AWB Limited - 2004 Annual Report

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 22. DIVIDENDS Dividends recognised in the current year by AWB Limited are as follows. All dividends are fully franked: AWB Limited 2004 2003 $'000 $'000 Dividends paid during the year – Interim – franked (14 cents per share) (2003: 14 cents per share) 47,321 38,369 – Final – franked 2003 (11 cents per share) 35,971 – 83,292 38,369 Subsequent events On 24 November 2004, the directors declared a final dividend of 11 cents per share resulting in a dividend payable of $37.62 million. The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 September 2004 and will be recognised in subsequent reports. Franking credit balance 30% franking credits available to shareholders of AWB Limited for subsequent financial years 55,293 26,476 Notional fully franked dividend based on available franking credits 129,017 61,777 The above available amounts are based on the balance of the dividend franking account at year end adjusted for: (a) franking credits that will arise from the payment of the current tax liability; (b) franking debits that will arise from the payment of dividends recognised as a liability at the year end; (c) franking credits that will arise from the receipt of dividends recognised as receivables at the year end; and (d) franking credits that the entity may be prevented from distributing in subsequent years. The ability to use the franking credits is dependent upon there being sufficient available profits to declare dividends. 23. NOTES TO THE STATEMENT OF CASH FLOWS Consolidated AWB Limited 2004 2003 2004 2003 $'000 $'000 $'000 $'000 (a) Reconciliation of net profit from ordinary activities after income tax expense to the net cash flows from operations Profit from ordinary activities after income tax 97,651 44,150 40,955 61,297 Add/(less) non–cash items: Net loss/(gain) on disposal of property, plant and equipment (5,545) (21) (5,185) 23 Depreciation 56,186 27,415 207 14,279 Amortisation 27,100 2,467 23 26 Share of profits of associates net of dividends received (7,297) (1,941) – – Write down in the value of property plant and equipment to recoverable amount – 7,182 – 7,182 Write down in the value of investment in associate to recoverable amount 2,806 – 2,806 – Increase/(decrease) in income tax payable 50,642 (26,518) 34,076 13,056 Increase/(decrease) in deferred income tax liability 5,951 (11,388) 10,380 (470) Decrease/(increase) future income tax benefit 1,427 (1,678) (35,032) (732) Changes in assets and liabilities adjusted for the effects of purchasing a controlled entity during the financial year: Trade receivables (502,950) 342,716 – – Grower loan receivables (161,981) 1,063,445 – – Inventories 4,416 66,914 – – Prepayments and other debtors (1,817) 5,354 (1,217) 873 Trade and other creditors 96,974 20,323 33,017 (26,495) Provisions 1,405 5,874 (11,723) 5,568 Net cash flow from/(used in) operating activities (335,032) 1,544,294 68,307 74,607 78
23. NOTES TO THE STATEMENT OF CASH FLOWS (continued) Consolidated AWB Limited 2004 2003 2004 2003 $'000 $'000 $'000 $'000 (b) Reconciliation of cash Cash balance comprises: – cash at bank and on hand 44,023 25,066 87,890 2,328 – cash on deposit 4,202 29,719 – – Closing cash balance 48,225 54,785 87,890 2,328 24. DIRECTOR AND EXECUTIVE DISCLOSURES (a) Remuneration of specified directors and specified executives by the consolidated entity Remuneration levels are competetively set to attract and retain appropriately qualified experienced directors and executives. Remuneration for specified executives is divided into two components. The first is the fixed component, referred to as “total cost”, which is made up of base salary and benefits, including superannuation benefits. The second component is the “at risk” component which includes the short term incentives that take the form of cash, and long–term incentives provided via an equity plan. The amount of at risk remuneration, if any, that is earned by an executive is wholly dependent upon the performance of the individual, the team and the businesses against pre–determined Key Performance Indicators (KPIs) and performance hurdles approved by the board. The cost and value of all of the components are considered as a whole. AWB’s remuneration policy is to pay at the median level of remuneration for target performance and to provide the opportunity for upper decile rewards for distinctive (upper decile) performance. Details of each at risk element of remuneration are set out below. At risk remuneration At risk remuneration is delivered as short and long term incentives under AWB’s remuneration policies. The short-term incentive (STI) is cash based and applies to eligible employees across the business, including the group’s executive management team. The STI is calculated for each eligible employee by assessing performance in relation to KPIs. KPIs are based on group, individual business/revenue stream and personal measures with three levels of performance against each KPI: threshold (the minimum necessary to qualify for any reward); target (where the performance requirements have been met); and stretch (where performance requirements are exceeded). Eligible employees are those who have been employed by the AWB Group for a minimum of six months during the year ended 30 September 2004. The maximum STI payment is between 10% and 100% of an employee's total cost. Senior employees and those with revenue generating accountability generally have the highest STI potential. The AWB Group measure under the STI is based on profit before tax and amortisation. Performance against this measure has a weighting in the range of 30% to 50% of the overall STI for an AWB Group employee. The Managing Director is also assessed against specific health, safety and environmental targets as Group measures. Long term incentive is provided for the Managing Director via a cash based plan, the executive management team and selected senior