annual report 2015 - k&d warehouse · 2018. 11. 22. · bcom, diped, grad.cert. in re, med,...

AnnualReport 2015

DIRECTORS

R A BrownLLB

ABN 81 009 475 941An Unlisted Public Company

incorporated in Tasmania, Australia

C A G KempBCom, DipEd, Grad.Cert.

in RE, MEd, GAICD

M A RaynerBEc (Hons), FCPA,

FGIA, FAICD

R E G KempBA, Grad.Cert. in

Marketing, MAICD(alternate for A G Kemp)

BANKERSCommonwealth Bank of Australia Limited

SOLICITORSPage Seager

AUDITORSDeloitte Touche TohmatsuChartered Accountants

REGISTERED OFFICE AND SHARE REGISTER159 Harrington Street Hobart Tasmania 7000

CONTROLLED ENTITY(Incorporated in Tasmania)Kemp & Denning Hardware Pty LtdABN 29 009 481 761

G J WoolleyLLB (Hons), BCom

(elected on 24/09/14)

P R StoneSECRETARY AND

CHIEF FINANCIAL OFFICERBBus, MBA, FCPA,

GAICD, FGIA

N D FazzolariCHIEF EXECUTIVE OFFICER

A G KempAM, FCPA, FAICD

(resigned on 24/09/14)

S M Allison-RogersFAICD

G GoodmanFAICD

(appointed on 24/09/14)

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

DIRECTORS’ REPORT

KEMP & DENNING LIMITED ABN 81 009 475 941

DEAR SHAREHOLDERSYour Directors present to you the 92ndAnnual Report of Kemp & Denning Limited together with the financial statements of K&D and its controlled entity, Kemp & Denning Hardware Pty Ltd (collectively referred to in this Annual Report as “the Company”) forthe year ending 31st May 2015 (FY15).

In compliance with the provisions of theCorporations Act 2001, the Directors report as follows:

FINANCIAL RESULTSTotal Sales Revenue for FY15 from trading was $90.0M and in FY14 $89.0M.In FY15 Profit after Tax was $242,738 and in FY14 $292,502. Underlying profit, being profit from trading and excluding impairments,was $1,941,630 ($618,002 in FY14)The result has been impacted by thefollowing impairments, being assets sold or revalued at less than their value in theAccounts of the Company,

• $1,410,716 on the sale of the former brick manufacturing property in Giblin Street, which was reported to you on the 19th December 2014, also at that stage paying a Special Dividend of $1.50 per share out of the proceeds of sale.

• $288,176 on a general revaluation of property, at 7 Linear Court, being land at the rear of the Glenorchy Warehouse. This property was purchased in 2013 for $400,000 and we subsequently capitalised purchase expenses and improvements at $298,176 holding it in the Accounts at $698,176. It was revalued to $410,000, so basically the revaluation discounted the cost of the improvements.

The general revaluation, which is undertaken every 3 years, of real property assets, hasresulted in the value of all other assetsincreasing by $3,714,817, which is reflectedin the Asset Revaluation Reserve.

DIVIDENDSA Final Dividend of 40 cents per sharewill be paid on the 23rd September 2015to all Shareholders registered on the 16thSeptember 2015. The Dividends paid in FY15 (excluding the Special Dividend of $1.50 per Share paid from the proceeds of the sale of Giblin Street) will be 65 cents per share, comprising the Interim Dividend of 25 cents per share which was paid on the 26th March 2015.

The Dividends paid in FY14 were 25 cents per share. The Dividends paid in FY13 were 60 cents per share. All Dividends are fully franked at the Company Tax rate of 30 cents.

TO THE SHAREHOLDERS

1

Kem

p &

Denning

Annual R

epo

rt 2015

Nathan Maynard,Assistant StoreManager Hobart

Nathan Maynard joined Kemp & Denning on 29 June 2015 as Assistant Manager of the Hobart Store after working in retail for more than 18 years with Coles and Woolworths.

DIRECTORS’ REPORTSAFETYIt is a primary focus of the Board andManagement to ensure the safety of our staff, customers and all persons with whom we interact. We have a dedicated full time Safety Officer who conducts regular audits,inspections and training. Recently weengaged an external consultancy, IPM Safety, to conduct a safety audit and assessment of our sites and procedures.

PRINCIPAL ACTIVITIESThe principal activities of the Companyduring the year were merchants of building supplies, hardware, home related products, pavers, blocks and bricks.

SHARE TRADINGShareholders were informed on the 27th February 2015 that we have created aplatform for the trading of shares in thecompany. If you go to our website atwww.kdltd.com.au and click on the Investor Information menu, all relevant information and the processes are provided.

Other than providing a platform, providing Share transaction information and processing Share transfers, the Company has noinvolvement in the process.

CHANGES IN THE STATEOF AFFAIRSThere have been no significant changes in the state of affairs of the Company during the financial year not otherwise disclosed in this report or the financial statements.

SUBSEQUENT EVENTSFollowing considerable investigation anddeliberation, on the 24th July 2015 weformally gave Mitre 10 notice that we had decided to end our 25 year association with the Mitre 10 group. In advising Mitre 10 of our decision we thanked them for what has been a mutually beneficial relationship.

The landscape within which our business operates has, and will continue to change. Research on brand, supply chain logistics and our financial modelling strongly indicated that we need to assert our independence, therefore as from October, we will rebrand as K&D.

FUTURE DEVELOPMENTSThe disclosure of further informationregarding likely developments in theoperations of the Company in futurefinancial years and the expected results of those operations is likely to result inunreasonable prejudice to the Companyand accordingly has not been disclosed.

SHARE OPTIONSNo Share Options have been granted and there are no Share Options outstanding.

CORPORATE GOVERNANCEYour board reviews and, whilst not obligated by law, considers Corporate GovernancePrinciples and recommendations published by the Australian Stock Exchange (ASX)Corporate Governance Committee (CGC) when considering company practices.This statement reflects the 8 central ASX CGC principles.

Stuart Selby joined Kemp & Denning on 10 May 2010 as Manager of the Glenorchy Store. Prior to this he worked with Big W for six years as a Store Manager and 11 years with Purity/Woolworths. Stuart was appointed Manager at the Cambridge Store in March 2015.Stuart Selby,

Store ManagerCambridge

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

2

DIRECTORS’ REPORTROLES AND RESPONSIBILITIES1. To lay solid foundations for management and oversightThe board strives to build shareholder value and ensure that shareholders’ funds areprudently safeguarded.

Kemp & Denning Limited’s (K&D)constitution, which sets out the provisions that govern the internal management of K&D, can only be amended by special resolution of shareholders. Under the constitution,shareholders elect directors whose function is to represent shareholders by ensuring that the best interests of K&D are protected.

The board’s functions include;

• ApprovingK&D’sstrategies,budgets, plans and policies.• Assessingperformanceagainststrategies and considering the continuing suitability of those strategies.• Reviewingoperatinginformationto understand at all times the state of K&D.• Consideringmanagement recommendations on proposed acquisitions, divestments and significant capital expenditure.• Consideringmanagement recommendations on capital management and other financing proposals.• EnsuringK&Doperateswithinan appropriate corporate governance structure.• ApprovingK&D’sriskmanagement strategy and frameworks.• Consideringthesocial,ethicaland environmental impact of K&D’s activities and monitoring compliance with K&D’s related policies.• Monitoringinternalgovernance.

2. To structure the board to add valueK&D’s constitution prescribes that the board must comprise at least 3 and a maximum of 7 members. The board considers that its membership should comprise directors with an appropriate mix of skills, experience and personal attributes to allow directorsindividually and the board collectively to;

• Dischargetheirresponsibilitiesunderthe law effectively and efficiently.• Understandthebusinessandthe environment within which K&D operates so as to be able to agree with management the objectives, goals and strategic direction that will maximise shareholder value.• Assesstheperformanceofmanagement in meeting those objectives.

The Chairman and Deputy Chairman areappointed by the board and provideleadership to ensure that a high standardof values, processes and constructiveinteraction is maintained.

Director IndependenceWhilst all your Directors would consider themselves to be independent non-executive Directors, the board recognises thatcurrently, according to the ASXRecommendations, 4 members of the board would not be considered independent.Your Directors, in balancing the need to maintain continuity and appropriately staged succession, are committed to achieving a majority independent board.

Jade Smith,Store ManagerGlenorchy

Jade Smith commenced with Kemp &Denning on 14 April 2014 as Assistant Manager of the Hobart Store. Jade’s retail experience is quite extensive working for Coles, Telstra (Retail) and Woolworths in both Assistant Manager and Store Manager roles. In March 2015 Jade accepted the role as Manager of the Glenorchy Store.

3

Kem

p &

Denning

Annual R

epo

rt 2015

DIRECTORS’ REPORTConflicts of InterestThe board has processes in place to ensure that conflicts of interest, that may arise from time to time, are managed appropriately.

Election of DirectorsThe board takes on the role of nomination and governance committee and considers the following criteria when recommending Directors;

• Determiningtheappropriatesizeand composition of the board.• Determiningtheappropriatecriteriafor the appointment of Directors.• Recommendingtheappointmentand removal of Directors.• Determiningtermsandconditionsof appointments to and retirement from the board.

The Chairman takes responsibility foroverseeing the induction of new Directors.

K&D aims to have a board which, as a whole, has a range of skills, knowledge, background and experience to govern K&D and is made up of individuals of high integrity, with sound commercial judgement and inquiring minds and able to cohesively work with otherDirectors.

Board CommitteesTo increase its effectiveness the boardcurrently has 2 committees; the Corporate Governance Committee (CGC) and theCapital Expenditure Review Committee (CERC).

Performance EvaluationThe performance of the board, bothindividually and collectively, is reviewed regularly and the performance of the CEO is reviewed at least annually through a formal performance appraisal process conducted by the Chairman and signed off by the board.

3. To act ethically and responsiblyK&D has a framework of policies,underpinned by its goals, values and ethics. These are reviewed regularly and updated or adjusted appropriately in keeping with changing social, political, regulatory and commercial expectations.

4. To have a structure that independently verifies and safeguards the integrity of K&D’s financial reporting.The CGC operates independently from management and advises the board on all aspects of external audit, the adequacy ofaccounting and risk management procedures, systems, controls and financial reporting.Procedures for the selection and appointment, to ensure the external auditor is independent, are in place and the external auditor annually confirms his/her independence within the meaning of applicable legislation and professional standards.

5. To make timely and balanced disclosureAs a Unlisted Public Company we are required to report to shareholders annually. It is your Directors current position to also report at the time of the Interim Dividend.

6. To respect the right of security holders.Your board strives to communicateeffectively with shareholders about K&D’s performance, presenting this annual report and other information in clear language.

7. To recognise and manage risk.There are many risks in the markets in which K&D operates. A range of factors, some of which are beyond our control, can influence performance of K&D.

