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ASX Market Announcements
Australian Securities Exchange
Attached is the Company’s Annual Report for the 12 month period ended 31 March 2021 in
the form in which it will be distributed to shareholders of the Company.
This version will be mailed to those shareholders who have elected to receive a printed copy of
the Annual Report as at 25 June 2021.
Shareholders who have elected to receive the Annual Report electronically will receive an email
on or about 25 June 2021 providing a link to the report on the Company’s website.
This announcement is authorised to be given to the ASX by the AACo Board.
Issued by:
Bruce Bennett
Company Secretary and General Counsel
Australian Agricultural Company Limited
Level 1, Tower A, 76 Skyring Terrace
Newstead QLD 4006
ABN 15 010 892 270
Telephone: 07 3368 4400
Facsimile: 07 3368 4401
ir@aaco.com.au
www.aaco.com.au
2021 ANNUAL REPORT
A year in
REVIEW
Positive operating results delivered despite a year that was made challenging
by COVID-19 and in the face of lower red meat production.
$24.41
M
OPERATING
PROFIT2
vs $15.2M pcp
$18.41
M
OPERATING
CASHFLOW
vs $20.1M pcp
$45.5M
STATUTORY PROFIT
AFTER TAX
vs $31.3M pcp
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JobKeeper assistance totaled $6.7M Operating Profit and Operating Cash Flow.
The measure of Operating Profit is a key indicator which is used to monitor and manage the Company. It eliminates the potential distraction caused by unrealised
cattle valuation adjustments being recorded in the financial results and is a better reflection of actual financial performance under the control of management.
Hence the Company believes that external stakeholders benefit from this metric being reported. Operating Profit is unaudited, non-IFRS financial information.
Operating Profit assumes movement in Livestock and inventory volume at cost of production, while Statutory EBITDA results include revaluations based on
livestock market values.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy
Our strong
GLOBAL DISTRIBUTION
network has helped to deliver
+8%
AVERAGE MEAT
SALES PRICE/KG
INCREASE VS
PRIOR YEAR
11%
25%
WESTHOLME %
OF MEAT SALES
VS PRIOR YEAR
74%
OF BRANDED
MEAT SALES3 NOW
WESTHOLME AND
DARLING DOWNS
Strengthening of the
BALANCE SHEET
$1B
OVER
NET
ASSETS
$1.75
PER
SHARE
NTA
vs $1.53 pcp
3
Continued to strengthen depth of talent and leadership capability
in key functional roles across the business.
Introduced AACo’s Beef Cattle Herd Management Carbon Project4
which has commenced the journey of reducing our emissions
intensity of beef cattle production.
3 Branded meat sales represents total meat sales excluding trim.
4
AACo’s Beef Cattle Herd Management Carbon project (“BCHM”) is a program of work targeted at carbon abatement and is registered under the Australian
Government Clean Energy Regulator’s BCHM carbon methodology. For every tonne of carbon equivalent abatement achieved under the project, one Australian
Carbon Credit Unit (ACCU) is awarded by the Clean Energy Regulator.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information T
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The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy
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The AACo Story
Message from the Chairman
Letter from the MD and CEO
Our Strategy
Our People
Our Brands
Regional Performance
Our Operations
Sustainability
Directors' Report
Financial Report
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ASX Additional Information
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Company Information
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationContents The AACo
Story
Our story is forged from
THE LAND
Established in 1824 with the assistance of a British
Parliament Crown Grant of 1 million acres of land, we
are Australia's oldest continuously operating company.
Today we are the proud custodians of around 6.4
million hectares of land in Queensland and the
Northern Territory and are one of Australia's largest
integrated cattle and beef producers.
We operate an integrated cattle production system
across 19 owned cattle stations, 3 leased stations,
3 agisted properties, 2 owned feedlots and 2 owned
farms. From these operations in Australia we export
our premium branded beef around the world with
tailored route-to-market models for each country.
Our Australian hard-working attitude combined with
years of experience cultivating cattle on our pristine
pastoral assets is unique to our country and our
company; we take great pride in that.
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2021 AACO ANNUAL REPORT - Company ProfileMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy
7
The land is our
LEGACY
It is the renowned relationship
between our people, livestock, land and
communities that has lasted generations
and positions us internationally as the
finest Australian Wagyu beef producer.
We capture the magic of Australia
and craft this into remarkable dining
experiences for people around the
world to enjoy.
Glentana Station
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Message from
the Chairman
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MESSAGE
FROM THE
CHAIRMAN DONALD MCGAUCHIE AO
Chairman
Dear Fellow Shareholders,
I am pleased to report that AACo has
demonstrated great resilience in a
uniquely challenging year.
Global and seasonal factors have
required significant adaptation within
our overall branded beef strategy in
Financial Year 2021. Our progress to
date has helped AACo navigate the
worst impacts of a global pandemic,
geopolitical uncertainty and the
ongoing effects of recent flood and
drought events. The result has been
positive financial outcomes in FY 21,
building on the value of our brands, our
global distribution partnerships, and
the underlying value of our assets.
AACo continues to produce the
highest quality beef at scale. Through
our quality brands, we improve the
value of every kilo of beef sold. This
unique value proposition remains
the cornerstone of AACo’s long term
shareholder value.
RESPONDING TO
UNCERTAINTY IN
FINANCIAL YEAR 2021
In my letter to you last year I noted
that, while the early stages of the
COVID-19 pandemic presented
unprecedented challenges, “AACo
sees this as an opportunity to examine
everything we do as a company and
ensure that we emerge as a stronger
business.” I am pleased to report that
this is the case.
At the start of AACo’s FY 21, every one
of our 16 food service markets around
the world was directly impacted by
COVID-19 public health restrictions.
As a company committed to both
retail and fine-dining markets, this
presented a significant challenge.
At the same time AACo confronted
geopolitical uncertainty including
market access constraints in East Asia.
These challenges slowed progress
in the roll out of our branded beef
strategy. The AACo team responding
tactically, sought out new and
expanded retail opportunities around
the world – including direct to the
consumer. Many new channels were
created and expanded, with many new
consumers connecting with AACo’s
beef and brands.
This was attributable to a number
of factors. Global demand for safe,
healthy, high-quality beef continues
to grow among the world’s middle
class – including transitioning to
at-home dining. AACo remains one of
the world’s finest producers of beef at
scale, with enviable natural resources
and some of the world’s finest genetics.
Every person at AACo maintains a
relentless focus on our customers –
which helped us adapt at every level
over the last year and continue to
deliver great dining experiences.
In addition to these underlying
strengths, AACo’s branded beef
strategy proved invaluable in
navigating uncertainty in FY 21.
The AACo StoryOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy
AACo remains one of the world’s
finest producers of beef at scale, with
enviable natural resources and some
of the world’s finest genetics.
LAND AND HERD ASSETS
PEOPLE
AACo’s unparalleled land assets and
footprint remained largely unchanged
in FY 21. The value of our land assets
grew over the year, consistent with
longer-term improvement in the value
of our pastoral assets. This has been
underpinned by the underlying quality
of these assets and ongoing work by
the AACo team to improve them.
AACo’s herd continues to improve
in genetic and phenotypic quality
markers. Strategic destocking in
response to ongoing drought since
2018 and the Gulf flood event in
2019 has focused on protecting our
breeding animals. I am pleased to
report that over this period we have
improved our herd genetics, providing
a strong platform as we continue our
herd rebuild.
Central to this investment is our
whole of company commitment to
sustainability. I am pleased to report
that AACo’s sustainability efforts
progressed in FY 21 with tangible
benefits to our animals, our people
and the land, water and ecosystems
for which we are responsible.
The AACo team have been remarkable
in adapting to difficult challenges in
FY 21. At every level our people have
confronted personal and professional
uncertainty by working together,
focusing on our animals and our
customers, and getting the job done.
This includes a number of internal
changes and promotions supporting
continued execution of the company’s
strategy. I want to thank the whole
AACo team for their commitment,
dedication and resilience in creating a
strong platform for our future growth.
After a year of great challenges,
I am pleased to report that AACo has
emerged a stronger business with a
clear focus and strategy for delivering
long term value for shareholders.
Yours sincerely,
9
DONALD MCGAUCHIE AO
Chairman
Australian Agricultural Company Limited
Our strong brands improved the
average price per kilo of beef sold.
Global relationships along the value
chain helped identify and connect
with new customers in key markets,
including North America. And a
simpler and more efficient business
supported ongoing cost discipline and
rapid operational adjustment.
This was particularly important as
AACo faced reduced meat volumes
available for sale in FY 21. Flood
and drought events since 2018 have
impacted AACo calving rates over this
period. This resulted in fewer mature
animals for meat production in FY 21,
with consequent impacts on revenue.
Looking forward, meat volume and
revenue challenges are likely to
continue into FY 22 as our herd rebuild
continues and we anticipate some
additional purchases of cattle will be
required during the period. Uncertainty
around COVID-19 and its impacts in
key markets will continue. Geopolitical
uncertainty, including in our region, is
likely to continue also. Offsetting these
challenges, global demand for safe,
quality beef remains strong and
AACo’s growing brand value remains
a key asset.
In this context the brand premium
generated by AACo in FY 21 has
been vitally important to our
financial results – and forms a
critical foundation for future
shareholder value.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information
Letter from
MD and CEO
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LETTER
FROM THE
MD AND CEO
HUGH KILLEN
Managing Director and CEO
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceOur Strategy
Dear Fellow Shareholders,
LOWER MEAT VOLUMES
Financial Year 2021 presented a
unique set of challenges for AACo
that required us to draw on our almost
200 years of operational expertise to
navigate. I am pleased to report that
the AACo team responded quickly
and effectively across all parts of the
business, producing positive financial
results for the year and a solid platform
for future growth.
At the start of FY 21, we faced the
early stages of the global COVID-19
pandemic and ongoing geopolitical
uncertainty. We also felt the impact
of lower mature animal numbers and
meat production volumes coming off
the back of the ongoing drought and
devastating Gulf flood. In the face of
these challenges, AACo’s global brands
and value chain partnerships helped
the team identify new markets and new
customers. This meant we were able to
continue to improve our price per kilo
for beef sold in the face of significant
disruption to the foodservice industry
around the world.
The end result has been a positive
operating cashflow of $18.4M and an
improved operating profit of $24.4M
and statutory EBITDA outcome of
$99.3M – despite a 19% decrease
in meat volumes available for sale
and $68.6M lower overall revenue
compared to the previous year.
AACo’s longer term strategy roll out
was limited by the challenges in FY 21.
However, the AACo team’s ability
to rapidly identify and access new
opportunities was achieved because
of the progress we have made to date
against our branded beef strategy. This
strategy remains the strongest pathway
to future value for AACo shareholders.
AACo’s calving rates and the
composition of our herd were impacted
by the devastating Gulf Floods in early
2019 and multiple drought years from
2018 to 2020. It takes our F1 animals
an average of 3.5 years to get from
station to plate, which has meant that
lower calving rates over this period
directly impacted AACo’s mature
animal numbers in FY 21. This resulted
in 19% lower meat volumes available
for sale compared to the previous year
and $68.6M lower overall revenue.
These supply constraints were broadly
in line with the national industry and
will continue into FY 22.
The end result has been a positive
operating cashflow of $18.4M and an
improved operating profit of $24.4M.
Along with the wider national industry
herd rebuild, AACo’s calving rates grew
in FY 21 by 47% compared to FY 20.
This correction will take time to flow
through to meat volumes and AACo
will continue some supplemental cattle
purchases over this period.
AACo’s destocking in response to the
drought focused on protecting our
highest quality breeding animals. As
a result, the genetic and phenotypic
markers of our herd have continued
to improve – ensuring we continue to
strengthen the underlying genetics at
the heart of our business.
11
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Letter from
MD and CEO
In total, 74% of AACo’s branded beef sales (excluding “trim”),
and 80% of our highest quality “loins and rumps” cuts were sold
under our Westholme and Darling Downs brands in FY 21. The
combined price per kilo of these brand sales has increased 17%
each year since 2019 on an annualised basis.
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Our strategic stocking rates, together
with improvements in our pastoral
properties and infrastructure,
will benefit our animals, the
quality of our beef and our overall
contribution to the ecosystems
for which we are responsible.
RESPONDING TO COVID-19
COVID-19 disrupted the foodservice
industry around the world in FY 21,
with all 16 of AACo’s global foodservice
markets impacted by public health
restrictions. In response, the AACo
team rapidly identified new retail
sales channels and successfully
expanded existing ones. These tactical
responses built on and leveraged
our strategic brand investment in
recent years. The presence of AACo’s
Darling Downs brand in South
Korea was strengthened in FY 21
through a targeted brand refresh. The
strength and depth of our distributor
partnerships in North America
supported the realisation of new retail
opportunities in the region. This
included new direct to consumer sales
channels, underpinned by concerted
investment in digital marketing to
promote our Westholme brand in
the USA.
Pursuit of these new retail sales
opportunities in FY 21 was also
important in offsetting ongoing
market constraints in China.
BRANDED BEEF VALUE
The strength of AACo’s brands was
particularly evident in driving these
retail sales, and AACo’s improved
price per kilo in FY 21.
In total, 74% of AACo’s branded beef
sales (excluding “trim”), and 80% of
our highest quality “loins and rumps”
cuts were sold under our Westholme
and Darling Downs brands in FY 21.
The combined price per kilo of these
brand sales has increased 17% each
year since 2019 on an annualised basis.
This has been critical to securing
AACo’s overall 8% annualised price per
kilo growth over the same period.
When quality beef is sold through these
brands, the return to AACo improves.
Investment in brand equity and
transition of more “loins and rumps”
through these brands, has been critical
in generating positive financial results
in a challenging FY 21 landscape.
This underscores the long-term value
of AACo’s branded beef strategy. It
demonstrates the importance of the
progress made to date and it marks the
pathway for AACo to realise additional
value for shareholders in the future.
Through continued investment in
brand equity and product innovation,
there is scope for more of AACo’s beef
to realise improved returns through
branded beef sales.
