2011 For personal use only - Australian Securities · PDF fileand supply tyre business ... distributor, and ToLife Technologies ... The Company, for the fi rst time, established consolidated

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annual report

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ABN 16 082 341 197

DIRECTORS

David Schwartz I Chairman

John Mancini I Managing Director

Mike Arnold I Executive Director

SECRETARY

Demetrius Hassiotis

CHIEF FINANCIAL OFFICER

Paul Roberts

PRINCIPAL REGISTERED OFFICE IN AUSTRALIA

17 Oxleigh Drive

Malaga, Western Australia 6090

SHARE REGISTER

Boardroom Pty Limited

Level 7, 207 Kent Street

Sydney, New South Wales 2000

AUDITOR

Deloitte Touche Tohmatsu

Woodside Plaza

Level 14, 240 St Georges Terrace

Perth, Western Australia 6000

SOLICITORS

Steinepreis Paganin

Level 4, Next Building, 16 Milligan Street


BANKERS

Australia and New Zealand Banking Group Limited

Level 7, 77 St Georges Terrace


STOCK EXCHANGE LISTINGS

ADG Global Supply Limited shares are listed on the

Australian Securities Exchange

ASX code: ADQ

WEBSITE ADDRESS

www.adgglobalsupply.com

Corporate Directory

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Established in 1994, ADG Global Supply (“ADG”) is a

provider of industrial products, global procurement and

supply chain services and project logistics. ADG works

with exploration, mining and energy clients to improve

their supply chain eff ectiveness through a ‘single

contact - global reach’ model.

With a head offi ce in Perth, Western Australia, a London

offi ce and consolidation hubs in key international

locations, ADG’s approach allows customers to access a

global network and experience an integrated products

and services solution.

About ADG Global Supply

Industrial Products

ADG’s Industrial Products division markets leading industrial brands including drilling fl uids by M-I SWACO and off -the-road tyres by Magna Tyres.

The division also off ers a specialist service of sourcing and supplying premium large diameter earthmover tyres to all corners of the globe.

Universal Pumps is the Company’s own brand of water products and provides pumps and grey water diversion systems to domestic, rural, industrial and light commercial markets.

Other industrial products include drilling equipment and general consumbales including products for MRO (Maintenance, Repair, Operating).

Global Procurement &

Supply Chain

Through its global procurement and supply chain expertise, ADG provides clients with a streamlined solution of strategic planning, supplier management, sourcing, receiving, and logistics for supply to site.

Utilising consolidation hubs across the globe, ADG sources from over 3000 suppliers and OEM’s (Original Equipment Manufacturer) across 21 countries.

ADG specialises in supply to remote site locations and tackling the complex dynamics of these challenging environments. The service also extends to on-site support and inventory management.

Project Logistics

This niche capability provides clients with logistics and shipping management services to support major capital equipment programs.

Servicing mining and drilling sectors, our global network supports operational control across major continents.

From a centralised coordination point we manage transportation, charter vessel and liner service scheduling, freight coordination, clearances and information management.

This service is supported by Joint Venture operations, bringing together extensive project management capabilities and industry experience.

ASX Code: ADQ (Listed 2008)

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4 ADG Global Supply Limited Annual Report 2011

contents

ADG at a Glance 5

FY2011 Overview 5

Comparative Financials 6

Board of Directors 7

Chairman’s Letter 8

Managing Director’s Report 10

FY2011 Financial Report 15

CLIENT ACTIVITY REGIONS

OFFICE & WAREHOUSE LOCATIONS

CONSOLIDATION HUBS

”“3000 suppliers across 21 countries - 1100 customers across 44 countries

our global reach

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ADG Global Supply Limited Annual Report 2011 5

* after tax

ADG Global Supply provides a ‘single contact - global reach’ solution to support the critical product & supply chain needs of our customers in the exploration, mining & energy markets

adg at a glance

Revenue $52.2m up 46% from FY10

Strategy to increase revenue and margin Signed 2 Global Procurement & Supply Chain

contracts during the year Introduced new product lines including Magna

Tyres Australia in September 2010 Continued to grow client base in Africa and

Asia Pacifi c Delivered operational improvements

Other Strategic / Operational Achievements Entered Joint Venture with Denmark based

logistics group - Airland Projects to deliver end-to-end supply & logistics for African based clients Board restructure and key senior appointments Implemented system improvements with Pronto

ERP system Improvements in logistics and freight

capabilities

Strategy to be more eff ective and effi cient to lower costs Operating costs down by 17% to 14.7% of

revenue Establishment of consolidation hubs in key

industrialised regions across the globe Closed non-core warehouses 26 freight carriers consolidated to 5

Market Review Increasing activity levels in Africa with Foreign

Direct Investment forecasted to be $150 billion by 2012 (source: Ernst & Young report)

Mining industry experiencing shortages in OTR tyres positively impacting on ADG’s sourcing and supply tyre business Commodity prices continued to strengthen Australia aff ected by adverse weather

conditions resulting in lower profi t levels from water products

fy2011 overview

EBIT $1.5mup $2.5m from FY10

Net Profi t* $725k up $1.8m from FY10

Gross Margin 17.6%up 18% from FY10

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comparative fi nancials

Consolidated

2009

$

2010

$

2011

$

Revenue (excluding interest income) 47,415,069 35,886,712 52,215,837

Gross margin % (excluding interest income) 15.70% 14.77% 17.51%

Operating profi t (loss) before tax, depreciation and amortisation -5,811,092 -768,449 1,784,258

Depreciation and amortisation -221,916 -254,317 -285,109

Earnings before interest & tax (EBIT) -6,033,008 -1,022,766 1,499,149

Finance costs -408,691 -475,864 -438,345

Net profi t before tax -6,441,699 -1,498,630 1,060,804

Income tax revenue / (expense) 31,149 423,594 -336,196

Net Profi t / (Loss) for the year after tax -6,410,550 -1,075,036 724,608

Net cash infl ow/(outfl ow) provided by operating activities -4,287,229 -358,126 111,653

Cash on hand 1,010,063 648,171 4,813,304

Net assets 7,978,927 9,707,072 16,180,607

Total borrowings 7,239,137 5,449,454 4,100,000

Total shares on issue 73,537,602 115,612,045 221,849,400

Net tangible assets per share (cents per share) 0.06 1.42 3.62

Earnings per share (cents per share) -8.72 -1.09 0.47

Revenue EBIT

* Includes impairment charges

*

*

FY2009

FY2010

FY2011

$47.7m

$35.9m

$52.2m

FY2009

FY2010

FY2011

0

-$6.0m

-$1.0m

$1.5m

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adg board

David Schwartz

Non-Executive Chairman

Age 57

Mr David Schwartz joined the ADG Board in May 2008 as the non-executive Director and Chairman. He is also the Chairman of Clime Investment Management Limited and a non-executive Director of Schaff er Corporation Limited and Betts Group Limited.

He has over 25 years of experience managing successful companies including Primewest Management Group which manages an investment portfolio of over $1 billion.

He also has extensive experience in manufacturing, procurement and distribution through his private businesses Pascoes Pty Ltd, a chemical manufacturer and distributor, and ToLife Technologies Pty Ltd.

David chairs the Audit, Nomination and Remuneration Committees.

John Mancini

Managing Director

Age 42

Mr John Mancini became Managing Director of ADG in January 2010 after joining the Company in January 2008 as an Executive Director and head of Sales & Marketing. Since he joined ADG he has led key growth initiatives for the company through a re-focused business strategy, the integration of the water business into ADG, and in delivering initiatives in the turnaround of the Company.

He was previously an associate director in Ernst & Young’s strategic growth markets division - assisting and fi nding growth solutions for WA fast growth private companies and listed entities that sit in the ASX200-600. John also sits on advisory board for two unlisted entities. He is currently treasurer for Variety WA, a leading children’s charity. He has a business degree (Bachelor) and is a member of the Australian Institute of Company Directors.

Mike Arnold

Executive Director

Age 44

Mr Mike Arnold joined ADG Global Supply as Chief Operating Offi cer in June 2010 and joined the Board as an Executive Director on the 31st July 2010.

He has a solid background in logistics and supply chain management with over 25 years working for some of Australia’s leading logistics companies.

For the past 10 years Mike has held Managing Director and senior executive roles for AirRoad Logistics Pty Ltd, SWADS (now owned by Australia Post’s logistics entity – Post Logistics) and Lakewood Logistics Pty Ltd. During his time at Lakewood Logistics (a Joint Venture between himself and Australia Post’s logistics entity – Post Logistics) he built it into one of the largest privately owned logistics companies in Western Australia. He is a member of the Australian Institute of Company Directors

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chairman’s letter

Our strategy, as I reported in last year’s annual report, was to focus on sustainable profi table growth, cost containment and delivering shareholder value.

As a part of this focus, over the past 12 months the Company has successfully re-engineered systems and processes which have led to signifi cant improvements in supply chain capabilities.

The Company, for the fi rst time, established consolidated hubs in key industrialised areas allowing goods coming from multiple suppliers to be consolidated for streamlined despatch. This has further strengthened our competitive advantage in providing end-to-end supply solutions to our clients and improving profi tability, particularly in the key regions of Africa and the Asia-Pacifi c.

The Turnaround NumbersDuring FY2011, ADG Global Supply Limited (“ADG”) achieved 46% growth in revenue from continuing operations to $52.2m (2010: $35.8m) and a profi t after tax of $725k (2010: loss -$1,075k).

After provisions adversely aff ected earnings for FY2010, it was pleasing to see that for the FY2011 period, positive trends were experienced with increasing cash, profi ts and gross margins.

Cash at 30 June 2011 signifi ed a strong turnaround with cash and cash equivalents of $4.8m (2010: $648k). Equity was up more than $6m to $16.2m (2010: $9.7m) and unutilised debt facilities were $850k (2010: $850k). Bank debt stood at $4.1m down from $5.3m.

On behalf of ADG Global Supply Limited’s

Board I am pleased to report on a year of

turnaround. The 2011 fi nancial year saw

continued improvements, both fi nancially

and operationally, which led to positive

fi nancial results and have positioned the

Company for growth into FY2012.

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Funding the GrowthA focus on investor relations and on positioning the Company well for future growth over the past twelve months saw three share placements and a rights issue raising a total of $6.1m in additional capital.

The Company’s share register has been strengthened with the addition of new small cap institutional investors and high net worth individuals.

The additional funds raised have bolstered the Company’s balance sheet allowing for expansion into Europe as a strategic base to support exploration, mining and energy clients in Africa. It has also positioned the Company well to capitalise on future opportunities in the region. Strategy & OutlookThe operational and strategic changes implemented over the past 12-18 months will continue to deliver benefi ts in the coming year.

A key management focus for FY2012 will be to ensure that operational changes are successfully implemented to their full potential.

At the same time we will continue to invest in growth areas of the business, including growing our industrial products range and further improving our procurement and supply chain capabilities to service our remote site customers in Africa and Asia -Pacifi c.

As a part of this we will continue to expand our global ‘on the ground’ presence into both Africa and Europe with establishment of new offi ces and consolidation hubs.

Our strategy, combined with prevailing market conditions for FY2012, is expected to provide a platform for solid growth over the coming year. Our improved balance sheet also gives us the fl exibility to create further growth through business development and acquisitions.

Already, we have entered a Joint Venture with Denmark based logistics group, Airland Projects to complement our project logistics off er to African mining clients.

We will continue to seek out opportunities to grow the business. Shareholders can be confi dent that our business is now fi t for growth.

I take the opportunity to thank my fellow Directors for their dedication to delivering on our strategy over the past year. I also thank the senior leadership team and all our employees for their achievements in delivering this turnaround result.

Finally, thank you to our shareholders for their ongoing support as we work to position ourselves as a leader in providing industrial products and services to the exploration, mining and energy markets internationally.

You can be confi dent in that although we are satisfi ed with these results, your Board is very much focused on delivering improved shareholder value over the coming years.

David SchwartzChairman

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md report

In June 2010 we set a goal to achieve sustainable revenue and profi table growth. To do this over the past year we introduced new revenue streams, launched system re-engineering programs, increased investment in our company, added talent to the team, initiated cost savings at an operational level and opened new offi ces and consolidated hubs.

Our mantra was “driving the turnaround” and I am pleased to report that our investments and growth orientated eff orts have resulted in a positive FY2011 performance, and a fundamental shift in the way we do business.

Solid Performance ResultsBusiness performance improved steadily each quarter and after reporting a half year EBIT of $426k we fi nished the year strongly with an EBIT of $1.5m.

Last year was a turnaround year for ADG

Global Supply with signifi cantly improved

revenue and profi t performance levels.

While we enjoyed favourable market

conditions as the resource and energy

sectors experienced an upswing, we also

became a company that is in control of its

operations and able to deliver sustainable

profi ts. The next step is to translate these

improved results to shareholder benefi ts.

FY2010 ($35.9M) FY2011 ($52.2M)SALES BY REGION

Data excludes Pump customers which sit outside resources sector

AFRICAASIA

AUSTRALIA

Rest Of World

Africa grew 106%

Asia grew 16%

Australiagrew 10%

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Total revenue was $52.2m, 46% higher in comparison to FY2010, with growth across both industrial products and services. All our key regions experienced sales growth, with Africa alone growing in sales by 106%.

The benefi ts of cost reductions, new contract revenue, increased demand and higher margins all contributed to deliver a net profi t after tax of $725k. This was a signifi cant turnaround from the loss of -$1,075k in FY2010.

The focus on maintaining the strength of the balance sheet and reducing costs will continue into FY2012.

Despite the fact that there still remains no like-for-like business in the Australian market, we face competition from both product suppliers and services providers which means we must remain cost competitive. Driving a more eff ective and effi cient business culture to lower costs and adding value to our clients continues to be a priority.

The Business Model ShiftDuring FY2011 ADG adopted a new business model that shifted away from a four division approach to an integrated products and services model. Our customers are beginning to view us as an end-to-end provider of products and services, refl ective in the signing of our fi rst global procurement and supply chain contract in February 2010.

The business model rolled out during FY2011 represents our business in three core areas:

Industrial Products

The Industrial Products area of our business includes our drilling fl uids and equipment range, off -the-road tyres and pumps. As shown to the right, our Industrial Products experienced substantial growth in key regions of Africa and Asia-Pacifi c, due in part to increased demand for earthmover tyres.

During the year we expanded our range of Industrial Products to include industrial and off -the-road tyres by the Holland based group, Magna Tyres. This fi ve year exclusive distribution agreement compliments ADG’s specialist service of sourcing and supplying premium large diameter earthmover tyres to exploration and mining clients.

As the Australasian distributors for the leading drilling fl uids, M-I SWACO, ADG services mining, horizontal directional drilling and waterwell clients. This product line experienced solid sales growth for FY2011 and a 12 month exclusive supply agreement was signed with NSW based Arogen in March 2011.

Universal Pumps is the Company’s own brand of water products and is primarily focused on the domestic, rural and light commercial markets. Universal Pumps experienced a decline in sales due in part to adverse weather conditions and subdued retail markets. On a positive note, Universal Pumps secured attractive supply agreements in the later part of the year which should materialise in improved sales for FY2012.

During FY2011 Africa was identifi ed as

a key growth region with an increase in

sales of 294% for Industrial Products

and 51% for Global Procurement, Supply

Chain & Project Logistics when compared

to FY2010.

Asia/Australia also experienced an

increase in sales for Industrial Products

of 112% from FY2010.

A strong contributor to this growth was

the increasing sales of earthmover tyres

as global worldwide shortages impacted

the resources sector.

AFRICA FY2011 SALES

AUSTRALIA/ASIA FY2011 SALES

$9.4m

IndustrialProducts

$18.6m

IndustrialProducts

$11.6m

Global Procurement & Supply Chain

$9.1m


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The Global Procurement & Supply Chain service is focused on providing clients in the exploration, mining and energy markets with products and services to meet their requirements. This includes products for MRO (Maintenance, Repair and Operating), capital equipment and general consumables. ADG accesses over 3000 suppliers and OEM’s (Original Equipment Manufacturers) across 21 countries to deliver this consolidated, integrated supply service to our clients.

In February 2010, we signed a three year contract for procurement and logistics services with Pacifi c based drilling contractor, Traverse Drilling which has a projected contact value in excess of $25m.

Importantly, this contract signifi ed a change to the way we engage with our customers. With an ongoing focus on developing our infrastructure and capabilities to meet client’s procurement and supply chain needs we expect to see further growth in sales and contract revenue during FY2012.

Project Logistics

The company introduced Project Logistics into the business model in June 2011. This niche capability provides clients with logistics and shipping management services to support major capital equipment programs.

Servicing mining and drilling sectors, our global network supports operational control across major continents from a central management point.

In FY2012 we anticipate increased demand from our clients, particularly as they invest in their own expansion phases. Project Logistics is an important part of our integrated products and services off er allowing us to support clients at each stage of their capital expenditure programs.

Growth in emerging marketsWhile ADG has been involved in supply to African based exploration and mining clients since inception, over the past 12 months we undertook an internal review to scope infrastructure and capabilities to support the fast growth in this region.

Our business activities in the emerging African market delivered solid results and sales volumes for both our industrial products and global procurement and supply chain businesses, with approximately 50% of revenue derived from the region (this doubled to $21m in FY2011).

As a part of the review it became apparent that to support this growth region we would need to establish a Europe presence to take advantage of time zone and logistics benefi ts. The establishment of a new London offi ce and distribution facilities in UK and Antwerp, Belgium was announced in September 2011.

In June 2011, we announced that we had

entered a Joint Venture with Denmark

based logistics group, Airland Logistics.

Together with ADG this brings extensive

project management capabilities and

industry experience.

md report continued

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Operational ImprovementsIn June 2010 we introduced a program to enhance ADG’s internal capabilities, systems and processes. Key milestones included the introduction of daily dashboard reporting, an internal restructure of customer service and operations teams, closure of non-core warehouses and consolidation of freight providers. These have delivered a solid platform to assist ADG’s growth over the coming year.

PeopleOur ability to recruit and retain quality people is critical to the success of the Company. During FY2011 we recruited senior management roles including Paul Roberts (CFO) and Ross Spanbroek (Global Sales Manager – Drilling).

Our FTE (full time equivalent) head count increased by two during the year (FTE FY11 45.5) which, given our turnaround results, signifi es a tremendous eff ort by the ADG employees.

Safety During FY2011 the Company placed signifi cant focus on enhancing our OH&S standards. The Company implemented a program which included the standardisation of inductions and training, rolling out an Employee Handbook and various initiatives via an OH&S Committee.

We had no Lost Time Injuries during FY2011.

Looking to the futureWe believe ADG Global Supply is well-positioned for continued growth into FY2012. Demand for both our products and services is solid and the full eff ect of recent operational advancements and contract revenues will continue to materialise.

Opportunities in our key markets remain substantial. Our global infrastructure and supply chain capabilities allow us to provide clients with cost-eff ective and timely solutions. The addition of our new Project Logistics services complements our integrated products and services solution with the added capabilities of logistics and shipping management.

Overall, our ability to grow organically coupled with our unique positioning across markets, commodities and product groups will ensure a positive future going forward.

I would like to thank my ADG colleagues for their hard work and dedication throughout a busy year, and extend thanks to both ADG customers, manufacturers and suppliers for their ongoing support.

ADG’s focus has been on improving

operations and capabilities by investing

in infrastructure, systems, processes

and procedures. The result has seen

enhanced supply chain capabilities to

support a growing customer base. The

improvements have also seen an increase

in both productivity and effi ciency levels,

ensuring ADG is a company fi t for growth.

