i have to calculate CASH FLOW DOL FOR 2014 AND 2015 for these two companies and need to state why there are significant differences in the DOL between the companies?

Annual Report GUD Holdings Limited (ABN 99 004 400 891) Year Ended 30 June 2015 Table of Contents Directors' Report ............................................................................................................................................ 3 Operating and Financial Review ..................................................................................................................... 9 Remuneration Report (Audited) ................................................................................................................... 21 Financial Statements .................................................................................................................................... 34 Additional Shareholder Information and Services ....................................................................................... 89 2 Directors' Report The Directors of GUD Holdings Limited (the Company) present their report on the consolidated entity, being the Company and its subsidiaries, for the year ended 30 June 2015. Directors The names of the Directors who held office during the financial year and details of their qualifications, experience and special responsibilities are as follows: R M Herron* FCA FAICD Appointed NonExecutive Director on 17 June 2004. Appointed Chairman on 1 January 2012. Mr Herron has been a Chartered Accountant since 1973. He is a former Deputy Chairman of Coopers & Lybrand (now PricewaterhouseCoopers) and retired as a partner of PricewaterhouseCoopers in December 2002. He is also a NonExecutive Director of Select Harvests Limited (since January 2005), Insurance Manufacturers Australia Ltd and Kinetic Superannuation Fund. Mr Herron is a former Director of Heemskirk Consolidated Limited (retired February 2011) and Customers Limited (retired July 2012). Mr Herron is Immediate Past President and former Chairman of the Royal Automobile Club of Victoria (RACV) Ltd (retired December 2014). P A F Hay* LLB FAICD Appointed NonExecutive Director on 26 May 2009. Appointed Chairman of the Remuneration Committee on 22 June 2010. Mr Hay is currently Chairman of Newcrest Limited (appointed January 2014) and Chairman of Federation Centres Limited and Director of Federation Limited (appointed June 2015). Mr Hay is a Director of the Australian Institute of Company Directors Ltd (appointed November 2012) and is a member of the Australian Government Takeovers Panel (since May 2009). Mr Hay is a former Director of NBN Co Limited (retired August 2012), Alumina Limited (retired December 2013), Australia and New Zealand Banking Group Limited (retired April 2014) and Myer Holdings Limited (retired July 2014). He is former Chairman of the Advisory Board of Lazard in Australia (retired October 2013). He is former Director of Landcare Australia Limited and Epworth Foundation. M G Smith* Dip. Business (Marketing) FAMI CPM FAIM FAICD Appointed NonExecutive Director on 26 May 2009. Mr Smith is NonExecutive Director and Chairman of Patties Foods Ltd (since April 2013). He is a former Non Executive Director of Toll Holdings Limited (retired May 2015). Mr Smith was Managing Director of Cadbury Schweppes Australia and New Zealand (2003 to 2007), and a member of the Asia Pacific Regional Board. Over a 16year career with the Cadbury Schweppes group he held senior management positions in Australia, the UK and North America. Prior to joining Cadbury Schweppes, Mr Smith's career included senior marketing management positions with Unilever and Uncle Toby's. He is a former Chairman of Food Holdings Limited (retired August 2011). G A Billings* BCom FCA MAICD Appointed NonExecutive Director on 20 December 2011. Appointed Chairman of Audit & Compliance Committee on 1 January 2012. Mr Billings has been a Chartered Accountant since 1980 and retired from PricewaterhouseCoopers in 2011 after 34 years. He is a former head of the Melbourne Assurance practice as well as heading the firm's Australian and Global Industrial Products business. He has had extensive experience over a 34 year period providing assurance, transaction and consulting services to multinational and national clients in the automotive, construction and manufacturing industries. Mr Billings was appointed as a NonExecutive Director of Korvest Limited on 7 May 2013, becoming Chairman on 18 September 2014. He was also appointed NonExecutive Director of Clover Corporation Limited on 14 May 2013. 3 Directors' Report D D Robinson* Appointed NonExecutive Director on 20 December 2011. Prior to joining the Board, Mr Robinson spent the past 22 years with global automotive parts, general industrial and consumer products manufacturer and marketing company Robert Bosch GmbH. In that time he worked in the USA, Germany and Australia and had responsibility for sales, marketing, engineering, manufacturing, accounting and personnel. He was President of Robert Bosch Australia and Robert Bosch New Zealand. J P Ling Appointed Managing Director on 1 August 2013. He is former Managing Director and CEO of Fletcher Buildings Limited (retired September 2012), a former Non Executive Director of ASB Bank Ltd (retired February 2013) and a former NonExecutive Director of Pacific Brands Group Limited (retired February 2014). * All NonExecutive Directors are independent. Corporate executive Chief Financial Officer M A Fraser B Bus, EMBA, GAICD, FCA Mr Fraser's early career was with Coopers & Lybrand in Australia, followed by over 25 years in Asia and Europe in senior finance and operational roles in Asia and Europe with McIntosh Hamson Hoare Govett, Jardine Matheson Ltd and the Schindler Group. Company Secretary M G Tyler LLB BCom (Hons) MBA AGIA Mr Tyler is an associate of Governance Institute Australia, a former partner with Freehills and general counsel with Southcorp Limited. He has held a legal practicing certificate in Victoria for 29 years. General Manager Strategy & Planning D A Draycott Dip. Bus. Studies, Grad. Dip. Accounting, AMAMI Mr Draycott has been with GUD for 17 years in the corporate planning and strategy role. Prior to GUD he was with Bunge Australia in both operational and corporate roles, latterly as General Manager, Sunicrust Clayton Bakery. Mr Draycott commenced his career with Metal Box UK and then spent time in the marketing research profession at A C Nielsen. Directors' attendances at meetings The Board held eleven meetings during the year. Meetings are generally held monthly, with ad hoc meetings called to consider specific or urgent matters. Directors Board Audit & Compliance Committee Remuneration Committee Nominations Committee Held Attended Held Attended Held Attended Held Attended R M Herron 11 11 4 4 3 3 1 1 P A F Hay 11 11 4 3 3 3 1 1 M G Smith 11 11 4 4 3 3 1 1 G A Billings 11 11 4 4 3 3 1 1 D D Robinson 11 11 4 4 3 3 1 1 J P Ling 11 11 It is the Board's practice that the NonExecutive Directors meet regularly without the presence of Management. 