SUSTAINABILITY
A critical component of AACo’s
operations and our brands is our
whole of company commitment
to sustainability.
In FY 21 AACo managed its
environmental footprint in multiple
ways. We launched our Beef Cattle
Herd Management Carbon Project,
which is registered with the Australian
Government’s Clean Energy Regulator.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceOur Strategy
OUR AACO TEAM
LOOKING FORWARD
Like all Australians, the AACo team
was personally and professionally
impacted by the uncertainty of the
global pandemic in FY 21. Our staff
have shown great resilience and their
work has made it possible for AACo to
navigate the unique challenges of the
year just gone.
Over the year, AACo continued to
invest in the wellbeing, diversity,
careers and leadership of our team.
We launched our “1AA” safety
culture and our “Switch On” safe
work practices program. Alongside
our ongoing leadership development
efforts, these programs have helped
improve safety markers across the
business. We also refocused the
AACo graduate program in FY 21.
We currently have five fantastic young
women working across AACo as part
of the next generation of high-
performance leaders in our industry.
AACo continued to strengthen the
depth of our talent and leadership
capability in key functional roles
across the business. This included a
number of internal promotions within
our operations team over the year,
reflecting the quality of our leaders and
our investment in their development.
I want to thank each and every
one of my team for their absolute
commitment to AACo – to our animals,
our operations, to each other and to
our customers.
Global demand for high quality
beef – backed by provenance, safety
and traceability – remains strong.
AACo’s unparalleled ability to
produce the highest quality beef at
scale and the growing strength of
our global brands position us well
to meet this growing demand.
Along with the national industry, our
herd rebuild has commenced – and
the quality of our herd and genetics
continues to improve. Meat volume
constraints in FY 21 are likely to
continue in FY 22 and we will carry on
managing this challenge. Geopolitical
uncertainty is likely to remain with us
in the future and recent events have
underscored the ongoing uncertainty
and challenge of COVID-19. AACo
continues to monitor the global
response to COVID-19 and new market
opportunities as they emerge.
Following a year of rapid adaptation,
the leadership team remains focused
on progressing AACo's branded beef
strategy as a primary driver of value for
AACo shareholders.
Yours sincerely,
13
HUGH KILLEN
Managing Director and CEO
Australian Agricultural Company Limited
This work is focused on reducing
the emissions intensity of our beef
production. AACo continued to
transition away from fossil fuels
through the installation of additional
solar powered bores in FY 21. We
also launched our Animal Health and
Welfare Committee and we continue
to progress our poll breeding program.
AACo’s overall stocking strategy will
further improve our custodianship
of the ecosystems for which we
are responsible.
Within the framework of these
changes, the AACo team as a whole is
driving continuous improvement in
our sustainability and helping prepare
AACo for our next 200 years.
OPERATIONS AND COSTS
Each of the measures and
achievements referred to above
was made possible by our ongoing
commitment to a simpler and more
efficient AACo. Overall expenditure
was $76M lower in FY 21 compared
to the previous year. This was
substantially driven by more favourable
seasonal conditions and reduced costs
associated with lower meat production
volumes. FY 21 consolidated important
efforts in recent years to minimise
operating expenditure – including
a disciplined approach during the
uncertainty of COVID-19.
Through these changes, our focus has
been to build operating systems which
support clarity and consistency in meat
production. This has been critical in
our planning and to help our marketing
and sales teams rapidly adjust to new
challenges and opportunities
in FY 21.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Our
Strategy
Delivering on our
STRATEGY
We continued to make
progress with our branded
beef strategy despite the challenges of
the COVID-19 pandemic and lower meat
production during the year.
Dealing with adversity is ingrained
in the DNA of this business and this
tenacity, supported by the progress
that we have made against our strategy,
enabled our team to rapidly adapt to
these challenges, using the strength
of our global distribution network to
identify and access new opportunities
in retail channels.
We were able to adapt to changing
consumer trends and the rise of at home
dining with a commercial focus on
gourmet e-marketplaces and enhanced
digital marketing campaigns.
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We further rationalised our brand
portfolio and grew our Westholme and
Darling Downs brands throughout the
period, which contributed to an overall
price per kilo increase for the year.
Our commitment to a simpler and
more efficient AACo has also supported
us through these uncertain times
with the consolidation of important
efforts in recent years to optimise
operating expenditure.
The flexibility and resilience shown
by our strategy in this uncertain year
demonstrates that it remains the
strongest pathway to future value
for AACo shareholders, and we
remain committed to delivering
on this going forward.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEO
Progress against our strategy in FY21
CONSUMER +
CUSTOMER CENTRICITY
Strategic Revenue
Management
• Optimisation of
market mix helped
drive an overall
increase of 8% in
average meat sales
price per kg.
Go to Market Model
• The strength of our
global distribution
network and
partnerships enabled
us to move into new
retail channels to
negate the impact on
global foodservice by
COVID-19.
• Our focus on gourmet
e-marketplaces
addressed the needs of
home chefs, which grew
during COVID-19.
Brand Portfolio and
Consumer Engagement
• Further rationalised brand
portfolio with Westholme
and Darling Downs now
representing 74% of AACo’s
branded meat sales*.
• Chef partnerships enhanced
our digital campaigns across
the USA and Australia.
STRATEGIC
REVENUE
MANAGEMENT
BUSINESS
OPTIMISATION
R C E N
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GO TO
MARKET
MODEL
BRAND
PORTFOLIO +
CONSUMER
ENGAGEMENT
R I C I T Y
T
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SUSTAINABILITY
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A
M
HIGH
PERFORMANCE
CULTURE
OUR Val u e s
Aim higher
Take the reins
embrace change
do it for the diner
RESPECT WHAT MAKES
IT POSSIBLE
OUR TEAM
High Performance Culture
• We continue to strengthen our depth
of talent and leadership capability in
key functional roles across
the business.
• Over the last 12 months we have seen
numerous internal promotions within
our operations team recognising
our bench strength.
OPERATIONAL
EXCELLENCE
Business
Optimisation
• We were able
to deliver ~$76M
savings vs prior year
through
a disciplined
focus on cost
management across
the supply chain.
Sustainability
• We introduced AACo’s
Beef Cattle Herd
Management Carbon
Project** which has
commenced the
journey of reducing
our emissions
intensity of beef cattle
production.
• July 2021 we will
release our second
Sustainability
Benchmarking Report.
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*
**
Branded meat sales represents total meat sales excluding trim.
AACo’s Beef Cattle Herd Management Carbon project (“BCHM”) is a program of work targeted at carbon abatement and is registered under the Australian
Government Clean Energy Regulator’s BCHM carbon methodology. For every tonne of carbon equivalent abatement achieved under the project, one Australian
Carbon Credit Unit (ACCU) is awarded by the Clean Energy Regulator.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information
Our
People
Pride in
OUR PEOPLE
It's that ingrained dedication and commitment to our craft that our passionate team
possess. It's what it takes to manage more than 300,000 head of the highest quality
cattle the world has to offer. As the custodians of nearly 1% of Australia's land mass,
we see the 6.4 million hectares of land that our people work to nurture our animals,
maximise returns and continue our legacy as a big responsibility.
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The AACo StoryMessage from the ChairmanOur Brands Regional PerformanceLetter from MD and CEOOur Strategy
PUTTING PEOPLE FIRST
WOMEN OF AACO: OUR WOMEN ON THE LAND
Our people are our greatest asset.
They work across our stations, feedlots
and farms in Queensland and the
Northern Territory as well as our head
office in Brisbane and commercial
offices around the world. They deliver
on our high-performance culture by
living our values: aim higher, embrace
change, take the reins, respect
what makes it possible and do it
for the diner.
We identify and promote career
growth opportunities for all of our
employees. One example is our
successful graduate program to
discover and nurture new talent
whom we mentor to become the
future custodians of AACo.
AACo's commitment to safety
continues to evolve and advance
as we refine our work health and safety
strategy, including the introduction of
three new programs: lAA, Switch On
and Leadership Development.
These initiatives have supported
improved performance across our key
safety metrics including increasing
Near Miss reporting and reducing
serious injuries.
It's because of our dedicated team that
our beef feeds people throughout the
world, every single day.
Australian women have always been
a vital part of the success of AACo.
proportion of female leaders,
based on merit.
We strive for strong female
representation at all levels and to be
an employer of choice for women,
particularly in the agriculture sector.
With female representation across
our workforce at 39%, including 38%
of people on our stations and farms
and 32% of those working in feedlots,
our numbers are higher than the
broader agriculture industry, but we
know there's more to do.
In addition to the fact that 25% of
all leaders are female and two of our
seven member Executive Leadership
Team are female, we aspire to grow
our female representation across
our workforce and increase the
Workforce statistics for the
company's FY21 financial year
shows females make up around
43% of new appointments and two
out of every five promotions. 100%
of our graduates were also female.
We're also proud to remain a
part of the National Farmers'
Federation's Diversity in Agriculture
Leadership Program.
AACo will continue to build on
the solid foundation that we have
established and will work towards
ensuring our workplace provides for
a culture of inclusion and belonging
for all employees.
17
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Our
People
HEALTH, SAFETY & WELLBEING
One of the areas of focus we are proud
of at AACo is investing in our team's
health and wellbeing. We are focused
on ensuring everyone remains safe and
healthy, day-in, day-out both physically
and mentally.
We have recently run a number of
awareness sessions on mental health
for our people and we also ensure
that each station has a mental health
trained officer on hand to support
our workforce.
AACo promotes a strong community
based culture because we know that
being part of a community is critical to
creating a safe and healthy workplace.
A key commitment we’ve made is to
help prevent male suicide, particularly
in rural and regional communities.
It's a very sad fact that men in remote
areas are more likely to end their life by
suicide than their urban counterparts.
The toll of suicide in any community
is catastrophic, yet in smaller, isolated
towns like where our families hail
from, it can be even more brutal.
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The AACo StoryMessage from the ChairmanOur Brands Regional PerformanceLetter from MD and CEOOur Strategy
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LaBelle Station
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Our
Brands
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Indulging
THE SENSES
Crafting the magic of Australia into remarkable dining experiences.
Drawing on our rich Australian heritage and crafted by many hands
in an ardent pursuit of perfection, our portfolio of brands reflects
our dedication to producing premium Wagyu of unmatched integrity,
flavour and tenderness.
Nothing compares to the passion and respect our people have for our land
and our animals to create extraordinary dining experiences in some of the
most recognised and awarded restaurants around the world.
It’s how we share the magic of Australia.
The AACo StoryMessage from the ChairmanOur People Regional PerformanceLetter from MD and CEOOur Strategy
WYLARAH
Exclusive, rare, masterful. Wylarah is
like no other.
Crafted from Fullblood or Purebred
animals which have been derived
from some of the world’s most revered
breeding bulls and cows, Wylarah is
a decadent experience of silky, finely
textured slices specially curated to
deliver an exquisite moment.
As the pinnacle brand in the portfolio,
it is the perfect balance of marbling and
lean, delighting the palate with a sense
of pure luxury that is creamy and
perfectly buttery.
Wylarah is a rare piece of art, designed to
last only a fraction of time, yet leaving the
whispers of an everlasting memory; and
the murmur of a profound savoury depth.
WESTHOLME
There’s a story in every mouthful
of Westholme.
A story of Australian craftsmanship
and ingenuity, and an unyielding
dedication to perfection and care
from station to plate. A story of a country
so vast, that we’ve sustained for almost
two centuries, providing our unmatched
herd clean air, pure water and infinite
freedom to roam and graze.
Westholme builds on our strong heritage
of breeding, pairing a Wagyu herd of
unrivalled provenance with our own
northern Australian breed, the Mitchell,
to craft a signature eating experience
that is enjoyed around the world.
With every bite of Westholme, diners will
experience the layering of rich, complex,
buttery flavours that are consistent to
every cut. A flavour that only northern
Australia can produce, and only
Westholme can perfect.
2121
DARLING DOWNS
Darling Downs isn’t just a product, it’s a
way of life.
Crafted by our cattleman who love what
they do and take enormous pride in caring
for the land, their dedication ensures that
Darling Downs provides home chefs with
high quality goodness they can count on.
By honing our craft and building on our
experience, Darling Downs delivers the
most flavoursome, tender and versatile
Wagyu, with strong consumer demand
in the Korean market.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Regional
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The AACo StoryMessage from the ChairmanOur People Our Brands Letter from MD and CEOOur Strategy
Regional
PERFORMANCE
Leveraging our long-term existing partnerships, optimising sales mix
and lifting price per kilo remained AACo’s priorities during FY21.
REGIONAL/MARKET PROPORTION OF TOTAL SALES
19%
NORTH
AMERICA
7% FY20
61%
ASIA
66% FY20
13%
AUSTRALIA
7%
EUROPE/
MIDDLE EAST
15% FY20
12% FY20
6%
CHINA
15% FY20
55%
ASIA EX
CHINA
51% FY20
AUSTRALIA
Branded Meat Sales
$/Kg* 5% inc vs pcp
Further optimisation of our market
allocation and product mix combined
with higher pricing due to lower
market supply drove increase.
EUROPE / MIDDLE EAST
Branded Meat Sales
$/Kg* 2% dec vs pcp
COVID-19 restrictions adversely
impacted the high value foodservice
channels in this region in FY21.
23
NORTH AMERICA
Branded Meat Sales
$/Kg* 14% inc vs pcp
Increase driven by successful shift
to in-home dining shopping channels,
strength of partnerships with key
gourmet e-marketplaces, focused
brand awareness marketing campaigns
and profiling of restaurant meal kits
with customers.
ASIA
Branded Meat Sales
$/Kg* 5% inc vs pcp
Increase off the back of strong
relationships with distributors who
have retail exposure and the refresh
of Darling Downs in South Korea.
China trade tensions combined
with lower volume available for
sale, saw a shift in commodity-based
sales previously sold in China to
North America.
$200M
TOTAL MEAT SALES
A ACo distributes quality
product to more than 30
countries around the world and in
spite of the challenges the global
pandemic had on the foodservice
industry in FY21, we delivered a
solid commercial performance. This
is testament to the dedication and
resilience of our team who had to
rapidly adapt to these challenges,
enabled by the strength of our global
distribution network.