John ManciniManaging Director

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fi nancial report

Directors’ Report 16

Auditor’s Independence Declaration 26

Corporate Governance Statement 27

Statement of Comprehensive Income 33

Statement of Financial Position 34

Statement of Cashfl ows 35

Statement of Changes in Equity 36

Notes to Financial Report 37

Directors’ Declaration 92

Independent Auditor’s Report 93

ASX Additional Information 95

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director’s report for the year ended 30 June 2011

Your Directors present their report on the Consolidated Entity, consisting of ADG Global Supply Limited (“the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2011.

PRINCIPAL ACTIVITIES

During the year the principal continuing activities of the Consolidated Entity consisted of:

(a) the global supply of consumables, equipment and other products to many countries in the worldwide mining, oil and gas industries; and

(b) the wholesale supply of water pumps and other water products in Australia.

No signifi cant changes in the nature of the activities of the Consolidated Entity occurred during the year.

DIRECTORS

The names of the Company’s Directors in offi ce during the year ended 30 June 2011 (“the Financial Year”) and until the date of this report are:

Name Role Age Particulars

Mr D Schwartz Independent, NonExecutiveChairman

57 • Independent non-executive Director• Chair of the Audit, Nomination & Remuneration Committee• 25 years experience managing range of successful

companies• Director of Primewest Management Group which manages an

investment portfolio of over $1 billion• Extensive experience in international procurement

through his private businesses Pascoes Pty Ltd, a chemical manufacturer and distributor, and ToLife Technologies Pty Ltd

Mr J Mancini Managing Director

42 • Managing Director• Bachelor of Business; Member of the Australian Institute of

Company Directors• Previously in the role of Sales & Marketing Director• Past experience with Ernst & Young as an Associate Director

in its strategic growth markets division focused on assisting and fi nding growth solutions for WA fast growth private companies and listed entities that sit in the ASX200 – 600

• He is currently Treasurer for Variety WA, a leading children’s charity

Mr M Arnold Executive Director

since 31 July 2010

44 • Chief Operating Offi cer• Member of the Australian Institute of Company Directors• Experienced senior management executive with over 25

years of logistics and supply chain management experience within a number of market leading logistics organisations in Australia

• In the 10 years prior to his appointment at ADG, Mr Arnold held Managing Director and CEO for Lakewood Logistics Pty Ltd (a JV Company with Australia Post’s logistics arm Post Logistics), SWADS (State Warehousing and Distribution Services) and AirRoad Logistics Pty Ltd

Mr A Greathead Non Executive Director

Resigned 31 July 2010

49 • Mechanical Engineer• Member of the Nomination & Remuneration Committee• Eestablished ADG Global Supply in 1994 • Previously the Managing Director of ADG Global Supply from

its inception until January 2010 • Has over 20 years’ experience in mining equipment design,

sales and supply• Resigned on 31 July 2010

Mr D Craig Independent, Non Executive Director

Resigned 31 July 2010

55 • B.Juris (Hons) LLB (Hons) LLM (London) GDipAppFin (Finsia)• Member of the Australian Institute of Company Directors• Member of the Audit, Nomination & Remuneration Committee• Independent non-executive Director since 4 June 2008• Experienced businessman and lawyer, who has held

executive and Board positions in the fi elds of law, fi nancial services and the resources industry

• 10 years in fi nancial services as stockbroker and executive Director before spending 5 years in executive public and government aff airs position with Woodside Petroleum Ltd

• Resigned on 31 July 2010

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Directorships of other listed companies

Name Company Position Period of Directorship

Mr D Schwartz Schaff er Corporation LimitedClime Investment Management LimitedHeadline Group Limited

Non-Executive DirectorNon-Executive ChairmanNon-Executive Director

Since 1999Since 19982005 to 2008

Mr J Mancini -

Mr M Arnold -

Mr A Greathead -

Mr D Craig United Minerals Corporation NLEntek Energy LtdMoly Mines LimitedForge Group LtdNomad Building Solutions LtdSouthern Hemisphere Mining Limited

Non-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive Director

May 2008 to Feb 2010July 2008 to Nov 2010Since May 2009Since March 2011Since November 2010Since November 2009

DIRECTORS’ SHAREHOLDINGS AT 30 JUNE 2011

Name Shares Held Directly Options Held Directly

Mr D Schwartz 7,534,061 1,000,000 $0.11 with expiry 30/06/2014

Mr J Mancini 9,532,968 5,000,000 $0.11 with expiry 30/06/2014

Mr M Arnold 4,593,509 4,000,000 $0.11 with expiry 30/06/2014

Mr A Greathead 3,600,414

Mr D Craig 120,000

COMPANY SECRETARY

The Company Secretary is Mr Demetrius Hassiotis B.Sc. (Econ), CA, FCA, ACIS.

Mr Hassiotis was appointed to the position of Company Secretary in February 2008. Mr Hassiotis has over 16 years of senior corporate experience obtained in London and in Australia within organisations such as Ernst & Young, AVIVA plc, Goldman Sachs and PricewaterhouseCoopers. Mr Hassiotis is a member of the Institute of Chartered Accountants in Australia, the Institute of Chartered Accountants in England and Wales, and Chartered Secretaries Australia where he is a member of the WA State Council.

MEETING OF DIRECTORS

The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2011, and the numbers of meetings attended by each Director were:

MEETING OF COMMITTEES

Full meeting of Directors Audit Nomination Remuneration

A B A B A B A B

Mr D Schwartz 12 12 4 4 1 1 2 2

Mr J Mancini 12 12 4 4 1 1 2 2

Mr M Arnold 10 10 4 4 - - 2 2

Mr A Greathead 2 2 - - 1 1 -

Mr D Craig 2 2 - - 1 1 - -

A = Number of meetings attended

B = Number of meetings held during the time the Director held offi ce or was a member of the committee during the year

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REMUNERATION REPORT

The remuneration report is set out under the following main headings:

A. Principles used to determine the nature and amount of remuneration.

B. Details of remuneration

C. Service agreements

D. Share-based compensation

E. Link between remuneration policy and Company performance

The information provided in this remuneration report is also included in the fi nancial report which has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration

The objective of the Consolidated Entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market practice for delivery of reward. The Board ensures that executive reward satisfi es the following key criteria for good reward governance practices:

• competitiveness and reasonableness;

• acceptability to shareholders;

• performance linkage / alignment of executive compensation;

• transparency; and

• capital management.

In consultation with external remuneration consultants, where appropriate, the Consolidated Entity has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.

Alignment to shareholders’ interests:

• has economic profi t as a core component of plan design;

• focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-fi nancial drivers of value; and

• attracts and retains high calibre executives.

Alignment to program participants’ interests:

• rewards capability and experience;

• refl ects competitive reward for contribution to growth in shareholder wealth;

• provides a clear structure for earning rewards; and

• provides recognition for contribution.

The remuneration framework provides a mix of fi xed and variable pay, and a blend of short and long-term incentives. As executives gain seniority within the Consolidated Entity, the balance of this mix shifts to a higher proportion of ‘’at risk’’ rewards.

The Board has established a remuneration committee which provides advice on remuneration and incentive policies and practices and specifi c recommendations on remuneration packages and other terms of employment for executive Directors, other senior executives and non-executive Directors. The Corporate Governance Statement provides further information on the role of this committee.

director’s report for the year ended 30 June 2011F

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A. Principles used to determine the nature and amount of remuneration (continued)

Non-executive Directors

Fees and payments to non-executive Directors refl ect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Board has also considered the advice of independent remuneration consultants to ensure non-executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.

Directors’ fees

The current base remuneration was last reviewed with eff ect from 1 July 2011 and the fees listed below refl ect this review. The Chairman’s remuneration is inclusive of committee fees and other non-executive Directors who are members of a committee, do not receive additional yearly fees.

Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $250,000 per annum and was approved by shareholders at the Annual General Meeting on 20 November 2008.

The following fees apply:

Chairman $56,100

Executive pay

The executive pay and reward framework has currently the following component:

• base pay and benefi ts, including superannuation;

• short-term performance based incentives; and

• long-term incentives.

Base pay

This is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-fi nancial benefi ts at the executive’s discretion.

Executives are off ered a competitive base pay that comprises the fi xed component of pay and rewards.

External remuneration consultants provide analysis and advice to ensure base pay is set to refl ect the market for a comparable role as appropriate. Base pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are no guaranteed base pay increases included in any executives’ contracts.

Benefi ts

Executives receive, in the majority, cash in lieu of benefi ts.

Short-term performance based incentives

Senior executives are off ered short-term, cash, performance based incentives which are linked into specifi c performance targets including profi tability and other operational objectives.

Long-term incentives

Senior executives are also off ered long-term, share based incentives through the Consolidated Entity’s Employee Share Plan which was approved by shareholders at the Annual General Meeting on 30 November 2010 as well as through the issue of options as awarded last on 30 June 2010 following approval by shareholders at the General Meeting held on 29 June 2011.

B. Details of remuneration

Amounts of remuneration

Details of the remuneration of the Directors, the key management personnel of the Consolidated Entity (as defi ned in AASB 124 Related Party Disclosures) and specifi ed executives of ADG Global Supply Limited and the Consolidated Entity are set out in the following tables.


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B. Details of remuneration (continued)

The key management personnel of the Consolidated Entity are the Directors of ADG Global Supply Limited that held offi ce during the fi nancial year, and the following executives:

P Roberts – Chief Financial Offi cer – appointed 25 November 2010

L McNiece - Chief Financial Offi cer - resigned 24 November 2010

There are no further persons that need to be disclosed under the Corporations Act 2001 for being among the 5 highest remunerated Consolidated Entity executives.

SHORT-TERM POST-EMPLOYMENT

SHARE

BASED PAY-

MENT

TOTAL

Salary &

Fees

$

Cash

Bonus

$

Non

Monetary

benefi ts

$

Superan-

nuation

$

Retirement

Benefi ts

$

Options

$ $

30 June 2011David Schwartz 56,100 - - - - - 56,100

John Mancini 250,000 - - 22,500 - 15,708 288,208

Michael Arnold 240,000 - - 19,980 - 13,090 273,070

David Craig 3,188 - - 287 - - 3,475

Andrew Greathead 3,188 - - 287 - - 3,475

Paul Roberts 95,795 - - 8,037 - 3,091 106,923

Luke McNiece 95,802 - - 8,622 - - 104,424

TOTAL REMUNERATION: 744,073 - - 59,713 - 31,889 835,675


John Mancini 220,184 - 3,937 19,817 - - 243,938

Michael Arnold 10,854 - - 909 - - 11,763

David Craig 38,250 - - 3,443 - - 41,693

Andrew Greathead 262,604 - - 22,087 - - 289,691

Luke McNiece 65,625 - - 5,906 - - 71,531

Keith Gray 75,141 - - 6,763 - - 81,904

TOTAL REMUNERATION: 728,758 - 3,937 58,925 - - 791,620

C. Service agreements

On appointment to the Board, all non-executive Directors receive a letter including details of the agreed remuneration. No service agreements are in place with non-executive Directors.

Remuneration and other terms of employment for the Managing Director, Chief Operating Offi cer, Chief Financial Offi cer and other key management personnel are formalised in service agreements. Each of these agreements provide for the terms of employment and all relevant details of executive remuneration.

Other major provisions of the agreements relating to remuneration are set out below. All contracts with executives may be terminated early by either party with three months’ notice with the exception of Mr. John Mancini, the contract of whom contains a notice provision of six months. The agreements above may be terminated by the Company without any notice under certain circumstances.


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C. Service agreements (continued)

J Mancini, Managing Director

• Term of agreement - on-going commencing 18 January 2010.

• Base salary, exclusive of superannuation, for the year ended 30 June 2011 of $250,000, to be reviewed annually by the remuneration committee.

• A cash bonus of up to 50% of base salary upon achieving certain profi tability targets at the discretion of the Chairman. No bonus was paid under this arrangement in the year ended 30 June 2011.

• Payment of a termination benefi t on early termination by the Company, other than for gross misconduct, equal to the base salary for the remaining term of the notice period.

M Arnold, Executive Director

• Term of agreement - on-going commencing 14 June 2010.

• Base salary, exclusive of superannuation, for the year ended 30 June 2011 of $240,000 to be reviewed annually by the remuneration committee.

• A cash bonus of up to 50% of base salary upon achieving certain profi tability targets at the discretion of the Chairman. No bonus was paid under this arrangement in the year ended 30 June 2011.


P Roberts, Chief Financial Offi cer

• Term of agreement - on-going commencing 25 November 2010.

• Base salary, exclusive of superannuation, for the year ended 30 June 2011 (annualized) of $160,000, to be reviewed annually by the remuneration committee.


D. Share-based compensation

Issue of shares under Employee Share Plan

Following the approval of the Company’s Employee Share Plan at the Company’s Annual General Meeting on 30 November 2010 (resolution 7), and also the approvals of resolutions 8 and 9 of the same meeting, the Company has, during the year ended 30 June 2011, issued a total of 9,500,000 ordinary shares to participating employees.

Name Position Loan amount ($) No of shares issued

Mr John Mancini Managing Director 210,000 3,000,000

Mr Mike Arnold Executive Director 175,000 2,500,000

Various employees Senior Management Team 258,700 4,000,000

Total 643,700 9,500,000

The above shares were issued in accordance with the terms and conditions of the Company’s Employee Share Plan, resolutions 7, 8 and 9 of the Company’s Annual General Meeting on 30 November 2010 and the off er documents issued to each participating employee.

The shares issued are fully paid via an interest free limited recourse loan to employees, repayable by employees in 2 years, in the case of the two directors and 5 years in the case of the remaining Senior Management Team. The plan is accounted for as an in-substance option plan, with the contractual life of each option equivalent to the estimated loan life. Repayment of the loan constitutes exercise of the option, with the exercise price being the remaining loan balance per share.

The share issue above is subject to a 2 year minimum tenure performance condition and the repayment of the loans. Until both conditions are satisfi ed the shares will remain in a holding lock maintained by the Company’s Registry which prevents the shares from being traded. The Company also maintains a lien over the shares issued until each condition has been met.


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D. Share-based compensation (continued)

Issue of long-term incentive options

The below unlisted $0.11 options with expiry date of 30 June 2014 have been issued to the Directors of the Company pursuant to resolutions 3, 4 and 5 of the Company’s general meeting held on 29 June 2011 as follows

Name Position No of options issued

Mr John Mancini Managing Director 5,000,000

Mr Mike Arnold Executive Director 4,000,000

Mr David Schwartz Chairman 1,000,000

Total 10,000,000

The above options will vest on 30 June 2013 and cannot be exercised until they have vested. Unless the Board otherwise agrees, unvested Options will immediately lapse in the event an optionholder ceases to be an employee of the Company whether due to resignation by the optionholder or due to dismissal in accordance with the optionholder’s employment contact for reasons other than a change in control event.

Additional share based compensation disclosures

Directors and senior management were provided the following form of share based compensation as part of their remuneration during the year ended 30 June 2011 (2010: Nil):

2011Series (i), (ii)

No. Granted No. vested% of grant

vested% of grant forfeited

% of compensa-tion for the year

consisting of options

David Schwartz $0.11 Options 1,000,000 - - - -

John ManciniESP shares 3,000,000 - - - 5.5%

$0.11 Options 5,000,000 - - - -

Michael ArnoldESP shares 2,500,000 - - - 4.8%

$0.11 Options 4,000,000 - - - -

David Craig - - - - - -

Andrew Greathead - - - - - -

Paul Roberts ESP shares 500,000 - - - 2.9%

Luke McNiece - - - - - -

(i) ESP shares: Employee share plan shares.

(ii) $0.11 options: $0.11 options with an expiry date of 30 June 2014.

The following table summarises the value of options (and equivalent) granted, exercised or lapsed during to directors and senior management:

2011 SeriesValue of options granted at

grant date (i)$

Value of options exercised at the exercise date

$

Value of options lapsed at the date of lapse (ii)

$

David Schwartz $0.11 Options 24,187 - -

John ManciniESP shares 63,009 - -

$0.11 Options 120,935 - -

Michael ArnoldESP shares 52,508 - -

$0.11 Options 96,748 - -

Paul Roberts ESP shares 15,500 - -

(i) The value of options granted during the period is recognised in compensation over the vesting period of the

grant, in accordance with Australian Accounting Standards.

(ii) The value of options lapsing during the period due to the failure to satisfy a vesting condition is determined

assuming the vesting condition had been satisfi ed.


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E. Link between remuneration policy and Company performance

The table below sets out summary information about the Consolidated Entity’s earnings and movements in shareholder wealth for the three years to 30 June 2011. Only three years are presented below because in the Board’s opinion the previous years are not meaningful to the understanding of the Consolidated Entity’s fi nancial performance, with the Consolidated Entity having taken over ADG Global Supply Pty Ltd, its main operating subsidiary, in May 2008.

2011$

2010$

2009$

Revenue 52,215,837 35,886,712 47,415,069

Profi t / (Loss) after taxation 724,608 (1,075,036) (6,410,550)

Dividend - - -

Basic earnings per share (cents per share) 0.47 (1.09) (8.72)

Diluted earnings per share (cents per share) 0.47 (1.09) (8.72)

Share price at 30 June ($) 0.07 0.055 0.066

In the year ended 30 June 2009, all of the Consolidated Entity’s senior executives accepted a sizeable pay cut to account for the eff ects of the Global Financial Crisis on the Consolidated Entity’s performance. These cuts remained largely in place during the year ended 30 June 2010 whilst Management undertook a number of actions to improve the operating performance of the Consolidated Entity.

Owing to the Consolidated Entity’s improved performance in the year ended 30 June 2011, modest base salary increases were provided to the senior executives of the Consolidated Entity. Further, short-term performance based incentives provide a strong link between individual pay and achievement of profi tability and other operational targets. Finally the Consolidated Entity has, as disclosed in Section C of the Remuneration Report issued share-based compensation during 30 June 2011 which will further strengthen the link between senior executive remuneration and share price performance.

End of Remuneration Report.

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LOANS TO DIRECTORS AND EXECUTIVES

There were no loans outstanding to Directors and executives as at 30 June 2011 other than in connection to the issue of shares under the Employee Share Plan as disclosed in Section D of the Remuneration Report.

INSURANCE OF OFFICERS

During the fi nancial year, ADG Global Supply Limited paid a premium to insure the Directors and Secretary of the Company and its Australian-based controlled entities, and senior executives of the Consolidated Entity. A clause in the relevant insurance policy prevents the disclosure of the amount of the premium.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the offi cers in their capacity as offi cers of entities in the Consolidated Entity, and any other payments arising from liabilities incurred by the offi cers in connection with such proceedings.

This does not include such liabilities that arise from conduct involving a willful breach of duty by the offi cers or the improper use by the offi cers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

NUMBER OF OPTIONS OUTSTANDING

At the date of this report, the following number of options in the Consolidated Entity’s ordinary shares remained outstanding (refer to note 18 of the fi nancial report, for further information):

- 5,000,000 $0.10 options with an expiry date of 30 June 2013;

- 10,000,000 $0.11 options with an expiry date of 30 June 2014; and

- 5,000,000 $0.15 options with an expiry date of 30 June 2014.

PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION

The operations of the Consolidated Entity are not subject to any particular and signifi cant environmental regulation under a law of the Commonwealth or of a State or Territory.

