ANNUAL REPORT
ADELAIDE BRIGHTON LTD
ADELAIDE BRIGHTON LTD 2007 ANNUAL REPORT Adelaide Brighton Ltd Adelaide Brighton 596 018 ABN 15 007 1 Level Street 157 Grenfell Adelaide 5000 South Australia 2155 GPO Box 5001 Adelaide SA hone (08) 8223 8000 Telep (08) 8215 0030 Facsimile www.adbri.com.au Web COMPANY PROFILE
Corporate Office Concrete operations Adelaide Brighton Ltd Hy-Tec ACN 007 596 018 Unit 4, Gateway Business Park Level 1 63 - 79 Parramatta Road 157 Grenfell Street Silverwater NSW 2128 Adelaide SA 5000 Telephone (02) 9647 2866 GPO Box 2155 Facsimile (02) 9647 2924 Adelaide SA 5001 Hy-Tec Telephone (08) 8223 8000 Adelaide Brighton Ltd is a leading, Adelaide Brighton also has Concrete Products 105 Laurens Street Facsimile (08) 8215 0030 North Melbourne VIC 3051 integrated construction materials strategic cement positions in the Email [email protected] Under the brand name of C&M Telephone (03) 9328 1522 and lime producing Company eastern states through its Morgan Web www.adbri.com.au Brick, Adelaide Brighton holds Facsimile (03) 9328 5200 heavily focussed on the growing Cement grinding facility in New the second largest market share resources, engineering and South Wales, and its 50% owned Hy-Tec in the national concrete masonry Cement and lime operations Fishermans Road infrastructure sectors. cement supply joint ventures in products market, with operations Maroochydore QLD 4558 Queensland (Sunstate Cement) Adelaide Brighton Cement Telephone (07) 5443 4533 With its origins going back in New South Wales, South and Victoria (Independent Facsimile (07) 5443 6618 to 1882, Adelaide Brighton is Australia and Victoria. Birkenhead Operations Cement and Lime). 62 Elder Road Plant locations in Sydney, a S&P/ASX200 Company with Birkenhead SA 5015 Melbourne and the market capitalisation in excess Customers and sustainability Concrete and Aggregates PO Box 77 Sunshine Coast Port Adelaide SA 5015 of $1.8 billion, 1300 employees Incorporating Hurd Haulage The major end-use markets of Telephone (08) 8300 0300 and operations in all mainland Adelaide Brighton has a Pty Ltd, Kancon Group, Adelaide Brighton’s products Facsimile (08) 8341 1591 states and territories of Australia. modest position in the ready Port Minimix in north east include residential and mixed concrete markets through Angaston Operations New South Wales The principal activities of the non-residential construction, Stockwell Road Hy-Tec in Victoria, New South Adelaide Brighton Group are engineering construction, alumina Angaston SA 5353 Wales and south east Queensland the production and marketing and steel production and mining. PO Box 229 Concrete products and a 50% joint venture in Angaston SA 5353 C&M Brick of clinker, cement and lime Telephone (08) 8561 3100 northern Victoria and southern Adelaide Brighton’s commitment Head Office products; ready mixed concrete Facsimile (08) 8564 3019 New South Wales with the to sustainable development is 264 Keilor Road and aggregates; and concrete Web www.adelaidebrighton.com.au Mawson Group. demonstrated through the actions North Essendon VIC 3041 products. Telephone (03) 9375 8500 across a balanced program Northern Cement The Company has an emerging Facsimile (03) 9374 4736 of business based initiatives. Cement and Lime position in aggregate supply with Darwin Operations Web www.cmbrick.com.au Adelaide Brighton believes that Berrimah Road Locations throughout strategic reserves of aggregates East Arm Darwin NT 0828 Adelaide Brighton has market actioning sustainability objectives New South Wales, Victoria at Austen Quarry, west of Sydney, PO Box 39631 leadership positions in cement and throughout the organisation and South Australia through the Mawson Group and Winnellie NT 0821 lime in South Australia, Western positions the Company for long Hurd Haulage and Kancon in Telephone (08) 8984 4722 Australia, and Northern Territory term competitive business Facsimile (08) 8984 4674 northern New South Wales. Joint ventures through its Adelaide Brighton performance. Mataranka Operations Independent Cement & Lime (50%) Cnr Roper and Stuart Highways Cement, Cockburn Cement and 750 Lorimer Street Mataranka NT 0852 Northern Cement operations. Port Melbourne VIC 3207 Telephone (08) 8975 4575 GPO Box 523 Facsimile (08) 8975 4752 Port Melbourne VIC 3207 Telephone (03) 9676 0000 Cockburn Cement Facsimile (03) 9646 4954 Munster Operations Sunstate Cement (50%) Lot 242 Russell Road East Port Drive Munster WA 6166 Fisherman Islands QLD 4178 PO Box 38 PO Box 350 Hamilton Hill WA 6963 Wynnum QLD 4178 Telephone (08) 9411 1000 Telephone (07) 3895 1199 Facsimile (08) 9411 1150 Facsimile (07) 3895 1198 Dongara Operations Alternative Fuel Company (50%) Kailis Drive Wilkins Road Dongara WA 6525 Wingfield SA 5013 PO Box 530 Telephone (08) 8223 8000 Dongara WA 6525 Facsimile (08) 8215 0030 Telephone (08) 9927 2756 Facsimile (08) 9927 2761 Mawson Group (50%) 141 King George Street Kwinana Operations Cohuna VIC 3568 1 Year in review Lot 45 Leath Road Telephone (03) 5456 2409 Kwinana WA 6167 2 Chairman’s report Facsimile (03) 5456 2428 PO Box 528 3 Managing Director’s statement Adelaide Brighton Ltd Kwinana WA 6167 Locations throughout ABN 15 007 596 018 6 Financial results Telephone (08) 9499 2222 northern Victoria and Facsimile (08) 9499 2299 southern New South Wales Level 1 7 Map of operations 157 Grenfell Street 8 Review of operations Morgan Cement Adelaide 9 Cement and lime Foreshore Road South Australia 5000 12 Concrete and aggregates Port Kembla NSW 2505 GPO Box 2155 14 Concrete products Telephone (02) 4276 4888 Adelaide SA 5001 15 Joint ventures Facsimile (02) 4276 4399 Telephone (08) 8223 8000 16 Sustainability Facsimile (08) 8215 0030 25 Corporate governance Web www.adbri.com.au 31 Directors 32 Shareholder information 34 Directors’ report 38 Remuneration report 49 Financial statements 96 Auditor’s independence declaration 97 Independent audit report The Adelaide Brighton logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, 98 Financial history the Northern Cement logo, the Hy-Tec logo, the C&M logo, the Hurd Haulage logo and the
Kancon logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate. JORGENSEN DESIGN year in review
Profit after tax Record sales revenue of $888.4 million - $m 120 an increase of 11.8% 100 80 Record net profit after tax of $113.9 million - 60 an increase of 11.5% 40 20 20.0% increase in the 2007 total dividend 03 041 051 061 071 to 15.0 cents per share Dividends per share cents per share 21 Special dividend of 3.5 cents per share, = Special dividend fully franked (6.0 cents pcp) 18 15 12 Earnings per share increased 11.7% 9 to 21.0 cents (18.8 cents pcp) 6
3 Operating cash flow decreased 2.7% to $140.4 million 03 04 05 06 07 primarily due to higher tax and interest payments 2 3 Cash flow 1 from operations Gearing at 48.4% (33.6% pcp) rose due to increased $m dividend payments and acquisition outlay 160 140 120 Interest cover decreased to 7.9 times 100 (8.4 times pcp) 80 60
03 04 05 06 07
Gearing: net debt to equity Financial summary % 50 A$ Millions 2007 2006 45
Sales revenue 888.4 794.7 40 35 Depreciation (52.4) (51.8) 30 Earnings before interest and tax (“EBIT”) 171.3 148.8 25 Net interest2 (21.7) (15.2)
03 04 05 06 07 Profit before tax 149.6 133.6 4 4 4 4 Tax expense on profit before tax (35.7) (31.0) Return on Net profit after tax before tax consolidation 113.9 102.6 shareholders funds Minority interest – (0.5) % 18 Net profit attributable to members 113.9 102.1 16 Earnings per share (cents) 21.0 18.8 14 Dividends per share - fully franked (cents) 15.0 12.5 12 Special dividend per share - fully franked (cents) 3.5 6.0 10 Net debt (A$ Millions) 323.3 226.9 8 Net debt/equity (%) 48.4% 33.6%
03 04 05 06 07 1 Net debt/equity 1 1 1 1 2 Interest charge shown gross in the Income Statement with interest income included in revenue 1 Reported under AIFRS and before adjustments for the tax benefit on implementation of tax consolidation 2 Includes 6.0 cents special dividend 3 Includes 3.5 cents special dividend 4 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 Reported under AIRFS CHAIRMAN’S REPORT
delaide Brighton reported its seventh consecutive year of profit growth, a further record net profit. This growth, together with strong operating cash flows, allowed an increased full year ordinary dividend of 15.0 cents aper share and a special fully franked dividend of 3.5 cents per share. Financial performance Adelaide Brighton reported a record net profit after tax of $113.9 million for 2007, an 11.5% increase vero 2006. A fully franked final dividend of 9.0 cents per share was declared, taking the full year dividend to 15.0 cents per share, a 20.0% increase over 2006. The dividend payout ratio, before payment of the special dividend, increased to 71.5%. The continued growth in earnings and dividend has provided the basis of further improvement in total shareholder return which is now showing a 30.4% five year compound annual growth rate.
Strategic intent The Company made measured progress in furthering its strategic plans during 2007 by acquiring regional downstream positions in aggregates and concrete in New South Wales and Victoria. In May and July 2007, the aggregates and ready mixed businesses of Hurd Haulage Pty Ltd and Kancon in north east New South Wales were acquired. These operations serve the growing north east New South Wales coastal markets around Port Macquarie and were complemented by the acquisition of the Port Minimix ready mixed business in December 2007. Also in December 2007 the Company acquired 50% of the Mawson Group, a mid sized independent aggregates and ready mixed business based in northern Victoria. The Mawson acquisition adds significant critical mass of concrete and quarry expertise and aligns with our downstream integration strategy. These acquisitions bring with them significant aggregate reserves which, together with the successful full commissioning of the Austen Quarry in New South Wales, is beginning to build a credible emerging aggregates position for the Company.
Sustainability Adelaide Brighton continues to promote sustainability within the Company and to its external stakeholders. This report expands our sustainability reporting and includes additional measures which demonstrate our progress. A fundamental issue facing all major industries is that of greenhouse gas emissions and their impact on global warming. Adelaide Brighton and the Board moved quickly beyond the debate about the certainty and cause of global warming to the acceptance of the need for reducing greenhouse gas emissions and the support for the adoption of a broad based national Australian emissions trading scheme. Adelaide Brighton supports the early implementation of emissions trading which will begin with the capture and reporting of greenhouse gas emissions data under the National Greenhouse and Energy Reporting programme from July 2008. However, the Company also acknowledges the need to provide protection for emissions intensive, trade exposed industries in Australia such as cement, steel and alumina manufacture until our international competitors are also bound by a similar cost of carbon. In addition to contributing to the greenhouse gas emissions debate through the Cement Industry Federation and in our own right, Adelaide Brighton has set in place key strategies to reduce its future carbon footprint. The Company continues to closely monitor its environmental performance seeking continuous improvement beyond the levels of statutory compliance. This responsibility is a fundamentally important part of our ‘license to operate’ due to the proximity of our core manufacturing plants to both established and emerging local residential communities.
People and leadership Adelaide Brighton increased its investment in employee development and training during 2007. In addition to building on the Company’s skills and knowledge base, this investment has become an essential part of developing employee potential and enhancing job satisfaction, both key attributes in terms of employee retention in today’s tightening labour markets. In this regard, I would again commend our employees for their commitment and performance in achieving the 2007 results. The delegation and acceptance of responsibility and accountability in order to make timely and informed decisions continues to be a key factor in both the culture and performance of Adelaide Brighton.
Malcolm Kinnaird AO Chairman
2 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 MANAGING DIRECTOR’S STATEMENT
delaide Brighton delivered its seventh consecutive year of profit growth and shareholder returns based on the continued strength of its markets, improved operating performance aand the further development of its core strategies. 2007 performance Adelaide Brighton delivered a further record result for the year with a net profit after tax of $113.9 million, an 11.5% increase over 2006. The underlying earnings before interest and tax grew by 15.1% to $171.3 million on the basis of an 11.8% growth in sales and improved operating margins. Continued sales growth in our core markets increased revenues to a record $888.4 million, underpinned by an increase in cement and lime sales and the emerging aggregates position in New South Wales. Driven by higher demand from the residential, infrastructure and engineering sectors, cement sales increased in all states except New South Wales, which weakened further during the year. Adelaide Brighton’s lesser exposure to the New South Wales market mitigated the impact on the overall Company result. The New South Wales weakness however, had a direct impact on the performance of C&M Brick which derives nearly half of its sales income from this state. The resources sector continued its growth in Western Australia and began an emerging growth trend in South Australia and the Northern Territory, further increasing the demand for lime (calcium oxide), an important compound in the alumina, steel, copper, nickel and uranium ore refining processes. Lime sales increased by 6.5% during the year with over one million tonnes of lime supplied to the resources sector.
Adelaide Brighton share price $ 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5
03 04 05 06 07 08
The continuous supply of consistent, high quality lime is a key unique attribute for Adelaide Brighton in being able to meet peaks in customer demand from the West Australian market. This is achieved through the scale of the Company’s lime kilns at Munster and the Dongara kiln, north of Perth, and the ability to switch two of the Munster cement kilns to lime manufacture on an as needs basis. In its second largest lime market, Northern Territory, Adelaide Brighton’s lime sales also grew on increased resource sector demand resulting in the Mataranka lime plant increasing its output to capacity. In order to meet customer demand in the second half year, it was necessary to supplement Northern Territory demand, at reduced margins, with supply from the Angaston plant in South Australia. An important factor in meeting the increased cement demand was the extension of the Company’s clinker and cement supply chain from south east Asia. Additional product and freight contracts were secured during the year in order to meet future projected cement demand. The cost of imported cement has increased due to rising freight prices, which remain at close to cyclically high levels and underlying product cost increases, in particular on energy and fuel, in the Asian manufacturing bases. In Australia, energy and fuel costs have also risen acutely with gas pricing and supply and electricity pricing being key inflationary drivers in Western Australia and South Australia respectively. These price increases, together with fundamental escalation in materials, plant and spare parts costs, have driven the need to recover costs through cement sales price increases which were realised at, or close to, inflationary levels in all markets. The Company also commenced increasing lime margins to levels sufficient to sustain future capacity investment with price increases achieved at above inflationary levels during the year as some short and medium term lime supply contracts matured.
Earnings and sales $m 140 900 120 800 100 700 80 600 60 500
40 400 20 300
03 04 05 06 07 NPAT Sales
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 3 Operating performance continues to be a fundamental driver behind the improvement in earnings with consistent high levels of output being achieved from all cement and lime plants. Our core plants are now operating at, or close to capacity. Growth is being sustained by increasing supplies of imported cement and the improvement of plant output beyond rated capacity levels. A clearly defined operational improvement programme has been set in place which has begun to deliver output improvement and cost down benefits during 2007. Hy-Tec delivered a further record profit during the year despite the continued weakness in demand in New South Wales and rising costs of concrete materials. Improved demand in Queensland, a continued focus on improvement in distribution efficiencies and the optimisation of concrete mix designs were key factors in delivering the 2007 Hy-Tec result. The growth of the Austen Quarry to an economic operating scale was achieved during the year, primarily through the switch of aggregate supply to selected internal
Cockburn Cement’s Munster cement and lime plant
Hy-Tec Sydney plants and the sale of secondary road base materials to local markets. C&M Brick had a challenging year with the core New South Wales market depressed by lower market demand and a new market entrant. While some sales price recovery was seen, the volume decline had a material impact on the overall divisional result. C&M’s Victorian operations performed better, though were impacted by a $1.1 million inventory write down relating to the prior year. Actions were taken to reduce the division’s cost base in the 2007 final quarter at a cost of $2.2 million putting the division on a firmer footing for an improvement in operating performance in 2008. Normalising these impacts, the underlying 2007 earnings before interest and tax for C&M Brick was $5.3 million in 2007 compared to $7.7 million in 2006.
Strategic development The Company made further progress during the year on the delivery of its strategy of selective downstream integration into concrete, aggregates and sand, growth in lime and operational improvement. Following a review of regional growth market potential and business opportunities, the Hurd Haulage Pty Ltd, Kancon and Port Minimix businesses were acquired to form an integrated aggregate and concrete business in the Port Macquarie region. The returns from these successful businesses will be improved by the pull through benefits of supply of aggregates and sand from the Hurd Haulage quarries and the future infrastructure growth of this emerging regional corridor. In late 2007, Adelaide Brighton announced the acquisition of a 50% share in Mawsons, a long established quarry and concrete business located in northern Victoria.
4 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 In addition to progressing the Company’s vertical integration strategy, this acquisition provides Adelaide Brighton with an important profitable position in a growth market and the benefit from the introduction of additional human capital skills and operational experience in quarrying and concrete manufacturing and supply. With regard to our lime development strategy, the growth in lime demand during 2007 was in line with long term forecasts as additional resource sector capacity was brought on-stream. Consistent with prior year projections, we forecast an increase in lime demand by an additional 300,000 tonnes by the end of 2012. The Company will continue to monitor lime pricing in the context of expiring longer term contracts over the next four years and will realise margin growth through the recovery of manufacturing cost inflation and further improve margins to the levels required to sustain future long term investment in the lime manufacturing operations.
Austen Quarry at Hartley in New South Wales
Outlook In 2008, cement demand is projected to continue to be robust with volumes ahead of 2007. The rate of growth in Western Australia is expected to level out during the year with continued strong demand in Queensland, Victoria and South Australia. Demand in New South Wales continues to be depressed by the extremely low levels of residential activity and our operations are being managed to expect no market recovery during 2008. South east Asia cement availability remains tight and the underlying high product and shipping costs will continue to offset the strength in the Australian dollar. These forces, together with the continued input price pressures on labour, materials, fuel and energy costs, will allow for future price increases across all product sectors. In conclusion, the Company continues to be pleased with its operational performance and the delivery of increasing shareholder returns. The Company’s national geographical spread and continued exposure to the engineering, infrastructure and resource sectors will continue to provide Adelaide Brighton with a unique competitive position in the Australian construction materials and resource sectors. Through the delivery of its consistent strategies and effective capital management, the Company expects further growth in profitability and shareholder return in 2008.
Mark Chellew Managing Director
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 5 FINANCIAL RESULTS
arnings growth and strong cash flows provided the basis for an increase in dividend payout ratio to 71.5% and a 20% increase in the 2007 full year fully efranked dividend to 15.0 cents per share. Profits Finished product inventory levels Interest and taxation increased by $4.1 million due the Adelaide Brighton delivered a seventh Net interest expense rose by expansion of the Austen Quarry consecutive year of earnings growth $6.5 million to $21.7 million due to operating base and the acquisition of with net profit after tax increasing the higher average net borrowings Hurd Haulage Pty Ltd. by 11.5% to a record $113.9 million, and the progressive increase in the achieved despite higher tax and interest Income tax payments increased by cash rate. The 2006 expense also took expenses. Underlying earnings before $10.3 million to $44.5 million as a result benefit from a $2.4 million credit from interest and tax was $171.3 million, of the increase in taxable profits and capitalisation of interest expense an increase of 15.1% over 2006. higher opening tax payable balances. on the Austen Quarry. Dividends paid in 2007 increased by Tax expense rose by $4.7 million to Sales revenue $44.8 million to $105.8 million as a $35.7 million due to the higher taxable result of the further increase in payout Sales increased by 11.8% to a record profits mitigated by a $2.9 million tax ratio and the payment of the 6.0 cents $888.4 million as a result of increased benefit from research and development per share special dividend for 2006. demand for cement and lime in most projects. The Company continues to markets. The increase in lime sales Earnings per share benefit from the increase in the fully was driven by a 6.5% growth in lime Cents per share franked dividend received from 25 demand, principally from the resources Sunstate Cement which continued sector, and improved gross margins. 20 its 100% payout ratio in 2007. 15
Gross margins 10 Capital investments Earnings before interest and tax 5 Capital expenditure at $81.1 million margins increased to 19.3% from was similar to 2006 and included 03 04 05 06 07 18.7% as sales price rises and * * * * $14.5 million of business asset operational cost improvements offset * acquisitions - Kancon and Port Minimix Reported under AIFRS underlying inflationary cost increases, and before adjustments ready mixed concrete operations in New in particular energy costs. for the tax benefit on South Wales and the Blanchetown gypsum implementation of tax consolidation quarry in South Australia. Underlying Shareholder return capital expenditure was $66.6 million of which $36.4 million was developmental A final dividend of 9.0 cents per share Interest cover EBITDA basis and $30.2 million sustaining. was declared, resulting in a total fully Times franked dividend for 2007 of 15.0 cents 14 The key development investments per share, a 20% increase over 2006. 12 included completion of the Austen In addition, the Board declared a fully 10 Quarry, Munster kiln 6 coal milling, franked 3.5 cents per share special handling and firing systems, Angaston 8 dividend. kiln upgrades and Morgan Cement 6 materials handling, cement storage Earnings per share improved to 21.0 and dispatching systems. cents, an 11.7% increase over the prior 03 04 05 06 07 year. Total shareholder return, calculated Risk management on a dividends declared basis, increased Borrowings by 30.4% during 2007 and over the Adelaide Brighton continues to assess Net debt at 31 December 2007 rose longer term, the compound average and review its key business risks and to $323.3 million from $226.9 million annual growth in shareholder return maintain its core risk management in 2006. This resulted from acquisition since 2002 was 28.4%. processes under the guidance of the activity, the increase in the dividend Board Audit Risk and Compliance payout ratio and the payment of the Cash flow Committee. All aspects of risk, whether 2006 special dividend. Gearing (net commercial, financial, or operational are Operating cash flow remained strong debt to equity) at 48.4% remained at reviewed by management as part of a though dipping slightly by $3.9 million comfortable levels, in the middle of the formal risk management process and to $140.4 million as the increase in Board’s preferred range of 40% - 60%. reported to the Board committee. 2007 profitability was offset by higher The Company has rolled forward interest and income tax payments. The its short term one year $60 million Company continues to focus on working working capital facility until 31 March capital management and despite the 2009. The Company’s three year senior 11.8% growth in sales, the underlying debt facilities mature on 31 March increase in accounts receivable was 2009. Preliminary discussions with restricted to 7.6% through continued our principal bankers have shown a tight credit control. keen interest in the renewal tender scheduled for the third quarter of 2008.
Andrew Poulter Chief Financial Officer
6 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 MAP OF OPERATIONS
delaide Brighton’s national geographic spread, together with its higher exposure to the growing resources sector, provides the Company a unique competitive position in athe Australian construction materials and lime sectors.
Northern Cement Mataranka Lime Cement Lime
Exmouth Limestone Hy-Tec Qld Ready mixed concrete
Sunstate Cement (50% owned) Cement, drymix
Dongara Lime Hurd Haulage /Kancon Lime Aggregates, sands, ready mixed concrete
Cockburn Cement Munster, Kwinana Lime, cement, drymix Independent Cement and Lime (50% owned) Thornton / Kembla Grange Cement, lime, drymix, fly ash Rawlinna Quarry Adelaide Brighton Cement Limestone Birkenhead Hy-Tec NSW Cement, drymix, fly ash Ready mixed concrete
C&M Brick Morgan Cement / Vales Pt Adelaide Cement, fly ash Concrete products C&M Brick Cement, lime, drymix, Alternative Fuel Company Moorebank, Nowra, Canberra fly ash and gypsum: Adelaide (50% owned) Concrete products Adelaide Brighton Cement Alternative fuel Cockburn Cement Austen Quarry Morgan Cement / Vales Pt Adelaide Brighton Cement Aggregates Northern Cement Angaston Mataranka Lime Cement, lime Independent Cement and Lime Blanchetown Quarry Blanchetown Quarry (50% owned) Gypsum Cement, lime, drymix, slag Ready mixed concrete, aggregates and sands: Mawsons C&M Brick Austen Quarry (50% owned) Bendigo, Campbellfield Hurd Haulage /Kancon Regional Victoria / Southern NSW Concrete products Hy-Tec Qld, NSW, Vic Ready mixed concrete, aggregates Hy-Tec Vic Concrete products: Adelaide Brighton Cement Ready mixed concrete C&M Brick Geelong Quarry Limestone, sand Joint ventures: Alternative Fuel Company Independent Cement and Lime Mawsons Sunstate Cement
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 7 review of operations
The 2007 record profit was assisted by fairly consistent growth in construction materials markets in most states. Some regional weaknesses in residential construction were offset by further growth in the engineering, infrastructure and resource sectors.
Tom Douglas Michael Kelly Executive General Manager Executive General Manager Marketing and Sales Strategy and Business Development
Total assets $m 1200 1000 800 600 400 Turnover Sales by geographical 200 segmentation segmentation Cement Western Australia 03 04 05 06 07 Lime Victoria * * * * * Concrete South Australia Reported under AIFRS Concrete products New South Wales Queensland Northern Territory
8 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 CEMENT AND LIME
ement and Lime sustained overall operating performance with an improved output. The operational cost improvement programme is embedded in the division and is beginning c to deliver cost and volume benefits.
The delivery of demanding production Adelaide Brighton Feasibility studies are underway to targets to meet rising market demand cement ground evaluate the options for increasing (including imported clinker) was a key factor in the performance of Tonnes ‘000 lime capacity at Mataranka with the the Cement and Lime division during the 2500 likelihood of doubling capacity to year. With all plants operating at close 2000 meet forecast lime demand from to capacity, the achievement of planned the resources sector. The Angaston 1500 levels of uptime and consistent levels lime volumes used to supplement of output and quality were critical 1000 supply in 2007 were made at narrow factors in achieving this result. 500 margins due to the high transportation costs and are not sustainable in the The South Australian plants at 03 04 05 06 07 long term. Birkenhead and Angaston worked in tandem to meet the increased demand In Western Australia, high levels of both in local markets and in the Adelaide Brighton demand placed further output pressures seaborne supply of cement to Adelaide lime production on the operations at Munster, Kwinana Tonnes ‘000 Brighton’s joint ventures, Independent 1200 and Dongara. The progressive realisation Cement and Lime Pty Ltd in Victoria and 1000 of the projected increased lime demand Sunstate Cement Limited in Queensland. pushed Munster lime kilns 5 and 6 800 Birkenhead cement milling efficiency beyond their rated capacity limits and it was improved with record output and 600 was necessary to switch cement kiln 3 Angaston increased its lime output in 400 to lime production for a six week period order to meet increased market demand in order to meet peaks in lime demand. in the Northern Territory. 03 04 05 06 07 As a result, additional clinker imports were made into Kwinana to meet the In the first half year, Birkenhead increased demand for cement. successfully managed peak electric power demand constraints, turning Western Australian gas supply off cement mills when forecast pricing constraints became even more peaked to the benefit of both plant acute during 2007 necessitating operating costs and overall demands the acceleration of the Munster lime on the local grid and South Australian kiln 6 coal milling, handling and firing power supply. However, despite investment. This $19 million investment these actions, underlying South was commissioned on New Year’s Australian electricity pricing rose by Eve, and was critical in sustaining approximately 40% over the prior fuel supplies to Munster when gas year, a fundamental increase in Adelaide Brighton supplies were constrained early in 2008. lime sales market cement manufacturing cost. sector demand This investment has over halved the dependency on natural gas fuel at the In the Northern Territory, both the Alumina Other mineral processing Munster plant and will be essential in Darwin based cement milling and the Building and construction maintaining future uninterrupted fuel Mataranka lime operations increased Environmental supply to the Munster operations. output to maximum capacity in order Agriculture to meet local demand. Other This investment has also been complemented by the securing of long term coal and rail freight supply contracts and the switching of gas supplier to a preferred strategic partner.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 9 Meeting production targets was a key factor in the performance of the Cement and Lime division
Photograph courtesy of Robert Frith/Acorn Photo Agency Transperth Canning Bridge Train Station. A part of the Public Transport Authority of Western Australia’s Perth to Mandurah rail line, which required 250,000 concrtete sleepers over 72km of double track railway. Cockburn Cement supplied a range of cements for various applications.
10 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 The Cement and Lime division continues Australian cement production to progress the use of alternative fuels Tonnes ‘000 10000 in order to optimise manufacturing cost, and reduce Adelaide Brighton’s carbon 9000 footprint. The use of demolition wood 8000 waste as a replacement for natural 7000 gas was increased at the Birkenhead 6000 plant as was the oil combustion at
Mataranka. The Company continues to 96 97 98 99 00 01 02 03 04 05 06 07 explore opportunities to increase the use of alternative fuels and reduce its dependency on primary fuel resources. The delivery of the 2007 - 2011 operational improvement programme has become the key priority in meeting future increases in cement and lime demand and optimising the Company’s financial performance. Key capital projects designed to increase the capacity of the Munster lime kilns through eliminating process bottlenecks and improving plant uptime were approved during the year. At Birkenhead, plans have been put in place which are designed to extend refractory life and kiln uptime with the benefit of increasing clinker capacity. The benefits of these investments will begin to flow through in 2008.
Martin Brydon Executive General Manager Cement and Lime
Projects have been put in place at Birkenhead to extend refractory life and kiln uptime
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 11 CONCRETE AND AGGREGATES
ontinued focus on operating efficiency, optimisation of concrete mix designs and margins provided the basis for a record result for the Concrete and Aggregates division, together with strong concrete markets in Queensland c and Victoria, and the growth in internal aggregate sales in New South Wales.
Concrete and Aggregates reported Improved distribution efficiencies and A smaller scale position was taken in a record result for 2007 based on mix costs also improved the Hy-Tec the emerging north eastern New South stronger demand in Queensland, Victoria earnings though returns from Wales region with the acquisition of improved operating performance and this market continue to be challenged the Hurd Haulage Pty Ltd, Kancon and the achievement of operating scale by higher raw material costs and Port Minimix businesses to form an performance at the Austen Quarry lower concrete margins. integrated quarry and concrete materials in New South Wales. supply base in this region. Consistent In December, the Company acquired a with the overall Company strategy, these The performance in Queensland was 50% ownership of the Mawson Group, acquisitions have been successfully complemented by the opening of a long established quarry, sand and integrated into the Hy-Tec business and the Beerwah plant in January which concrete company based in Cohuna in will provide a platform for future profit quickly achieved target volumes due northern Victoria. This joint venture growth in this emerging market. to the increase in regional market ownership is aligned with Adelaide activity. The New South Wales market Brighton’s strategy of selective vertical remained depressed though overall integration and gives the Company state performance improved due to an important position in an emerging optimisation of concrete mix costs, the regional market. Mawsons brings recovery of raw material cost increases with it long term reserves of high in selling price and the first time quality aggregates, quarrying skills contribution from the Austen Quarry. and operational expertise which will complement the emerging Hy-Tec Austen Quarry is operating at a scale aggregates business. The Adelaide sufficient to recover its fixed overheads Brighton ownership will in turn secure and make a positive contribution to the long term, competitive cement earnings. The switch of the western supply to the Mawson Group. Mark Finney Sydney Hy-Tec concrete plants to Austen Executive General Manager aggregates and manufactured sand Concrete and Aggregates together with local supplies of road base to the Blue Mountains region, have been key factors in achieving As demand for ‘green’ product this operating scale. grows, Hy-Tec has equipped batching plants to supply this Australian concrete production Tonnes ‘000m3 emerging product stream 26000 24000 22000 20000 18000 16000
96 97 98 99 00 01 02 03 04 05 06 07
12 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 Hy-Tec Beerwah plant in Queensland
Fully commissioned Austen Quarry makes a positive contribution to Hy-Tec’s earnings
Australian concrete production by state Tonnes ‘000m3 8000 7000 6000 5000 4000 3000 2000 1000
96 97 98 99 00 01 02 03 04 05 06 07
NSW Vic Qld SA WA Tas NT ACT
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 13 CONCRETE PRODUCTS
he 2007 year was challenging for C&M Brick as weaker sales in its core New South Wales market and one-off restructuring costs impacted earnings. Through the delivery of plant efficiencies, customer service and product quality, t the South Australian operations were able to grow for the third consecutive year.
In 2007 there was a reversal in C&M Despite the reduction in sales turnover, Sales in Victoria dipped in the first half Brick’s profit growth due to a further it was possible to realise sales price year but showed some recovery in the weakening of the New South Wales increases in most markets to recover the second half. South Australia continued market as a result of reduced market underlying raw material cost increases its earnings improvement based on demand and increased competitor reflecting the cost and margin pressures increased margins through improved activity. Overall C&M’s sales revenue in the industry as a whole. product mix, production efficiency and declined by 6.5% to $82.5 million, realisation of price increases. predominantly due to New South C&M Brick continues to review its fix Wales, and earnings before interest cost operating base to optimise future and tax fell by $6.8 million to returns in line with forecast demand. $2.0 million. C&M Brick plant improvement After one off restructuring and initiatives have resulted in a prior year inventory adjustment an overall improved energy taken in 2007, the normalised underlying earnings for 2007 efficiency by 10% were $5.3 million compared with $7.7 million in 2006.
Steve Rogers Executive General Manager R C&M Brick’s Stradapave Concrete Products used in residential paving JOINT VENTURES
he continued strength of markets in Queensland and Victoria has supported improved contribution to Company performance in 2007 from Sunstate Cement t Limited and Independent Cement and Lime Pty Ltd.