K&D has risk management policies which set out the framework for risk management, internal compliance and control systems. Directors regularly review the risks and take action to appropriately balance and mitigate these risks.

Senior management manages and regularly reports to the board on business andfinancial risks including the managementof K&D’s Health and Safety environment,liabilities and legal responsibilities.

8. To remunerate fairly and responsiblyK&D’s policy is to reward executives with a combination of fixed remuneration and short term incentives structured to driveimprovements in shareholder value.Non-executive Directors receive no incentive payments and there are no retirementbenefits schemes in place.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

4

Your Directors are committed to ensuring the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in K&D are best suited to K&D. These systems are regularly reviewed to ensure they deliver best practice in Corporate Governance and ultimately K&D’s performance.

K&D’s Corporate Governance framework is kept under review. A report is provided to the board by the Company Secretary at least annually, recommending any improvements necessary to respond to changes in K&D’s business or applicable legislation andstandards.

DIRECTORSDirectors of the Company during or since the end of the financial year together with details of qualificationsand experience and relevant interests in the ordinary shares of Kemp & Denning Limited are as follows:

Name Qualifications, Experience & Shareholding Special Responsibilities (Relevant Interest)

R A BrownLLB Legal Practice, Corporate Governance and general 4,705(Chairman) management experience. Chairman of the Capital Expenditure Review Committee. C A G Kemp Experience in Retail Operations, Corporate IT Management and 53,000BCom, DipEd, MEd, Business Education. Chairman of the CorporateMAICD, MACE Governance Committee.(Deputy Chairman) M A RaynerB Ec (Hons), FCPA, Company management experience, was the previous Managing 6,416FGIA, FAICD Director and is a Director of a number of other Boards. Member of the Capital Expenditure Review Committee. S M Allison-Rogers Managing Director of own company since 1991, experience in R&D, 30,667FAICD retail, wholesale, manufacturing, import and export, IP and licensing. Member of the Corporate Governance Committee G J Woolley Executive Chairman of Woolley Holdings Pty Ltd. Investment, 27,927LLB (Hons), BCom Finance and Governance Experience. Member of the(elected on 24/09/14) Capital Expenditure Review Committee. G Goodman Chairman / Director of G&JA Goodman Pty Ltd TA Goodman 202FAICD Consulting. Director Club Assist Pty Ltd (Chair of Audit & Risk(appointed on 24/09/14) Committee). Chairman & Director of Shellfish Culture Ltd. Formerly- Group Chief Executive Officer of RACT and Director of RACT Insurance 12yrs. Self employed for 12yrs retail and commercial sales, warehousing and logistics. Banking and Finance 20yrs. Member of the Corporate Governance Committee. A G Kemp Company management experience and was previously a 452,654AM, FCPA, FAICD Director of several other Companies. (resigned on 24/09/14) R E G Kemp (alternate Experience in Investment Advisory; brick, aircraft and newsprint 42,987for A G Kemp who manufacturing, people management, marketing and brand consulting.resigned on 24/09/14) BA, Grad.Cert. inMarketing, MAICD

CHIEF EXECUTIVE OFFICERN D Fazzolari 21 years in retail operations and merchandise roles at Coles Myer, NILDip Logistics Non executive director at Speeds Shoes, Time spent working for Swire Corporation in PNG and prior to joining Kemp & Denning was the Chief Executive Officer at Armaguard.

COMPANY SECRETARYP R Stone Has worked for Kemp & Denning Limited since 2004 in this position NILBBus, MBA, FCPA, and was previously employed as company accountant of aGAICD, FGIA listed public company.

DIRECTORS’ REPORT

5

Kem

p &

Denning

Annual R

epo

rt 2015

DIRECTORS’ REPORT

DIRECTORS BENEFITSSince the end of the previous financial year no Director of the Company has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or receivable by Directors shown in the notes to the accounts, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related Corporation with a Director or with a Firm of which he or she is a member, or with a company in which he or she has a substantial financial interest except as set out in Note 29.

AUDITORS INDEPENDENCEDECLARATIONThe auditor’s independence declaration is included on page 10 of the financial report.

INDEMNIFICATION OFOFFICERS AND AUDITORSUnder section 24 of the Company’s Constitution each Director, Secretary and Officer is indemnified to the extent permitted by law.

During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all Executive Officers of the Company and of any related body corporate against a liability incurred as such a Director,

SCHEDULE OF DIRECTORS’ MEETINGS ATTENDEDDURING THE YEAR TO 31/05/15During the year the Company held 12 Board meetings, 1 Corporate Governance Committee meeting and 1 Capital Expenditure Review Committee meeting of Directors. The names ofDirectors and members of Committees of the Board are outlined below. The attendances of the Directors at meetings of the Board and of its Committees were: Board of Directors Corporate Governance Capital Expenditure Review Committee Eligible to Eligible to Eligible to Attend Attended Attend Attended Attend Attended

R A Brown 12 12 - - 1 1C A G Kemp 12 12 1 1 - -A G Kemp 6 Nil - - - -S M Allison-Rogers 12 12 1 1 - -M A Rayner 12 12 - - 1 1G J Woolley 7 7 - - 1 1G Goodman 6 6 1 1 - -

R E G Kemp 6 6 - - - -(alternate for A G Kemp)

Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The Company has not during or since the financial year, indemnified or agreed to indemnify the auditor of the Company or of any related body corporate against a liability incurred as the auditor.

MICHAEL RAYNER RETIRESFROM THE BOARDMichael Rayner informed the Board some months ago that he would not be seekingre-election as a Director when his termexpired at the 2015 AGM, and therefore at the expiration of the AGM on the 23rd September 2015, Michael will exit a Company with which he has had an involvement with in variouscapacities since 1983. In that year theCompany acquired the business and assets of Webster Hall Timber Pty Ltd of which Michael was the Manager, and he accepted a role to integrate Webster Hall into the Companyand to drive the rationalisation of our timbermilling business. The extent of Michael’s capacity and endeavour very quickly became evident and in 1986 he was appointedManaging Director (MD), which was at a time when the Company was in the process of building the first Warehouse store inAustralia. When Michael stepped into the role, trading conditions in several of the various 6

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

DIRECTORS’ REPORT

7

Kem

p &

Denning

Annual R

epo

rt 2015

divisions of the Company were difficult, the new store was being built and would not open until October, 1987, and as to how long it would take to become profitable was not certain. It was undoubtedly a very difficult period, and Michael, together with and supported by the Board, made difficult but necessary and decisive decisions to rationalise and or exit those tradingdivisions which were not sustainable.

Over the next 22 years, until he retired as MD in 2005, he was not only responsible for the general management of and the operations of the Company, he was also at the forefront of the Company’s strategic growth which included the opening of the Glenorchy Store in 1996 and the acquisition of the Shepparton store in 2001, both of which almost doubled our turnover and employee numbers. When Michael retired as MD, he was invited to join the Board as a Non-Executive Director and has served you assiduously in the role for the last 10 years.

If I can personally reflect on my association with Michael, an association which started when Webster Hall was acquired and I was at the time the Company’s Lawyer, then on the Board when I was elected in 1993 andMichael was MD, then when we servedtogether as Directors after he retired as MD, and in the last 3 years as Chairman, and I know that my reflections would be echoed by all those with whom he has had contact, that in all of those capacities Michael has worked tirelessly and given total commitment to those whose interests he has been entrusted with, his fellow employees, Directors andShareholders. He is a person of the highest

Cameron Ellis has been part of the K&D Team since 3 June 1991, undertaking various roles, prior to his appointment in March 2015 as General Manager Trade.

integrity and has left no stone unturned in whatever task he has undertaken on yourbehalf or on behalf of the Company.

We thank Michael Rayner, not just for his 32 years with the Company, 26 of which he has served as a Director and not just for his skill and capacity, but for his total commitment, dedication and untiring effort in variouscapacities over that period.

THE PRESENT AND THE FUTUREIn FY15 we regenerated the Board with the inclusion of Greg Goodman and GregWoolley and their specific skills, governanceexperience and contributions have added real value to our deliberations. In September 2014NickFazzolaricommencedasCEOandhe, together with his management team have examined every aspect of the business, have made changes to operations and these are ongoing. Specific key areas have beenoutlined in Nicks’ CEO Report.

This has been a year in which we examined every aspect of the business, have scoped all of our arrangements and have madeconsidered changes. Our CEO and themanagement team have our thanks fortheir commitment to their task.

Signed in accordance with a Resolution of Directors made pursuant to s298 (2) of the Corporations Act 2001.

Ray Brown - Chairman 12th August 2015

Cameron Ellis,General Manager K&D Trade

Cameron Leamey, K&D Trade Store Manager Kingston

Cameron Leamey joined Kemp & Denning on 21 February 2011 as a Sales Representative. Cameron was appointed Manager of our Trade Outlet at Kingston in February 2015.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

8

CHIEF EXECUTIVE OFFICER’S REPORTINTRODUCTIONThe past twelve months has been one of the most challenging periods in Kemp & Denning Limited’s recent history. We have undertaken a total tactical and strategic review of our business’s internal operations and externally sought to better understand our customers. These functional reviews have led to business restructuring that will enable our business to meet and exceed the challenges in the short and longer term.

Our business has also developed andimplemented updated Business Plans across our Retail and Trade segments and thestrategies developed will deliver sustained growth across both segments over the next 12 to 24 months.

BUSINESS PERFORMANCEK&D has achieved total revenue from tradingfor the year of $90M. Whilst this is only a marginal increase of 1.1% from the previous year’s result of $89M, it is an encouragingresult in an increasingly competitive market. We recognise that more work is needed, and is in progress, on operating margins,particularly around business running costsand inventory management.

As indicated in the Directors Report,underlying profit, being profit fromtrading excluding impairments, was $1,941,630 (last year $618,002). It is worth noting that this is an increase of 314% on last year and reflects the work already undertaken on margins, cost control and inventory management.

This result is a significant turnaround on the previous year. Having now come through a full strategic and operational review of the business with the strong support andcommitment from all our staff and theongoing loyalty of K&D’s valued customers, the result reflects a great team effort.K&D continues to deal with significant market changes. Growth throughout our business continues to come from focusing on our core activities and removing non value product segments and activities.

K&D will continue to focus on both business efficiency and maximising opportunities as we continue to increase market presence through more effective direct and indirect communication initiatives.

MERCHANDISE ANDMARKETINGWork has commenced to introduce Category Management disciplines across all

departments, which is a critical step towards delivering improved product and pricingoutcomes and will enable the business to compete profitably within the market.

A full and comprehensive independentexternal review has recently been undertakenon our Brand and Customers both on aQualitative and Quantitative level.The findings have validated a number of ourbusiness plans moving forward and it willenable us to confidently implement newMarketing and Brand messages over the next 12 months.

OPERATIONAL UPDATECustomer service excellence is our highestpriority and research has confirmed andidentified areas for improvement over the next 12 months. Excellent work has been done thus far managing and controlling Shrinkage and Waste performance and whilst results are encouraging more work is being done to improve results.