We are constantly looking to optimise
our market allocation and sales mix,
which means we focus on strategic
market allocation and adapting
our channel strategies to changing
consumer trends. This year was no
different as we flexed our approach
to address the rising growth of at
home consumption and the home chef
through gourmet e-marketplaces and
premium retail specialists.
We also continued to support the roll
out of our branded beef strategy with
targeted digital marketing campaigns
and improved branding of our
products on menu and in-store.
* Represents branded meat sales $/Kg excluding trim.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information s
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The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy
Our
Operations
Avon Downs Station
CIRCA 1% OF AUSTRALIA'S LAND MASS
Our
OPERATIONS
At AACo, we operate a strategic balance of world class assets
comprising around 6.4 million hectares of Australian land
which underpins the value of our business.
Our property portfolio is core
to our production system
and comprises a strategic mix of
cattle stations, feedlots and farms
throughout Queensland and the
Northern Territory. The strength of
these assets enables us to produce the
highest quality beef at scale and this
is key to supporting our branded beef
strategy. Leveraging our generational
experience with these properties,
we are constantly looking to evolve
and improve the efficiency of our
operations. The value of our pastoral
assets grew over the year, consistent
with a long-term trend in our business.
These assets are now worth $916
million supporting our net tangible
assets value of over $1 billion.
25
The quality of our herd is also core
to delivering on our strategy and this
is managed through our dedicated
Breeding and Genetics team.
This team measure and track the
performance metrics of our breeding
herd and use this information as well
as the latest technology to improve
genomic selections. This means we
are constantly refining our joining
and selection strategy to improve our
underlying genetics and this is paying
off. This year we continued to improve
the genetic and phenotypic quality
markers of our herd meaning we
have not only increased the quantity
of calves in our supply chain, but the
underlying quality of these animals has
also improved.
SustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional Information Our
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SUSTAINABILITY
We are embedding a whole of company commitment
and culture focused on Sustainability.
A ACo is committed to
embedding a culture of
sustainability in our business and
we have made progress against this
commitment in FY21.
We introduced AACo's Beef Cattle
Herd Management Carbon Project*
this year which has commenced our
journey of reducing our emissions
intensity of beef cattle production.
The core activities identified under
this project to drive carbon abatement
include improving our animal
selection through genomic selection,
increasing grazing areas through
improved water access points,
better pasture control through
fencing infrastructure and reduced
cattle handling through improved
yard infrastructure.
We further reduced our reliance on
fossil fuels this year, by more than
doubling the number of solar bores
on our properties.
We also continued our focus on the
health and welfare of our animals
with the establishment of our Animal
Health and Welfare Committee
as well as continued progress with
our poll breeding program.
Our second sustainability
benchmarking report will be released
in July 2021 and will provide further
context to our sustainability journey.
*
AACo’s Beef Cattle Herd Management Carbon project (“BCHM”) is a program of work targeted at carbon
abatement and is registered under the Australian Government Clean Energy Regulator’s BCHM carbon
methodology. For every tonne of carbon equivalent abatement achieved under the project, one Australian
Carbon Credit Unit (ACCU) is awarded by the Clean Energy Regulator.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEO
Sustainability
27
Wylarah Station
Wylarah Station
Our OperationsDirectors' ReportFinancial ReportCompany InformationASX Additional Information Your Directors submit their report for the year ended 31 March 2021.
Directors
The names and details of the Company’s Directors in office during the financial period and until the date of this
report are set out in the following section. All Directors were in office for the entire period unless otherwise stated.
Donald McGauchie
AO, FAICD (NON-EXECUTIVE CHAIRMAN)
Mr McGauchie was appointed a Director on
19 May 2010 and subsequently Chairman on
24 August 2010. Mr McGauchie is the Chairman
of the Nomination Committee and a member
of the Staff and Remuneration Committee and
Brand, Marketing & Sales Committee.
Mr McGauchie is currently a Director of
GrainCorp Limited. His previous roles with
public companies include Chairman of Nufarm
Limited, Chairman of Telstra Corporation
Limited, Deputy Chairman of Ridley
Corporation Limited, Director of National Foods
Limited, Chairman of Woolstock, Chairman
of the Victorian Rural Finance Corporation
(statutory corporation), Director of James
Hardie Industries plc, and also President of the
National Farmers Federation.
Hugh Killen
GMP (HARVARD BUSINESS SCHOOL)
Mr Killen was appointed Managing Director and
Chief Executive Officer in February 2018. Prior
to this, he held the position of Chief Commercial
Officer in a consulting capacity assisting AACo’s
operations and finance functions.
Mr Killen is a highly experienced senior
executive with over 25 years’ experience in
global financial markets and has worked in
London, New York and Sydney.
Before joining AACo, Mr Killen spent 15 years
at Westpac Institutional Bank. He held several
senior executive roles which included managing
Westpac Banking Corporation’s North American
business throughout the global financial crisis,
and finally as the Managing Director of Fixed
Income, Currency and Commodities.
During 2011 he retired as a member of the
Reserve Bank Board. In 2001 Mr McGauchie
was named the Rabobank Agribusiness Leader
of the Year, was later awarded the Centenary
Medal for services to Australian society through
agriculture and business, and in 2004 was
appointed an Officer of the Order of Australia.
During the past three years, Mr McGauchie
has served as a Director of the following listed
companies:
– GrainCorp Limited* – appointed December
2009
– Nufarm Limited – retired September 2020
*Denotes current Directorship.
Mr Killen has also served as a board member
of the Association for Financial Markets Global
Foreign Exchange Division, sat on the Reserve
Bank of Australia’s (RBA) Australian Foreign
Exchange Committee, and has represented
Australia internationally as the RBA appointed
member of the BIS Working Group developing
the Global Code of Conduct for foreign
exchange markets.
Mr Killen is an alumni of the Kings School,
Parramatta and Harvard Business School, and a
Member of the Australian Institute of Company
Directors. Mr Killen has a lifelong association
with agriculture, having being raised on pastoral
properties in northern NSW and south-west
Queensland, and has retained strong personal
involvement in the industry through private
investments in farming.
28
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Stuart Black
AM, FCA, FAICD, BA (ACCOUNTING)
Mr Black was appointed a Director on 5 October
2011. Mr Black is Chairman of the Audit and Risk
Management Committee and a member of the
Nomination Committee.
Mr Black has extensive experience in
agribusiness. He is a current non-executive
director of Palla Pharma Limited and Freedom
Foods Group Limited, a former director
of NetComm Wireless Limited, Coffey
International Limited, Country Education
Foundation of Australia Limited, former
Chairman of the Chartered Accountants
Benevolent Fund Limited, and a past President
of the Institute of Chartered Accountants of
Australia. He was the inaugural Chair and
is a past Board Member of the Australian
Accounting Professional and Ethical
Standards Board.
Tom Keene
BEC, FAICD
Mr Keene was appointed a Director on 5 October
2011. Mr Keene is Chairman of the Staff and
Remuneration Committee and a member of the
Nomination Committee.
Mr Keene has had an extensive career in
agriculture; he is the former Managing Director
of GrainCorp Limited, and is currently a Director
of the leading Australian wood fibre exporter,
Midway Limited. He is also the former Chairman
of Grain Trade Australia Limited and a former
Director of Cotton Seed Distributors Limited.
Dr Shehan Dissanayake
PHD
Dr Shehan Dissanayake was appointed as a
Director on 27 April 2012, and was an Executive
Director from 11 April 2017 to 20 November
2019. Dr Dissanayake is a senior Managing
Director of the Tavistock Group.
Before joining Tavistock Group in 2002,
Dr Dissanayake was a Managing Partner
of Arthur Anderson.
In 2012 he was appointed a Member of the Order
of Australia for services to the profession of
accounting, to ethical standards, as a contributor
to professional organisations and to the
community.
During the past three years Mr Black has served
as a Director of the following listed companies:
– NetComm Wireless Limited – resigned
June 2019
– Palla Pharma Limited* – appointed
June 2016
– Freedom Foods Group Limited* – appointed
March 2021
*Denotes current Directorship
In 2007, Mr Keene was named the NAB
Agribusiness Leader of the Year.
During the past three years Mr Keene has served
as a Director of the following listed companies:
– Midway Limited* – appointed August 2008
29
*Denotes current Directorship
He holds a Ph. D in Pharmacological and
Physiological Sciences from The University
of Chicago.
During the past three years Dr Dissanayake
has not served as a Director of any other
listed company.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report DIRECTORS'
REPORT
Directors (continued)
Jessica Rudd
BCOM LLB (HONS)
Ms Rudd was appointed a director on
15 November 2017. Ms Rudd is a member of the
Staff and Remuneration Committee, Nomination
Committee and Brand, Marketing & Sales
Committee.In 2015, Ms Rudd founded Jessica’s
Suitcase, an e-commerce retail platform which
offers high quality Australian products direct
to Chinese consumers through online cross-
border channels. In 2018, Ms Rudd announced
the sale of Jessica’s Suitcase to eCargo Holdings
(ASX:ECG), on whose board she served as a non-
executive director until 2020.
Ms Rudd has served on the Griffith University
Council since January 2020 and was appointed
co-chair of the National Apology Foundation
in 2021.
Marc Blazer
MSC (LSE), BA (UMD)
Mr Blazer was appointed a director on 31 July
2019. Mr Blazer is Chairman of the Brand,
Marketing & Sales Committee.
Mr Blazer is a leader in the international
tourism and hospitality sector. Mr Blazer is
currently the Chairman and CEO of Overture
Holdings, a consumer, food & beverage, and
hospitality investment group. From 2013 until
2020, he was the co-owner and Chairman of the
Board of Noma Holdings, the parent company
of world-renowned restaurant noma based
in Copenhagen; co-founder and Executive
Chairman of New York based PRIOR, a global
hospitality and travel company; and Co-founder
and Director of Ahimsa Partners, a venture
that invests in, licenses, owns, and operates
hospitality ventures in India.
In addition to his consumer and hospitality
business activities, Mr Blazer has also had an
extensive career in capital markets. Before
becoming Chairman of Overture Holdings, he
was a partner and the global head of investment
Beginning her career as a media and intellectual
property lawyer, Ms Rudd later worked in London
as a crisis management consultant for a global
communications firm before moving to Beijing,
where she lived and worked for five years.
Ms Rudd served as Australia and New Zealand
Lifestyle Ambassador for the Alibaba Group from
2016 until 2020. She holds a Bachelor of Laws
(Hons)/Bachelor of Commerce from Griffith
University and was admitted to the Supreme
Court of Queensland as a solicitor in 2007.
She was awarded the Griffith University Arts,
Education and Law Alumnus of the Year
in 2013.
During the past three years Ms Rudd has served
as a Director of the following listed companies:
– eCargo Holdings – resigned 22 January 2020
banking at Cantor Fitzgerald. During his tenure,
he was named one of Investment Dealer’s
Digests 40-under-40 in 2006. While at Cantor,
he was on the advisory board of Enertech, a
clean energy venture fund. Prior to joining
Cantor Fitzgerald, Mr. Blazer spent six years at
ChaseMellon Financial Corp. (now Bank of New
York Mellon), a joint venture between Chase
Manhattan Corporation and Mellon Financial
Group LLC.
Earlier in his career, Mr Blazer was an advisor
to members of Congress in both the US House
of Representatives and Senate on tax matters,
banking and securities legislation, international
trade policy, and foreign relations.
Mr Blazer earned a graduate degree from the
London School of Economics in 1992, and a BA
from the University of Maryland in 1990.
During the past three years Mr Blazer has not
served as a Director of any other listed company.
30
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' Report
Anthony Abraham
BEC LLB (ACCOUNTANCY AND LAW)
Mr Abraham was appointed a Director on
7 September 2014. Mr Abraham is a member of
the Audit and Risk Management Committee
and Nomination Committee.
Mr Abraham has over 30 years’ experience in
banking, finance and investment management
including 18 years specifically in food and
agriculture. Mr Abraham established Macquarie
Group’s agricultural funds management business
and is currently a member of ROC Partners’ food
and agricultural investment team.
Neil Reisman
JD
Mr Abraham consults to the Clean Energy
Finance Corporation’s food and agricultural
team who seek investments aimed at facilitating
the reduction of carbon intensity in the
Australian agricultural sector.
During the past three years Mr Abraham has not
served as a Director of any other listed company.
Mr Reisman was appointed a Director on
10 May 2016. He is a member of the Audit and
Risk Management Committee and the
Nomination Committee.
He received his juris doctor in 1986 from the
University of Pennsylvania Law School and his
Bachelor of Science in Accountancy in 1983 from
the University of Illinois.
Neil has more than 30 years of business
experience with emphasis on operations,
legal, tax, investments and finance. He has
worked at various multinational companies,
including Tavistock Group, Arthur Andersen
and Amoco Corporation.
During the past three years Mr Reisman
has served as a Director of the following
listed companies:
– Mirati Therapeutics – resigned
December 2018
31
Company secretary
Bruce Bennett
BCOM, LLB, AGIA ACG (CS, CGP)
Mr Bennett was appointed Company Secretary
and General Counsel in November 2006. Before
joining the Company, he held positions including
partner and special counsel in leading law firms,
where he specialised in company and property
law, mergers and acquisitions, and other
commercial contracts.
He has over 25 years’ experience in legal
practice, having practised in both Queensland
and New South Wales. Bruce has been a
Chartered Secretary since 2005 and is a member
of the Chartered Governance Institute and is
also an Associate of the Governance Institute
of Australia.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Interests in the shares and options of the
company and related bodies corporate
As at the date of this report, the interests of the Directors in the shares, options and performance rights of the Company were:
Current Directors
D. McGauchie
H. Killen
S. Black
T. Keene
Dr. S Dissanayake
A. Abraham
N. Reisman
J. Rudd
M. Blazer
DIVIDENDS AND EARNINGS PER SHARE
Earnings per share
Basic earnings per share
Diluted earnings per share
Ordinary shares
Options over
ordinary shares
Performance
rights
1,120,774
282,922
40,000
75,000
2,025,000
30,000
45,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
169,120
Nil
Nil
Nil
Nil
Nil
Nil
Nil
31 March 2021
Cents
31 March 2020
Cents
7.62
7.62
5.25
5.23
No final or interim dividends were declared or paid during the current and prior financial periods.