NON-AUDIT SERVICES

Tax compliance services were provided by the entity’s auditor, Deloitte Touche Tohmatsu during the year ended 30 June 2011 (30 June 2010: no non-audit services were provided). The Directors are satisfi ed that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of the non-audit service provided means that auditor independence was not compromised.

Deloitte Touche Tohmatsu received $10,605 plus GST for the provision of non-audit services during the year ended 30 June 2011 (30 June 2010: Nil).


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AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 26.

AUDITORS

Deloitte Touche Tohmatsu continues in offi ce in accordance with section 327 of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors

D J Schwartz

Chairman

Perth, 22 September 2011

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auditors independence declaration

Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au The Board of Directors

ADG Global Supply Limited 17 Oxleigh Drive MALAGA, WA 6090 22 Sepetmber 2011 Dear Board Members

ADG Global Supply Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of ADG Global Supply Limited. As lead audit partner for the audit of the financial statements of ADG Global Supply Limited for the financial year ended 30 June 2011, 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 Conley Manifis Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

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corporate governance statement

ADG Global Supply Limited (“the Company”) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of shareholders. The Company and its controlled entities together are referred to as the Consolidated Entity in this statement.

A description of the Company’s main corporate governance practices is set out below. All these practices, unless otherwise stated, were in place for the entire year. They comply with the August 2007 ASX Principles of Good Corporate Governance and Best Practice Recommendations unless otherwise stated below.

Principle 1: Lay solid foundations for management and oversight

The relationship between the Board and senior management is critical to the Consolidated Entity’s long-term success. The Directors are responsible to the shareholders for the performance of the Company in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Consolidated Entity as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Consolidated Entity is properly managed.

Responsibilities

The responsibilities of the Board include:

• providing strategic guidance to the Company including contributing to the development of and approving the corporate strategy;

• reviewing and approving business plans, the annual budget and fi nancial plans including available resources and major capital expenditure initiatives;

• overseeing and monitoring:

» organisational performance and the achievement of the Consolidated Entity’s strategic goals and objectives;

» compliance with the Company’s Code of Conduct; and

» progress of major capital expenditures and other signifi cant corporate projects including any acquisitions or divestments;

• monitoring fi nancial performance including approval of the annual and half-year fi nancial reports;

• liaison with the Company’s auditors;

• appointment, performance assessment and, if necessary, removal of the Managing Director;

• ratifying the appointment or removal and contributing to the performance assessment for the members of the senior management team including the Chief Financial Offi cer (“CFO”) and the Company Secretary;

• ensuring there are eff ective management processes in place and approving major corporate initiatives;

• enhancing and protecting the reputation of the organization; and

• overseeing the operation of the Consolidated Entity’s system for compliance and risk management reporting to shareholders.

Day to day management of the Consolidated Entity’s aff airs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the Managing Director and senior executives as set out in the Consolidated Entity’s delegations policy. These delegations are reviewed on an annual basis.

A performance assessment for senior executives last took place in June 2011.

Principle 2: Structure the board to add value

The Board operates in accordance with the broad principles set out in its Charter which is available from the corporate governance information section of the Company website at www.adgglobalsupply.com. The Charter details the Board’s composition and responsibilities and details of matters reserved for senior executives.

Board composition

The Charter states:

• the Board is to be comprised of both executive and non-executive Directors with a majority of non-executive Directors. Non-executive Directors bring a fresh perspective to the Board’s consideration of strategic, risk and performance matters and are best placed to exercise independent judgement and review and constructively challenge the performance of management;

• in recognition of the importance of independent views and the Board’s role in supervising the activities of management, the Chairman must be an independent non-executive Director and all Directors are required to bring independent judgement to bear in their Board decision making;

• the Chairman is elected by the full Board and is required to meet regularly with the Managing Director;

• the Company is to maintain a mix of Directors on the Board from diff erent backgrounds with complementary skills and experience; and

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• the Board is required to undertake an annual Board performance review and consider the appropriate mix of skills required by the Board to maximise its eff ectiveness and its contribution to the Consolidated Entity.

Board members

Details of the members of the Board, their experience, expertise, qualifi cations, term of offi ce and independent status are set out in the Directors’ report under the heading ‘’Information on Directors’’. There is one non-executive Director (the Chairman) who is also deemed to be independent under the principles set out below, and two executive Directors at the date of signing the Directors’ report. The Board is currently not comprised of a majority of non-executive directors because, owing to the size of the Company, compliance with this requirement would cause the Consolidated Entity an inappropriate fi nancial burden. The Board seeks to ensure that:

• at any point in time, its membership represents an appropriate balance between Directors with experience and knowledge of the Consolidated Entity and Directors with an external or fresh perspective; and

• the size of the Board is conducive to eff ective discussion and effi cient decision-making.

Directors’ independence

The Board has adopted specifi c principles in relation to Directors’ independence. These state that when determining independence, a Director must be a non-executive and the Board should consider whether the Director:

• is a substantial shareholder of the Company or an offi cer of, or otherwise associated directly with, a substantial shareholder of the Company;

• is or has been employed in an executive capacity by the Company or any other Consolidated Entity member within three years before commencing to serve on the Board;

• within the last three years has been a principal of a material professional adviser or a material consultant to the Company or any other Consolidated Entity member, or an employee materially associated with the service provided;

• is a material supplier or customer of the Company or any other Consolidated Entity member, or an offi cer of or otherwise associated directly or indirectly with a material supplier or customer;

• has a material contractual relationship with the Company or a controlled entity other than as a Director of the Consolidated Entity; and

• is free from any business or other relationship which could, or could reasonably be perceived

to, materially interfere with the Director’s independent exercise of their judgment.

Materiality for these purposes is determined on both quantitative and qualitative bases. In addition, a transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the Director’s performance.

Recent thinking on corporate governance has introduced the view that a Director’s independence may also be perceived to be impacted by lengthy service on the Board. To avoid any potential concerns, the Board has determined that a Director will not be deemed independent if he or she has served on the Board of the Company for more than ten years. The Board will continue to monitor developments on this issue.

Term of offi ce

The Company’s Constitution specifi es that all non-executive Directors must retire from offi ce no later than the third annual general meeting (“AGM”) following their last election. Where eligible, a Director may stand for re-election.

Chairman and Managing Director

The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives.

The Managing Director is responsible for implementing Consolidated Entity strategies and policies. The Board Charter specifi es that these are separate roles to be undertaken by separate people.

Induction

The induction provided to new Directors and senior managers enables them to actively participate in board decision-making as soon as possible. It ensures that they have a full understanding of the company’s fi nancial position, strategies, operations and risk management policies. It also explains the respective rights, duties, responsibilities and roles of the board and senior executives.

Commitment

The Board held twelve Board meetings and a number of corporate strategy workshops during the year.

The number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2011, and the number of meetings attended by each Director is disclosed on page 17.

It is the Company’s practice to allow its executive Directors to accept appointments outside the Company with prior written approval of the Board. No appointments of this nature were accepted during the

corporate governance statementF

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year ended 30 June 2011. The commitments of non-executive Directors are considered by the nomination committee prior to the Directors’ appointment to the Board of the Company.

Prior to appointment or being submitted for re-election, each non-executive Director is required to specifi cally acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company.

Confl ict of interests

Entities connected with Mr. D J Schwartz and Mr. J Mancini had business dealings with the Consolidated Entity during the year, as described in note 23 to the fi nancial statements. In accordance with the Board Charter, the Directors concerned declared their interests in those dealings to the Company and took no part in decisions relating to them or the preceding discussions. In addition, those Directors did not receive any papers from the Group pertaining to those dealings.

Independent professional advice

Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. Prior written approval of the Chairman is required, but this will not be unreasonably withheld.

Performance assessment

The Board undertakes an annual self-assessment of its collective performance, the performance of the Chairman and of its committees. Management is invited to contribute to this appraisal process. An assessment carried out in accordance with this process was undertaken during June 2010. The Chairman undertakes an annual assessment of the performance of individual Directors and meets privately with each Director to discuss this assessment.

Board committees

The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of complex issues. Current committees of the Board are the nomination, remuneration and audit committees. The committee structure and membership is reviewed on an annual basis.

Each committee has its own written charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. All of these charters are reviewed on an annual basis and are available on the Company website. All matters determined by committees are submitted to the full Board as recommendations for Board decisions.

Minutes of committee meetings are tabled at the subsequent Board meeting. Additional requirements for specifi c reporting by the committees to the Board are addressed in the charter of the individual committees.

Nomination committee

The nomination committee consisted of the following Directors until 31 July 2010:

D J Schwartz

A Greathead

From 31 July 2010 the composition of the Board changed and as a result the Board resolved that the nomination committee consist of the full Board. Details of these Directors’ attendance at nomination committee meetings are set out in the Directors’ report on page 17.

The nomination committee operates in accordance with its charter which is available on the Company website. The main responsibilities of the committee are to:

• conduct an annual review of the membership of the Board having regard to present and future needs of the Company and to make recommendations on Board composition and appointments;

• conduct an annual review of and conclude on the independence of each Director

• propose candidates for Board vacancies;

• oversee the annual performance assessment program;

• oversee Board succession including the succession of the Chairman; and

• assess the eff ectiveness of the induction process.

When a new Director is to be appointed the committee reviews the range of skills, experience and expertise on the Board, identifi es its needs and prepares a short-list of candidates with appropriate skills and experience. Where necessary, advice is sought from independent search consultants.

The full Board then appoints the most suitable candidate who must stand for election at the next annual general meeting of the Company. The committee’s nomination of existing Directors for reappointment is not automatic and is contingent on their past performance, contribution to the Company and the current and future needs of the Board and Company.

Details of the nomination, selection and appointment processes are available on the Company website. Notices of meetings for the election of Directors comply with the ASX Corporate Governance Council’s best practice recommendations.


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All new Directors participate in a comprehensive, formal induction program which covers the operation of the Board and its committees and fi nancial, strategic, operations and risk management issues.

Principle 3: Promote ethical and responsible decision making

Code of Conduct

The Company has developed a statement of values and a Code of Conduct (“the Code”) which has been fully endorsed by the Board and applies to all Directors and employees. The Code is regularly reviewed and updated as necessary to ensure it refl ects the highest standards of behaviour and professionalism and the practices necessary to maintain confi dence in the Consolidated Entity’s integrity.

In summary, the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Company policies.

The purchase and sale of Company securities by Directors and employees is only permitted during the thirty day period following the release of the half-yearly and annual fi nancial results to the market. Any transactions undertaken must be notifi ed to the Company Secretary in advance.

The Code including the Company’s share trading policy is discussed with each new employee as part of their induction.

The Code requires employees who are aware of unethical practices within the Group or breaches of the Company’s trading policy to report these using the Company’s whistleblower program. This can be done anonymously.

The Directors are satisfi ed that the Consolidated Entity has complied with its policies on ethical standards, including trading in securities.

A copy of the Code including and the share trading policy are available on the Company’s website.

Principle 4: Safeguard integrity in fi nancial reporting

Audit committee

The audit committee consisted of the following Directors until 31 July 2010: D A Craig (Chairman) D J Schwartz A Greathead From 31 July 2010 the composition of the Board changed and as a result the Board resolved that the audit committee consist of the full Board. Details of these Directors’ qualifi cations and attendance at audit committee meetings are set out in the Directors’ report on page 17.

The audit committee has appropriate fi nancial expertise and all members are fi nancially literate and have an appropriate understanding of the industries in which the Consolidated Entity operates.

The audit committee operates in accordance with a charter which is available on the Company website.

The main responsibilities of the Committee are to:

• review, assess and approve the annual full and concise reports, the half-year fi nancial report and all other fi nancial information published by the Company or released to the market;

• assist the Board in reviewing the eff ectiveness of the organisation’s internal control environment covering:

• eff ectiveness and effi ciency of operations;

• reliability of fi nancial reporting; and

• compliance with applicable laws and regulations;

• determine the scope of the internal audit function (where one is implemented) and ensure that its resources are adequate and used eff ectively, and assess its performance, including independence;

• ratify the appointment and/or removal and contribute to the performance assessment of the chief internal auditor;

• oversee the eff ective operation of the risk management framework;

• recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess performance;

• consider the independence and competence of the external auditor on an ongoing basis

• review and approve the level of non-audit services provided by the external auditors and ensure it does not adversely impact on auditor independence;

• review and monitor related party transactions and assess their propriety; and

• report to the Board on matters relevant to the committee’s role and responsibilities.

In fulfi lling its responsibilities, the audit committee:

• receives regular reports from management, the internal and external auditors;

• meets with the internal and external auditors at least twice a year, or more frequently if necessary;

• reviews the processes the Managing Director and CFO have in place to support their certifi cations to the Board;

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• reviews any signifi cant disagreements between the auditors and management, irrespective of whether they have been resolved;

• meets separately with the external auditors and (where applicable) the chief internal auditor at least twice a year without the presence of management; and

• provides the internal and external auditors with a clear line of direct communication at any time to either the Chairman of the audit committee or the Chairman of the Board.

The audit committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

External auditors

The Company and audit committee policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. Deloitte Touche Tohmatsu was the Company’s auditors for the year ended 30 June 2011.

It is Deloitte Touche Tohmatsu’s policy to rotate audit engagement partners on listed companies at least every fi ve years. The current audit engagement partner has been in place since the year ended 30 June 2007.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ report and in note 22 to the fi nancial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the audit committee.

The external auditors will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Principles 5 and 6: Make timely and balanced disclosures and respect the rights of shareholders

Continuous disclosure and shareholder communication

The Consolidated Entity has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Consolidated Entity that a reasonable person would expect to have a material eff ect on the price of the Company’s securities. These policies and procedures also include the arrangements the Company has in place to promote communication with shareholders and encourage eff ective participation at general meetings. A summary of these policies and procedures is available on the Company’s website.

The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Consolidated Entity’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website.

All shareholders receive a copy of the Company’s annual (full) and half-yearly reports. In addition, the company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all Company announcements, media briefi ngs, details of Company meetings, press releases and fi nancial reports since the 15 May 2008 being available on the Company’s website.

Principle 7: Recognise and manage risk

The Board, through the audit committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. These policies are available on the Company website. In summary, the Company policies are designed to ensure strategic, operational, legal, reputational and fi nancial risks are identifi ed, assessed, eff ectively and effi ciently managed and monitored to enable achievement of the Consolidated Entity’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organization structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of Conduct (see below) is required at all times and the Board actively promotes a culture of quality and integrity.

The Company risk management policy and the operation of the risk management and compliance systems are managed by the CFO. The Board receives annual updates from the CFO as to the eff ectiveness of the Company’s management of material risks that may impede meeting business objectives. Detailed control procedures cover a number of critical areas of the Consolidated Entity’s business.

The CFO facilitates a review of performance against each material risk annually. The basis for this report is an annual review of the past performance of each major business segment, and the current and future risks they face. The CFO reports to regular corporate strategy workshops attended by the Board and senior

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management. This reviews the Consolidated Entity’s strategic direction in detail and includes specifi c focus on the identifi cation of the key business and fi nancial risks which could prevent the Company from achieving its objectives.

The CFO is required to ensure that appropriate controls are in place to eff ectively manage those risks. This is monitored by the Board on an annual basis. The Board has a received a number of reports on this area during the year.

In addition, the Board requires that each major proposal submitted to the Board for decision is accompanied by a comprehensive risk assessment and, where required, management’s proposed mitigation strategies.

The environment, health and safety management

The Consolidated Entity recognises the importance of environmental and occupational health and safety (OH&S) issues and is committed to the highest levels of performance. To help meet this objective management has established controls under the supervision of the CFO to facilitate the systematic identifi cation of environmental and OH&S issues and to ensure they are managed in a structured manner.

These controls allow the Company to:

• monitor its compliance with all relevant legislation;

• continually assess and improve the impact of its operations on the environment;

• encourage employees to actively participate in the management of environmental and OH&S issues; and

• use energy and other resources effi ciently.

Information on compliance with signifi cant environmental regulations is set out in the Directors’ report.

Corporate reporting

The Managing Director and CFO have made the following certifi cations to the Board:

• that the Company’s fi nancial reports are complete and present a true and fair view, in all material respects, of the fi nancial condition and operational results of the Company and Consolidated Entity and are in accordance with relevant accounting standards; and

• that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control is operating effi ciently and eff ectively in all material respects.

Principle 8: Remunerate fairly and responsibly

Remuneration committee

The remuneration committee consisted of the following non-executive Directors until 31 July 2010:

D J Schwartz (Chairman)

D A Craig

A Greathead

From 31 July 2010 the composition of the Board changed and as a result the Board resolved that the remuneration committee consist of the full Board.

Details of these Directors’ attendance at remuneration committee meetings are set out in the Directors’ report on page 17.

The remuneration committee operates in accordance with its charter which is available on the Company website. The remuneration committee advises the Board on remuneration and incentive policies and practices generally, and makes specifi c recommendations on remuneration packages and other terms of employment for executive Directors, other senior executives and non-executive Directors.

Committee members can receive briefi ngs, when requested, from an external remuneration expert on recent developments on remuneration and related matters. Each member of the senior executive team signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specifi c formal job description.

Further information on Directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the Directors’ report under the heading ‘’Remuneration Report’’. The committee also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programs and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.

During the year ended 30 June 2011, options were issued to Mr D J Schwartz as disclosed in note 24 of the fi nancial report. Whilst this issue is not in accordance with the ASX Corporate Governance Recommendation, the Board is satisfi ed that the issue, which was provided in lieu of services rendered, do not compromise the Chairman’s independence and objectivity.


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statement of comprehensive income for the year ended 30 June 2011

CONTINUING OPERATIONS Notes

Consolidated

30 JUNE 2011

$

30 JUNE 2010

$

Revenue 7 52,215,837 35,886,712

Other income 7 22,917 32,212

Expenses from continuing operations

Raw materials and consumables used 7 (43,070,739) (30,587,966)

Employee benefi ts expense 7 (4,850,923) (4,086,469)

Bad debts expense - (3,035)

Depreciation and amortisation expense (285,109) (254,317)

Other expenses (2,532,834) (2,009,903)

Finance costs 7 (438,345) (475,864)

Profi t / (Loss) from continuing operations before income tax 1,060,804 (1,498,630)

Income tax (expense) / revenue 8 (336,196) 423,594

Profi t / (Loss) from continuing operations after tax 724,608 (1,075,036)

Net profi t / (loss) attributable to the members of ADG Global

Supply Limited724,608 (1,075,036)

Other comprehensive income

Cash fl ow hedges:

- Loss taken to equity (3,120) -

Other comprehensive income for the period (net of tax) (3,120) -

Total Comprehensive Income attributable to the members of ADG

Global Supply Limited721,488 (1,075,036)

Earnings per share (cents per share) 25

- basic; for profi t/(loss) for the year 0.47 (1.09)

- diluted; for profi t/(loss)for the year 0.47 (1.09)

Dividends paid per share (cents per share) - -

The statement of comprehensive income is to be read in conjunction with the accompanying explanatory notes to the

consolidated fi nancial statements

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statement of fi nancial position as at 30 June 2011

Notes

Consolidated

30 JUNE 2011

$

30 JUNE 2010

$

ASSETS

Current Assets

Cash and cash equivalents 9 4,813,304 648,171

Trade and other receivables 10 9,765,498 6,425,923

Inventories 11 4,363,389 4,790,944

Other assets 12 651,471 147,429

Total Current Assets 19,593,662 12,012,467

Non-Current Assets

Deferred tax asset 8 739,516 1,159,647

Property, plant and equipment 13 347,014 465,827

Intangible assets 14 8,151,413 8,049,387

Total Non-Current assets 9,237,943 9,674,861

TOTAL ASSETS 28,831,605 21,687,328

LIABILITIES

Current Liabilities

Trade and other payables 15 8,178,530 6,229,904

Income tax payable - -

Interest-bearing loans and borrowings 16 1,200,000 5,386,436

Provisions 17 332,388 260,377

Total Current Liabilities 9,710,918 11,876,717

Non-Current Liabilities

Deferred tax liabilities 8 - 3,479

Interest bearing loans and borrowings 16 2,900,000 63,018

Provisions 17 40,080 37,042

Total Non-Current Liabilities 2,940,080 103,539

TOTAL LIABILITIES 12,650,998 11,980,256

NET ASSETS 16,180,607 9,707,072

EQUITY

Contributed equity 18 15,301,362 41,359,766

Options valuation reserve 18 (f) 157,757 -

Cashfl ow hedge reserve (3,120) -

Retained earnings / (cumulative losses) 724,608 (31,652,694)

TOTAL EQUITY 16,180,607 9,707,072

The statement of fi nancial position is to be read in conjunction with the accompanying explanatory notes to the con-

solidated fi nancial statements.