4 Directors' Report Directors' interests and benefits Directors are not required to hold any share qualification. The current shareholdings are shown in the table below. Shares held beneficially Own name Private company / trust Total 30 June 2015 Total 30 June 2014 10,768 14,455 25,223 23,210 4,828 4,828 3,863 M G Smith 14,753 14,753 5,560 G A Billings 2,250 Nil D D Robinson 3,000 Nil 87,483 26,528 114,011 85,470 Directors R M Herron P A F Hay J P Ling Corporate Governance Statement The Corporate Governance Statement of the Directors, and the accompanying Appendix 4G, is separately lodged with ASX, and forms part of this Directors' Report. It may also be found on the Company's website at www.gud.com.au. Principal Activities The principal activities of the consolidated entity during the course of the financial year were the manufacture and importation, distribution and sale of cleaning products, household appliances, warehouse racking, industrial storage solutions, office storage products, automotive products, locking devices, pumps, pool and spa systems, and water pressure systems, with operations in Australia, New Zealand, France, Spain, China, Malaysia and Hong Kong. Other than as referred herein and in the Operating and Financial Review, there were no significant changes in the nature of the activities of the consolidated entity during the year. Operating and Financial Review The Operating and Financial Review for the consolidated entity during the financial year forms part of this Directors' Report. Significant Changes Effective 1 November, 2014 the Company: Sold 49% of the shares in Sunbeam Australia and New Zealand (\"Sunbeam ANZ\"), comprising Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited, to Holmes Products (Far East) Limited (\"HPFE\"), a subsidiary of Jarden Corporation for an estimated $31.2 million. Acquired 49% of Jarden Consumer Solutions (Asia) Limited (\"Jarden Asia\") from HPFE for USD$2.9 million (A$3.4 million). During the year the Company entered into a share purchase agreement to acquire 100% of the shares and voting interests of Brown & Watson International Pty Limited (\"Brown & Watson\") with businesses in the Australian and New Zealand for an estimated consideration of $209.1 million, effective 1 July, 2015. The acquisition is expected to provide the Group with an expanded presence in automotive aftermarket parts. In relation to the acquisition of Brown & Watson, the Company incurred $5.489 million of acquisition related costs including equity raising fees, legal fees, due diligence and other advisory fees. In the opinion of the Directors, other than referred to above, there were no significant changes in the state of affairs of the consolidated entity during the year. 5 Directors' Report Share Capital At 30 June 2015, there were 85,079,850 ordinary shares on issue. During the year the Company issued 14,140,358 shares through a combination of share placements and a share purchase plan. Dividends During and since the end of the financial year, the following dividends have been paid or declared. A final ordinary dividend of 18 cents per share in respect of the year ended 30 June 2014 was declared on 25 July 2014, and paid on 3 September 2014 amounting to $12,769,109. This dividend was fully franked. An interim ordinary dividend of 20 cents per share in relation to the year ended 30 June 2014 was declared on 20 January 2014 and paid on 6 March 2015, amounting to $ 14,187,898. This dividend was fully franked. A final ordinary dividend of 22 cents per share in respect of the year ended 30 June 2015 was determined on 29 July 2015, and is payable on 3 September 2015 to shareholders registered on 20 August 2015. This dividend will be fully franked. Shares will trade exdividend on 18 August 2015. The GUD Dividend Reinvestment Plan remains suspended for this dividend. Auditor Independence There is no current or former partner or director of KPMG, the Company's auditors, who is or was at any time during the financial year an officer of the consolidated entity. The auditor's independence declaration made under section 307C of the Corporations Act 2001 is set out on page 85 of the accompanying Financial Statements and forms part of this Report. NonAudit Services Details of the amounts paid or payable to the Company's auditors, KPMG, for nonaudit services provided during the year are shown in Note 5 to the financial statements, which accompany this Directors' Report. The Directors are satisfied that the provision of such nonaudit services is compatible with the general standard of independence for auditors imposed by, and did not compromise the auditor independence requirements of, the Corporations Act 2001 in view of both the amount and the nature of the services provided, and that all nonaudit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit & Compliance Committee to ensure they do not impact the integrity and objectivity of the auditor. Options and rights During the year a total of 577,619 Performance Rights were granted to executives under the GUD Holdings 2017 Long Term Incentive Equity Plan. This included 90,259 Performance Rights granted to the Managing Director in October 2014 after receiving approval of shareholders at the 2014 Annual General Meeting. In addition, as a result of executives departing the Group during the year, a total of 119,674 Performance Rights were determined by the Board to have lapsed. As a result of meeting TSR targets, 173,981 performance rights granted in 2012 vested and 99,574 performance rights lapsed in relation to the GUD Holdings 2015 Long Term Incentive Equity Plan. Except as below, no options or rights were granted during the year and no options or rights have been granted since the end of the financial year. No options were exercised during the financial year. There are no unissued shares or interests under option as at the date of this Report. Details of the Performance Rights granted to key management personnel are included in the Remuneration Report, which forms part of this Directors' Report. Special Incentives As a consequence of sale of 49% of the shares in Sunbeam ANZ, the Remuneration Committee approved special incentives for a key executive, Karen Hope, comprising 73,283 performance rights related to the year ended 30 June 2015, and 146,565 performance rights in respect of the year ending 30 June 2018, which will vest if respective EBITDA performance triggers are achieved. For the year ended June 30 2015, the EBITDA trigger level is subject to review and endorsement by Jarden Corporation by September 2015. We expect the performance rights will vest. If the special incentive does not vest, Karen Hope will be entitled to a STI in respect of year ended 30 June 2015 of $186,099. Due to the uncertainty of the result, a STI has not been reported in the Remuneration Report. Details of the Special Incentives granted to key management personnel are included in the Remuneration Report, which forms part of this Directors' Report. 6 Directors' Report Derivatives and Other Financial Instruments It is the consolidated entity's policy to use derivative financial instruments to hedge cash flows subject to interest rate and foreign exchange risk according to a policy approved by the Board. Derivative financial instruments are not held for speculative purposes. Exposures, including related derivative hedges, are reported to the Board on a monthly basis. Financial facilities and operating cash flows are managed to ensure that the consolidated entity is not exposed to any adverse liquidity risks. Adequate standby facilities are maintained to provide strategic liquidity to meet cash flows in the ordinary course of business. Environmental Regulation Some of the consolidated entity's activities are subject to various environmental regulations under both Commonwealth and State legislation. The Directors are not aware of any breaches of those environmental regulations during the financial year. The consolidated entity endorses an Environmental Policy of compliance and open communication on environmental issues. Proceedings on behalf of the Company There were no proceedings brought on behalf of the Company, nor any persons applying for leave under section 237 of the Corporations Act 2001 to bring proceedings on behalf of the Company. Indemnity and Insurance The Company has, pursuant to contractual arrangements, agreed to indemnify the current and a number of former Directors of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as a Director of the Company and its subsidiaries, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. The Company has also agreed to indemnify the current Directors of its subsidiaries, the Company Secretary and certain Senior Executives for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Pursuant to this indemnification, the Company has paid a premium for an insurance policy for the benefit of Directors, Secretaries and Executives of the Company and related bodies corporate of the Company. In accordance with common practice, the insurance policy prohibits disclosure of the nature of the liability covered and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Remuneration Policy for Directors and Executives The policy for determining the nature and amount of remuneration for Directors and Executives is described in the Remuneration Report, which forms part of this Directors' Report. Director and Executive Benefits Details of the benefits paid or provided to Directors and specified Executives are included in the Remuneration Report, which forms part of this Directors' Report, and in summary in Note 34 to the financial statements. Rounding Off The Company is a company of the kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and, in accordance with that Class Order, amounts in this Report and the accompanying financial statements have been rounded off to the nearest one thousand dollars unless otherwise stated. 