Supply Chain improvement has beenidentified as an area of great opportunity for the business to streamline inventory flow into the business, open up product and brandopportunities not currently available and also improve terms of trade. The project will be fully implemented over the next 12 months.

The redevelopment of the Hobart Warehouse has revitalised our people and our customers and the feedback and results thus far have been very encouraging.

TRADE UPDATEService consolidation and management realignment within K&D Trade has delivered strong sales and profit growth for the year.

The dedicated Trade operation at Kingston has also delivered strong customerengagement through the revitalised Trade Administration area. This new approach and focus has attracted a number of new Trade customers. Our plan is to finalise our Supply Chain review across our Trade customers and then develop and implement key initiatives by the end of 2015.

PEOPLEThe redefining of role responsibilities and communicating our operational and financial goals across the business has seen a renewed energy in our people.

Professional Development and Succession Planning has also commenced across the business and we are committed to providing growth pathways for our people.

Kem

p &

Denning

Annual R

epo

rt 2015

9

HEALTH AND SAFETYK&D remains committed, and is proactive in that commitment, to the Health and Safety of all our customers and employees. Training, process improvement and safe handling and clear chain of responsibility understanding across all our business units will ensure we have a safe and happy work environment.

WORKPLACE GENDEREQUALITY AGENCY (WGEA)In accordance with the requirements of the Workplace Gender Equality Act 2012 (Act) Kemp & Denning Limited lodged its Annual Public Report with the Workplace Gender Equality Agency on 1 June 2015 for the 2014-15 Reporting Period. On 16 July 2015 the Agency advised that the Company is compliant. This report can be viewed on K&D’s website www.kd.com.au

OUTLOOKDuring 2014-2015, the Tasmanian residential building market remained solid compared to the previous 2 years and the outlook overthe next 12 months remains steady.

CHIEF EXECUTIVE OFFICER’S REPORT

Nick Fazzolari,Chief ExecutiveOfficer

NickFazzolariwasappointedtothepositionof Chief Executive Officer on 8 September 2014. Nick has an extensive background in business management, trade, retail and supply chain management, having worked variously in senior roles with Dahlsens which is a large independent mainland trade and hardware chain and K Mart being part of the Wesfarmers network.

There are signs that the Government’sstimulus package relating to first homeowners has increased the demand for houses in this segment.

Whilst Tasmania’s population growth remains flat, Government initiatives to drive tourism should see a lift in demand in areas such as accommodation which translates intoadditional building activity.

We need to remain vigilant andcontinuously work on and manage the key drivers of our business to ensure that wedeliver real growth and improved returns.

NickFazzolari-ChiefExecutiveOfficer12th August 2015

Jason Hutton joined the business on16 February 2015 as General ManagerMerchandise & Marketing and has brought with him a wealth of cross functionalbusiness experience. Jason has spent many years fine tuning his business skills in a number of industries within Australia,New Zealand and Papua New Guinea.

Jason Hutton,General ManagerMerchandise & Marketing

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

10

AUDITOR’S INDEPENDENCE DECLARATION

The Board of DirectorsKemp & Denning Limited159 Harrington StreetHOBART TAS 7000

12 August 2015

Dear Board MembersKemp & Denning Limited

In accordance with section 307C of the Corporations Act 2001,I am pleased to provide the following declaration of independenceto the directors of Kemp & Denning Limited.

As lead audit partner for the audit of the financial statementsof Kemp & Denning Limited for the financial year ended 31 May 2015,I declare that to the best of my knowledge and belief,there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Carl HarrisPartner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.Member of Deloitte Touche Tohmatsu Limited

Deloitte Touche TohmatsuABN 74 490 121 060

Level 822ElizabethStreetHobart TAS 7000GPO Box 777Hobart TAS 7001 Australia

Tel: +61 3 6237 7000Fax: +61 3 6237 7001www.deloitte.com.au

Kem

p &

Denning

Annual R

epo

rt 2015

11

FINANCIAL STATEMENTSINCOME STATEMENTKemp & Denning Limited and Controlled Entities year ended 31 May

CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $Revenue 3 90,080,250 89,093,857 90,080,250 89,093,857Cost of sales (63,961,276) (63,801,531) (63,961,276) (63,801,531)Gross Profit 26,118,974 25,292,326 26,118,974 25,292,326 Other income 3 179,024 157,391 179,024 157,391Marketing expenses (642,356) (489,119) (642,356) (489,119) Occupancy expenses (3,570,584) (3,878,118) (3,395,026) (3,705,957) Administration expenses (18,134,641) (18,045,438) (18,134,641) (18,045,438) Impairment expense 12 (1,698,892) (325,500) (288,176) (325,500)Finance costs 4 (276,094) (440,886) (276,094) (440,886)Other expenses (961,359) (1,673,986) (961,359) (1,673,987)Profit before tax 1,014,072 596,670 2,600,346 768,830Income tax expense 6 (771,334) (304,168) (817,799) (346,650) Profit for the year attributableto members of the parent entity 242,738 292,502 1,782,547 422,180

The Income Statement should beread in conjunction with theaccompanying notes.

STATEMENT OF COMPREHENSIVE INCOMEKemp & Denning Limited and Controlled Entities year ended 31 May

CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $Profit for the year 242,738 292,502 1,782,547 422,180 Other comprehensive incomeOther Items that will not bereclassified subsequentlyto profit or loss: Gain/(loss) arising onrevaluation of properties 19 3,714,817 - - - Income tax relating tocomponents of othercomprehensive income 19 (60,817) - - - Total Comprehensive Incomefor the year 3,896,738 292,502 1,782,547 422,180

The Statement should be readin conjunction with theaccompanying notes.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

12

FINANCIAL STATEMENTSBALANCE SHEETKemp & Denning Limited and Controlled Entities as at 31 May

CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $Current Assets Cash and cash equivalents 80,383 65,200 80,383 65,200 Trade and other receivables 7 5,547,622 5,524,357 5,547,622 5,524,357Inventories 8 13,142,177 14,780,553 13,142,177 14,780,553 Asset classified as Held for Sale 31 - 5,617,408 - 117,408Current tax assets 6 37,641 125,984 37,641 125,984 Other current assets 9 601,240 666,978 601,240 666,978 Total Current Assets 19,409,063 26,780,480 19,409,063 21,280,480 Non-Current Assets Deferred tax assets 6 195,016 133,259 1,048,558 934,808 Other non-current assets 9 - - 6,399,306 10,355,233 Property, plant and equipment 10 32,352,246 29,014,377 9,050,375 9,422,763 Investment property 11 290,000 290,000 - -Goodwill 12 897,085 897,085 897,085 897,085 Total Non-Current Assets 33,734,347 30,334,721 17,395,324 21,609,889Total Assets 53,143,410 57,115,201 36,804,387 42,890,369 Current Liabilities Trade and other payables 14 7,980,418 7,091,032 7,980,418 7,091,032Borrowings 15 159,568 8,017,564 159,568 8,017,564 Current tax liabilities 6 478,286 - 478,286 -Provisions 16 1,663,454 1,643,873 1,663,454 1,643,873Other Liabilities 17 102,471 102,471 102,471 102,471 Total Current Liabilities 10,384,197 16,854,940 10,384,197 16,854,940 Non-Current Liabilities Borrowings 15 4,662,197 1,239,184 4,662,197 1,239,184 Deferred tax liabilities 6 - - - -Provisions 16 373,912 350,708 373,912 350,708Other Liabilities 17 595,769 475,048 595,769 475,048 Total Non-Current Liabilities 5,631,878 2,064,940 5,631,878 2,064,940Total Liabilities 16,016,075 18,919,880 16,016,075 18,919,880 Net Assets 37,127,335 38,195,321 20,788,312 23,970,489 Equity Issued capital 18 2,008,692 2,008,692 2,008,692 2,008,692Reserves 19 15,798,861 17,494,405 - - Retained earnings 20 19,319,782 18,692,224 18,779,620 21,961,797Total Equity 37,127,335 38,195,321 20,788,312 23,970,489 The Balance Sheet should beread in conjunction with theaccompanying notes.

Kem

p &

Denning

Annual R

epo

rt 2015

13

FINANCIAL STATEMENTSSTATEMENT OF CHANGE IN EQUITYKemp & Denning Limited and Controlled Entities as at 31 May Asset Capital Share Retained Revaluation Profits Capital Earnings Reserve Reserve Total $ $ $ $ $CONSOLIDATED Balance at 31 May 2013 2,008,692 19,712,245 16,272,897 1,384,985 39,378,818 Payment of dividends - (1,475,999) - - (1,475,999) Profit attributable tomembers of parent entity - 292,502 - - 292,502 Other comprehensiveincome for the year - - - Total comprehensiveincome for the year - 1,258,561 (75,261) - 1,183,300Transfer to/ from retained earnings 163,477 (163,477) - Balance at 31 May 2014 2,008,692 18,692,224 16,109,420 1,384,985 38,195,321 Payment of dividends - (4,964,723) - - (4,964,723) Profit attributable tomembers of parent entity - 242,738 - - 242,738Other comprehensiveincome for the year - 3,654,000 - 3,654,000 Total comprehensiveincome for the year - 242,738 3,654,000 - 3,896,738 Transfer to/ from retained earnings 5,349,544 (5,349,544) - Balance at 31 May 2015 2,008,692 19,319,782 14,413,876 1,384,985 37,127,335 COMPANY Balance at 31 May 2013 2,008,692 22,910,142 75,697 - 24,994,531 Payment of dividends - (1,475,999) - - (1,475,999) Profit attributable tomembers of parent entity - 422,180 - - 422,180 Total comprehensiveincome for the year - 422,180 - - 422,180 Deferred tax liability - - 29,777 - 29,777Transfer to/ from retained earnings - 105,474 (105,474) - - Balance at 31 May 2014 2,008,692 21,961,797 - - 23,970,489 Payment of dividends - (4,964,723) - - (4,964,723) Profit attributable tomembers of parent entity - 1,782,546 - - 1,782,546 Total comprehensiveincome for the year - 1,782,546 - - 1,782,546 Balance at 31 May 2015 2,008,692 18,779,620 - - 20,788,312

The Statement of Changes in Equity should beread in conjunction with the accompanying notes.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

14

FINANCIAL STATEMENTSCASH FLOW STATEMENTKemp & Denning Limited and Controlled Entities year ended 31 May

CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $Cash Flows from Operating Activities Profit for the year 242,738 292,502 1,782,547 422,180 (Gain)/loss on sale or disposalof property, plant & equipment 6,868 9,842 6,868 9,842 (Gain)/loss on sale of shares - - - - Depreciation and amortisation 1,197,364 1,850,493 1,021,806 1,678,332 Increase/(decrease) in tax liability 478,286 (101,122) 478,286 (69,976) (Increase)/decrease in tax assets 26,586 (74,851) 25,407 (74,851) Impairment expense 1,698,892 325,500 288,176 325,500 Changes in net assets and liabilities,net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets: Trade and other receivables (23,265) 1,029,441 (23,265) 1,029,441Inventories 1,638,465 3,784,365 1,638,465 3,784,365 Other financial assets - - 4,067,432 7,581Prepayments 65,738 (82,979) 65,738 (82,979) Increase/(decrease) in liabilities: Trade and other payables 613,033 (2,345,979) 613,033 (2,345,979)Provisions 42,785 (130,378) 42,785 (130,378)Other liabilities 120,721 244,415 120,721 244,415 Net cash from operating activities 6,108,211 4,801,249 10,127,999 4,797,493 Cash Flows from Investing Activities Payments for property,plant and equipment (1,271,768) (1,209,237) (991,555) (1,205,481) Proceeds from sale of property,plant and equipment 4,838,711 5,062,528 538,711 5,062,528 Proceeds from sale of shares - - - -Interest received 19,547 15,035 19,547 15,035 Net cash provided by/(used in) investing activities 3,586,490 3,868,326 (433,297) 3,872,082 Cash Flows from Financing Activities Proceeds from borrowings 30,000,000 22,794,507 30,000,000 22,794,507 Repayment of borrowings (33,882,367) (29,250,000) (33,882,367) (29,250,000)Interest paid (276,094) (440,886) (276,094) (440,886)Dividends paid (4,964,723) (1,475,999) (4,964,723) (1,475,999) Repayment of finance lease (276,353) (208,785) (276,353) (208,785) Net cash provided by/(used in) financing activities (9,399,537) (8,581,163) (9,399,537) (8,581,163) Net increase / (decrease) in cashand cash equivalents 295,164 88,412 295,164 88,412 Cash and cash equivalents at thebeginning of the financial year (214,781) (303,193) (214,781) (303,193) Cash and cash equivalents at theend of the financial year 26(a) 80,383 (214,781) 80,383 (214,781) The Cash Flow Statement should be read in conjunction with the accompanying notes.

Kem

p &

Denning

Annual R

epo

rt 2015

15

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities

1. SIGNIFICANT ACCOUNTING POLICIESStatement of ComplianceThese financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations and comply with other requirements of the law.

The financial statements include the separate financial statements of Kemp & Denning Limited (the company) and the consolidated statements of the consolidated entity, which comprise the company and the entities it controlled during the financial year.

Accounting Standards include AustralianAccounting Standards (AAS). Compliance with the AAS ensures that the financial statements and notes of the company and the consolidated entity comply with International Financial Reporting Standards (IFRS). The financial statements were authorised for issue by the directors on 12 August 2015. The company is a for-profit entity.

General informationKemp & Denning Limited is an unlisted public company, incorporated in Tasmania, Australia and operating in Australia.

Registered Office159 Harrington Street,Hobart, Tasmania, 7000Telephone (03) 62 300 300

Principal place of BusinessCnr Murray & Brisbane Streets,Hobart, Tasmania, 7000Telephone (03) 62 300 300

Basis of preparationThe financial report has been prepared on the basis of historical cost, except for certainnon-current assets which are at fair value and the revalued amounts of certain assets andfinancial instruments. Cost is based on the fair values of the consideration given in exchange for assets. The accounting policies adopted are consistent with those of the previous year, unless otherwise stated.

The accounting policies set out below have been applied in preparing the financialstatements for the year ended 31 May 2015. Details of significant accounting policies are:

(a) Basis of ConsolidationThe consolidated financial statements have been prepared by aggregating the financial statements of all entities that comprise the

Kemp & Denning Group (the Group), being Kemp & Denning Limited (the parent entity) and its controlled entities. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities. A list of subsidiaries appears in note 25 to the financial statements.Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.On acquisition, the assets, liabilities andcontingent liabilities of a subsidiary aremeasured at their fair values at the date ofacquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.The consolidated financial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity.In preparing the consolidated financialstatements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminatedin full.

(b) Business combinationsAcquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquire and the equity instruments issued by the Group in exchange for control of the aquiree. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively.

(c) GoodwillGoodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see (b) above) less accumulated impairment losses, if any.For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups ofcash-generating units) that is expected to benefit from the synergies of the combination.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

16

1. SIGNIFICANT ACCOUNTING POLICIES (CONT)

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently where there is indication that the unit may be impaired.If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

(d) Cash and Cash EquivalentsCash and cash equivalents are defined as cash at bank and on hand and cash equivalents. Cash and cash equivalents are short term and include highly liquid investments which are readily convertible to known amounts of cash, which are subject to an insignificant risk in changes in value and have a maturity of three months or less at the date of acquisition. Bank overdrafts are shown within borrowingsin current liabilities in the balance sheet.

(e) Income TaxCurrent taxCurrent tax is calculated by reference to the amount of income tax payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantially enacted by the reporting date.Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred taxDeferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributable to that asset or liability for tax purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are

not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the periodCurrent and deferred tax are recognised as an expense or income in the profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.

Tax ConsolidationThe company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Kemp & Denning Limited is the head entity


Kem

p &

Denning

Annual R

epo

rt 2015

17



in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in thetax-consolidated group).Due to the existence of a tax funding arrangement between the entities in thetax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 6 to the financial statements. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

(f) InventoriesInventories are stated at the lower of cost and net realisable value. The value of inventory is based on the average cost method.Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. For manufactured lines, costs include direct materials and labour and an appropriate proportion of fixed and variable overhead expenditure.

(g) Property, Plant and EquipmentLand and buildings are measured at fair value. Independent valuations prepared by external valuation experts are made with sufficient regularity to ensure the carrying amount of property does not differ materially from its fair value at balance date. Annual internal assessments are made, supplemented by

independent assessments at least every three years.Any revaluation increase arising on the revaluation of land and buildings is credited to an asset revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense in profit or loss, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of land and buildings is charged as an expense in profit or loss to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset.Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the asset revaluation reserve, net of any related deferred taxes, is transferred directly to retained earnings.Borrowing and other holding and development costs on property under development are capitalised until completion of the development.Plant and equipment and leasehold improvements are measured at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item.Depreciation is provided on property, plantand equipment, including freehold buildings, but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.The following estimated useful lives are used in the calculation of depreciation:• Buildings 40years• Leaseholdimprovements 5-10years• Plantandequipment 3-20years

(h) Employee BenefitsA liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and other employee obligations when it is probable that settlement will be required and they are capable of being measured reliably.Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

18



at the time of settlement.Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months, are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(i) Foreign Currency TransactionsAll foreign currency transactions during the period are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable in foreign currencies at year end are converted at the rates of exchange ruling at that date.The gains and losses from conversion of short-term assets and liabilities, whether realised or unrealised, are included in operating profit before income tax as they arise.

(j) Leased Assets Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate ofinterest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as an expense in the accounting period in whichthey are incurred. Finance leased assets are amortised on a straight-line basis over the estimated usefullife of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except when another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

Lease incentiveIn the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expenses on a straight-line basis, except where another systematic basis is more representative of the time pattern in which the economic benefits from the leased asset are consumed.

(k) Financial AssetsInvestments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of any transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements.Other financial assets are classified into the following specified categories: financial assets ‘at fair value through the profit and loss’, ‘available-for-sale’ financial assets, ‘held-to-maturity investments’ and ‘loans and receivables’. The classification depends on the nature and purpose of the financial asset and is determined at the time of initial recognition.

Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

Financial assets at fair valuethrough profit or lossFinancial assets are classified as financial assets at fair value through profit or loss (FVTPL) where the financial asset: has been acquired principally for the purpose of selling in the near future; is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or is a derivative that is not designated and effective as a hedging instrument.Financial assets at fair value through profit or

Kem

p &

Denning

Annual R

epo

rt 2015

19



loss are stated at fair value, with any resultant gain or loss recognised in profit and loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate.

Impairment of financial assetsFinancial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted.For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.

Derecognition of financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another equity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

(l) Critical accounting judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policiesThe following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

InventoriesNote 8 sets out the categories of inventory carried. The net realisable value of inventories is the estimated selling price in the ordinary course of business less estimated costs to sell which approximates fair value less cost to sell. The key assumptions require the use of management judgement and are reviewed annually. These key assumptions are the variables affecting the estimated costs to sell and the expected selling price. Any reassessment of cost to sell or selling price in a particular year will affect the cost of goods sold.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

20



Employee entitlementsManagement judgement is applied in determining the following key assumptions used in the calculation of long service leave at balance date: future increases in wages and salaries; future on cost rates; and experience of employee departures and period of service. Details of these entitlements are set out in note 16.

Key sources of estimation uncertaintyApart from the note below concerning Goodwill, there are no key assumptions concerning the future, and no other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.Impairment of Goodwill: Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at 31 May 2015 was $897,085(31 May 2014: $897,085). (m) CurrencyAll amounts shown in the financial report are in Australian currency.

(n) BorrowingsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit and loss in the period in which they are incurred.

(o) Comparative FiguresWhere necessary to facilitate comparison, comparative figures have been adjusted to conform with changes in presentation in the current financial year.

(p) Impairment of long-lived assetsexcluding goodwillAt each reporting date, the Group reviews the

carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the assets belong. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash generating unit is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. The reversal of an impairment loss is recognised in profit or loss immediately unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(q) Goods & Services TaxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:(i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or(ii) for receivables and payables which are recognised inclusive of GST.The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

Kem

p &

Denning

Annual R

epo

rt 2015

21



(r) Revenue RecognitionRevenue is measured at fair value when the Group has passed control of the goods to the buyer on normal trade terms.

Sale of goodsRevenue from the sale of goods is recognised when all the following conditions are satisfied:• theGrouphastransferredtothebuyer the significant risks and rewards of ownership of the goods;• theGroupretainsneithercontinuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;• theamountofrevenuecanbemeasured reliably;• itisprobablethattheeconomicbenefits associated with the transaction will flow to the entity; and• thecostsincurredortobeincurredin respect of the transaction can be measured reliably.

Dividend and interest incomeDividend revenue from investments is recognised when the Group’s right to receive payment has been established. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Rental incomeRevenue from operating leases is recognised on a straight-line basis over the term of the relevant lease.

(s) ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Where some or all of the economic benefit required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an

asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(t) Investment PropertyInvestment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains or losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise.

(u) Financial InstrumentsDebt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual agreement.Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments.

Financial LiabilitiesFinancial Liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

Financial Liabilities at fair valuethrough profit or loss Financial liabilities are classified as at fair value through profit or loss where the financial liability is either held for trading or it is designated as at fair value through profit or loss. A financial liability is held for trading if: it has been incurred principally for the purpose of repurchasing in the near future; or it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument.A financial liability other than a financial liability held for trading is designated as at fair value through profit or loss upon initial recognition if; such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to be designated as

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

22



at fair value through profit or loss.Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilitiesOther financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

(v) Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

2. APPLICATION OF NEWAND REVISED ACCOUNTINGSTANDARDS2.1 Amendments to AASBs and the new Interpretation that are mandatorily effective for the current yearIn the current year, the Group has applied a number of amendments to AASBs and a new Interpretation issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 June 2014.

AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities’The amendments to AASB 132 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’.The amendments have been applied retrospectively. The Group has assessed whether certain of its financial assets and financial liabilities qualify for offset based on the criteria set out in the amendments and concluded that the application of the amendments does not have any material impact on the amounts recognised in theGroup’s consolidated financial statements.

AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures forNon-Financial Assets’The amendments to AASB 136 remove the requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce additional disclosure requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value less costs of disposal. These new disclosures include the fair value hierarchy, key assumptions and valuation techniques used which are in line with the disclosure required by AASB 13 ‘Fair Value Measurements’. The application of these amendments does not have any material impact on the disclosures in the Group’s consolidated financialstatements.

Kem

p &

Denning

Annual R

epo

rt 2015

23

2. APPLICATION OF NEW ANDREVISED ACCOUNTING STANDARDS (CONT)


AASB 1031 ‘Materiality’,AASB 2013-9 ‘Amendments to Australian Accounting Standards’ – Conceptual Framework, Materiality and Financial Instruments’ (Part B: Materiality), AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part C: Materiality)The revised AASB 1031 is an interim standard that cross-references to other Standards and the ‘Framework for the Preparation and Presentation of Financial Statements’ (issued December 2013) that contain guidance on materiality. The AASB is progressively removing references to AASB 1031 in all Standards and Interpretations. Once all of these references have been removed, AASB 1031 will be withdrawn. The adoption of AASB 1031, AASB 2013-9 (Part B) and AASB 2014-1 (Part C) does not have any material impact on the disclosures or the amounts recognised in the Group’s consolidated financial statements.

2.2 Standards and Interpretations in issue not yet adoptedAt the date of authorisation of the financial statements, the Standards and Interpretations thatwere issued but not yet effective are listed below. The group has considered the impact of these standards in issue not yet adopted and do not expect a material impact to the financial statements following adoption.

Effective for annual Expected to be initially reporting periods applied in the financial Standard/Interpretation beginning on or after year ending AASB 9 ‘Financial Instruments’, 1 January 2018 30 June 2019and the relevant amending standards1

AASB 15 ‘Revenue from Contracts with 1 January 2017 30 June 2018Customers’ and AASB 2014-5‘Amendments to Australian AccountingStandards arising from AASB 15’

AASB 2014-4 ‘Amendments to Australian 1 January 2016 30 June 2017Accounting Standards – Clarification ofAcceptable Methods of Depreciation andAmortisation’

AASB 2015-1 ‘Amendments to Australian 1 January 2016 30 June 2017Accounting Standards – Annual Improvementsto Australian Accounting Standards 2012-2014Cycle’

AASB 2015-2 ‘Amendments to Australian 1 January 2016 30 June 2017Accounting Standards – Disclosure Initiative:Amendments to AASB 101’

AASB 2015-3 ‘Amendments to Australian 1 July 2015 30 June 2016Accounting Standards arising from theWithdrawal of AASB 1031 Materiality’

1 The AASB has issued the following versions of AASB 9: •AASB9‘FinancialInstruments’(December2009)andtherelevantamendingstandard; •AASB9‘FinancialInstruments’(December2010)andtherelevantamendingstandards; •AASB2013-9‘AmendmenttoAustralianAccountingStandards–ConceptualFramework, Materiality and Financial Instruments’, Part C – Financial Instruments •AASB9‘FinancialInstruments’(December2014)andtherelevantamendingstandards

All the standards have an effective date of annual reporting periods beginning on or after 1 January 2018. Either AASB 9 (December 2009) or AASB 9 (December 2010) can be early adopted if the initial application date is before 1 February 2015. After this date only AASB 9 (December 2014) can be early adopted.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

24

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities year ended 31 May

CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $3. REVENUEAn analysis of the Group’s revenuefor the year is as follows:

Revenue from the sale of goods 90,080,250 89,093,857 90,080,250 89,093,857 Other income Interest from bank deposits 19,547 15,035 19,547 15,035

Rental income from property rental 105,027 111,777 105,027 111,777 Gain /(loss) on disposal ofproperty, plant & equipment (6,868) (9,842) (6,868) (9,842) Gain /(loss) on sale of shares - - - -Other income 61,318 40,421 61,318 40,421Total Other Income 179,024 157,391 179,024 157,391Total Revenue 90,259,274 89,251,248 90,259,274 89,251,248

4. FINANCE COSTSInterest on bank overdrafts and loans 239,958 386,204 239,958 386,204Other finance costs 36,136 54,682 36,136 54,682 276,094 440,886 276,094 440,886

5. PROFIT FOR THE YEARS(a) Gains and lossesProfit before income tax has beenarrived at after crediting/(charging)the following gains and losses: Gain/(loss) on sale of shares - - - - Gain/(loss) on disposal of property,plant & equipment (6,868) (9,842) (6,868) (9,842) (b) Other expenses Profit for the year includes thefollowing expenses: Impairment of trade receivables 91,708 106,229 91,708 106,229 Depreciation of non-current assets: Buildings 239,307 235,910 63,749 63,749Plant and equipment 958,057 1,614,583 958,057 1,614,583 1,197,364 1,850,493 1,021,806 1,678,332 Operating lease rental expenses - Minimum lease payments 2,036,664 2,249,663 2,036,664 2,249,663 Employee benefits expense: Post employment benefits -defined contribution plan 1,154,006 1,126,433 1,154,006 1,126,433Other employee benefits 14,355,391 14,278,891 14,355,391 14,278,891 15,509,397 15,405,324 15,509,397 15,405,324

Kem

p &

Denning

Annual R

epo

rt 2015

25


CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $6. INCOME TAXES(a) Income tax recognised in profit or loss

Tax expense/ (income) comprises:Current tax expense/(income) 893,912 417,872 931,554 458,985 Adjustment recognised in the currentyear in relation to the current taxof prior years - (1,212) - (1,212) Deferred tax expense/(income)relating to the origination and reversal of temporary differences (122,578) (112,492) (113,755) (111,123) Total tax expense/(income) 771,334 304,168 817,799 346,650 The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: Profit from operations 1,014,072 596,670 2,600,346 768,830

Income tax expense calculated at 30% 304,222 179,001 780,104 230,649 Tax effect of permanentand other differences:- Non-deductible expenses 25,872 127,312 25,872 127,312 - Non-assessable income - - - - - (Over)/ Under provision of income tax in previous year - (1,212) - (1,212) Other 441,240 (933) 11,823 (10,099) 771,334 304,168 817,799 346,650 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

(b) Current tax assets and liabilities Current tax assets: Tax refund receivable attributable to: Parent entity - 84,568 - 84,568 Entities in the tax-consolidated group 37,641 41,416 37,641 41,416 37,641 125,984 37,641 125,984 Current tax liabilities: Income tax payable attributable to: Parent entity 478,286 - 478,286 - Entities in the tax-consolidated group - - - - 478,286 - 478,286 - Deferred tax assets comprise: Deferred tax asset 195,016 133,259 1,048,558 934,808 Deferred tax liabilities comprise: Deferred tax liabilities - - - -

26

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities year ended 31 May Opening Charged Acquisitions Charged Closing Balance to Income /Disposals Equity Balance

6. INCOME TAXES (CONT)(c) Deferred tax balances

Movement in net deferred incometax assets/liabilities attributable to temporary differencesConsolidated 2015Deferred tax asset/(tax liability) Property, plant and equipment (980,243) 63,609 (60,817) (977,451)Employee entitlements 598,373 12,835 - - 611,208 Other 515,129 46,130 561,259 133,259 122,574 - (60,817) 195,016Consolidated 2014 Deferred tax asset/(tax liability) Property, plant and equipment (1,046,502) 66,259 - (980,243)Employee entitlements 639,286 (40,913) - - 598,373Other 427,983 87,146 515,129 20,767 112,492 - - 133,259Company 2015 Deferred tax asset/(tax liability) Property, plant and equipment (178,697) 54,786 - - (123,911)Employee entitlements 598,375 12,835 - - 611,210Other 515,130 46,129 - - 561,259 934,808 113,750 - - 1,048,558Company 2014 Deferred tax asset/(tax liability) Property, plant and equipment (243,585) 64,888 - - (178,697)Employee entitlements 639,287 (40,912) - - 598,375Other 427,983 87,147 - - 515,130 823,685 111,123 - - 934,808

Tax Consolidation System The company and its wholly-owned Australian resident entity is eligible to consolidate for tax purposes under this legislation and have elected to be taxed as a single entity from 1 June 2004. The head entity within the tax consolidation group for the purposes of the tax consolidation system is Kemp & Denning Limited. Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding agreement, Kemp & Denning Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.

Kem

p &

Denning

Annual R

epo

rt 2015

27


CONSOLIDATED COMPANY 2015 2014 2015 20147. TRADE & OTHER $ $ $ $RECEIVABLESCurrent Trade receivables (i) 5,618,622 5,595,357 5,618,622 5,595,357 Allowance for doubtful debts (71,000) (71,000) (71,000) (71,000) Total current receivables 5,547,622 5,524,357 5,547,622 5,524,357

(i) The average credit period on sale of goods is 40 days. No interest is charged on the trade receivables for up to 60 days from the date of the invoice. Thereafter, interest is charged at 16% per annum on the outstanding balance. An allowance has been made for estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. The Group has provided for specific receivables over 120 days where their collection is not expected to be recoverable. Trade receivables between 60 days and 120 days are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. Before accepting any new customers, the Group uses information from an external source, and reference checks from referees to assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed regularly. There is no customer which represents more than 3% of the total balance of trade receivables.

Ageing of past due but not impaired 60 - 90 days 281,137 350,153 281,137 350,15 90 - 120 days 77,926 34,447 77,926 34,447120+ days 137,454 210,039 137,454 210,039Total 496,517 594,639 496,517 594,639 Movement in the allowance for doubtful debts Balance at the beginning of the year 71,000 65,000 71,000 65,000 Impairment losses recognisedon receivables 120,010 118,082 120,010 118,082 Amounts written off as uncollectible (91,708) (100,229) (91,708) (100,229) Impairment losses reversed (28,302) (11,853) (28,302) (11,853) Balance at the end of the year 71,000 71,000 71,000 71,000

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of $71,000 (2014: $71,000) which are in doubt. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected proceeds. The Group hold caveats on personal property for approximately half of these balances.