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statement of cashfl ows for the year ended 30 June 2011

Notes

Consolidated

30 JUNE 2011

$

30 JUNE 2010

$

CASHFLOWS FROM OPERATING ACTIVITIES

Receipts from customers 50,014,416 35,972,809

Payments to suppliers and employees (49,569,019) (35,937,540)

Interest received 24,145 25,555

Interest paid (438,345) (418,950)

Income tax refund received 80,456 -

Net cash fl ows from / (used in) operating activities 24 111,653 (358,126)

CASHFLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment 19,409 11,902

Purchase of property, plant and equipment (112,458) (84,273)

Purchase of intangible assets (180,412) (194,893)

Net cash fl ows used in investing activities (273,461) (267,264)

CASHFLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 6,124,244 2,195,211

Transactions costs relating to issue of shares (447,849) (142,030)

Repayment of borrowings (1,349,454) (1,789,683)

Net cash fl ows from fi nancing activities 4,326,941 263,498

Net increase / (decrease) in cash and cash equivalents 4,165,133 (361,892)

Cash and cash equivalents at beginning of period 648,171 1,010,063

Cash and cash equivalents at end of period 9 4,813,304 648,171

RECONCILIATION OF CASH

Cash at bank and in hand 4,813,304 648,171

4,813,304 648,171

The statement of cashfl ows is to be read in conjunction with the accompanying explanatory notes to the consolidated

fi nancial statement.

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statement of changes in equity for the year ended 30 June 2011

CONSOLIDATED Note

Contributed

Equity

$

Options

valuation

reserve

$

Cashfl ow

hedge

reserve

$

Retained

earnings /

(cumulative

losses)

$

Total

Equity

$

AT 1 JULY 2009 38,556,585 - - (30,577,658) 7,978,927

Loss for the period - - - (1,075,036) (1,075,036)

Other comprehensive income for the period

- - - - -

Total comprehensive income for the period

- - - (1,075,036) (1,075,036)

Transactions with owners, in their capacity as owners

Issue of ordinary shares 18 2,948,029 - - - 2,948,029

Ordinary shares bought back (2,818) - - - (2,818)

Transaction costs on ordinary shares issued

18 (142,030) - - - (142,030)

AT 30 JUNE 2010 41,359,766 - - (31,652,694) 9,707,072

AT 1 JULY 2010 41,359,766 - - (31,652,694) 9,707,072

Profi t for the period - - - 724,608 724,608

Other comprehensive income for the period

- - (3,120) - (3,120)

Total comprehensive income for the period

- - (3,120) 724,608 721,488

Transactions with owners, in their capacity as owners

Equity Consolidation 18 (31,652,694) - - 31,652,694 -

Issue of ordinary shares 18 6,149,244 - - - 6,149,244

Transaction costs on ordinary shares issued

18 (554,954) - - - (554,954)

Value of options issued during the period

18 - 157,757 - - 157,757

AT 30 JUNE 2011 15,301,362 157,757 (3,120) 724,608 16,180,607

The statement of changes in equity is to be read in conjunction with the accompanying explanatory notes to the

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notes to fi nancial report for the year ended 30 June 2011

1. CORPORATE INFORMATION

The consolidated fi nancial statements of ADG Global Supply Limited (“the Company”) for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of the directors of the Company dated 22 September 2011. ADG Global Supply Limited is a Company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange.

The nature of the operation and principal activities of the Company and its controlled entities are described in note 6.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated fi nancial statements comprise the fi nancial statements of ADG Global Supply Limited and its controlled subsidiaries (‘the Consolidated Entity’).

(a) Basis of preparationThis general purpose fi nancial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (including Australian Accounting Interpretations) and the Corporations Act 2001. The Consolidated Entity has implemented the Corporations Amendment Regulations 2010 (No 6) regarding the requirement to disclose parent entity information as a note to the consolidated fi nancial statements. Parent entity information is presented in note 3.

Compliance with IFRSAustralian Accounting Standards include Australian equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the fi nancial report of the Consolidated Entity complies with International Financial Reporting Standards (“IFRS”).

Historical cost conventionThese fi nancial statements have been prepared under the historical cost convention.

Critical accounting estimatesThe preparation of fi nancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in the process of applying the Consolidated Entity’s accounting policies. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements are disclosed in note 5.

(b) Principles of consolidationSubsidiaries are all those entities (including special purpose entities) over which the Consolidated Entity has the power to govern the fi nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and eff ect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity.

The consolidation accounting method used for the consolidated fi nancial statements that include the fi nancial statements made up to the balance sheet date each year of the Company and its subsidiaries is disclosed under the note on ‘Business Combinations’ below. Consolidated fi nancial statements are the fi nancial statements of the Consolidated Entity presented as those of a single economic entity. The consolidated fi nancial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

All signifi cant intra-Consolidated Entity balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The results of the investees acquired or disposed of during the fi nancial year are accounted for from the respective dates of acquisition or up to the dates of disposal. On disposal, the attributable amount of goodwill, if any, is included in the determination of the gain or loss on disposal.

(c) Business combinationsAcquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Consolidated Entity in exchange for control of the acquiree. Acquisition-related costs are recognised in profi t or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below).

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Business combinations (continued)All other subsequent changes in the fair value of contingent consideration classifi ed as an asset or liability are accounted for in accordance with relevant accounting standards. Changes in the fair value of contingent consideration classifi ed as equity are not recognised.

Where a business combination is achieved in stages, the Consolidated Entity’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Consolidated Entity attains control) and the resulting gain or loss, if any, is recognised in profi t or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassifi ed to profi t or loss, where such a treatment would be appropriate if that interest were disposed of.

The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 (2008) are recognised at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefi t arrangements are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefi ts respectively;

• liabilities or equity instruments related to the replacement by the Consolidated Entity of an acquiree’ share-based payment awards are measured in accordance with AASB 2 Share-based Payment; and

• assets (or disposal groups) that are classifi ed as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Consolidated Entity reports provisional amounts for the terms for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to refl ect new information obtained about facts and circumstances that existed as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

(d) Segment reportingOperating segments are identifi ed on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers in order to allocate resources to the segments and to assess their performance.

(e) Foreign currency translation

Functional and presentation currency Items included in the fi nancial statements of each of the Consolidated Entity’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated fi nancial statements are presented in Australian Dollars, which is the Consolidated Entity’s presentation currency.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, at year end exchange rates, of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when they are deferred in equity as qualifying cash fl ow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Translation diff erences on non-monetary fi nancial assets and liabilities are reported as part of the fair value gain or loss. Translation diff erences on non-monetary fi nancial assets and liabilities such as equities held at fair value through profi t or loss are recognised in profi t or loss as part of the fair value gain or loss. Translation diff erences on non-monetary fi nancial assets such as equities classifi ed as available for sale fi nancial assets are included in the fair value reserve in equity.

All companies of the Consolidated Entity have Australian Dollars as a functional currency.


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(f) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Consolidated Entity and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:

Sale of goodsRevenue from the sale of goods is recognised when the Consolidated Entity has passed control of the goods to the buyer.

Interest Interest is recognised when earned.

(g) Income taxThe income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary diff erences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary diff erences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated fi nancial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction aff ects neither accounting, nor taxable profi t or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary diff erences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary diff erences and losses.

Deferred tax liabilities and assets are not recognised for temporary diff erences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary diff erences and it is probable that the diff erences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are off set when there is a legally enforceable right to off set current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are off set where the entity has a legally enforceable right to off set and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(h) Hire purchases and leases Hire purchases and leases of property, plant and equipment where the Consolidated Entity, as lessee, has substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of fi nance charges, are included in other short term and long term payables. Each lease payment is allocated between the liability and fi nance cost. The fi nance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under fi nance leases are depreciated over the shorter of the asset’s useful life and the lease term.

Leases in which a signifi cant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classifi ed as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease.

Lease income from operating leases where the Consolidated Entity is a lessor is recognised as income on a straight line basis over the lease term.


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(i) Impairment of assetsGoodwill and intangible assets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash infl ows which are largely independent of the cash infl ows from other assets or groups of assets (cash generating units). Non-fi nancial assets other than goodwill that suff ered impairment are reviewed for possible reversal of the impairment at each reporting date.

(j) Cash and cash equivalentsCash and cash equivalents includes cash on hand, deposits held at call with fi nancial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of fi nancial position.

(k) Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost using the eff ective interest method, less a provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off . A provision for impairment of trade receivables is established when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired.

The amount of the provision is the diff erence between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the original eff ective interest rate. Cash fl ows relating to short term receivables are not discounted if the eff ect of discounting is immaterial. The amount of the provision is recognised in the statement of comprehensive income in other expenses.

(l) InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in acquiring the inventories and in bringing them to their existing condition and location.

Costs are assigned to individual items of inventory on a basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(m) Fair value estimation The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of fi nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash fl ows at the current market interest rate that is available to the Consolidated Entity for similar fi nancial instruments.

(n) Investments and other fi nancial assets

Classifi cation

The Consolidated Entity classifi es its fi nancial assets in the following categories: fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments and available-for-sale fi nancial assets.

The classifi cation depends on the purpose for which the investments were acquired. Management determines the classifi cation of its investments at initial recognition and, in the case of assets classifi ed as held-to-maturity, re-evaluates this designation at each reporting date.


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(n) Investments and other fi nancial assets (continued)

(i) Financial assets at fair value through profi t or lossFinancial assets at fair value through profi t or loss are fi nancial assets held for trading. A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are classifi ed as held for trading unless they are designated as hedges. Assets in this category are classifi ed as current assets.

(ii) Loans and receivablesLoans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classifi ed as non-current assets. Loans and receivables are included in trade and other receivables (note 10) in the statement of fi nancial position.

(iii) Held-to-maturity investmentsHeld-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities that the Consolidated Entity’s management has the positive intention and ability to hold to maturity. If the Consolidated Entity were to sell other than an insignifi cant amount of held-to-maturity fi nancial assets, the whole category would be tainted and reclassifi ed as available-for-sale. Held-to-maturity fi nancial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classifi ed as current assets.

(iv) Available-for-sale fi nancial assets Available-for-sale fi nancial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classifi ed in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fi xed maturities and fi xed or determinable payments and management intends to hold them for the medium to long term. Recognition and derecognition

Regular purchases and sales of fi nancial assets are recognised on trade-date - the date on which the Consolidated Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all fi nancial assets not carried at fair value through profi t or loss. Financial assets carried at fair value through profi t or loss, are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership.

When securities classifi ed as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

Subsequent measurement

Loans and receivables and held-to-maturity investments are carried at amortised cost using the eff ective interest method.

Available-for-sale fi nancial assets and fi nancial assets at fair value through profi t and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘fi nancial assets at fair value through profi t or loss’ category are presented in the income statement within other income or other expenses in the period in which they arise. Dividend income from fi nancial assets at fair value through profi t and loss is recognised in the income statement as part of revenue from continuing operations when the Consolidated Entity’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classifi ed as available-for-sale are analysed between translation diff erences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation diff erences related to changes in the amortised cost are recognised in profi t or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classifi ed as available-for-sale are recognised in equity.


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(n) Investments and other fi nancial assets (continued)

Impairment

The Consolidated Entity assesses at each balance date whether there is objective evidence that a fi nancial asset or a group of fi nancial assets is impaired. In the case of equity securities classifi ed as available-for-sale, a signifi cant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale fi nancial assets, the cumulative loss - measured as the diff erence between the acquisition cost and the current fair value, less any impairment loss on that fi nancial asset previously recognised in profi t or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classifi ed as available-for-sale are not reversed through the income statement. (o) Derivatives and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Consolidated Entity designates certain derivatives as either:

• hedges of the fair value of recognised assets or liabilities or a fi rm commitment (fair value hedges),

• hedges of the cash fl ows of recognised assets and liabilities and highly probable forecast transactions (cash fl ow hedges), or

• hedges of a net investment in a foreign operation (net investment hedges).

The Consolidated Entity documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Consolidated Entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly eff ective in off setting changes in fair values or cash fl ows of hedged items.

(p) Property, plant and equipment Land and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Depreciation is calculated over the estimated useful life of the asset as follows:• Plant and equipment - over 3 to 20 years;

• Furniture and fi ttings – over 3 to 13 years;

• Motor Vehicles – over 8 years;

• Leasehold improvements – over 40 years; and

• Computer hardware/software – over 3 to 5 years.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement. When revalued assets are sold, it is the Consolidated Entity’s policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.


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(q) Intangible assets

Acquired both separately and from a business combinationIntangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied to the class of intangible assets. Where amortisation is charged on assets with fi nite lives, this expense is taken to the income statement through the ‘amortisation expenses’ line item.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profi ts in the period in which the expenditure is incurred.

Intangible assets are tested for impairment where an indicator of impairment exists and in the case of indefi nite lived intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

(i) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Consolidated Entity’s share of the net identifi able assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Consolidated Entity’s investment in each country of operation by each operating segment.

(ii) IT development and softwareCosts incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period fi nancial benefi ts through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Consolidated Entity has an intention and ability to use the asset.

(ii) Product rightsProduct rights acquired separately are initially measured at cost and classifi ed as ‘Product Rights’. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Product rights are amortised over their useful economic life based on related product sales volumes achieved.

(r) Trade and other payablesThese amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the reporting date which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. (s) Provisions Provisions for legal claims, service warranties and make good obligations are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of past events, it is probable that an outfl ow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outfl ow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outfl ow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of Management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value refl ects current market assessments of the time value of money and the risks specifi c to the liability. The increase in the provision due to the passage of time is recognised as interest expense.


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(t) Employee benefi ts

(i) Wages and salaries and annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefi ts, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leaveThe liability for long service leave is recognised in the provision for employee benefi ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outfl ows.

(iii) Profi t-sharing and bonus plansThe Consolidated Entity recognises a liability and an expense for bonuses and profi t-sharing based on a formula that takes into consideration the profi t attributable to the Company’s shareholders after certain adjustments. The Consolidated Entity recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(iv) Termination benefi tsTermination benefi ts are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefi ts. The Consolidated Entity recognises termination benefi ts when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefi ts as a result of an off er made to encourage voluntary redundancy. Benefi ts falling due more than 12 months after reporting date are discounted to present value.

(u) Share-based payment transactionsThe Consolidated Entity provides benefi ts to employees (including executive directors) of the Consolidated Entity in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of ADG Global Supply Limited (‘market conditions’). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity where applicable, over the period in which the performance conditions are fulfi lled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date refl ects the extent to which the vesting period has expired and the number of awards that are expected to ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met, as the eff ect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not been modifi ed. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modifi cation, as measured at the date of modifi cation.

(v) BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any diff erence between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the eff ective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Bank loans are carried at amortised cost. Transaction costs are deducted against the outstanding principal amount at amortised cost using the eff ective interest rate method.


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(w) Convertible notesConvertible notes are compound fi nancial instruments with separate liability and equity components identifi ed on initial recognition. Transaction costs are deducted against the liability component of the compound fi nancial instrument at amortised cost using the eff ective interest rate method.

(x) Contributed equityOrdinary shares are classifi ed as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profi t or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(y) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the fi nancial year but not distributed at balance date.

(z) Earnings per share

(i) Basic earnings per shareBasic earnings per share is calculated by dividing the profi t attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the fi nancial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per shareDiluted earnings per share adjusts the fi gures used in the determination of basic earnings per share to take into account the after income tax eff ect of interest and other fi nancing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(aa) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of fi nancial position.

(bb) Standards and Interpretations adopted with no eff ect on fi nancial statementsThe following new and revised Standards and Interpretations have also been adopted in these fi nancial statements. Their adoption has not had any signifi cant impact on the amounts reported in these fi nancial statements but may aff ect the accounting for future transactions or arrangements.

Reference TitleApplication date

of standard*

Application date

for the Company

AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions

[AASB 2]

1 January 2010 1 July 2010

AASB 2009-10 Amendments to Australian Accounting Standards – Classifi cation of Rights Issues

[AASB 132]

1 February 2010 1 July 2010


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(bb) Standards and Interpretations adopted with no eff ect on fi nancial statements (continued)


of standard*

Application date

for the Company

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project – The subject of amendments to the standards are set out below:

• AASB 5 – Disclosures in relation to non-current assets (or disposal groups) classifi ed as held for sale or discontinued operations

• AASB 8 – Disclosure of information about segment assets

• AASB 101 – Current/non-current classifi cation of convertible instruments

• AASB 107 – Classifi cation of expenditures that does not give rise to an asset

• AASB 117 – Classifi cation of leases of land• AASB 118 – Determining whether an entity is acting as

a principle or an agent• AASB 136 – Clarifying the unit of account for goodwill

impairment test is not larger than an operating segment before aggregation

• AASB 139 – Treating loan prepayment penalties as closely related embedded derivatives, and revising the scope exemption for forward contracts to enter into a business combination contract


AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

[AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]

Limits the scope of the measurement choices of non-controlling interest to instruments that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. Other components of NCI are measured at fair value.

Requires an entity (in a business combination) to account for the replacement of the acquiree’s share-based payment transactions (whether obliged or voluntarily), in a consistent manner i.e., allocate between consideration and post combination expenses.

Clarifi es that contingent consideration from a business combination that occurred before the eff ective date of AASB 3 Revised is not restated.

Clarifi es that the revised accounting for loss of signifi cant infl uence or joint control (from the issue of IFRS 3 Revised) is only applicable prospectively.

1 July 2010 1 July 2010


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(bb) Standards and Interpretations adopted with no eff ect on fi nancial statements (continued)


of standard*

Application date

for the Company

AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

[AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139]

Limits the scope of the measurement choices of non-controlling interest to instruments that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. Other components of NCI are measured at fair value.

Requires an entity (in a business combination) to account for the replacement of the acquiree’s share-based payment transactions (whether obliged or voluntarily), in a consistent manner i.e., allocate between consideration and post combination expenses.

Clarifi es that contingent consideration from a business combination that occurred before the eff ective date of AASB 3 Revised is not restated.

Clarifi es that the revised accounting for loss of signifi cant infl uence or joint control (from the issue of IFRS 3 Revised) is only applicable prospectively.

1 July 2010 1 July 2010

Interpretation 19

Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments

This interpretation clarifi es that equity instruments issued to a creditor to extinguish a fi nancial liability are “consideration paid” in accordance with paragraph 41 of IAS 39. As a result, the fi nancial liability is derecognised and the equity instruments issued are treated as consideration paid to extinguish that fi nancial liability.