7 Directors' Report Significant Events after Year End Effective 1 July, 2015, the Company acquired 100% of the shares and voting interests of Brown & Watson International Pty Ltd. Of the total estimated consideration of $209.1 million, $187 million was paid on the 1 July 2015. We expect a further $13 million will be paid upon completion of the Brown & Watson 30 June 2015 financial statements. In addition, management estimate contingent consideration of $9.1 million, payable based on an earnout for the year ending 30 June 2016. In the opinion of the Directors, other than as described above, no matters or circumstances have arisen since the end of the year which significantly affected or may affect the operations of the consolidated entity which have not been outlined in this report. This Directors' Statutory Report is signed on behalf of the Directors in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001. R M Herron Chairman of Directors J P Ling Managing Director Dated at Melbourne, 30 July 2015 8 Operating and Financial Review Overview Following 201314's year of transition for GUD, 201415 was marked by major progress being made on all elements of the strategy that was articulated in last year's Operating and Financial Review. The uplift in profit performance reported for 201415 is a direct result of the initiatives and programs that commenced in the previous financial year. These programs focused on three targeted areas for improvement, namely: 1. A detailed understanding of where each business generates its profits, by customer and by product. The majority of the underpinning analyses for this program were completed in 201314 and in the ensuing year the detailed profit improvement plans by business were documented and acted upon. Structured tracking of progress is in place to ensure that the improvements flagged are delivering the required uplift in financial performance. The expected benefits from the first fully developed profit improvement plans at Davey, Dexion and Sunbeam have been instrumental in driving the profit uplift in each of these businesses. 2. The second corporate program instigated in 201314 centred on creating a high performance culture in each operating business. The development of this program continued in 201415 with each business's management team now engaged in embedding high performance principles into their daily operating environments. 3. Following progress being made on the first two programs detailed above, focus has now turned to creating a breakthrough innovation culture across all GUD's businesses. Innovation, whether product or service, is fundamental to driving sales growth and margin protection in future years. GUD's aim is to have, in each business, a pipeline of breakthrough new products or services to ensure that brand momentum is maintained in every sector in which the group competes. A Product Leadership Council has been established which is tasked with driving an innovation culture in the operating businesses and with gauging the success of innovation activities with a common set of key performance measures. The initial, truly innovative new product releases are flagged for the 201516 year while progress continues on a number of other ideas which should come to fruition either later in the financial year or into 201617. Apart from underpinning a necessary return to more acceptable levels of profitability and economic return, the principal objective of the three programs described above is to position GUD as a portfolio manager of a group of product leadership businesses that are managed for growth with common links through: Strong, innovation cultures. Embedded high performance cultures, and Wellled, competent management teams. In addition to the activities described above, major actions to address the future shape of the Group's portfolio of businesses occurred in 201415. An analysis of past financial performance, sector attractiveness and each business's position and capabilities was performed and a set of guiding portfolio principles agreed. Consequently, two major strategic portfolio activities occurred in the 201415 year: 1. The Sunbeam small appliance business was placed in a joint venture with the USbased Jarden Corporation. Jarden has a substantial position in the small appliance industry internationally, especially in North and Latin America and Europe, and has a nascent presence in the emerging markets of South East, North East and sub continental Asia. The link with Jarden provides Sunbeam with access to a broad product and brand portfolio along with the ability to capitalise on market growth in the region. Likewise Jarden benefits from Sunbeam's skills in consumer insights, product design and engineering and brand marketing expertise. 2. The acquisition of Brown and Watson International (BWI), which was completed on the first day of the 2015 16 financial year. The portfolio review noted above identified that the automotive aftermarket was an attractive sector, as evidenced by GUD's Automotive business being the standout performer for the Group in recent years. Consequently, additional presence in this sector has been targeted and the opportunity to acquire BWI arose during the year. Following operational, financial and legal due diligence the acquisition was completed. BWI, through its brands Narva and Projecta, complements GUD's current presence in automotive aftermarkets with Ryco and Wesfil in filtration products and Goss with engine management parts. BWI, like GUD's longstanding automotive activities, is a branded business focused on the aftermarket with no reliance on the vehicle manufacturing sector in Australia. 9 Operating and Financial Review All of the activities described above have been aimed at transitioning GUD and positioning it for the future. The early results from the profit improvement plans are evident in the 201415 financial performance, with more expected to come in the 201516 year. The first truly, innovative products will be in market launch phase during the first half of the current year while the effects of the Sunbeam joint venture and BWI acquisition will be equally apparent in the results. Financial Performance Review Sales The two years of revenue decline reported in the 201213 and 201314 was reversed in the 201415 financial year. Total Group revenue increased by 3% to $611.5 million, the highest revenue result achieved by the business. The revenue growth reported was just under $20 million and all businesses, with the exception of Sunbeam, registered growth on the prior year. All of this growth occurred in the second half of the year when revenue increased by $21.2 million following a small decline in the first half, compared with the previous first half year. All the business units recorded second half revenue growth. The principal factors influencing these revenue results for the 201415 year were: Despite an overall decline of 2%, which was due to a decline in the first half of $2.8 million on the previous first half, Sunbeam's revenue trend reversed notably in the second half. Growth