Sunstate Cement Continued buoyant demand for cement The use of landfill is rapidly diminishing products in Victoria provided the base in developed countries due to its high Sunstate Cement Limited, a joint for further profit growth in ICL and environmental cost. The pressure from venture between Adelaide Brighton an improved valuable contribution to the introduction of landfill levies, for and Blue Circle Southern Cement, is a Adelaide Brighton’s earnings. example, has been used in Europe to cement milling, storage and distribution develop environmentally sound waste facility at Fisherman Islands, Port Further increases in demand in disposal methods. Appropriate levels Brisbane. Sunstate is supplied with Victoria took the cement capacity of of landfill levy in South Australia are seaborne supply of clinker both from the the shared Melbourne Cement Facility now being imposed which will ensure Adelaide Brighton Birkenhead plant and operations close to capacity levels and viable waste reuse alternatives to also from imports from south the construction of a new cement silo landfill are sustainable. east Asia. With a capacity of over one was largely completed in 2007. When million tonnes per year of both bulk commissioned, this silo will release Mawsons and bagged cement products, Sunstate further dedicated cement storage for Cement is an important scale supplier ICL providing for future market growth. Mawson Group (Mawsons) is a joint to Queensland’s construction industry. In addition, this will improve the supply venture between Adelaide Brighton chain efficiency and costs and enhance and BA Mawson Pty Ltd. Mawsons is In a strong Queensland market, customer service in the Victorian the largest ready mixed concrete and demand for cement products continued market. quarry operator in the northern regional to grow with Sunstate Cement reaching Victoria and southern regional New its maximum supply capacity during Alternative Fuel Company South Wales and holds leading market periods of peak demand. Based on this Pty Ltd (AFC) positions in the markets it serves. increased demand and optimising its operational and logistical expertise, Alternative Fuel Company Pty Ltd is a In December 2007, Adelaide Brighton Sunstate Cement showed continued joint venture between Adelaide Brighton made a strategic 50% investment in profit growth during 2007 providing and Adelaide based Resourceco Pty Ltd. Mawsons, a mid sized independent a valuable contribution to the overall AFC processes selected combustible aggregates and concrete business Adelaide Brighton result. In order to construction and demolition waste based in northern Victoria and southern meet the future demand arising from (primarily timber waste) into fuel New South Wales. Mawsons is a long projected Queensland growth, Sunstate suitable as a replacement for traditional established and well managed integrated Cement has begun its investment in fossil fuels. The demolition wood business renowned for high levels of additional cement milling and cement waste is utilised by Adelaide Brighton’s customer service and product quality and clinker storage capacity. This Birkenhead plant as a substitute for supply to its regional markets. expansion, which will be completed natural gas in the kiln. This resource In addition to bringing a future profit in mid 2009, will increase Sunstate recovery process diverts demolition stream to Adelaide Brighton consistent Cement’s capacity for the supply of wood waste away from landfill and with its downstream integration strategy, bulk and bagged cement products to delivers a major environmental benefit Mawsons also will provide opportunities 1.5 million tonnes per annum. to South Australia by reducing material for skills sharing and transfer with going to landfill and also reducing the existing Adelaide Brighton Hy-Tec Independent Cement greenhouse gas emissions by replacing Concrete and Aggregates division. and Lime Pty Ltd (ICL) natural gas. Independent Cement and Lime Pty AFC is now providing a key Ltd, a joint venture between Adelaide environmental and cost benefit to South Brighton and Barro Group Pty Ltd, is a Australia in reducing the quantities of specialist supplier of cement, cement demolition waste sent to landfill and blended products, and agricultural lime supplementing the primary natural gas to a wide variety of industries, major fuel stream used at Adelaide Brighton’s retail outlets, and agricultural markets Birkenhead plant. throughout Victoria and New South Wales. ICL is also supplied with cement both from Birkenhead and imported sources.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 15 sustainability
Adelaide Brighton’s commitment to sustainable development is demonstrated through the actions across a balanced program of business based initiatives. Adelaide Brighton believes that actioning sustainability objectives throughout the organisation positions the Company for long term competitive business performance.
Environmental Eco-efficiency Impact management Product stewardship
Greenhouse gas reduction Sustainability reporting Energy efficiency Process waste reduction Alternative fuels Mains water efficiency Alternative Local environmental raw materials effects Supplementary cementitious Sustainable materials business
Economic Social Economic viability Employee resources Assurance of supply Product development Stakeholder relations Corporate citizenship Community interaction Flexible work arrangements Developing a skills base Safety
Governance Management standards Compliance
16 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 As part of Adelaide Brighton’s commitment to sustainability, a data base is being built and measures developed to monitor progress across objectives. Our sustainability indicators cover energy, greenhouse gas emissions, eco-efficiency, cleaner production and health and safety. The Cement and Lime division has the greatest impact on Adelaide Brighton’s sustainable development and has fully established data collection. The Concrete and Aggregates and Concrete Products divisions are setting up data collection systems, and their specific performance achievements have been included in this report where trend data is robust. These consolidated measures include only wholly owned subsidiaries of Adelaide Brighton and do not include acquisitions made in 2007.
Energy Production records monitor all forms of energy used, from the mining operations through to the dispatch of all cementitious products. This indicator demonstrates both energy efficiency and total energy needs. Transport that is contracted out is not included, and the tonnes of product includes materials that are used by the process as intermediate product e.g. clinker and cementitious materials sold directly as cementitious binders.
Cement and lime Cement and lime
Energy GHG (CO2) emissions* < Total energy GJ/t > < ‘000 tonnes t/t > 19000 8 3400 1.2 18500 7 3300 1.0 18000 6 3200 0.8 17500 5 3100 0.6 17000 4 3000 0.4 16500 3 2900 0.2 03 04 05 06 07 03 04 05 06 07
Total energy TJ Total kilo tonnes Lime production GJ/t Lime t/t Cementitious GJ/t Cementitious t/t Clinker production GJ/t Clinker t/t
*Process, fuel and power
Greenhouse emissions Adelaide Brighton has adopted the National Greenhouse Accounts (NGA) Factors and the World Business Council for Sustainable Development (WBCSD) Cement Sustainability Initiative protocols to calculate the emissions from processing materials, fossil fuel burning and power generation. Initiatives that reduce these sources of emissions and the greenhouse gas footprint in concrete are included in the eco-efficiency and energy efficiency measures of cement and lime.
Cleaner production Monitors process waste that is put to landfill.
Eco-efficiency Programs conserving natural resources, e.g. raw materials, fuels and water. The measure has been split into four forms: raw materials, fuel, water, and supplementary cementitious materials (SCM).
Health and Safety Adelaide Brighton measures lost time injury rate, lost time injury frequency and restricted duties, including in the statistics all employees and contractors. ‘Lost time’ is defined as the inability to attend the next regular work shift.
Cement and lime Cement and lime Cement and lime Process waste to landfill Alternative resources Mains water ‘000 tonnes < ‘000 tonnes % > ML 140 500 15 600 130 450 12 550 120 400 9 500 110 350 6 450 100 300 3 400 03 04 05 06 07 03 04 05 06 07 250 03 04 05 06 07
Total tonnes % kiln fuel substitution % SCM sunstitution
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 17 KEY SUSTAINABILITY INITIATIVES
delaide Brighton continues to develop its strategies for building a sustainable business in each of the following areas - social, environmental and economic performance, underpinned with sound agovernance through compliance and management systems. In 2007, the Company’s approach Energy efficiency Upgrading the Birkenhead burner to sustainability policy, objectives system to a multi-channel, energy Cement and Lime division use more and reporting were reviewed and efficient state-of-the-art low oxides of than 98% of the Company’s energy benchmarked externally against nitrogen (NOx) technology is an exciting needs, making energy efficiency a criteria for the Global Reporting program for 2008 for energy efficiency significant focus. Rigorous attention Initiative and the World Business gains. This will complete the progress is paid to the physical and chemical Council for Sustainable Development, started in 2005 with the electronic condition of the materials and process Cement Sustainability Initiative. burner management system. control of the plant using sophisticated The report was encouraging stating computer systems. Modern energy Northern Cement achieved above budget Adelaide Brighton’s approach was efficient production technology makes production in cement milling in addition complete and aligned with functional over 70% of the clinker, and 85% of to limiting operations to within a power objectives and actions. Adelaide Brighton’s quicklime product. tariff and achieving power efficiency Key programs and their progress improvement. Energy use across the Company has across the Company are detailed in decreased due to initiatives such as The Munster lime kilns produce 85% this 2007 sustainability report. transport rationalisation, implementation of the Company’s total lime production of more energy efficient practices in the using energy efficient technology kilns. Greenhouse gas reduction process and investment in new plant: Angaston’s lime production showed More than 99% of Adelaide Brighton’s In 2007, the energy required per notable improvement in its efficiency, greenhouse gas emissions (GHG) are tonne of cementitious material produced being progressively lowered over the last produced during the manufacture of decreased as a result of sourcing clinker three years with longer manufacturing cement clinker and lime. The focus from other producers to meet the rise runs and kiln engineering improvements. of Adelaide Brighton’s sustainability in market demand. Consequently, a new strategies are therefore to reduce Cement and Lime division has triggered measure of clinker production energy the GHG from these parts of the the threshold for Energy Efficiency efficiency has been introduced to the manufacturing process and reduce the Opportunities (EEO) legislation and have Cement and Lime sustainability emissions in cement by substituting the implemented a management system energy measure. clinker component with supplementary to meet the legislated requirements cementitious materials. The Angaston clinker kiln improvements by fitting into existing energy review in 2007 have demonstrated gains in programs. Three sites are required Adelaide Brighton has implemented efficiency with a three year project to to conduct energy assessments and four key strategies to reduce the improve the quality of the raw feed and these are expected to be completed in GHG signature of its cement and lime optimise the operation of the burner. 2008 with the identified opportunities products: progressing as part of the annual site Energy efficiency programs improvement programs.
Alternative resources to displace C&M Brick reduction In 2007, C&M Brick improved traditional GHG producing fuels and in energy use overall energy efficiency by 10%. (GJ/t) materials in clinker production 0.12 As an example, the Moorebank plant replaced the steam pipe system to Development and acceptance of low 0.10 the kiln and modified curing cycles, GHG cements, cementitious binders 0.08 achieving a 25% reduction in the and concretes. 0.06 natural gas use. Monitoring and investigation of 0.04 Energy Market Reform is an item on emerging technologies. 0.02 the Cement Industry Action Agenda Adelaide Brighton has established (CIAA). The recommendation pursued the internal data capture and reporting 06 07 by the industry and Government is to protocols necessary for compliance ensure the reform process, takes into with the National Greenhouse and account the issues of the Major Energy Energy Reporting regulations (in support Users (MEU). MEU lobby takes comment of the proposed Australian Emissions from the CIAA Energy Taskforce and Mataranka lime plant Trading Scheme (AETS), and the includes their issues in dialog with the fuel substitution requirements of Greenhouse Challenge % Reform Committee. Plus and Energy Efficiency Opportunities 100 reporting, programs that will become 80 Alternative fuels mandatory in 2008. The reporting 60 Adelaide Brighton’s Cement and through the annual Sustainability Report 40 Lime division continue to progress will complement these requirements and 20 the alternative fuels program using give guidance to the benefits of Adelaide biomass fuel substitutes: Brighton’s sustainability strategies. 05 06 07
18 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 During 2007, the quantity and Supplementary cementitious Product development quality of carbon powder and recycled materials (SCM) Adelaide Brighton is committed to construction and demolition waste All divisions in the Company are developing quality products that meet timber has increased the substitution developing products with higher levels of the needs of our customers: of natural gas use at Birkenhead by a supplementary cementitious materials. further 2%. This substitution is expected The successful development of Bulk Materials such as fly ash and granulated to continue to increase in 2008. Cementitious Binder (BCB) as a low blast furnace slag displace GHG intensive emission product for the mining industry During 2007, the Mataranka lime plant clinker from the cement and concrete: has reduced the GHG footprint of the achieved over 92% fuel substitution Cement and Lime division has been binder by 4%. This initiative achieved of natural gas with waste oil. This is actively involved with the use of recognition from the Cement Industry a significant substitution rate for cementitious materials since the 1970’s Federation Sustainability Awards in the industry. with the development of fly ash in South 2007 for Climate Protection. Australia and granulated blast furnace Alternative raw materials Adelaide Brighton with other cement slag in Western Australia. manufacturers is working to change the Adelaide Brighton has embarked on Hy-Tec has continued to increase their Australian Standards to accept lower a broad strategy to replace natural substitution rate of SCM in concrete GHG footprint cements. Trialling and materials with by-products from other through improved mix design. Demand proving a proposed increase in mineral industries and waste streams: for “green” product is growing and addition content in cement is underway Cement and lime production has sought Hy-Tec has equipped batching plants through the Australian Standards calcined raw materials to substitute the with additional silo capacity in order to Committee. source of calcium carbonate (from the supply this emerging product stream. Adelaide Brighton is supporting traditional feed stock of limestone) in Hy-Tec’s achievements demonstrate a higher use of low GHG cements through the feed for the kiln which contributes focus of the CIAA, to increase the use of support of the Green Building Council to the process emissions. The use of air supplementary cementitious materials of Australia. cooled blast furnace slag at Angaston in cement and concrete to improve has reduced over 4,000t GHG in 2007 in Through new batch design, Hy-Tec concrete durability, GHG efficiency, clinker production, and other substitutes is developing high slump and crack and utilise higher content of recycled are being developed for the lime resistant concrete with improved materials. process. durability properties. In 2007, successful trials of foundry Hy-Tec and C&M Brick are developing sand at Angaston and Alox and mill Hy-Tec supplementary green star product in response to cementious material scale at Birkenhead have resulted in used in concrete market demand. Hy-Tec at Laverton has the displacement of natural resources % developed a new product, Eco-crete, of sand, clay and iron ore. 30 with a high content of recycled materials. 25 Hy-Tec concrete plants in New South Hy-Tec in New South Wales has 20 Wales have added supplementary achieved significant quality performance aggregate and sand materials to 15 standards in high specification product. concrete mixes with use of manufactured 10 sand, a rejected sand sizing from hard 5 rock quarry operations. 05 06 07
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 19 Increased computerisation of the These plans focus on understanding Cognisant with feedback from the Hy-Tec batching process has improved the site’s consumption and losses of local community, a noise monitoring precision of batching, and the new water, and employee awareness of program was completed on the software is being rolled out across the conserving water: Angaston boundaries measuring division. Hy-Tec Queensland is preparing the tonal effects of plant noise. Angaston plant, which utilises a its sites to be flexible by producing the Following analysis of this data, the wet process for clinker and lime full product range. second stage will be to implement manufacturing, implemented a recommendations to lessen Birkenhead is trialling changes in clinker waste water recovery project with a community impact. chemistry and kiln temperature control neighbouring wine bottling company. to manufacture improved performance The project established a specification Dust extraction systems have been to gain greater product diversity. and procedures for the management of upgraded at Hy-Tec Queensland this waste water into the cement making plants with further dust suppression Adelaide Brighton supported the process where it displaces mains water initiatives planned in 2008. Hy-Tec has Concrete 07 Conference with a theme supplied from the Murray River. This use implemented a dust suppression study set by the plenary speaker, Roger also eliminated the need for the disposal at the North Melbourne plant to provide Plank, on Sustainable Construction. of all the bottling company waste water. a safer work environment for drivers. In 2008, Angaston will further increase Process waste reduction Austen Quarry is increasing the their waste water use in production. moisture content of the manufactured Reducing process waste is a focus for This project was a finalist in the National sand in order to reduce dust during all Adelaide Brighton sites. Some of our Banksia Awards 2007, Water category. transportation and handling. 2007 initiatives are demonstrated by: Hy-Tec plant wash down water is C&M Brick’s Adelaide plant reduced recycled, resulting in two components landfill by minimising waste and adding from the settling process - the value by segregating waste for recycling. recovered water and the sludgy waste. The Adelaide site is aiming for a zero The recovered water is returned to waste target. the process while the sludgy fines are dewatered and used to stabilise road Munster plant achieved a 15% reduction base. Improvements to water recycling in landfill by managing and segregating at Hy-Tec’s North Melbourne and plant waste material to feedback into Dandenong sites have enabled more the manufacturing process. of the fine material and waste water to Hy-Tec plants are implementing be recirculated back into the process procedures to manage returned reducing silt in the settling chamber. concrete. Including additional paving Birkenhead has focused on the high to seal the batching sites thereby water demand of the cooler heat reducing fugitive dust; the manufacture exchanger and has achieved a 40% of concrete cubes for non structural use reduction in water requirement. and concrete for reuse as base rubble in civil works. These actions have Air quality and noise allowed the Hy-Tec plants to set a Adelaide Brighton’s key air emission target for zero process waste. issues lie with dust and noise. During Waste legislation is under review in 2007, a number of initiatives were most states. Adelaide Brighton believes successfully implemented: a waste levy with a five or more year Birkenhead significantly reduced Revegetation of Schroder Park undertaken increase plan is an effective instrument with assistance of local primary school dust emissions by depressurising the to encourage a resource recovery children as part of Community Day clinker storage shed. The project is now industry. demonstrating its success with recorded Corporate citizenship Through the CIAA, the principles of community dust reports reducing resource recovery have been formulated by more than 60%. The project was Adelaide Brighton is committed to and put to the National Waste Working successful at the 2007 Cement Industry engaging with the community and Group to maximise the reuse of wastes Federation Sustainability Awards winning endeavours to be a valued member in and by-products by the cement industry. the Emissions Reporting category. the communities in which it operates: Successful trials were conducted on The Birkenhead plant renegotiated its Mains water efficiency Angaston’s kiln 3 with the addition Environment Protection Authority (EPA) Water reduction plans to achieve specific of calcium fluoride as a mineraliser. operating licence in 2007, achieving state targets have been implemented The benefits of this addition included agreement between the community, at all eligible Adelaide Brighton sites lower emissions of NOx and improved EPA and the Company. Birkenhead’s in South Australia, Victoria and production rates and product quality. Environment Improvement Plan (EIP) Queensland. 2005-2007 has been completed and a study is being conducted in consultation with local community to establish a new EIP.
20 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 Birkenhead plant has created bio-diversity corridors linking vacant land around the site
Left: Cockburn Cement Munster plant catchment area reduces demand on mains water supply by recirculating waste process water
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 21 Young Achievement Australia business group “YANCIE”
The Seagrass research project in The Adelaide Brighton 2007 sponsored Major community donations Cockburn Sound (WA) has successfully business group “YANCIE” was successful made during 2007 were to: planted and developed seagrass in achieving awards for “Tertiary Botanic Gardens of Adelaide meadows in deep water as a means Company of the Year”, “Pam Lane Media Ronald McDonald House, Maroochydore of rehabilitating the coastline. The Award” and the “Marketing Initiative Dongara Denison Surf Life Saving Cub milestone was recognised with the Award”. Bush Children’s Education Foundation Community Award from the CIF Aboriginal Catholic Ministry Adelaide Brighton has been an active Sustainability Awards in 2007. In 2008, Cancer Council participant in the Land Management this work will be progressed further Quest for Life Foundation Corporation Community Advisory with the support of two University Operations Flinders Foundation. Group on the redevelopment of Port funding programs. Adelaide. Of key concern to the Safety In partnership with the Young Company is the project’s focus on Achievement Australia (YAA) Business residential development over integrated Adelaide Brighton regards safety Skills Program™, Adelaide Brighton has development with the existing elements performance as a priority with the goal provided development opportunities of the working Port of Adelaide. It is for each employee to return home for young Australians. The objective important to Adelaide Brighton that the safely each day. The effectiveness of of the YAA program is to prepare opportunity to develop the character of the Company’s safety awareness and young people to meet the social and the Port is part of the plan, and Adelaide process and risk management systems economic challenges of the next Brighton’s nearly 100 years of maritime are at different stages of development decade by providing challenging and trading and manufacturing is part within each division, with the more inspiring educational programs that of that character and economic recently acquired businesses such as promote lifelong learning and foster contribution to the State. C&M Brick still in the early stages of qualities of leadership, innovation and development. The shift of a business entrepreneurial spirit. culture to a safety first awareness is a fundamental requirement to optimising safety performance.
22 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 Renewed focus across all divisions was Cement and lime Implementation of the Adelaide given to the return to work programs. Lost time injuries Brighton safety health and environment 20 This initiative has reduced the overall management system continues for all restricted duties severity rate for 15 divisions within the Company. All sites Adelaide Brighton and was achieved 10 monitor the progress of the standards by developing partnerships with local 5 through their safety, health and medical providers, making them aware environment committees. of the alternative duties program that 03 04 05 06 07 enables employees to return to work Developing a skills base No. incidents quickly and positively. Frequency A multi discipline and cross divisional While the lost time injury count Graduate Program was introduced increased overall this year, it is in 2007 as an opportunity for the Adelaide Brighton important to note that the severity restricted duties Company to build employee skills and of the injuries reduced. There was an severity rate loyalty. The program runs over two outstanding performance by Hy-Tec 2500 years and provides a broad based New South Wales who had a lost 2000 experience as graduates rotate their time injury free year. 1500 roles and functional responsibilities four times across divisions and regions. During 2007, customised training 1000 Graduates are assigned a mentor provided frontline supervisors with 500 throughout their development program the tools to effectively manage safety, and at the conclusion, a full time health and environment within their 06 07 position in the business. A benefit of work groups. This was aimed at manual the programme is exposure to new handling and slip, trips and falls as a talent and providing longer serving significant number of reported incidents Lost time injury employees with opportunities to transfer were identified as soft tissue injuries frequency rates 16 skills and experience and participate (strains and sprains). 12 in graduate development. Traffic management and mobile 8 equipment movements have also 4 received greater emphasis following risk assessments and the higher number of 03 04 05 06 07 near miss incidents. The diligent and open reporting of near miss incidents is a key part of Lost time injuries 50 understanding safety awareness culture 40 and assessing future safety risks. Such incident reporting has been progressively 30 embraced by the workforce as a whole 20 Employees by division and provides an important input and 10 Cement and lime basis for safety improvement action Concrete and aggregates plans. 03 04 05 06 07 Concrete products Corporate A new initiative was implemented at Concrete products Concrete and aggregates the Angaston plant to promote employee Cement and lime involvement to address safe behaviours - “SAFE-AS”. The program was developed and run by employees, taking co- Restricted duties operative action to assess each other’s 120 practices at work. Many workplace 100 improvements came from the program 80 and the analysis of the assessments 60 forms an important database for safety Employees by location action on the site. 40 South Australia 20 Western Australia As part of the risk management New South Wales strategy to reduce exposure to moving Victoria 03 04 05 06 07 Queensland equipment, machine guarding to all Concrete products Northern Territory divisions received significant capital Concrete and aggregates Australian Capital Territory this year. Cement and lime
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 23 The Company continues to optimise employee A succession planning process was introduced to capture career potential development opportunities and development information about our people. Having greater knowledge of our internal capability provides employees with both career path potential and opportunities for promotion and development within the Company. In 2007, the Company focused on building internal skill sets across the managers and supervisors by sponsoring training programmes in leadership and management, project management and negotiation.
Flexible work arrangements In today’s increasingly competitive labour markets the flexibility of work arrangements is becoming an important factor in recruiting and retaining key personnel. Some 10% of Adelaide Brighton employees are working to flexible arrangements, including flexible start/finish times, part time or job sharing opportunities, leave without pay to cover school holidays, and paid maternity leave. These programs support the CIAA Workforce Taskforce that has been developing programs to attract and retain female employees in the cement industry workforce. Other programs of the Taskforce include recruitment of key skilled personnel from overseas, and the promotion of the cement industry to new graduates.
Sam Toppenberg Executive General Manager Adelaide Brighton’s flexible Human Resources working arrangements support CIAA Workforce Taskforce employee initiatives
24 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 CORPORATE GOVERNANCE STATEMENT
his statement provides an outline of the main corporate governance practices that the Company had in place during t the past financial year. The Board is committed to conducting Input into and final approval of 1.2 Composition of the Board the Company’s business ethically and management’s development of The composition of the Board is in accordance with high standards of corporate strategy, including setting determined using the following corporate governance. To this end, the performance objectives and approving principles: Board (together with the Company’s operating budgets. The Board may, in accordance management) regularly reviews the Reviewing and guiding systems of with the Constitution, comprise up Company’s policies, practices and other risk management and internal control to ten Directors. arrangements governing and guiding and ethical and legal compliance. the conduct of the Company and The Chairman of the Board should This includes reviewing procedures those acting on its behalf. be an independent non-executive in place to identify the main risks Director. The Board believes that the Company’s associated with the Company’s policies and practices have complied in businesses and the implementation The Board should comprise Directors all substantial respects with corporate of appropriate systems to manage with a broad range of experience governance best practice in Australia, these risks. reflecting the character of the Group’s including the revised ASX Corporate business. The Board is structured Monitoring corporate performance Governance Council Principles and in such a way that it has proper and implementation of strategy and Recommendations released in understanding and competency in the policy. August 2007. current and emerging issues facing the Approving major capital expenditure, Company, and can effectively review 1 The Board of Directors acquisitions and divestitures, cessation and challenge management’s decisions. of any significant business activity and Details of the Directors as at the date of The Board operates in accordance monitoring capital management. this report, including their qualifications, with the general principles set out experience, expertise, terms of office, in its Charter, which is available from Monitoring and reviewing management other past and present Directorships, the corporate governance section processes in place aimed at ensuring and special responsibilities are set of the Company’s website at: integrity of financial and other reporting. out on page 31 of this report. www.adbri.com.au. Monitoring and reviewing policies As at the end of the year, the Board and processes in place relating to 1.1 Role of the Board had six non-executive Directors, five of occupational health and safety, The role of the Board of Directors is to whom are deemed independent under compliance with laws, and the protect and optimise the performance the principles set out below, and an maintenance of high ethical standards. of the Group and accordingly the Board executive Managing Director. takes accountability for setting strategic Formulating the Company’s Directors’ independence direction, establishing policy, overseeing policy in relation to, and monitoring The Board has adopted the definition the financial position and monitoring implementation of, sustainable resource of independence set out in the IFSA the business and affairs of the Group use and the impact of the Company’s Blue Book (a copy of which is available on behalf of shareholders. operations on the environment, at www.ifsa.com.au). The Board has community and stakeholders. Responsibility for the day-to-day developed guidelines to determine management of the Company is Performing such other functions as materiality thresholds for the purposes delegated to the Managing Director are prescribed by law or are assigned of that definition. In general, these and senior management. by the Board. guidelines seek to determine whether the Director is generally free of any Responsibilities of the Board include: In carrying out its responsibilities and interest and any business or other functions, the Board may delegate any Selecting, appointing and evaluating relationship which could, or could of its powers to a Board committee, from time to time the performance of, reasonably be perceived to, materially a Director, employee or other person determining the remuneration of, and interfere with the Director’s ability to subject to ultimate responsibility of planning for the successor of, the act in the best interests of the Company. the Directors under the Corporations Group Managing Director. Act 2001. The Directors have concluded that the Reviewing procedures in place for period of a Director’s tenure will not The respective roles and responsibilities appointment of senior management automatically disqualify that Director of the Board and management are and monitoring of its performance, from being regarded as independent. outlined further in the Board Charter. and reviewing executive development An assessment must be made on a activities. This includes ratifying the case-by-case basis, with reference to appointment and the removal of the the length of service, of whether the Chief Financial Officer and the Director’s ability to act in the best Company Secretary. interests of the Company has been materially interfered with.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 25 Having regard to these factors, 1.5 Commitment Generally, feedback is collected by either the Directors are of the view that Non-executive Directors are expected the Chairman or an external facilitator Mr D Barro is the only non-executive to devote the necessary time to and is discussed by the Board, which Director who is not considered discharge their duties. This means that considers whether any steps should be “independent” by virtue of his position they will commit sufficient time required taken to improve performance. as a Director, Executive Chairman, and in the preparation for and attendance of For the 2007 financial year, a shareholder of Barro Group Pty Ltd, Board and committee meetings performance evaluation was led by the which controls 50% of the Company’s and associated activities. Chairman to assess the performance joint venture, Independent Cement & The number of meetings of the of individual Directors, the Board as a Lime Pty Ltd. Independent Cement and Company’s Board of Directors and each whole and various aspects of the Board Lime Pty Ltd has an ongoing trading Board committee held during the year committees such as their performance, relationship with the Barro Group of and the attendance at those meetings membership, roles and Charters. companies. is set out on 36 of this report. The purpose of the review was to Mr Barro also has a shareholding in, Prior to appointment, non-executive assess strengths and weakness, and to but is not a Director of Barro Properties Directors are required to provide identify areas which might be improved Pty Ltd, which is a substantial the Nomination and Remuneration if there were some change. The findings shareholder in the Company. Committee with details of other of this performance review have been commitments and an indication of time considered by the Board, individual 1.3 Term of office and re-election involved and to acknowledge that they Directors and the Board committees and The Company’s Constitution requires will have adequate time to meet what have been, and continue to be, taken one third of the Directors to retire is expected of them. into account in planning and conducting from office at the annual general Board and committee matters in 2008. meeting each year. Retiring Directors Non-executive Directors are expected are eligible for re-election. to consider their obligations to Executives and managers are also the Company and to consult with subject to an annual performance The Board considers it inappropriate the Chairman before accepting review in which performance is for a Director to offer himself or herself appointments outside the Company measured against agreed business for re-election unless a performance which might conflict with or impact on objectives. The performance of the appraisal has been undertaken. the time a non-executive Director is able Managing Director is assessed by the The Nomination and Remuneration to devote to the Company in the role of Board against objectives related to the Committee is responsible for monitoring non-executive Director of the Company. Company’s strategy and business plans. the length of service of current Board members (although a strict tenure policy For the 2007 financial year, the 1.6 Conflicts of interest has not been adopted), monitoring the performance of the Managing Director In order to ensure that any “interests” skills and expertise of Board members, was reviewed by the Chairman, of a Director in a particular matter to considering succession planning issues the Nomination and Remuneration be considered by the Board are known and identifying the likely order of Committee and the Board against the by each other Director, the Company retirement by rotation of non- achievement by the business and the has developed protocols, consistent executive Directors. Managing Director of agreed objectives. with obligations imposed by the The performance of the Company’s Corporations Act 2001, to require each 1.4 The roles of the Chairman senior executives during 2007 was Director to disclose any relationships, and the Managing Director reviewed by the Managing Director, and duties or interests held that may give The Chairman’s responsibility is to by the Nomination and Remuneration rise to a potential conflict. Appropriate lead the Board, ensure Directors Committee led by the Managing Director procedures have been adopted to are properly informed on all matters and the Executive General Manager, ensure that, where the possibility of relevant to the discharge of their Human Resources. a material conflict arises, information role and responsibilities, facilitate is not provided to the Director, and, in A description of the Company’s constructive Board discussions and accordance with the Corporations Act performance evaluation process is manage the Board’s relationship with 2001, the Director does not participate available in the corporate governance the Company’s senior executives. in, or vote at, the meeting where the section of the Company’s website at The Managing Director is responsible matter is considered. www.adbri.com.au. for the management of the Company with powers delegated to him by 1.7 Performance evaluation 1.8 Independent professional advice the Board. He is also responsible for The Board, Board committees, individual Directors have the right, in connection implementing the Company’s strategies Directors and the Company’s key with their duties and responsibilities and policies set by the Board. executives are all required to participate as Directors, to seek independent in annual performance reviews. professional advice at the Company’s To maintain independent oversight expense, provided the costs are and an appropriate balance of power Directors must provide written feedback reasonable and the advice is specific. within the Company, these roles are in relation to the performance of the undertaken by different individuals. Board (and its committees) against a Prior approval from the Chairman is set of agreed criteria. Each committee required, which will not be unreasonably of the Board is also required to provide withheld. feedback in terms of a review of its own performance.