The interpretation states that equity instruments issued as payment of a debt should be measured at the fair value of the equity instruments issued, if this can be determined reliably. If the fair value of the equity instruments issued is not reliably determinable, the equity instruments should be measured by reference to the fair value of the fi nancial liability extinguished as of the date of extinguishment

1 July 2010 1 July 2010


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(cc) New standards and interpretations not yet adoptedAustralian Accounting Standards and Interpretations that have recently been issued or amended but are not yet eff ective have not been adopted by the Company for the annual reporting period ended 30 June 2011. They are outlined in the following table.

The Company has not yet determined the potential eff ect of these on its fi nancial statements.

Refer-

enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 9 Financial Instruments

AASB 9 includes requirements for the classifi cation and measurement of fi nancial assets resulting from the fi rst part of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement).

These requirements improve and simplify the approach for classifi cation and measurement of fi nancial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below.

a. Financial assets are classifi ed based on (1) the objective of the entity’s business model for managing the fi nancial assets; (2) the characteristics of the contractual cash fl ows. This replaces the numerous categories of fi nancial assets in AASB 139, each of which had its own classifi cation criteria.

b. AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profi t or loss and there is no impairment or recycling on disposal of the instrument.

c. Financial assets can be designated and measured at fair value through profi t or loss at initial recognition if doing so eliminates or signifi cantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on diff erent bases.


AASB 2009-11

Amendments to Australian Accounting Standards arising from AASB 9

[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Int 10 & 12]

These amendments arise from the issuance of AASB 9 Financial Instruments that sets out requirements for the classifi cation and measurement of fi nancial assets. The requirements in AASB 9 form part of the fi rst phase of the International Accounting Standards Board’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

This Standard shall be applied when AASB 9 is applied.



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(cc) New standards and interpretations not yet adopted (continued)

Refer-

enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 124 (Revised)

Related Party Disclosures (December 2009)

The revised AASB 124 simplifi es the defi nition of a related party, clarifying its intended meaning and eliminating inconsistencies from the defi nition, including:

the defi nition now identifi es a subsidiary and an associate with the same investor as related parties of each other; entities signifi cantly infl uenced by one person and entities signifi cantly infl uenced by a close member of the family of that person are no longer related parties of each other; and the defi nition now identifi es that, whenever a person or entity has both joint control over a second entity and joint control or signifi cant infl uence over a third party, the second and third entities are related to each other.

A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures.


AASB 119 (Revised)

Employee Benefi ts

The main amendments to the standard relating to defi ned benefi t plans are as follows :-

• Elimination of the option to defer the recognition of actuarial gains and losses (the ‘corridor method’);

• Remeasurements (essentially actuarial gains and losses) to be presented in other comprehensive income;

• Past service cost will be expensed when the plan amendments occur regardless of whether or not they are vested; and

• Enhanced disclosures for Tier 1 entities.

The distinction between short-term and other long-term employee benefi ts under the revised standard is now based on expected timing of settlement rather than employee entitlement. The revised standard also requires termination benefi ts (outside of a wider restructuring) to be recognised only when the off er becomes legally binding and cannot be withdrawn.


AASB 2009-12

Amendments to Australian Accounting Standards

Accounting Standards[AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]

This amendment makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations.In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to refl ect changes made to the text of IFRSs by the IASB.



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enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 2009-14

Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement

[AASB Interpretation 14]

Standard makes amendments to Interpretation 14 AASB 119 – The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction. The requirements of IFRIC 14 meant that some entities that were subject to minimum funding requirements could not treat any surplus in a defi ned benefi t pension plan as an economic benefi t. The amendment requires entities to treat the benefi t of such an early payment as a pension asset. Subsequently, the remaining surplus in the plan, if any, is subject to the same analysis as if no prepayment had been made.


AASB 1054

Australian Additional Disclosures

This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB.

This standard relocates all Australian specifi c disclosures from other standards to one place and revises disclosures in the following areas:a. Compliance with Australian Accounting Standardsb. The statutory basis or reporting framework for

fi nancial statementsc. Whether the fi nancial statements are general

purpose or special purposed. Audit feese. Imputation credits

1 July 2011 1 July 2011

AASB 1053

Application of Tiers of Australian Accounting Standards

This Standard establishes a diff erential fi nancial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose fi nancial statements:a. Tier 1: Australian Accounting Standards; andb. Tier 2: Australian Accounting Standards – Reduced

Disclosure Requirements.Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements.The following entities apply Tier 1 requirements in preparing general purpose fi nancial statements:a. for-profi t entities in the private sector that have

public accountability (as defi ned in this Standard); and

b. the Australian Government and State, Territory and Local Governments.

The following entities apply either Tier 2 or Tier 1 requirements in preparing general purpose fi nancial statements:a. for-profi t private sector entities that do not have

public accountability;b. all not-for-profi t private sector entities; andc. public sector entities other than the Australian

Government and State, Territory and Local Governments.

1 July 2013 1 July 2013


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enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 2010-2

Amendments to Australian Accounting Standards arising from reduced disclosure requirements

This Standard gives eff ect to Australian Accounting Standards – Reduced Disclosure Requirements. AASB 1053 provides further information regarding the diff erential reporting framework and the two tiers of reporting requirements for preparing general purpose fi nancial statements.

1 July 2013 1 July 2013

AASB 2010-6

Amendments to AustralianAccounting Standards –Disclosures on Transfers ofFinancial Assets[AASB 1 & AASB 7]

The amendments increase the disclosure requirements for transactions involving transfers of fi nancial assets. Disclosures require enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognised and introduce new disclosures for assets that are derecognised but the entity continues to have a continuing exposure to the asset after the sale.

1 July 2011 1 July 2011

AASB 2010-4

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]

Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with fi nancial instruments.Clarifi es that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the fi nancial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for signifi cant events and transactionsClarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account.


AASB 2010-5

Amendments to Australian Accounting Standards[AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to refl ect changes made to the text of IFRSs by the IASB.

These amendments have no major impact on the requirements of the amended pronouncements.


AASB 2010-8

Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112]

These amendments address the determination of deferred tax on investment property measured at fair value and introduce a rebuttable presumption that deferred tax on investment property measured at fair value should be determined on the basis that the carrying amount will be recoverable through sale. The amendments also incorporate SIC-21 Income Taxes – Recovery of Revalued Non-Depreciable Assets into AASB 112.



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enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 2010-7

Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127]

The requirements for classifying and measuring fi nancial liabilities were added to AASB 9. The existing requirements for the classifi cation of fi nancial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for fi nancial liabilities the change in fair value is accounted for as follows:• The change attributable to changes in credit risk

are presented in other comprehensive income (OCI)

• The remaining change is presented in profi t or loss

If this approach creates or enlarges an accounting mismatch in the profi t or loss, the eff ect of the changes in credit risk are also presented in profi t or loss.


AASB 2011-1

Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project

[AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132 & AASB 134 and Interpretations 2, 112 & 113]

This Standard amendments many Australian Accounting Standards, removing the disclosures which have been relocated to AASB 1054.

1 July 2011 1 July 2011

AASB 2011-2

Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements[AASB 101 & AASB 1054]

This Standard makes amendments to the application of the revised disclosures to Tier 2 entities that are applying AASB 1053.

1 July 2013 1 July 2013

AASB 2011-4

Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements[AASB 124]

These amendments remove the individual key management personnel (KMP) disclosures from AASB 124.

1 July 2013 1 July 2013


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enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 2011-5

Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation

[AASB 127, AASB 128 & AASB 131]

This standard makes further amendments to certain Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements

1 Jul y 2011 1 Jul y 2011

AASB 2011-6

Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements

[AASB 127, AASB 128 & AASB 131]

This standard makes further amendments to certain Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements

1 Jul y 2013 1 Jul y 2013

AASB 2011-7

Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangement Standards

Consequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments in Associates as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities.


AASB 12 Disclosure of Interests in Other Entities

AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.



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Refer-

enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 2011-9

Amendments to Australian Accounting Standards -Presentation of Items of Other Comprehensive Income

[AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]

The main change resulting from the amendments relates to the Statement of Comprehensive Income and the requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifi able to profi t or loss subsequently (reclassifi cation adjustments). The amendments do not remove the option to present profi t or loss and other comprehensive income in two statements.

The amendments do not change the option to present items of OCI either before tax or net of tax. However, if the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassifi ed to profi t or loss and those that will not be reclassifi ed) must be shown separately.

1 July 2012 1 July 2012

AASB10 Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated fi nancial statements and Interpretation 112 Consolidation – Special Purpose Entities.

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specifi c situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group.


AASB10 Consolidated Financial Statements

AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated fi nancial statements and Interpretation 112 Consolidation – Special Purpose Entities.

The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specifi c situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group.



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Refer-

enceTitle Summary

Application

date of

standard*

Application

date for the

Company

AASB 11 Joint Arrangements

AASB 11 replaces AASB 131 Interests in Joint Ventures and Interpretation 113 Jointly- controlled Entities – Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to defi ne joint control, and therefore the determination of whether joint control exists may change. In addition AASB 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangements held by the group.


AASB 13 Fair Value Measurement

AASB 13 establishes a single source of guidance under Australian Accounting Standards for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under Australian Accounting Standards when fair value is required or permitted by Australian Accounting Standards. Application of this defi nition may result in diff erent fair values being determined for the relevant assets.AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.



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3. PARENT ENTITY DISCLOSURES

(a) Financial position

AS AT 30 JUNE

2011

$

2010

$

ASSETS

Current assets 11,056,054 6,593,786

Non-current assets 9,640,633 12,044,700

Total assets 20,696,687 18,638,486

LIABILITIES

Current liabilities 7,389,492 19,513,500

Non-current liabilities 2,900,000 -

Total liabilities 10,289,492 19,513,500

Net Assets / (Liabilities) 10,407,195 (875,014)

EQUITY

Issued capital 15,945,061 41,359,765

Accumulated losses (5,051,923) (42,234,779)

Reserves 157,757 -

Net Equity 10,407,195 (875,014)

(b) Financial performance

AS AT 30 JUNE

2011

$

2010

$

Profi t / (loss) for the year 5,530,163 (328,582)

Other comprehensive income - -

Total comprehensive income 5,530,163 (328,582)

(c) Guarantees entered into by the parent entity in relation to the debts of its subsidiariesRefer to Note 20 for details of the parent entity’s Deed of Cross Guarantee with its subsidiaries.

(d) Contingent liabilities of the parent entity.No contingent liabilities existed within the parent entity as at 30 June 2011 (30 June 2010: Nil).

(e) Commitments for the acquisition of property plant and equipment by the parent entityNo commitments for the acquisition of property plant and equipment by the parent entity existed as at 30 June 2011 (30 June 2010: Nil).


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4. FINANCIAL RISK MANAGEMENT

The Consolidated Entity’s activities expose it to a variety of fi nancial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity’s overall risk management program focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse eff ects on the fi nancial performance of the Consolidated Entity.

The Consolidated Entity makes occasional use of derivative fi nancial instruments such as foreign exchange contracts to manage foreign currency risk. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity uses diff erent methods to measure diff erent types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk.

Risk management is carried out by the CFO under the supervision of the Board of Directors. The Board provides principles for overall risk management, as well as policies and supervision covering specifi c areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative fi nancial instruments and non-derivative fi nancial instruments, and investment of excess liquidity.

The Consolidated Entity holds the following fi nancial instruments:

Notes

CONSOLIDATED

30 JUNE 2011

$

30 JUNE 2010

$

FINANCIAL ASSETS

Cash and cash equivalents 9 4,813,304 648,171

Trade and other receivables 10 9,765,498 6,425,923

14,578,802 7,074,094

FINANCIAL LIABILITIES

Trade and other payables 15 8,178,530 6,229,904

Interest-bearing loans and borrowings 16 4,100,000 5,449,454

12,278,530 11,679,358

(a) Market risk

(i) Foreign exchange riskThe Consolidated Entity makes sales and purchases some of which are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, in the ordinary course of business.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Consolidated Entity’s functional currency. The risk is measured using sensitivity analysis and cash fl ow forecasting.

Management has set up a standard pricing policy for dealing with foreign currency risk in the purchasing and quoting/sales functions of the Consolidated Entity in order to manage foreign exchange risk against the Consolidated Entity’s functional currency. Material sales or purchase contracts which are denominated in a foreign currency are regularly reviewed by management and when it is considered necessary the currency risk exposure is managed either via use of existing US dollar cash deposits or via the use of foreign currency contracts.


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4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk (continued)

(i) Foreign exchange risk The Consolidated Entity’s exposure to foreign currency risk with respect to the US Dollar at the reporting date was as follows:

CONSOLIDATED

2011

USD $

2010

USD $

FINANCIAL ASSETS

Cash and cash equivalents 85,687 22,039

Trade and other receivables 1,361,566 1,504,351

1,447,253 1,526,390


Trade and other payables 2,073,701 697,068

2,073,701 697,068

Net exposure (626,448) 829,322

(ii) Consolidated Entity - sensitivity

The US Dollar/Australian Dollar exchange rate used to translate balances denominated in USD as at 30 June 2011 was: 1.0739 (2010: 0.8523).

Based on the fi nancial instruments held at 30 June 2011, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the Consolidated Entity’s post-tax profi t for the year and equity would have been $58,334 lower/ $58,334 higher (2010: $97,304 higher/$97,304 lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated fi nancial instruments as detailed in the above table.

(iii) Cash fl ow and fair value interest rate risk

The Consolidated Entity’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Consolidated Entity to cash fl ow interest rate risk. Borrowings issued at fi xed rates expose the Consolidated Entity to fair value interest rate risk. The Consolidated Entity policy is to manage both risks as appropriate in conjunction with considerations about minimising the Consolidated Entity’s liquidity risk (see below), the current state of the yield curve and expectations about interest rates in the medium term and the need for fl exibility so as to minimise the Consolidated Entity’s interest expense.

As at the reporting date, all of the Consolidated Entity had the following variable/fi xed rate borrowings:

Weighted Aver-age Interest Rate

%

30 June 2011

$

Weighted Aver-age Interest Rate

%

30 June 2010

$

FINANCIAL ASSETS

Cash and cash equivalents Variable 4,813,304 Variable 648,171


Commercial bill –secured – capped (i) 6.20% 3,600,000 6.20% 3,600,000

Commercial bill –secured – Fixed (ii) 5.54% 500,000 5.54% 1,700,000

4,100,000 5,300,000

(i) Capped debt pays interest at variable BBSY interest rates subject to a cap of 6.90% until 15 May 2012.(ii) Fixed debt pays interest at a fi xed rate of 5.54% until 15 May 2012. This portion of the debt is being repaid at a rate of $100,000 per month.


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(a) Market risk (continued)

(iii) Cash fl ow and fair value interest rate risk (continued)

An analysis by maturities is provided in (c) below.

The Consolidated Entity analyses its interest rate exposure on a dynamic basis. Various scenarios are modelled taking into consideration refi nancing, renewal of existing positions, alternative fi nancing and hedging. Based on these scenarios, the Consolidated Entity calculates the impact on profi t and loss of a defi ned interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions.

Based on the various scenarios, the Consolidated Entity manages its cash fl ow interest rate risk adopting an appropriate mix of fi xed versus variable rate debt and also an appropriate mix of debt maturities to provide it with fl exibility to repay debt as quickly as possible whilst having liquidity available to take advantage of business opportunities as they arise.

Consolidated Entity sensitivity

At 30 June 2011, if interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax profi t for the year would have been $12,133 lower/higher (2010 - change of -/+ 100 bps: $29,518 higher/lower), mainly as a result of a higher/lower interest expense arising from borrowings off set partially by lower/higher interest income from cash and cash equivalents. Equity would have been $12,133 lower/higher (2010 - $29,518 higher/lower) for the same reasons as above.

(b) Credit riskCredit risk is limited to high credit quality fi nancial institutions with which deposits are held and high credit quality wholesale customers with which the Consolidated Entity trades.

Credit risk is managed on a Consolidated Entity basis. Credit risk arises from cash and cash equivalents, derivative fi nancial instruments and deposits with banks and fi nancial institutions, as well as credit exposures to wholesale customers, including outstanding receivables and committed transactions. For banks and fi nancial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its fi nancial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set internally. The compliance with credit limits by wholesale customers is regularly monitored by line management.

The maximum exposure to credit risk at the reporting date is the carrying amount of the fi nancial assets as summarised in each applicable note. For wholesale customers without credit rating the Consolidated Entity generally retains title over the goods sold until full payment is received. For some trade receivables the Consolidated Entity may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement.

The Consolidated Entity does not hold any credit derivatives to off set its credit exposure. The Consolidated Entity trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Consolidated Entity’s policy to securitise its trade and other receivables.


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(b) Credit risk (continued)The credit quality of fi nancial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

CONSOLIDATED

2011

$

2010

$

CASH AND CASH EQUIVALENTS

AA 4,813,304 648,171

A - -

Non-rated - -

4,813,304 648,171

TRADE AND OTHER RECEIVABLES

Non-rated 9,765,498 6,425,923

9,765,498 6,425,923

(c) Liquidity riskPrudent liquidity risk management implies maintaining suffi cient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Consolidated Entity manages liquidity risk by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities. Due to the dynamic nature of the underlying businesses, the Consolidated Entity aims at maintaining fl exibility in funding by keeping committed credit lines available and, where possible, with a variety of counterparties. Surplus funds are generally only invested in overnight deposits or used to repay debt.

Financing arrangements

The Consolidated Entity had access to the following undrawn borrowing facilities at the reporting date:

30 JUNE 2011

Facility Limit

$

Used

$

Available

$

CONSOLIDATED 4,950,000 4,100,000 850,000

30 JUNE 2010

Facility Limit

$

Used

$

Available

$

CONSOLIDATED 6,150,000 5,300,000 850,000

The Consolidated Entity had $850,000 of available facilities to manage its liquidity as at 30 June 2011 (2010: $850,000). In addition the Consolidated Entity had a net investment in inventories of $4,363,389 as at 30 June 2011 (2010: $4,790,944).

Maturities of fi nancial assets and fi nancial liabilities

The tables below analyse the Consolidated Entity’s fi nancial liabilities, net and gross settled derivative fi nancial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows.


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(c) Liquidity risk (continued)Consolidated disclosures

YEAR ENDED 30 JUNE 2011

≤6 months

$

6-12 months

$

1-5 years

$

≤5 years

$

Total

$

CONSOLIDATED FINANCIAL ASSETS

Cash and cash equivalents 4,813,304 - - - 4,813,304

Trade and other receivables 9,765,498 - - - 9,765,498

14,578,802 - - - 14,578,802

CONSOLIDATED FINANCIAL

LIABILITIES

Trade and other payables 8,178,530 - - - 8,178,530

Interest bearing loans & borrowings 600,000 600,000 2,900,000 - 4,100,000

8,778,530 600,000 2,900,000 - 12, 278,530

Net maturity 5,800,272 (600,000) (2, 900,000) - 2,300,272


≤6 months

$

6-12 months

$

1-5 years

$

≤5 years

$

Total

$

CONSOLIDATED FINANCIAL ASSETS

Cash and cash equivalents 648,171 - - - 648,171

Trade and other receivables 6,425,923 - - - 6,425,923

7,074,094 - - - 7,074,094

CONSOLIDATED FINANCIAL

LIABILITIES

Trade and other payables 6,229,904 - - - 6,229,904

Interest bearing loans & borrowings 643,218 643,218 4,163,018 - 5,449,454

6,873,122 643,218 4,163,018 - 11,679,358

Net maturity 200,972 (643,218) (4,163,018) - (4,605,264)

(d) Fair value estimationThe fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of fi nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash fl ows at the current market interest rate that is available to the Consolidated Entity for similar fi nancial instruments.