of $1.7 million was reported with the major contributors to this being the launch of the Oster blender range, the introduction of the GoBlend and GoLunch products and, stemming from these activities, an improvement in retailer support. In addition the reintroduction of the Sunbeam brand into the Noel Leeming chain of stores in New Zealand has provided a further boost to revenue on a yearonyear basis. Growth in Dexion, especially in the second half, as some major projects were finalised and as market conditions in New Zealand and Asia improve. The Australian market for warehouse racking products continues to suffer from pricing and margin pressure and this is being addressed through a number of on going costtoserve improvement actions. Oates reported solid sales growth across the year, reflecting its market leading service capabilities in the hardware and commercial market segments. The grocery market remains competitive and brands continue to be under pressure from retailers' house brand aspirations. The Automotive business benefited from a combination of new product activities and market leading marketing and promotional campaigns. Revenue growth of 6% was recorded reflecting the market share gains being made by Ryco, Goss and Wesfil in their respective market segments. With little new product activity in the year and prolonged competitive conditions in the Australian water product markets, Davey's revenue improved by only 1% on the level of the prior year. What new product activity there was occurred late in the year, with the result that there was little contribution logged. Conversely, Davey's export business picked up following the devaluation of the Australian dollar and as a result of a number of inmarket initiatives. Despite suffering from delayed new product programs and relatively flat demand in a number of crucial market segments, Lock Focus registered a small revenue growth from its identified growth market segments. Profit Net profit after tax was $33.2 million, an increase of 88% on the $17.7 million in the prior year. Apart from an improvement in business operating performance a major contributor to the profit uplift was the absence of substantial restructuring and impairment costs in 201415. In the prior year a total of $19 million pretax was incurred in Sunbeam and Dexion, principally, in restructuring and associated activities. In 201415 no costs of this nature were incurred. However, an amount of $1.7 million was incurred relating to costs associated with the Sunbeam joint venture transaction and the acquisition of Brown and Watson. Underlying Earnings before Interest and Tax (EBIT) increased by 20% to $58.9 million from $49.0 million in the prior year. With the exception of Lock Focus all business reported growth in underlying EBIT in 201415, Sunbeam being the standout with a 383% uplift. Dexion's underlying EBIT improved an impressive 72% on the prior year's level. 10 Operating and Financial Review The principal factors affecting the profit results for the 201415 year were: The profit improvement plan initiatives that were actioned in Sunbeam, Dexion and Davey following the profitability analyses completed in late 2013. Improvements in freight and logistics costs, warranty costs and costtoserve have all contributed to the profit uplift in these businesses. Sales growth and gross profit margin contributed nearly $8 million of gross profit improvement compared with the prior year. In a year when the Australian dollar has devalued against the US dollar, the primary currency in which GUD purchases a substantial component of its product requirements, all business have been active in either seeking price increases to compensate for the high cost of product or actively managing product cost with suppliers, or a combination of both. The recent decline in commodity and base metal prices has resulted in further opportunities to improve the cost of product with the objective of maintaining gross profit margins. Gross profit margin remained stable at just over 37% as a consequence of the pricing and product cost activities mentioned above and as a result of the prior year's restructuring activities. There has been a contribution to this result from Dexion's relocation of rack manufacturing from Sydney to Malaysia as well as from Dexion Commercial ceasing manufacturing and outsourcing to lower cost product sources. Foreign Exchange GUD continues to source inputs or completed products from suppliers based predominately in Asia, usually priced in the foreign currency. As the inputs or products are typically onsold to customers in Australia or New Zealand in Australian dollars or New Zealand dollars, movements in foreign currency values have the potential to substantially impact the Group financial result each year. To address these potential impacts, GUD continues hedges up to 90% of the forecast foreign currency net purchases for up to twelve months. In considering the level and period of forward cover for each business, management considers the typical variability and seasonality of sales and the typical lead times required to review price lists and apply price changes in the markets or channels where the businesses participate. As the gradual weakening of the Australian dollar was anticipated, currency hedging over the past year was addressed exclusively through forward exchange contracts wherein the exchange rate is defined at the time of entering the contract. The weakening of the Australian Dollar, and with it the New Zealand Dollar, against the US Dollar has necessitated the careful management of potential supplier cost reductions as well as domestic cost inflation, and in most businesses revisions to price lists. The businesses were successful in achieving price rises although, in the case of Dexion, weakening steel prices largely offset the currency impacts to reduce the level of price increases sought from the market. Many businesses have also put in place, or are finalising, price rises to take effect early in the coming financial year in light of current exchange rates and anticipated domestic cost inflation. Dividends The total dividend for the 201415 year was 42 cents per share, consisting of an interim dividend of 20 cents per share and 22 cents per share final dividend. Both dividends were fully franked. The total dividend for 201415 represents an increase of 17% on the level for the previous financial year, when dividends of 36 cents per share were declared and paid. The Dividend Reinvestment Plan remains suspended due to GUD's continuing strong balance sheet position. Cash Generation and Capital Management Operating cash flow increased from $29.6 million in 201314 to $30.1 million in the year being reviewed. The increase lagged the growth in profits as $7.9 million of restructuring costs reported in the prior financial year were paid out in the current financial year and inventory increased in line with new product introductions and a move toward a growth agenda in the coming year. Debtors increased over the prior year, in part due to the robust sales performance in the last months of the year, but were largely funded by the growth in payables. In spite of the growth, the Group's value of bad debts did not escalate over the prior year's level and remain immaterial. The major capital management development for the year was the increase in the Company's share capital following a private placement and a share purchase plan. These were required to partially finance the acquisition of Brown & Watson International Pty. Ltd. A total of 14,140,358 shares were issued in the last quarter of the year raising $101.5 million after associated issue costs. As a result of the liquidity flowing from the capital raisings the net debt of the Company, at 30th June 2015, swung to a net cash position of $0.6 million. The Company returned to a net debt position on 1st July 2015 after the settlement of the Brown and Watson acquisition. 