Operating and financial review
32
ABOUT AACO
The Australian Agricultural Company (AACo) is an Australian beef company with a heritage dating back to 1824. AACo is one of
Australia’s largest, integrated cattle and beef producers, and is the oldest continuously operating company in Australia.
AACO’S BUSINESS ACTIVITIES
AACo controls a strategic balance of properties, feedlots, farms and a processing facility comprising around 6.4 million hectares of
land and specialises in high-quality beef production.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Operating and financial review (continued)
AACO’S BUSINESS MODEL
AACo is a fully integrated branded beef business with three principal activities:
– Sales and marketing of high-quality branded beef into global markets;
– Production of beef including breeding, backgrounding and feedlotting; and
– Ownership, operation and development of pastoral properties.
AACo operates an integrated cattle production system across 19 owned cattle stations, 3 leased stations, 3 agisted properties, 2
owned feedlots, and 2 owned farms located throughout Queensland and the Northern Territory.
AACo distributes branded beef to a range of customers across the world, tailoring its route-to-market model by country to
capitalise on regional opportunities. The Company is large enough to obtain scale efficiencies but small enough to ensure the
highest of production standards and produce the finest quality beef in the world.
KEY FINANCIAL INDICATORS USED BY MANAGEMENT
The following table summarises financial indicators used by management to monitor and manage the Company. Operating
Profit is one of the key performance metrics of the Company, as Management believe it is a better reflection of actual financial
performance under the control of management. It assumes all livestock inventory is valued on a $/kg live-weight (LW) basis and
is derived by adjusting statutory EBITDA to substitute the movement in livestock at market value with the movement at cost of
production. Management therefore believe that external stakeholders benefit from this metric being reported. Operating Profit,
Statutory EBIT and Statutory EBITDA are unaudited, non-IFRS financial information. Discussion on drivers of movements in
key financial indicators are included in the Sales & Marketing, Production and Statutory Financial Results sections below.
Meat sales
Cattle sales
Administration and selling costs
Statutory EBITDA profit
Statutory EBIT profit
Net profit after tax
Net cash inflow from operating activities
Operating Profit
31 March 2021
$000
31 March 2020
$000
Movements
$000
199,974
65,548
(33,483)
99,326
80,322
45,474
18,423
24,360
229,607
104,539
(37,572)
80,129
62,063
31,317
20,120
15,194
(29,633)
(38,991)
4,089
19,197
18,259
14,157
(1,697)
9,166
33
Statutory EBITDA was a profit of $99.3 million in FY21 ($80.1 million profit in FY20), while Operating Profit was $24.4 million
($15.2 million profit in FY20). Operating Profit includes JobKeeper wage subsidy payments of $6.7 million but does not include
unrealised livestock gains or losses, while Statutory EBITDA does include these.
Statutory EBITDA is earnings before interest, tax, depreciation and amortisation, and gain/loss on equity investments.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Operating and financial review (continued)
KEY FINANCIAL INDICATORS USED BY MANAGEMENT (CONTINUED)
Sales and Marketing
In line with the historical low herd levels seen in the Australian national cattle herd, AACo experienced lower calving in prior
periods due to drought and the Gulf flood event.
These headwinds are still being felt through the supply chain due to the average F1 Wagyu lifecycle length being 3.5 years from
conception through to backgrounding, feedlots, and processing. Lower calving in prior impacted periods have translated into lower
meat production volume.
In FY21, Wagyu beef revenues declined with production volume, however sales $/kg increased on FY20, consistent with the
Company’s branded beef strategy.
Drought conditions stretching over FY19 and FY20 resulted in elevated cattle sales in prior years, as the Company strategically
destocked herd levels. The number of head sold in FY21 has decreased from the elevated sales volume seen in FY20; however,
FY21 cattle sales have yielded higher prices.
Wagyu beef revenue – $ mil
Wagyu beef kgs sold – mil kg CW(1)
Wagyu beef sold – $/kg CW
Cattle sales – mil kg LW(1)
Cattle revenue – $mil
31 March 2021
31 March 2020
196.9
12.7
$15.50
19.4
65.5
225.4
15.7
$14.36
34.2
104.5
(1) CW – carton weight containing saleable boxed meat, LW – Live animal weight.
Production
Kilograms produced is a measure of the number of kilograms of live weight of cattle grown throughout the breeding,
backgrounding and feedlot operations of the Company during the period, excluding the offsetting impact of attrition kilograms.
Kilograms produced has reduced 23% on the previous corresponding period, resulting from lower calving in prior periods due to
drought and the Gulf flood event.
34
Cost of production is a measure of the operating costs incurred to produce a kilogram of live weight of cattle throughout the
breeding, backgrounding and feedlot operations of the Company during the period. Lower production volumes have had an
adverse impact on cost of production; however, the Company has still realised a 12% reduction on the previous corresponding
period, due to a disciplined focus on costs across the business, and improved seasonal conditions.
Kilograms produced – mil Kg LW
Cost of production – $/kg LW
31 March 2021
31 March 2020
41.6
$2.99
54.1
$3.38
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT In summary:
– Total sales revenue of
$265.5 million, compared with
$334.1 million in FY20, with lower
cattle sales and meat production
volumes resulting in decreased
revenues, offset by higher average
prices in both revenue streams
– Statutory EBITDA profit of
$99.3 million, compared with
an EBITDA profit of $80.1 million
for FY20
– Operating Profit of $24.4 million,
compared with a profit of $15.2
million in FY20
– Cost of production $/kg Live
Weight decreased by 12% in FY21,
which is due to a disciplined focus
on costs held across the business,
as well as improved seasonal
conditions
– Net tangible assets per share
was $1.75 as at 31 March 2021,
compared to $1.53 as at 31 March
2020, driven by improvements in
the livestock market values and in
the property portfolio
– The Company maintains a robust
balance sheet, with comfortable
headroom under existing bank
covenants
– Positive net operating cash flows of
$18.4 million, compared with $20.1
million in FY20
35
Operating and financial review (continued)
OPERATING REVIEW
FY21 and the global pandemic brought
widespread challenges to individuals,
families, and businesses everywhere.
The Company continues to navigate
this dynamic landscape as new
challenges with the pandemic present
themselves. Despite challenging
circumstances in FY21, the Company’s
investment in strategic relationships
and global distribution reach allowed
for an agile response.
As restaurant closures and partial
re-openings have cycled in waves
around the world, the Company
has been able to respond to shifting
demand by rapidly re-balancing
product across markets and channels.
The Company’s strategic relationships
with its customer base nurtured over
several years, its global distribution
reach, and in-market presence enabled
this rapid re-balancing of product
distribution. Further, the strength of
our brand premium continued to grow,
and an extra $1.14/kg was added to
average meat selling price (up 8%).
Management’s disciplined focus
on expenditures across the entire
business, along with improved seasonal
conditions has resulted in material
reductions in operating expenditures.
Livestock Movements
Livestock values as recorded on the
Balance Sheet have improved from the
prior year due to price improvements
on Non-Wagyu and Wagyu livestock,
offset by headcount reductions.
As the Company has suspended its
1824 product line, there continues to
be a lower reliance on Non-Wagyu herd
numbers, which has led to a decline in
the Non-Wagyu headcount. Further,
the 2019 Gulf flood losses and drought
conditions impacted brandings
during FY20, resulting in a decline
in Wagyu headcount.
Market values of Non-Wagyu and
Wagyu animals have however
improved over the past year, leading
to a significant increase in the value of
cattle held at year end.
Property
Property values continue to see
growth, and during FY21 the Company
recorded a net $105.2 million increase
in the fair value of the Company’s
pastoral property and improvements,
bringing the value of this portfolio
to $915.8 million as at 31 March
2021. This increase is a reflection
of Management’s active investment
in improving these properties, and
also due to market increases seen in
comparable property sales.
Consistent with prior years, the
Company reflects potential risks and
impacts of climate change as part of the
valuation methodology, by ensuring the
pastoral property values are based on a
long-term view of sustainable carrying
capacity and rates applied that reflect
sustainable management practices.
Impacts of Coronavirus
(COVID-19)
The Company continues to monitor
the developments in the COVID-19
pandemic and the measures being
implemented to control and slow
further outbreaks of the virus and the
impacts on global markets, supply
chains and customers.
STATUTORY FINANCIAL
RESULTS
The FY21 results include a Statutory
EBITDA profit of $99.3 million,
driven by improvements in both
cattle and meat sales per kg on
lower volumes, $76.2 million in
overall expenditure reduction from
the prior year, and a $91.4 million
positive market value increase in
the value of the closing herd.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Operating and financial review (continued)
RISK MANAGEMENT
NET TANGIBLE ASSETS
The Company is committed to the
identification, measurement and
management of material business
risks. The Company’s breeding and
sales programs to date have produced
a herd with the right genetic and age
profile capable of thriving in a diverse
set of geographic locations and climatic
conditions. Day-to-day production
risks are managed by management
at stations and overseen by relevant
Regional Managers. Appropriate
insurance coverage is maintained in
respect of the business, properties
and assets.
Price and currency risks are managed,
where possible, through forward sales
of branded beef and over-the-counter
foreign exchange derivatives.
The Company’s net tangible assets per
share was $1.75 as at 31 March 2021,
compared to $1.53 as at 31 March 2020.
Net tangible assets of the Company
include leasehold land assets.
WAGE SUBSIDY – JOBKEEPER
The Company received $6.7 million
of wage subsidy payments under the
JobKeeper Payment scheme due to
the financial impact of COVID-19.
The payments received have been
presented as Other Income in the
Consolidated Income Statement
and as Cash Flows from operating
activities in the Consolidated
Statements of Cash Flows.
The Company did not apply for the
Job Keeper extension programs which
came into effect on 28 September 2020.
BUSINESS STRATEGIES,
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS
The Board has reiterated its
commitment to increasing shareholder
value through incremental
improvements to Return on Capital
Employed (ROCE) over time. The
goal is to improve the quantity and
quality of the Company’s earnings by
increasing the Company’s exposure to
premium branded beef prices which
are underpinned by rising incomes
in both the developed and developing
world. The medium-term strategy
will focus on optimising our supply
chains, implementing a differentiated
branding strategy, and investing in
innovation and technology.
The ongoing impact of COVID-19 on
the Company's go forward consolidated
results of operations and cash flows
cannot be reasonably estimated at
this stage.
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of the Company during the financial year.
36
Significant events after balance date
There have been no significant events after the balance date which require disclosure in the financial report.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Environmental regulation and performance
Some regulated areas of operation are:
– Stock watering facilities which
– Northern Australian Beef
Limited (NABL), a wholly owned
subsidiary of the Company, owns
the Livingstone Beef Processing
Facility and land at Livingstone
Farm, Noonamah, Stuart Highway,
Northern Territory. NABL
holds, and must comply with
an Environmental Protection
Licence (EPL) under the Waste
Management and Pollution Control
Act (NT) for the storage, treatment,
recycling and disposal of waste in
connection with the facility.
The EPL contains stringent
and detailed environmental
requirements overseen by the
Northern Territory Environment
Protection Authority (NT EPA).
NABL and the NT EPA continue
to work together constructively to
monitor compliance with the EPL.
There have been no breaches of
compliance with environmental
regulations during the year ended
31 March 2021.
37
utilise bores, require licensing in
Queensland and registration in the
Northern Territory.
– Stock water facilities shared
with Queensland Stock Routes
are administered by local
governments, guided by legislation
and framework developed by the
Queensland Government. Shared
water facilities need to comply
with registered Stock Route water
agreement requirements. A Permit
to Occupy is also required if this
facility is unfenced within a station
grazing area.
– Vegetation Clearing Permits
are sought under the Vegetation
Management Act 1999 (Qld) for
any clearing required for ongoing
operations including but not limited
to the development of areas for land
use change and the installation of
infrastructure such as fence lines
and water development.
– The Company continues to be
involved in consultation processes;
for example, in the areas of Water
Resource Planning, Wild Rivers
legislation and the conversion of
land titles in relevant areas.
– The Company must abide
by environmental and other
obligations contained in
Queensland’s State Rural
Leasehold Land Strategy in
respect of the Company’s pastoral
leasehold interests in Queensland.
The State Rural Leasehold
Land Strategy is a framework of
legislation, policies and guidelines
supporting the environmentally
sustainable, productive use of rural
leasehold land for agribusiness.
– The operations of Goonoo and
Aronui Feedlots are regulated
by licences issued under the
Environmental Protection Act
1994 (Qld) and administered by
the Queensland Department of
Agriculture and Fisheries (DAFF).
Each feedlot is required to report
to the National Pollution Inventory
each year with respect to water, air
and soil quality. DAFF conducts
audits of compliance with licence
requirements at regular intervals.
The Company recorded no
breaches of licence requirements
in the year to 31 March 2021.
– The pumping of water from the
Comet River for irrigation and
feedlot use at Goonoo Station
is subject to licensing under
the Sustainable Planning Act
1997 (Qld) and the Water Act
2000 (Qld). Regulations specify
minimum water flows and heights
in the river to allow sufficient
environmental flows. Goonoo
Station and Wylarah Station
have licences to harvest water for
irrigation purposes. The pumping
of underground water for the
prescribed purpose of ‘Livestock
Intensive’ requires licensing, and
regular reporting and monitoring.
The Company has several licences
allowing this pumping subject to
these regulations and conditions
being met.
– The Company holds other water
access rights in the Gulf region
of Queensland that currently
remain unused; however, should
the Company begin to access water
under these licenses, the pumping
of water under these licenses
would be subject to regulations
under the Sustainable Planning
Acct 2009 (QLD) and the Water
Act 2000 (QLD).
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report
Share options
UNISSUED SHARES
As at the date of this report, there were
523,795 unissued ordinary shares
under performance rights.