Ageing of impaired trade receivables 90 - 120 days - - 120+ days 71,000 71,000 71,000 71,000 Total 71,000 71,000 71,000 71,000

28

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015


CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $8. INVENTORIESCurrent Raw materials and stores 18,489 19,361 18,489 19,361Finished goods 13,123,688 14,761,192 13,123,688 14,761,192 13,142,177 14,780,553 13,142,177 14,780,553

9. OTHER ASSETS Current Prepayments 601,240 666,978 601,240 666,978

Non-Current Shares - Controlled entities Unquoted - at cost 25 - - 4 4 Other loans - controlled entities- at amortised cost - - 6,399,302 10,355,229 - - 6,399,306 10,355,233 10. PROPERTY, PLANTAND EQUIPMENT Freehold properties: Plant and Capital work Land & Buildings equipment in progress CONSOLIDATED (at fair value $) (at cost $) (at cost $) TotalGross Carrying amount balanceas at 1 June 2013 28,682,051 15,792,819 16,496 44,491,366Additions 772,815 422,990 13,432 1,209,237Disposals - (420,182) - (420,182)Net revaluation increments/(decrements) - - - -Asset reclassified as Held for sale (5,617,408) - - (5,617,408)Transfers to another class - 16,496 (16,496) -Balance at 31 May 2014 23,837,458 15,812,123 13,432 39,663,013Additions 326,737 315,381 629,650 1,271,768Disposals (93,308) (5,326,299) - (5,419,607)Net revaluation increments/(decrements) 3,003,824 - - 3,003,824Impairment (288,176) - - (288,176)Transfers to another class - 13,432 (13,432) -Balance at 31 May 2015 26,786,535 10,814,637 629,650 38,230,822 Accumulated depreciation balanceas at 1 June 2013 235,776 8,907,009 - 9,142,785Disposals - (344,642) - (344,642)Depreciation expense 235,910 1,614,583 - 1,850,493Balance as at 1 June 2014 471,686 10,176,950 - 10,648,636Disposals - (5,256,431) - (5,256,431)Net adjustments from revaluationincrements/(decrements) (710,993) - - (710,993)Depreciation expense 239,307 958,057 - 1,197,364Balance as at 31 May 2015 - 5,878,576 - 5,878,576 Net book value As at 31 May 2014 23,365,772 5,635,173 13,432 29,014,377As at 31 May 2015 26,786,535 4,936,061 629,650 32,352,246

Kem

p &

Denning

Annual R

epo

rt 2015

29


10. PROPERTY, PLANTAND EQUIPMENT (CONT) Freehold properties: Plant and Capital work Land & Buildings equipment in progress COMPANY (at fair value $) (at cost $) (at cost $) TotalGross Carrying amount balanceas at 1 June 2013 3,250,006 15,792,819 16,496 19,059,321Additions 769,059 422,990 13,432 1,205,481Disposals - (420,182) - (420,182)Asset reclassified as Held for sale (117,408) - - (117,408)Transfers to another class - 16,496 (16,496) -Balance as at 1 June 2014 3,901,657 15,812,123 13,432 19,727,212Additions 46,524 315,381 629,650 991,555Disposals - (5,326,299) - (5,326,299)Net revaluation increments/(decrements) (175,341) - - (175,341)Transfers to another class - 13,432 (13,432) -Balance at 31 May 2015 3,484,664 10,814,637 629,650 14,928,951 Accumulated depreciation balanceas at 1 June 2013 63,750 8,907,009 - 8,970,759Disposals (344,642) - (344,642)Asset reclassified as Held for sale - - - -Depreciation expense 63,749 1,614,583 - 1,678,332Balance as at 1 June 2014 127,499 10,176,950 - 10,304,449Disposals - (5,256,431) - (5,256,431)Net adjustments from revaluationincrements/(decrements) (191,248) - (191,248)Depreciation expense 63,749 958,057 - 1,021,806Balance as at 31 May 2015 - 5,878,576 - 5,878,576 Net book value As at 31 May 2014 3,774,158 5,635,173 13,432 9,422,763As at 31 May 2015 3,484,664 4,936,061 629,650 9,050,375

(i) Valuation of freehold properties The basis of valuation of freehold properties is fair value, being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction. The latest assessment of fair value is based on independent valuations by Brothers & Newton Pty Ltd, registered valuers, as a guide. The valuations have been based on commercial rates of rent for similar properties. The effective date of the valuation is 31 May 2015 (2014: 31 May 2012). Aggregate depreciation allocated during the year is recognised as an expense and disclosed in note 5 to the financial statements. Directors elected to combine Land and Buildings as one asset class in 2009. (ii) Asset reclassified as Held for sale The Land at 110 Giblin Street, New Town was held for sale at 31 May 2014. The property was sold with Council approval for a 114 lot residential sub-division. In compliance with Australian Accounting Standards, the Land was shown at the lower of carrying ‘amount and fair value less costs to sell as at 31 May 2014 and shown as Held for Sale - see Note 31. In December 2014 the land was sold and an impairment charge of $1,410,716 was incurred which has been reflected in the Income Statement as at 31 May 2015.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

30


10. PROPERTY, PLANTAND EQUIPMENT (CONT)(iii) Impairment expense Due to the revaluation of freehold properties in 2015, a write down was necessary for two properties. It is the first time one of these properties has been independently valued since it has been acquired. Since there had been no adjustments previously, the write down of $288,176 been shown as an impairment expense in the current year. In addition the property at 110 Giblin Street was sold for $1,410,716 less than what the asset washeld for sale at May 2014 - see Note 31. As a result there was an impairment incurred of $1,410,716which has been shown as an impairment in the current year. This is despite an amount of $5,349,544 in the ARR which has been transfered to retained earnings which relates to this property.

Importantly, despite the impairment expense of $1,698,892, the revaluation reserve increased by $3,714,817, as a result of the valuations in 2014/15. CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $The carrying amount of land and buildingshad they been recognised under thehistorical cost model is as follows: Freehold Land 4,830,673 4,779,214 1,864,394 1,817,870Buildings 8,399,310 8,217,340 3,073,568 3,073,568 Assets classified as Held for Sale - 273,852 - 117,408 Details of the Group’s freehold land and buildings information about the fair value hierarchy as at 31 May 2015 are as follows: Fair value as at Level 1 Level 2 Level 3 31/05/15 Warehouse stores in Australia that contains: - freehold land - 15,760,000 - 15,760,000- buildings - 11,026,535 - 11,026,535 the fair value categories are described in note 1.

CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $11. INVESTMENT PROPERTY Balance at beginning of financial year 290,000 290,000 - - ‘Net revaluation increments/(decrements) - - - - Net gain/(loss) from fair value adjustments - - - - Balance at end of financial year 290,000 290,000 - - Valuation The basis of valuation is fair value, being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction. The latest assessment of fair value is primarily based on independent valuations by Brothers & Newton Pty Ltd, registered valuers, as a guide which was based on reference to market evidence of transaction prices for similar properties. The effective date of the valuation is 31 May 2012 (2013: 31 May 2012). Fair value as at Level 1 Level 2 Level 3 31/05/15 Investment property in Australia that contains: - freehold land - 200,000 - 200,000 - buildings - 90,000 - 90,000 the fair value categories are described in note 1.

Kem

p &

Denning

Annual R

epo

rt 2015

31


31/05/15 31/05/14 01/06/1412. GOODWILLCost 1,362,085 1,362,085 1,362,085 Accumulated impairment losses (465,000) (465,000) (139,500) 897,085 897,085 1,222,585

CONSOLIDATED COMPANY 2015 2014 2015 2014Cost $ $ $ $Balance at beginning of year 1,362,085 1,362,085 1,362,085 1,362,085 Addition amounts recognised fromacquisition of new businesses - - - - occurring during the year Balance at the end of the year 1,362,085 1,362,085 1,362,085 1,362,085 Accumulated impairment losses Balance at beginning of year (465,000) (139,500) (465,000) (139,500) Impairment during the year - (325,500) - (325,500) Balance at the end of the year (465,000) (465,000) (465,000) (465,000)

(i) Allocation of goodwill to cash-generating units Goodwill has been allocated for impairmenttesting purposes to the following cash-generating units. Before recognition ofimpairment losses, the carrying amountsof goodwill was allocated to cash-generating units as follows:- Hobart Warehouse 290,000 290,000 290,000 290,000 - Glenorchy Warehouse 407,085 407,085 407,085 407,085 - Kingston Trade outlet 200,000 200,000 200,000 200,000 897,085 897,085 897,085 897,085

The recoverable amount of these cash-generating units is determined based on the value in use calculation which uses cash flow projections based on financial budgets approved by the directors. Assumptions have been made to predict figures past the current budget period for a further four years and a discounted rate of 15% per annum (2014: 15%). The cash flow projections beyond the current budget period have been extrapolated using a steady 2.5% per annum growth rate. Directors believe that any reasonable possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit. There was an impairment charge recognised in the prior year for the Devonport Warehouse(formerly Brewster Launceston) business due to the low retention of Launceston customers.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

32


13. ASSETS PLEDGED AS SECURITYIn accordance with the security arrangements of liabilities, as disclosed in note 15 to the financial statements, all non-current assets of the Group, except deferred tax assets, have been pledged as security. The holder of the security does not have the right to repledge the assets. The Bank overdraft and loans for the Group of $3,650,000 (2014: $7,279,981) and for the Company of $3,650,000 (2014: 7,279,981) were secured by a mortgage over the Group’s freehold land and buildings and fixed and floating assets of the company (refer note 10).

CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $

14. TRADE & OTHERPAYABLES Trade payables - unsecured (i) 7,341,885 6,362,039 7,341,885 6,362,039 Goods and services tax (GST) payable 638,533 728,993 638,533 728,993 7,980,418 7,091,032 7,980,418 7,091,032 (i) The consolidated entity has policiesin place to ensure that all payablesare paid within the credit time frame

15. BORROWINGS Current - Amortised Cost Bank overdraft - secured (i) - 279,981 - 279,981 Bank loans - secured (i) - 7,000,000 - 7,000,000 Other loans - unsecured current - 528,649 - 528,649 Finance lease liabilities - secured 24 159,568 208,934 159,568 208,934 159,568 8,017,564 159,568 8,017,564 Non-current - Amortised Cost Bank loans - secured (i) 3,650,000 - 3,650,000 - Finance lease liabilities - secured 24 1,012,197 1,239,184 1,012,197 1,239,184 4,662,197 1,239,184 4,662,197 1,239,184 (i) The bank overdraft and bank loans are secured by Registered Mortgage Debentures over fixed and floating assets of the company and of the controlled entity along with registered mortgages on freehold property of the controlled entity. The unused facilities available on the Group’s bank overdraft is $2,750,000 (2014: $2,470,019).