11 Operating and Financial Review External Financing Facilities During the year GUD Holdings debt facilities continued unchanged, with the Group relying principally on the $150 million of facilities in place for Australia and New Zealand with a combination of Westpac, National Australia Bank and ANZ Banking Group of which $50 million was due to expire in October 2016 and $100 million in October 2018. The agreement was modified during the year to permit the sale of 49% of Sunbeam to Jarden Corporation. Elsewhere minor additional facilities remain in place to support the working capital requirements of GUD's Asian subsidiaries. To accommodate the acquisition of Brown & Watson International Pty Ltd, it was necessary to seek expanded banking facilities. With favourable facility pricing in the debt marketplace, the Company took the opportunity to negotiate new banking facilities for a total of $300 million. This new five year facility commenced after the completion of the financial year and will expire on 1st July 2020. The facility, combined with interest swaps for a similar period on the expanded debt, provides midterm security over debt finance availability and pricing. The new facility sees a change in the banking profile involving Westpac, NAB and the Commonwealth Bank. The ANZ Bank will continue to be involved through Asian debt facilities. Strategy Review GUD's primary objective is to produce longterm shareholder returns above the cost of capital and to maximise the value of its brand portfolio for the benefit of shareholders. Strategy development and execution is focused at an individual business level and the businesses operate with a significant degree of autonomy within a framework of the overarching strategy. This strategy is simple and includes the following elements: 1. Investing in innovative product development in every business to deliver to consumer, trade or industrial customers, breakthrough new products with distinctive features, lower costs and improved performance. 2. Investing in GUD's brands through the full spectrum of marketing activities and programs to maintain strong positions with each brand's target audience. 3. Improving product and supply chain costs and efficiency to enable each business to remain internationally competitive in its product market. 4. Improving efficiency and product unit costs in operations where GUD retains a manufacturing capability. 5. Actively managing the business portfolio to optimise shareholder returns. This involves using the Group's strong financial position to make selected, value creating acquisitions that either complement the existing activities or, that provide new avenues for growth. Actions taken on these strategy components during the 201415 financial year are detailed below. Innovation and New Product Development As detailed earlier in this Operating and Financial Review, innovation and product leadership is a major priority for all businesses in the GUD group both in the short and longer terms. The principal focus is changing, however, from innovation that could be classified as incremental to that which is truly breakthrough. Necessarily, breakthrough activities take longer to come to market than those that are merely cosmetic or minor, as they require a vigorous process starting with a deep understanding of consumers' or users' needs stemming from uncovering insights into behaviours and usage patterns. Much of the evident new product activity in 201415 has been grounded in incremental processes. However, each business has embarked upon a course to identify the breakthrough product and service opportunities that will make a difference in the future. The progress with these varies by business, from one which is in prototype testing mode to others, which are still undergoing research and ideation. Notwithstanding that breakthroughs should become more frequent in 201516 there were a number of notable activities that supported revenue growth and margin retention in the year. First, the connection with Jarden provided Sunbeam with the opportunity to launch a range of high quality blenders using Jarden's Oster brand. Oster was the original blender brand in the US and Sunbeam was able to select a number of products from Oster's range, including the high end Versa model, the iconic Beehive blender and a personal blender - the FitBlend. This range was launched in April 2015 in time for Mothers Day. The launch was supported by a multifaceted communications program based around extended infomercials shown on both freetoair and subscription television. 12 Operating and Financial Review The blender market has been one of the fastest growing categories in small electrical appliances in recent years, especially the personal blender segment. The joint venture with Jarden has allowed Sunbeam to circumvent the usual prolonged product development process and to access products that it can readily bring to market to capitalise on these types of trends. While this new product activity can be classified as \"catchup\" the next phase of Sunbeam's new product program is dedicated to breakthrough actions. The first of these is scheduled for launch in the first half of the 201516 year. Another notable new product activity occurring in 201415 comes from Dexion's Commercial business unit. This business is focused on storage solutions for commercial enduses; that is storage in offices, museums, libraries and the like. Following the completion of its challenging outsourcing program attention in Dexion Commercial has been redirected to new products and new markets. A growing market internationally at present is that for parcel lockers, as it is following the growth of internet shopping and the increase in parcel deliveries to consumers as a result. Across the 201415 year Dexion was active in introducing three new lockers products onto the market, including one parcel locker range. These products have hit the mark and are partly behind the recovery in financial performance reported from Dexion Commercial. Prior to the commencement of the 201415 year Dexion's Industrial business completed the installation of the new \"Jumbo\" equipment at its Kuala Lumpur factory. This gear allows Dexion to produce industrial racking structures for the emerging highbay warehouse market. Demand for this profile of storage facility is growing rapidly, especially in the developing Asian markets where land is expensive. By building vertically rather than horizontally the cost per square metre reduces substantially. Dexion's ability to service this market with the particular racking product required has been enhanced by this investment in plant and it has been rewarded by Dexion securing six major automated systems projects for this type of product over the course of the year. It also maintains a strong order pipeline for product from this equipment going into 201516. Investing in Brands GUD has operated a common brand management process across all businesses for over seven years. This process involves the creation of an annual brand plan, in conjunction with the annual budget planning cycle. Each plan outlines the actions to be undertaken to strengthen the brand, both within the forthcoming budget year and beyond. Performance against these actions is tracked with a structured, annual brand tracking survey. These surveys monitor the major brand health parameters. Performance issues that are identified through the brand health survey are embedded into the annual brand plan update. The associated remedial actions and timelines are incorporated into the brand plan and the annual budget. In the context of the brand planning disciplines instilled in GUD's operating businesses the major branding activities, apart from new product development, that occurred in 201415 were: A number of disruptive and innovative marketing campaigns were initiated by Sunbeam in the lead up to the Christmas trading period in 2014. These campaigns utilised a blend of media including traditional television, social media along with supporting instore activities. Three campaigns were activated - The Seven