An Executive Option Plan previously
existed, for which no further grants will
be made. The last options under this
plan expired on 1 January 2019.
Option holders did not, and
performance rights do not, have any
right, by virtue of the option or
performance right, to participate in
any share issue of the Company or any
related body corporate or in the interest
issue of any other registered scheme.
SHARES ISSUED AS A RESULT
OF THE EXERCISE OF OPTIONS
During and since the end of the
financial period, there were no
options exercised to acquire shares
in the Company.
The Company’s Performance Rights
Plan has been in place since 2011 and
has taken the place of the option plan
for future incentive awards comprising
performance rights. The performance
rights will remain until such time
as they are either exercised or the
rights lapse.
There were 269,251 shares issued on
exercise of performance rights under
the AACo Performance Rights Plan
during the year.
Indemnification and insurance of directors and officers
Under the Company’s Constitution,
each of the Company’s Directors, the
Company Secretary and every other
person who is an officer is indemnified
for any liability to the full extent
permitted by law.
Each Director has entered into a Deed of
Access, Insurance and Indemnity, which
provides for indemnity against liability
as a Director, except to the extent of
indemnity under an insurance policy
or where prohibited by statute. The
Deed also entitles the Director to access
Company documents and records,
subject to confidentiality undertakings.
The terms of the insurance contracts
prohibit the Company from disclosing
the level of premium paid and the nature
of the liabilities insured.
38
The Company’s Constitution also
provides for the Company to indemnify
each of the Company’s Directors, the
Company Secretary and every other
person who is an officer to the maximum
extent permitted by law, for legal costs
and expenses incurred in defending civil
or criminal proceedings.
The Company maintains Director’s and
Officer’s insurance policies, to insure
the Company’s Directors, Company
Secretary and those Directors and
officers of its subsidiaries. The Company
has paid or has agreed to pay the
premium for these policies.
Corporate governance statement
The Company’s Corporate Governance Statement sets out the corporate governance framework adopted by the Board of Australian
Agricultural Company Limited. This statement is publicly available on the Company’s external
website: www.aaco.com.au/investors-media/corporate- governance.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Corporate governance statement (continued)
BOARD SKILLS MATRIX
The aim of the Board Skills Matrix is to set out the mix of skills that the Board currently has and is looking to achieve. It is a
summary of the Company’s internal assessments of the Board. Information is obtained from a Director review of skills and
competencies completed for each Director. This information is summarised into the Board Skills Matrix.
The Board recognises that each Director will not necessarily possess experience in all areas relevant to the Company’s operations
and therefore seeks to ensure that its membership includes an appropriate mix of directors with skills, knowledge and experience
in agriculture, other relevant industry sectors, general management and finance. A summary of the Board’s skills, knowledge and
experience is set out in the table below:
Skill/knowledge/experience
Leadership and Governance
Organisational Governance
Strategy
Government Relations
Previous ASX NED Experience
Previous ASX CEO Experience
Operations
Environment, Health and Safety
Work Health and Safety Committee Experience
Agribusiness
Farmer or Producer
Innovation
Information Technology
Sectoral Experience
Livestock
Beef Manufacturing
Sales
Branding and Marketing
Finance, Capital Management and Risk
Formal Accounting and Finance Qualifications (CPA or CA)
Capital Restructuring
Audit Committee Experience
Legal
People
People and Culture
Remuneration Committee Experience
Geographic Experience
International Markets
Asian Markets
USA Markets
Out of 9 directors
39
9
9
8
5
1
7
6
6
2
7
5
5
2
5
6
3
6
7
4
9
5
8
7
7
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited)
This remuneration report for the year ended 31 March 2021 outlines the remuneration arrangements of the Company in
accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited
as required by section 308(3C) of the Act.
The remuneration report details the remuneration arrangements for key management personnel (KMP) of the Company, who
are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the
Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company.
For the purposes of this report, the term ‘executive’ encompasses the Managing Director/Chief Executive Officer (MD/CEO),
senior executives and Company Secretary of the Company and the Group.
The remuneration report is presented under the following sections:
1.
Individual Key Management Personnel (KMP) disclosures
2. Executive remuneration framework (overview)
3. Executive contractual arrangements
4. Remuneration of Key Management Personnel – Other KMP
5. Link between remuneration and performance
6. Board oversight of remuneration
7. Non-Executive Director (NED) remuneration arrangements
8. Equity instruments disclosures
9. Shareholdings and other mandatory disclosures
1. INDIVIDUAL KEY MANAGEMENT PERSONNEL
Details of KMP of the Company are set out in the following sections.
(i) Directors
D. McGauchie
Chairman, Non-executive Director
Independent
Appointed 19 May 2010
H. Killen
Managing Director and Chief Executive Officer
Non-Independent(1)
Appointed 1 February 2018
40
Dr S. Dissanayake
Non-executive Director
Non-Independent(1)
Appointed 27 April 2012
N. Reisman
A. Abraham
S. Black
T. Keene
J. Rudd
M. Blazer
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
(1) These directors of the Company were determined to be non-independent.
(ii) Non-independent Directors
Non-Independent(1)
Appointed 10 May 2016
Independent
Independent
Independent
Independent
Independent
Appointed 7 September 2014
Appointed 5 October 2011
Appointed 5 October 2011
Appointed 15 November 2017
Appointed 31 July 2019
H. Killen
Dr S. Dissanayake
N. Reisman
Mr H. Killen is not considered independent by virtue of his executive office as Managing Director and
Chief Executive Officer.
Dr S. Dissanayake is not considered independent as he is an officer of Tavistock Group which controls the AA Trust,
a major 48.06% shareholder of the Company
Mr N. Reisman is not considered independent as he was an officer of Tavistock Group within the last 3 years which
controls the AA Trust, a major 48.06% shareholder of the Company.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
(iii) Executives
B. Bennett
A. Speer
N. Simonsz
A. O’Brien
D. Harris
R. Scott
Company Secretary/General Counsel
Appointed 20 November 2006
Chief Operating Officer - Pastoral
Chief Financial Officer
Chief Commercial Officer
Appointed 30 July 2018
Appointed 1 August 2018
Appointed 17 December 2018
Chief Operating Officer – Supply Chain
Appointed 1 April 2020
Chief Marketing Officer
Appointed 6 July 2020
(iv) Executives who resigned, retired or otherwise ceased employment during the period
S. Grant
Head of People & Culture
Until 14 July 2020
A. Speer resigned from AACo and concludes her employment on 31st May 2021.
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW)
Remuneration strategy and policy
CEO and Key Management Personnel (KMP)
Consistent with contemporary Corporate Governance standards, the Company’s remuneration strategy and policies aim to set
employee and executive remuneration that is fair, competitive and appropriate for the markets in which it operates whilst being
mindful of internal relativities. The Company aims to ensure that the mix and balance of remuneration is appropriate to reward
fairly, attract, motivate and retain senior executives and other key employees.
Appropriate remuneration policy settings will be achieved by consistently applying a clear remuneration strategy directed at
supporting the Board approved business strategy with appropriate and flexible processes, policies and procedures established by
the Board from time to time.
Specific objectives of the Company’s remuneration policies include the following:
– Provide competitive total rewards to attract and retain high calibre employees and executives
41
– Provide fair and competitive fixed remuneration for all positions, under transparent policies and review procedures
– Have a meaningful portion of remuneration “at risk”, dependent upon meeting pre-determined performance benchmarks
– Link MD/CEO and senior executive rewards to achieving short, medium and long term key performance criteria
– Establish appropriate and demanding performance hurdles for any executive incentive remuneration
– Payment of cash bonus short term incentives (STI), which is at the discretion of the Board after assessing the performance of
the Company and the MD/CEO and other senior executives against agreed performance hurdles
– Offer participation in the long term incentives (LTI) plan to the MD/CEO and other senior executives
– Provide Deferred Equity Awards (DEA), in the form of grants of performance rights to the MD/CEO and other senior
executives with deferred vesting of two years (50%) and three years (50%)
– The actual DEA awarded to an executive is generally set at 50% of the amount of any STI actually paid to the executive
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW) (CONTINUED)
The following table illustrates the structure of the Company’s executive remuneration arrangements for the year ended
31 March 2021:
Attract and retain high
calibre employees
Motivate and reward outstanding
performance
Align to Shareholder returns
Remuneration
Component
Total Fixed Remuneration
At risk remuneration
Short-term incentive STI
Long-term incentive LTI
Objective
Mechanism
Base salary,
superannuation and
any ‘packaged’ benefits
including FBT grossed-up
on a Total Employment
Cost (TEC) basis
Cash
Deferred Equity
(Performance Rights)
Deferred Equity
(Performance Rights)
Purpose
Reward for role size and
complexity and external
and internal relativities
Reward for contribution
to achievement of
business outcomes and
individual KPIs
Reward for contribution
to achievement of
business outcomes and
individual KPIs
Aligns remuneration of
the Company’s senior
executives with the long-
term strategic goals of
the company, as well as
retention
Link to
performance
42
No link to Company
performance although
reviewed annually with
consideration given to
the performance of the
Company and business
unit in the remuneration
review
STI for executives is
calculated with a balance
across financial, non-
financial and individual
performance metrics
Generally, 50% of the
STI cash bonus earned
and subject to two- year
(50%) and three-year
(50%) service vesting
conditions
Linked to achievement of
the Company’s targeted
market capitalisation as
well as meeting individual
service conditions
The current executive remuneration strategy can be represented broadly, as follows:
Total Fixed
Remuneration
%
53
50-63
Short Term
Incentives
%
26
25-29
DEA
Incentive(1)
%
13
13-15
Long Term
Incentive
%
Total Targeted
Reward
%
8
0-12
100
100
MD/CEO
Key Management
(1) 50% of cash bonus paid
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW) (CONTINUED)
Structure
Remuneration is determined as part of an annual performance review process, having regard to market factors, relevant
comparative data, a performance evaluation process and independent remuneration advice, where necessary.
Total Fixed Remuneration (TFR)
Executives may receive their fixed
remuneration as cash, or cash with
non-monetary benefits such as
health insurance, car allowances
and tax advisory services. Total fixed
remuneration comprises cash and
other benefits and entitlements to
provide a base level of remuneration
which is both appropriate to the role
and responsibilities, reflects current
market conditions, the individual’s
seniority and overall performance
of the Company and the relevant
business units.
For all Australian based executives,
superannuation is included in TFR.
Executive contracts of employment
do not include any guaranteed base
pay increases.
Senior executives are given the
opportunity to receive a portion of
their fixed remuneration in forms
other than cash, such as motor
vehicles, under a framework that
ensures the Company does not incur
additional cost.
The fixed component of the
executives’ and MD/CEO’s base
remuneration is detailed in the
tables on pages 48 and 53.
Short-term incentives
The Company operates an annual STI
program that is available to executives
and employees and awards a cash
bonus subject to the attainment of
Company, business unit and
individual measures which are
set at the commencement of the
performance period.
The aim of the STI is to link the
achievement of the Company’s
annual and/or immediate financial
and broader operational targets with
the remuneration received by the
executives and senior employees
responsible for achieving those targets.
The total potential STI is set at a level
so as to provide sufficient incentive to
executives to achieve the operational
targets and at a cost to the Company
that is reasonable in the circumstances.
Actual STI payments awarded to each
executive depend on the extent to
which specific targets prescribed in the
performance agreement for a financial
year are met. The targets consist of a
number of key performance indicators
covering financial and non-financial,
corporate and individual measures
of performance.
These measures were chosen as
they represent the key drivers for the
short-term success of the business and
provide a framework for delivering
long-term value.
Under the arrangements approved
by the Board the general principles
that will apply are that the executive
will receive an STI in the form of a
cash bonus that is generally set at a
maximum of 50% of the executive’s
total fixed remuneration.
The STI will be paid within three
months of the financial year end in
which the executive’s performance is
being measured.
In addition, Executives who are paid an
STI cash bonus will receive a Deferred
Equity Award (DEA) which is generally
equal to 50% of the amount of the STI
cash bonus actually earned. The DEA
is in the form of a grant of performance
rights under the performance rights
plan and is subject to two-year (50%)
and three-year (50%) service vesting
conditions i.e. vesting of the DEA is
subject to the executive still being
employed by the Company at the
relevant vesting date.
The Company has a Good Leaver and
a Bad Leaver Policy. If an executive
ceases employment with the Company,
then any unvested DEA will be
automatically forfeited. If the executive
was a Good Leaver, then the Board
will consider the circumstances of
the cessation of employment and may
exercise its discretion to allow some
or all of the unvested DEA to vest (and
be exercised).
The Board assesses the performance
of the MD/CEO against targets and
determines actual STI payment based
upon the recommendation of the Staff
and Remuneration Committee.
The MD/CEO assesses the
performance of other senior executives
against their targets and determines
the actual STI with oversight by the
Board through the Chairman and the
Staff and Remuneration Committee.
43
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW) (CONTINUED)
The structure of the short-term incentive plan is as follows:
Feature
Description
Maximum opportunity
Short-term incentives (STI)
CEO: 50% of fixed remuneration
Other executives: 50% of fixed remuneration
Deferred equity award (DEA)
CEO: 50% of short-term incentive cash bonus
Minimum opportunity
Performance metrics
Other executives: generally 50% of short-term incentive cash bonus
Short-term incentives (STI)
CEO: 0% of fixed remuneration
Other executives: 0% of fixed remuneration
Deferred equity award (DEA)
CEO: 0% of short-term incentive cash bonus
Other executives: 0% of short-term incentive cash bonus
The STI metrics align with the strategic priorities at both a Company and business unit level.
The general performance metrics for the KMP are as follows:
Metric
Primary metrics are Financial, Strategic, Customer, Operational and People.
The STI is paid in cash generally in the next financial year.
Delivery of STI
Board discretion
The DEA is subject to two-year (50%) and three-year (50%) service vesting conditions. This encourages
retention and shareholder alignment.
The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward
outcomes, including reducing (down to zero, if appropriate) any deferred STI award.
