Annual Report 2009
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ANNUAL REPORT 2009 ANNUAL REPORT 2009 REPORT ANNUAL WWW.GAZAL.COM.AU ABN 57 004 623 474 004 623 ABN 57 ANNUAL REPORT 2009 FInanCIal CalenDar 2009 PRELIMINARY FINAL REPORT 26 AUGUST AND DIVIDEND ANNOUNCEMENT RECORD DATE FOR FINAL DIVIDEND 18 SEPTEMBER FINAL DIVIDEND PAYABLE 6 OCTOBER ANNUAL REPORT AND NOTICE OF 23 OCTOBER ANNUAL GENERAL MEETING MAILED TO SHAREHOLDERS ANNUAL GENERAL MEETING 26 NOVEMBER HALF YEAR END 31 DECEMBER The Annual General Meeting of Shareholders of Gazal Corporation Limited will be held at The J.S. Gazal Building, 3-7 McPherson Street Banksmeadow on 26 November 2009 at 11:30am. A formal notice of meeting is enclosed with this Annual Report setting out the business of the Annual General Meeting. ANNUAL REPORT 2009 1 THE YEAR IN REVIEW The Gazal Corporation Limited Group (“Gazal”) recorded an after-tax Looking forward into the new financial year, the work undertaken profit of $6.833 million for the year ended 30 June 2009. This was in reducing our overhead cost base places the Company in a far better a decrease of 28.3% on the previous year. position. There are some recent signs of growing consumer confidence; however, underlying retail trading conditions remain somewhat Group sales revenue from continuing operations decreased 1.6% uncertain. Whilst the A$/US$ exchange rate has improved recently, any to $243.5 million. The economic slowdown impacted our sales benefit that may arise from a stronger A$/US$ rate is not likely to be of branded merchandise to the department store sector, although realised until the second half of financial year 2010. It is too early to the Government’s stimulus money assisted sales in the second half make any predictions in relation to earnings for the new financial year; of the financial year. The slowdown in the construction and mining however, we expect to be able to update shareholders at the Annual industries also affected our workwear business. Sales increased in our General Meeting in November 2009. direct-to-consumer businesses. The Directors declared a final dividend of 4 cents per share fully franked After-tax profit from continuing operations was $6.8 million for the (final dividend 2008: 7 cents per share fully franked). The record date 12 months, compared with $9.2 million last year, a decline of 26%. for determining shareholders’ entitlement for the final dividend is This disappointing outcome was mainly as a result of lower gross profit 18 September 2009 and the final dividend is payable on 5 October 2009. margins in the second half due to the sharp decline in the Australian dollar exchange rate. The average A$/US$ rate achieved to pay The Directors would like to convey their appreciation to management overseas suppliers in the January to June 2009 period was 0.6744. and staff for their contribution during the year. We also wish to thank This compares to the average rate of 0.8802 for the same period last you, our shareholders, for your continuing support. year. Margins were also impacted by clearance of surplus inventories, particularly in the last quarter of the financial year. Much work was done to reduce overheads in the business, with selling and marketing, distribution and administration expenses all down on last year. Also, these expenses include one-off restructuring charges, mainly in relation to redundancies made during the year. J.W. Blood M.J. Gazal The marked drop in the A$/US$ exchange rate resulted in higher Chairman Managing Director closing inventory levels, which ended the period at $45.9 million. This was $6.5 million higher than at the same time last year. This impacted on cash flows from operating activities during the year, which were $7.4 million. This result was much lower than that of the previous year, which benefited from substantial reductions in working capital from the higher levels that prevailed at the beginning of financial year 2008. Net debt levels as at 30 June 2009 were $41.7 million compared to $33.8 million at the same time last year. The Company’s loan facilities with Westpac of $74 million are in place through to September 2010 and we expect that these facilities will be renewed through to September 2011 following Westpac’s normal annual review process. The Company’s new SAP ERP computer system, which went live in February 2009, is performing to expectations. Over the next period, we will continue to develop its capabilities as we fine-tune its integration with our other software systems to provide the Company with best practice support systems in the apparel industry. We continue to work with these new systems with a heightened emphasis on inventory planning and working capital management. GAZAL CORPORATION LIMITED 2 FINANCIAL REPORT DIRECTORS’ REPORT 4 AUDITOR INDEPENDENCE AND 12 NON-AUDIT SERVICES