Measures of Mixing, Real Men Cook and Cooking is Competitive. The consumer and trade response to all three was extremely positive during the period in which the campaigns were active. In addition to the marketing activities noted above Sunbeam capitalised on its connection to Jarden Consumer Solutions by accessing products in the Jarden portfolio and launching them during the fourth quarter of the year in both Australia and New Zealand. Products were put to market using the Sunbeam and Oster brand names. These activities have been instrumental in driving Sunbeam's revenue growth in the second half. Following last year's line extension into agricultural and heavy duty filters the Ryco business introduced a filter program for motorcycles, supplemented with an industryleading catalogue. In addition, to maintain its market leading position in automotive filtration Ryco introduced 130 new part numbers as part of its strategy to ensure it is able to meet the needs of the local market with its diversity of automobile choices. Similar to Sunbeam Ryco also embarked upon a disruptive marketing campaign with its Bucket List promotion run in conjunction with the automotive parts distributor Burson. Reflecting its innovative approach this marketing activity won the \"Most Innovative Supply Chain Engagement Award\" at the Australian Automotive Aftermarket Association Expo held in Melbourne in April 2015. 13 Operating and Financial Review Still in Automotive, the other two brands in this stable - Goss and Wesfil - both engaged in range extension programs during the year. Goss sourced and introduced an emission sensor parts program to complement its established range of replacement fuel pumps and associated engine management parts and expanded its range of coils to around 200 parts. Wesfil acquired a range of budget lighting products under the Exelite brand to complement its premium Osram offering. GUD's Oates cleaning products business continues with activities directed at securing its position as the number one supplier to the commercial and industrial cleaning market segment. These activities include new products and industryleading trade programs. Reflecting this approach Oates was recognised by winning the \"Supplier of the Year\" by the Rapid Clean group. Following its major brand consolidation activity in 201314 Dexion focused on a number of product launches in 201415 in both its Industrial and Commercial business units. In the former the principal activity was the introduction of the Dexion 808 product, directed at large automated storage and retrieval systems. The existence of this product was only possible through commissioning the new \"Jumbo\" rollforming equipment at Dexion's Malaysian factory during 2014. The rationale for investing in this equipment was to provide Dexion with access to a growing market segment in the Asian and Middle Eastern region. In its Commercial business Dexion brought to market a range of new products including shelving and lockers. Following a number of years of restructuring and withdrawal from local manufacturing Dexion Commercial is now firmly focused on product innovation and this is evident through the new product activity in 201415 and that planned for successive years. Similar to its companion businesses in the GUD Group, Davey's year was also busy with product launches and marketing programs. A number of new product development activities, which had been underway for some years, finally reached the commercialisation stage in 201415. These included two variable speed drive pumps, one for swimming pools and one for pump sets, a small diesel engine Firefighter pump and Davey's new Promatic salt chlorinator. Moreover, Davey's support to regional and rural Australia was acknowledged by it winning Ruralco/CRT's \"Supplier of the Year\" award in Queensland against 1,000 suppliers to this leading agribusiness. In addition to the more strategic branding activities detailed above, GUD's businesses make ongoing investments in their respective brands through normal daytoday marketing activities such as: Media advertising: GUD's brands communicate through a mix of television, magazines, trade publications, radio, internet and social media channels. Pointofsale collateral, including product packaging, shelf talkers, catalogues and swing tags. Website development and enhancement. New product design, development and introduction (as detailed in the previous section). Supply Chain Efficiency GUD's traditional operating method has been to run each business completely autonomously, with very little sharing of facilities and services. Some purchasing and procurement activities have occurred centrally, where opportunities exist to capitalise on the combined purchasing power. For example, the Group has procured its ocean freight requirements on a consolidated basis since 2008. This approach has delivered substantial benefits to the operating businesses, as they have been able to secure more attractive freight rates due to the combined volumes along with a commitment to space, especially in peak seasonal periods. With changing market conditions and increasingly competitive environments the potential to improve the Group's cost position through a more coordinated approach to supply chain activities was identified as an area that potentially provides opportunity to generate efficiencies and the attendant financial benefits. Substantial effort has been applied to improving logistics costs at Davey in particular. As a result of a number of individual initiatives freight and logistics cost at this business have reduced markedly both as a proportion of sales value and in absolute terms. These initiatives have included revising the way spare parts are held and freighted, leading to a reduction in airfreight costs, leveraging the combined GUD spend to achieve more favourable freight rate structures and relocation to a shared facility in Brisbane. 14 Operating and Financial Review The last of these is significant as it is the first time in many years that GUD's businesses have operated from a common distribution facility in an interstate location. The facility in Brisbane is shared between Oates and Davey. The benefits of this arrangement accrue not only in the form of operating efficiencies but also in underpinning the reduction in product being shipped from a national warehouse to interstate branches. The Brisbane warehouse is sufficiently scaled that both Oates and Davey can ship product directly from offshore suppliers to Brisbane, thereby avoiding costly handling through their respective primary warehouses, both of which are located in Melbourne. In addition to the improvements noted above, an evaluation of the potential to consolidate shipments at source (principally China) and ship directly to interstate locations is now being evaluated. If feasible this concept should lead to further utilisation of interstate branches and lessen the reliance on each business's main hub. The benefits of this are many, not the least of which is an enhanced level of customer service as product will be available at locations that are closer to the ultimate demand point at a lower cost. Improved Manufacturing Efficiency GUD maintains a manufacturing capability in three businesses - Davey, Dexion and Lock Focus. All other businesses in the Group source their products from third party suppliers the majority of which are located offshore. Davey essentially assembles products from sourced components at its Scoresby factory in Melbourne's south eastern suburbs. Close by, Lock Focus engages in die casting, metal stamping and assembly processes to make its range of locking and associated products. The focus on improving manufacturing efficiency in 201415 was principally on Dexion Until this year Dexion operated four manufacturing facilities. Three of these - Sydney, Kuala Lumpur and Shanghai - are associated with the warehouse racking part of the Dexion business, while the fourth - a factory in Sunshine, Melbourne supported Dexion's