44
DEAs are provided to the MD/CEO and Senior Executives based on the level of STI earned each year. The last offer under this plan
was made on 3 July 2017 and subject to two (50%) and three (50%) year service vesting conditions.
There is also a tax exempt share plan that may be utilised at the discretion of the Board for general employee equity participation.
An Executive Option Plan, for which no further grants were made, had a series of grants outstanding, the last of which expired on
1 January 2019.
Long-term incentives
Following an extensive review of its remuneration practises for employees and executives, the Board approved the Company’s
adoption of a Long Term Incentive (LTI) Plan on 9 May 2017 (LTI Plan Implementation Date). The LTI Plan attempts to align
remuneration of the Company’s senior executives with the long-term strategic goals of the Company.
The introduction of an LTI Plan is consistent with the Company’s objectives for remuneration, which include providing
competitive total rewards to attract and retain high calibre senior executives, having a meaningful portion of remuneration “at
risk” and, above all, creating value for shareholders.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW) (CONTINUED)
Long-term incentives (continued)
Performance rights under the LTI Plan will be granted in a number of rounds. The number of performance rights granted to
eligible persons in each grant round and the performance conditions applying to the vesting of those performance rights will be
determined at the discretion of the Board.
It was determined by the Board that there will be four grant rounds in total. The following summary reflects the key features of the
four grant rounds:
Feature
Description
Timing of grant
Grants of performance rights in a grant round will not be made unless and until the specific ‘commencing’ market
capitalisation of the Company for that grant round is achieved.
The commencing market capitalisation of the Company for the first grant round was the market capitalisation of
the Company on the LTI Plan Implementation Date.
Performance condition
The performance condition which applies to the vesting of performance rights in a grant round is the
achievement of the specific ‘target’ market capitalisation of the Company during the performance period for that
grant round.
The performance condition for the first grant round was satisfied on 5 June 2017.
Performance period
The performance period for each grant round is calculated by reference to the target market capitalisation of the
Company for that grant round and an assumed annualised growth rate of 20%.
Determination of market
capitalisation of the
Company for the purposes
of the LTI Plan
For the purposes of calculating the market capitalisation of the Company in order to determine if the
commencing market capitalisation of the Company or the target market capitalisation of the Company for each
grant round has been achieved, the twenty day volume weighted average price (VWAP) of ordinary shares in the
capital of the Company will be used.
Vesting period
In respect of each grant round, there is a four-year staggered vesting period for performance rights in that grant
round which commences on satisfaction of the performance condition for that grant round.
Number of available
performance rights
Lapsing conditions
In each grant round, eligible persons may be offered a percentage of the “Total Available Performance Rights” for
that grant round (rounded down to the nearest whole number).
In respect of each grant round, the number of “Baseline Shares” will be the number of ordinary shares in the
Company acquired on market by the AACo Employee Share Trust in respect of that grant round having an
aggregate share acquisition price of $5 million.
45
In respect of each grant round, the number of “Total Available Performance Rights” will be
(a) the number of Baseline Shares for that grant round; plus
(b) the number of any Total Available Performance Rights for previous grant rounds which, at the time of
completion of acquisition of all of the Baseline Shares for that grant round and all previous grant rounds, are not
notionally allocated to a previous grant round.
Holders of performance rights will be entitled to exercise those performance rights if they have vested and have
not otherwise lapsed.
The circumstances in which performance rights may lapse include non-satisfaction of performance conditions or
ceasing employment with the Company group.
If the holder of performance rights ceases to be an employee as a result of an “Uncontrollable Event” (e.g. death,
permanent disablement, retirement, retrenchment, or such other circumstances which the Board determines
is an Uncontrollable Event), any unvested performance rights held by that person are expected to continue to
be subject to the requirements for vesting and exercise applying to those performance rights, unless the Board
determines that the vesting conditions applying to some or all of those performance rights will be waived or that
some or all of those performance rights will lapse.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK (OVERVIEW) (CONTINUED)
Long-term incentives (continued)
Feature
Description
Change of control event
If a change of control event for the Company occurs, the treatment of any unvested performance rights will be
within the discretion of the Board to determine.
On market acquisition of
shares
The requirement to deliver shares in the Company upon the vesting and exercise of performance rights under the
LTI Plan must be satisfied by way of on market acquisition of shares in the Company.
The applicable commencing market capitalisation of the Company, performance condition and performance period for each
contemplated grant round are as set out in the following table:
Commencing market
capitalisation of the company
Performance condition
(targeted market
capitalisation of the company)
Performance period (calculated
using an assumed annualised
growth rate of 20%)
First grant round
The market capitalisation of
the Company on the LTI Plan
Implementation Date
$1 billion
Second grant round
$1 billion
$1.5 billion
Third grant round
$1.5 billion
$2 billion
Fourth grant round
$2 billion
$2.5 billion
46
Within 2 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 September 2017)
Within 9 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 June 2019)
Within 16 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
31 March 2021)
Within 22 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 September 2022)
The performance condition for the first grant round of targeted market capitalisation of $1 billion was achieved on 5 June 2017.
The rights associated with the first grant round have been granted to the relevant senior executives at a fair value per right of $1.07.
The second grant round, offered during FY19, was forfeited in FY20 by all recipients as the performance condition of target market
capitalisation was not met by 30 June 2019. The third grant round, offered during FY20, was forfeited in FY21 by all recipients as
the performance condition of target market capitalisation was not met by 31 March 2021.
3. EXECUTIVE CONTRACTUAL ARRANGEMENTS
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are provided
below. Company employees are employed by the subsidiary company A.A. Company Pty Ltd, AACo Singapore Holdings Pty Ltd
Singapore Branch and AACo Operations (US) LLC.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
3. EXECUTIVE CONTRACTUAL ARRANGEMENTS (CONTINUED)
CEO description
Senior executive description
Total fixed remuneration
Short Term Incentive (STI) Cash Bonus
$600,000 including superannuation
(subject to annual review by Board)
Maximum opportunity of $300,000
(50% of TFR)
Range between $353,100 and $550,000
Maximum opportunity 50% of TFR
Deferred Equity Award
Long Term Incentive
Generally 50% of the actual amount of the
STI cash bonus earned
Generally 50% of the actual amount of the
STI cash bonus earned
Subject to Company performance conditions
being satisfied and the service conditions
being met
Subject to Company performance conditions
being satisfied and the service conditions
being met
Contract duration
Ongoing
Ongoing
The MD/CEO’s termination provisions are as follows:
Employer-initiated
termination
Notice period
6 months
Termination for serious
misconduct
Nil
Payment in lieu
of notice
Treatment of STI
on termination
Treatment of performance rights
on termination-
Part or all of
6 months
Not eligible
Unvested performance rights lapse unless Good
Leaver and Board exercises discretion to allow
Nil
Not eligible
Unvested performance rights lapse
Employee-initiated
termination
6 months
Part or all of
6 months
Not eligible
Unvested performance rights lapse unless Good
Leaver and Board exercises discretion to allow
Upon termination, the MD/CEO is subject to 12 months’ restriction for competition, employee inducement and client solicitation.
Other Key Management Personnel
The executive service agreements for other senior executives generally reflect that of the MD/CEO.
Standard Key Management Personnel termination provisions are as follows:
47
Employer-initiated
termination
Notice period
3 to 6 months
Termination for serious
misconduct
Nil
Payment in lieu
of notice
Treatment of STI
on termination
Treatment of performance rights
on termination
Part or all of
3 to 6 months
Not eligible
Unvested performance rights lapse unless Good
Leaver and Board exercises discretion to allow
Nil
Not eligible
Unvested performance rights lapse
Employee-initiated
termination
3 to 6 months
Part or all of
3 to 6 months
Not eligible
Unvested performance rights lapse unless Good
Leaver and Board exercises discretion to allow
COVID-19 salary variations for the MD/CEO and Executives
As a result of the uncertainty generated by the COVID-19 pandemic at the commencement of FY21, the MD/CEO and Executives
collectively accepted a temporary salary variation which reduced their individual base salaries to 80% for the three-month period
from May 2020 to July 2020. Utilisation of annual leave balances during this period was paid at full base salary. This variation was
not extended beyond the initial 3-month period, and all parties resumed their full base salaries from 1 August 2020.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
4. REMUNERATION OF KEY MANAGEMENT PERSONNEL – OTHER KMP
Short Term
Post-
Employment
Long-Term
Benefit
Termination
Share Based Payment
Salary
& Fees
$
Other
Payments
$
Non-
Monetary
Benefits
$
Super-
annuation
$
Long
Service
Leave(1)
$
Benefits
$
Short Term
Incentive
Performance
Rights
(DEA)(2)
$
(LTI)(3)
$
Total
$
Executives
Current Other KMP
B. Bennett
31/03/2021
338,862
158,895
31/03/2020
359,194
–
–
–
21,521
20,828
9,469
3,136
N. Simonsz
31/03/2021
580,280
247,500
31/03/2020
594,013
–
A. Speer
31/03/2021
489,283
25,000(4)
31/03/2020
532,223
25,000(4)
A. O’Brien
31/03/2021
665,276
247,182
31/03/2020
676,201
70,000(5)
D. Harris(6)
31/03/2021
365,828
168,750
31/03/2020
R. Scott(7)
–
–
31/03/2021
347,472
151,230
48
31/03/2020
–
Former KMP
S. Grant
31/03/2021
117,856
31/03/2020
405,664
Total Remuneration: Other KMP
–
–
–
4,200
4,200
12,435
12,435
–
–
–
–
–
–
21,521
21,434
21,521
20,764
–
–
21,521
–
16,271
–
1,400
4,200
17,906
18,483
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
362,917
–
672
7,162
51,599
85,603
581,018
475,923
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
853,501
619,647
548,239
590,422
912,458
746,201
556,099
–
514,973
–
500,079
428,347
31/03/2021
2,904,857
998,557
18,035
120,261
31/03/2020
2,567,295
95,000
20,835
81,509
9,469
3,136
362,917
672
51,599
4,466,367
–
7,162
85,603
2,860,540
(1) Long service leave balances are only accrued from 5 years’ service onwards
(2) The STI expense amounts to the value expensed by the Company for the period
(3) The LTI expense is based on estimates of the expected value of rights to be granted under the LTI plan at that point in time
(4) Other payments to A. Speer during FY20 and FY21 relate to anniversary payments
(5) Other payments to A. O’Brien during FY20 relates to a relocation assistance package
(6) Dave Harris became a KMP on 1 April 2020 upon appointment as the Chief Operations Officer, Supply Chain
(7) Rose Scott became a KMP on 6 July 2020 upon appointment as the Chief Marketing Officer
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
5. LINK BETWEEN REMUNERATION AND PERFORMANCE
Statutory performance indicators
The table below shows measures of the Company’s financial performance over the last five years. However, these are not
necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to KMPs. As
a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable
remuneration awarded.
Measure
Profit/(loss) for the year
attributable to owners ($000)
Basic earnings/(loss) per share
(cents)
Dividend payments ($000)
Dividend payout ratio (%)
Increase/(decrease) in share
price (%)
2021
45,474
7.62
–
–
5%
Operating cash flow ($000)
18,423
2020
31,317
5.25
–
–
10%
20,120
2019
2018
(148,396)
(102,559)
(24.9)
(17.4)
–
–
(14%)
12,990
–
–
(31%)
(39,864)
2017
71,586
13.2
–
–
28%
29,260
Additional statutory information
The table below shows the relative proportions of remuneration that were linked to performance and those that were fixed, based
on the amounts disclosed as statutory remuneration expense (refer to tables on page 48 and 53).
Fixed Remuneration
At Risk – STI – Cash
At Risk – STI – DEA(1)
At Risk – LTI
2021
2020
2021
2020
2021
2020
2021
2020(2)
Directors
H. Killen
Executives
B. Bennett
N. Simonsz
A. Speer
A. O’Brien
D. Harris
R. Scott
73%
89%
22%
64%
71%
95%
73%
70%
71%
80%
100%
100%
100%
–
–
27%
29%
5%
27%
30%
29%
Former Executives
S. Grant
100%
100%
0%
49
0%
0%
0%
0%
0%
–
–
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
2%
0%
0%
0%
–
–
0%
5%
9%
0%
0%
0%
0%
0%
0%
11%
18%
0%
0%
0%
–
–
0%
(1) Based on the share-based payment expense incurred by the Company in relation to a prior year award.
(2) Percentages disclosed are the fair value of rights to be granted under the LTI plan.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
5. LINK BETWEEN REMUNERATION AND PERFORMANCE (CONTINUED)
Performance based remuneration granted during the year
The commencement of the FY21 performance year coincided with the increase in uncertainty generated by the COVID-19
pandemic. Due to this uncertainty, the Board agreed to assess the performance of Management in two halves based on KPIs set for
each half, of Financial, Strategic, Customer, Operational and People.
The Board have exercised their discretion to award, on average, 88% of the target STI bonus and DEA entitlement in relation
to FY21 performance. As a result the total amount of STI cash bonus paid or accrued for the MD/CEO or any other executive
in respect of performance during the year to 31 March 2021 amounts to $1,183,722 (31 March 2020: $nil). The DEA has not yet
been formally offered to the MD/CEO or any other executives in respect of performance during the year to 31 March 2021 and
will be granted upon acceptance of letters of offer. Letters of offer will be transmitted to participants once the Board approves the
opening of the first trading window under the AACo trading policy, which is typically immediately following the AACo full-year
announcement. The DEA is awarded based on FY21 performance and will be expensed over the 3-year vesting period commencing
on grant date. No expense has been recorded for the FY21 performance year DEA in the 31 March 2021 results.
The FY20 STI targets for the MD/CEO and key executives were largely achieved however due to the uncertain and unprecedented
environment created by COVID-19, the Board exercised their discretion to not offer any STI bonus or DEA entitlement in relation
to FY20 performance. The STI cash bonus for the MD/CEO and any other executives in respect of performance during the year
to 31 March 2020 was therefore nil. No DEA was offered to the MD/CEO or other executives in respect of performance during the
year to 31 March 2020.