26 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 2 Committees of the Board To evaluate the independence of 2.2 Nomination and both the non-executive Directors and Remuneration Committee To assist the Board in fulfilling its external auditors and to monitor the The Nomination and Remuneration responsibilities, the Board has implementation of the Board’s policy in Committee is made up of four established a number of committees relation to the provision of non-audit independent non-executive Directors: with responsibility for particular areas. services by the Company’s auditor C L Harris (Chairman), M A Kinnaird, Each committee has a specific (referred to in paragraph 6.1 below). L V Hosking and G F Pettigrew. Charter. The Charters for the Audit, To recommend to the Board the Details of these Directors’ attendance Risk and Compliance Committee appointment, removal and remuneration at Nomination and Remuneration and the Nomination and Remuneration of the external auditors, to review the Committee meetings are set out on Committee are available on the terms of their engagement, the scope page 36 of this report. corporate governance section of and quality of the audit and to assess the Company’s website at: The role of the Committee is to performance. www.adbri.com.au. The Board assist and advise the Board on matters periodically reviews each Board To determine the scope of the internal relating to the appointment and committee’s Charter. audit function and ensure that it has remuneration of the non-executive adequate resources to fulfil its role, Directors, Managing Director and other Generally, minutes of committee and to assess its performance, senior executives of the Company. meetings are tabled at the immediate including independence. subsequent Board meeting. Additional The Committee: requirements for specific reporting by To determine whether new policies Reviews (and recommends to the the committees are addressed in the or training should be implemented to Board) the fees paid to non-executive Charter of the individual committees. safeguard against possible risks or Directors, within the limits approved non-compliance with applicable laws, by shareholders. 2.1 Audit, Risk and regulations or Company policies. Compliance Committee Reviews (and recommends to the To monitor compliance with the The Audit, Risk and Compliance Board) the compensation arrangements Company’s policies and procedures Committee is made up of four for the Managing Director, including that recognise the Company’s independent non-executive Directors: short term and long term incentives. business, environmental and L V Hosking (Chairman), C L Harris, statutory responsibilities. Reviews performance targets, and G F Pettigrew, and M A Kinnaird. approves recommendations from the To report the results of the Committee’s Details of these Directors’ qualifications Managing Director on total levels of review of risk management and internal and attendance at Audit, Risk and remuneration, for senior executives. compliance and control systems to Compliance Committee meetings are set the Board. Oversees the implementation of the out on pages 31 and 36 respectively of Company’s short term and long term this report. Members of management may attend incentive arrangements, including meetings of the Committee at the The Committee has appropriate assessing the extent to which invitation of the Committee Chairman. financial expertise and all members performance conditions are satisfied It is the practice of the Committee are financially literate and have an and making relevant awards. that the Managing Director, the Chief appropriate understanding of the Financial Officer and the Company Assesses the appropriate mix of skills, industries in which the Company Secretary attend all Audit, Risk and experience and expertise required on operates. Compliance Committee meetings. the Board and assesses the extent The main responsibilities of the The Group Risk Manager generally to which these required skills are Committee include: attends meetings of the Committee represented on the Board. when non-financial risk management To review, assess and approve the Establishes processes for the matters are considered. annual financial reports, the half-year identification of suitable candidates financial report and the results of Further, in fulfilling its responsibilities, for appointment to the Board, engages external audit or review; and all other the Committee has rights of access to appropriate search firms to assist in financial information published by the management and to auditors (external identifying suitable candidates and Company or released to the market. and internal) without management makes a recommendation regarding present and may seek explanations and the most appropriate candidates to To review the appropriateness of additional information. The Committee the Board which ultimately will accounting principles adopted by may, with the approval of the Board, appoint the new Directors. management in the composition and engage any independent advisers in presentation of financial reports and to Oversees or designs induction relation to any matter pertaining to approve any change in the accounting and ongoing training and education the powers, duties and responsibilities principles applied in preparing the programs for the Board to ensure that of the Committee. Company’s reports. non-executive Directors are provided with adequate information regarding the operations of the business, the industry and their legal responsibilities and duties.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 27 Monitors the tenure of Board members, Generally when a SH&E Committee 4 Managing Director and Chief considering succession planning and meeting is held, it normally meets prior Financial Officer Certification identifying the likely order of retirement to a Board meeting with the SH&E The Managing Director and Chief by rotation of non-executive Directors. Committee Chairman reporting at the Financial Officer have made the Board meeting about the proceedings Establishes processes for the review following certifications to the Board: of the Committee. of the performance of individual non- That the Company’s financial reports executive Directors, the Board as a Details of members’ attendance present a true and fair view, in all whole and the operation of Board at Safety, Health & Environment material respects, of the financial committees. Committee meetings in 2007 are condition and operational results of set out on page 36. It has been the practice of the the Company and are in accordance Nomination and Remuneration with relevant accounting standards. 2.4 Other Board committees Committee on occasion to invite other The Corporate Governance Committee That the Company has adopted an Directors to attend Committee meetings. comprises L V Hosking (Chairman), appropriate system of risk management Members of management, particularly M A Kinnaird and C L Harris. The and internal compliance and control the Executive General Manager, Human role of the Committee is to oversee which implements the policies adopted Resources, may also attend meetings the Company’s implementation and by the Board and forms the basis for of the Committee at the invitation of compliance with best practice in the statement given above. the Committee Chairman, whenever corporate governance applicable to the particular matters arise that require That the Company’s risk management circumstances of the Company. This management participation. and internal compliance and control Committee is responsible for ensuring system is operating efficiently and New Directors are provided with a letter the periodic review of the Company’s effectively in all material respects. of appointment setting out their term of charters and policies and recommending appointment, powers, expectations of any changes that may be necessary 5 Risk management and the Company and rights and obligations. from time to time. internal controls The Company’s induction process The Board established a permanent covers the operation of the Board and committee, the Independent Directors’ 5.1 Managing risks its committees, and the Company’s Committee, on 27 October 2003. The The Board, through the Audit, Risk and financial, strategic, operational and role of the Committee is to investigate Compliance Committee, is responsible risk management positions. All new and consider corporate proposals for ensuring there are adequate policies Directors are required to become made to the Company. The Committee in relation to risk management and familiar with these matters through comprises Directors who do not have internal compliance and control systems. the induction process or otherwise by any conflict of interest concerning the It is part of the Board’s oversight role making enquiries of the Chairman, matters considered by the Committee. to regularly review the effectiveness of the Company Secretary or the The present members of the Committee the Company’s implementation of that Company’s management. are M A Kinnaird (Chairman), system. Management is responsible Further information on Directors’ and C L Harris, L V Hosking, J D McNerney, for identifying and managing risks to executives’ remuneration is set out in G F Pettigrew and M P Chellew the Company’s businesses. The Board, the Remuneration Report and Note 32 (Managing Director). through the Committee, monitors the to the Financial Statements. management of these risks. 3 Director and executive In brief, the Company’s risk 2.3 Safety, Health and Environment remuneration management framework is designed Committee Remuneration levels are competitively to ensure strategic, operational, legal, The members of the Safety, Health set to attract and retain appropriately reputation and financial risks are & Environment Committee (SH&E qualified and experienced personnel. identified, assessed, effectively and Committee) are G F Pettigrew Performance, duties and responsibilities, efficiently managed and monitored to (Chairman), M A Kinnaird, J D McNerney market comparison and independent enable achievement of the Company’s and M P Chellew (Managing Director). advice are all considered as part of the business objectives. The Committee has a broad role remuneration process. in reviewing safety, health and The structure and details of the environmental matters across the remuneration paid to the Directors and Group. Committee meetings are also senior executives during the period are attended by the Company’s Chief set out in the Remuneration Report on Financial Officer, its General Counsel, pages 38 to 48 of this Report and Note and the Executive General Manager, 32 to the Financial Statements. Human Resources.
28 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 5.2 Internal controls framework Investment appraisal: the Group has 6.1 Non-audit services A robust control environment is clearly defined guidelines for capital and Auditor independence fundamental to the effectiveness of the expenditure. These include annual The Board has adopted a policy in Company’s risk management framework. budgets, detailed appraisal and review relation to the provision of non-audit The Company has a clear organisational procedures, levels of delegated authority services by the Company’s external structure with clearly drawn lines and due diligence requirements where auditor, which is based on the principle of accountability and delegation of businesses are being acquired or that work that may detract from the authority. Matters reserved for the Board divested. external auditor’s independence and are set out in the Board Charter which impartiality (or that may be perceived Internal audit: assists the Board in is available on the Company’s website. as doing so) should not be carried ensuring compliance with internal All Directors, executives and employees out by the external auditor. controls. The Audit, Risk and Compliance are required to adhere to the Code of Committee reviews and approves the During the year, the Company’s external Conduct (described below) and the selection and engagement of internal auditors advised on the preparation of Board actively promotes a culture of auditors, the internal audit programme Research and Development claims for quality and integrity. to be conducted each financial year, and taxation purposes and on indirect tax Procedures have been established at the scope of the work to be performed compliance. The Board does not believe the Board and executive management at each location. The internal auditors that the provision of these non-audit levels that are designed to safeguard provide the Committee with their services compromises the external the assets and interests of the Company, comments and recommendations about auditors’ independence. and ensure the integrity of reporting. the identification of areas perceived Details and the break down of fees These include accounting, financial to be of a greater level of risk than for non-audit services and an analysis reporting and internal control policies others, and any areas for other reasons of fees paid to external auditors are and procedures. requiring particular scrutiny. The provided in Note 33 to the Financial Committee receives and reviews the The Board acknowledges that it is Statements. reports of the internal auditors. responsible for the overall internal A copy of the auditors’ independence control framework, but recognises Delegated authorities and restrictions: declaration, as required under section that no cost effective internal control there is a comprehensive procedure 307C of the Corporations Act 2001, system will prevent all errors and which provides a framework that is set out on page 96 of this report. irregularities. To assist in discharging enables employees to operate and this responsibility, the Board has act within clearly defined and The external auditor will attend instigated an internal control framework communicated parameters. the Annual General Meeting and that can be described as follows: be available to answer shareholder A description of the Company’s risk questions about the conduct of the Financial reporting: there is a management policy and internal audit and the preparation and content comprehensive budgeting system compliance and control system is of the auditors’ report. with an annual budget reviewed and available from the corporate governance approved by the Board. Monthly actual section of the Company’s website at 7 Insurance results are reported against budget www.adbri.com.au. and revised forecasts for the year are In order to protect shareholders’ prepared regularly. The Group reports 6 External auditors funds, the Company carries insurance to shareholders half-yearly. Procedures which the Board considers is sufficient The Company and Audit, Risk and are also in place to ensure that price for the size and nature of the Compliance Committee policy is to sensitive information is reported to the Company’s business. appoint external auditors who clearly Australian Stock Exchange in accordance demonstrate quality and independence. with continuous disclosure requirements. The performance of the external auditor Operating unit controls: financial is reviewed annually and applications controls and procedures including for tender of external audit services information systems controls are in are requested as deemed appropriate, operation throughout the consolidated taking into consideration assessment of entity. Operating units complete detailed performance, existing value and tender questionnaires confirming compliance costs. PricewaterhouseCoopers remains with these procedures. the external auditor of the Company for the Group’s financial report for the Functional speciality reporting: the year ended 31 December 2007. Group has identified a number of key areas which are subject to regular reporting to the Board, such as safety and environment, risk management, taxation, finance and administration.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 29 8 Code of conduct 9 Shareholdings of The Company Secretary has been Directors and employees nominated as the person responsible The Company is committed to upholding for communicating with the ASX. This the highest ethical standards of Under the Constitution (adopted at role includes responsibility for ensuring corporate behaviour. A Code of Conduct the 2005 Annual General Meeting), compliance with the continuous has been adopted, which requires Directors are not required to hold any disclosure requirements in the Listing that all Directors, senior management shares to qualify for appointment. The Rules and overseeing and coordinating and employees act with the utmost details of Directors’ shareholdings are (with the Group Corporate Affairs integrity and honesty. It aims to further disclosed on page 36 of this report. Adviser) information disclosure to the strengthen the Company’s ethical The Board has a policy that Adelaide ASX, analysts, brokers, shareholders, climate by promoting practices that Brighton Ltd Directors and employees the media and the public. foster the Company’s key values of: may not buy or sell Adelaide Brighton The Company’s website contains Acting with fairness, honesty and Ltd shares except within the period copies of annual reports, financial integrity. of one month following the annual accounts, presentations, media releases and half-yearly results announcements Being aware of and abiding by and other investor relations publications. and the period from the release of the laws and regulations. All relevant announcements made to the Company’s annual report until one market, and any related information, Individually and collectively month after the annual general are also posted on the Company’s contributing to the wellbeing of meeting. The policy supplements the website as soon as they have been shareholders, customers, the Corporations Act 2001 provisions that released to the ASX. economy and the community. preclude Directors and employees from trading in securities when they are in The Board encourages full participation Maintaining the highest standards possession of “insider information”. of shareholders at the Annual General of professional behaviour. Meeting in order to promote a high level The Board has also adopted a Policy Avoiding or managing conflicts of accountability and discussion of the that prohibits executives from hedging of interest. Company’s strategy and goals. (or otherwise locking in a profit over) Striving to be a good corporate citizen, unvested securities issued under the and to achieve community respect. Company’s Share Plans. The Code of Conduct is publicly A summary of the Share Trading Policy available on the Company’s website. is available on the Company’s website at www.adbri.com.au. The Company has also adopted policies requiring compliance with (amongst 10 Continuous disclosure and others) occupational health and safety, communication with shareholders environmental, privacy, fair treatment, equal employment opportunity and The Company is committed to providing trade practices law. There are ongoing relevant and timely information to its programmes for the audit of the shareholders and to the broader market, Company’s operations. Occupational in accordance with its obligations under Marcus Clayton health and safety, environmental, and the ASX continuous disclosure regime. General Counsel and Company Secretary other risks are covered by these audits. The Company’s Continuous Disclosure Employees are encouraged to attend Policy is available on the Company’s training or seminars presented by the website and sets out guidelines and Company or external service providers processes to be followed in order to to ensure that they remain up-to- ensure that the Company’s continuous date with relevant legal and industry disclosure obligations are met. Material developments. information must not be selectively disclosed prior to being announced to The Code requires all officers, the ASX. These policies and procedures employees, contractors, agents or are supplemented by the Shareholder people associated with the Company Communications Policy (also published to report any potential breaches to on the Company’s website) which the Company Secretary under the includes arrangements the Company has whistleblower program. This may be in place to promote communication with done anonymously. shareholders and encourage effective In the interest of investor confidence, participation at general meetings. the Company has a formal policy governing the trading of the Company’s securities by Directors, officers and employees. A summary of this policy is set out below.
30 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 DIRECTORS
M A Kinnaird C L Harris J D McNerney G F Pettigrew AO, DUniv, BE, Hon FIEAust, FTS Bec, FCPA, FAICD BE, MEngSc, MIE, MBA, CEng, FIEI FPNA, FAIM, FAICD Age 74 Age 61 Age 63 Age 59 Independent non-executive Independent non-executive Non-executive Director since Independent non-executive Director since September Director since March 1995. 2002 as nominee of RMC Director since August 2004. 1996. (Deputy Chairman An economics graduate, Group plc. Independent Extensive experience in from September 1996 qualified accountant and non-executive Director from the building materials to January 1997). A civil former CEO and Managing April 2004. Former Managing industry and former Chief engineer, founder and past Director of FH Faulding & Co Director and non-executive Executive Officer of CSR Executive Chairman of Ltd and Deputy Chairman Director of Readymix plc, a Building Products and broad former engineering firm of Adelaide Bank Ltd. listed construction materials management experience Kinhill Pty Ltd, now known Chairman, Argo Investments Company based in Ireland gained in South East Asia as KBR. Consultant with Ltd. Director, Australian with 37 years experience in and the United Kingdom KBR. Involvement in wider Vintage Ltd, United Water the construction materials through former positions as professional and business International Pty Ltd, JM industry. Director, Plato Managing Director of Chubb community. Chairman, Asia Financial Group Ltd and Ireland Ltd. Member, Australia Limited and Wormald Pacific Transport Pty Ltd, Arana Therapeutics Ltd. Independent Directors’ Security Australia Pty Ltd. Freight Link Pty Ltd and Chairman, Nomination and Committee and SH&E Director, Lafarge Plasterboard Alternative Fuel Company Remuneration Committee Committee. Pty Ltd and Atlas Group Pty Ltd. Director of National and Superannuation Policy Holdings Limited. Chairman, Electricity Market Management Committee. Member, SH&E Committee. Member, Company Ltd (NEMMCO), Audit, Risk and Compliance Audit, Risk and Compliance United Water International Committee, Corporate Committee, Independent Pty Ltd, Macmahon Holdings Governance Committee Directors’ Committee and Ltd. Member of the and Independent Directors’ Nomination and Remuneration Defence SA Board. Officer Committee. Committee. in the General Division of the Order of Australia for services to engineering and the community. Appointed Chairman January 1997. L V Hosking Chairman, Independent Age 63 Directors’ Committee. Independent non-executive Member, Audit, Risk and Director since June 2003. Compliance Committee, Extensive experience in Nomination and Remuneration commercial and financial Committee, Corporate matters with 15 years Governance Committee and D Barro experience as Chief Executive M P Chellew SH&E Committee. AO, FAIM of the Sydney Futures BSc, ME, Grad Diploma Mgt Age 86 Exchange and former Chief Age 51 Non-executive Director Executive Officer of Axiss Executive Director and since November 1999. Australia. Currently Managing Managing Director since Over 57 years of extensive Director, National Electricity September 2001. Mechanical manufacturing and operational Market Management Company Engineer with over 26 years experience particularly in the Limited (NEMMCO) and experience in the heavy premixed concrete, quarrying, Director of the Innovation building materials and related cement, construction, Australia. Chairman, Audit, industries gained in Australia property development and Risk and Compliance and the United Kingdom. transport industries. Executive Committee and Corporate Previously held the position Chairman, Barro Group Pty Governance Committee. of Managing Director of Ltd. Officer of the Order of Member, Nomination and Blue Circle Cement in the Australia for services to the Remuneration Committee United Kingdom and senior community, particularly to and Independent Directors’ management positions the Italian community. Committee. within the CSR group of companies in Australia and the United Kingdom. Member, Independent Directors’ Committee and SH&E
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 Committee. 31 SHAREHOLDER INFORMATION
Enquiries about Combining multiple On market buy back your shareholding shareholdings At 17 March 2008, there is no on-market buy back Enquiries or notifications by If you have multiple shareholding of the Company’s shares being undertaken. shareholders regarding their accounts that you want to shareholdings or dividends consolidate into a single account, Top twenty largest shareholders as at 17 March 2008 should be directed to Adelaide please advise the share registry, No. of ordinary % of issued Brighton’s share registry: Computershare Investor Services Shareholder shares held capital Computershare Investor Services Pty Ltd, in writing. Pty Ltd Boral Limited 107,830,340 19.86 Level 5, 115 Grenfell Street Change of address Barro Properties Pty Ltd 106,530,714 19.62 Adelaide SA 5000 Shareholders who are Issuer JP Morgan Nominees Australia Limited 43,583,521 8.03 Telephone (08) 8236 2300 Sponsored should notify any change International +618 8236 2300 of address to the share registry, National Nominees Limited 38,470,963 7.08 Facsimile (08) 8236 2305 Computershare Investor Services Citicorp Nominees Pty Limited 26,853,152 4.95 International +618 8236 2305 Pty Ltd, by telephone or in writing HSBC Custody Nominees (Australia) Limited 22,402,419 4.13 [email protected] quoting your security holder reference number, previous address Barro Group Pty Ltd 16,700,408 3.08 When communicating with the and new address. Broker Sponsored RBC Dexia Investor Services Australia share registry, shareholders (CHESS) holders should advise their Nominees Pty Ltd (PIPOOLED A/C) 13,991,664 2.58 should quote their current address sponsoring broker of the change. together with their Security ANZ Nominees Limited (Cash Income Account) 11,946,374 2.22 Reference Number (SRN) or Holder Registered office Cogent Nominees Pty Limited 7,915,438 1.59 Identification Number (HIN) as it Level 1, 157 Grenfell Street Tasman Asset Management Ltd (Tyndall appears on their Issuer Sponsored/ Adelaide SA 5000 Australian Share Wholesale Portfolio A/C) 7,670,722 1.41 CHESS statement. Telephone (08) 8223 8000 Citicorp Nominees Pty Limited Facsimile (08) 8215 0030 Online services
32 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 financial statements
Directors’ report ...... 34 Remuneration report...... 38 Income statements ...... 49 Balance sheets ...... 50 Statements of recognised income and expense...... 51 Statements of cash flows ...... 52 Notes 1 Summary of significant accounting policies ...... 53 2 Critical accounting estimates and assumptions ...... 60 3Revenue and other income ...... 61 4 Expenses...... 61 5 Income tax...... 62 6 Current assets - cash and cash equivalents ...... 63 7Current assets - receivables...... 63 8 Current assets - inventories...... 63 9 Current assets - derivative financial instruments ...... 64 10 Non-current assets - receivables ...... 64 11 Non-current assets - investments accounted for using the equity method...... 65 12 Non-current assets - other financial assets ...... 66 13 Non-current assets - property, plant and equipment ...... 67 14 Non-current assets - deferred tax assets ...... 68 15 Non-current assets - intangible assets ...... 68 16 Current liabilities - payables...... 69 17 Current liabilities - borrowings ...... 70 18 Current liabilities - provisions...... 70 19 Current liabilities - other ...... 70 20 Non-current liabilities - borrowings ...... 71 21 Non-current liabilities - deferred tax liabilities ...... 72 22 Non-current liabilities - provisions ...... 72 23 Retirement benefit obligations...... 73 24 Contributed equity...... 76 25 Reserves and retained profits...... 77 26 Minority interests ...... 78 27 Dividends ...... 78 28 Financial risk management objectives ...... 79 29 Contingent liabilities and contingent assets...... 81 30 Commitments for expenditure...... 82 31 Employee benefits ...... 82 32 Key management personnel disclosures ...... 83 33 Remuneration of auditors ...... 87 34 Related parties...... 87 35 Investments in controlled entities ...... 89 36 Deed of cross guarantee...... 90 37 Notes to the statements of cash flows...... 91 38 Business combinations ...... 92 39 Earnings per share ...... 93 40 Events occurring after the balance sheet date ...... 93 41 Segment information...... 93 Directors’ declaration...... 96 Auditor’s independence declaration...... 96 Independent audit report...... 97 Financial history ...... 98
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 33 DIRECTORS’ REPORT
The Directors present their report (A$ million) 2007 2006 on the consolidated entity (the Group) consisting of Adelaide Brighton Ltd (the Sales revenue 888.4 794.7 Company) and the entities it controlled Depreciation (52.4) (51.8) at the end of, or during, the year ended 31 December 2007. Earnings before interest and tax (“EBIT”) 171.3 148.8 Net interest (21.7) (15.2) Directors Profit before tax 149.6 133.6 The Directors of the Company, at any Income tax expense (35.7) (31.0) time during or since the end of the financial year and up to the date of this Net profit after tax 113.9 102.6 report, are: Attributable to: M A Kinnaird AO Members of Adelaide Brighton Ltd 113.9 102.1 C L Harris Minority interest - 0.5 D Barro AO J D McNerney Basic earnings per share (cents) 21.0 18.8 L V Hosking Basic dividend per share (cents) 15.0 12.5 G F Pettigrew Special dividend per share (cents) 3.5 6.0 M P Chellew Franking (%) - all dividends 100% 100% Net debt (A$ million) 323.3 226.9 Principal activities Net debt/equity (%) 48.4% 33.6% During the year the principal activities of the Group consisted of the manufacture Operating revenue increased by 11.8% through the recovery of specific cost and distribution of cement, and over the prior year to $888.4 million as increases within contract terms and cementitious products, lime, ready a result of continued growth in sales of through the re-negotiation of customer mixed concrete, aggregates, sand and cement, lime and aggregates. Cement contracts which expired during the year. sales volumes grew in most states and concrete products. The growth in sales volumes and prices, reached further record levels for the together with a further improvement in Company overall. Lime sales continued Review of operations operating efficiency, were the key their predicted growth patterns in drivers behind the 15.1% increase in A summary of the financial results for Western Australia and aggregate sales EBIT to $171.3 million ($148.8 million the year ended 31 December 2007 is have now begun to deliver a material pcp). EBITDA increased by 11.4% to set out below: contribution in New South Wales from $223.9 million and the underlying both the Austen Quarry and the Hurd EBITDA margin at 25.3% was consistent Haulage operations. with 2006 levels. Cement demand in all markets except Clinker output fell below 2006, partly New South Wales showed fairly due to one off operating issues in the consistent growth throughout the year final quarter and partly due to the need with regional weaknesses in residential to switch Munster cement kiln 3 over to construction being offset by further lime manufacture in order to meet peak growth in the engineering and lime demand. Cement to lime infrastructure sectors. This increase in ‘campaign’ switching of this nature will demand was met through further continue to be used periodically in order improvements in operating performance, to meet spikes in lime demand until the complemented by additional clinker and operational improvement programmes, cement imports from South East Asia. now underway, are fully embedded into Lime volumes increased by 6.5% during the Munster lime production processes. the year as a result of increased Birkenhead sustained its clinker output capacity in the alumina and steel sectors at consistently high levels and increased partially offset by reduced off-take from its cement output to record levels one major customer in the nickel sector through further improvements in cement owing to changes in ore characteristics. mill efficiency and uptime. Birkenhead’s The recovery of acute inflationary performance, together with the pressures on electricity and natural gas management of the extended supply were a key focus of product pricing chain of cement to Adelaide Brighton’s strategies. Cement price increases were joint ventures Independent Cement and realised during the year at a level Lime (ICL) in Victoria and Sunstate sufficient to recover cost increases Cement in Queensland, continues to be overall. Lime price increases continue to a key component in overall profit be realised at above inflationary levels growth.
34 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 The rising costs of energy were a Demand in New South Wales continued In late 2007, Adelaide Brighton challenge for the Company and also the at cyclically low levels due to the purchased the Blanchetown quarry in national and international cement continued depressed state of the South Australia, a key supplier of low industry. In Adelaide Brighton’s core residential sector. Hy-Tec has geared its cost, high quality gypsum to the clinker production states, South operations accordingly through the Birkenhead plant. This acquisition Australia and Western Australia, this transfer of surplus mixer trucks secures the future long term supply of cost escalation had been compounded interstate and has put in place a plan this critical additive to the cement by the supply risks to electricity and gas for plant rationalisation and focus on manufacturing process. availability respectively. The Company future growth market sectors. Operating cash flow decreased by 2.7% continues to meet these challenges The weakness in demand in New South to $140.4 million ($144.3 million pcp) successfully through effective electricity Wales has had a greater impact on C&M as improved profitability was primarily demand management at its Birkenhead Brick which derives half of its revenues offset by tax and interest payments. and Angaston plants and through the from this state. Both the depressed Accounts receivable, while growing by use of alternative fuels and fuel commercial block sector and a new 7.6%, continues under tight credit substitutes for natural gas at both market entrant has caused further control. The increase resulted from the Birkenhead and Munster. volume and pricing pressures in the 11.8% growth in sales, with the lower Adelaide Brighton supports the greater Sydney market. C&M Brick rate of growth in total receivables introduction of an Australian emissions rationalised its management structure reflecting an underlying reduction in trading scheme as a mechanism for and inventory holdings in the final debtor days. Inventory levels increased future greenhouse gas reductions. quarter taking an abnormal $2.2 million by $3.5 million due to the need to build Emissions trading is expected to provide EBIT expense. These changes will up operating scale tonnages at Austen incentives to the Company to further provide the basis for performance Quarry and the take up of the Hurd reduce its greenhouse gas emissions improvement in 2008. Haulage and Kancon inventories. through the use of alternative materials As a result of these one off costs, Year end net borrowings increased to and potential investments in lower together with a 6.5% decline in sales $323.3 million ($226.9 million pcp), emissions technologies. revenue, C&M Brick reported a $6.8 principally due to the $45.2 million in The part substitution of natural gas with million reduction in EBIT to $2.0 million. business acquisitions and a $44.8 demolition wood waste at Birkenhead, Management remain confident in the million increase in dividend payments. which will decrease overall carbon future performance of C&M Brick as Bank borrowing facility limits were emission levels, increased further during presented by the South Australian increased by $20 million during the year 2007. Following the successful trialling operations which, through the delivery to $360 million, of which $300 million of coal on Munster kiln 6, the $19 of further plant efficiencies, customer matures on 31 March 2009. The $60 million coal milling, handling and firing service and product quality, were able to million working capital facility has been project was successfully commissioned grow EBIT for the third consecutive rolled over for a further 364 days in late December. This latter investment year. The recovery of the New South effective 1 April 2008. will be critical in reducing the Wales market will, however, be a key Capital expenditure of $81.1 million for dependence on supply constrained factor in the timing of C&M’s overall the year included $14.5 million of natural gas in Western Australia and profit recovery. acquired business assets for Kancon, mitigating the impact of current and The Company continues to execute its Port Minimix and the Blanchetown future increases in natural gas pricing. strategy of selective downstream gypsum quarry. The underlying $66.6 The Hy-Tec Concrete and Aggregates integration as demonstrated by the Hurd million expenditure on existing operations had a further successful year Haulage, Kancon and Port Minimix operations was within prior guidance, of improving their overall EBIT to record acquisitions which were concluded which $30.2 million was for sustaining levels. This result was based during the year. The entry into future and $36.4 million for development predominantly on the strong concrete growth markets through acquisition and capital expenditure. The key markets in Queensland and Victoria and the extraction of aggregate pull through investments during the year were the the growth in internal aggregate sales in supply benefits are key deliverables Munster kiln 6 coal handling, milling and New South Wales. The latter has from this strategy. firing plant, replacement of Birkenhead resulted from both the expansion of the major component assets, Angaston kiln In December, Adelaide Brighton made Austen Quarry volumes and the upgrades and the Morgan Cement its first move into the Victorian acquisition of Hurd Haulage and its material handling and finished product aggregates market through the supply to the coastal North Eastern New storage systems. acquisition of a 50% interest of the South Wales markets. The pull through Mawsons group of companies. Mawsons In addition to the business assets benefits of linking Hurd’s quarries with is one of the largest regional concrete purchased during the year, $45.2 million the demand from the recently acquired and aggregate businesses in Victoria was spent on the combined business Kancon, Port Minimix and Hastings and operates in the north eastern region acquisitions of Hurd Haulage, the 50% Concrete ready mix businesses will of the state. In addition to the projected joint venture investment in Mawsons provide a smaller but important platform organic growth in this market, Mawsons and purchase of the outstanding 30% for future growth in this emerging will also bring additional operational minority interest in C&M Brick. regional market. skills transfer to the existing Hy-Tec concrete and aggregates business and further scale leverage in purchasing materials and supplies.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 35 Dividends paid or declared by the Environmental performance Adelaide Brighton is implementing Company systems to manage the changes and The Group is subject to various additional requirements of legislation in In respect to the 2007 financial year, Commonwealth, State and Territory water plans, the National Pollutant the following dividends were paid: laws concerning the environment. Inventory and National Greenhouse and Management ensures that any •A final dividend in respect of the year Energy Reporting. registrations, licenses or permits required ended 31 December 2006 of 13.5 cents for the Group’s operations are obtained The prosecution issued on 15 December per share, including a special dividend and observed. All operations have access 2003 by the South Australian of 6.0 cents per share, fully franked, to safety and environmental legislation Environment Protection Authority was paid on 12 April 2007. This dividend summaries specific to their activities concerning the alleged discharge totalled $73,190,742. and a group-wide Safety, Health and (denied by the Company) from the • An interim dividend in respect of the Environmental (SH&E) Management MV Accolade II has concluded. year ended 31 December 2007 of 6.0 System is in place for monitoring, Judgment was delivered in favour of cents per share, fully franked was paid reporting and addressing SH&E matters. Adelaide Brighton with the court finding on 11 October 2007. This dividend Two sites, Birkenhead and Angaston that no discharge ever occurred and totalled $32,579,914. are certified to the international entering findings of not guilty on all environment standard ISO 14001. accounts. Since the end of the financial year the Directors have approved the payment of The Group monitors SH&E matters by Information on Directors a final dividend of 9.0 cents per share, site and business division, and fully franked, to be paid on 10 April information about the Company’s Information relating to Directors’ 2008. In addition, a special dividend of performance is regularly reported and qualifications, experience and special 3.5 cents per share franked at 100% reviewed by the Group’s senior responsibilities are set out on page 31 was declared, payable coincident with management, the Safety, Health & of the Annual Report. the 2007 final dividend. Environment Committee of the Board and the Board. Directors’ meetings State of affairs All Adelaide Brighton facilities comply The number of Directors’ meetings and No significant changes occurred in the with State and Federal requirements. meetings of committees of Directors state of affairs of the Group during the During 2007, no formal environmental held during the financial year and the financial year. notices were received. number of meetings attended by each Director are as follows: Events subsequent to the end of the financial year Director Board Audit, Risk Nomination Corporate Independent SH&E Meetings and and Governance Directors’ Committee As at the date of this report, no other Compliance Remuneration Committee Committee matter or circumstance has arisen since Committee Committee 31 December 2007 that has significantly affected, or may significantly affect the AH AH AH AH AH AH Group’s operations, the results of those M A Kinnaird 7 7 4 4 3 3 0 0 3 3 2 2 operations, or the Group’s state of C L Harris 7 7 4 4 3 3 0 0 3 3 affairs in future financial years. D Barro 5 7 L V Hosking 7 7 4 4 3 3 0 0 3 3 Likely developments and expected J D McNerney 7 7 3 3 2 2 results of operations G F Pettigrew 7 7 4 4 3 3 3 3 2 2 Likely developments in the operations M P Chellew 7 7 3 3 2 2 of the Group, known at the date of this A Number of meetings attended report, and the expected results of H Number of meetings held during period of office those operations, have been covered generally within the financial report. Throughout 2007, the general business Ordinary shares Further information on likely of the Corporate Governance Committee M A Kinnaird 74,286 developments in the operations of the was dealt with at the Company’s Board C L Harris 70,001 Group and the expected results of Meetings and no separate committee D Barro 17,565,253 operations in the future financial years meetings were held. J D McNerney 101,000 have not been included in this report Particulars of the Company’s corporate L V Hosking 2,000 because the Directors believe it would governance practices, including the roles G F Pettigrew 5,000 be likely to result in unreasonable of each Board Committee, are set out M P Chellew 440,149 prejudice to the Group. on pages 25 to 30 of this report. Full details of the interests in share Directors’ interests capital of Directors of the Company are disclosed in Note 32 to the Financial The relevant interest of each Director in Statements on page 85 of this report. the share capital of the Company at the Full details of the interests in Awards of date of this report is as follows. the Managing Director of the Company are set out in the Remuneration Report on pages 38 to 48 of this report.