Commercial business. It was previously announced that, during the course of 201415, the Sunshine and Kings Park (Sydney) factories were to be closed. The rationale for ceasing operations at each of these locations was to lower the cost of product to ensure Dexion maintained competitiveness in each sector in which it competes. This process is well known to GUD, which, during the course of the late 1990s and into the 2000s, engaged in similar activities at Sunbeam, Oates and the Automotive businesses. Dexion's Commercial manufacturing plant at Sunshine ceased operations in September 2014 and all products sold by Dexion Commercial are now sourced from offshore suppliers. The cost of this restructuring was taken up in the accounts for 201314. On top of the decision to exit the Elite Built business, which was completed in July 2014, the closure of Sunshine has had the effect of focusing this business's activities to product design, storage solution selling and project management and this focus is now being rewarded by a markedly improved financial performance and an improving position in the market, especially in the developing regions of South and North East Asia. The most farreaching manufacturing restructure was that in Dexion Industrial, which was also announced and accounted for in the previous financial year. This involved a number of activities including the closure of the factory in Sydney, the relocation of much of its machinery to Dexion's facility in Malaysia and the subsequent re configuration of the Malaysian factory and the commissioning of the relocated equipment. The Sydney factory was closed on schedule in October 2014. The first tranche of equipment to be shifted to Malaysia was moved in July that year and further shipments occurred progressively between July and September. The reconfigured plant at Kuala Lumpur became fully operational in December 2014 and since that time efforts have been applied to maximising its efficiency and equipment utilisation. To support the increased manufacturing capacity in Malaysia a new leased warehouse was built and automated equipment for shipping container loading and unloading was installed. Following this fundamental reshaping of Dexion's manufacturing footprint the principal remaining task is that of supply chain efficiency. This was being addressed in the second half of 201415 and will remain a priority for the 201516 financial year. 15 Operating and Financial Review The financial benefits from both of these activities - the closure of Sunshine and the relocation of Sydney - are evident in Dexion's financial performance. In particular the conversion cost for warehouse racking products has declined considerably as a result of the shift to Malaysia. However, there are further benefits to flow as Dexion's supply chain becomes optimised over time. Portfolio Management GUD undertook two noteworthy portfoliochanging actions in the 201415 year: Joint venturing the Sunbeam business with the USbased Jarden Corporation, and The acquisition of BWI. The first of these, the Sunbeam joint venture, was announced in October 2014 and involved Jarden, through its small appliance business unit Jarden Consumer Solutions (JCS), acquiring 49% of Sunbeam. In turn, GUD has acquired 49% of JCS's Asian sales and marketing operations. The two joint ventures are operating under a unified management structure that is led by Sunbeam's CEO, Karen Hope. The combined business has been tasked with growing sales of both Sunbeam's and JCS's array of products in the AsiaPacific region. The business is expected to be active in twenty countries spanning from India to New Zealand in 2015. The rationale for this arrangement is that this effectively resolves Sunbeam's lack of international scale and geographic, brand ownership limitations. Sunbeam is able to access the full JCS product range and brand portfolio to support revenue growth in Australia and New Zealand. Equally, opportunities open up for Sunbeam's product range across the Asian markets, opportunities that were not previously available due to GUD having ownership rights to the Sunbeam brand for only Australia and New Zealand. One such opportunity has been secured with the April 2015 launch of a range of Oster blenders in Australia and New Zealand, as previously detailed. In addition to the obvious sales growth potential available through combining the Sunbeam and JCS businesses there is the potential to generate considerable synergy savings. Sunbeam will be able to utilise JCS's substantial Hong Kongbased sourcing office to complement its own activities in this critical business function while it should also benefit from JCS's scale in purchasing small electrical appliances. Following the announcement of the joint venture Sunbeam's sourcing and quality assurance team in Hong Kong relocated to Jarden's offices. This combining of the two organisations will accelerate the capturing of those synergies available on the product supply side of the business. This venture with JCS addresses Sunbeam's need to have revenue growth opportunities outside of its established base in Australia and New Zealand, while it also provides the business with scale economies for sourcing. Importantly the joint ventures provide Sunbeam with the opportunity to participate in joint product development initiatives with Jarden globally, such initiatives being fundamental to underpinning future profit growth. As noted in the Overview section of this Review, GUD undertook the acquisition of BWI on 1st July 2015. This acquisition was announced in May 2015 and was supported by a successful institutional share placement and retail share purchase plan. BWI is a leading supplier of lighting and electrical accessories and battery power and maintenance products to, principally, the automotive aftermarket. It serves a broader customer base than GUD's existing Automotive business; this customer base includes the auto electrical trade, the battery specialist trade, manufacturers and fabricators of semitrailers, truck bodies and caravans/camper vans and motor homes. The business has been in existence since 1953 but has focused only on automotive products since the early 1980s. Similar to most of GUD's business units BWI maintains an active product development and technology expertise along with comprehensive test laboratory facilities. It manages two leading brands in their respective market sectors - Narva in lighting and Projecta in battery products - and sources its product range from leading international suppliers. BWI's sales footprint covers Australia and New Zealand. 16 Operating and Financial Review The acquisition of BWI was attractive to GUD for a number of compelling reasons including: Attractive and complementary market its fundamental business drivers are similar to the existing GUD Automotive business, with demand driven by Australia's total vehicle pool. Market leading brands it is the owner of the market leading NARVA and Projecta brands in Australia and New Zealand Leading inhouse research and development capabilities - these allow BWI to be first to market with new products and technologies tailored to the local market conditions Comprehensive product portfolio - BWI is a 'onestop shop' with an extensive product range of over 6,000 products developed over 30 years Broad customer base and diversified distribution channels. Strong expected financial performance with upside potential - there is a clear path to FY16 earnings growth with the introduction of new products and the implementation of GUD's management processes. Benefits to the broader automotive business the ability to strengthen customer and supplier relationships across GUD Automotive and BWI. BWI's long standing Managing Director and significant shareholder, Steve Waterham, is retiring following the acquisition and his role will be filled by Bob Pattison, who transfers to BWI from GUD's Ryco business. This move will facilitate BWI's transition into, and integration with, GUD. It is expected that this acquisition