16. PROVISIONSCurrent Employee benefits 1,663,454 1,643,873 1,663,454 1,643,873

Non-Current Employee benefits 373,912 350,708 373,912 350,708

Kem

p &

Denning

Annual R

epo

rt 2015

33


CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $

17. OTHER LIABILITIESCurrent Lease incentive 24 102,471 102,471 102,471 102,471

Non-Current Lease incentive 24 595,769 475,048 595,769 475,048

18. ISSUED CAPITAL2,683,635 fully paid ordinaryshares (2014: 2,683,635) 2,008,692 2,008,692 2,008,692 2,008,692 Fully paid ordinary shares carry one voteper share and carry the right to dividends. Changes to the then Corporations Lawabolished the authorised capital and parvalue concept in relation to share capitalfrom 1 July 1998. Therefore, the companydoes not have a limited amount ofauthorised capital and issued sharesdo not have a par value.

19. RESERVESAsset revaluation 14,413,876 16,109,420 - -Capital profits 1,384,985 1,384,985 - - 15,798,861 17,494,405 - - Asset revaluation reserve Balance at the beginning of year 16,109,420 16,272,897 - 75,697Revaluation increments/(decrements) 3,714,817 - - -Transfer to retained earnings (5,349,544) (163,477) - (105,474)Deferred tax liability (60,817) - - 29,777Balance at the end of year 14,413,876 16,109,420 - - The asset revaluation reserve arises on the revaluation of land and buildings. Where a revalued land or building is sold that portion of the asset revaluation reserve which relates to that asset, and is effectively realised, is transferred directly to retained earnings. The capital profits reserve relates to capital profits realised on disposal of non-current assets.

20. RETAINED EARNINGSBalance at the beginningof the financial year 18,692,224 19,712,244 21,961,797 22,910,142 Net profit attributable tomembers of the parent entity 242,738 292,502 1,782,547 422,180 Transfer from asset revaluation reserve 5,349,544 163,477 - 105,474 Total available for appropriation Dividends provided for or paid 21 (4,964,724) (1,475,999) (4,964,724) (1,475,999) Retained earnings at theend of the financial year 19,319,782 18,692,224 18,779,620 21,961,797

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

34

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities year ended 31 May 2015 2014 Cents per Total Cents per Total share $ share $21. DIVIDENDSRecognised Amounts Fully paid ordinary shares Prior year final dividend -franked to 100% (2014: 100%) 10.0 268,364 40.0 1,073,454Special dividend - franked to 100% 150.0 4,025,453 - -Interim dividend - franked to 100% (2014: 100%) 25.0 670,908 15.0 402,545 185.0 4,964,724 55.0 1,475,999 Unrecognised Amounts Fully paid ordinary shares Final dividend- franked to 100% (2014: 100%) 40.0 1,073,454 10.0 268,364 The final dividend for the financial year for the year ended 31 May 2015 has not been recognised in this financial report because it was declared after 31 May 2015. The amounts disclosed as recognised include publicly recommended dividends in respect of ordinary shares subsequent to reporting date. In future financial reports the amount disclosed as ‘recognised’ will be the final dividend in respect of the prior financial year, and the interim dividend in respect of the current financial year.

COMPANY 2015 2014 $ $Adjusted franking account balance 6,490,829 7,681,216

Impact on franking account balance of dividend not recognised (460,052) (115,013)

CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $

22. COMMITMENTSFOR EXPENDITURE(a) Capital expenditure Land, Plant and Equipment) contractedfor is payable not later than one year - - - -

(b) Non-cancellable operating leasecommitments are disclosed in note 24 to the financial statements.

23. CONTINGENT LIABILITIESRehabilitation bond on land for whichthe Company holds mining leases. 30,000 30,000 30,000 30,000 Court proceedings (i) - - - - (i) There is an ongoing Supreme court actionwith a resident who lived opposite the Brickmanufacturing plant for 10 months. The Group is unable to assess whether anyobligation will arise as a consequence of the action.

Kem

p &

Denning

Annual R

epo

rt 2015

35


24. LEASESFinance LeasesLeasing arrangements Finance leases relate to Mobile plant with lease term of less than 7 years. The group/company will purchase the equipment at the end of the leases for a cost of $293,870. The group/company ‘s obligation under finance leases are secured by the lessor’s title to the lease assets. Minimum future lease payments Present value of Minimum future lease payments

CONSOLIDATED COMPANY CONSOLIDATED COMPANY 2015 2014 2015 2014 2015 2014 2015 2014 $ $ $ $ $ $ $ $Finance lease liabilitiesNo later than 1 year 236,267 308,643 236,267 308,643 159,568 208,934 159,568 208,934Later than 1 year and notlater than 5 years 898,302 1,058,442 898,302 1,058,442 739,335 843,757 739,335 843,757 Later than 5 years 297,939 441,485 297,939 441485 272,862 395427 272,862 395427 Minimum future lease payments* 1,432,508 1,808,570 1,432,508 1,808,570 1,171,765 1,448,118 1,171,765 1,448,118Less future finance charges (260,743) (360,452) (260,743) (360,452) Present value of minimumlease payments 1,171,765 1,448,118 1,171,765 1,448,118 1,171,765 1,448,118 1,171,765 1,448,118 Included in the financial statements as: (note 15) Current borrowings 159,568 208,934 159,568 208,934Non-current borrowings 1,012,197 1,239,184 1,012,197 1,239,184 1,171,765 1,448,118 1,171,765 1,448,118

* Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.

Operating Leases Leasing arrangements Operating leases include: - warehouse facilities with lease terms of 10 years, with a further two options to extend for a further 10 years each. - warehouse facilities with lease terms of 3 years. - vehicle and plant leases that range from a few months to 10 years. Operating leases for warehouses contain annual consumer price index (CPI) increase and market review in year 5. The group/company does not have an option to purchase the leased asset at the expiry of the lease period. The group/company does has first right of refusal to purchase the land and buildings should the Landlord decide to sell. CONSOLIDATED COMPANY 2015 2014 2015 2014 Note $ $ $ $Non-cancellable operatinglease commitmentsNot longer than one year 1,778,238 1,837,806 1,778,238 1,837,806 Longer than one year and notlonger than five years 4,309,851 4,991,405 4,309,851 4,991,405 Longer than five years 2,354,545 3,197,964 2,354,545 3,197,964 8,442,634 10,027,175 8,442,634 10,027,175In respect of non-cancellable operating leasesthe following liabilities have been recognised: Lease incentive Current 17 102,471 102,471 102,471 102,471 Non-current 17 595,769 475,048 595,769 475,048 698,240 577,519 698,240 577,519

36

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities year ended 31 May Country Ownership Interest of 2015 2014 Incorporation % %25. INVESTMENTS IN CONTROLLED ENTITY Parent Entity Kemp & Denning Limited Australia Controlled Entity Kemp & Denning Hardware Pty Ltd Australia 100 100 (i) A deed of cross guarantee between Kemp & Denning Hardware Pty Ltd and the Company dated 30 September 1992 was obtained and this controlled entity has been relieved from the requirement to prepare and lodge an audited financial report under a class order issued by ASIC. (ii) Kemp & Denning Limited is the head entity within the tax-consolidated group. Kemp & Denning Limited and Kemp & Denning Hardware Pty Ltd are members of the tax-consolidated group.

The financial statements of the Kemp & Denning Hardware Pty Ltd which is party to the deed of cross guarantee are: 2015 2014Income Statement - year ended 31 May $ $Occupancy expenses (175,558) (172,161)Impairment expense (1,410,716) - Profit/(Loss) before tax expense (1,586,274) (172,160) Income tax expense 46,465 42,482 Profit/(Loss) for the year (1,539,809) (129,678) Balance Sheet as at 31 MayNon-Current Assets Property, plant and equipment 23,301,874 25,091,617 Investment property 290,000 290,000Deferred tax assets 787 39,903 Total Non-Current Assets 23,592,661 25,421,520Total Assets 23,592,661 25,421,520

Non-Current Liabilities Deferred tax liabilities 854,329 841,452Other 6,399,361 10,355,238 Total Non-Current Liabilities 7,253,690 11,196,690Total Liabilities 7,253,690 11,196,690 Net Assets 16,338,971 14,224,830 Equity Issued capital 4 4Reserves 15,798,806 17,494,400Accumulated profits/(losses)* 540,161 (3,269,574)Total Equity 16,338,971 14,224,830 Accumulated profits/(losses)* Balance at the beginning of the financial year (3,269,574) (3,197,899) Transfers from reserves 5,349,544 58,003 Net Profit/(Loss) after tax (1,539,809) (129,678)Accumulated profits/(losses) at the end of the financial year 540,161 (3,269,574) Kemp & Denning Hardware Pty Ltd owns the properties that Kemp & Denning Limitedoperates from and also receives administrative services from Kemp & Denning Limited.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

Kem

p &

Denning

Annual R

epo

rt 2015

37



26. NOTES TO THE CASH FLOW STATEMENT(a) Reconciliation of Cashand Cash Equivalents For the purposes of the statement of cashflows, cash and cash equivalents includescash on hand and in banks and depositsat call, net of outstanding bank overdrafts.Cash and cash equivalents at the end ofthe financial year as shown in thestatement of cash flows is reconciled tothe related items in the statement ofbalance sheet as follows:Cash and cash equivalents 80,383 65,200 80,383 65,200 Bank overdraft - (279,981) - (279,981) 80,383 (214,781) 80,383 (214,781)

(b) Financing facilities Secured bank overdraft facility,reviewed annually.Amount used - 279,981 - 279,981 Amount unused 2,750,000 2,470,019 2,750,000 2,470,019 2,750,000 2,750,000 2,750,000 2,750,000 Secured bill acceptance facility,reviewed annually.Amount used 3,650,000 7,000,000 3,650,000 7,000,000 Amount unused 3,600,000 1,000,000 3,600,000 1,000,000 7,250,000 8,000,000 7,250,000 8,000,000

27. FINANCIAL INSTRUMENTS(a) Capital risk management The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2014. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 15, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 18, 19 and 20 respectively. The Group is not subject to externally imposed capital requirements. Operating cash flows are used to maintain and expand the group’s assets, as well as to make the routine outflows of tax and dividends. The Group’s policy is to use borrowing facilities to meet anticipated funding requirements. The Group reviews the capital structure regularly and balances its overall capital structure through the payment of dividends as well as the issue of new debt or the redemption of existing debt. (b) Financial risk The Group’s exposure to financial risk is limited to market risk, credit risk and liquidity risk as discussed below. The Group does not use derivative financial instruments to minimise risk. Management report periodically throughout the year to the Board of Directors about risk exposure and as necessary procedures are adopted to minimise these risks, as and when they arise and the Board considers the exposure to be significant.

38


27. FINANCIAL INSTRUMENTS (CONT) (c) Market risk The Group did not have any exposure to market risk in the current or previous financial years. Management continue to monitor financial instruments to assess whether market risk arises and if such risk was to arise and it was significant, management would implement appropriate procedures to manage the risk. (d) Interest rate risk management The Group’s exposure to interest rates on financial assets and financial liabilities is detailed in the liquidity risk management section below. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. Management have assessed the recent interest rate fluctuations and determined that 50 basis points as a reasonable estimate of the possible changes in interest rates.