36 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 Director and executive Company, its wholly owned subsidiaries, Details of the amounts paid or payable remuneration and nominee Directors on the Board of to PricewaterhouseCoopers for audit Independent Cement & Lime Pty Ltd. and non-audit services provided during Details of the Company’s remuneration These deeds provide for indemnification the year are set out in Note 33 to the policies and the nature and amount of on a full indemnity basis and to the full Financial Statements on page 87 of this the remuneration of the Directors and extent permitted by law against all report. certain senior executives are set out in losses or liabilities incurred by the the Remuneration Report on pages 38 to The Board of Directors has considered person as an officer of the relevant 48 of this report. the position and, in accordance with the Company. The indemnity is a continuing advice received from the Audit, Risk and obligation and is enforceable by an Company Secretaries Compliance Committee, is satisfied that officer even if he or she has ceased to the provision of the non-audit services The Company’s principal Company be an officer of the relevant Company. is compatible with the general standard Secretary is Marcus Clayton, who has The Company was not liable during of independence for auditors imposed been employed by the Company in 2007 under such indemnities. by the Corporations Act 2001. The the two separate offices of General Directors are satisfied that the provision Counsel and Company Secretary since No indemnity has been granted to an of non-audit services by the auditor, as 24 February 2003. He is a legal auditor of the Company in their capacity set out below, did not compromise the practitioner admitted in South Australia as auditor of the Company. auditor’s independence requirements of with 21 years experience. Rule 9.5 of the constitution provides the Corporations Act 2001 for the Two other employees of the Company that the Company may purchase and following reasons: also hold the office of Company maintain insurance or pay or agree to • All non-audit services have been Secretary, to assist with secretarial pay a premium for insurance for reviewed by the Audit, Risk and duties should the principal Company “officers” (as defined in the constitution) Compliance Committee to ensure they Secretary be absent. One is the against liabilities incurred by the officer do not impact the impartiality and Company’s Chief Financial Officer, in his or her capacity as an officer of the objectivity of the auditor. Andrew Poulter, who is a Chartered Company or of a related body corporate, Accountant. The other is the Group’s including liability for negligence or for • None of the services undermine the Corporate Affairs Adviser, Luba reasonable costs and expenses incurred general principles relating to auditor Alexander, who has been a Company in defending proceedings, whether civil independence as set out in Professional Secretary since 22 March 2001. or criminal and whatever their outcome. Statement F1, including reviewing or auditing the auditor’s own work, acting Indemnification and insurance of During the year the Company paid in a management or a decision making officers the premiums in respect of Directors’ capacity for the Company, acting as and Officers’ Liability Insurance to Rule 9 of the Company’s constitution advocate for the Company or jointly cover the Directors and Secretaries of provides that the Company indemnifies sharing economic risk and rewards. the Company and its subsidiaries, and each person who is or who has been an the general managers of each of the A copy of the auditors’ independence “officer” of the Company on a full divisions of the Group, for the period declaration as required under section indemnity basis and to the full extent 31 March 2007 to 31 March 2008. 307C of the Corporations Act 2001 is permitted by law, against liabilities Due to confidentiality obligations under set out on page 96. incurred by that person in their capacity that policy, the premium payable and as an officer of the Company or of a further details in respect of the nature Rounding off related body corporate. of the liabilities insured against cannot The Company is of a kind referred to in Rule 9.1 of the constitution defines be disclosed. ASIC Class Order 98/0100 dated 10 July “officers” to mean: 1998 and, in accordance with that Class Proceedings on behalf of the • each person who is or has been a Order, amounts in the financial report Company Director, alternate Director or executive and Directors’ report have been rounded officer of the Company or of a related No person has applied for leave of the off to the nearest one hundred thousand body corporate of the Company who in Court to bring proceedings on behalf of dollars, unless otherwise stated. that capacity is or was a nominee of the the Company or to intervene in any Dated on 14 March 2008. Company; and proceedings to which the Company is a party for the purpose of taking Signed in accordance with a resolution • such other officers or former officers of responsibility on behalf of the Company of the Directors the Company or of its related bodies for all or any part of those proceedings. corporate as the Directors in each case The Company was not a party to any determine. such proceedings during the year. The indemnity is a continuing obligation and is enforceable by an officer even if Non-audit services he or she has ceased to be an officer of M Chellew The Company may decide to employ the the Company or its related bodies Managing Director auditor on assignments additional to corporate. their statutory audit duties where the Additionally, the Company has entered auditor’s experience and expertise with into Deeds of Access, Indemnity and the Company and the Group are Insurance with all Directors of the important.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 37 REMUNERATION REPORT
The Directors of the Company present Table 1 - Overview of elements of remuneration the Remuneration Report prepared in Discussion in accordance with section 300A of the Elements of Directors Senior Remuneration Corporations Act 2001 for the Company remuneration Non-Executive Executive Executives Report and the Group for the year ended 31 Fixed Fees ✓✗✗pages 38, 39 December 2007. remuneration ✗✓✓ This Remuneration Report forms part of Salary pages 39, 40 the Directors’ report. Other benefits ✗✓✓page 47
This Remuneration Report: At-risk Short term ✗✓✓pages 40 - 42 • Explains the Board’s policies relating to remuneration incentive remuneration of Directors and senior Long term ✗✓✓pages 42 - 45 executives (as defined in Section 2 of incentive the Remuneration Report). Post- Superannuation ✓✓✓pages 39, 48 • Discusses the relationship between employment these policies and the Group’s Notice periods & ✗✓✓pages 46, 47 performance. termination payments • Provides details of the performance conditions applicable to senior executive “at risk” remuneration. Section 1 - Non-executive Directors’ • Independent professional advice. remuneration • Sets out remuneration details for each •Fees paid by comparable companies. Director and senior executive. 1.1 Board Policy on remuneration • The general time commitment and Details of the Group’s remuneration The remuneration of non-executive responsibilities involved. strategy for 2007 are set out on pages Directors is determined by the Board on • The risks associated with discharging 38 to 45 of this report. the recommendation of its Nomination the duties attaching to the role of and Remuneration Committee within the An overview of the elements of Director. maximum amount approved by remuneration is set out in Table 1. shareholders. A maximum amount of • The level of remuneration necessary to A more detailed discussion of each $700,000 per annum was approved at attract and retain Directors of a suitable element is contained in this the 2005 Annual General Meeting. calibre. Remuneration Report. The remuneration of the non-executive The Board Nomination and Directors consists of Directors’ fees, Remuneration Committee will continue committee fees and superannuation to review its approach to non-executive contributions. This remuneration is not Director remuneration to ensure it linked to the performance of the Group remains in line with general industry in order to maintain the independence practice and best practice principles of and impartiality of the non-executive corporate governance. Details of the Directors. membership of the Nomination and Remuneration Committee and its In setting fee levels, the Nomination and responsibilities are set out on pages 27 Remuneration Committee, which makes and 28 in the Corporate Governance recommendations to the Board, takes Statement. into account: Fees payable to non-executive Directors • The Group’s existing remuneration are set out in Table 2. policies.
Table 2 - Non-executive Directors’ fees Board Board Committee3
Chairman Member Chairman Member
$$$$
Fee applicable for 2007 235,0001 65,0002 7,500 5,000
1 The Chairman receives no additional fees for Committee work. 2 In 2007 J D McNerney received a Director’s fee of $55,000. 3 At present, there are no fees payable for the Independent Directors’ Committee.
38 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 In addition to Directors’ fees, non- retirement benefits other than Directors are also entitled to be executive Directors generally have the superannuation contributions. reimbursed for all business related benefit of a contribution towards their expenses, including travel, as may be In accordance with rule 7.3(f) of the superannuation equivalent to 10% of incurred in the discharge of their duties. Company’s constitution, Directors are their Directors’ fees. This additional 10% also permitted to be paid additional fees is not made available for M A Kinnaird, 1.2 Remuneration for special duties or exertions. Such fees D Barro or J D McNerney, for whom no may or may not be included in the Details of non-executive Directors’ superannuation contributions are made. aggregate remuneration cap approved remuneration for the years ended 31 Consistent with best practice, the Group by shareholders, as determined by the December 2007 and 31 December 2006 does not pay non-executive Director Directors. No such fees were paid during are set out in Table 3. All values are in the year. A$ unless otherwise stated.
Table 3 - Non-executive Directors’ remuneration for the 2007 and 2006 financial years Post- Other Share- employment long term Termination based Short-term benefits benefits benefits benefits payments
Directors’ Committee Superannuation Year Fees Fees contributions1 Other2 Total
$$ $$$$$
M A Kinnaird (Chairman) 2006 212,500 - ----212,500 2007 235,000 - ----235,000 C L Harris 2006 59,000 23,250 8,225 - - - 90,475 2007 65,000 25,000 9,000---99,000 D Barro 2006 59,000 - ----59,000 2007 65,000 - ----65,000 J D McNerney 2006 51,500 5,125 ----56,625 2007 55,000 5,000 ----60,000 L V Hosking 2006 59,000 18,125 7,712 - - - 84,837 2007 65,000 20,000 8,500---93,500 G F Pettigrew 2006 59,000 11,625 7,063 - - - 77,688 2007 65,000 17,500 8,250---90,750
Total 2006 500,000 58,125 23,000 - - - 581,125 2007 550,000 67,500 25,750---643,250
1 Superannuation contributions are made on behalf of non-executive Directors to satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation. 2 Non-monetary and other benefits (inclusive of applicable fringe benefits tax).
Section 2 - Managing Director and Executives Position senior executive remuneration Managing Director The Group has provided disclosures in M P Chellew Managing Director and CEO relation to the remuneration of the Senior executives Managing Director, Mr Mark Chellew, A D Poulter Chief Financial Officer and members of the executive team, M R D Clayton General Counsel and Company Secretary on the basis that these executives M Brydon Executive General Manager, Cement and Lime (“senior executives”) had the authority T Douglas Executive General Manager, Marketing & Sales and responsibility for planning, directing Executive General Manager, Concrete Products and controlling the activities of the (31 October 2007 to 9 December 2007) Company and the Group during the M A Finney Executive General Manager, Concrete and Aggregates financial year. This includes the MKelly Executive General Manager, Strategy and Business Development Managing Director and the five most S J Toppenberg Executive General Manager, Human Resources highly remunerated senior executives of C Kupke Managing Director C&M Brick Pty Ltd (21 April 2007 until employment the Company and the Group during the with the Company ceased on 31 October 2007) financial year as required under section SB Rogers Executive General Manager, Concrete Products 300A of the Corporations Act 2001. (Commenced 10 December 2007)
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 39 2.1 Board policy on remuneration 2.2 Elements of remuneration Details of the certain benefits made available to the Managing Director and The Nomination and Remuneration As indicated above, remuneration for senior executives are outlined in the Committee has recommended, and the the Group’s Managing Director and summary of the Service Agreements set Board has adopted, a policy that senior executives is made up of the out on pages 46 to 47 of this report. remuneration will: following components:
• Be competitive in the markets in which (i) Fixed remuneration; and 2.2.2 At-risk remuneration - the Group operates in order to attract, Short Term Incentive (STI) (ii) Performance based remuneration, motivate and retain high calibre comprising: The STI program involves linking employees. specific annual performance targets • Short Term Incentives (“STI”) - based •Reinforce the short and long term (predominantly financial) with the on annual individual and operational objectives of the Group as set out in the opportunity to earn cash incentives performance over 12-month periods. strategic business plans endorsed by the based on a percentage of fixed Board. • Long Term Incentives (“LTI”) - based on remuneration. The performance criteria sustained shareholder value creation are set by the Board and agreed with • Provide a common interest between over 3-year periods. the executive during the first half of the employees and shareholders by linking year, determined following the close of the rewards that accrue to management The relative proportions of the Managing the relevant financial year and paid to the creation of value for Director’s and senior executives’ total during or before March in the following shareholders. remuneration packages that are fixed year. These targets are set with respect and performance-based are explained The policy seeks to support the Group’s to organisational goals. below. objective to be perceived as “an The Group STI performance measures employer of choice” by: 2.2.1 Fixed remuneration contain initial target, target, partial • Offering remuneration levels which are stretch and stretch objectives. Initial The terms of employment for all competitive relative to those offered by target objectives must be met for any executive management contain a fixed comparable employers. reward to be payable. To secure remuneration component. This is maximum STI reward, stretch objectives • Providing strong, transparent linkages expressed as a dollar amount that the must be met. Table 4 below shows the between individual and Group executive may take in a form agreed percentage of fixed remuneration which performance and rewards. with the Company or the Group. This the Managing Director and senior amount of remuneration is determined The Board, based on the executives may earn under the STI for in line with the median market rate for recommendations of the Nomination and the 2007 financial year if the relevant a comparable role. Remuneration Committee, establishes performance measures are met. the remuneration of the Managing Director. Table 4 - Amount of STI which can be earned Financial year ending 31 December 2007 The Nomination and Remuneration % of fixed remuneration Committee, based on the 2007 Group performance against Budget Managing Director Senior executives recommendations of the Managing Director, establishes the remuneration Initial Target (Tier 1) 90-99.9% 10% 48% of senior executives reporting to the Target (Tier 2) 100% 50% 40% Managing Director, including their Partial Stretch (Tier 3) 101-109% 54-86% 43-67% participation in both short term and Stretch (Tier 4) 110% or greater 90% 70% long term incentive schemes. Details of the composition and Table 4A - Amount of STI which can be earned responsibilities of the Nomination and Financial year ending 31 December 2006 Remuneration Committee are set out % of fixed remuneration on pages 27 and 28. The Committee 2006 Group performance against Budget Managing Director Senior executives receives independent external advice on Initial Target (Tier 1) 90-99.9% 10% 48% matters relating to remuneration as Target (Tier 2) 100% 50% 40% required. Partial Stretch (Tier 3) 101-114% 52.7-87.8% 42-68% The Board aims to achieve a balance Stretch (Tier 4) 115% or greater 90% 70% between fixed and performance related components of remuneration that reflect Information relating to the amount of market conditions at each job and the STI bonus earned by the Managing seniority level. Director and senior executives for In general, between 40% and 60% of performance in the 2007 and 2006 the total remuneration packages for the financial years is set out in Table 5 on Managing Director and senior executives page 42 of this report. is performance-based.
40 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 Performance conditions At-risk remuneration - STI In accordance with the 2007 STI under the STI Performance Incentives 2007 - 2008 scheme explained above, 80% of these maximum STI entitlements was payable The STI performance targets are based Under the STI arrangements, the based upon the Group’s performance on the Group’s performance against the amount available to the Managing against budget in the 2007 financial Group’s budget for the relevant year. Director and eligible senior executives year. The proportion of the remaining The Board considers performance targets is determined based on the Group’s 20% Functional Component which was to be appropriate because it provides a performance against both budget and determined to be payable was direct link between a component of the personal functional hurdles. The amount dependent upon each individual’s executive’s remuneration which is “at payable to the Managing Director and success in achieving personal targets. risk” and the performance of the Group eligible senior executives is based on The achievement of these personal for the relevant year. The key financial two separate performance measures: targets by the individuals varied measure used is Profit Before Tax. A (1) 80% is tested on the Group’s between 87.5% and 100% of the percentage of the executive’s 2007 STI performance against budget is also subject to additional personal Functional Component. (Financial Component). functional performance hurdles. Specific information relating to the (2) 20% is tested on both the Group’s Profit Before Tax (PBT) is defined for percentage of the 2007 and 2006 STI performance against its budget and the STI purposes as net profit after interest which was paid and the percentage that senior executive/Managing Director but before income tax expense, was forfeited for the Managing Director meeting personal targets agreed with exceptional, abnormal, extraordinary and senior executives of the Company the CEO/Board (Functional Component). items and the effect of any acquisitions and Group is set out in Table 5. made during the financial period. The STI constitutes a cash bonus granted during the financial year, The Board may adjust performance to determined following the close of the take account of factors beyond the control of executive management. Factors that financial year results, and paid by March would be considered beyond the control of the following year. The cash bonus is, of management include any takeover bid therefore, dependant upon both the for the Company or a substantial change Group’s performance and the individual’s in the ownership of the Company. performance. Assessment of performance 2007 Performance For 2007, the Group’s actual PBT was In assessing the extent to which these $149.6 million. The Managing Director performance hurdles were satisfied, the and senior executives satisfied the Board reviews the budgeted targets for Financial Component of the performance the year, focusing on PBT financial conditions applicable to the 2007 STI as measure, and assesses the degree to the Group achieved 110% of budgeted which the Group met these targets. PBT. Tier 4 (Stretch) of the STI was Where applicable, abnormal, reached, resulting in a maximum STI extraordinary or unanticipated factors, entitlement equal to 70% for senior which may have affected the Group’s executives and 90% for the Managing performance during the year, are Director of fixed remuneration (2006 - considered and where necessary, the 54.7% for senior executives, 68.9% for Group’s performance is adjusted. the Managing Director). Assessment of performance against the performance hurdles for the relevant year are determined at the first Board meeting subsequent to the balance date, following finalisation of the Group’s full year results (generally in February), and is normally paid to the executive by March. This method of assessing performance was chosen because the Board considers it appropriate to drive Company performance and shareholder returns.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 41 Table 5 - STI for the 2007 and 2006 financial years If the performance conditions are Managing satisfied, the Award vests and shares Director Stretch STI Actual STI Actual STI % of stretch are delivered to the executive on & Senior as % of fixed as % of fixed as a % of payment not Actual STI exercise of the Award. Awards are executives Year remuneration remuneration stretch achieved1 payment2 granted at no cost to the executive and no amount is payable by the executive %%%%$ on exercise of the Award. M P Chellew 2006 90.0 68.9 76.6 23.4 551,200 If an executive ceases employment with 2007 90.0 90.0 100.0 0.0 990,000 the Company, the Awards in respect of A D Poulter 2006 70.0 54.0 77.1 22.9 217,080 any tranche that is not exercisable will 2007 70.0 70.0 100.0 0.0 308,000 be forfeited, except in limited M R D Clayton 2006 70.0 54.0 77.1 22.9 156,600 circumstances. These circumstances 2007 70.0 69.0 98.6 1.4 227,674 include death, retirement, redundancy M Brydon 2006 70.0 54.0 77.1 22.9 230,580 and in the case of voluntary cessation of 2007 70.0 69.3 99.0 1.0 360,360 employment, where the Board consents T Douglas 2006 70.0 52.7 75.3 24.7 164,795 to the exercise. In these circumstances, 2007 70.0 70.0 100.0 0.0 231,000 where an Award is permitted to be M A Finney 2006 70.0 52.9 75.6 24.4 192,629 exercised at an earlier date, in respect 2007 70.0 70.0 100.0 0.0 273,000 of any tranche, the number of shares 3 MKelly 2006 70.0 54.0 77.1 22.9 78,750 available will be reduced in accordance 2007 70.0 68.3 97.5 2.5 255,938 with a formula to reflect the shorter S J Toppenberg 2006 70.0 51.8 74.0 26.0 124,416 performance period. 2007 70.0 68.6 98.0 2.0 205,800 SB Rogers4 2006 - - - - - An executive’s entitlement to shares 2007 - - - - - under an Award may also be adjusted to Former executives take account of capital reconstructions C Kupke5 2006 60.0 40.1 66.8 33.2 127,502 and bonus issues. In the event of a 2007 - - - - - takeover bid (or other transaction likely to result in a change in control of the 1 Where the actual STI payment is less than maximum potential, the difference is forfeited and does not become Company), an executive will only be payable in subsequent years. 2 2007 STI constitutes a cash bonus granted during 2007; determined following close of 2007 results and paid by allowed to exercise their Awards to the March 2008. extent determined by the Board as 2006 STI constitutes a cash bonus granted during 2006; determined following close of 2006 results and paid by provided in the Plan Rules. March 2007. 3M Kelly joined the scheme on 14 August 2006 and received a pro-rata STI payment corresponding to the period of In order to safeguard shareholders’ his service during 2006. interests, the Awards (to the extent that 4S B Rogers commenced employment with the Company on 10 December 2007. He is not entitled to receive any they have not been exercised) will lapse STI payment for performance in the 2007 financial year. if the Board considers that the executive 5C Kupke’s 2006 STI payment was based on the terms of the Group’s 2005 STI scheme, which provided for a 60% has acted fraudulently, dishonestly or in stretch STI. C Kupke ceased employment with the Company on 31 October 2007. He received no STI payment for performance in the 2007 financial year. breach of their obligations to the Company. 2.2.3 At-risk remuneration - Overview of the LTI Plan Any shares allocated to the executive Long Term Incentive (LTI) The Adelaide Brighton Ltd Executive following exercise of an Award are not The Group’s LTI arrangements are Performance Share Plan (“the Plan”) subject to any restrictions on dealing, designed to link executive reward with provides for grants of Awards generally other than the restrictions in trading the the key performance drivers which to the Managing Director and senior Company’s securities under the underpin sustainable growth in executives. This Plan was approved by Company’s Share Trading Policy and the shareholder value, and comprise both shareholders at the Annual General generally applicable insider trading share price and returns to shareholders. Meeting held on 19 November 1997. In prohibitions. accordance with the requirements of the Participation in the LTI arrangements Awards granted to the Managing ASX Listing Rules, the Awards granted are generally offered to the Managing Director and senior executives to the Managing Director have been Director and senior executives who are under the Plan approved by shareholders. able to influence the generation of During 2007, there were two existing shareholder wealth and thus have a Under the Plan, eligible executives are series of Awards on issue to the direct impact on the Group’s granted Awards (each being an Managing Director and senior performance against the relevant entitlement to a fully paid ordinary executives: performance hurdles. share of Adelaide Brighton Ltd, subject to the satisfaction of performance •Awards (Tranches 1, 2 and 3) granted conditions) on terms and conditions to senior executives in 2004 and the determined by the Board. Managing Director in 2005 (known as the “2004 Awards”).
42 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 •Awards (Tranches 1, 2 and 3) granted 2004 Awards - Performance • S&P / ASX 200 Materials Accumulation to senior executives and the Managing conditions Index (AS 51 MATL) plus 2% premium. Director in 2006 and 2007 (known as The 2004 Awards granted to the • S&P / ASX 200 Accumulation Index (AS the “2007 Awards”), details of which are Managing Director and senior executives 51) plus 3% premium. set out below. are divided into 3 equal tranches and The relevant exercise condition under The relevant performance conditions for are exercisable (subject to satisfaction the Plan Rules provides that the the 2004 Awards and the 2007 Awards of relevant performance conditions) as Company’s growth in TSR is measured are tied to total shareholder return follows: as at 1 April prior to the exercise date (TSR) and earnings per share growth •Tranche 1 - Exercise Date 1 May 2006 for the relevant tranche of Awards (EPS). (“Performance Date”). •Tranche 2 - Exercise Date 1 May 2007 The Board considers these performance The TSR hurdle will be adjusted by the targets to be appropriate because they •Tranche 3 - Exercise Date 1 May 2008 Board to neutralise fluctuations in the ensure that a proportion of each The relevant performance conditions are share price at the Performance Date executive’s remuneration is linked to the tied to total shareholder return and resulting from the Boral Takeover Offer generation of profits and shareholder earnings per share growth. made on 30 January 2004. value and ensure that executives only receive a benefit where there is a The Board may apply and evaluate both In assessing whether the TSR corresponding direct benefit to or either of these performance targets performance hurdle has been met, the shareholders. (as it decides) to determine whether the Company receives independent data, performance of the Group entitles the which provides both the Company’s TSR In particular, the use of a TSR based executive to exercise any or all of a growth over the relevant performance hurdle: tranche of the Award. In relation to the period and that of the comparator group. • Ensures alignment between comparative 2004 Awards granted to the Managing If the TSR performance hurdle is not shareholder return and reward for the Director and senior executives (as met in respect of any tranche, the executive; announced at the 2005 AGM), the Board Performance Date will be adjusted to has determined that: • Provides a relative, external market allow re-testing of the performance performance measure, having regard to • 50% of each tranche of the Award will hurdle at consecutive three month those companies with which the Group be subject to the TSR hurdle, intervals up until the expiry date of the competes for capital, customers and Award. • 50% of each tranche of the Award will talent; be subject to the EPS hurdle. EPS performance hurdle while an EPS based hurdle: The EPS performance hurdle measures TSR performance hurdle the average annual growth in EPS of the • Is a fundamental indicator of financial TSR measures the return a shareholder Company from 1 January 2004 until the performance, both internally and obtains from shares in a Company in a end of the financial year immediately externally; defined period and takes into account prior to the Performance Date (as various matters such as changes in the • Links directly to the Group’s long-term defined above). market value of the shares as well as objectives of maintaining and improving dividends on the shares. As a threshold before any part of the earnings. relevant tranche of the 2004 Awards The Company’s TSR performance will be The introduction of dual performance subject to the EPS hurdle will vest, the compared with the TSR performance of measures combines a strong external average annual growth in EPS of other companies in a comparator group. market-based focus through share price Adelaide Brighton from 1 January 2004 growth and dividends (TSR), and a non- The TSR hurdle is that the Company’s until the end of the financial year market based measure aimed at driving TSR growth must equal or exceed the immediately prior to the Performance improved Company results and the median TSR growth of the companies in Date must equal or exceed 7% per creation of shareholder wealth (EPS). at least 2 of the 3 indices below plus the annum compound growth measured These performance measures are widely percentage premium applicable to the against the EPS for the financial year accepted as key drivers of sustainable respective indices: ended 31 December 2003. long-term organisational performance. • S&P / ASX Small Ordinaries Once the 7% threshold is reached, the A detailed discussion of the Group’s Accumulation Index (AS 38) plus 2% relevant tranche of Awards subject to performance, set specifically against the premium. the EPS hurdle will progressively vest in Group’s earnings and the consequences accordance with the following scale. of the Group’s performance on shareholder wealth, both in the current Table 6 - EPS hurdle vesting schedule - 2004 Award financial year and the previous four Average Annual Compound Growth in EPS years, is set out on pages 45 to 46 of below 7% to 8% to 9% to 10% to 11% to 12% to 13% to above this report. 7% 8% 9% 10% 11% 12% 13% 14% 14% Further details of the specific EPS and TSR performance conditions applicable Percentage of to the 2004 Awards and the 2007 Awards subject Awards are as follows. to EPS hurdle which vest Nil 30% 40% 50% 60% 70% 80% 90% 100%
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 43 EPS is measured as disclosed in the In assessing whether the TSR subject to the EPS hurdle will vest, the audited annual accounts of the Group performance hurdle has been met, the average annual growth in EPS of the for the financial years ending on Company receives independent data, Company (as disclosed in the audited 31 December (as defined above). which provides both the Company’s TSR accounts of the Company and before growth over the relevant performance any write downs and capital If the EPS performance hurdle is not period and that of the comparator group. management initiatives) must equal met in respect of any tranche, the or exceed 7% per annum compound Performance Date will be adjusted to No re-testing of the TSR performance growth measured against the EPS for allow re-testing of the performance hurdle is permitted in respect of the the Company’s financial year ended hurdle at the end of each subsequent 2007 Awards. 31 December 2006 (before abnormal financial year until either the EPS EPS performance hurdle or exceptional items, such as (without performance hurdle is met or the Award The EPS performance hurdle measures limitation) capitalised interest and expires, whichever is the earlier. the average annual growth in EPS of the taxation benefits). 2007 Awards - Performance Company from 1 January 2007 until the Once the 7% threshold is reached, the conditions end of the financial year immediately relevant tranche of Awards subject to prior to the exercise date for a particular The 2007 Awards granted to the the EPS hurdle will progressively vest in tranche. Managing Director and senior executives accordance with the following scale. are divided into 3 equal tranches and As a threshold before any part of the are exercisable (subject to satisfaction relevant tranche of the 2007 Awards of relevant performance conditions) as follows: Table 7 - EPS hurdle vesting schedule - 2007 Award Average Annual Compound Growth in EPS •Tranche 1 - Exercise Date 1 May 2009 below 7% to 9% to •Tranche 2 - Exercise Date 1 May 2010 7% 7% 9% 9% 11% 11% •Tranche 3 - Exercise Date 1 May 2011 Percentage of Awards subject The relevant performance conditions are to EPS hurdle which vest Nil 40% Pro-rata 70% Pro-rata 100% tied to TSR and EPS.
In relation to the 2007 Awards granted EPS is measured as disclosed in the Awards granted as remuneration to the Managing Director and senior audited annual accounts of the Group executives, the Board has determined During the year, the Company granted for the financial years ending on that: Awards to senior executives as set out 31 December (as defined above). •50% of each tranche of the Award will in Table 8 below. Each Award is over be subject to the TSR hurdle; and No re-testing of the EPS performance one ordinary share in the Company, and hurdle is permitted in respect of the is exercisable subject to certain hurdles •50% of each tranche of the Award will 2007 Awards. being met (as discussed above). be subject to the EPS hurdle.
TSR performance hurdle Table 8 - Awards granted during the year The Company’s TSR performance will be Managing Director & Number of Future years in which Maximum value compared with the TSR performance of Senior executive3,4,5 Awards granted1 awards may vest of awards2 other companies in a comparator group. MPChellew 1,305,0004 2009, 2010, 20114 $1,674,750 The TSR hurdle is that the TSR growth M Brydon 300,0003 2009, 2010, 20113 $449,000 of the Company must equal or exceed MKelly 85,0005 20085 $188,700 the growth in the returns of at least two of the three indices below (expressed as Total 1,690,000 $2,312,450
a percentage) plus the percentage 1 The grants made to the Managing Director and the senior executives constituted 100% of the grants available for the premium applicable to the respective year. As the Awards only vest on satisfaction of performance conditions which are to be tested in future financial indices: periods, none of the Awards set out above vested or were forfeited during the year. 2 The values per Award were independently valued. An explanation of the pricing model used to calculate these values • S&P / ASX Small Ordinaries is set out in Note 32 to the financial statements. The minimum total value of the grant, if the applicable performance Accumulation Index (XSO Al) plus 2% conditions are not met, is nil. premium. 3 300,000 Awards were granted to M Brydon on 1 March 2007, under the 2007 Award, divided into 3 tranches as follows: • S&P / ASX 200 Materials Accumulation •Tranche 1: 100,000 Awards - Exercise Date 1 May 2009 Index (XMJ Al) plus 2% premium. •Tranche 2: 100,000 Awards - Exercise Date 1 May 2010 •Tranche 3: 100,000 Awards - Exercise Date 1 May 2011 • S&P / ASX 200 Accumulation Index The Awards expire on 30 September 2011. The performance conditions applicable to the Awards are set out in the (XJO Al) plus 3% premium. discussion above. 4 In 2006, as the Company is required to seek shareholder approval of the issue of Awards to the Managing Director, The relevant exercise condition under the Company was unable to grant Awards to the Managing Director at the same time as those granted for senior the Plan Rules provides that the executives. Shareholder approval was granted at the Annual General Meeting held in 2007 and subsequently, the Company’s growth in TSR is measured Managing Director was granted 1,305,000 Awards divided into 3 tranches as follows, on terms similar to those as at 31 December prior to the exercise applicable for the Awards granted to senior executives in 2006: date for the relevant tranche of Awards. •Tranche 1: 435,000 Awards - Exercise Date 1 May 2009 •Tranche 2: 435,000 Awards - Exercise Date 1 May 2010 •Tranche 3: 435,000 Awards - Exercise Date 1 May 2011 5 85,000 Awards were granted to M Kelly on 2 August 2007, under Tranche 3 of the 2004 Award. The Awards are exercisable on 1 May 2008.
44 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 Table 9 sets out details of the movement in Awards held by the Managing Director and senior executives during the reporting period.
Table 9 - Movement in Awards during the year Value per share Managing Director/ Balance at Exercised / Lapsed / Balance at at the date senior executive5 31 Dec 2006 Granted1 vested2 forfeited3 31 Dec 2007 Exercise date of exercise4
M P Chellew 600,000 1,305,000 300,000 - 1,605,000 2 August 2007 $3.250 A D Poulter 470,000 - 85,000 - 385,000 6 July 2007 $3.557 M R D Clayton 470,000 - 85,000 - 385,000 6 July 2007 $3.557 M Brydon 170,000 300,000 85,000 - 385,000 1 August 2007 $3.260 T Douglas 170,000 - 85,000 - 85,000 1 August 2007 $3.260 M A Finney 470,000 - 85,000 - 385,000 1 August 2007 $3.260 M Kelly 300,000 85,000 - - 385,000 - - S J Toppenberg 470,000 - 85,000 - 385,000 1 May 2007 $3.585 CKupke ------SB Rogers ------
Total 3,120,000 1,690,000 810,000 - 4,000,000
1 The value of Awards granted to Directors and senior executives during the year (including the aggregate value of Awards granted) is set out in Table 8. 2 All 810,000 Awards which were exercisable were exercised in 2007. The number of Awards vested during the period and exercisable at 31 December 2007 is nil. The number of Awards vested but not yet exercisable at 31 December 2007 is nil. 3 The value of an Award on the day it lapses or is forfeited is nil. 4 The value per share shown at the date of exercise is the Volume Weighted Average Price (VWAP) calculated by the Australian Stock Exchange Limited for the 5 day trading period ending on the exercise date. The aggregate value of Awards that vested during the year is $2,830,368 based on the VWAP values per share 5T Douglas participated in the 2004 Award but not the 2007 Award. C Kupke did not participate in either the 2004 Award or 2007 Award. C Kupke ceased employment with the Company on 31 October 2007. S B Rogers commenced employment with the Company on 10 December 2007. On 19 February 2008 he was invited to participate in the 2007 Award for 200,000 awards.