The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date.

(e) Capital risk managementThe Consolidated Entity manages its capital to ensure that entities in the Consolidated Entity will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Consolidated Entity’s overall strategy remains unchanged from 2010.


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(e) Capital risk management (continued)The capital structure of the Consolidated Entity consists of net debt (borrowings as detailed in note 16 off set by cash and bank balances) and equity of the Consolidated Entity (comprising issued capital, reserves, retained earnings and non-controlling interests as detailed in notes 18).

The Consolidated Entity is not subject to any externally imposed capital requirements.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a fi nancial impact on the entity and that are believed to be reasonable under the circumstances.

The Consolidated Entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

Impairment testing of goodwill

The Consolidated Entity tests annually whether goodwill has suff ered any impairment, in accordance with the accounting policy stated in note 1(q). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 14 for details of these assumptions and the potential impact of changes to the assumptions.

6. SEGMENT INFORMATION

(a) Products and services from which reportable segments derive their revenuesThe operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that off ers diff erent products and serves diff erent markets.

The Mining, Oil and Gas Supply Division is a supplier of tyres, consumables, drilling fl uids, drilling and other equipment to the mining, oil and gas industries worldwide.

The Pump Division is a wholesale supplier of pumps, diversion valves and other water products.

The Corporate business segment represents the results of the parent entity, ADG Global Supply Limited, of AWS (Security Holder) Pty Ltd and of other non-operating subsidiaries.

Transfer prices between operating segments are set at an arms-length basis in a manner similar to transactions with third parties.


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6. SEGMENT INFORMATION (CONTINUED)

(b) Operating segmentsThe following tables present revenue and profi t information and certain asset and liability information regarding operating segments for the year ended 30 June 2011.


CONTINUING OPERATIONS

Mining, Oil & Gas

$

Pumps

$

Corporate

$

Total

$

Revenue

Sales to external customers 49,011,056 3,204,781 - 52,215,837

Other revenues from external customers 18,581 - 4,336 22,917

Inter-segment sales - - - -

Total segment revenue 49,029,637 3,204,781 4,336 52,238,754

Inter-segment elimination -

Total consolidated revenue 52,238,754

Result

Segment result 5,551,659 (140,445) (316,398) 5,094,816

Unallocated expenses (3,595,667)

Profi t before tax and fi nance costs 1,499,149

Finance costs (438,345)

Profi t before income tax 1,060,804

Income tax expense (336,196)

Net profi t for the year 724,608

Assets and liabilities 18,401,820 2,940,260 - 21,342,080

Segment assets(a) 7,219,891

Unallocated assets 28,561,971

Total assets

Segment liabilities(b) 3,204,922 51,765 - 3,256,687

Unallocated liabilities 8,480,977

Total liabilities 11,737,664

Other segment information

Capital expenditure 317,870

Depreciation and amortisation 285,109

(a) Segment assets include trade and other receivables, inventory and goodwill. All other assets are classifi ed as unallocated assets

(b) Segment liabilities include trade creditors, and other liabilities relating to the operating segment.


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6. SEGMENT INFORMATION (CONTINUED)

(b) Operating segments (continued)The following tables present revenue and profi t information and certain asset and liability information regarding operating segments for the year ended 30 June 2010.


CONTINUING OPERATIONS

Mining, Oil & Gas

$

Pumps

$

Corporate

$

Total

$

Revenue

Sales to external customers 31,486,632 4,400,080 - 35,886,712

Other revenues from external customers 29,026 32 3,154 32,212

Inter-segment sales - - - -

Total segment revenue 31,515,658 4,400,112 3,154 35,918,924

Inter-segment elimination -

Total consolidated revenue 35,918,924

Result

Segment result 1,637,927 472,987 (391,167) 1,719,747

Unallocated expenses (2,742,513)

Profi t before tax and fi nance costs (1,022,766)

Finance costs (475,864)

Profi t before income tax (1,498,630)

Income tax expense 423,594

Net profi t for the year (1,075,036)

Assets and liabilities 11,797,273 2,430,668 - 14,227,941

Segment assets(a) 7,459,387

Unallocated assets 21,687,328

Total assets

Segment liabilities(b) 5,153,166 1,527,611 - 6,680,777

Unallocated liabilities 5,299,479

Total liabilities 11,980,256

Other segment information

Capital expenditure 160,352 193,993 - 354,345

Depreciation and amortisation 205,741 7,816 40,760 254,317

*The 2010 segment note has been restated to be consistent with the operating segment note for 2011.


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7. REVENUE, INCOME AND EXPENSES

(a) Revenue, Income and Expenses from Continuing Operations

CONSOLIDATED

2011

$

2010

$

REVENUE

Sales revenue 52,215,837 35,886,712

Total revenue 52,215,837 35,886,712

OTHER INCOME

Loss on disposal of assets (5,481) (1,045)

Bank Interest 24,145 33,257

Other 4,253 -

Total other income 22,917 32,212

FINANCE COSTS

Bank loans and overdrafts 431,512 390,327

Unwind of discount of deferred purchase consideration - 56,914

Finance charges payable under fi nance leases and hire purchase contracts 6,833 28,623

Total fi nance costs 438,345 475,864

DEPRECIATION, AMORTISATION, FOREIGN EXCHANGE DIFFERENCES & COSTS OF INVENTORIES

INCLUDED IN PROFIT OR LOSS

Included in expenses:

Depreciation and amortisation 285,109 254,317

Net foreign exchange (gains)/losses (81,113) (174,639)

Cost of inventories recognised as an expense 43,070,739 30,587,966

(b) Lease payments and other expenses included in profi t or loss

CONSOLIDATED

2011

$

2010

$

Included in administrative expenses

Minimum lease payments - operating lease 99,019 55,491

(c) Employee benefi ts expense

CONSOLIDATED

2011

$

2010

$

Wages and Salaries 4,509,663 3,756,479

Superannuation costs 341,260 329,990

4,850,923 4,086,469


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8. INCOME TAX

The major components of income tax expense for the year ended 30 June 2011 are:

CONSOLIDATED

2011

$

2010

$

CONSOLIDATED INCOME STATEMENT – CONTINUING OPERATIONS

Current income tax Current income tax expense - -

Adjustments in respect of current income tax of previous years (3,669) -

Deferred income tax Relating to origination and reversal of temporary diff erences 339,865 (423,594)

Income tax revenue reported in profi t or loss 336,196 (423,594)

A reconciliation of income tax expense applicable to accounting profi t before income tax at the statutory income tax rate to income tax expense at the Consolidated Entity’s eff ective income tax rate for the years ended 30 June 2011 and 30 June 2010 is as follows:

CONSOLIDATED

2011

$

2010

$

Profi t/(Loss) from continuing operations before income tax 1,060,804 (1,498,630)

At the statutory income tax rate of 30% (2010: 30%) 318,241 (449,589)

Expenditure / (Income) not allowable for income tax purposes 21,624 25,995

Adjustments in respect of current income tax of previous years (3,669) -

At eff ective income tax rate of 31.7% (2010: 28.3%) 336,196 (423,594)

Tax consolidation

ADG Global Supply Limited and its 100% owned subsidiaries are a tax Consolidated Entity. Members of the Consolidated Entity have not entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis. At the balance date, the possibility that the head entity will default on its tax payment obligations is remote. The head entity of the tax Consolidated Entity is ADG Global Supply Limited.


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8. INCOME TAX (CONTINUED)

BALANCE SHEET INCOME STATEMENT

2011

$

2010

$

2011

$

2010

$

Deferred income tax

Deferred income tax at 30 June relates to the following:

CONSOLIDATED

Deferred income tax liabilities

Capitalised borrowing costs - - - 147

Unrealised foreign exchange gains (77,072) (19,300) (57,772) 84,879

Depreciable assets - (3,479) (3,479) (3,479)

Other (132,676) (80,120) (52,556) (35,698)

Set off of deferred tax liabilities 209,748 99,420 110,328 99,420

Gross deferred income tax liabilities - (3,479) - -

Deferred income tax assets

Depreciable assets 50,984 17,518 33,466 15,686

Provision for impairment of trade debtors - 18,116 (18,116) (38,437)

Provisions and accruals 212,720 220,456 (7,736) 38,584

Inventory - 88,972 (88,972) 88,972

Unrealised foreign exchange losses 9,967 18,146 (8,179) (15,731)

Losses available for off set against future taxable income 675,593 895,859 (220,266) 288,671

Set off of deferred tax liabilities (209,748) (99,420) (110,328) (99,420)

Gross deferred income tax assets 739,516 1,159,647 - -

Less: Cashfl ow hedge reserve (taken to equity) - - (1,337) -

Add: : Prior year restatement - - 78,124 -

Deferred income tax revenue / (expense) - - (339,865) 423,594

Tax LossesThe Consolidated Entity had recognised a deferred tax asset as at 30 June 2011 as a result of tax losses arising in Australia in prior years in the amount of $2,251,973 (2010: $2,986,197). The benefi t of the tax losses will be available indefi nitely and realised provided that:

i. the consolidated entity derives future assessable income of a nature and amount suffi cient to enable the benefi t from the deductions for the losses to be realised;

ii. the consolidated entity continues to comply with the conditions for deductibility imposed be the tax legislation; and

iii. no change in tax legislation adversely aff ects the consolidated entity in realising the benefi t from the deductions for the losses.

At 30 June 2011, there is no recognised or unrecognised deferred income tax liability (2010: Nil) for taxes that would be payable on the unremitted earnings of certain of the Consolidated Entity’s subsidiaries, as the Consolidated Entity has no liability for additional taxation should such amounts be remitted.


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8. INCOME TAX (CONTINUED)

Measurement method adopted under UIG 1052 Tax Consolidation AccountingThe head entity and the controlled entities in the tax Consolidated Entity continue to account for their own current and deferred tax amounts. The Consolidated Entity has applied the Consolidated Entity allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax Consolidated Entity. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below.

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax Consolidated Entity.

Nature of the tax funding agreement Members of the tax Consolidated Entity have entered into a tax funding agreement. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a diff erence between the amount charged under the tax funding agreement and the allocation under UIG 1052, the head entity accounts for these as equity transactions with the subsidiaries. The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each fi nancial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.

Tax consolidation contributions/(distributions)The Consolidated Entity has recognised the following amounts as tax consolidation contribution adjustments:

PARENT

2011

$

2010

$

Total Increase/(reduction) to tax payable of ADG Global Supply Limited: 290,705 (137,173)

Total increase/(reduction) to intercompany assets of ADG Global Supply Limited: 290,705 (137,173)

Taxation of fi nancial arrangements (TOFA)Legislation is in place which changes the tax treatment of fi nancial arrangements including the tax treatment of hedging transactions. The Consolidated Entity has assessed the potential impact of these changes on the Consolidated Entity’s tax position. No impact has been recognised and no adjustments have been made to the deferred tax and income tax balances at 30 June 2011 (2010: Nil).

9. CASH AND CASH EQUIVALENTS

For the purposes of the cash fl ow statement, cash and cash equivalents are comprised of the following:

CONSOLIDATED

2011

$

2010

$

Cash at bank and in hand 4,813,304 648,171

4,813,304 648,171

The Consolidated Entity’s exposure to interest rate risk is discussed in note 4.

10. TRADE AND OTHER RECEIVABLES

PARENT

2011

$

2010

$

Trade receivables 9,461,632 6,390,296

Allowance for impairment loss (a) - (60,386)

GST receivables - 51

Other receivables 303,866 90,962

9,765,498 6,425,923


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10. TRADE AND OTHER RECEIVABLES (CONTINUED)

(a) Allowance for impairment lossTrade receivables are non-interest bearing and are generally on 30 - 60 days terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment provision of nil (2010: $60,386) has been recognised by the Consolidated Entity.

At 30 June, the ageing analysis of trade receivables is as follows:

Total

$0000-30 Days

$00031-60 Days

$000

61-90 Days

PDNI*$000

61-90 Days

CI*$000

+91 Days

PDNI*$000

+91 Days

CI*$000

2011 Consolidated 9,462 8,175 739 201 - 347 -

2011 Consolidated 6,390 2,536 2,762 321 - 711 60

* Past due not impaired (‘PDNI’) Considered impaired (‘CI’)

Receivables past due but not considered impaired are: Consolidated Entity: $548,000 (2010: $1,032,000). Payment terms on these amounts have not been re-negotiated however credit has been stopped until full payment is made. Each operating unit has been in direct contact with the relevant debtor and is satisfi ed that payment will be received in full.

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

(b) Fair value and credit risk Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Consolidated Entity’s policy to transfer (on-sell) receivables to special purpose entities.

(c) Foreign exchange and interest rate riskDetail regarding foreign exchange and interest rate risk exposure is disclosed in note 4.

11. INVENTORIES

CONSOLIDATED

2011

$

2010

$

Stock on hand at cost 4,202,086 6,179,386

Provision for impairment (a) - (2,212,638)

Stock in transit at cost 161,303 824,196

4,363,389 4,790,944

(a) Provision for impairmentWrite-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2011 amounted to Nil (2010: $778,960).


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12. OTHER ASSETS

CONSOLIDATED

2011

$

2010

$

CURRENT

Prepayments 651,471 147,429

651,471 147,429

13. PROPERTY, PLANT AND EQUIPMENT

CONSOLIDATED

Leasehold improvements

$

Plant and equipment

$

Motor vehicles

$

Total

$


At 1 July 2010

Net of accumulated depreciation 223,642 175,038 67,147 465,827

Additions 3,376 104,182 4,900 112,458

Disposals (5,521) (30,875) (12,337) (48,733)

Depreciation charge for the year (95,405) (73,054) (13,443) (181,902)

At 30 June 2011


AT 1 JULY 2010

Cost 483,148 427,276 135,279 1,045,703

Accumulated depreciation and impairment (259,506) (252,238) (68,132) (579,876)

Net carrying amount 223,642 175,038 67,147 465,827

AT 30 JUNE 2011

Cost 478,379 460,179 113,379 1,051,937



Assets held under fi nance leases or hire purchase contracts at 30 June 2011 Nil (2010: $206,703).

All of the assets of the Consolidated Entity are subject to a fi rst charge to secure the Consolidated Entity’s commercial bills (note 16).


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13. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

CONSOLIDATED

Leasehold improvements

$

Plant and equipment

$

Motor vehicles

$

Total

$


At 1 July 2009


Additions 7,602 73,489 3,182 84,273

Disposals (3,435) (1,112) (8,400) (12,947)

Depreciation charge for the year (94,061) (64,377) (17,077) (175,515)

At 30 June 2010


AT 1 JULY 2009

Cost 458,256 366,779 113,903 938,938



AT 30 JUNE 2010

Cost 483,148 427,276 135,279 1,045,703



14. INTANGIBLE ASSETS

CONSOLIDATED

2011

$

2010

$

Goodwill (a) 7,817,678 7,817,678

Software 24,886 37,537

Distribution rights (b) 308,849 193,993

Other intangible assets - 179

8,151,413 8,049,387


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14. INTANGIBLE ASSETS (CONTINUED)

An analysis of intangible assets is presented below:

CONSOLIDATED

Goodwill (a) $

Software $

Product Rights

$

Other $

Total

$


At 1 July 2009

Net of accumulated amortisation 7,817,678 115,439 - 179 7,933,296

Additions - 900 193,993 - 194,893

Impairment (c) - - - - -

Amortisation - (78,802) - - (78,802)

At 30 June 2010

Net of accumulated amortisation 7,817,678 37,537 193,993 179 8,049,387


At 1 July 2010

Net of accumulated amortisation 7,817,678 37,537 193,993 179 8,049,387

Additions - 36,155 169,527 - 205,412

Impairment (c) - (48,806) (54,401) - (103,207)

Amortisation - - - (179) (179)

At 30 June 2011

Net of accumulated amortisation 7,817,678 24,886 308,849 - 8,151,413

AT 1 JULY 2010

Cost (gross carrying amount) 14,082,301 199,447 193,993 781 14,476,522

Accumulated amortisation and impairment

(6,264,623) (161,910) - (602) (6,427,135)

Net carrying amount 7,817,678 37,537 193,993 179 8,049,387

AT 30 JUNE 2011

Cost (gross carrying amount) 14,082,301 235,602 363,250 781 14,681,934

Accumulated amortisation and impairment

(6,264,623) (210,716) (54,401) (781) (6,530,521)

Net carrying amount 7,817,678 24,886 308,849 - 8,151,413

(a) Goodwill

Goodwill consisted of the following components:

2011

$

2010

$

Goodwill arising on consolidation of ADG Global Supply Pty Ltd by the Consolidated Entity

7,817,678 7,817,678

7,817,678 7,817,678


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14. INTANGIBLE ASSETS (CONTINUED)

(b) Product rightsProduct rights refer to the exclusive distribution and manufacturing rights associated with the Waterboy Wizard enclosed bypass water system product that were acquired during the year ended 30 June 2011. On 1 September 2010, the Consolidated Entity issued 500,000 ordinary shares to Dreamlight Nominees Pty Ltd as fi nal settlement of the Consolidated Entity’s purchase of the Waterboy Wizard enclosed bypass water system from Worldlink Investments Pty Ltd. On fi nal settlement the Consolidated Entity obtained all of the remaining intellectual property rights associated with the Wizard enclosed bypass water system.

(c) Amortisation expenseAmortisation of $103,207 (2010: $78,802) is included in depreciation and amortisation expense in the income statement

(d) Impairment tests for goodwillGoodwill is allocated to the Consolidated Entity’s cash-generating units (“CGUs”) identifi ed according to business segment. Accordingly the entire carrying amount of goodwill as at 30 June 2011 has been allocated to the ‘Mining, Oil & Gas’ business segment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash fl ow projections based on fi nancial budgets approved by management covering a period of up to fi ve-years. Cash fl ows beyond this period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

As a consequence of performing the impairment test using prudent assumptions Management identifi ed that the Consolidated Entity’s goodwill balance at 30 June 2011 was less that its recoverable amount. In consequence no impairment expense has been recognised during the year ended 30 June 2011 (2010: Nil).

(e) Key assumptions used for value-in-use calculations in respect of the relevant CGU are as follows:

Gross margin2012 - 2024: 19% (2010 average used: 18.5%)

Revenue annual growth rate2012 - 2024: 5%-10% (2010 average used: 3%-10%)

Discount ratePre-tax discount rate: 21.72% per annum (2010: 16.50%)

In performing the value-in-use calculations for each CGU, the Consolidated Entity has applied pre-tax discount rates to discount the forecast future attributable pre-tax cash fl ows. The same pre-tax discount rate was applied throughout the forecast period. Management determined budgeted gross margin based on past performance and its expectations for the future. The weighted average growth rates used are consistent with forecasts included in industry reports. The discount rates used refl ect specifi c risks relating to the relevant segment and the environment in which it operates. A forecast period in excess of fi ve years has been used in order to more appropriately refl ect the value of the business in the future.