will contribute $27.9 million of EBIT to the GUD result for the 201516 financial year. Corporate Social Responsibility People, Safety and Culture Throughout the year there have been a number of initiatives introduced to instil confidence in GUD's people to succeed in business and build capability for the future, and to do so in a challenging, rewarding and safe environment. Late in the preceding year the Managing Director set the threshold, challenging the Chief Executives of the businesses to drive for better performance in all aspects of business, but focusing on driving growth through innovation, high performance and relooking at the ways of doing business. As noted previously an innovation program has been introduced with the establishment of the Product Leadership Council. This has an ongoing focus of developing a stream of new products to ensure GUD's brands remain foremost in customers' and consumers' minds. The excitement generated by successful new products also engenders a sense of pride in all employees. High performance was a particular focus, with CEOs and corporate executives introduced to a model for improving team dynamics and identifying, challenging and rewarding high performers. This program has been highly successful, most clearly in the performance of the Automotive business. The year also saw the introduction of two surveys of employees. The first was a broad based employee satisfaction survey designed to understand how GUD people across the businesses perceive a number of cultural and management effectiveness dimensions. It was important to understand how people have coped with the changes introduced, how they feel about communication around the changes as well as how supportive the business is to roles and to contribution to the future direction. The responses to the survey lead to various initiatives to increase the communication of plans and objectives of the Board and senior management. The second survey was a targeted employee safety survey as part of the approach to improving the overall safety culture by measuring initial safety culture strength and identifying areas for the improvement of safety management systems and leadership. The responses to this survey provided GUD's safety teams with information to consider strength and weaknesses in categories of Leadership, Structure, and Process and Actions. Since the survey the priority has been to enhance safety leadership through a number of initiatives. The results from the increased emphasis on safety across the businesses are evident in the following table. Measure Total Recordable Injury Frequency Rate Lost Time Injury Frequency Rate Days Lost per 100 Employees Per Year 201213 16.8 3.7 25.4 201314 14.3 5.6 27.8 201415 8.2 1.8 17.1 17 Operating and Financial Review Not resting there, management is intent on moving safety culture away from one of supervised safety to independence, where employees take responsibility for their own safety and the safety of their work colleagues. Another initiative undertaken during the year was to conduct a study, with the assistance of AON Hewitt, to evaluate and grade each role within the businesses. This study allows the Group to ensure equality and fairness in making salary and career decisions for GUD's employees. It also forms the basis of ensuring sustainability into the future in particular in areas such as career and succession planning, development planning and workforce planning. The objective is to understand and grow the pool of talent available to the Group and ensure that personnel with the right skills and experience are best utilised. Diversity, in particular gender diversity, is at the forefront of Board and management thinking. GUD's formal report on diversity is included in the Corporate Governance Statement, which is available on the website at http://www.gud.com.au/corporategovernance. A copy of GUD's diversity policy is also available at the same location. Sustainability GUD manages its businesses to be responsive, ethical, open and accountable, promoting a relationship of respect and trust by and with shareholders, customers, government and community, and employees. Initiatives such as ethical sourcing, responsible packaging, lower energy consumption, hazardous chemical reduction, waste recycling and storm water harvesting are ongoing programs across the Group. GUD addresses sustainability on two levels: 1. Striving to design and make more environmentally sustainable products, in terms of efficiency, materials usage and recycling. GUD's businesses have always strived to bring innovation to their product ideas and development. Recent management action has meant that innovation, an important factor in the sustainability of any business, has been mandated as a priority. 2. Improving the Group's manufacturing and distribution operations and processes to optimise performance. A major focus continues on inbound and outbound freight and logistics operations, having already identified and realised considerable savings and operational efficiencies. GUD's businesses have relatively minor impact on climate change through greenhouse gas emissions and energy consumption. GUD's operations in total continue to be well beneath the reportable thresholds established by the National Greenhouse and Energy Reporting Act. Nevertheless, businesses are conscious of their impact on the environment and seek to minimise that impact by implementing costeffective changes to practices. Recognising the need to incorporate sustainability into an overall comprehensive reporting of nonfinancial information, GUD is developing a framework for sustainability strategy and reporting. The first step in developing, understanding and managing sustainability risk is to assess each business's major activities and then determine material issues with initial prioritisation. Once the material risks are identified, the businesses will develop action plans and programs for monitoring and reporting. Risk Review Operational Risks It is the policy of GUD Holdings Limited to ensure that there is a systematic process to identify, analyse, assess, manage and monitor risk throughout the Group. An evaluation of all organisational risks at business level is performed twice annually for presentation to the Board for review. In addition, there are established policies and processes in relation to specific risks, such as occupational health and safety and financial risk management. The twice annual business unit risk assessments are performed utilising a standard framework that is designed to ensure that strategic, operational, legal, reputational, product quality, brand and technological risks are identified, assessed, managed and monitored. The risk management framework highlights those risks that are classified as \"extreme\" or \"high\" and these become the priorities for mitigation actions. These risks are material business risks that could adversely affect achievement of GUD's strategy outlined in the 'Strategy' section above and financial prospects described in the 'Outlook' section. 18 Operating and Financial Review The risks identified as \"extreme\" have not changed in the past year; these are detailed below. Brand reputation risk due to poor product quality from external suppliers. GUD relies heavily on external manufacturers to supply products that comply with GUD's brand quality standards. Any decline in quality could cause major reputational damage and a consequent degradation in brand equity. Consolidation of the customer base. Further consolidation of corporate ownership of the customers served by GUD's businesses could potentially lead to pressures to negotiate less favourable trading terms for GUD and to demands for additional promotional allowances and other marginreducing activities. Whilst having reduced in perceived risk from \"extreme\" to \"high\" GUD still considers supply chain risk, which includes supplier failure and the inability to receive products sourced from offshore suppliers, to be a threat. GUD is he