2.3 Group performance Table 10 - Shareholders’ wealth improvement from year 2003 to year 2007 Year ended The Group’s remuneration policy aims to achieve a link between the remuneration 31 Dec 07 31 Dec 06 31 Dec 05 31 Dec 04 31 Dec 03 received by executives, increased Group 1 earnings and the creation of shareholder Share price (A$) 3.48 2.81 2.10 1.70 1.50 wealth. The STI is focussed on achieving Total dividends paid (Ac) 18.5 18.5 10.5 7.5 6.0 operational targets and short-term Franked dividends (%) 100% 100% 100% 100% 81.7% 2,3 profitability and the LTI is focussed on EPS (Ac) 21.0 18.4 16.2 14.6 10.7 achieving long-term growth in TSR (%) 30.4% 42.6% 29.4% 18.3% 33.3% shareholders’ wealth. Compound Annual Growth Rate since 2002 28.4% 29.4% 33.6% 36.0% 46.6% Shareholders’ wealth 1 The amount disclosed is the closing price of the Company’s shares on the ASX on 31 December of the relevant year. The total return to an investor over a 2 The 2006, 2005 and 2004 earnings exclude the adjustment for the tax benefit on implementation of tax given period consists of the combination consolidation. of dividends paid, the movement in the 3 2005 and 2004 EPS and TSR are AIFRS adjusted. market value of their shares over that As can be seen from the results Earnings period and any return of capital to provided, the Group has delivered shareholders. During financial year 2007 A fundamental driver of shareholder consistent growth over the last five the share price fluctuated between a low value is earnings growth. Annual years, resulting in: of A$2.66 (February 2007) and a high of budgets are reviewed by the Board and A$3.95 (September 2007). • An increase in the Company’s share approved once the Board is satisfied price by 195% over the period 2003 - that the budgets are consistent with Table 10 shows the Company’s TSR, 2007 (the increase measured from both Group strategy and sufficiently basic EPS, dividends per share, and 1 January 2003, from the price of ambitious in terms of the delivery of share price from 2003 to 2007. All are $1.18 per share). shareholder value. indices which illustrate the consequences of the Group’s •A progressive increase in dividend Adelaide Brighton’s earnings over the performance on shareholder wealth. resulting from both improved five years to 31 December 2007 are profitability and an increase in dividend summarised in Table 11. Earnings before payout ratio. Interest Tax and Amortisation (EBITA) is one of the measures used to show •A return to the payment of fully franked earnings growth. This measure allows a dividends from 2004. more consistent comparison with prior • An average annual increase in earnings years being stated before the benefits of per share of 17%. the accounting adjustments that have been required by both AIFRS and Tax •A Compound Annual Growth Rate of consolidation in 2005, 2006 and 2007. 28.4% since 31 December 2002.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 45 Table 11 - Earnings improvement from year 2003 to year 2007 2.4 Service agreements Year ending The remuneration and other terms of 31 Dec 07 31 Dec 063 31 Dec 053 31 Dec 041 31 Dec 031 employment for the Managing Director A$m A$m A$m A$m A$m and senior executives are formalised in Service Agreements. Sales revenue 888.4 794.7 719.4 696.4 630.6 EBITA 171.3 148.8 134.1 117.2 106.8 General information regarding the EBITA margin % 19.3% 18.7% 18.6% 16.8% 16.9% duration of the contracts, the periods of Profit before tax 149.6 133.6 120.1 94.9 84.4 notice required to terminate the Net profit after tax (PAT) 113.9 102.12 90.92 81.52 57.7 contracts and the termination payments provided for under the Service 1 Earnings for years 2003 & 2004 do not include AIFRS adjustments (Relevant calculations for the STI schemes in Agreements are summarised in the those years were based on AGAAP earnings). discussion below. 2PAT includes one off tax credits of $2.1m (2006), $3.1m (2005) and $14.0m (2004) as a result of tax consolidation. 3 2005 & 2006 Sales revenue restated to reflect re-classification of interest income to revenue. Duration of contracts The earnings growth over the past five integration into concrete, aggregates and Under the terms of the Service years endorses the rationale for linking concrete products, focus on operational Agreements, the Managing Director and executive long-term incentives to three- performance improvement and the other members of the senior executive year shareholder returns of TSR and EPS. development of the lime business. team continue to be employed until In using these measures, executive rewards Increased acquisition activity in their employment is terminated. are linked closely to shareholder value downstream businesses was seen in 2007 creation over the longer term. This in turn in pursuit of this strategy, the full year Notice periods and payments on provides a complementary executive focus benefits of these investments will be seen termination on medium to longer-term strategic decision from 2008 onwards. Delivery upon the The Service Agreements provide for operational improvement programme has making which may not be as relevant to termination payments to be made in become a key factor in maintaining the delivery of short-term incentives. certain circumstances. In particular, the operating margins at a time when key Company may terminate the Summarising percentage earnings growth, input costs such as energy and fuels are employment of the Managing the underlying EBITA has increased from rising at above inflationary levels. In Director/senior executive on giving five $106.8 million in 2003 to $171.3 million in progressing this strategy, management weeks written notice and may require 2007, a 60.4% increase. Similarly profit continue to employ rigorous evaluation of the Managing Director/senior executive before tax increased from $84.4 million in capital investments and the imposition of to serve the period on an active or 2003 to $149.6 million in 2007, a 77.3% demanding hurdle rates of return in order passive basis or make payment to the increase. to optimise shareholder return and Managing Director/senior executive in The benefits to the Group of attracting, manage investment risk. lieu of all or part of the notice period retaining and motivating its executive team Set out in the graph below is the based upon the Managing is demonstrated clearly in the improvement performance of Adelaide Brighton’s share Director’s/senior executive’s annual total in the Group’s results over the last five price versus the ASX Small Ords remuneration on termination. years. The stability of the executive team Accumulation Index (AS38) and the over this period together with the ASX 200 Materials Accumulation Index In general, the Managing Director and execution of a consistent strategy has (ASX51MATL) from 1 January 2002. other senior executives must give the been an important part of delivering the The Adelaide Brighton share price has Company at least three months notice five year performance improvement. outperformed both indices, reflecting of resignation. In certain circumstances, Adelaide Brighton’s executive management the strength of its core markets in the such as a substantial diminution of continue to drive for improved returns resources and construction materials responsibility, a material reduction in through the optimisation of the Company sectors and the success of the Company status (excluding any diminution with strategy of selective downstream strategy. the Managing Director’s/senior executive’s consent and, in some cases, Comparison of growth ABC share price to the ASX Small Ords and ASX200 a corporate restructure) or relocation to Accumulation Index another state other than a state where 450% his/her usual office is located, the Managing Director/senior executive may 400% ABC immediately terminate the employment share 350% price upon giving notice that in his or her opinion, acting reasonably, a 300% Fundamental Change has occurred (i.e. the Company may be deemed to have 250% terminated the employment), and the Small 200% Company will be liable to make Ords Accum compensation payments. 150%
100% ASX 200 Accum 50%
0%
-50% 31/12/2001 31/12/2002 31/12/2003 31/12/2004 31/12/2005 31/12/2006 31/12/2007
46 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 In general, upon termination, the Company (other than S B Rogers), the quantify the potential future impact of Managing Director and other senior salary component of the separation these agreements on the Group’s executives who have served for over amount will be an amount equivalent to financial position. However, the Group’s three years are entitled to receive a nine months salary, plus an additional policy in relation to these potential separation amount which is equivalent amount equivalent to one month’s obligations is to make provision on an to 12 months of the Managing Director’s/ salary for each full year of service with annual basis when a present obligation senior executive’s total remuneration on the Company, up to a maximum arises. termination, in addition to a pro-rata of aggregate amount equivalent to twelve Post-employment restraint the Managing Director’s/senior months salary. S B Rogers’ salary executive’s STI for that proportion of the component of the separation amount is Upon termination of employment for any current financial year elapsed upon the an amount equivalent to 12 months reason, the Managing Director and other termination date and if applicable, any salary. senior executives are prohibited from amounts payable to the Managing engaging in any activity that would The separation amount will not be Director/senior executive pursuant to compete with the Group for a period of payable if the Managing Director or the Company’s redundancy policy. up to 6 months in order to protect the other senior executive voluntarily Group’s business interests. In line with The Company must vest, and allow the resigns (unless the Managing Director/ principles of employment law, and in Managing Director/senior executive to senior executive terminates the order to ensure that the restraint is exercise, a pro-rated amount of any employment on the grounds that a enforceable by the Group, during the outstanding long term incentive award Fundamental Change has occurred) or period of the restraint the executive will in accordance with the terms of the has their employment terminated for be paid a monthly amount equivalent to Service Agreement. The Managing serious misconduct. the executive’s monthly fixed Director/senior executive is entitled to The potential liability of the Group in remuneration at the time of termination. receive remuneration due and a relation to the termination of payment in lieu of any accrued annual Other terms employment of senior executives is or long service leave to which the dependent on the circumstances of the Certain executives, due to individual Managing Director/senior executive is termination, the Group’s policies and circumstances, have different or entitled, up to and including the arrangements. As the potential for additional provisions in their agreements termination date. liability is dependent on the relating to payments on termination and For senior executives who have not circumstances in which an executive other benefits. These are set out in the served at least three years with the ceases employment, it is not possible to table below.
Executive Summary
M Brydon Entitled to the following additional payments on termination: •Ex-gratia payment of $10,000. •Payment of sick leave.
T Douglas Company may terminate employment on giving 9 months notice or payment in lieu of notice. Up until 31 December 2008, the executive may terminate his employment by giving 3 months notice. From 1 January 2009, the executive may terminate his employment with immediate effect without having to give any period of notice. Entitled to the following payments on termination: • Lump sum amount equivalent to 9 months remuneration. •Ex-gratia payment of $10,000. •Payment of sick leave. • Amounts payable to the Company’s reducancy policy. In certain circumstances, a pro-rated amount of STI.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 47 2.5 Remuneration paid
Details of the remuneration paid to the Managing Director and key management personnel of the Company and the Group, which includes the five group executives who received the highest remuneration during the 2007 and 2006 financial years are set out in table 12 below.
Table 12 - Remuneration for the 2007 and 2006 financial years Post- Share employment based Short-term benefits benefits payments1,2 Total
Super- Fixed Non- annuation Long term Year salary STI monetary Other contributions incentive
$$ $$$$$
M P Chellew 2006 787,587 551,200 - 320,0006 12,413 240,697 1,911,897 2007 1,112,102 990,000 - - 12,908 507,997 2,623,007 A D Poulter 2006 389,587 217,080 - 120,6006 12,413 50,971 790,651 2007 430,259 308,000 - - 12,908 148,236 899,403 M R D Clayton 2006 277,587 156,600 - 87,0006 12,413 50,985 584,585 2007 320,426 227,674 - - 12,908 148,236 709,244 M Brydon 2006 414,587 230,580 - 128,1006 12,413 51,101 836,781 2007 514,842 360,360 - - 12,908 152,665 1,040,775 T Douglas 2006 275,771 164,795 - - 37,229 50,207 528,002 2007 291,997 231,000 - - 39,251 20,677 582,925 M A Finney 2006 333,945 192,629 - 109,2006 30,055 50,985 716,814 2007 359,786 273,000 - - 32,381 148,236 813,403 M Kelly 2006 205,821 78,750 - - 11,099 - 295,670 2007 345,948 255,938 - 82,5005 38,560 231,577 954,523 S J Toppenberg 2006 219,301 124,416 - - 19,737 114,599 478,053 2007 279,817 205,800 - - 25,184 190,355 701,156 S B Rogers3 2006 ------2007 ------
Total for the 2006 2,904,186 1,716,050 - 764,900 147,772 609,545 6,142,453 Company 2007 3,655,177 2,851,772 - 82,500 187,008 1,547,979 8,324,436
C Kupke4 2006 280,733 127,502 3,850 - 25,266 - 437,351 2007 364,940 - - 224,2644 24,520 - 613,724
Total for the 2006 3,184,919 1,843,552 3,850 764,900 173,038 609,545 6,579,804 Group 2007 4,020,117 2,851,772 - 306,764 211,528 1,547,979 8,938,160
1 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted or outstanding during the year. The notional value of equity instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual executives may ultimately realise should the equity instruments vest. The notional value of Awards as at the date of their grant has been determined in accordance with the accounting policy note 1(x)(iv). 2 In 2007 19% of the Managing Director’s and 4% - 27% of the senior executives’ remuneration for the financial year consists of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan. In 2006 13% of the Managing Director’s and 0% - 24% of the senior executives’ remuneration for the financial year consists of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan. 3S B Rogers commenced employment with the Company effective 10 December 2007 and received no compensation during the 2007 financial year. 4C Kupke ceased employment with the Company effective 31 October 2007. C Kupke’s statutory leave entitlements received on termination. 5M Kelly’s compensation for benefits forfeited on changing employment to join the Company. 6 Amending Agreement Compensation.
48 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 INCOME STATEMENTS
For the year ended 31 December 2007 Consolidated The Company
($ Million) Notes 2007 2006 2007 2006
Revenue 3 888.4 794.7 132.3 160.9 Cost of sales (573.2) (509.0) - - Freight and distribution costs (121.3) (108.8) - -
Gross profit 193.9 176.9 132.3 160.9 Other income 3 6.8 4.8 - - Marketing costs (11.6) (11.0) - - Administration costs (41.1) (40.7) (1.4) (1.2) Other expenses 4 - - (11.7) (10.8) Finance costs 4 (24.8) (17.9) (21.9) (14.7) Share of net profits of joint ventures accounted 11(b) for using the equity method & (c) 26.4 21.5 - -
Profit before income tax 149.6 133.6 97.3 134.2 Income tax (expense)/benefit 5(a) (35.7) (31.0) 2.8 1.2
Net profit 113.9 102.6 100.1 135.4
Net profit attributable to: Equity holders of the parent 113.9 102.1 100.1 135.4 Minority interest - 0.5 - -
113.9 102.6 100.1 135.4
Cents Cents Earnings per share for profit attributable to the ordinary equity holders of the Company: Basic earnings per share 39 21.0 18.8 Diluted earnings per share 39 20.8 18.7
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 THE INCOME STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO THE FINANCIAL STATEMENTS SET OUT ON PAGES 53 TO 95. 49 BALANCE SHEETS
As at 31 December 2007 Consolidated The Company
($ Million) Notes 2007 2006 2007 2006
Current assets Cash and cash equivalents 6 19.3 24.2 4.8 0.5 Receivables 7 128.8 119.7 601.3 483.9 Inventories 8 84.3 80.8 - - Derivative financial instruments 9 0.7 - - -
Total current assets 233.1 224.7 606.1 484.4
Non-current assets Receivables 10 29.5 27.5 85.1 162.2 Investments accounted for using the equity method 11 66.9 40.8 - - Other financial assets 12 - - 442.6 349.7 Property, plant and equipment 13 742.5 694.2 4.6 4.8 Deferred tax assets 14 - - 3.3 3.3 Intangible assets 15 164.4 164.6 - - Retirement benefit assets 23(b) 2.7 0.1 - -
Total non-current assets 1,006.0 927.2 535.6 520.0
Total assets 1,239.1 1,151.9 1,141.7 1,004.4
Current liabilities Payables 16 84.8 85.4 236.2 178.7 Borrowings 17 60.7 40.4 60.0 40.0 Current tax liabilities 9.2 15.4 9.2 15.7 Provisions 18 26.8 25.5 - - Other 19 13.5 13.2 - -
Total current liabilities 195.0 179.9 305.4 234.4
Non-current liabilities Borrowings 20 281.9 210.7 280.0 210.0 Deferred tax liabilities 21 63.0 61.5 - - Provisions 22 31.2 24.7 - - Other 0.1 0.1 - -
Total non-current liabilities 376.2 297.0 280.0 210.0
Total liabilities 571.2 476.9 585.4 444.4
Net assets 667.9 675.0 556.3 560.0
Equity Contributed equity 24 514.0 513.3 506.8 506.1 Reserves 25 14.5 13.3 2.2 0.9 Retained profits 25(d) 136.4 139.8 47.3 53.0
Parent entity interest 664.9 666.4 556.3 560.0 Minority interests 26 3.0 8.6 - -
Total equity 667.9 675.0 556.3 560.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 50 THE BALANCE SHEETS SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO THE FINANCIAL STATEMENTS SET OUT ON PAGES 53 TO 95. STATEMENTS OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2007 Consolidated The Company
($ Million) 2007 2006 2007 2006
Exchange differences on translation of foreign operations, net of tax (0.1) (0.1) - - Actuarial gain (loss) on defined benefit plan, net of tax 0.7 0.3 - -
Net income recognised directly in equity 0.6 0.2 - - Net profit for the year 113.9 102.6 100.1 135.4
Total recognised income and expense for the year 114.5 102.8 100.1 135.4
Attributable to: Equity holders of the parent 114.5 102.3 100.1 135.4 Minority interests - 0.5 - -
114.5 102.8 100.1 135.4
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 THE STATEMENTS OF RECOGNISED INCOME AND EXPENSE SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO THE FINANCIAL STATEMENTS SET OUT ON PAGES 53 TO 95. 51 STATEMENTS OF CASH FLOWS
For the year ended 31 December 2007 Consolidated The Company
($ Million) Notes 2007 2006 2007 2006
Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) 960.0 859.8 - 0.4 Payments to suppliers and employees (inclusive of goods and services tax) (779.6) (694.8) - (2.1) Dividends received 20.7 18.8 110.0 135.0 Interest received 3.1 2.6 10.8 14.7 Other revenue received 2.6 4.7 - - Interest paid (21.9) (12.6) (21.5) (12.5) Income taxes paid (44.5) (34.2) (3.3) (10.7)
Net cash inflow from operating activities 37 140.4 144.3 96.0 124.8
Cash flows from investing activities Payments for property, plant and equipment (81.1) (81.5) 0.2 - Payments for controlled entities and operations (45.2) - (17.6) - Proceeds from sale of property, plant and equipment 1.8 2.5 - - Loans to joint venture entities (3.8) (4.3) - - Repayment of loans by other related parties 1.8 0.2 0.2 0.2 Loans to controlled entities - - (58.7) (60.1)
Net cash (outflow) from investing activities (126.5) (83.1) (75.9) (59.9)
Cash flows from financing activities Proceeds from borrowings 170.8 250.0 170.8 250.0 Repayment of borrowings (81.4) (250.3) (80.8) (250.0) Dividends paid to Company’s shareholders 27 (105.8) (61.0) (105.8) (61.0) Dividends paid to minority interests in controlled entities (0.2) (0.2) - -
Net cash (outflow) from financing activities (16.6) (61.5) (15.8) (61.0)
Net (decrease) increase in cash held (2.7) (0.3) 4.3 3.9 Cash at the beginning of the financial year 6 24.2 24.6 0.5 (3.4) Cash balances in controlled entities acquired (2.2) - - - Effects of exchange rate changes on cash and cash equivalents - (0.1) - -
Cash at the end of the financial year 6 19.3 24.2 4.8 0.5
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 52 THE STATEMENTS OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO THE FINANCIAL STATEMENTS SET OUT ON PAGES 53 TO 95. NOTES TO THE FINANCIAL STATEMENTS
1 Summary of significant accounting Subsidiaries are fully consolidated from (iii) Minority interest policies the date on which control is transferred Minority interests in the results and to the Group. They are de-consolidated equity of subsidiaries are shown The principal accounting policies from the date that control ceases. The separately in the consolidated income adopted in the preparation of the purchase method of accounting is used statement and balance sheet financial report are set out below. to account for the acquisition of respectively. The Group applies a policy These policies have been consistently subsidiaries by the Group (refer to note of treating transactions with minority applied to all the years presented, 1(i)). interests as transactions with equity unless otherwise stated. The financial owners of the Group. For purchases report includes separate financial Intercompany transactions, balances from minority interests, the difference statements for Adelaide Brighton Ltd as and unrealised gains on transactions between any consideration paid and the an individual entity and the Group between Group companies are relevant share acquired of the carrying consisting of Adelaide Brighton Ltd and eliminated. Unrealised losses are also value of net assets of the subsidiary is its subsidiaries. eliminated unless the transaction deducted from equity. Gains or losses on provides evidence of the impairment of disposals to minority interests are also (a) Basis of preparation the asset transferred. Accounting recorded in equity. For disposals to policies of subsidiaries have been This general purpose financial report has minority interests, differences between changed where necessary to ensure been prepared in accordance with any proceeds received and the relevant consistency with the policies adopted Australian equivalents to International share of minority interests are also by the Group. Financial Reporting Standards (AIFRS), recorded in equity. other authoritative pronouncements of Investments in subsidiaries are the Australian Accounting Standards accounted for at cost in the individual (c) Segment reporting Board, Urgent Issues Group financial statements of Adelaide A business segment is a group of assets Interpretations and the Corporations Act Brighton Ltd. Such investments include and operations engaged in providing 2001. The report is prepared on a going both investments in shares issued by products or services that are subject to concern basis. the subsidiary and other parent entity risks and returns that are different to interests that in substance form part of Historical cost convention those of other business segments. A the parent entity’s investment in the These financial statements have been geographical segment is engaged in subsidiary. These include investments in prepared under the historical cost providing products or services within a the form of interest-free loans which convention, except for the particular economic environment and is have no fixed repayment terms and circumstances when fair value method subject to risks and returns that are which have been provided to has been applied as detailed in the different from those of segments subsidiaries as an additional source of accounting policies below. operating in other economic long term capital. Trade amounts environments. Compliance with IFRS receivable from subsidiaries in the Australian Accounting Standards include normal course of business and other (d) Foreign currency translation AIFRS. Compliance with AIFRS ensures amounts advanced on commercial terms that the consolidated financial and conditions are included in (i) Functional and presentation currency statements and notes of the Group receivables. Items included in the financial comply with International Financial statements of each of the Group’s (ii) Joint venture entities Reporting Standards (IFRS). The parent entities are measured using the The interest in joint ventures is entity financial statements and notes currency of the primary economic accounted for in the consolidated also comply with IFRS. environment in which the entity financial statements using the equity operates (‘the functional currency’). method. Under the equity method, the (b) Principles of consolidation The consolidated financial statements share of the post acquisition profits or are presented in Australian dollars, (i) Subsidiaries losses of the joint venture is recognised which is Adelaide Brighton Ltd’s The consolidated financial statements in the income statement, and the share functional and presentation currency. incorporate the assets and liabilities of of movements in post acquisition all entities controlled by Adelaide reserves is recognised in consolidated (ii) Transactions and balances Brighton Ltd (“the Company”) as at 31 reserves in the balance sheet. Profits or Foreign currency transactions are December 2007 and the results of all losses on transactions establishing the translated into the functional currency controlled entities for the year then joint ventures and transactions with the using the exchange rates prevailing at ended. The Company and its controlled joint venture are eliminated to the the dates of the transactions. Foreign entities together are referred to in this extent of the Group’s ownership interest exchange gains and losses resulting financial report as “the Group”. until such time as they are realised by from the settlement of such transactions the joint ventures on consumption or and from the translation at year end Subsidiaries are all those entities over sale, unless they relate to an unrealised exchange rates of monetary assets and which the Group has the power to loss that provides evidence of the liabilities denominated in foreign govern the financial and operating impairment of an asset transferred. currencies are recognised in the income policies, generally accompanying a statement. shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 53 (iii) Group companies (f) Debt defeasance Current and deferred tax balances The results and financial position of all attributable to amounts recognised Net gains or losses on defeasances of the Group entities that have a functional directly in equity are also recognised debt are brought to account in the currency different from the presentation directly in equity. income statement at the date of currency are translated into the entering into the defeasance Tax consolidations presentation currency as follows: arrangement. The net gain or loss is Adelaide Brighton Ltd and its wholly • Assets and liabilities for each balance calculated as the difference between the owned Australian subsidiaries sheet presented are translated at the carrying amount of assets given up and implemented the tax consolidation closing rate at the date of that balance the carrying amount of the debt, and legislation as of 1 January 2004. sheet. after taking into account costs Adelaide Brighton Ltd, as the head associated with the defeasance. • Income and expenses for each income entity in the tax consolidated group, statement are translated at average recognises current tax liabilities and tax (g) Income tax exchange rates (unless this is not a losses (subject to meeting the “probable reasonable approximation of the The income tax expense or revenue for test”) relating to all transactions, events cumulative effect of the rates prevailing the period is the tax payable on the and balances of the tax consolidated on the transaction dates, in which case current period’s taxable income based group as if those transactions, events income and expenses are translated at on the national income tax rate for each and balances were its own. Amounts the dates of the transactions). jurisdiction adjusted by changes in receivable or payable under an deferred tax assets and liabilities accounting tax sharing agreement with • All resulting exchange differences are attributable to temporary differences the tax consolidated entities are recognised as a separate component of between the tax bases of assets and recognised separately as tax-related equity. liabilities and their carrying amounts in amounts receivable or payable. On disposal or partial disposal of a the financial statements, and to unused Expenses and revenues arising under foreign entity, the balance of the foreign tax losses. the tax sharing agreement are currency translation reserve relating to recognised as a component of income Deferred tax assets and liabilities are the entity, or to the part disposed of, is tax expense. recognised for temporary differences at recognised in the income statement as a the tax rates expected to apply when Individual tax consolidated entities part of the gain or loss on disposal. the assets are recovered or liabilities are recognise tax expenses and revenues settled, based on those tax rates which and current and deferred tax balances in (e) Revenue recognition are enacted or substantively enacted for relation to their own taxable income, Revenue is measured at the fair value of each jurisdiction. The relevant tax rates temporary differences and tax losses consideration received or receivable. are applied to the cumulative amounts using the separate taxpayer within the Amounts disclosed as revenue are net of of deductible and taxable temporary group method. Entities calculate their returns, trade allowances and duties and differences to measure the deferred tax current and deferred tax balances on taxes paid. Revenue is recognised for asset or liability. An exception is made the basis that they are subject to tax as the major business activities as follows: for certain temporary differences arising part of the tax consolidated group. All from the initial recognition of an asset current tax liabilities and tax losses are (i) Sales revenue or a liability. No deferred tax asset or transferred to the head entity as tax- Sales revenue comprises revenue liability is recognised in relation to these related amounts receivable or payable. earned from the provision of goods to temporary differences if they arose in a entities outside the Group when Deferred tax balances relating to assets transaction, other than a business significant risks and rewards of that had their tax values reset on combination, that at the time of the ownership of the goods has transferred. joining the tax consolidated group have transaction did not affect either Sales of services are recognised in the been remeasured based on the carrying accounting profit or taxable profit or accounting period in which the services amount of those assets in the tax loss. are rendered. consolidated group and their reset tax Deferred tax assets are recognised for values. The adjustment to these (ii) Deferred income deductible temporary differences and deferred tax balances is recognised in Income received in advance in relation unused tax losses only if it is probable the consolidated financial statements to contract drivers is deferred in the that future taxable amounts will be against income tax expense. balance sheet and recognised as income available to utilise those temporary on a straight-line basis over the period differences and losses. Deferred tax of the contract. liabilities and assets are not recognised (iii) Interest income for temporary differences between the Interest income is recognised using the carrying amount and tax bases of effective interest rate method. investments in controlled entities where the parent entity is able to control the (iv) Dividends timing of the reversal of the temporary Dividends are recognised as revenue differences and it is probable that the when the right to receive payment is differences will not reverse in the established. foreseeable future.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 54 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (h) Leases Identifiable assets acquired and (l) Trade receivables liabilities and contingent liabilities Leases of property, plant and equipment Trade receivables are recognised initially assumed in a business combination are where the Group has substantially all at fair value and subsequently measured measured initially at their fair values at the risks and rewards of ownership are at amortised cost, less provision for the acquisition date, irrespective of the classified as finance leases. Finance doubtful debts. Trade receivables are extent of any minority interest. The leases are capitalised at the lease’s due for settlement no more than 30 to excess of the cost of acquisition over inception at the lower of the fair value 45 days from the end of the month of the fair value of the Group’s share of of the leased property and the present invoice. the identifiable net assets acquired is value of the minimum lease payments. recorded as goodwill (refer to note 1(s)). The collectibility of trade receivables is The corresponding rental obligations, If the cost of acquisition is less than the reviewed regularly. Debts which are net of finance charges, are included in fair value of the net assets of the known to be uncollectible are written borrowings. Each lease payment is subsidiary acquired, the difference is off. A provision for doubtful receivables allocated between the liability and recognised directly in the income is established when there is objective finance charges so as to achieve a statement, but only after a evidence that the Group will not be able constant rate on the finance balance reassessment of the identification and to collect all amounts due according to outstanding. measurement of the net assets the original terms of receivables. The The interest element of the finance cost acquired. amount of the provision is the difference is charged to the income statement over between the asset’s carrying amount Where settlement of any part of cash the lease period so as to produce a and the present value of estimated consideration is deferred, the amounts constant periodic rate of interest on the future cash flows, discounted at the payable in the future are discounted to remaining balance of the liability for effective interest rate. Cash flows their present value as at the date of each period. The property, plant and relating to short term receivables are exchange. The discount rate used is the equipment acquired under finance not discounted if the effect of entity’s incremental borrowing rate, leases are depreciated over the shorter discounting is immaterial. The amount being the rate at which a similar of the asset’s useful life and the lease of the provision is recognised in the borrowing could be obtained from an term. income statement. independent financier under comparable Leases in which a significant portion of terms and conditions. (m) Inventories the risks and rewards of ownership are retained by the lessor are classified as (j) Impairment of assets Raw materials and stores, work in operating leases. Payments made under progress and finished goods are stated Assets that have an indefinite useful life operating leases (net of any incentives at the lower of cost and net realisable are not subject to amortisation and are received from the lessor) are charged to value. Cost comprises direct materials, tested annually for impairment. Assets the income statement on a straight-line direct labour and an appropriate that are subject to amortisation or basis over the period of the lease. proportion of variable and fixed depreciation are reviewed for overhead expenditure, the latter being impairment whenever events or changes (i) Business combinations allocated on the basis of normal in circumstances indicate that the operating capacity. Costs are assigned The purchase method of accounting is carrying amount may not be to individual items of inventory on the used to account for all acquisitions of recoverable. An impairment loss is basis of weighted average costs. assets (including business combinations) recognised for the amount by which the regardless of whether equity asset’s carrying amount exceeds its Net realisable value is the estimated instruments or other assets are recoverable amount. The recoverable selling price in the ordinary course of acquired. Cost is measured as the fair amount is the higher of an asset’s fair business less the estimated costs of value of the assets given, shares issued value less costs to sell and value in use. completion and the estimated costs or liabilities incurred or assumed at the For the purposes of assessing necessary to make the sale. date of exchange plus costs directly impairment, assets are grouped at the attributable to the acquisition. Where lowest levels for which there are (n) Financial assets equity instruments are issued in an separately identifiable cash flows (cash The Group classifies its financial assets acquisition, the value of the instruments generating units). in the following categories: loans and is their published market price as at the receivables, and financial assets at fair date of exchange unless, in rare (k) Cash and cash equivalents value through profit or loss. The circumstances, it can be demonstrated Cash and cash equivalents includes classification depends on the purpose that the published price at the date of cash on hand, deposits held at call with for which the financial assets were exchange is an unreliable indicator of financial institutions, other short-term, acquired. Management determines the fair value and that other evidence and highly liquid investments with original classification of its financial assets at valuation methods provide a more maturities of three months or less that initial recognition and re-evaluates this reliable measure of fair value. are readily convertible to known amounts designation at each reporting date. Transaction costs arising on the issue of of cash and which are subject to an equity instruments are recognised insignificant risk of changes in value, net directly in equity. of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 55 (i) Loans and receivables Non-current assets (including those that (iv) Other fixed assets Loans and receivables are non- are part of a disposal group) are not Freehold land is not depreciated. derivative financial assets with fixed or depreciated or amortised while they are Depreciation on other assets, including determinable payments that are not classified as held for sale. Interest and buildings and leasehold property, is quoted in an active market. They arise other expenses attributable to the calculated using the straight line method when the Group provides money, goods liabilities of a disposal group classified to allocate their cost or deemed cost or services directly to a debtor with no as held for sale continue to be amounts, over their estimated useful intention of selling the receivable. They recognised. lives, as follows: are included in current assets, except - Buildings 20 - 40 years Non-current assets classified as held for for those with maturities greater than - Plant and equipment 3 - 30 years sale and the assets of a disposal group 12 months after the balance sheet date, - Leased plant and equipment 6 - 10 years classified as held for sale are presented which are classified as non-current assets. separately from the other assets in the The assets’ residual values and useful Loans and receivables are included in balance sheet. The liabilities of a lives are reviewed, and adjusted if receivables in the balance sheet. disposal group classified as held for sale appropriate, at each balance sheet date. (ii) Financial assets at fair value through are presented separately from other An asset’s carrying amount is written profit or loss liabilities in the balance sheet. down immediately to its recoverable Financial assets at fair value through amount if the asset’s carrying amount is profit or loss are financial assets held (q) Property, plant and equipment greater than its estimated recoverable for trading. A financial asset is classified amount (note 1(j)). Gains and losses on Property, plant and equipment is carried in this category if acquired principally disposals are determined by comparing at historical cost less accumulated for the purpose of selling in the short proceeds with carrying amount and depreciation and any recognised term. Derivatives are classified as held included in the income statement. impairment losses. Historical cost for trading unless they are designated includes expenditure that is directly as hedges. Assets in this category are (r) Overhaul of complex assets attributable to the acquisition of the classified as current assets. items. Significant items of plant that are overhauled during annual shutdowns are (o) Derivatives Subsequent costs are included in the treated as complex assets and different asset’s carrying amount or recognised Derivatives are initially recognised at depreciation rates applied to each major as a separate asset, as appropriate, only fair value on the date a derivative component as appropriate. When these when it is probable that future economic contract is entered into and are components are replaced during a benefits associated with the item will subsequently remeasured to their fair shutdown, and the replacement is flow to the Group and the cost of the value. Derivative instruments entered considered to increase the service item can be measured reliably (note into by the Group do not qualify for potential of the asset as a whole, the 1(r)). hedge accounting. Changes in the fair associated costs are capitalised and value of any derivative instrument that (i) Mineral reserves depreciated over their estimated useful does not qualify for hedge accounting Mineral reserves are amortised based on life, in accordance with note 1(q). All are recognised in the income statement. annual extraction rates over the other repairs and maintenance are estimated life of the reserves, between charged to the income statement during (p) Non-current assets (or disposal 40 - 50 years, with the maximum period the financial period in which they are groups) held