15.7) (17.8)
Net Cash Provided by Operating Activities 130.4 98.4
Cash Flows Related to Investing Activities
Payments for businesses, net of cash acquired (208.6) (44.8)
Payments for property, plant, equipment and intangible assets (39.8) (37.6)Payments for investments (1.8) (5.1)Proceeds from sale of property, plant and equipment 7.9 9.6
Net Cash Used in Investing Activities (242.3) (77.9)
Cash Flows Related to Financing Activities
Proceeds from borrowings 439.5 296.9 Repayments of borrowings (193.8) (224.5)Net proceeds from borrowings 245.7 72.4 Proceeds from issues of shares 2.4 0.9 Payments for share buy-back (3.6) (33.4)Dividends paid - Ansell Limited shareholders (49.5) (46.6)Dividends paid - Non-controlling interests (2.7) (2.2)Interest received 7.7 7.0 Interest and borrowing costs paid (16.9) (12.4)
Net Cash Provided by/(Used in) Financing Activities 183.1 (14.3)
Net increase in cash and cash equivalents 71.2 6.2
Cash and cash equivalents at the beginning of the financial year 250.3 258.7 Effects of exchange rate changes on the balances of cash and cash equivalents held inforeign currencies at the beginning of the financial year (12.3) (14.6)
Cash and Cash Equivalents at the End of the Financial Year 309.2 250.3
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Notes to the Financial Statements32. US Dollar Financial Information (continued)Operating Segmentsof Ansell Limited and Subsidiaries for the year ended 30 June 2013
2013 2012 2013 2012US$m US$m US$m US$m
Business SegmentsIndustrial 563.6 504.1 92.0 83.7 Medical 349.5 356.4 41.1 39.5 Sexual Wellness 229.7 217.3 34.2 33.2 Specialty Markets 230.0 177.5 11.7 7.2
Total Business Segments 1,372.8 1,255.3 179.0 163.6 Corporate costs (8.5) (10.4)Earnings before Interest and Tax (EBIT) 170.5 153.2 Net interest expense and other financing costs (10.7) (5.0)Profit before Income Tax 159.8 148.2 Income tax (16.5) (12.1)Profit for the period 143.3 136.1 Non-controlling interests (4.1) (3.1)
Total Consolidated 1,372.8 1,255.3 139.2 133.0
Regional SegmentsAsia Pacific 280.4 267.9 65.0 64.0 Europe, Middle East and Africa 572.3 478.4 70.7 62.6
Latin America & Caribbean 101.3 82.8 14.0 10.4
North America 418.8 426.2 29.3 26.6
Total Regional Segments 1,372.8 1,255.3 179.0 163.6
2013 2012 2013 2012US$m US$m US$m US$m
Business SegmentsIndustrial 440.6 336.7 95.8 101.2 Medical 280.5 285.4 70.5 81.8 Sexual Wellness 208.7 200.8 38.6 33.7 Specialty Markets 270.0 123.7 56.1 23.0
Total Business Segments 1,199.8 946.6 261.0 239.7
Corporate assets/liabilities 194.9 157.0 669.4 390.6 Cash 309.2 250.3 -
Total Consolidated 1,703.9 1,353.9 930.4 630.3
Regional SegmentsAsia Pacific 284.3 243.3 94.5 95.4 Europe, Middle East and Africa 209.6 143.7 83.9 52.8 Latin America & Caribbean 59.2 33.2 22.7 5.6 North America 165.0 192.7 59.9 85.9 Goodwill and brand names 481.7 333.7 - -
Total Regional Segments 1,199.8 946.6 261.0 239.7
Operating Revenue Operating Result
Assets Employed Liabilities
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Directors' Declaration
1. In the opinion of the Directors of Ansell Limited ('the Company'):
(a) the consolidated financial statements and notes, set out on pages 2 to 48, and the Remuneration Report contained in the Directors'Report, set out on pages 17 to 36, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group's financial position as at 30 June 2013 and of its performance, for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1;
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officerand the Chief Financial Officer for the financial year ended 30 June 2013.
Signed in accordance with a resolution of the directors:
G L L Barnes M R NicolinChairman Director
Dated in Melbourne this 20th day of August 2013
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KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
Independent auditor’s report to the members of Ansell Limited
Report on the financial report We have audited the accompanying financial report of Ansell Limited (the Company), which comprises the consolidated balance sheet as at 30 June 2013, consolidated income statement and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 32 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation 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 Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion In our opinion:
(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.
Report on the remuneration report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Ansell Limited for the year ended 30 June 2013, complies with Section 300A of the Corporations Act 2001.
KPMG
Gordon Sangster Partner
Melbourne
20 August 2013
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