executives via the Performance Rights Plan, and for all other employees via the Employee Share Plan and the Staff Ownership Plan. A description of the operation and conditions of these plans is included later in this note and in Note 30. AWB’s equity–based remuneration plans have been approved by shareholders and offers and payments made under the plans comply with thresholds set in the plans. Remuneration structure It is AWB’s policy that service contracts for senior executives be unlimited in term but capable of termination on not more than 12 months notice and that AWB retains the right to terminate the contract immediately, by making a payment equal to not more than 12 months pay in lieu of notice. The Managing Director and Chief Financial Officer have fixed term contracts which will expire on 30 September 2008 unless terminated earlier or extensions of the contracts are negotiated. AWB retains the right to terminate these contracts earlier with the provision of 12 months notice or payment in lieu of notice. The Remuneration Committee has determined that it will limit notice periods to 12 months in all future contracts for executives, unless exceptional circumstances exist. The service contracts typically outline the components of remuneration paid to executives but do not prescribe how remuneration levels are to be modified from year to year. Remuneration levels are reviewed annually, to take account market relativities, individual performance and the businesses’ capacity to pay, thereby ensuring alignment with the principles of the remuneration policy are maintained. Remuneration of non–executive directors The AWB Limited constitution requires that the remuneration of directors for their services as directors be by fixed sum and not a commission on or a percentage of profits or operating revenue. At the 2004 Annual General Meeting, shareholders determined that the maximum aggregate remuneration for all non–executive directors of AWB Limited is $1,200,000 per annum. All non–executive directors are paid a fixed fee in cash. The fixed fee amounts are determined by the board, with the assistance of the Remuneration Committee and external advisers. The following principles are applied in determining the amount of remuneration for non–executive directors: the amount of time required for directors to consider AWB and board matters including preparation time; acknowledgement of the personal risk borne as a company director; a comparison with professional market rates of remuneration and those offered by comparative companies and external independent advice as to appropriate levels to remain competitive with the market, having regard to companies of similar size and complexity; and the desire to attract directors of a high calibre, with appropriate levels of expertise and experience. The non–executive directors do not receive equity based remuneration or performance based remuneration. Other than statutory superannuation, there are no schemes for retirement benefits for non–executive directors. The non–executive directors are currently paid a fixed fee of $90,000 per annum (from 11 March 2004). The chairman receives 2.5 times this amount. An additional amount of $25,000 per annum is paid to the Chair of the Audit Committee and an additional amount of $20,000 per annum is paid to the Chair of the Group Corporate Risk Committee. (These amounts include statutory superannuation.) 79
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Annual Report 2004
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Who We Are AWB Limited (AWB) is Aus
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Finance AWB harvest finance book pe
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Five Year Summary 2004 2003 2002 20
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Chairman’s and Managing Director
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To continue building its capability
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Pool Management Services Highlights
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AWB National Pool participants. AWB
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Landmark Highlights Integrated Land
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the integration, Landmark has reloc
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Finance and Risk Management Highlig
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Finance Limited, a wholly owned, ba
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Grain Acquisition and Trading Highl
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through the AWB Geneva office, both
Page 29 and 30: Supply Chain & Other Investments Hi
Page 31 and 32: The Five Star Feed Mill, located on
Page 33 and 34: Our People AWB employs over 2,700 p
Page 35 and 36: More than 70% of AWB’s employees
Page 37 and 38: Our Social Commitment Together with
Page 39 and 40: Social service providers While not
Page 41 and 42: 7. Richard Fuller General Manager,
Page 43 and 44: Independence All of the current 11
Page 45 and 46: Services Agreement Committee The Se
Page 47 and 48: its observance provides the foundat
Page 49 and 50: Promotion Committee and Founding Ch
Page 51 and 52: 1. Brendan Stewart Chairman, Non-ex
Page 54 and 55: DIRECTORS' REPORT Your directors su
Page 56 and 57: DIRECTORS' REPORT (continued) REMUN
Page 58 and 59: DIRECTORS' REPORT (continued) DIREC
Page 60 and 61: DIRECTORS' REPORT (continued) DIREC
Page 62 and 63: STATEMENT OF FINANCIAL PERFORMANCE
Page 64 and 65: STATEMENT OF CASH FLOWS FOR THE YEA
Page 66 and 67: NOTES TO AND FORMING PART OF THE FI
Page 106 and 107: INDEPENDENT AUDIT REPORT TO THE MEM
Page 108 and 109: SHAREHOLDER COMMUNICATION FINANCIAL
Page 110 and 111: GLOSSARY AWB Basis Pool AWB Basis P
Page 112: Head Office 380 La Trobe Street Mel
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AWB Limited - 2004 Annual Report

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