for sale of amortisation capped at 50 years. incurred. Non-current assets (or disposal groups) (ii) Complex assets (s) Intangible assets are classified as held for sale and stated The costs of replacing major at the lower of their carrying amount components of complex assets, (i) Goodwill and fair value less costs to sell if their capitalised in accordance with note 1(r), Goodwill represents the excess of the carrying amount will be recovered are depreciated over the estimated cost of an acquisition over the fair value principally through a sale transaction useful life, generally being the period of the Group’s share of the net rather than through continuing use. until next scheduled replacement. identifiable assets of the acquired subsidiary/joint venture at the date of An impairment loss is recognised for any (iii) Leasehold property acquisition. Goodwill on acquisitions of initial or subsequent write down of the The cost of improvements to or on subsidiaries is included in intangible asset (or disposal group) to fair value leasehold properties is amortised over assets. Goodwill on acquisitions of joint less costs to sell. A gain is recognised the unexpired period of the lease or the ventures is included in investments in for any subsequent increases in fair estimated useful life, whichever is the joint ventures. value less costs to sell of an asset (or shorter. Amortisation is over 5 - 30 disposal group), but not in excess of any years. cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 56 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Goodwill acquired in business (v) Trade and other payables (iv) Provisions for close down and combinations is not amortised. Instead, restoration costs These amounts represent liabilities for goodwill is tested for impairment Close down and restoration costs include goods and services provided to the annually or more frequently if events or the dismantling and demolition of Group prior to the end of financial year, changes in circumstances indicate that it infrastructure and the removal of which are unpaid. The amounts are might be impaired, and is carried at cost residual materials and remediation of unsecured and are usually paid within less accumulated impairment losses. disturbed areas. Provisions for close 30-60 days of recognition. Gains and losses on the disposal of an down and restoration costs do not entity include the carrying amount of include any additional obligations, which (w) Provisions goodwill relating to the entity sold. are expected to arise from future Goodwill is allocated to cash-generating Provisions are recognised when the disturbance. The costs are estimated on units for the purpose of impairment Group has a present legal or the basis of a closure plan. The cost testing. Each of those cash-generating constructive obligation as a result of estimates are reviewed annually during units are consistent with the Group’s past events; it is more likely than not the life of the operation, based on the primary reporting segment. that an outflow of resources will be net present value of estimated future required to settle the obligation; and the costs. (ii) Lease rights amount has been reliably estimated. Lease rights acquired have a finite Estimate changes resulting from new Provisions are not recognised for future useful life. Amortisation is calculated disturbance, updated cost estimates, operating losses. using the straight-line method to changes to the lives of operations and allocate the cost over their estimated Where there are a number of similar revisions to discount rates are useful lives, which varies from 2 to 5 years. obligations, the likelihood that an capitalised within property, plant and outflow will be required in settlement is equipment. These costs are then (t) Borrowings determined by considering the class of depreciated over the lives of the assets obligations as a whole. A provision is to which they relate. Borrowings are initially recognised at recognised even if the likelihood of an fair value, net of transaction costs The amortisation or ‘unwinding’ of the outflow with respect to any one item incurred. Borrowings are subsequently discount applied in establishing the net included in the same class of obligations measured at amortised cost. Any present value of provisions is charged may be small. difference between the proceeds (net of to the income statement in each transaction costs) and the redemption (i) Dividends accounting period. The amortisation of amount is recognised in the income Provision is made for the amount of any the discount is shown as a financing statement over the period of the dividend declared on or before the end cost. borrowings using the effective interest of the period but not distributed at (v) Contingent liabilities method. Borrowings are classified as balance date. Contingent liabilities are not recognised current liabilities unless the Group has (ii) Workers’ compensation in the financial statements. A contingent an unconditional right to defer Certain entities within the Group are liability is, however, disclosed in the settlement of the liability for at least self insured for workers compensation financial statements unless the 12 months after the balance sheet date. purposes. For self-insured entities, possibility of an outflow of resources provision is made that covers accidents embodying economic benefits is remote. (u) Borrowing costs that have occurred and have been Contingent liabilities are assessed Borrowing costs incurred for the reported together with an allowance for continually to determine whether an construction of any qualifying asset are incurred but not reported claims. The outflow of resources embodying capitalised during the period of time provision is based on an actuarial economic benefits has become probable. that is required to complete and prepare assessment. If it becomes probable that an outflow the asset for its intended use or sale. (iii) Restructuring costs of future economic benefits will be Other borrowing costs are expensed. Liabilities arising directly from required for an item previously dealt The capitalisation rate used to undertaking a restructuring program, with as a contingent liability, a provision determine the amount of borrowing not in connection with the acquisition of is recognised in the financial statements costs to be capitalised is the weighted an entity, are recognised when a in the period in which the change in average interest rate applicable to the detailed plan has been developed, probability occurs. entity’s outstanding borrowings during implementation has commenced, by the year, in this case 6.52% (2006 - entering into binding sales agreement 6.48%). and making detailed public announcements such that the affected parties are in no doubt that the restructuring program will proceed. The cost of restructurings provided for is the estimated future cash flows from implementation of the plan.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 57 (vi) Contingent assets (iii) Retirement benefit obligations Future taxes that are funded by the Contingent assets are not recognised in All employees of the Group are entitled entity and are part of the provision of the financial statements. A contingent to benefits on retirement, disability or the existing benefit obligation (e.g. asset is disclosed in the financial death from the Group’s superannuation taxes on investment income and statements when an inflow of economic plan. The Group has a defined benefit employer contributions) are taken into benefits is probable. section and an accumulation section account in measuring the relevant within its plan. The defined benefit components of the employer’s defined Contingent assets are assessed section provides defined lump sum benefit liability or asset. continually to determine whether an benefits on retirement, death, disablement inflow of economic benefits has become Contributions to the accumulation fund and withdrawal, based on years of virtually certain. If it becomes virtually are recognised as an expense as they service and final average salary. certain that an inflow of economic become payable. Prepaid contributions benefits will arise the asset and related The defined benefit plan section is closed are recognised as an asset to the extent income are recognised in the financial to new members. The accumulation that a cash refund or a reduction in the statements in the period in which the section receives fixed contributions from future payments is available. change in probability occurs. Group companies and the Group’s legal (iv) Share-based payments or constructive obligation is limited to Share-based compensation benefits are (x) Employee benefits these contributions. provided to executives via the Adelaide (i) Wages and salaries, annual leave and A liability or asset in respect of defined Brighton Ltd Executive Performance sick leave benefit superannuation plans is Share Plan. Liabilities for wages and salaries, recognised in the balance sheet, and is The fair value of options granted under including non-monetary benefits, annual measured as the present value of the the Plan is recognised as an employee leave, sick leave and other current defined benefit obligation at the benefit expense with a corresponding employee entitlements are accrued in reporting date less the fair value of the increase in equity. The fair value is respect of employees’ services up to the superannuation fund’s assets at that date measured at grant date and recognised reporting date and are measured at the and any unrecognised past service cost. over the period during which the amounts expected to be paid when the The present value of the defined benefit employees become unconditionally liabilities are settled. obligation is based on expected future entitled to the options. (ii) Long service leave payments, which arise from membership The fair value at grant date is The liability for long service leave is of the fund to the reporting date, independently determined using a Black- recognised in the provision for employee calculated annually by independent Scholes option pricing model that takes benefits and measured as the present actuaries using the projected unit credit into account the exercise price, the term value of expected future payments to be method. Consideration is given to of the option, the vesting and made in respect of services provided by expected future wage and salary levels, performance criteria, the impact of employees up to the reporting date experience of employee departures and dilution, the non-tradeable nature of the using the projected unit credit method. periods of service. option, the share price at grant date and Consideration is given to expected Expected future payments are expected price volatility of the future wage and salary levels, discounted using market yields at the underlying share, the expected dividend experience of employee departures and reporting date on national government yield and the risk-free interest rate for periods of service. bonds with terms to maturity and the term of the option. Expected future payments are currency that match, as closely as The fair value of the options granted discounted using market yields at the possible, the estimated future cash excludes the impact of any non-market reporting date on national government outflows. vesting conditions (e.g. earnings per bonds with terms to maturity and Actuarial gains and losses arising from share). Non-market vesting conditions currency that match, as closely as experience adjustments and changes in are included in assumptions about the possible, the estimated future cash actuarial assumptions are charged or number of options that are expected to outflows. credited directly to retained earnings. become exercisable. At each balance sheet date, the entity revises its Past service costs are recognised estimate of the number of options that immediately in income, unless the are expected to become exercisable. changes to the superannuation fund are The employee benefit expense conditional on the employees remaining recognised each period takes into in service for a specified period of time account the most recent estimate. (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 58 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (v) Profit-sharing and bonus plans (aa) Rounding of amounts •AASB 7 Financial Instruments: The Group recognises a liability and an Disclosures. The Company is of a kind referred to in expense for short-term incentives Class order 98/0100, issued by the •Revised AASB 101 Presentation of available to certain employees on a Australian Securities and Investments Financial Statements (revised October formula that takes into consideration Commission, relating to the ‘‘rounding 2006). agreed performance targets. The Group off’’ of amounts in the financial report. recognises a provision where The adoption of both of these standards Amounts in the financial report have contractually obliged or where there has only affected the disclosure in these been rounded off in accordance with is a past practice that has created a financial statements. There has been no that Class Order to the nearest hundred constructive obligation. affect on profit and loss or the financial thousand dollars, unless otherwise stated. position of the entity. (vi) Termination benefits Termination benefits are payable when (ab) Goods and Services Tax (GST) Certain new accounting standards and employment is terminated before the UIG interpretations have been published Revenues, expenses and assets are normal retirement date, or when an but are not mandatory for 31 December recognised net of the amount of employee accepts voluntary redundancy 2007 reporting periods and have not yet associated GST, unless the GST incurred in exchange for these benefits. The been adopted by the Group: is not recoverable from the taxation Group recognises termination benefits authority. In this case it is recognised •AASB 8 Operating Segments and AASB when it is demonstrably committed to as part of the cost of acquisition of the 2007-3 Amendments to Australian either terminating the employment of asset or as part of the expense. Accounting Standards arising from AASB current employees according to a 8. AASB 8 and AASB 2007-3 are detailed formal plan without possibility Receivables and payables are stated effective for annual reporting periods of withdrawal or providing termination inclusive of the amount of GST commencing on or after 1 January benefits as a result of an offer made to receivable or payable. The net amount 2009. AASB 8 will result in a significant encourage voluntary redundancy. of GST recoverable from, or payable to, change in the approach to segment Benefits falling due more than 12 the taxation authority is included with reporting, as it requires adoption of a months after balance sheet date are other receivables or payables in the ‘management approach’ to reporting on discounted to present value. balance sheet. financial performance. The information Cash flows are presented on a gross being reported will be based on what (y) Contributed equity basis. The GST components of cash the key decision makers use internally Ordinary shares are classified as equity. flows arising from investing or financing for evaluating segment performance and Incremental costs directly attributable to activities which are recoverable from, or deciding how to allocate resources to the issue of new shares or options are payable to the taxation authority, are operating segments. The Group will shown in equity as a deduction, net of presented as operating cash flow. apply the standard from 1 January tax, from the proceeds. Incremental 2009. Application of AASB 8 may result costs directly attributable to the issue of (ac) Financial guarantee contracts in different segments, segment results new shares or options, for the purpose and different types of information being Financial guarantee contracts are of acquisition of a business, are not reported in the segment note of the recognised as a financial liability at the included in the cost of the acquisition as financial report. However, at this stage, time the guarantee is issued. The liability part of the purchase consideration. it is not expected to affect any of the is initially measured at fair value and amounts recognised in the financial subsequently at the higher of the amount (z) Earnings per share statements. determined in accordance with AASB 137 (i) Basic earnings per share Provisions, Contingent Liabilities and •Revised AASB 123 Borrowing Costs and Basic earnings per share is calculated by Contingent Assets and the amount AASB 2007-6 Amendments to Australian dividing the profit attributable to equity initially recognised less cumulative Accounting Standards arising from AASB holders of the Company, excluding any amortisation, where appropriate. 123 [AASB 1, AASB 101, AASB 107, costs of servicing equity other than AASB 111, AASB 116 & AASB 138 and ordinary shares, by the weighted (ad) New accounting standards and UIG Interpretations 1 & 12]. The revised average number of ordinary shares interpretations AASB 123 is applicable to annual outstanding during the year. reporting periods commencing on or In the current year, the Group has after 1 January 2009. It has removed (ii) Diluted earnings per share adopted all of the new and revised the option to expense all borrowing Diluted earnings per share adjusts the accounting standards and costs and - when adopted - will require figures used in the determination of Interpretations issued by the Australian the capitalisation of all borrowing costs basic earnings per share to take into Accounting Standards Board (AASB) that directly attributable to the acquisition, account the after income tax effect of are relevant to its operations and construction or production of a interest and other financing costs effective for the current annual qualifying asset. There will be no impact associated with dilutive potential ordinary reporting period. on the financial report of the Group, as shares and the weighted average The Group has adopted the following the Group already capitalises borrowing number of shares assumed to have been revised accounting standards which costs relating to qualifying assets. issued for no consideration in relation to became applicable on 1 January 2007: dilutive potential ordinary shares.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 59 •AASB-I 14 The Limit on a Defined • UIG 8 Scope of AASB 2, UIG 9 Benefit Asset, Minimum Funding Reassessment of Embedded Derivatives, Requirements and their Interaction. AASB 2005-10 Amendments to AASB-I 14 will be effective for annual Australian Accounting Standards [AASB reporting periods commencing on or 132, AASB 101, AASB 114, AASB 117, after 1 January 2008. It provides AASB 133, AASB 139, AASB 1, AASB 4, guidance on the maximum amount that AASB 1023 & AASB 1038]: may be recognised as an asset in consequential amendments as a result relation to a defined benefit plan and of the release of AASB 7. The Group is the impact of minimum funding currently assessing the impact of requirements on such an asset. The adopting these standards. Group will apply AASB-I 14 from 1 January 2008 and is currently assessing 2 Critical accounting estimates and the impact of adopting this standard. assumptions •Revised AASB 101 Presentation of The Group makes estimates and Financial Statements and AASB 2007-8 assumptions concerning the future. Amendments to Australian Accounting The resulting accounting estimates will, Standards arising from AASB 101. A by definition, seldom equal the related revised AASB 101 was issued in actual results. The estimates and September 2007 and is applicable for assumptions that are significant to the annual reporting periods beginning on or carrying amounts of assets and liabilities after 1 January 2009. It requires the in the next financial year are discussed presentation of a statement of below. comprehensive income and makes changes to the statement of changes in (a) Provisions for close down and equity, but will not affect any of the restoration costs amounts recognised in the financial Restoration provisions are based on statements. If an entity has made a estimates of the cost to rehabilitate prior period adjustment or has currently disturbed areas based on reclassified items in the financial current costs and legislative statements, it will need to disclose a requirements. The Group progressively third balance sheet (statement of rehabilitates as part of the mining financial position), this one being as at process. Cost estimates are continually the beginning of the comparative period. evaluated and are based on historical The Group intends to apply the revised experience and other factors, including standard from 1 January 2009. expectations of future events that are •AASB 2008-1 Amendments to Australian believed to be reasonable under the Accounting Standard - Share-based circumstances. The detailed accounting Payments: Vesting Conditions and treatment is set out in note 1(w)(iv). Cancellations. AASB 2008-1 was issued in February 2008 and will become (b) Impairment of assets applicable for annual reporting periods The Group tests annually whether beginning on or after 1 January 2009. goodwill and other non-current assets The revised standard clarifies that have suffered any impairment, in vesting conditions are service conditions accordance with the accounting policies and performance conditions only and stated in notes 1(j) and 1(s). The that other features of a share-based recoverable amounts of cash generating payment are not vesting conditions. units have been determined based on It also specifies that all cancellations, value-in-use calculations. These whether by the entity or by other parties, calculations require the use of should receive the same accounting assumptions. For detailed assumptions treatment. The Group will apply the refer to note 15. revised standard from 1 January 2009 and is currently assessing the impact of adopting this standard.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 60 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated The Company
($ Million) 2007 2006 2007 2006
3 Revenue and other income
Revenue Sale of goods 884.5 791.2 - - Interest from controlled entities - - 21.7 25.4 Interest from joint ventures 1.7 1.4 - - Interest from other parties 1.4 1.3 0.2 0.1 Dividends from controlled entities - - 110.0 135.0 Royalties 0.8 0.8 0.4 0.4
888.4 794.7 132.3 160.9
Other income Net gain on disposal of property, plant and equipment 0.7 0.9 - - Other income 6.1 3.9 - -
6.8 4.8 - -
Revenue and other income (excluding shares of equity accounted net profits of joint ventures) 895.2 799.5 132.3 160.9
4 Expenses
Profit before income tax includes the following specific expenses: Depreciation Buildings 2.0 1.9 - - Plant and equipment 48.3 48.4 - - Mineral reserves 2.1 1.5 - -
Total depreciation 52.4 51.8 - -
Amortisation Other intangibles 0.2 0.4 - -
Total amortisation 0.2 0.4 - -
Remediation provision expense 4.2 - - -
Other charges against assets Write down of inventories 0.3 0.3 - - Bad and doubtful debts - trade debtors 0.6 0.5 - - Write down of loans to controlled entities - - 11.71 10.81
Total other charges against assets 0.9 0.8 11.7 10.8
Finance costs Interest and finance charges paid / payable 22.2 17.3 21.9 14.7 Unwinding of the discount on restoration provisions and retirement benefit obligation 3.5 3.0 - - Exchange gains on foreign currency contracts (0.8) - - - Interest capitalised in respect of qualifying assets (0.1) (2.4) - -
Total finance costs 24.8 17.9 21.9 14.7
Rental expense relating to operating leases Minimum lease payments 3.2 3.1 - -
1 The Company has made provision against debts of $11,717,000 (2006: $10,849,000) due by wholly owned entities.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 61 Consolidated The Company
($ Million) 2007 2006 2007 2006
5 Income tax
(a) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense 149.6 133.6 97.3 134.2
Tax at the Australian tax rate of 30% (2006: 30%) 44.9 40.1 29.1 40.1 Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non allowable expenses 0.2 0.2 - - Rebateable dividends (5.7) (4.4) (33.0) (40.5) Bad and doubtful debts - - 3.6 3.3 Research and development allowance (1.2) (0.6) (1.0) - Sundry items (0.2) 0.7 - -
38.0 36.0 (1.3) 2.9
Prior year tax losses not recognised now recouped - (4.1) - (4.1) Under (over) provided in prior years (2.3) 1.2 (1.5) -
Income tax expense (benefit) 35.7 33.1 (2.8) (1.2) Adjustments to deferred tax balances on implementation of tax consolidation - (2.1) - -
Aggregate income tax expense (benefit) 35.7 31.0 (2.8) (1.2)
Aggregate income tax expense (benefit) comprises: Current taxation provision 41.1 35.3 (1.3) 2.2 Deferred tax liabilities (note 21) (3.1) (3.4) - - Deferred tax assets (note 14) - - - (3.3) (Over) under provided in prior year (2.3) (0.9) (1.5) (0.1)
35.7 31.0 (2.8) (1.2)
(b) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit and loss but directly debited (credited) to equity Net deferred tax 0.2 (0.2) - -
(c) Tax losses Unused tax losses for which no deferred tax asset has been recognised: Capital losses 22.4 22.4 22.4 22.4
This benefit for tax losses will only be obtained if:
(i) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised,
(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation, and
(iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
(d) Tax consolidations Adelaide Brighton Ltd and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 January 2004. The accounting policy in relation to this legislation is set out in note 1(g). The entities have entered a tax sharing and funding agreement. Under the terms of this agreement the wholly-owned subsidiaries reimburse Adelaide Brighton Ltd for any current income tax payable arising in respect of their activities and have fully compensated Adelaide Brighton Ltd for deferred tax balances assumed.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 62 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated The Company
($ Million) 2007 2006 2007 2006
6 Current assets - cash and cash equivalents
Cash at bank and in hand 16.5 21.5 4.8 0.5 Deposits at call 2.8 2.7 - -
Cash and cash equivalents in the statement of cash flows 19.3 24.2 4.8 0.5
7 Current assets - receivables
Trade receivables 109.2 103.6 0.1 0.1 Less: Provision for doubtful receivables (2.1) (2.1) - -
107.1 101.5 0.1 0.1 Amounts due by joint ventures 16.2 10.7 - - Loans to controlled entities - - 527.5 451.3 Tax amounts receivable from wholly-owned entities - - 72.9 31.7 Prepayments 3.8 3.7 - - Other receivables 1.7 3.8 0.8 0.8
128.8 119.7 601.3 483.9
(a) Included in the Group’s trade receivables balance are debtors with a carrying value of $4.5 million (2006:$3.3 million) which are past due but not impaired. The Group has not provided for these amounts as there has not been a significant change in credit quality or for debtors which there is no recent history of default. The Group believes these amounts are still recoverable. The ageing analysis is as follows: 60 days $4.5 million (2006:$3.3 million).
(b) Effective interest rates and credit and foreign exchange risk Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in note 28. All receivables are denominated in Australian dollars.
(c) Movement in provision for doubtful receivables Opening balance at 1 January 2.1 2.0 - - Amounts written off during the year (0.4) (0.4) - - Increase recognised in income statement 0.4 0.5 - -
Closing balance at 31 December 2.1 2.1 - -
8 Current assets - inventories
Engineering spare parts stores - at cost 25.9 24.8 - - Raw materials and work in progress - at cost 27.5 29.2 - - Finished goods - at cost 30.9 26.8 - -
84.3 80.8 - -
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 63 Consolidated The Company
($ Million) 2007 2006 2007 2006
9 Current assets - derivative financial instruments
Financial assets carried at fair value through profit or loss: Forward foreign exchange contracts 0.7 - - -
Outstanding contracts: Average Foreign Contract exchange currency value Fair Value Consolidated rate million $ million $ million
Buy Japanese Yen Less than three months 97.614 940.0 9.1 0.5 Buy US Dollars Less than three months 0.879 7.3 8.1 0.1 Three to six months 0.875 4.1 4.5 0.1
0.7
Consolidated The Company
($ Million) 2007 2006 2007 2006
10 Non-current assets - receivables
Loans to controlled entities (c) - - 82.9 159.7 Loans to joint ventures 26.6 25.0 - - Other debtors 2.9 2.5 2.2 2.5
29.5 27.5 85.1 162.2
(a) Fair values Details of the fair value of non-current assets are set out in note 28.
(b) Effective interest rates and credit risk Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in note 28.
(c) Loans to controlled entities have decreased in the current period due to a $75.4 million reclassification as a result of the terms of a subsidiary loan changing in the current year to being non interest bearing.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 64 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 11 Non-current assets - investments accounted for using the equity method
Interests in joint ventures are accounted for in the Group’s financial statements using the equity method and are carried at cost by the respective parent entity.
(a) Carrying amounts Ownership interest Consolidated The Company
2007 2006 2007 2006 2007 2006 Name of company Principal activity % % $ Million $ Million $ Million $ Million
Sunstate Cement Ltd Cement manufacture 50 50 18.2 15.8 - - Independent Cement Cement and Lime Pty Ltd distribution 50 50 28.3 25.0 - - Alternative Fuel Processing Company Pty Ltd waste materials 50 50 - - - - E.B. Mawson & Sons Pty Ltd and Lake Boga Concrete and Quarries Pty Ltd quarry 50 - 20.4 - - -
Interest in joint venture entities 66.9 40.8 - -
On 10 December 2007, Adelaide Brighton Management Ltd acquired 100% of the ownership interest in K.C. Mawson Pty Ltd. K.C. Mawson Pty Ltd has 50% investments in E.B. Mawson & Sons Pty Ltd and Lake Boga Quarries Pty Ltd. Each of above joint ventures is incorporated in Australia. All the joint ventures, except Alternative Fuel Company Pty Ltd, have a balance sheet date of 30 June, which is different to our balance sheet date of 31 December. Financial reports prepared as at 31 December are used for equity accounting purposes. Our ownership interest in jointly controlled entities with different balance sheet dates is the same as that balance date as 31 December unless otherwise noted.
($ Million) 2007 2006
(b) Movements in carrying amounts Carrying amount at 1 January 40.8 38.1 Share of net profits 26.4 21.5 Dividends received (20.7) (18.8) Acquisition of joint ventures 20.4 -
Carrying amount at 31 December 66.9 40.8
(c) Share of joint ventures’ profits Revenues 209.0 185.2 Expenses (174.5) (157.6)
Profit before income tax 34.5 27.6 Income tax expense (8.1) (6.1)
Profit after income tax 26.4 21.5
Share of net profit - equity accounted 26.4 21.5 Retained profits at 1 January 6.7 4.0 Dividends and distributions (20.7) (18.8)
Share of retained profits at 31 December 12.4 6.7
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 65 ($ Million) 2007 2006
11 Non-current assets - investments accounted for using the equity method (continued)
(d) Summarised financial information of joint ventures Current assets 98.6 76.0 Non-current assets 71.6 59.5
Total assets 170.2 135.5
Current liabilities (51.0) (31.1) Non-current liabilities (40.9) (37.4)
Total liabilities (91.9) (68.5)
Group’s 50% share of joint ventures net assets 39.2 33.5 Adjustments arising from equity accounting: Goodwill 7.4 7.4 Unrealised profit in inventory (0.1) (0.1)
Net assets - equity adjusted 46.5 40.8 Carrying value of recently acquired joint venture 20.41 -
Carrying value at 31 December 66.9 40.8
1 Summarised financial information of recently acquired E.B. Mawson & Sons Pty Ltd and Lake Boga Quarries Pty Ltd has not been disclosed as acquisition accounting was not finalised at the date of this report.
(e) Share of joint ventures’ expenditure commitments Lease commitments 8.3 - Capital commitments 16.8 3.2
25.1 3.2
Consolidated The Company
($ Million) 2007 2006 2007 2006
12 Non-current assets - other financial assets
Other (non-traded) investments Shares in controlled entities - at cost - - 367.2 349.7 Loans to controlled entities1 - - 75.4 -
- - 442.6 349.7
Controlled entities are listed in note 35.
1 Loans to controlled entities represent non interest bearing loans in accordance with Group policy outlined in note 1(b).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 66 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 13 Non-current assets - property, plant and equipment
Consolidated at 31 December 2007 Asset In course Freehold Leasehold Plant & Leased Mineral retirement of con- ($ Million) land Buildings property equipment assets reserves cost struction Total
At cost 89.2 73.8 6.5 973.7 0.7 113.8 4.9 61.3 1,323.9 Accumulated depreciation - (31.8) (2.2) (534.3) (0.7) (10.8) (1.6) - (581.4)
Net book amount 89.2 42.0 4.3 439.4 - 103.0 3.3 61.3 742.5
Reconciliations Carrying amount at 1 January 2007 86.3 38.6 4.0 420.7 0.1 89.5 2.2 52.8 694.2 Additions 1.9 4.1 - 39.8 - - 0.8 35.5 82.1 Disposals (0.2) (0.2) - (0.8) ----(1.2) Reclassification (0.2) 0.4 0.6 21.9 - 4.3 - (27.0) - Acquired in business combinations 1.4 1.1 - 5.7 - 11.1 0.5 - 19.8 Depreciation/amortisation expense (note 4) - (2.0) (0.3) (47.9) (0.1) (1.9) (0.2) - (52.4)
Carrying amount at 31 December 2007 89.2 42.0 4.3 439.4 - 103.0 3.3 61.3 742.5
Consolidated at 31 December 2006 Asset In course Freehold Leasehold Plant & Leased Mineral retirement of con- ($ Million) land Buildings property equipment assets reserves cost struction Total
At cost 86.3 68.6 5.8 916.4 0.7 98.4 3.6 52.8 1,232.6 Accumulated depreciation - (30.0) (1.8) (495.7) (0.6) (8.9) (1.4) - (538.4)
Net book amount 86.3 38.6 4.0 420.7 0.1 89.5 2.2 52.8 694.2
Reconciliations Carrying amount at 1 January 2006 86.6 40.6 1.3 383.7 0.3 87.2 1.8 64.1 665.6 Additions - 0.2 0.2 47.9 - 3.8 0.5 29.4 82.0 Disposals (0.6) (0.6) - (0.4) ----(1.6) Reclassification 0.3 0.3 2.8 37.3 - - - (40.7) - Depreciation/amortisation expense (note 4) - (1.9) (0.3) (47.8) (0.2) (1.5) (0.1) - (51.8)
Carrying amount at 31 December 2006 86.3 38.6 4.0 420.7 0.1 89.5 2.2 52.8 694.2
The Company
($ Million) 2007 2006
Mineral reserves Carrying amount at 1 January 4.8 4.8 Disposals (0.2) -
Carrying amount at 31 December 4.6 4.8
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 67 Consolidated The Company
($ Million) 2007 2006 2007 2006
14 Non-current assets - deferred tax assets
The balance comprises temporary differences attributable to: Property, plant and equipment 0.1 0.2 - - Share option reserve 1.8 1.1 - - Provisions 20.5 18.2 - - Tax losses 3.3 3.3 3.3 3.3
Deferred tax assets 25.7 22.8 3.3 3.3
Movements: Opening balance at 1 January 22.8 19.0 3.3 - Credited to the income statement 2.7 3.2 - 3.3 Credited to equity - 0.2 - - Over provision in prior year 0.2 0.4 - - Offset to deferred tax liability (note 21) (25.7) (22.8) - -
Closing balance at 31 December - - 3.3 3.3
Consolidated
($ Million) Goodwill Lease right Total
15 Non-current assets - intangible assets
Cost 164.4 1.8 166.2 Less: Accumulated amortisation - (1.8) (1.8)
Carrying amount at 31 December 2007 164.4 - 164.4
Opening balance at 1 January 2007 164.4 0.2 164.6 Amortisation charge - (0.2) (0.2)
Closing balance at 31 December 2007 164.4 - 164.4
Cost 164.4 1.8 166.2 Less: Accumulated amortisation - (1.6) (1.6)
Carrying amount at 31 December 2006 164.4 0.2 164.6
Opening balance at 1 January 2006 164.4 0.6 165.0 Amortisation charge - (0.4) (0.4)
Closing balance at 31 December 2006 164.4 0.2 164.6
Amortisation of $0.2 million (2006:$0.4 million) is included in “Administration costs’’ in the income statement.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 68 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 15 Non-current assets - intangible assets (continued)
(a) Impairment tests for goodwill Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segments. A segment level summary of the goodwill allocation is presented below. Consolidated
($ Million) 2007 2006
Construction and mining materials 163.4 163.4 Building products 1.0 1.0
164.4 164.4
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on 2007 actual results and 2008 financial budgets approved by management. Cash flows beyond the financial year 2008 are extrapolated using the estimated growth rates. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
(b) Key assumptions used for value-in-use calculations Gross margin1 Growth rate2 Discount rate3 2007 2006 2007 2006 2007 2006 % % % % % %
Construction and mining materials 48.6 36.5 2.5 2.5 10.3 10.0 Building products 56.1 59.5 2.5 2.5 10.3 10.0
1 Budgeted gross margin (excluding fixed production costs) 2 Weighted average growth rate used to extrapolate cash flows beyond the budget period 3 Pre-tax discount rate applied to cash flow projections
The assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on the past performance and its expectations for the future. The weighted average growth rates used are consistent with forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to relevant segments.
Consolidated The Company
($ Million) 2007 2006 2007 2006
16 Current liabilities - payables
Trade payables 81.2 79.7 - - Loans from joint ventures 3.6 5.6 - - Loans from controlled entities - - 235.7 178.3 Other payables and accruals - 0.1 0.5 0.4
84.8 85.4 236.2 178.7
All payables are denominated in Australian dollars.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 69 Consolidated The Company
($ Million) 2007 2006 2007 2006
17 Current liabilities - borrowings
Secured Lease liabilities (note 30) 0.7 0.4 - - Unsecured Bank loans (note 20(a)) 60.0 40.0 60.0 40.0
60.7 40.4 60.0 40.0
(a) Interest rate risk exposures Details of the Group’s exposure to interest rate changes on borrowings are set out in note 28.
(b) Fair value disclosures Details of the fair value of borrowings for the Group are set out in note 28.
18 Current liabilities - provisions
Employee benefits 16.8 16.8 - - Workers’ compensation (note 1(w)(ii)) 1.3 0.9 - - Restoration provisions (note 1(w)(iv)) 4.7 2.5 - - Other provisions 4.0 5.3 - -
26.8 25.5 - -
Movement in each class of provision during the financial year, other than employee benefits, is set out below.
Workers’ ($ Million) compensation Restoration Other
Opening balance at 1 January 0.9 2.5 5.3 Additional provision recognised 0.5 3.5 0.9 Provisions reclassified - (1.1) (2.0) Payments (0.1) (0.2) (0.2)
Closing balance at 31 December 1.3 4.7 4.0
Consolidated The Company
($ Million) 2007 2006 2007 2006
19 Current liabilities - other
Deferred income - 0.1 - - Limited recourse loan 12.3 12.3 - - Other 1.2 0.8 - -
13.5 13.2 - -
A limited recourse loan of $12.3 million was owing to Rugby Holdings Ltd at 31 December 2007 (2006: $12.3 million) by Cockburn Cement Ltd, a subsidiary of Adelaide Brighton Ltd. This is in respect of real property belonging to Rugby Holdings Ltd on loan to Cockburn Cement Ltd. The loan is non-interest bearing. Rugby Holdings Ltd was the direct parent Company of Adelaide Brighton Ltd in the period from July 1999 to December 2003.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 70 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated The Company
($ Million) 2007 2006 2007 2006
20 Non-current liabilities - borrowings
Secured Lease liabilities (note 30) 1.9 0.7 - - Unsecured Bank loans (a) 280.0 210.0 280.0 210.0
281.9 210.7 280.0 210.0
Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. The carrying amount of plant & equipment under finance lease is nil (2006 - $0.1 million).
Consolidated The Company
($ Million) 2007 2006 2007 2006
(a) Financing arrangements Unrestricted access was available at balance date to the following lines of credit:
(i) Credit standby arrangements Total facilities Bank overdrafts (ii) 4.0 4.0 4.0 4.0 Bank facilities - external parties (ii) 360.0 340.0 360.0 340.0 Lease liabilities 2.6 1.1 - -
366.6 345.1 364.0 344.0
Used at balance date Bank facilities - external parties (ii) 340.0 250.0 340.0 250.0 Lease liabilities 2.6 1.1 - -
342.6 251.1 340.0 250.0
Unused at balance date Bank overdrafts (ii) 4.0 4.0 4.0 4.0 Bank facilities - external parties (ii) 20.0 90.0 20.0 90.0
24.0 94.0 24.0 94.0
(ii) Bank loan facilities The Group has access to net bank overdraft facilities of $4 million. Interest on bank overdrafts is charged at variable rates. Bank borrowing facility limits were increased by $20 million during the year to $360 million, of which $300 million matures on 31 March 2009.
(b) Interest rate risk exposures Details of the Group’s exposure to interest rate changes on borrowings are set out in note 28.
(c) Fair values Details of the fair value of non-current borrowings for the Group are set out in note 28.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 71 Consolidated The Company
($ Million) 2007 2006 2007 2006
21 Non-current liabilities - deferred tax liabilities
The balance comprises temporary differences attributable to: Property, plant and equipment 77.4 75.0 - - Inventories 8.5 4.0 - - Defined benefit obligations 0.8 - - - Other 2.0 5.3 - -
Deferred tax liabilities 88.7 84.3 - -
Offset from deferred tax assets (note 14) (25.7) (22.8) - -
Net deferred tax liabilities 63.0 61.5 - -
Movements: Opening balance at 1 January 61.5 60.3 - - Recognised in the income statement (3.3) (3.4) - - Recognised in equity 0.2 (0.2) - - Acquired in business combinations 4.6 - - - Under provision in prior year - 4.8 - -
Closing balance at 31 December 63.0 61.5 - -
22 Non-current liabilities - provisions
Employee benefits 3.1 3.0 - - Restoration provisions (note 1(w)(iv)) 28.1 21.7 - -
31.2 24.7 - -
Movement in each class of provision during the financial year, other than employee benefits, are set out below.
($ Million) Restoration
Opening balance at 1 January 21.7 Additional capitalised provision (note 13) 0.8 Discount unwinding to finance costs 0.7 Provisions reclassified from current 3.1 Acquired in business combinations 1.1 Charged to income statement 0.7
Closing balance at 31 December 28.1
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 72 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 23 Retirement benefit obligations
(a) Superannuation plan The majority of Adelaide Brighton Ltd employees are members of the consolidated superannuation entity being the Adelaide Brighton Group Superannuation Plan (“the Plan”), a sub-plan of the Mercer Super Trust (“MST”). The MST is a superannuation master trust arrangement governed by an independent trustee, Mercer Investment Nominees Ltd. The Plan commenced in the MST on 1 August 2001.