(f) Impact of possible changes in key assumptions The recoverable amount of goodwill, which is contained within the ‘Mining, Oil & Gas’ CGU, is estimated to be $ 15,580,282. This represents an excess to the carrying amount of the CGU’s goodwill and related assets at 30 June 2011 of $ 5,028,344. An unfavourable change in any of the above assumptions would cause the recoverable amount of goodwill to reduce as follows:

- A 10% increase in the pre-tax discount rate causes a $869,018 reduction in the recoverable amount of the goodwill. - A 1% decrease in the level of assumed gross profi t margin causes a $1,070,253 reduction in the recoverable amount of the goodwill.


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15. TRADE AND OTHER PAYABLES

CONSOLIDATED

2011

$

2010

$

Trade payables 4,170,021 4,381,056

Accruals and other payables 3,995,696 1,848,848

Derivative fi nancial instruments (b) 12,813 -

8,178,530 6,229,904

(a) Risk exposureInformation about the Consolidated Entity’s exposure to foreign exchange risk is provided in note 4.

(b) Derivative fi nancial instrumentsThese instruments relate to foreign exchange forward contracts used to off set the US Dollar foreign exchange volatility risk of committed or highly probable purchase transactions made in the ordinary course of business. The relevant contracts that were outstanding at 30 June 2011 were all due to expire at diff erent dates during the months of July to September 2011.

16. INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings are comprised of the following:

CONSOLIDATED

2011

$

2010

$

CURRENT

Finance leases - 86,436

Commercial bill – secured (a) 1,200,000 5,300,000

1,200,000 5,386,436

NON-CURRENT

Finance leases - 63,018

Commercial bill – secured (a) 2,900,000 -

2,900,000 63,018

4,100,000 5,449,454

(a) Commercial bill - securedAt 30 June 2011 the Consolidated Entity owed $4,100,000 (2010: $5,300,000) to ANZ Bank in the form of commercial bills. The principal terms of the commercial bills are as follows:

Maturity date: The commercial bills are reviewed annually and rolled forward on a monthly basis. The whole of the debt is ubject to a fi xed repayment rate of $100,000 per month. Termination date: 28 June 2013.

Interest rate: At 30 June 2011 $0.5 million (2010: $1.7 million) of the debt was subject to a fi xed rate of interest of 5.54% until 15 May 2012 and $3.6 million of the debt was subject to a capped rate of interest of 6.20% until 15 May 2012.

Security: The commercial bills are secured via a fi rst charge over the assets of the Consolidated Entity.

Covenants: Interest cover ratio of >2.5 times EBIT calculated quarterly.


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16. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)

(a) Commercial bill - secured (continued)

The commercial bills have been accounted for under AASB 139 ‘Financial Instruments – Recognition & Measurement’ using the eff ective interest method.

(b) Risk exposure

Details of the Consolidated Entity’s exposure to risks arising from current and non-current borrowings are set out in note 4.

(c) Fair values

The carrying amount of the Consolidated Entity’s current and non-current borrowings approximate their fair value

17. PROVISIONS

Provisions are comprised of the following:

CONSOLIDATED

2011

$

2010

$

CURRENT

Annual leave 248,140 180,312

Long service leave 46,009 58,000

Other 38,239 22,065

Total Current 332,388 260,377

NON-CURRENT

Long service leave 40,080 37,042

Total Non-Current 40,080 37,042

372,468 297,419

18. CONTRIBUTED EQUITY

(a) Ordinary shares

Full paid ordinary shares carry one vote per share and carry the right to dividends.

CONSOLIDATED

2011

Number

2010

Number

ORDINARY SHARES

Issued and fully paid 221,849,400 115,612,045


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18. CONTRIBUTED EQUITY (CONTINUED)

(a) Ordinary shares (continued)

Date Number $

MOVEMENT IN ORDINARY SHARES ON THE ISSUE

At 1 July 2010 115,612,045 41,359,766

Issue of shares (Note 1) 01/09/2010 500,000 25,000

Less: share issue costs (7,730)

Share placement (Note 2) 16/11/2010 16,900,000 1,014,000

Capital reduction (Note 3) 1/12/2010 (31,652,694)

Entitlements issue & shortfall (Note 4) 30/12/2010 44,337,333 2,660,241

Less: capital raising costs - cash (235,931)

Less: capital raising costs – options (Note 18 (f)) (107,105)

Issue of shares under Employee Share Plan (Note 5) 04/01/2011 9,000,000 -

Issue of shares under Employee Share Plan (Note 5) 29/04/2011 500,000 -

Issue of shares 29/04/2011 22 3

Share placement (Note 6) 30/06/2011 35,000,000 2,450,000

Less: capital raising costs (204,188)

Closing number of securities 30/6/2011 221,849,400 15,301,362

Note 1: Issue of shares

On 1 September 2010 the Company issued 500,000 ordinary shares to Dreamlight Nominees Pty Ltd as fi nal settlement of the Company’s purchase of the Waterboy Wizard enclosed bypass water system from Worldlink Investments Pty Ltd.

Note 2: Share placement

On 16 November 2010 the Company completed a placement of shares of 16,900,000 ordinary shares at 6 cents per share with Seaspin Pty Ltd, a globally focused investor in resource exploration and development projects.

Note 3: Capital Reduction

On 1 December 2010 the Company implemented resolution 5 of the Company’s Annual General Meeting held on 30 November 2010. Resolution 5 had sought the reduction of the Company’s share capital, in accordance with section 256C of the Corporations Act and clause 10.2 of the Company’s Constitution, pursuant to the write off of accumulated losses of the Company amounting to $31,652,694 at 30 June 2010, thereby reducing the Company’s share capital as disclosed in its 30 June 2010 fi nancial statements from $41,359,766 to $9,707,072.

Note 4: Non-renounceable entitlements issue and shortfall

On 18 November 2010 the Company announced a non-renounceable entitlements issue of shares at 6 cents per share. Under this issue the Directors reserved the right to place any entitlements not taken up under a Shortfall Off er, under which the placement occurred on 30 December 2010.

Note 5: Issue of shares under Employee Share Plan

Following the approval of the Company’s Employee Share Plan at the Company’s Annual General Meeting on 30 November 2010 (resolution 7), and also the approvals of resolutions 8 and 9 of the same meeting, the Company has, during the year ended 30 June 2011, issued a total of 9,500,000 ordinary shares to participating employees.


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Name Position Loan amount ($) No of shares issued

Mr John Mancini Managing Director 210,000 3,000,000

Mr Mike Arnold Executive Director 175,000 2,500,000

Various employees Senior Management Team 258,700 4,000,000

Total 643,700 9,500,000

The above shares were issued in accordance with the terms and conditions of the Company’s Employee Share Plan, resolutions 7, 8 and 9 of the Company’s Annual General Meeting on 30 November 2010 and the off er documents issued to each participating employee.

The shares issued are fully paid via an interest free limited recourse loan to employees, repayable by employees in 2 years, in the case of the two directors and 5 years in the case of the remaining Senior Management Team. The plan is accounted for as an in-substance option plan, with the contractual life of each option equivalent to the estimated loan life. Repayment of the loan constitutes exercise of the option, with the exercise price being the remaining loan balance per share.

The share issue above is subject to a 2 year minimum tenure performance condition and the repayment of the loans. Until both conditions are satisfi ed the shares will remain in a holding lock maintained by the Company’s Registry which prevents the shares from being traded. The Company also maintains a lien over the shares issued until each condition has been met.

Note 6: Share Placement

On 30 June 2011 the Company issued 35,000,000 ordinary shares under a share placement to participating investors at 7 cents per share.

Date Number $

MOVEMENT IN ORDINARY SHARES ON THE ISSUE

At 1 July 2009 73,537,602 38,556,585

Buy-back of shares 1/7/2009 (20,000) (1,400)

Less: capital raising costs (100)

Buy-back of shares 13/07/2009 (20,000) (1,400)


Buy-back of shares 15/07/2009 (258) (18)


Deferred consideration settlement I (Note 1) 30/09/2009 7,678,572 537,500

Deferred consideration settlement II (Note 1) 9/11/2009 3,035,714 212,500

Placement (Note 2) 13/11/2009 12,131,744 849,222


Rights Issue (Note 3) 11/12/2009 8,336,009 583,521

Shortfall Issue Stage I (Note 3) 29/12/2009 1,706,491 119,454


Shortfall Issue Stage II (Note 3) 18/1/2010 9,076,171 635,332

Shortfall Issue Stage III (Note 3) 2/2/2010 150,000 10,500


As at 30 June 2010 30/6/2010 115,612,045 41,359,766


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Note 1 Deferred consideration settlement

On 24 September 2009 the Company entered into an agreement with the vendors of ADG Global Supply Pty Ltd (“the Vendors”) to issue shares instead of cash, in full settlement of the deferred purchase consideration payable by the Company in relation to the acquisition of ADG Global Supply Pty Ltd. Under the terms of the Share Purchase Agreement dated 25 February 2008, the Company owed the Vendors a post completion cash payment of $750,000 payable in August 2010. With respect to the settlement reached with the Vendors, the Company issued 10,714,286 ordinary shares, in two tranches, in full settlement of the deferred purchase consideration obligation of the Company. The issue of these shares was approved by shareholders on 6 November 2009.

Note 2 Placement of shares

On 13 November 2009 the Company completed a placement of shares at 7 cents per share plus one free attaching option for every two shares, with an exercise price of 15 cents and an expiry date of 31 March 2011. The free attaching options for this placement were subject to shareholder approval, which was obtained on 8 January 2010.

Note 3 Non-renounceable entitlements issue

On 13 November 2009 the Company announced a non-renounceable entitlements issue of shares at 7 cents per share plus one free attaching option for every two shares, with an exercise price of 15 cents and an expiry date of 31 March 2011. Under this issue the Directors reserved the right to place any entitlements not taken up under a Shortfall Off er, under which there were three placements occurred on 29 December 2009, 18 January 2010 and 2 February 2010.

(b) $0.15 options with expiry date of 31 March 2011

Movement in options on issue Date Number

Opening number of options 1/7/2010 16,549,458

Expiry of options 31/3/2011 (16,549,458)

Closing number of options 30/6/2011 -


Opening number of options 1/7/2009 -

Rights Issue (Note 1) 11/12/2009 4,168,023

Shortfall Issue Stage I (Note 1) 29/12/2009 853,254

Issue of placement options (Note 2) 8/1/2010 6,065,873

Issue of options to Minc Stockbroking (Note 2) 8/1/2010 849,222

Shortfall Issue Stage II (Note 1) 18/1/2010 4,538,086

Shortfall Issue Stage III (Note 1) 2/2/2010 75,000

Closing number of options 30/6/2010 16,549,458

Note 1 Non-renounceable entitlements issue

On 13 November 2009 the Company announced a non-renounceable entitlements issue of shares at 7 cents per share plus one free attaching option for every two shares, with an exercise price of 15 cents and an expiry date of 31 March 2011. Under this issue the Directors reserved the right to place any entitlements not taken up under a Shortfall Off er, under which there were three placements occurred on 29 December 2009, 18 January 2010 and 2 February 2010.


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Note 2 Placement of shares

On 13 November 2009 the Company completed a placement of shares at 7 cents per share plus one free attaching option for every two shares, with an exercise price of 15 cents and an expiry date of 31 March 2011. The free attaching options for this placement were subject to shareholder approval, which was obtained on 8 January 2010. Minc Stockbroking was engaged to conduct this placement and it was agreed that 849,222 options with an exercise price of 15 cents and an expiry date of 31 March 2011 would be issued to Minc Stockbroking as part of their fee subject to shareholder approval. This approval was also obtained on 8 January 2010.

(c) $0.10 options with expiry date of 30 June 2013



Issue of options 13/1/2011 5,000,000


The above unlisted options have been issued in part consideration for Bardi Holdings Pty Ltd and Seaspin Pty Ltd acting as underwriters of the Company’s non-renounceable entitlements off er completed in December 2010.

(d) $0.15 options with expiry date of 30 June 2014



Issue of options 13/1/2011 5,000,000


The above unlisted options have been issued in part consideration for Bardi Holdings Pty Ltd and Seaspin Pty Ltd acting as underwriters of the Company’s non-renounceable entitlements off er completed in December 2010.

(e) $0.11 options with expiry date of 30 June 2014



Issue of options 30/6/2011 10,000,000


The above unlisted options have been issued to the Directors of the Company pursuant to resolutions 3, 4 and 5 of the Company’s general meeting held on 29 June 2011 as follows:

Name Position No of shares issued

Mr John Mancini Managing Director 5,000,000

Mr Mike Arnold Executive Director 4,000,000

Mr David Schwartz Chairman 1,000,000

Total 10,000,000


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(e) $0.11 options with expiry date of 30 June 2014 (continued)The above options will vest on 30 June 2013 and cannot be exercised until they have vested. Unless the Board otherwise agrees, unvested Options will immediately lapse in the event an optionholder ceases to be an employee of the Company whether due to resignation by the optionholder or due to dismissal in accordance with the optionholder’s employment contact for reasons other than a change in control event.

(f) Options valuation reserve

Date

granted

Exercise

Price

(cents)

Share

price at

grant

date

(cents)

Vesting

date

Prob-

ability of

vesting

VolatilityInterest

rate

Fair

value

per

option

(cents)

Number

Expensed

during

period

$

Employee Share Plan shares - Directors

4/1/11 7 6 14/12/12 100% 70% 5.02% 2.1 5,500,000 28,798

Employee Share Plan shares - Employees

4/1/11 6-7.7 6-7.7 Various 80% 70% 5.25% 3.1-4 4,000,000 21,854

Pareto/Seaspin options

13/1/11 10-15 6.5 13/1/11 100% 70% 5.25% 1-1.2 10,000,000 107,105

Director incentive options

30/6/11 11 7 30/6/13 100% 70% 5.25% 2.4 10,000,000 -

Total

options

valuation

reserve

157,757

Less: Value of options capitalised as capital raising costs

(107,105)

Total

options

valuation

expense

in profi t or

loss

50,652

The above options and Employee Share Plan shares have been valued using a Binomial valuation model using the principal assumptions disclosed in the above table.

Employee Share Plan shares have been treated as options for the purposes of applying the measurement requirements AASB 2 Share Based Payment.


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19. COMMITMENTS AND CONTINGENCIES

(a) Operating lease commitments – Consolidated Entity as lesseeThe Consolidated Entity has entered into commercial leases on certain motor vehicles and items of small machinery where it is not in the best interest of the Consolidated Entity to purchase these assets.

These leases have an average life of between 21 and 84 months with renewal terms included in the contracts. Renewals are at the option of the specifi c entity that holds the lease.

There are no restrictions placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

CONSOLIDATED

2011

$

2010

$

Within one year 315,827 319,277

After one year but not more than fi ve years 57,996 1,440,214

More than fi ve years - -

373,823 1,759,491

(b) Finance lease and hire purchase commitmentsThe Consolidated Entity had, at 30 June 2011 no fi nance leases and hire purchase contracts in place.

The Consolidated Entity had, at 30 June 2010 fi nance leases and hire purchase contracts for various items of plant and machinery. These leases had no terms of renewal or purchase options and escalation clauses.

Future minimum lease payments under fi nance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows:

2011 2010

Minimum

Payments

$

Present value

of payments

$

Minimum

Payments

$

Present value

of payments

$

CONSOLIDATED

Within one year - - 86,436 -

After one year but not more than fi ve years - - 76,950 -

Total minimum lease payments - - 163,386 -

Less amounts representing fi nance charges - - (13,932) -

Present value of minimum lease payments - - 149,454 149,454

(c) Other purchase commitments

No other purchase commitments existed as at 30 June 2011.


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20. RELATED PARTY DISCLOSURES

The consolidated fi nancial statements include the fi nancial statements of ADG Global Supply Limited and the subsidiaries listed in the following table.

Country of

incorporation

EQUITY INTEREST

2011

%

2010

%

ADG Global Supply Pty Ltd^ Australia 100 100

AWS (Security Holder) Pty Ltd Australia 100 100

Rain One Pty Ltd Australia 100 100

Australian Waterwise Solutions - Trade Pty Ltd # Australia 100 100

ADG Technology (Vic) Pty Ltd^ # Australia 100 100

ADG Technology (Qld) Pty Ltd^ # Australia 100 100

ADG Technology International Pty Ltd^ # Australia 100 100

ADG Global Supply Limited is the ultimate parent of the Consolidated Entity.

^ Entities subject to class order

Pursuant to Class Order 98/1418, relief has been granted to ADG Global Pty Ltd and its subsidiaries from the Corporations Act 2001 requirements for preparation, audit and lodgement of their fi nancial reports.

As a condition of the Class Order, ADG Global Supply Limited and ADG Global Supply Pty Ltd and its subsidiaries, entered into a Deed of Cross Guarantee on 4 July 2000 as amended by a Deed of Assumption dated 20 June 2008. The eff ect of the deed is that ADG Global Supply Limited has guaranteed to pay any defi ciency in the event of winding up of either controlled entity.

The below entities were dormant at 30 June 2011 and not part of the above Deed of Cross Guarantee arrangements:

- AWS (Security Holder) Pty Ltd - Rain One Pty Ltd - Australian Waterwise Solutions - Trade Pty Ltd

The consolidated statement of fi nancial position and the consolidated statement of comprehensive income of the entities within the scope of the above Deed of Cross Guarantee are the same as the consolidated statement of fi nancial position and the consolidated statement of comprehensive income presented within these fi nancial statements.

# Deregistered Entities

The below entities were deregistered with the Australian Securities and Investments Commission on 10 July 2011:

- Australian Waterwise Solutions - Trade Pty Ltd - ADG Technology (Vic) Pty Ltd^ # - ADG Technology (Qld) Pty Ltd^ # - ADG Technology International Pty Ltd^ #


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20. RELATED PARTY DISCLOSURES (CONTINUED)

The following table provides the total amount of transactions which have been entered into with related parties for the relevant fi nancial year:

Sales to related parties

$

Purchases from related parties

$

Amount owed by related parties

$

Amounts owed to related parties

$

CONSOLIDATED

Related Party

The ‘17 Oxleigh Drive’ Partnership (a)

2011 - 18,735 - -

2010 - 201,591 - -

Aintree Investments Pty Ltd as trustee for Stoneham Unit Trust (b)

2011 - - - -

2010 - 42,225 - -

Greathead Superannuation Fund (c)

2011 - 9,919 - -

2010 - - - -

Gas Property Trust (d) 2011 - - - -

2010 - 23,730 - -

Pascoes (e) 2011 64,065 - - -

2010 23,730 - - -

IML Logistics Pty Ltd (f) 2011 - 43,221 - -

2010 - 6,656 - -

PARENT

Controlled Entity

ADG Global Supply Pty Ltd 2011 - - 1,797,680 -

2010 - - 6,595,662 -

Rain One Pty Ltd 2011 - - - -

2010 - - - 4,344

AWS (Security Holder) Pty Ltd 2011 - - - 6,712,849

2010 - - - 12,942,325

Other entities under administration

2011 - - - -

2010 - - - 1,644,417


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20. RELATED PARTY DISCLOSURES (CONTINUED)

(a) The ‘17 Oxleigh Drive’ PartnershipThe 17 Oxleigh Drive (property) partnership is the registered owner of a building occupied by the Consolidated Entity since 15 May 2008. Mr. Andrew Greathead, a former Director of the Consolidated Entity has an interest in the 17 Oxleigh Drive Partnership.

(b) Aintree Investments (WA) Pty Ltd as trustee for Stoneham Unit TrustAintree Investments (WA) Pty Ltd as trustee for Stoneham Unit Trust is the registered owner of certain buildings occupied by the Consolidated Entity in Victoria and Queensland. Mr. Andrew Greathead, a former director of the Consolidated Entity has an interest in Aintree (WA) Investments Pty Ltd and in the Stoneham Unit Trust.