As outlined above, for each STI cash bonus and grant of rights to deferred shares (refer to tables on pages 54 to 55), the percentage
of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited as a result of
the Board’s discretionary decision is set out below.
Current Year STI Entitlement (Cash Bonus and DEA)
Total Opportunity ($)
Awarded %(1)
Forfeited %
50
Directors
H. Killen
Executives
B. Bennett
N. Simonsz
A. Speer
A. O’Brien
D. Harris
R. Scott
450,000
261,771
412,500
371,287
372,712
281,250
342,002
70%
90%
90%
0%(2)
95%
90%
90%
30%
10%
10%
100%(2)
5%
10%
10%
(1) The DEA is awarded based on FY21 performance, yet will be granted in FY22 and expensed over the subsequent 3-year vesting period
(2) A. Speer resigned her employment with AACo effective 31 May 2021 and therefore has forfeited any STI entitlement
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
6. BOARD OVERSIGHT
OF REMUNERATION
MD/CEO, these arrangements are then
subject to shareholder approval.
Staff and Remuneration
Committee
The Staff and Remuneration
Committee currently comprises three
independent non-executive Directors
(Ms J. Rudd, Mr D. McGauchie and
Mr T. Keene (Committee Chairman)).
The Staff and Remuneration
Committee is responsible for making
recommendations to the Board on
the remuneration arrangements of
non- executive directors (NEDs)
and executives. The Staff and
Remuneration Committee assesses
the appropriateness of the nature and
amount of remuneration of NEDs
and executives on a periodic basis by
reference to relevant employment
market conditions with the overall
objective of ensuring maximum
stakeholder benefit from the retention
of high performing Directors and an
executive team. In determining the
level and composition of executive
remuneration, the Staff and
Remuneration Committee may also
seek external advice as set out above.
Mr H. Killen (MD/CEO) attends
certain Staff and Remuneration
Committee meetings by invitation
but is not present during any
discussions relating to his own
remuneration arrangements.
Remuneration approval process
The Board is responsible for
and approves the remuneration
arrangements for the MD/CEO and
executives, and all awards made under
any deferred equity award (DEA) and
long-term incentive (LTI) plan. The
Staff and Remuneration Committee
provide recommendations for these
remuneration arrangements and
obtain independent remuneration
advice as necessary. In the case of the
The Board also sets the aggregate
remuneration of NEDs, which is then
subject to shareholder approval.
The Board oversees the MD/CEO’s
recommendations for remuneration of
senior executives with the assistance
of the Staff and Remuneration
Committee and independent
remuneration advice, where necessary.
The Board approves, having regard
to the recommendations made by the
Staff and Remuneration Committee,
the level of any Company short-
term incentive (STI) payments to
employees, including KMP’s and
therefore the amount of any DEA
entitlement. The level of STI payments
to the MD/CEO are determined
separately by the Board. Any DEA
entitlement resulting in an issue of
securities for the MD/CEO must be
approved by shareholders.
Voting and comments made at the
company’s 29 July 2020 Annual
General Meeting (‘AGM’)
The Company received 98.87%
of ‘for’ votes in relation to its
remuneration report for the year-
ended 31 March 2020.
7. NON-EXECUTIVE DIRECTOR
(NED) REMUNERATION
ARRANGEMENTS
Remuneration policy
The Board seeks to set aggregate
remuneration at a level that provides
the Company with the ability to attract
and retain Directors of the highest
calibre, whilst incurring a cost that is
acceptable to shareholders.
The amount of aggregate remuneration
sought to be approved by shareholders
and the fee structure is reviewed
annually against fees paid to NEDs
of comparable companies. The Board
considers advice from external
consultants when undertaking the
annual review process.
The Company’s Constitution and the
ASX Listing Rules specify that the
aggregate remuneration of NEDs shall
be determined, from time to time,
by general meeting. An amount not
exceeding the amount determined is
then divided between the Directors as
agreed. The latest determination was at
the AGM held on 23 August 2017, when
shareholders approved an aggregate
remuneration of $1,250,000 per year.
Structure
The remuneration of NEDs consists
of Directors’ fees and committee
fees. NED’s do not receive retirement
benefits other than superannuation,
nor do they participate in any
incentive programs.
Each NED receives a base fee for
being a Director of the Company.
An additional fee is also paid for
each Board committee on which a
Director sits, with a higher fee paid if
the Director is a Chairman of a Board
committee. The payment of additional
fees for serving on a committee
recognises the additional time
commitment required by NEDs who
serve on one or more committees.
The Board may also establish specialist
subcommittees from time to time,
comprised of Directors, to oversee and
report back to the Board on any Board
identified large or otherwise important
projects. Generally, Directors are
not separately remunerated for
membership in such subcommittees.
51
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
7. NON-EXECUTIVE DIRECTOR
(NED) REMUNERATION
ARRANGEMENTS (CONTINUED)
Structure (continued)
NED’s are encouraged to hold shares in
the Company. Any shares purchased
by the Directors are purchased on
market, which is in line with the
Company’s overall remuneration
philosophy and aligns NEDs with
shareholder interests.
The remuneration of NEDs for the
years ended 31 March 2021 and 31
March 2020 is detailed in the table on
page 53.
COVID-19 salary variations for
Non-Executive Directors
As a result of the uncertainty generated
by the COVID-19 pandemic at the
commencement of FY21, the NEDs
collectively accepted a temporary
salary variation which reduced their
individual base salaries to 80% for the
three-month period from May 2020
to July 2020. This variation was not
extended beyond the initial 3-month
period, and all parties resumed their
full base salaries from 01 August 2020.
Payment of amounts equivalent
to superannuation for US based
Directors
During the period the Board
determined that US based Directors
of the Company should receive a
monetary amount in lieu of post-
employment benefits, with the amount
being equivalent to superannuation
as if Australia’s superannuation
laws applied to them, subject to the
following qualifications:
(a) Dr Shehan Dissanayake, a US based
director, will not receive an amount
in lieu of post-employment benefits
as he is an officer of Tavistock
Group which controls the AA
Trust which is a major 48.061%
shareholder of the Company;
(b) Neil Reisman, a US based director,
will receive an amount in lieu of
post-employment benefits from
April 2020; and
(c) Marc Blazer, a US based director,
will receive an amount in lieu of
post-employment benefits from
the date of his appointment at the
AGM in July 2019.
Use of Remuneration Consultants
During the year ended 31 March 2021
no consultants were engaged for
remuneration matters (31 March 2020:
$43,302).
52
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
7. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION ARRANGEMENTS (CONTINUED)
Short Term
Post-
Employment
Long-Term
Benefit
Termination
Share Based Payment
Salary
& Fees
$
Other
Payments
$
Non-
Monetary
Benefits
$
Super-
annuation
$
Long
Service
Leave(1)
$
Benefits
$
Short Term
Incentive
Performance
Rights
(DEA)(2)
$
(LTI)(3)
$
Total
$
Directors
Non-executive Directors
D. McGauchie
31/03/2021
237,397
31/03/2020
250,000
S. Black
31/03/2021
118,699
31/03/2020
125,000
A. Abraham
31/03/2021
109,203
31/03/2020
105,753
T. Keene
31/03/2021
118,699
31/03/2020
134,247
Dr S. Dissanayake
31/03/2021
94,959
31/03/2020
189,625
N. Reisman
–
–
–
–
–
–
–
–
–
–
31/03/2021
109,203
10,374(4)
31/03/2020
115,000
J. Rudd
31/03/2021
31/03/2020
M. Blazer
31/03/2021
31/03/2020
–
–
–
123,447
105,507
118,699
83,562
19,215(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Executive Directors
H. Killen
31/03/2021
647,829
210,164
31/03/2020
643,498
-
Total Remuneration: Directors
31/03/2021
1,678,135
239,753
31/03/2020
1,752,192
-
19,445
19,445
19,445
19,445
22,553
23,750
11,276
11,875
10,374
10,047
11,276
12,753
–
–
–
–
11,727
10,023
–
–
19,494
25,664
86,700
94,112
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
259,950
273,750
129,975
136,875
119,577
115,800
129,975
147,000
94,959
189,625
119,577
115,000
135,174
115,530
137,914
83,562
51,599
85,603
948,531
774,210
51,599
85,603
2,075,632
1,951,352
53
(1) Other payments relate to STI payments for the MD/CEO and payments in lieu of post-employment benefits for US based Directors
(2) Long service leave balances are only accrued from 5 years’ service onwards, and this is not applicable to Non-Executive Directors
(3) The LTI expense is based on estimates of the expected value of rights to be granted under the LTI plan at that point in time
(4) N. Reisman received an amount in lieu of post-employment benefits from 01 April 2020
(5) M. Blazer received an amount lieu of post-employment benefits from 31 July 2019
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Remuneration Report (audited) (continued)
8. EQUITY INSTRUMENTS DISCLOSURES
Nil performance rights under the LTI plan and Nil DEA performance rights were granted during the twelve months to 31 March
2021 (31 March 2020: nil performance rights under the LTI plan and nil DEA performance rights).
178,833 shares were distributed to key management personnel during the year-ended 31 March 2021, as a result of exercising
vested performance rights granted during 2018 (31 March 2020: 178,834).
Rights to shares
The fair value of rights is determined based on the market price of the Company’s shares at the grant date, with an adjustment
made to take into account the two and three year vesting period (where applicable, i.e. on the issue of DEA) and expected dividends
during that period that will not be received by the employees. Although the approved STI calculation relates to the year ended 31
March 2021, the DEA is not granted to participants until the Board approves the opening of the first trading window under the
AACo trading policy, which is typically immediately following the AACo full-year announcement.
A summary of the outstanding performance rights relating to key management personnel is provided below, with a full listing
provided in note F8 Share-based Payments.
Details on rights over ordinary shares in the Company that were granted as compensation or vested during the reporting period to
each key management person during the reporting period are as follows:
Fiscal year
granted
Award
Balance at
beginning
of period
Granted as
remuner-
ation
Exercised
during the
year
Net change
other
Balance
at end of
period
Not vested
and not
exercisable
Vested and
exercisable
Number
Number
Number
Number
Number
Number
Number
54
Executives
H. Killen
2022(1)
2018
B. Bennett
2022(1)
2018
2018
N. Simonsz 2022(1)
A. Speer
–
A. O’Brien
2022(1)
D. Harris
2022(1)
R. Scott
2022(1)
Former Executives
S. Grant
–
DEA
LTIP
DEA
LTIP
DEA
DEA
DEA
DEA
DEA
–
253,681
–
253,681
9,712
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(84,561)
–
(84,561)
(9,712)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
169,120
169,120
–
-
169,120
169,120
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Value
yet to
vest(2)
$
105,082
180,960
79,448
180,960
–
123,750
–
123,591
84,375
75,615
–
(1) Shares for the Deferred Equity Award will be granted once the Board approves the opening of the first trading window under AACo trading policy, which is
usually immediately following the AACo full-year announcement. The number of performance rights granted will depend on the Company’s share price at
the grant date. The 2022 DEA is awarded based on FY21 performance and will be expensed over the 3-year vesting period commencing once grant dated has
occurred.
(2) The maximum value of the deferred rights over shares granted in the 2018 fiscal year and yet to vest has been determined as the amount of the grant date fair
value of the rights that are yet to be expensed. The maximum value for the deferred shares awarded in respect of performance in the 2021 fiscal year is 50% of
the short-term incentive cash bonus for fiscal year 2021, with the number of rights to be granted subject to the share price on grant date. The minimum value
of deferred shares yet to vest is nil, as the shares will be forfeited if the vesting conditions are not met.
No other Directors or executives held options or performance rights during the period.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Remuneration Report (audited) (continued)
9. SHAREHOLDINGS AND OTHER MANDATORY DISCLOSURES
Shareholdings
The table below summarises the movements during the period in the shareholdings of key management personnel, including their
personally related parties, in the Company for the period.
2021
Directors
D. McGauchie
H. Killen
S. Black
T. Keene
A. Abraham
Dr S. Dissanayake
N. Reisman
J. Rudd
M. Blazer
Executives
B. Bennett
N. Simonsz
A. Speer
A. O’Brien
D. Harris
R. Scott
Former Executives
S. Grant
Total
Balance at
beginning of
period
Granted as
remuneration
Exercise of
options/rights
Net change
other
Balance at
end of period
Number
Number
Number
Number
Number
1,120,774
198,361
40,000
75,000
30,000
2,025,000
45,000
–
–
191,415
–
–
50,000
–
–
–
3,775,550
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
84,561
–
–
–
–
–
–
–
94,272
–
–
–
–
–
–
178,833
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,120,774
282,922
40,000
75,000
30,000
2,025,000
45,000
–
–
285,687
–
–
50,000
–
–
–
3,954,383
55
All equity transactions with Directors and 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.
Loans to key management personnel and their related parties
There are no loans outstanding with the key management personnel at 31 March 2021 (31 March 2020: nil), nor have there been
any transactions that would be considered a loan throughout the period.
Other transactions and balances with key management personnel and their related parties
There have been no other transactions with key management personnel or their related parties during the financial year to 31
March 2021 (31 March 2020: nil).
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report Directors’ Meetings
The number of Meetings of Directors (including meetings of Committees of Directors) held during the year and the number of
meetings attended by each Director is as follows:
Directors’
Meetings
Audit & Risk
Management
Committee
Staff &
Remuneration
Committee
Nomination
Committee
Brand, Marketing
& Sales
Committee
A
10
10
10
10
10
10
10
10
10
B
10
10
10
10
9
9
10
10
10
A
9
9
9
9
9
9
9
9
9
B
9*
9*
9*
9
5*
9
9
9*
6*
A
6
6
6
6
6
6
6
6
6
B
6
6*
6
5*
3*
4*
5*
6
3*
A
1
1
1
1
1
1
1
1
1
B
1
1*
1
1
1
1
1
1
1
A
9
9
9
9
9
9
9
9
9
B
9
9*
5*
5*
0*
5*
4*
9
9
D. McGauchie
H. Killen¥
T. Keene
S. Black
Dr S. Dissanayake
A. Abraham
N. Reisman
J. Rudd
M. Blazer
A = Number of meetings held during the time the Director held office
B = Number of meetings attended
* Not a member of the relevant committee
¥ Mr. Killen is invited to all Committee meetings but as an executive is not a member of those Committees
COMMITTEE MEMBERSHIP
As at the date of this report, the Company had an Audit and Risk Management Committee, Staff and Remuneration Committee,
Nomination Committee and a Brand, Marketing & Sales Committee.