Membership is in either the Defined Benefit or Accumulation categories of the Plan. The following sets out details in respect of the defined benefit section only.
Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit section of the Plan is closed to new members. All new members receive accumulation only benefits. During the 12 months to 31 December 2007, all new employees have become members of the accumulation category of the Plan. The limited number of employees who are not members of the Plan are in complying superannuation funds as specified by the Enterprise Bargaining Agreements (WA and Victoria Award covered employees) that cover their employment.
Consolidated The Company
($ Million) 2007 2006 2007 2006
(b) Balance sheet amounts Present value of the defined benefit liabilities 57.9 55.9 - - Fair value of defined benefit plan assets (60.6) (56.0) - -
Net (asset) / liability in the balance sheet (2.7) (0.1) - -
The Group has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. The Group intends to contribute to the defined benefit section of plan at a rate of 12% of salaries in line with the actuary’s latest recommendations.
Consolidated The Company
($ Million) 2007 2006 2007 2006
(c) Reconciliations Reconciliation of the present value of defined benefit liability, which is wholly funded: Opening balance at 1 January 55.9 52.8 - - Current service costs 2.0 2.0 - - Interest costs 2.8 2.4 - - Actuarial gains and losses 1.1 2.0 - - Contributions by plan participants 1.8 1.3 - - Benefits, expenses and insurance premiums paid (5.8) (4.7) - - Transfers in 0.1 0.1 - -
Closing balance at 31 December 57.9 55.9 - -
Reconciliation of the fair value of plan assets Opening balance at 1 January 56.0 51.4 - - Expected return on plan assets 3.7 3.3 - - Actuarial gains and losses 2.2 2.4 - - Employer contributions 2.6 2.2 - - Contributions by plan participants 1.8 1.3 - - Benefits, expenses and insurance premiums paid (5.8) (4.7) - - Transfers in 0.1 0.1 - -
Closing balance at 31 December 60.6 56.0 - -
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 73 Consolidated The Company
($ Million) 2007 2006 2007 2006
23 Retirement benefit obligations (continued)
(d) Amounts recognised in income statement The amounts recognised in the income statement are as follows: Current service costs 2.0 2.0 - - Interest costs 2.8 2.4 - - Expected return on plan assets (3.7) (3.3) - -
Total included in employee benefits expense 1.1 1.1 - -
Actual return on plan assets 5.9 5.7 - -
The amounts recognised in the statement of recognised income and expense are as follows: Actuarial (gains) recognised in the year (1.1) (0.4) - -
Cumulative actuarial (gains) recognised in statement of recognised income and expense (2.6) (1.5) - -
(e) Categories of plan assets The major categories of plan assets are as follows: Australian Equity 20.0 20.2 - - International Equity 17.0 15.7 - - Fixed income 7.8 8.4 - - Property 5.5 4.5 - - Cash 10.3 7.2 - -
60.6 56.0 - -
% 2007 2006 2007 2006
(f) Principal actuarial assumptions The principal actuarial assumptions used were as follows: Discount rate 5.3 4.9 - - Expected return on plan assets 6.7 6.7 - - Future salary increases 4.0 4.0 - -
The expected rate of return on assets is based on historical and future expectations of returns for each of the major categories of asset classes (equities, property, fixed interest and cash) as well as the expected actual allocation of plan assets to these major categories. This resulted in the selection of a 6.7% rate of return net of tax and expenses. The discount rate used to value the defined benefit obligation is based on the 10 year government bond rate.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 74 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 23 Retirement benefit obligations (continued)
(g) Employer contributions Employer contributions to the defined benefit section of the plan are based on recommendations by the plan’s actuary. Actuarial assessments are made at no more than three yearly intervals, and the last assessment was made as at 1 July 2004. The next actuarial valuation is due as at 1 July 2007. This review has commenced and will be completed prior to 30 June 2008.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the Attained Age Normal method.
Under the Attained Age Normal method, a “normal cost” is calculated which is the estimated employer contribution rate required to provide benefits in respect of future service after the review date. The “normal cost” is then adjusted to take into account any surplus (or deficiency) of assets over the value of liabilities in respect of service prior to the review date. Any surplus or deficiency can be used to reduce or increase the “normal” employer contribution rate over a suitable period of time.
Using the funding method described above and particular actuarial assumptions as to the plan’s future experience, the actuary recommended in the actuarial review as at 1 July 2004, the payment of employer contributions to the plan of 12% of salaries for employees who are members of the defined benefit section. These contribution rates have been adopted by the Group from 1 January 2006 and represent an increase of 2% of salaries in the Group’s contributions from that previously used.
Total employer contributions expected to be paid by Group companies for the year ended 31 December 2008 are $2.2 million (parent entity: $Nil).
The economic assumptions used by the actuary to make the funding recommendations were a long term investment earning rate of 11.1% pa in first year (6.7% pa thereafter) and a salary increase rate of 4% pa.
(h) Net financial position of plan In accordance with AAS 25 Financial Reporting by Superannuation Plans the plan’s net financial position is determined as the difference between the present value of the accrued benefits and the net market value of plan assets. This has been determined as at the date of the most recent financial report of the superannuation plan (1 July 2004), and a deficit of $0.1 million was reported.
The deficit, as at 1 July 2004, under AAS 25 differs from the net asset of $2.7 million recognised in the balance sheet as at 31 December 2007 due to different measurement rules in the relevant accounting standards AAS 25 and AASB 119 Employee Benefits and different measurement dates.
($ Million) 2007 2006 2005 2004
(i) Historic summary Defined benefit obligation (57.9) (55.9) (52.8) (44.9) Plan assets 60.6 56.0 51.4 44.1
Surplus/(deficit) 2.7 0.1 (1.4) (0.8)
Experience adjustments arising on plan liabilities (2.2) (2.4) (3.6) (4.0) Experience adjustments arising on plan assets 2.1 3.2 5.0 0.8
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 75 Consolidated The Company
($ Million) Notes 2007 2006 2007 2006
24 Contributed equity
(a) Share capital Issued and paid up capital 542,998,567(2006: 542,153,567) ordinary shares, fully paid 514.0 513.3 506.8 506.1
(b) Movements in ordinary share capital Opening balance at 1 January 513.3 513.3 506.1 506.1 Shares issued 845,000 shares issued under Executive Performance Share Plan (2006: nil) (i) 0.7 - 0.7 -
Closing balance at 31 December 514.0 513.3 506.8 506.1
(i) Ordinary shares issued under the Adelaide Brighton Ltd Executive Performance Share Plan (refer note 31).
(c) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and, upon a poll, each share is entitled to one vote.
(d) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Board reviews the capital structure on an annual basis. The Board will balance its overall capital structure through the payment of dividends, share issues as well as the issue of new debt or the redemption of existing debt.
During 2007, the Group’s strategy, which was unchanged from 2006, was to maintain a gearing ratio within 40% - 60% and an implied BBB+ credit rating. The Company chooses not to apply for an official credit rating. The gearing ratios at 31 December were as follows:
Consolidated The Company
($ Million) 2007 2006 2007 2006
Total borrowings 342.6 251.1 340.0 250.0 Less cash and cash equivalents (19.3) (24.2) (4.8) (0.5)
Net debt 323.3 226.9 335.2 249.5 Total equity 667.9 675.0 556.3 560.0
Total capital 991.2 901.9 891.5 809.5
Gearing ratio 48.4% 33.6% 60.3% 44.6%
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 76 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated The Company
($ Million) 2007 2006 2007 2006
25 Reserves and retained profits
Reserves Asset revaluation reserve 12.4 12.4 - - Foreign currency translation reserve (0.1) - - - Share-based payment reserve 2.2 0.9 2.2 0.9
14.5 13.3 2.2 0.9
Movements were as follows:
(a) Asset revaluation reserve Opening balance at 1 January 12.4 12.4 - -
Closing balance at 31 December 12.4 12.4 - -
(b) Foreign currency translation reserve Opening balance at 1 January - - - - Currency translation differences arising during the year (0.1) - - -
Closing balance at 31 December (0.1) - - -
(c) Share-based payment reserve Opening balance at 1 January 0.9 1.6 0.9 1.6 Awards expense 1.5 0.6 - - Deferred tax 0.5 0.6 - - Issue of shares to employees (0.7) - (0.7) - Group transactions - (1.9) 2.0 (0.7)
Closing balance at 31 December 2.2 0.9 2.2 0.9
(d) Retained profits Opening balance at 1 January 139.8 98.4 53.0 (21.4) Net profit for the year 113.9 102.1 100.1 135.4 Actuarial gain / (loss) on defined benefit plan 0.7 0.3 - - Dividends (105.8) (61.0) (105.8) (61.0) Distribution to owners on acquisition of minority interest (note 1 (b)) (12.2) - - -
Closing balance at 31 December 136.4 139.8 47.3 53.0
(e) Nature and purpose of reserves
(i) Asset revaluation reserve The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets. The balance standing to the credit of the reserve may be used to satisfy the distribution of bonus shares to shareholders and is only available for the payment of cash dividends in limited circumstances as permitted by law.
(ii) Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entities (Adelaide Brighton Cement Inc., Fuel and Combustion Technology Inc., and Fuel and Combustion Technology International Ltd) are taken to the foreign currency translation reserve, as described in note 1(d)(iii).
(iii) Share-based payment reserve The share-based payment reserve is used to recognise the fair value of Awards issued but not exercised.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 77 Consolidated
($ Million) 2007 2006
26 Minority interests
Interest in: Share capital 4.9 4.9 Reserves - 3.6 Retained profit (1.9) 0.1
3.0 8.6
The Company
($ Million) 2007 2006
27 Dividends
Dividends paid during the year 2007 interim dividend of 6.0 cents (2006 - 5.0 cents) per fully paid ordinary share, franked at 100% (2006 - 100%) paid on 11 October 2007 32.6 27.1 2006 final dividend of 7.5 cents (2005 - 6.25 cents) per fully paid ordinary share, franked at 100% (2005 - 100%) paid on 12 April 2007 40.7 33.9 2006 special dividend of 6.0 cents (2005 - nil) per fully paid ordinary share, franked at 100% (2005 - nil) paid on 12 April 2007 32.5 -
Total dividends paid in cash 105.8 61.0
Dividends not recognised at year end Since the end of the year the Directors have recommended the payment of a final dividend of 9.0 cents (2006 - 7.5 cents) per fully paid share, franked at 100% (2006 - 100%). The aggregate amount of the proposed final dividend expected to be paid on 10 April 2008, not recognised as a liability at the end of the reporting period, is 48.9 40.7 In addition a special dividend of 3.5 cents (2006 - 6.0 cents) franked at 100% (2006 - 100%), was declared payable coincident with the 2007 final dividend. The aggregate amount of the proposed special dividend expected to be paid on 10 April 2008, not recognised as a liability at the end of the reporting period, is 19.0 32.5
Franked dividends The franked portions of the dividends proposed as at 31 December 2007 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 31 December 2008.
Consolidated The Company
($ Million) 2007 2006 2007 2006
Franking credits available for subsequent financial years based on a tax rate of 30% 43.7 33.7 43.7 33.7
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of any current tax liability
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $29.1 million (2006: $31.4 million).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 78 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 28 Financial risk management (a) Market risk (ii) Cash flow interest rate risk objectives The Group’s main interest rate risk (i) Foreign exchange risk arises from bank borrowings. The Group’s activities expose it to a The Group’s activities through its Borrowings issued at variable rates variety of financial risks: market risk overseas cement, clinker and equipment expose the Group to cash flow interest (including currency risk), credit risk, purchases expose it to foreign exchange rate risk. Due to the historically low liquidity risk and cash flow interest rate risk arising from various currency levels of gearing, Group policy is to take risk. The Group’s overall risk exposures, primarily with respect to the on senior debt facilities on a one to management program focuses on the US Dollar and the Japanese Yen. The three year term with fixed bank lending unpredictability of financial markets and Company is not exposed to foreign margins associated with each term. seeks to minimise potential adverse exchange risk. Bank bills to meet short and medium effects on the financial performance of Foreign exchange risk arises from term borrowing requirements are drawn the Group. future commercial transactions and down against the senior debt lending The Board approves written principles recognised assets and liabilities that are facilities on a 30, 60 or 90 day basis, at for overall risk management, as well as denominated in a currency that is not a variable lending rate comprising the policies covering specific areas, such as the entity’s functional currency. The risk fixed bank margin applied to the daily foreign exchange risk, interest rate risk, is measured using sensitivity analysis bank bill swap rate effective at the date credit risk, use of derivative and non- and cash flow forecasting. of each bank bill. During both 2007 and derivative financial instruments and 2006, the Group’s borrowings at The Group enters into foreign exchange investment of excess liquidity. The variable rate were denominated in forward contracts to hedge its foreign Group does not enter into or trade Australian Dollars. exchange risk on these overseas trading financial instruments, including activities against movements in the The Group analyses its interest rate derivative financial instruments, for Australian dollar. Due to the increasing exposure on a dynamic basis. speculative purposes. dependence upon imported cement and Periodically, various scenarios are The Group uses different methods to clinker the Group has increased its simulated taking into consideration measure different types of risk to which exposure to foreign currency exchange refinancing, renewal of existing it is exposed. These methods include rates over the last two years. positions, alternative financing and sensitivity analysis in the case of hedging. Based on these scenarios, the The Group Treasury’s risk management interest rate, foreign exchange and Group calculates the impact on forecast policy is to hedge between 75% and other price risks, and ageing analysis for profit and loss of a defined interest rate 100% of anticipated cash flows (mainly credit risk. The Group uses derivative shift. The scenarios are run only for purchases of cement and clinker financial instruments in the form of liabilities that represent the major inventory) in US dollars for up to six foreign exchange contracts to hedge interest-bearing positions. Based on the months and in Japanese Yen for up to certain currency risk exposures. latest calculations performed, the impact four months. Longer hedge positions on on profit and equity of a 50 basis-point Derivatives are initially recognised at the Japanese Yen are deemed too movement would be a maximum fair value at the date a derivative expensive versus the value at risk due increase/decrease of $1.7 million (2006: contract is entered into and are to the respective currencies’ interest $1.3 million). A 50 basis-point subsequently remeasured at their fair rate spread. Derivative instruments sensitivity has been selected as this is value at each reporting date, the entered into by the Group do not qualify considered reasonable given the current Company does not utilise hedge for hedge accounting. level of both short term and long term accounting as permitted under AIFRS. At 31 December 2007, had the Australian dollar interest rates. The Group’s Corporate Treasury Function Australian Dollar weakened/ (iii) Summarised sensitivity analysis provides services to the business, co- strengthened by 10% against the US ordinates access to domestic financial Dollar and Japanese Yen with all other The following table summarises the markets and monitors and manages the variables held constant, post-tax profit sensitivity of the Group’s and the financial risks relating to the operations and equity for the year would have been Company’s financial assets and financial of the Group. The Group Treasury $2.6 million higher/$2.1 million lower liabilities to interest rate risk and foreign Function reports to the Board on a (2006: $0.6 million higher/$0.5 million exchange risk. monthly basis an analysis of exposures lower), as a result of foreign exchange by degree and magnitude of risk. gains/losses on translation of US dollar and Japanese Yen denominated financial assets at fair value through profit or loss. A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on an historical basis and market expectations for future movement.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 79 28 Financial risk management objectives (continued) Foreign exchange Interest rate risk risk(i)
-0.5% +0.5% -0.5% +0.5% -10% +10%
Carrying Value Consolidated The Company Consolidated 2007 ($ Million) Notes Consolidated The Company Profit & Equity Profit & Equity Profit & Equity
Financial assets Cash and deposits 6 19.3 4.8 (0.1) 0.1 - - - - Receivables 7&10 158.3 686.4 (0.2) 0.2 - - - - Derivative financial instruments 9 0.7 - - - - - 2.6 (2.1)
178.3 691.2 (0.3) 0.3 - - 2.6 (2.1)
Financial liabilities Borrowings 17&20 342.6 340.0 1.7 (1.7) 1.7 (1.7) - - Payables 16 84.8 236.2 ------Limited recourse loan 19 12.3 ------
439.7 576.2 1.7 (1.7) 1.7 (1.7) - -
Total increase/(decrease) 1.4 (1.4) 1.7 (1.7) 2.6 (2.1)
(i) The Company is not exposed to foreign exchange risk. Foreign exchange Interest rate risk risk(i)
-0.5% +0.5% -0.5% +0.5% -10% +10%
Carrying Value Consolidated The Company Consolidated 2006 ($ Million) Notes Consolidated The Company Profit & Equity Profit & Equity Profit & Equity
Financial assets Cash and deposits 6 24.2 0.5 ------Receivables 7&10 147.2 646.1 (0.1) 0.1 - - - -
171.4 646.6 (0.1) 0.1 - - - -
Financial liabilities Borrowings 17&20 251.1 250.0 0.1 (0.1) 0.1 (0.1) - - Payables 16 85.4 178.7 ------Limited recourse loan 19 12.3 ------
348.8 428.7 0.1 (0.1) 0.1 (0.1) - -
Total increase/(decrease) - - 0.1 (0.1) - -
(b) Credit risk Credit risk is managed on a group basis using delegated regional authority limits. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.
For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. For trading credit risk wholesale customers are rated using both external independent agency ratings and if there is no independent rating, Credit Control assesses the credit quality of the customer, taking into account its financial position, past experience, external credit agency reports and credit references. Individual risk limits are set based on internal or external ratings in accordance with delegated authority limits set by the Board. The utilisation of credit limits by credit approved customers is regularly monitored by line credit management. Sales to retail customers are settled either in cash or using major credit card, mitigating credit risk.
Credit risk further arises in relation to financial guarantees given to certain parties. Such guarantees are only provided in exceptional circumstances and are subject to specific Board approval.
The Group has no significant concentration of credit risk. The Group has policies and procedures in place to ensure that sales are made to customers with an appropriate credit history. With a small number of customers, with credit history uncertain, the Group has taken out personal guarantees in order to cover credit exposures. As at 31 December 2007, the Group held no collateral over outstanding debts, consequently, the maximum exposure of credit risk represents the carrying value of receivables and derivatives. Derivative counterparties and cash transactions are limited to high credit quality institutions.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 80 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 28 Financial risk management objectives (continued)
(c) Liquidity risk The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group’s Corporate Treasury Function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 20 is a statement of undrawn facilities that the Group and Company has at its disposal to further reduce liquidity risk. The table below analyses the Group’s and the Company’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the contractual discounted cash flows. The interest rate used is 8% (2006: 7%) based on current bank borrowing rates and current expectations. Consolidated The Company
($ Million) 2007 2006 2007 2006
Ageing of financial liabilities into relevant maturity groups: Less than 1 year Bank borrowings - external parties (note 17) 64.8 42.8 64.8 42.8 Lease liabilities (note 17) 0.7 0.4 - -
65.5 43.2 64.8 42.8
Between 1 and 2 years Bank borrowings - external parties (note 20) 302.4 224.7 302.4 224.7 Lease liabilities (note 20) 1.9 0.7 - -
304.3 225.4 302.4 224.7
(d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
The carrying amounts of financial assets and liabilities of the Group and the Company at balance date equate net fair values. Net fair value is exclusive of costs which would be incurred on realisation of an asset, and inclusive of costs which would be incurred on settlement of a liability.
Consolidated The Company
($ Million) 2007 2006 2007 2006
29 Contingent liabilities and contingent assets
Details and estimates of maximum amounts of contingent liabilities are as follows: (a) Guarantees Bank guarantees 11.4 11.7 1.6 2.1
(b) Litigation At the time of preparing this financial report some companies included in the Group are parties to pending legal proceedings, the outcome of which is not known. The entities are defending, or prosecuting, these proceedings as they are entitled to. The Directors have assessed the impact on the Group from the individual actions to be immaterial. No material losses are anticipated in respect of any of the above contingent liabilities.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 81 Consolidated The Company
($ Million) 2007 2006 2007 2006
30 Commitments for expenditure
Capital commitments - Property, plant and equipment Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Within one year 6.1 8.1 - -
Finance leases Commitments in relation to finance leases are payable as follows: Within one year 0.7 0.4 - - Later than one year but not later than five years 1.9 0.7 - -
Minimum lease payments 2.6 1.1 - - Less: Future finance charges - - - -
Recognised as a liability 2.6 1.1 - -
Representing lease liabilities: Current (note 17) 0.7 0.4 - - Non-current (note 20) 1.9 0.7 - -
2.6 1.1 - -
Operating leases Commitments in relation to operating leases contracted for at the reporting date, but not recognised as liabilities, payable: Within one year 2.8 2.8 - - Later than one year but not later than five years 5.0 5.3 - - Later than five years 7.2 8.0 - -
15.0 16.1 - -
Commitments for operating lease payments relate mainly to rental leases on property.
31 Employee benefits
Employee benefit liabilities Provision for employee benefits Current (note 18) 16.8 16.8 - - Non-current (note 22) 3.1 3.0 - -
Aggregate employee benefit liability 19.9 19.8 - -
Consolidated The Company Employee numbers Average number of employees during the year 1,270 1,281 - -
As explained in note 1(x)(ii), the liability for long service leave is measured at its present value. The following assumptions were adopted in measuring present values: Consolidated The Company
2007 2006 2007 2006
Long service leave Weighted average rates of increase in annual employee benefits to settlement of the liabilities 2.9% 2.9% - - Weighted average discount rates 6.3% 5.5% - - Weighted average years to settlement of the liabilities 10 10 - -
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 82 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 31 Employee benefits (continued) earlier than 1 May 2006, 1 May 2007 • 3,105,000 shares to the Participants, and 1 May 2008 respectively. The total under the 2007 Award (2006 - Employee Share Plan number of Awards granted under the 1,500,000 shares). The establishment of the Adelaide 2004 Award was 2,790,000 with Brighton Ltd Employee Share Plan was The Plan does not entitle the 845,000 exercised during the period. approved by special resolution at the Participants to participate in any other During the period 85,000 awards were Annual General Meeting of the Company share issues of the Company and the granted. The 2004 Award expires on 28 held on 19 November 1997. All full time unexercised Awards do not attract May 2008. employees of the Company and its dividend or voting rights. The Plan is controlled entities who have been Performance conditions accounted for by the Company in continuously employed by the Company Detailed discussion of 2004 Award and accordance with note 1(x)(iv), with or a controlled entity for a period of one 2007 Award performance conditions is $1,536,293 (2006 - $638,402) year are eligible to participate in the set out in the Remuneration Report on recognised as an expense during the plan. Casual employees and contractors pages 42 to 45. year. are not eligible to participate in the Awards exercised to date Plan. 32 Key management personnel During 2007, 845,000 shares were disclosures No shares were issued under the issued under the Plan on the exercise Employee Share Plan during the year of Tranche 2 under the 2004 Award, The Remuneration Report prepared in (2006 - nil). In subsequent years, the following the Board’s determination that: accordance with Section 300A of the Board will decide whether, considering Corporations Act 2001 is set out on • Earnings per share exercise condition the profitability of the Company and the pages 38 to 48 of this report, including applicable to 50% of exercisable Awards demands of the business, further discussion on the Group performance. had been satisfied for Tranche 1. invitations to take up grants of shares Details of key management should be made. •Total Shareholder Return exercise personnel condition applicable to 50% of Executive Performance Share Plan exercisable Awards had been satisfied (a) Directors The Adelaide Brighton Ltd Executive for Tranche 1. The following persons were Directors of Performance Share Plan (the Plan) the Company during the financial year: provides for grants of Awards to the The value per share at the date of Chairman - non-executive Managing Director and senior exercise is the Volume Weighted M A Kinnaird AO executives. This plan was approved by Average Price (VWAP) calculated by the Non-executive Directors shareholders at the Annual General Australian Stock Exchange Limited for C L Harris Meeting held on 19 November 1997. In the 5 day trading period ending on the D Barro AO accordance with the requirements of the exercise date. The aggregate value of J D McNerney ASX Listing Rules, the Awards since Awards exercised during the year is L V Hosking granted to the Managing Director have $2,830,368 based on the VWAP values G F Pettigrew been approved by shareholders. per share. Executive Director Under the Plan, eligible executives are Balance of Awards M P Chellew, Managing Director granted Awards (each being an As at 31 December 2007, if the exercise (b) Executives entitlement to a fully paid ordinary conditions are satisfied and the The following persons were the share of Adelaide Brighton Ltd, subject remaining balance of all currently executives (other than Directors) with to the satisfaction of performance approved Awards are exercised, the the greatest authority and responsibility conditions) on terms and conditions Company would be obliged to transfer: for planning, directing, and controlling determined by the Board. • 930,000 shares to the Participants, the activities of the Group (“senior 2007 Award under the 2004 Award (2006 - executives”) during the year: Under the Plan, Participants were invited 1,690,000 shares); and to apply to take up an Award up to a maximum number of shares, divided Name Position into three equal tranches exercisable no earlier than 1 May 2009, 1 May 2010 Senior executives and 1 May 2011 respectively. The total A D Poulter Chief Financial Officer number of Awards granted under the M R D Clayton General Counsel & Company Secretary 2007 Award was 3,105,000 with none M Brydon Executive General Manager, Cement & Lime exercised at 31 December 2007. During T Douglas Executive General Manager, Marketing and Sales the period 1,605,000 Awards were M A Finney Executive General Manager, Concrete and Aggregates granted. The grant date of the 2007 M Kelly Executive General Manager, Strategy & Business Development Awards is set out in the Remuneration S J Toppenberg Executive General Manager, Human Resources Report on page 44. C Kupke Managing Director C&M Brick Pty Ltd (resigned 31 October 2007) S B Rogers Executive General Manager, Concrete Products 2004 Award Under the Plan, Participants were invited (from 10 December 2007) to apply to take up an Award up to a All of the above persons, except S B Rogers were also executives during the year ended maximum number of shares, divided 31 December 2006. into three equal tranches exercisable no
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 83 Consolidated The Company
($ Million) 2007 2006 2007 2006
32 Key management personnel disclosures (continued)
Compensation of key management personnel Short-term employee benefits 7.8 6.4 0.6 0.6 Post-employment benefits 0.2 0.2 - - Share-based payments 1.5 0.6 - -
9.5 7.2 0.6 0.6
The Company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed remuneration disclosures to the Directors’ report. The relevant information is set out in the Remuneration report on pages 38 to 48.
Awards holdings of key management personnel The number of Awards granted as compensation and details of Awards vested, exercised or lapsed during the year are disclosed in the Remuneration Report on page 45.
For the purposes of pricing model inputs, the exercise price of awards is based on the closing published share price at grant date. The assessed fair value at grant date of Awards granted to the individuals is allocated equally over the period from grant date to vesting date. Fair values at the grant date are independently determined using Black Scholes option pricing model that takes into account the exercise price, the term of the Awards, the lack of marketability, the impact of TSR vesting condition (applicable to 50% of Awards), the expected future dividends and the risk free interest rate for the term of the Award.
2004 Awards grant - pricing model inputs Value per Expected Risk-free Lack of TSR Number of Grant Exercise award at annual interest marketability condition awards date price grant date dividends rate discount discount
$$$%%%
M P Chellew Tranche 3 300,000 19/5/05 1.61 0.79 0.08 5.22 9.0 50.0 A D Poulter Tranche 3 85,000 30/8/04 1.42 0.58 0.08 5.28 9.0 50.0 M R D Clayton Tranche 3 85,000 2/9/04 1.41 0.58 0.08 5.18 9.0 50.0 M Brydon Tranche 3 85,000 4/9/04 1.41 0.58 0.08 5.21 9.0 50.0 T Douglas Tranche 3 85,000 1/9/04 1.40 0.57 0.08 5.21 9.0 50.0 M A Finney Tranche 3 85,000 2/9/04 1.41 0.58 0.08 5.18 9.0 50.0 S J Toppenberg Tranche 3 85,000 1/12/05 1.98 1.07 0.08 5.36 9.0 50.0 M Kelly Tranche 3 85,000 2/8/07 3.30 2.22 0.14 6.32 3.0 50.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 84 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 32 Key management personnel disclosures (continued)
2007 Awards grant - pricing model inputs Value per Expected Risk-free Lack of TSR Number of Grant Exercise award at annual interest marketability condition awards date price grant date dividends rate discount discount
$$$%%%
M P Chellew Tranche 1 435,000 31/12/06 2.81 1.495 0.125 6.10 3.0 50.0 Tranche 2 435,000 31/12/06 2.81 1.275 0.125 6.10 6.0 50.0 Tranche 3 435,000 31/12/06 2.81 1.080 0.125 6.10 9.0 50.0 M Brydon Tranche 1 100,000 1/3/07 3.31 1.745 0.145 5.92 3.0 50.0 Tranche 2 100,000 1/3/07 3.31 1.485 0.145 5.92 6.0 50.0 Tranche 3 100,000 1/3/07 3.31 1.260 0.145 5.92 9.0 50.0 A D Poulter, M R D Clayton, M A Finney, M Kelly and S J Toppenberg Tranche 1 100,000 31/12/06 2.81 1.495 0.125 6.10 3.0 50.0 Tranche 2 100,000 31/12/06 2.81 1.275 0.125 6.10 6.0 50.0 Tranche 3 100,000 31/12/06 2.81 1.080 0.125 6.10 9.0 50.0
Shareholdings of key management personnel The movement during the reporting period in the number of ordinary shares in Adelaide Brighton Ltd held directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Number of shares held in Adelaide Brighton Limited at 31 December 2007 Balance at Received on Balance at start of year exercise of EPSP Other changes end of year
Non-executive Directors M A Kinnaird 74,286 - - 74,286 C L Harris 110,001 - (40,000) 70,001 D Barro 125,216,706 - 20,000 125,236,706 J D McNerney 101,000 - - 101,000 L V Hosking 2,000 - - 2,000 G F Pettigrew 5,000 - - 5,000 Executive Director M P Chellew 800,149 300,000 (660,000) 440,149 Senior executives A D Poulter 237,500 85,000 (222,500) 100,000 M R D Clayton 21,337 85,000 (80,000) 26,337 M Brydon 59,715 85,000 (139,715) 5,000 T Douglas 235,000 85,000 (230,000) 90,000 M A Finney 85,000 85,000 - 170,000 M Kelly ---- S J Toppenberg - 85,000 (85,000) - C Kupke ---- S B Rogers ----
Total 126,947,694 810,000 (1,437,215) 126,320,479
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 85 32 Key management personnel disclosures (continued)
Number of shares held in Adelaide Brighton Limited at 31 December 2006 Balance at Received on Balance at start of year exercise of EPSP Other changes end of year
Non-Directors M A Kinnaird 74,286 - - 74,286 C L Harris 110,001 - - 110,001 D Barro 124,620,591 - 596,115 125,216,706 J D McNerney 101,000 - - 101,000 L V Hosking 2,000 - - 2,000 G F Pettigrew 5,000 - - 5,000 Executive Director M P Chellew 799,143 300,000 (298,994) 800,149 Senior executives A D Poulter 150,000 85,000 2,500 237,500 M R D Clayton - 85,000 (63,663) 21,337 M Brydon 49,715 85,000 (75,000) 59,715 T Douglas 150,000 85,000 - 235,000 M A Finney 100,000 85,000 (100,000) 85,000 M Kelly ---- S J Toppenberg ---- C Kupke ----
Total 126,161,736 725,000 60,958 126,947,694
Other transactions with key management personnel D Barro AO, a Director of Adelaide Brighton Ltd, is Executive Chairman of Barro Group Pty Ltd, a Company in which he has significant influence. Barro Group Pty Ltd and Adelaide Brighton Ltd, through its 100% owned subsidiary, Adelaide Brighton Management Ltd, each control 50% of Independent Cement and Lime Pty Ltd, a distributor of cement and lime in Victoria and New South Wales.
During the year, the Barro Group of Companies purchased goods and materials from and sold goods, materials and services to Independent Cement and Lime Pty Ltd. The Barro Group of Companies also purchased goods and materials from Sunstate Cement Ltd, a Company in which the Group has a 50% share.
M P Chellew, a Director of Adelaide Brighton Ltd, T Douglas and M Brydon, Senior executives of Adelaide Brighton Ltd, are Directors of Sunstate Cement Ltd. T Douglas and M Brydon are also Directors of Independent Cement and Lime Pty Ltd. During the year, the Group traded significantly with both Independent Cement and Lime Pty Ltd and Sunstate Cement Ltd.
All transactions involving the Barro Group Pty Ltd and Adelaide Brighton Ltd and its subsidiaries, Independent Cement and Lime Pty Ltd and its subsidiaries and Sunstate Cement Ltd were conducted on standard commercial terms.
From time to time Directors of the Company or its controlled entities, or their related parties, may purchase goods from the Group. These purchases are on the same terms and conditions as those entered into by other Group employees. These transactions are conducted on standard commercial terms. Consolidated The Company
$ 2007 2006 2007 2006
Aggregate amounts of the above transactions with the Directors and their related parties: Sales to Director related parties 36,854,880 31,952,742 - - Purchases from Director related parties 6,099,791 4,536,382 - -
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 86 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated The Company
$ 2007 2006 2007 2006
33 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) Assurance services Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports and other audit work under the Corporations Act 2001 597,319 577,513 29,712 61,275
Total remuneration for audit services 597,319 577,513 29,712 61,275
Other assurance services PricewaterhouseCoopers Australian firm Other 4,459 9,500 - -
(b) Taxation services PricewaterhouseCoopers Australian firm Tax compliance services 18,900 11,647 - -
34 Related parties
(a) Key management personnel Disclosures relating to key management personnel are set out in note 32.
(b) Controlled entities Details of interests in controlled entities are set out in note 35. The ultimate parent Company is Adelaide Brighton Ltd.
(c) Joint venture entities Details of interests in joint venture entities are set out in note 11(a).
- Adelaide Brighton Cement Ltd and Morgan Cement International Ltd supplied finished products and raw materials to Sunstate Cement Ltd and Independent Cement and Lime Pty Ltd.
-Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd, C&M Brick Pty Ltd and Adelaide Brighton Cement Ltd purchased raw materials from Sunstate Cement Ltd and Independent Cement and Lime Pty Ltd.