(c) Greathead Superannuation FundGreathead Superannuation Fund is the registered owner of certain buildings occupied on a month to month basis by the Consolidated Entity. Mr. Andrew Greathead, a former Director of the Consolidated Entity, has an interest in the Greathead Superannuation Fund.

(d) Gas Property TrustGas Property Trust is the registered owner of certain buildings occupied on a month to month basis by the Consolidated Entity. Mr. Andrew Greathead, a former Director of the Consolidated Entity, has an interest in the Gas Property Trust.

(e) PascoesThe Consolidated Entity has on occasion made purchases of immaterial nature in arms’ length transactions at both normal market prices and normal commercial terms from Pascoes. Mr David Schwartz, a Director of the Consolidated Entity, has an interest in Pascoes.

(f) IML Logistics Pty LtdThe Consolidated Entity has on occasion used the services of this entity in arms’ length transactions at both normal market prices and normal commercial terms. Mr John Mancini, a Director of the Consolidated Entity, was a non-executive Director of IML Logistics Pty Ltd until 31 March 2011.

(a-f) Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made in arms’ length transactions at both normal market prices and normal commercial terms.

Outstanding balances at year-end are unsecured and settlement occurs in cash and on demand. There have been no guarantees provided or received for any related party receivables.

For the year end 30 June 2011, the Consolidated Entity has not raised any provision for doubtful debts relating to amounts owed by related parties as the payment history has been excellent (2010: Nil). This assessment is undertaken each fi nancial year through examining the fi nancial position of the related party and the market in which the related party operates in. When assessed as required the Consolidated Entity raises such a provision.

21. EVENTS AFTER THE BALANCE SHEET DATE

No event has occurred since the reporting date to the date of this report that has signifi cantly aff ected, or may signifi cantly aff ect:

(a) the Consolidated Entity’s operations, or (b) the results of those operations, or (c) the Consolidated Entity’s state of aff airs.


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22. AUDITORS’ REMUNERATION

CONSOLIDATED

2011

$

2010

$

Amounts received or due and receivable to former auditor, PKF Chartered Accountants & Business Advisers for the period to 1 July 2010 for:

• an audit or review of the fi nancial report of the Parent Entity and any other entity in the Consolidated - 28,608

• other services in relation to the Parent Entity and any other entity in the Consolidated Entity

(a) tax compliance - -

(b) assurance related - -

(c) special audits required by regulators - -

- 28,608

Amounts received or due and receivable by the current auditor, Deloitte Touche Tohmatsu (eff ective 2 July 2010) for:

• an audit or review of the fi nancial report of the Parent Entity and any other entity in the Consolidated Entity 59,617 29,392

• other services in relation to the Parent Entity and any other entity in the Consolidated Entity

(a) tax compliance 10,605 -

(b) assurance related - -

(c) special audits required by regulators - -

70,222 29,392

23. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of key management personnel

(i) Specifi ed directors

David Schwartz Chairman (non-executive) John Mancini Managing DirectorMichael Arnold Executive Director / Chief Operating Offi cer – appointed 31 July 2010Andrew Greathead Director (non-executive) - resigned 31 July 2010 David Craig Director (non-executive) - resigned 31 July 2010

(ii) Specifi ed executives

Paul Roberts Chief Financial Offi cer – appointed 25 November 2010Luke McNiece Chief Financial Offi cer – resigned 24 November 2010

(b) Remuneration of key management personnel

(i) Remuneration Policy

The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors, the Managing Director and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such offi cers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefi t from the retention of a high quality Board and executive team. Such offi cers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefi ts such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.


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23. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED)

(b) Remuneration of key management personnel (continued)It is the Remuneration Committee’s policy that employment agreements shall be entered into with the Managing Director and all other executives.

The current employment agreement with the Managing Director has a six month notice period.

The current employment agreements with the Chief Operating Offi cer and the Chief Financial Offi cer have a three month notice period.

(ii) Remuneration of key management personnel

SHORT-TERM POST-EMPLOYMENT

SHARE

BASED

PAYMENT

TOTAL

Salary &

Fees

$

Cash

Bonus

$

Non

Monetary

benefi ts

$

Superan-

nuation

$

Retirement

Benefi ts

$

Options

$ $


John Mancini 250,000 - - 22,500 - 15,708 288,208

Michael Arnold 240,000 - - 19,980 - 13,090 273,070

David Craig 3,188 - - 287 - - 3,475

Andrew Greathead 3,188 - - 287 - - 3,475

Paul Roberts 95,795 - - 8,037 - 3,091 106,923

Luke McNiece 95,802 - - 8,622 - - 104,424

TOTAL REMUNERATION 744,073 - - 59,713 - 31,889 835,675


John Mancini 220,184 - 3,937 19,817 - - 243,938

Michael Arnold 10,854 - - 909 - - 11,763

David Craig 38,250 - - 3,443 - - 41,693

Andrew Greathead 262,604 - - 22,087 - - 289,691

Luke McNiece 65,625 - - 5,906 - - 71,531

Keith Gray 75,141 - - 6,763 - - 81,904

TOTAL REMUNERATION 728,758 - 3,937 58,925 - - 791,620

(c) Remuneration options: Granted and vested during the yearDuring the fi nancial year ended 30 June 2011 a number of options and Employee Share Plan shares were issued to certain Directors and executives of the Consolidated Entity as disclosed in notes 18(e), 23(e) and 23(f) as equity compensation benefi ts though none had vested.

During the fi nancial year ended 30 June 2010 no shares or options had been granted or vested as equity compensation benefi ts to any Director or executive of the Consolidated Entity.

(d) Shares issued on exercise of remuneration optionsDuring the fi nancial year ended 30 June 2011 no shares (2010: Nil) were issued on exercise of remuneration options to any director or executive of the Consolidated Entity.


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(e) Shareholdings of key management personnelOrdinary Shares held in ADG Global Supply Limited

2011Balance

01-Jul-10

Granted as

Remuneration#

On Exercise of

Options

Net Change

Other

Balance

30-June-11

David Schwartz 4,200,728 - - 3,333,333 7,534,061

John Mancini 4,899,635 3,000,000 - 1,633,333 9,532,968

Michael Arnold 1,260,176 2,500,000 - 833,333 4,593,509

David Craig 120,000 - - - 120,000

Andrew Greathead 13,197,844 - - (9,597,430) 3,600,414

Paul Roberts - 500,000 - - 500,000

Luke McNiece 753,300 - - - 753,300

TOTAL 24,431,683 6,000,000 - (3,797,431) 26,634,252

2010Balance

01-Jul-09

Granted as

Remuneration

On Exercise of

Options

Net Change

Other

Balance

30-June-10

David Schwartz 3,104,328 - - 1,096,400 4,200,728

John Mancini 2,192,500 - - 2,707,135 4,899,635

Michael Arnold - - - 1,260,176 1,260,176

David Craig 100,000 - - 20,000 120,000

Andrew Greathead 7,664,689 - - 5,533,155 13,197,844

Luke McNiece - - - 753,300 753,300

Keith Gray - - - 350,000 350,000

TOTAL 13,061,517 - - 11,720,166 24,781,683

All equity transactions with specifi ed directors and specifi ed executives other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length.

# Shares disclosed as granted as remuneration refer to incentive shares issued to participating employees under the Employee Share Plan (refer to note 18 (a) for more information).


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(f) Option holdings of specifi ed key management personnel$0.15 options with an expiry date of 31 March 2011 held in ADG Global Supply Limited

2011Balance

01-Jul-10

Granted as

Remuneration

Exercise of

Options

Net Change

Other

Balance

30-June-11

SPECIFIED

DIRECTORS

David Schwartz 307,000 - - (307,000) -

John Mancini 357,143 - - (357,143) -

Michael Arnold - - - - -

David Craig 10,000 - - (10,000) -

Andrew Greathead 1,248,632 - - (1,248,632) -

SPECIFIED

EXECUTIVES

Paul Roberts - - - - -

Luke McNiece - - - - -

TOTAL 2,097,775 - - (2,097,775) -

2010Balance

01-Jul-09

Granted as

Remuneration

Exercise of

Options

Net Change

Other

Balance

30-June-10

SPECIFIED

DIRECTORS

David Schwartz - - - 307,000 307,000

John Mancini - - - 357,143 357,143

Michael Arnold - - - - -

David Craig - - - 10,000 10,000

Andrew Greathead - - - 1,248,632 1,248,632

SPECIFIED

EXECUTIVES


Keith Gray - - - - -

TOTAL - - - 2,097,775 2,097,775

The above options expired unexercised on 31 March 2011.


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(f) Option holdings of specifi ed key management personnel (continued)$0.11 options with an expiry date of 30 June 2014 held in ADG Global Supply Limited

2011Balance

01-Jul-10

Granted as

Remuneration

Exercise of

Options

Net Change

Other

Balance

30-June-11

SPECIFIED

DIRECTORS

David Schwartz - 1,000,000 - - 1,000,000

John Mancini - 5,000,000 - - 5,000,000

Michael Arnold - 4,000,000 - - 4,000,000

David Craig - - - - -

Andrew Greathead - - - - -

SPECIFIED

EXECUTIVES

Paul Roberts - - - - -


TOTAL - 10,000,000 - - 10,000,000

Refer to note 18 (e) for further information regarding this issue of options.

(g) Loans to key management personnel

Employee share incentive loans were issued during the year in connection with the issue of shares under the Company’s Employee Share Plan. Refer to note 18 (a) for further information.

At 30 June 2011 or at any time during that fi nancial year there were no loans outstanding to specifi ed directors and specifi ed executives.


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24. RECONCILIATION OF NET LOSS AFTER TAX TO NET CASH FLOWS FROM OPERATIONS

Reconciliation of net loss after tax to the net cash fl ows from

operations

CONSOLIDATED

30 JUNE 2011

$

30 JUNE 2010

$

Net profi t/(loss) after taxation 724,608 (1,075,036)

ADJUSTMENTS FOR:

Depreciation and amortisation 285,109 254,317

Unwind of discount of deferred consideration provision - 56,914

Options Valuation Expense 50,652 -

Net loss / (profi t) on disposal of property, plant and equipment 5,481 1,045

CHANGES IN ASSETS AND LIABILITIES

(increase)/decrease in inventories 427,555 1,698,255

(increase)/decrease in trade and other receivables (2,426,241) 86,234

(increase)/decrease in other assets (504,042) (91,064)

(increase)/decrease in net deferred income tax assets and liabilities 416,652 (423,594)

(decrease)/increase in tax provision - -

(decrease)/increase in trade and other payables 1,056,830 (841,860)

(decrease)/increase in provisions 75,049 (23,337)

Net cash fl ows used in operating activities 111,653 (358,126)

Non-cash investing and fi nancing activities

Acquisition of Waterboy Wizard product rights

On 1 September 2010 the Company issued 500,000 ordinary shares (valued at 5 cents each) to Dreamlight Nominees Pty Ltd as fi nal settlement of the Company’s purchase of the Waterboy Wizard enclosed bypass water system from Worldlink Investments Pty Ltd.

Issue of options to Bardi Holdings Pty Ltd and Seaspin Pty Ltd

On 13 January 2011 the Company issued 5,000,000 $0.10 options with expiry date of 30 June 2013 and 10,000,000 $0.15 options with expiry date of 30 June 2014 in part consideration for Bardi Holdings Pty Ltd and Seaspin Pty Ltd acting as underwriters of the Company’s non-renounceable entitlements off er completed in December 2010. This issue was valued at $107,105 (refer to note 18(f)).


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25. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profi t for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profi t attributable to ordinary shareholders (after deducting interest on the convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the year (adjusted for the eff ects of dilutive options and dilutive convertible non-cumulative redeemable preference shares).

The following refl ects the income and share data used in the total operations basic and diluted earnings per share computations:

CONSOLIDATED

2011

$

2010

$

Net profi t / (loss) attributable to equity holders from continuing operations

724,608 (1,075,036)

Loss attributable to equity holders from discontinued operations - -

Net loss attributable to ordinary shareholders for basic earnings per share

724,608 (1,075,036)

Eff ect of dilutive equity instruments - -

Net loss attributable to ordinary shareholders for diluted earnings per share

724,608 (1,075,036)

Number of

shares

2011

Num ber of

shares

2010

Weighted average number of ordinary shares for basic earnings per share 153,047,102 98,350,676

Eff ect of dilution: - -

Adjusted weighted average number of ordinary shares for diluted earnings per share 153,047,102 98,350,676

Weighted average number of converted, lapsed or cancelled potential ordinary shares included in diluted earnings per share - -

There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these fi nancial statements.

The number of ordinary shares on issue at 30 June 2011 was 221,849,400.


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DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of ADG Global Supply Limited, I state that:

(a) in the Directors’ opinion the fi nancial statements and notes of the Company and the Consolidated Entity have been prepared in accordance with the Corporations Act 2001, including that they:

(i) comply with Australian Accounting Standards and Corporations Regulations 2001; and

(ii) give a true and fair view of the fi nancial position of the Company and of the Consolidated Entity as at 30 June 2011 and of their performance as represented by the results of their operations and their cash fl ows for the year ended on that date; and

(b) the Directors have been given the declarations by the Managing Director and Chief Financial Offi cer required by Section 295A;

(c) 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; and

(h) the fi nancial report also complies with International Financial Reporting Standards as disclosed in note 2(a).

The Company and certain of its wholly owned controlled entities (listed in note 20) have executed a Deed of Cross Guarantee enabling them to take advantage of the accounting and audit relief off ered by class order 98/1418 (as amended), issued by the Australian Securities and Investments Commission.

The nature of the Deed of Cross Guarantee is to guarantee each creditor payment in full of any debt in accordance with the terms of the Deed of Cross Guarantee.

At the date of this declaration, there are reasonable grounds to believe that the Company and its controlled entities which executed the Deed of Cross Guarantee are able, as an economic entity, 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

David SchwartzChairman

Perth, 22 September 2011

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independent auditor’s report

Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au

Independent Auditor’s Report to the members of ADG Global Supply Limited Report on the Financial Report We have audited the accompanying financial report of ADG Global Supply Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 33 to 92. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. 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.

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

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independent auditor’s report

Auditor’s Independence Declaration In 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 ADG Global Supply Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of ADG Global Supply Limited is in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its 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 2.

Report on the Remuneration Report We have audited the Remuneration Report included in pages 18 to 23 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of ADG Global Supply Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU Conley Manifis Partner Chartered Accountants Perth, 22 September 2011

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Additional information required by the Australian Securities Exchange Limited ‘s Listing Rules and not disclosed elsewhere in this report. The information is provided below: (a) Distribution of Shareholders

Category HoldersFully Paid Ordinary

Shares%

1 - 1,000 155 30,939 0.014

1,001 - 5,000 86 231,836 0.105

5,001 - 10,000 38 296,764 0.134

10,001 - 100,000 132 5,644,042 2.544

100,001 - and over 148 215,645,819 97.204

Total 559 221,849,400 100.000

Holding less than a marketable parcel 132 14,562 0.007

(b) Distribution of Option holders: $0.10 options expiring 30/6/2013

Category HoldersOptions $0.10

Exp 30/6/2013%

1 - 1,000 - - -

1,001 - 5,000 - - -

5,001 - 10,000 - - -

10,001 - 100,000 - - -

100,001 - and over 2 5,000,000 100.000

Total 2 5,000,000 100.000

(c) Distribution of Option holders: $0.15 options expiring 30/6/2014


Exp 30/6/2014%

1 - 1,000 - - -

1,001 - 5,000 - - -

5,001 - 10,000 - - -

10,001 - 100,000 - - -

100,001 - and over 2 5,000,000 100.000

Total 2 5,000,000 100.000

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(d) Distribution of Option holders: $0.11 options expiring 30/6/2014


Exp 30/6/2014%

1 - 1,000 - - -

1,001 - 5,000 - - -

5,001 - 10,000 - - -

10,001 - 100,000 - - -

100,001 - and over 3 10,000,000 100.000

Total 3 10,000,000 100.000

(e) Shareholdings - Substantial Shareholdings

The number of shares held at the report date, by the substantial shareholders was as follows:

Ordinary Shareholder Fully Paid Ordinary Shares %

Seaspin Pty Ltd 30,825,160 13.895

Pareto Capital (via a number of entities) 17,275,123 7.786

Total 48,100,283 21.681

(f) Shareholdings - Twenty Largest Holders of Quoted Equity Securities

The number of shares held at the report date by the twenty largest holders of quoted equity securities:

Ordinary Shareholder Fully Paid Ordinary Shares %

Seaspin Pty Ltd 30,825,160 13.895

Pareto Capital (via a number of entities) 17,275,123 7.787

Mr John Mancini (via a number of entities) 9,532,968 4.297

Mr David Schwartz (via a number of entities) 7,534,061 3.396

Jasforce Pty Ltd (via a number of entities) 7,500,000 3.381

Skye Alba Pty Ltd 7,100,000 3.200

Picton Cove Pty Ltd 6,795,000 3.063

Traverse Drilling International Pty Ltd 6,666,667 3.005

Moutier Pty Ltd 5,555,200 2.504

Mr. Michael Arnold (via a number of entities) 4,593,509 2.071

Magna Group BV 4,166,667 1.878

Bell Potter Nominees Ltd <BB Nominees A/C> 4,000,000 1.803

M & M Schaillee Pty Ltd 4,000,000 1.803

Fifty Second Celebration Pty Ltd 3,700,000 1.668

Dixson Trust Pty Ltd 3,500,000 1.578

Rubi Holdings Pty Ltd 3,500,000 1.578

Mr Andrew Greathead & Mrs Denise Anne Greathead 3,300,000 1.487

Jodonash Pty Ltd 3,000,000 1.352

J P Morgan Nominees Australia Limited 2,920,000 1.316

Stonehaven Holdings Pty Ltd 2,807,900 1.266

Total 138,272,255 62.327

asx additional information as at 31 August 2011

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(g) Shareholdings - Director and Company Secretary Shareholdings

The number of shares held at the report date, by the Directors and the Company Secretary were as follows:

Ordinary Shareholder Fully Paid Ordinary Shares$0.11 Options

Exp. 30/6/2014

Mr. David Schwartz 7,534,061 1,000,000

Mr. John Mancini 9,532,968 5,000,000

Mr. Michael Arnold 4,593,509 4,000,000

Mr. Demetrius Hassiotis 133,000 -

Total 21,613,538 10,000,000

(h) Company Secretary

Mr Demetrius Hassiotis

(i) Registered Offi ce

17 Oxleigh Drive, MALAGA, WA, AUSTRALIA, 6090

Tel: +61 8 9209 6800

(j) Share Registry

BOARD ROOM PTY LIMITED Level 7, 207 Kent Street, SYDNEY, NSW, AUSTRALIA, 2000Tel: +61 2 9290 9600

asx additional information as at 31 August 2011

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Head Offi ce Australia

17 Oxleigh Drive Malaga Western Australia 6090PO Box 2012 Malaga Western Australia 6944T +61 8 9249 7599 F +61 8 9249 7699www.adgglobalsupply.comABN 16 082 341 197

Perth

Brisbane

Melbourne

London

Industrial Products


Project Logistics

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Documents

2011 For personal use only - Australian Securities · PDF fileand supply tyre business ... distributor, and ToLife Technologies ... The Company, for the fi rst time, established consolidated