STATEMENT OF CORPORATE 13 GOVERNANCE PRACTICES INDEPENDENT AUDIT REPORT 16 DIRECTORS’ DECLARATION 18 INCOME STATEMENT 19 BALANCE SHEET 20 CASH FLOW STATEMENT 21 STATEMENT OF CHANGES IN EQUITY 22 NOTES TO THE FINANCIAL 23 STATEMENTS SHAREHOLDER INFORMATION 73 TOP 20 SHAREHOLDERS 74 CORPORATE INFORMATION 75 ANNUAL REPORT 2009 3 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 YOUR DIRECtors have pleasure DIRECTORS IN SUBMITTING THEIR report for THE YEAR ENDED 30 JUNE 2009. The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES John W. Blood Non-executive Chairman – Has had widespread experience in the textile and garment industry. He is presently a director of Canningvale Australia Pty Ltd, Macquarie Textiles Group Limited and Cotton Seed Distributors. He is a member of the Audit and Risk Committee and Chairman of the Remuneration and Nomination Committee. Michael J. Gazal B.Com Managing Director and CEO – Joined the Gazal Group in 1986 after gaining experience in merchant banking and stockbroking. In November 1989, after the passing of Mr J.S. Gazal AM, his father and founding Chairman of the Gazal Group, he was appointed Chief Executive Officer and is responsible for the day-to-day management of the Group. David J. Gazal Executive Director – Joined the Gazal Group in 1987, appointed Director on 24 April 1999 and has performed a number of key roles within the Group since joining, including Group Divisional Manager of Surf and Casual wear and Managing Director of Mambo. He is currently the General Manager of Sourcing and certain group operating divisions. Craig Kimberley Non-executive Director – The founder of the Just Jeans retail chain, he has had 30 years experience in the retail and apparel industries. He is a member of the Remuneration and Nomination Committee. Graham Paton AM B.Ec FCPA Non-executive Director – Previously a partner for 23 years in Arthur Andersen, Chartered Accountants, retiring from that firm and public practice in July 2001. He is presently a director of Harvey Norman Holdings Limited, a position he has held since 26 June 2005. He is the Chairman of the Audit and Risk Committee. COMPANY SECRETARY Peter J. Wood CA FICS Has been the Company Secretary of Gazal Corporation Limited for 22 years. Prior to holding this position, he held the role of Financial Controller of related Gazal companies for six years. Mr. Wood has been a Chartered Accountant for over 30 years. GAZAL CORPORATION LIMITED 4 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODY CORPORATE At the date of this report, the interests of the Directors in the shares and other equity securities of the Company and related body corporate are: Total interest Ordinary in ordinary Director shares shares held Options J.W. Blood 250,000 100,000 – M.J. Gazal 1,212,211 29,582,911(1) – 1,007,554(2) – 3,411,363(3) – D.J. Gazal 1,139,622 29,582,911(1) – 1,007,554(2) – 2,067,696(4) – C. Kimberley – 265,000 – G. Paton – – – 1-2 M.J. Gazal and D.J. Gazal have a relevant interest in Gazal Corporation Limited shares held by a wholly owned subsidiary of Gazal Nominees Pty Limited (1) and directly by Gazal Nominees Pty Limited (2), as each of M.J. Gazal and D.J. Gazal have a 25% shareholding in Gazal Nominees Pty Limited. 3 M.J. Gazal has a relevant interest in Gazal Corporation Limited shares held by MJ and HH Gazal Pty Limited as trustee for the Michael Gazal Family Trust, as M.J. Gazal has a 50% shareholding in MJ and HH Gazal Pty Limited. 4 D.J. Gazal has a relevant interest in Gazal Corporation Limited shares held by The David Gazal Family Company Pty Limited as trustee for the David Gazal Family Trust, as D.J. Gazal has a 50% shareholding in The David Gazal Family Company Pty Limited. DIRECTORS’ MEETINGS The names of Directors and members of Committees of the Board are outlined below. The attendances of the Directors at meetings of the Board and of its Committees held during the financial year were: Remuneration and Board of Directors Audit and Risk Committee Nomination Committee Maximum Maximum Maximum possible possible possible Attended attended Attended attended Attended attended J.W. Blood 8 8 2 2 1 1 M.J. Gazal 8 8 – – – – D.J. Gazal 8 8 – – – – C. Kimberley 7 8 – – 1 1 G. Paton 8 8 2 2 – – ANNUAL REPORT 2009 5 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009 PRINCIPAL ACTIVITIES LIKELY DEVELOPMENTS AND EXPECTED RESULTS The principal activities of Gazal Corporation Limited and its subsidiaries (“the economic entity”, “the Group” or “the Company”) The Directors have excluded from this report any further information in the course of the financial year were the design, manufacture, on the likely developments in the operations of the economic entity importation, wholesale and retail of well known branded apparel and the expected results of those operations in future financial years, and accessories.