- Alternative Fuel Company Pty Ltd supplied waste fuel materials to Adelaide Brighton Cement Ltd.
All transactions are on normal commercial terms and conditions and transactions for the supply of raw materials and finished products are covered by shareholder agreements.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 87 Consolidated The Company
$’000 2007 2006 2007 2006
34 Related parties (continued)
(d) Transactions with related parties The following transactions occurred with related parties: Sales of goods - Controlled entities - 4,517 - - - Joint venture entities 139,890 126,388 - - Purchases of materials and goods - Joint venture entities 32,458 31,332 - - Interest revenue - Controlled entities - - 21,744 25,401 - Joint venture entities 1,750 1,409 - - - Other related parties 176 176 176 176 Dividend income - Controlled entities - - 110,000 135,000 - Joint venture entities 20,780 18,811 - - Write down of loans - Controlled entities - - 11,717 10,849 Superannuation contributions - Contributions to superannuation funds on behalf of employees 2,568 2,214 - - Loans advanced to: - Controlled entities - - 58,697 60,119 - Joint venture entities 1,582 4,314 - - - Other related parties (212) (203) (212) (203)
(e) Outstanding balances with related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Current receivables - Controlled entities (trade) - - 527,684 451,315 - Controlled entities (tax amounts receivable under tax - consolidation legislation) - - 72,987 31,717 - Joint venture entities (interest) 596 500 - - - Joint venture entities (trade) 15,624 10,204 - - Non-current receivables - Controlled entities (loans) - - 158,216 159,716 - Joint venture entities (loans) 26,603 25,021 - - - Other related parties (loans) 2,243 2,455 2,243 2,455 Current payables - Controlled entities (trade) - - 235,710 178,278 - Joint venture entities (trade) 3,608 5,612 - - Outstanding balances are unsecured and repayable in cash.
(f) Loans to related parties A loan to Adelaide Brighton Cement Ltd of $82,860,247 funds a capital reduction payment. The loan is subordinated and is only repayable after full repayment of external borrowings. Interest is charged quarterly at the 90 day BBSW market rate at the beginning of each quarter plus 5.5% premium on the outstanding balance. All other loans to and from group entities are repayable at call.
The Company has provided C&M Brick Pty Ltd with a loan of $42,718,929. There was no interest charged on the outstanding balance during the reporting year. Interest revenue brought to account by the Company during the reporting year on this loan was $nil (2006: $5,112,000).
A loan to Independent Cement and Lime Pty Ltd has interest charged at the ruling commercial rates on the outstanding balance. Interest revenue brought to account by the Group during the reporting year on this loan was $1,161,000 (2006: $943,000).
A loan to Alternative Fuel Company Pty Ltd has interest charged at the ruling commercial rates on the outstanding balance. Interest revenue brought to account by the Group during the reporting year on this loan was $589,000 (2006: $466,000).
The Company has provided MCB Wingfield Pty Ltd (MCBW), other related party, with a loan of $2.75 million to fund the construction of the waste processing plant at the site owned by MCBW at Wingfield, South Australia. The site and the plant are leased to Alternative Fuel Company Pty Ltd and Resourceco. MCBW’s obligations to the Company under the loan documents are secured by various securities including a deed of charge over all of the assets and undertaking of MCBW and a real property mortgage over the entire parcel of land. Interest revenue brought to account by the Group during the reporting year on this loan was $176,000 (2006: $175,000).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 88 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 35 Investments in controlled entities Equity holding Place of Class of 2007 2006 Name of entity incorporation shares % %
Adelaide Brighton Ltd Adelaide Brighton Cement Ltd South Aust3 Ord 100 100 Adelaide Brighton Cement Inc Washington USA2 Ord 80 80 Adelaide Brighton Cement Investments Pty Ltd South Aust3 Ord 100 100 Adelaide Brighton Management Ltd South Aust3 Ord 100 100 Adelaide Brighton Cement International Pty Ltd South Aust1 Ord 100 100 Adelaide Brighton Intellectual Property Pty Ltd South Aust1 Ord 100 100 Cement Resources Consolidated Pty Ltd South Aust1 Ord 100 100 Cockburn Cement Ltd Western Aust3 Ord 100 100 C & M Brick Pty Ltd Victoria Ord 100 70 Hy-Tec Industries (Queensland) Pty Ltd South Aust3 Ord 100 100 Northern Cement Ltd Northern Territory3 Ord 100 100 Premier Resources Ltd NSW3 Ord 100 100 Adelaide Brighton Cement Ltd Exmouth Limestone Pty Ltd Western Aust1 Ord 51 51 Adelaide Brighton Cement Inc Adelaide Brighton Cement (Florida) Inc Florida USA2 Ord 100 100 Adelaide Brighton Cement (Hawaii) Inc Hawaii USA2 Ord 100 100 Hileah (Florida) Management Inc Florida USA2 Ord 100 100 Adelaide Brighton Management Ltd Accendo Pty Ltd South Aust1 Ord 100 100 Adba Pty Ltd NSW1 Ord 100 100 Hurd Haulage Pty Ltd Vic1 Ord 100 - K.C. Mawson Pty Ltd NSW1 Ord 100 - Adelaide Brighton Cement International Pty Ltd Adelaide Brighton Cement Inc Wash. State USA2 Ord 20 20 Fuel & Combustion Technology International Ltd United Kingdom2 Ord 100 100 Fuel & Combustion Technology International Ltd Fuel & Combustion Technology International Inc USA2 Ord 100 100 Northern Cement Ltd Mataranka Lime Pty Ltd South Aust1 Ord 100 100 Cockburn Cement Ltd Cockburn Waters Pty Ltd Western Aust1 Ord 100 100 Hydrated Lime Pty Ltd Western Aust1 Ord 100 100 Chemical Unit Trust Western Aust1 Units 100 100 Kalgoorlie Lime & Chemical Company Pty Ltd Western Aust1 Ord 100 100 Premier Resources Ltd Hy-Tec Industries Pty Ltd NSW3 Ord 100 100 Hy-Tec Industries (Victoria) Pty Ltd NSW3 Ord 100 100 Bonfoal Pty Ltd NSW1 Ord 100 100 Aus-10 Rhyolite Pty Ltd NSW1 Ord 100 100 Morgan Cement International Pty Ltd NSW3 Ord 100 100 Hy-Tec Industries (Victoria) Pty Ltd CRC2 Pty Ltd Vic1 Ord 100 100 CRC3 Pty Ltd Vic1 Ord 100 100 Hy-Tec Industries (Victoria) No 1 Pty Ltd NSW1 Ord 100 100 Hy-Tec Industries (Victoria) No 2 Pty Ltd NSW1 Ord 100 100 Sheltacrete Pty Ltd NSW1 Ord 100 100 C&M Brick Pty Ltd C&M Masonry Products Pty Ltd South Aust Ord 100 100 Betta Brick Pty Ltd Vic1 Ord 100 100 C&M Brick (Bendigo) Pty Ltd Vic1 Ord 100 100 C&M Design/Construct Pty Ltd Vic1 Ord 100 100
1 Small proprietary Company as defined by the Corporations Act 2001 and is not required to be audited for statutory purposes. 2 Controlled entities of which PricewaterhouseCoopers has not acted as auditor. 3 These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities & Investments Commission. For further information see note 36.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 89 36 Deed of cross guarantee
As at the date of this report, Adelaide Brighton Ltd, Adelaide Brighton Cement Ltd, Cockburn Cement Ltd, Adelaide Brighton Cement Investments Pty Ltd, Adelaide Brighton Management Ltd, Northern Cement Ltd, Premier Resources Ltd, Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd and Morgan Cement International Pty Ltd are parties to a Deed of Cross Guarantee (the Deed) under which each Company guarantees the debts of the others. By entering into the Deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities & Investments Commission.
The above companies represent a “Closed Group” for the purposes of the Class Order, and as there are no other parties to the Deed that are controlled by the Company, they also represent the “Extended Closed Group”.
Set out below is a consolidated balance sheet as at 31 December 2007 of the Closed Group.
($ Million) 2007 2006
Current assets Cash and cash equivalents 10.2 17.1 Receivables 203.2 191.4 Inventories 57.9 54.9 Derivative financial instruments 0.6 -
Total current assets 271.9 263.4
Non-current assets Receivables 106.6 104.6 Investments accounted for using the equity method 62.9 36.8 Other financial assets 32.5 32.5 Property, plant and equipment 581.2 530.0 Intangible assets 155.3 155.4 Retirement benefit assets 2.7 0.1
Total non-current assets 941.2 859.4
Total assets 1,213.1 1,122.8
Current liabilities Payables 133.1 127.9 Borrowings 60.3 40.0 Current tax liabilities 17.3 19.9 Provisions 23.6 22.5 Other 13.4 12.9
Total current liabilities 247.7 223.2
Non-current liabilities Borrowings 281.5 210.0 Deferred tax liabilities 48.9 47.4 Provisions 30.6 24.2 Other - 0.1
Total non-current liabilities 361.0 281.7
Total liabilities 608.7 504.9
Net assets 604.4 617.9
Equity Contributed equity 505.0 513.3 Reserves 20.6 14.7 Retained profits 78.8 89.9
Total equity 604.4 617.9
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 90 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 ($ Million) 2007 2006
36 Deed of cross guarantee (continued)
Set out below is a condensed consolidated income statement and a summary of movements in consolidated retained profits for the year ended 31 December 2007 of the Closed Group. Profit before income tax 147.0 130.7 Income tax expense (39.2) (31.8)
Profit for the year 107.8 98.9
Retained profits 1 January 89.9 51.7 Profit for the year 107.8 98.9 Transactions recognised directly in retained earnings (13.1) 0.3 Dividends provided for or paid (105.8) (61.0)
Retained profits 31 December 78.8 89.9
Consolidated The Company
($ Million) 2007 2006 2007 2006
37 Notes to the statements of cash flows
Reconciliation of profit after income tax to net cash inflow from operating activities Profit after tax for the year 113.9 102.6 100.1 135.4 Doubtful debts - 0.1 11.7 10.8 Depreciation and amortisation 52.6 52.2 - - (Gain) loss on sale of non-current assets (0.7) (0.9) - - Share of joint venture entities’ net profit (5.6) (2.7) - - Fair value adjustments (4.1) - - - Other 1.7 (0.8) (9.6) (11.1)
Net cash provided by operating activities before changes in assets and liabilities 157.8 150.5 102.2 135.1 Changes in operating assets and liabilities, net of effects from purchase of controlled entity: (Increase) in inventories (2.7) (5.4) - - (Increase) / decrease in prepayments (0.1) 1.4 - 1.1 (Increase) in trade debtors (9.1) (10.3) - - Increase in trade creditors 0.3 12.4 0.3 0.4 Increase / (decrease) in provisions 3.2 (0.6) - - Increase / (decrease) in taxes payable (6.1) (5.0) (6.5) (8.5) Increase / (decrease) in deferred taxes payable (2.9) 1.3 - (3.3)
Net cash inflow from operating activities 140.4 144.3 96.0 124.8
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 91 38 Business combinations
(a) Summary of acquisitions The following acquisitions were made during the year:
• On 1 May 2007, Adelaide Brighton Management Limited acquired all the issued shares in Hurd Haulage Pty Limited.
• On 19 July 2007, Hurd Haulage Pty Ltd purchased the assets of Kancon cement.
• On 4 December 2007, Hurd Haulage Pty Ltd purchased the assets of Port Minimix.
• On 21 December 2007, Adelaide Brighton Cement Ltd purchased the assets of the Blanchetown quarry.
The acquired businesses contributed revenues of $3.5 million and net profit of $0.4 million to the Group for the period 1 May 2007 to 31 December 2007. If the acquisition had occurred on 1 January 2007, consolidated revenue and consolidated profit for the year ended 31 December 2007 would have been $889.6 million and $113.8 million respectively. The accounting for Kancon, Port Minimix and Blanchetown quarry has not been finalised as the final valuations have not been finalised as at the date of this report.
($ Million) Consolidated
Purchase consideration Cash paid 20.7 Direct costs 1.2
Total purchase consideration 21.9 Fair value of net identifiable assets acquired (c) 26.0
Fair value adjustment in other income 4.1
(b) Purchase consideration Outflow of cash, net of cash acquired Cash consideration 21.9 Less bank overdraft (2.2)
Outflow of cash 24.1
Acquiree’s Fair ($ Million) carrying amount Value
(c) Assets and liabilities acquired Net cash acquired (2.2) (2.2) Trade debtors 0.9 0.9 Inventories 0.8 0.8 Property, plant and equipment 24.7 34.4 Trade creditors (0.2) (0.2) Provisions (0.1) (1.1) Deferred tax - (4.6) Income tax liabilities (0.1) (0.1) Lease liabilities (1.9) (1.9)
21.9 26.0
Net identifiable assets acquired 26.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 92 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Consolidated
(Cents) 2007 2006
39 Earnings per share
Basic earnings per share 21.0 18.8
Diluted earnings per share 20.8 18.7
Consolidated
(Number) 2007 2006
Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 542,720,759 542,153,567 Adjustments for calculation of diluted earnings per share: Awards 4,035,000 3,190,000
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 546,755,759 545,343,567
Consolidated
($ Million) 2007 2006
Reconciliations of earnings used in calculating earnings per share Basic and diluted earnings per share Profit after tax 113.9 102.6 Profit attributable to minority interests - (0.5)
Profit attributable to ordinary equity holders of the Company used in calculating basic and diluted earnings per share 113.9 102.1
40 Events occurring after the balance sheet date
As at the date of this report, no other matter or circumstance has arisen since 31 December 2007 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
41 Segment information
Business segments The Group is organised into the following divisions by product and service type:
Construction and mining materials Production and sale of clinker, cement, lime, ready mixed concrete and supplementary cementitious materials. The major end-users of these products are the Australian residential and non-residential construction, engineering construction and mining markets.
Building products Production and sale of building products including concrete masonry products. The major end-users of these products are the Australian residential and non-residential construction markets.
Inter-segment pricing is determined on an arm’s length basis and transfers are eliminated on consolidation.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 93 41 Segment information (continued)
Primary reporting - business segments 2007
Notes Construction and Building Unallocated/ ($ Million) mining materials products Eliminations Consolidated
External sales revenue 802.0 82.5 884.5 Inter-segment sales 2.2 - 2.2 Interest revenue 0.8 0.2 1.0
Total segment revenue 805.0 82.7 887.7 Inter-segment elimination (2.2) Unallocated 2.9
Consolidated revenue 888.4
Segment result 156.0 1.8 - 157.8
Share of net profit of joint ventures 26.4 - - 26.4
Unallocated (12.9) Net interest expense (21.7)
Profit before income tax 149.6 Income tax expense (35.7)
Net profit for the year 113.9
Segment assets 672.6 109.5 457.0 1,239.1 Segment liabilities 495.8 89.4 (14.0) 571.2
Investments in joint ventures 66.9 - - 66.9
Acquisitions of fixed assets 76.8 3.6 0.7 81.1
Depreciation and amortisation expense 47.6 4.2 0.8 52.6
No significant non-cash expenses other than depreciation and amortisation.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 94 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 41 Segment information (continued)
Primary reporting - business segments 2006
Notes Construction and Building Unallocated/ ($ Million) mining materials products Eliminations Consolidated
External sales revenue 703.0 88.2 791.2 Inter-segment sales 4.5 - 4.5 Interest revenue 0.7 0.2 0.9
Total segment revenue 708.2 88.4 796.6 Inter-segment elimination (4.5) Unallocated 2.6
Consolidated revenue 794.7
Segment result 130.2 8.8 - 139.0
Share of net profit of joint ventures 21.5 - - 21.5
Unallocated (11.7) Net interest expense (15.2)
Profit before income tax 133.6 Income tax expense (31.0)
Net profit for the year 102.6
Segment assets 579.4 112.3 483.0 1,174.7 Segment liabilities 435.5 94.1 (29.9) 499.7
Investments in joint ventures 40.8 - - 40.8
Acquisitions of fixed assets 75.0 5.0 1.5 81.5
Depreciation and amortisation expense 46.6 4.3 1.3 52.2
No significant non-cash expenses other than depreciation and amortisation.
Geographical segments All of the Group’s divisions operate in Australia. The major end-use markets for these products are the Australian construction and mining markets.
Secondary reporting - geographical segments Segment revenues - Acquisitions of external Segment assets fixed assets
($ Million) 2007 2006 2007 2006 2007 2006
Australia 885.5 792.1 1,235.8 1,150.6 81.1 81.5 Other countries - - 3.3 1.3 - -
885.5 792.1 1,239.1 1,151.9 81.1 81.5
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 95 DIRECTORS’ DECLARATION AUDITOR’S INDEPENDENCE DECLARATION
In the Directors’ opinion As lead auditor for the audit of Adelaide Brighton Ltd for the year ended (a) the financial statements and notes set 31 December 2007, I declare that to out on pages 49 to 95 are in accordance the best of my knowledge and belief, with the Corporations Act 2001, there have been: including: a) no contraventions of the auditor (i) complying with Accounting Standards, independence requirements of the the Corporations Regulations 2001 and Corporations Act 2001 in relation to other mandatory professional reporting the audit; and requirements; and b) no contraventions of any applicable (ii) giving a true and fair view of the code of professional conduct in relation Company’s and Group’s financial to the audit. position as at 31 December 2007 and of their performance, as represented by This declaration is in respect of the results of their operations, changes Adelaide Brighton Ltd and the entities in equity and their cash flows, for the it controlled during the period. financial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and Andrew Forman Adelaide (c) the audited remuneration disclosures set Partner 14 March 2008 out on pages 38 to 48 of the Directors’ PricewaterhouseCoopers report comply with Accounting Standard AASB 124 Related Party Disclosures and Class Order 06/50 issued by the Australian Securities and Investments Liability limited by a scheme approved under Commission; and Professional Standards Legislation (d) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in note 36 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross Guarantee described in note 36. The Directors have been given the declarations by the managing Director and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors.
M Chellew Director Dated on 14 March 2008.
96 ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF ADELAIDE BRIGHTON LTD
Report on the financial report Auditor’s responsibility Independence and the AASB124 remuneration Our responsibility is to express an In conducting our audit, we have disclosures contained in the opinion on the financial report based on complied with the independence directors’ report our audit. We conducted our audit in requirements of the Corporations Act We have audited the accompanying accordance with Australian Auditing 2001. financial report of Adelaide Brighton Ltd Standards. These Auditing Standards (“the Company”), which comprises the require that we comply with relevant Auditor’s opinion on the financial balance sheet as at 31 December 2007, ethical requirements relating to audit report and the income statement, statement of engagements and plan and perform the In our opinion: recognised income and expense and audit to obtain reasonable assurance cash flow statement for the year ended whether the financial report is free from (a) the financial report of Adelaide Brighton on that date, a summary of significant material misstatement. Our Ltd is in accordance with the accounting policies, other explanatory responsibility is to also express an Corporations Act 2001, including: notes and the directors’ declaration for opinion on the remuneration disclosures (i) giving a true and fair view of the both the Company and the Adelaide contained in the directors’ report based Company’s and Consolidated Entity’s Brighton Ltd Group (“the Consolidated on our audit. financial position as at 31 December Entity”). The Consolidated Entity An audit involves performing procedures 2007 and of their performance for the comprises the Company and the entities to obtain audit evidence about the year ended on that date; and it controlled at the year’s end or from amounts and disclosures in the financial time to time during the financial year. (ii) complying with Australian Accounting report and the remuneration disclosures Standards (including the Australian We have also audited the remuneration contained in the directors’ report. The Accounting Interpretations) and the disclosures contained in the directors’ procedures selected depend on the Corporations Regulations 2001; and report under the heading “remuneration auditor’s judgement, including the report” in pages 38 to 48 of the assessment of the risks of material (b) the financial report also complies with directors’ report and not in the financial misstatement of the financial report and International Financial Reporting report. the remuneration disclosures contained Standards as disclosed in Note 1. in the directors’ report, whether due to Directors’ responsibility for the fraud or error. In making those risk Auditor’s opinion on the AASB 124 financial report and the AASB124 assessments, the auditor considers remuneration disclosures contained remuneration disclosures contained internal control relevant to the entity’s in the directors’ report in the directors’ report preparation and fair presentation of the In our opinion, the remuneration financial report and the remuneration The directors of the Company are disclosures that are contained in pages disclosures contained in the directors’ responsible for the preparation and fair 38 to 48 of the directors’ report comply report in order to design audit presentation of the financial report in with section 300A of the Corporations procedures that are appropriate in the accordance with Australian Accounting Act 2001. circumstances, but not for the purpose Standards (including the Australian of expressing an opinion on the Accounting Interpretations) and the effectiveness of the entity’s internal Corporations Act 2001. This responsibility control. An audit also includes includes establishing and maintaining evaluating the appropriateness of PricewaterhouseCoopers internal control relevant to the accounting policies used and the preparation and fair presentation of the reasonableness of accounting estimates financial report that is free from made by the directors, as well as material misstatement, whether due to evaluating the overall presentation of fraud or error; selecting and applying the financial report and the appropriate accounting policies; and remuneration disclosures contained in Andrew Forman Adelaide making accounting estimates that are the directors’ report. Partner 14 March 2008 reasonable in the circumstances. In Note 1, the directors also state, in Our procedures include reading the accordance with Accounting Standard other information in the Annual Report AASB101 Presentation of Financial to determine whether it contains any Statements, that compliance with the material in consistencies with the Australian equivalents to International financial report. Financial Reporting Standards ensures For further explanation of an audit, visit that the financial report, comprising the our website http://www.pwc.com/au/ financial statements and notes, complies financialstatementaudit. with International Financial Reporting Standards. Our audit did not involve an analysis of the prudence of business decisions The directors of the Company are also made by directors or management. responsible for the remuneration disclosures contained in the directors’ We believe that the audit evidence we report. have obtained is sufficient and appropriate to provide a basis for our audit opinions.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 31 DECEMBER 2007 97 FINANCIAL HISTORY
Year ended Dec Dec Dec Dec13 Dec Dec Dec Dec10 Dec10 Jun Jun ($ Million unless stated) 2007 2006 2005 2004 2003 2002 2001 2000 1999 1999 1998 Statements of financial performance Sales revenue 888.4 794.7 717.3 683.4 630.6 486.8 387.8 401.9 378.7 313.6 318.2 Depreciation11 52.4 51.8 47.0 51.4 52.3 45.1 41.0 43.2 28.5 26.1 23.0 Earnings before interest & tax 171.3 148.8 134.1 119.6 97.0 80.0 46.9 48.6 48.3 35.1 39.1 Net interest earned (paid) (21.7) (15.2) (14.0) (14.7) (12.6) (13.1) (16.3) (19.5) (18.3) (14.6) (14.8) Profit before tax, abnormal and extraordinary items 149.6 133.6 120.1 104.9 84.4 66.9 30.6 29.1 30.0 20.5 24.3 Tax (expense) / benefit1 (35.7) (31.0) (29.2) (11.8) (25.8) 16.2 - - 3.0 4.0 6.3 Profit from discontinued operations - - - 1.3 ------Minority interest1 - (0.5) - (1.1) (0.9) - - - 3.2 5.0 6.0 Net profit after tax and outside equity interest before abnormal and extraordinary items1 113.9 102.1 90.9 93.3 57.7 50.7 30.6 29.1 23.8 11.5 12.0 Abnormal and extraordinary items after tax and outside equity interest ------(49.1) (49.4) 0.3 Net profit (loss) after tax, abnormal and extraordinary items 113.9 102.1 90.9 93.3 57.7 50.7 30.6 29.1 (25.3) (37.9) 12.3 Group balance sheet Current assets 233.1 224.7 211.0 196.2 173.3 143.3 119.0 136.4 167.9 154.0 117.2 Property, plant and equipment 742.5 694.2 665.6 613.5 620.1 561.3 510.7 509.1 514.7 527.6 405.4 Receivables 29.5 27.5 23.3 19.1 12.2 12.5 11.7 10.9 - 15.3 14.5 Investments 66.9 40.8 38.1 35.6 33.6 30.8 27.6 26.9 34.0 33.3 62.5 Intangibles 164.4 164.6 165.0 165.5 166.4 146.6 147.2 152.7 159.9 163.9 12.5 Other non-current assets 2.7 0.1 19.0 19.7 17.1 28.5 37.0 29.6 26.0 31.5 23.4 Total assets 1,239.1 1,151.9 1,122.0 1,049.6 1,022.7 923.0 853.2 865.6 902.5 925.6 635.5 Current borrowings and creditors 145.5 125.8 323.5 294.6 306.3 58.3 49.9 99.4 54.6 59.5 43.9 Current provisions 49.5 54.1 58.2 48.1 42.3 54.8 43.8 52.2 37.7 26.6 25.6 Non-current borrowings 281.9 210.7 1.0 1.1 1.5 200.8 228.5 204.9 300.13 309.53 208.43 Deferred income tax and other non-current provisions 94.3 109.1 105.3 116.8 97.0 83.3 77.0 66.9 83.0 103.8 59.3 Total liabilities 571.2 499.7 488.0 460.6 447.1 397.2 399.2 423.4 475.4 499.4 337.2 Net assets 667.9 675.0 634.0 589.0 575.6 525.8 454.0 442.2 427.1 426.2 298.3 Contributed equity 514.0 513.3 513.3 512.8 512.8 512.1 462.4 462.2 462.2 467.7 78.79 Reserves 14.5 13.3 14.0 12.8 30.4 30.6 30.9 30.8 31.2 31.5 140.1 Retained Profits 136.4 139.8 98.4 54.1 22.4 (19.9) (42.2) (53.8) (69.3) (76.0) (32.5) Shareholders' equity attributable to members of the Company 664.9 666.4 625.7 579.7 565.6 522.8 451.0 439.2 424.1 423.2 186.3 Minority interests 3.0 8.6 8.3 9.3 10.0 3.0 3.0 3.0 3.0 3.0 112.0 Total shareholders funds 667.9 675.0 634.0 589.0 575.6 525.8 454.0 442.2 427.1 426.2 298.3 Total equity Asset Backing (A$/share) 0.93 0.94 0.87 0.78 0.76 0.70 0.65 0.61 0.56 0.56 1.10 Return on shareholders' funds (%) 17.1% 15.3% 14.5% 16.1% 10.2% 9.7% 6.8% 6.6% 5.6% 2.7% 6.4% Basic earnings per share (¢/share) 21.0 18.8 16.8 17.2 10.7 9.9 6.5 6.1 (5.3) (24.1) 7.8 Alternative earnings (¢/share) 20.8 18.4 16.2 14.6 10.7 9.9 6.5 6.1 5.0 7.3 7.6 Total dividend (¢/share) 18.5 18.5 10.5 7.5 6.0 5.25 4.0 3.0 - - 5.0 Interim dividend (¢/share) 6.02 5.02 4.252 3.52 2.754 2.59 2.08 1.52 --2.55 Final dividend (¢/share) 9.02 7.52 6.252 4.02 3.252,12 2.756 2.07 1.52 --2.57 Special dividend (¢/share) 3.52 6.02 ------
1Excluding extraordinary items 5 75% Franked 9 In accordance within AASB1033 Presentation and Disclosure of Financial Instruments Convertible Notes 2 Fully franked 6 35% Franked of $58.2 million have been reclassified from share capital to non-current borrowings as at 1 July 1997 3 Includes convertible notes 7 20% Franked 10 Proforma 12 month period 4 60% Franked 8 13% Franked 11 Includes amortisation of complex asset components from 1/7/98 12 Dividend declared after year end as a result of Boral Ltd Takeover Offer of Adelaide Brighton Ltd 13 Restated for AIFRS 98 ADELAIDE BRIGHTON LTD ANNUAL REPORT 2007 This page has been left blank intentionally
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100 COMPANY PROFILE
Corporate Office Concrete operations Adelaide Brighton Ltd Hy-Tec ACN 007 596 018 Unit 4, Gateway Business Park Level 1 63 - 79 Parramatta Road 157 Grenfell Street Silverwater NSW 2128 Adelaide SA 5000 Telephone (02) 9647 2866 GPO Box 2155 Facsimile (02) 9647 2924 Adelaide SA 5001 Hy-Tec Telephone (08) 8223 8000 Adelaide Brighton Ltd is a leading, Adelaide Brighton also has Concrete Products 105 Laurens Street Facsimile (08) 8215 0030 North Melbourne VIC 3051 integrated construction materials strategic cement positions in the Email [email protected] Under the brand name of C&M Telephone (03) 9328 1522 and lime producing Company eastern states through its Morgan Web www.adbri.com.au Brick, Adelaide Brighton holds Facsimile (03) 9328 5200 heavily focussed on the growing Cement grinding facility in New the second largest market share resources, engineering and South Wales, and its 50% owned Hy-Tec in the national concrete masonry Cement and lime operations Fishermans Road infrastructure sectors. cement supply joint ventures in products market, with operations Maroochydore QLD 4558 Queensland (Sunstate Cement) Adelaide Brighton Cement Telephone (07) 5443 4533 With its origins going back in New South Wales, South and Victoria (Independent Facsimile (07) 5443 6618 to 1882, Adelaide Brighton is Australia and Victoria. Birkenhead Operations Cement and Lime). 62 Elder Road Plant locations in Sydney, a S&P/ASX200 Company with Birkenhead SA 5015 Melbourne and the market capitalisation in excess Customers and sustainability Concrete and Aggregates PO Box 77 Sunshine Coast Port Adelaide SA 5015 of $1.8 billion, 1300 employees Incorporating Hurd Haulage The major end-use markets of Telephone (08) 8300 0300 and operations in all mainland Adelaide Brighton has a Pty Ltd, Kancon Group, Adelaide Brighton’s products Facsimile (08) 8341 1591 states and territories of Australia. modest position in the ready Port Minimix in north east include residential and mixed concrete markets through Angaston Operations New South Wales The principal activities of the non-residential construction, Stockwell Road Hy-Tec in Victoria, New South Adelaide Brighton Group are engineering construction, alumina Angaston SA 5353 Wales and south east Queensland the production and marketing and steel production and mining. PO Box 229 Concrete products and a 50% joint venture in Angaston SA 5353 C&M Brick of clinker, cement and lime Telephone (08) 8561 3100 northern Victoria and southern Adelaide Brighton’s commitment Head Office products; ready mixed concrete Facsimile (08) 8564 3019 New South Wales with the to sustainable development is 264 Keilor Road and aggregates; and concrete Web www.adelaidebrighton.com.au Mawson Group. demonstrated through the actions North Essendon VIC 3041 products. Telephone (03) 9375 8500 across a balanced program Northern Cement The Company has an emerging Facsimile (03) 9374 4736 of business based initiatives. Cement and Lime position in aggregate supply with Darwin Operations Web www.cmbrick.com.au Adelaide Brighton believes that Berrimah Road Locations throughout strategic reserves of aggregates East Arm Darwin NT 0828 Adelaide Brighton has market actioning sustainability objectives New South Wales, Victoria at Austen Quarry, west of Sydney, PO Box 39631 leadership positions in cement and throughout the organisation and South Australia through the Mawson Group and Winnellie NT 0821 lime in South Australia, Western positions the Company for long Hurd Haulage and Kancon in Telephone (08) 8984 4722 Australia, and Northern Territory term competitive business Facsimile (08) 8984 4674 northern New South Wales. Joint ventures through its Adelaide Brighton performance. Mataranka Operations Independent Cement & Lime (50%) Cnr Roper and Stuart Highways Cement, Cockburn Cement and 750 Lorimer Street Mataranka NT 0852 Northern Cement operations. Port Melbourne VIC 3207 Telephone (08) 8975 4575 GPO Box 523 Facsimile (08) 8975 4752 Port Melbourne VIC 3207 Telephone (03) 9676 0000 Cockburn Cement Facsimile (03) 9646 4954 Munster Operations Sunstate Cement (50%) Lot 242 Russell Road East Port Drive Munster WA 6166 Fisherman Islands QLD 4178 PO Box 38 PO Box 350 Hamilton Hill WA 6963 Wynnum QLD 4178 Telephone (08) 9411 1000 Telephone (07) 3895 1199 Facsimile (08) 9411 1150 Facsimile (07) 3895 1198 Dongara Operations Alternative Fuel Company (50%) Kailis Drive Wilkins Road Dongara WA 6525 Wingfield SA 5013 PO Box 530 Telephone (08) 8223 8000 Dongara WA 6525 Facsimile (08) 8215 0030 Telephone (08) 9927 2756 Facsimile (08) 9927 2761 Mawson Group (50%) 141 King George Street Kwinana Operations Cohuna VIC 3568 1 Year in review Lot 45 Leath Road Telephone (03) 5456 2409 Kwinana WA 6167 2 Chairman’s report Facsimile (03) 5456 2428 PO Box 528 3 Managing Director’s statement Adelaide Brighton Ltd Kwinana WA 6167 Locations throughout ABN 15 007 596 018 6 Financial results Telephone (08) 9499 2222 northern Victoria and Facsimile (08) 9499 2299 southern New South Wales Level 1 7 Map of operations 157 Grenfell Street 8 Review of operations Morgan Cement Adelaide 9 Cement and lime Foreshore Road South Australia 5000 12 Concrete and aggregates Port Kembla NSW 2505 GPO Box 2155 14 Concrete products Telephone (02) 4276 4888 Adelaide SA 5001 15 Joint ventures Facsimile (02) 4276 4399 Telephone (08) 8223 8000 16 Sustainability Facsimile (08) 8215 0030 25 Corporate governance Web www.adbri.com.au 31 Directors 32 Shareholder information 34 Directors’ report 38 Remuneration report 49 Financial statements 96 Auditor’s independence declaration 97 Independent audit report The Adelaide Brighton logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, 98 Financial history the Northern Cement logo, the Hy-Tec logo, the C&M logo, the Hurd Haulage logo and the
Kancon logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate. JORGENSEN DESIGN ANNUAL REPORT
ADELAIDE BRIGHTON LTD
ADELAIDE BRIGHTON LTD 2007 ANNUAL REPORT Adelaide Brighton Ltd Adelaide Brighton 596 018 ABN 15 007 1 Level Street 157 Grenfell Adelaide 5000 South Australia 2155 GPO Box 5001 Adelaide SA hone (08) 8223 8000 Telep (08) 8215 0030 Facsimile www.adbri.com.au Web