At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s: - net profit would decrease by $18,305 and increase by $18,305 (2014: decrease by $39,095 and increase by $39,095).

The Group’s sensitivity to interest rates has decreased during the current period due to the reduction in debt and an increase in cash and cash equivalents.

(e) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate equitable charges over property and director guarantees are sought from customers. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained: CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $Financial assets and other credit exposuresGuarantee provided under thedeed of cross guarantee - - 6,399,302 10,355,229 (f) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group 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.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

Kem

p &

Denning

Annual R

epo

rt 2015

39


27. FINANCIAL INSTRUMENTS (CONT) Included in note 26(b) is a listing of additional undrawn facilities that the company/Group has at its disposal to further reduce liquidity risk. Liquidity and interest risk tables The following tables detail the company’s and the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes principal cash flows only.

CONSOLIDATED COMPANY Weighted average Weighted average effective Less than 1 1-5 5+ effective Less than 1 1-5 5+ % year $ years $ years $ % year $ years $ years $Finance Liabilities2015 Non-interest bearing - 10,017,784 - - - 10,017,784 - -Fixed interest rate (Leases) 7.87% 159,568 739,335 272,862 7.87% 159,568 739,335 272,862Variable interest rate Commercial Bills 2.08% 3,650,000 - - 2.08% 3,650,000 - -Variable interest rate Other Loans - - - - - - - - 13,827,352 739,335 272,862 13,827,352 739,335 272,862 2014 Non-interest bearing - 9,085,613 - - - 9,085,613 - -Fixed interest rate (Leases) 7.87% 208,934 843,757 395,427 7.87% 208,934 843,757 395,427Variable interest rate Bank Overdraft 9.38% 279,981 - - 9.38% 279,981 - -Variable interest rate Commercial Bills 3.57% 7,000,000 - - 3.57% 7,000,000 - -Variable interest rate Other Loans 2.20% 528,649 - - 2.20% 528,649 - - 17,103,181 843,757 395,427 17,103,181 843,757 395,427

The following tables detail the company’s and the Group’s expected maturity for its financial assets. The tables have been drawn up based on the undiscounted contractual maturities of the financial assets. CONSOLIDATED COMPANY Weighted average Weighted average effective Less than 1 effective Less than 1 % year $ % year $Finance Assets2015Non-interest bearing - 6,193,525 - 6,193,525 Variable interest rate instruments 1.90% 10,958 1.90% 10,958 6,204,483 6,204,4832014 Non-interest bearing - 6,235,998 - 6,235,998Variable interest rate instruments 2.40% 10,378 2.40% 10,378 6,246,376 6,246,376 (g) Fair Value of financial instruments The carrying amount of all other financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in note 1 to the financial statements.

(h) Other Price Risk The Group’s market risk is limited to the exposure from investments in equities held at fair value. The Group’s exposure to market risk has been eliminated in the current year as equities held at fair value have been disposed of during the period. Investments held by the Group at year end are held for strategic rather than trading purposes and therefore do not present a market risk as they are valued at cost.

40

NOTES TO THE FINANCIAL STATEMENTSKemp & Denning Limited and Controlled Entities year ended 31 May CONSOLIDATED COMPANY 2015 2014 2015 2014 $ $ $ $28. KEY MANAGEMENTPERSONNEL REMUNERATION The aggregate compensation of the keymanagement personnel of the consolidatedentity and the company is set out below Short-term employee benefits 1,531,337 1,424,931 1,531,337 1,424,931Post-employment benefits 140,763 118,897 140,763 118,897 1,672,100 1,543,828 1,672,100 1,543,828

29. RELATED PARTY DISCLOSURES(a) Directors The directors of Kemp & Denning Limited during the year were: R A Brown C A G KempM A Rayner S M Allison-Rogers G J Woolley (elected on 24/09/14) G Goodman (appointed on 24/09/14) A G Kemp (resigned on 24/09/14) R E G Kemp (as an alternate for A G Kemp)

(b) Directors’ Shareholdings The aggregate number of ordinary shares held at reporting date directly, indirectly or beneficially by directors 95,215 962,731

(c) Directors’ Deposits The directors of the consolidated entity, or their director-related entities, have deposits at call with the consolidated entity that occur within a normal depositor relationship on terms and conditions no more favourable than those with which it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at arm’s length in similar circumstances. The aggregate amount of thesedeposits at year end, all of which isclassified in the financial reportas current, is: - 257,628 - 257,628

The aggregate amount of interest expenseattributable to these deposits and includedin the determination of the operatingprofit before tax for the financial year is: 3,371 4,313 3,371 4,313

(d) Other Director Related TransactionsThe directors of the consolidated entity, or their director-related entities, have transactions of a domestic or trivial nature with entities within the consolidated entity that occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those with which it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at arm’s length in similar circumstances. (e) Equity interests in subsidiariesKemp & Denning Limited owns 100% of the shares in Kemp & Denning Hardware Pty Ltd. Details are contained within note 25. (f) Key management Personnel Compensation Details are contained within note 28.

(g) Transactions within the Wholly-Owned GroupDetails are contained within note 25.

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

Kem

p &

Denning

Annual R

epo

rt 2015

41



30. REMUNERATIONOF AUDITORSAuditing the Financial Report 61,030 59,030 61,030 59,030Taxation 14,975 20,080 14,975 20,080Other services 1,390 20,080 1,390 20,080 77,395 99,190 77,395 99,190 The Auditor is DeloitteTouche Tohmatsu

31 . ASSET CLASSIFIEDAS HELD FOR SALE Asset classified as Held for Sale (i) - 5,617,408 - 117,408

(i) The Land at 110 Giblin Street, New Town was sold in December 2014 with Council approval for a 114 lot residential sub-division. In compliance with Australian Accounting Standards, the Land has been show at the lower of carrying amount and fair value less costs to sell as at 31 May 2014. The amount was transferred from Property, Plant & Equipment - see Note 10. When sold in December 2014 an impairrment of $1,410,716 was incurred which is shown in the Income Statement as at 31 May 2015. Despite having $5,349,544 in the asset revaluation reseve (ARR) relating to the Giblin Street property this could not be used to offset the imapirment due to the asset being classified as Held for sale as at May 2014. This amount has been transferred from the ARR to retained earning during 2014/15 - see Notes 19 and 20.

32. SUBSEQUENT EVENTSFollowing considerable investigation and deliberation, on the 24th July 2015 we formally gave Mitre 10 notice that we had decided to end our 25 year association with the Mitre 10 group. In advising Mitre 10 of our decision we thanked them for what has been a mutually beneficial relationship. The landscape in our business has been changing and will continue to change. Research on brand, supply chain logistics and our financial modelling strongly indicated that we need to assert our independence, therefore as from October, we will rebrand as K&D.

42

DIRECTORS’ DECLARATION

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;

(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity; and

(c) in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the financial statements.

At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the directors’ opinion, there are reasonable grounds to believe that the companies to which the ASIC Class Order applies, as detailed in note 25 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

R A BrownDirector

Hobart, 12 August 2015

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

Kem

p &

Denning

Annual R

epo

rt 2015

43

We have audited the accompanying financial report of Kemp & DenningLimited, which comprises the balance sheet as at 31 May 2015,the income statement, the statement of comprehensive income,the cash flow statement and the statement of changes in equity forthe year ended on that date, notes comprising a summary of significantaccounting policies and other explanatory information, and the directors’declaration of the consolidated entity, comprising the company and theentities it controlled at the year’s end or from time to time duringthe financial year as set out on pages 11 to 38.

Directors’ Responsibility for the Financial ReportThe directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s ResponsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s Independence DeclarationIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Kemp & Denning Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

OpinionIn our opinion:

(a) the financial report of Kemp & Denning Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 May 2015 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.

DELOITTE TOUCHE TOHMATSU

Carl HarrisPartner Chartered AccountantsHobart, 12 August 2015

Liability limited by a scheme approved under Professional Standards Legislation.Member of Deloitte Touche Tohmatsu Limited

Deloitte Touche TohmatsuABN 74 490 121 060

Level 822ElizabethStreetHobart TAS 7000GPO Box 777Hobart TAS 7001 Australia

Tel: +61 3 6237 7000Fax: +61 3 6237 7001www.deloitte.com.au

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KEMP & DENNING LIMITED

44

ADDITIONAL INFORMATION

SHARE INFORMATION AS AT 31 JULY 2015

20 Largest Holders of OrdinaryFully Paid Shares Number % of Total Shares

Mr A G Kemp 351,654 13.1%

Mrs S G Allison 179,356 6.7%

Neale Edwards Pty Ltd 102,723 3.8%

T H Management Services P/L 90,386 3.4%

Mrs E M Kemp 89,000 3.3%

Mr G F Allison 64,750 2.4%

PJ & PF Alexander Super Fund A/c 55,100 2.1%

Mr C A G Kemp 50,000 1.9%

B L Moody Family A/c 47,732 1.8%

Mrs A M G Banks 38,432 1.4%

Dr S E G Kemp 36,608 1.4%

Mrs S Reid 36,050 1.3%

Treasure Island Hire Boat Company Pty Ltd 32,730 1.2%

D R Yeadon Pty Ltd 32,326 1.2%

Ms K J Allison 30,666 1.1%

Mr N C Ashdown 30,000 1.1%

R M Rex, S Rex, E Rex & B Rex 28,970 1.1%

Mrs S C White 28,297 1.1%

Mr G J Woolley 27,927 1.0%

R & R Kemp Family Trust A/c 24,700 0.9%

1,377,407 51.3%

Kemp & DenningService Awards,August 2015

Kem

p &

Den

ning

Ann

ual R

epo

rt 2

015

SUPPORTING THE COMMUNITYK&D continues to be involved in supporting local Community & Charity Events. For a third year K&D, in partnership with Wilson Homes are building a “wish home” for Make-A-Wish® Australia.

Make-A-Wish® Australia grant wishes to children with life-threatening medical conditions to enrich their lives with hope, strength and joy. A similar project has been completed this year with Lyden Builders and proceeds going to Give Me 5 for Kids. Money raised helps provide the local community with aid and support to sick children and their families in times of need.

Sporting partnerships have been formed with clubs in local football rosters (NWFL and SFL Tasmania), with the K&D Trade brand prominently displayed at club football grounds.

Local events promoting a healthy life style within the community are supported through sponsorship with staff and their families also encouraged to participate. There is a strongfocus on raising awareness and funding for charities aligned with these events.

TasmanianSchools Triathlon Challenge

Point to Pinnacle 2014 WinnerDylan Evans

Kem

p &

Denning

Annual R

epo

rt 2015

Give Me 5for Kids House,Frame work

Make-A-Wish®Australia volunteers,- Wish Home launch

WAREHOUSEK&D

annual report 2015 - k&d warehouse · 2018. 11. 22. · bcom, diped, grad.cert. in re, med,...

Documents