ROUNDING
Amounts contained in this report and in the financial report have been rounded to the nearest thousand dollars for presentation
where noted ($000). This has been completed under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.
56
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT Auditor Independence
We have obtained the following independence declaration from our auditors KPMG.
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Australian Agricultural Company Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Australian Agricultural
Company Limited for the financial year ended 31 March 2021 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Scott Guse
Partner
Brisbane
20 May 2021
57
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationDirectors' Report
Non Audit Services
The following non-audit services were provided by the entity’s lead auditor, KPMG. The Directors are satisfied 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 non-audit service provided means that auditor independence was not compromised. The lead
auditor received or are due to receive the following amounts for the provision of non-audit services:
Metrics
Review of draft sustainability report
Signed in accordance with a resolution of the Directors
31 Mar 2021
$
31 Mar 2020
$
–
–
19,600
19,600
Donald McGauchie
Chairman
Brisbane
20 May 2021
58
Hugh Killen
Managing Director
Brisbane
20 May 2021
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Directors' ReportDIRECTORS' REPORT FINANCIAL
STATEMENTS
60
Consolidated Income Statement
61
62
63
64
65
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
110
Directors’ Declaration
111
Independent Audit Report
116
ASX Additional Information
118
Company Information
59
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationContentsFinancial Report CONSOLIDATED
INCOME STATEMENT
For the year ended 31 March 2021
Note
31 March 2021
$000
31 March 2020
$000
Meat sales
Cattle sales
Cattle fair value adjustments
Cost of meat sold
Cost of live cattle sold
Cattle and feedlot expenses
Gross margin
Other income
Employee expenses
Administration and selling costs
Other operating costs
Property costs
Loss on equity investments
Depreciation and amortisation
Profit before finance costs and income tax
Finance costs
Profit before income tax
Income tax expense
Net profit after tax
60
A3
A2
F4
F4
F4
F3
Profit per share attributable to the ordinary equity holders of the parent
Note
Basic profit per share
Diluted profit per share
C5
C5
199,974
65,548
265,522
218,037
483,559
(150,045)
(63,257)
(76,674)
193,583
229,607
104,539
334,146
285,810
619,956
(199,779)
(99,428)
(130,001)
190,748
9,700
4,174
(46,660)
(33,483)
(21,101)
(2,713)
(385)
(18,619)
80,322
(14,275)
66,047
(20,573)
45,474
Cents
7.62
7.62
(47,903)
(37,572)
(25,756)
(3,562)
(172)
(17,894)
62,063
(14,935)
47,128
(15,811)
31,317
Cents
5.25
5.23
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Financial Report CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the year ended 31 March 2021
Profit for the year
Other Comprehensive Income
Items not to be reclassified to profit or loss:
Fair value revaluation of land and buildings, net of tax
Items to be reclassified subsequently to profit or loss:
Changes in the fair value of cash flow hedges, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive profit for the year, net of tax
31 March 2021
$000
31 March 2020
$000
45,474
31,317
76,095
44,528
8,845
84,940
130,414
(6,305)
38,223
69,540
61
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 31 March 2021
Note
As at
31 Mar 2021
$000
As at
31 Mar 2020
$000
Current Assets
Cash
Trade and other receivables
Inventories and consumables
Livestock
Other assets
Total Current Assets
Non-Current Assets
Livestock
Property, plant and equipment
Intangible assets
Right-of-use assets
Investments
Other receivables
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Interest-bearing liabilities
Lease liabilities
Derivatives
Total Current Liabilities
62
Non-Current Liabilities
Provisions
Interest-bearing liabilities
Lease liabilities
Derivatives
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Retained losses
Total Equity
B1
B4
B3
A3
A3
A4
F2
F6
B5
C1
F2
C2
C1
F2
C2
F3
C3
F5
8,875
7,202
26,543
202,730
4,084
249,434
334,641
975,916
2,896
21,612
288
777
18,125
9,907
26,571
186,995
2,895
244,493
285,974
870,652
1,995
28,159
3,402
867
1,336,130
1,585,564
1,191,049
1,435,542
16,457
3,562
1,856
4,171
5,362
31,408
2,881
367,173
18,035
2,675
118,767
509,531
540,939
1,044,625
528,822
558,847
(43,044)
1,044,625
22,358
2,962
1,824
5,776
8,941
41,861
2,891
382,858
22,701
7,324
64,518
480,292
522,153
913,389
528,822
473,085
(88,518)
913,389
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Financial Report CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 March 2021
At 1 April 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Issue of share capital, net of transaction costs
Treasury shares acquired
Revaluation of foreign currency operations
Cost of share-based payment
At 31 March 2020
At 1 April 2020
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Issue of share capital, net of transaction costs
Treasury shares acquired
Revaluation of foreign currency operations
Cost of share-based payment
At 31 March 2021
Contributed
Equity (Note C3)
$000
528,822
–
–
–
–
–
–
–
Reserves
(Note F5)
$000
Retained
Earnings/(Losses)
$000
Total Equity
$000
435,369
–
38,223
38,223
–
–
(762)
255
(119,835)
31,317
–
31,317
–
–
–
–
844,356
31,317
38,223
69,540
–
–
(762)
255
528,822
473,085
(88,518)
913,389
528,822
–
–
–
–
–
–
–
473,085
–
84,940
84,940
–
–
674
148
(88,518)
45,474
–
45,474
–
–
–
–
913,389
45,474
84,940
130,414
–
–
674
148
528,822
558,847
(43,044)
1,044,625
63
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 31 March 2021
Note
31 Mar 2021
$000
31 Mar 2020
$000
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers, employees, and others
Interest received
Net operating cash inflow before interest and finance costs
Payment of interest and finance costs
Net cash inflow/(outflow) from operating activities
B2
Cash Flows from Investing Activities
Payments for property, plant and equipment and other assets
Proceeds from sale of property, plant, and equipment
Investments in associates
Net cash inflow/(outflow) from investing activities
Cash Flows from Financing Activities
Proceeds from interest-bearing liabilities, net of transaction costs
Repayment of interest-bearing liabilities, net of transaction costs
Acquisition of treasury shares
Principal repayments of leases
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash
Cash at the beginning of the year
Cash at the end of the year
64
B1
285,899
(253,591)
10
32,318
(13,895)
18,423
(9,421)
415
2,653
(6,353)
15,000
(31,139)
–
(5,181)
(21,320)
(9,250)
18,125
8,875
359,182
(324,339)
68
34,911
(14,791)
20,120
(22,666)
748
(148)
(22,066)
37,000
(20,876)
–
(3,618)
12,506
10,560
7,565
18,125
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Financial Report INDEX – NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
A
A1
A2
A3
A4
A5
B
B1
B2
B3
B4
B5
C
C1
C2
C3
C4
C5
C6
D
D1
D2
D3
D4
D5
E
E1
E2
F
F1
F2
F3
F4
F5
F6
F7
F8
F9
F10
F11
F12
FINANCIAL PERFORMANCE
Significant Matters
Operating Margin
Livestock
Property
Segment Information
WORKING CAPITAL
Net Working Capital
Cash
Inventory and Consumables
Trade and Other Receivables
Trade and Other Payables
FUNDING AND CAPITAL MANAGEMENT
Interest-bearing Liabilities
Derivatives
Equity
Capital Management
Earnings Per Share
Dividends
FINANCIAL RISK MANAGEMENT
Interest Rate Risk
Foreign Currency Risk
Commodity Price Risk
Credit Risk
Liquidity Risk
UNRECOGNISED ITEMS
Commitments
Contingencies
OTHER
Property, Plant and Equipment at Cost
Right-of-use Assets and Lease Liabilities
Tax
Other Earnings Disclosures
Reserves
Investments
Related Parties
Share-based Payments
Controlled Entities
Parent Entity
Auditor’s Remuneration
Significant Events After Balance Date
Page
67
68
68
71
74
76
76
77
77
78
78
79
80
81
81
82
82
83
84
85
85
86
86
87
87
89
90
91
91
92
93
97
101
101
101
65
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report INDEX – NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
G
G1
G2
G3
POLICY DISCLOSURES
Corporate Information
Basis of Preparation
Accounting Policies
Page
102
102
103
66
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - Financial Report NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A FINANCIAL PERFORMANCE
A1 SIGNIFICANT MATTERS
Property Revaluation
The Company recorded a net $105.2 million increase in the value of the Company’s pastoral property and improvements, following
a Directors’ assessment of fair value at 31 March 2021. In assessing fair value, the Directors utilised information provided by
an independent valuation performed by LAWD during FY21. The revaluation reflects value increases resulting from capital
investments made to our properties, and increased prices for recent comparable property sales.
See note A4 for further details.
Herd Numbers
The closing herd head count is 1.8% lower than prior year. This decline is a result of the Company experiencing lower calving in
prior periods due to the drought and the Gulf flood event.
Herd Valuation
Improvements in wagyu and Non-Wagyu liveweight market prices since 31 March 2020 have resulted in an unrealised gain in the
fair value of the herd of $91.4 million.
Livingstone Beef
At 31 March 2021, consideration was given to internal and external factors that may impact the recoverable value of the Cash-
Generating Unit, noting no indications of a material change to the recoverable value of Livingstone Beef at year-end.
Regular upkeep and maintenance of the facility and its supporting assets continues, whilst the Board and Management continue
to monitor and review various strategic options for Livingstone Beef.
Impacts of Coronavirus (COVID-19)
Valuations included in the financial report such as the valuation of Pastoral property and improvements and Livestock are based
on information available and relevant as at 31 March 2021, which is the Company’s balance date. No significant impacts on
operating results or balance sheet valuations materialised as a result of COVID-19.
The Company continues to monitor the developments in the COVID-19 pandemic and the measures being implemented to control
and slow further outbreaks of the virus and the impacts on global markets, supply chains and customers.
67
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A2 OPERATING MARGIN
Operating margin represents value added through the production chain. Margin is achieved through sales of meat products and
cattle, as well as cattle production (pastoral and feedlot).
Note
31 Mar 2021
$000
31 Mar 2020
$000
Meat Sales
Sales
Cost of meat sold(1)
Operating margin
Cattle Sales
Sales
Cost of cattle sold(2)
Operating margin
Cattle Production
Fair value adjustments
Cattle expenses
Feedlot expenses
Operating margin
199,974
(150,045)
49,929
65,548
(63,257)
2,291
218,037
(32,489)
(44,185)
141,363
229,607
(199,779)
29,828
104,539
(99,428)
5,111
285,810
(62,145)
(67,856)
155,809
A3
Total Operating Margin
193,583
190,748
(1) Includes the transfer of cattle at the applicable fair value at the time they leave the property gate en route to a processing plant.
(2) Represents the fair value of the cattle at the time of live sale. At that time, the cost of cattle sold equates to the recorded fair value less costs to sell.
Refer to note A3 for financial information and accounting policies related to Livestock.
68
A3 LIVESTOCK
Cattle at fair value
Current
Non-Current
Total livestock
Livestock movement
Opening carrying amount
Changes in fair value
Purchases of livestock
External sale of livestock less selling expenses
Transfers for meat sales
Closing carrying amount
31 Mar 2021
$000
31 Mar 2021
Head
31 Mar 2020
$000
31 Mar 2020
Head
202,730
334,641
537,371
87,814
252,032
339,846
186,995
285,974
472,969
104,197
241,888
346,085
31 Mar 2021
$000
31 Mar 2020
$000
472,969
218,037
33,239
(63,257)
(123,617)
537,371
423,337
285,810
22,345
(99,428)
(159,095)
472,969
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A3 LIVESTOCK (CONTINUED)
Cattle fair value adjustments
Market value movements(1)
Biological transformation(2)
Natural increase
Attrition
Other
Total cattle fair value adjustments
31 Mar 2021
$000
31 Mar 2020
$000
91,401
86,860
65,690
(25,611)
(303)
104,144
150,752
42,436
(11,250)
(272)
218,037
285,810
(1) As a biological asset, AASB 141 Agriculture requires the livestock to be valued at fair value less costs to sell at all times prior to sale or harvest. As such, value
increases occur through changes in fair value rather than sales margin.
(2) Biological transformation in accordance with Australian Accounting Standard AASB 141 Agriculture, includes reclassification of
an animal as it moves from being a branded calf, grows, ages, and progresses through the various stages to become a trading or
production animal.
Accounting Policies – Livestock
Livestock is measured at fair value less costs to sell, with any change recognised in the profit or loss. Costs to sell include all costs
that would be necessary to sell the assets, including freight and direct selling costs.
The fair value of livestock is based on its present location and condition. If an active or other effective market exists for livestock
in its present location and condition, the quoted price in that market is the appropriate basis for determining the fair value of that
asset. Where the Company has access to different markets, then the most relevant market is used to determine fair value. The
relevant market is defined as the market “that access is available to the entity” to be used at the time the fair value is established.
If an active market does not exist, then one of the following is used in determining fair value in the below order:
– the most recent market transaction price, provided that there has not been a significant change in economic circumstances
between the date of that transaction and the end of the reporting period
– market prices, in markets accessible to us, for similar assets with adjustments to reflect differences
– sector benchmarks
In the event that market determined prices or values are not available for livestock in its present condition, the present value of the
expected net cash flows from the asset discounted at a current market determined rate may be used in determining fair value.
69
Livestock fair value
At the end of each reporting period, livestock is measured at fair value less costs to sell. The fair value is determined through price
movements and movements in the weight of the herd due to growth, attrition, natural increase, beef transfers or sale.
The net increments or decrements in the market value of livestock are recognised as either gains or losses in the profit or loss,
determined as:
– The difference between the total fair value of livestock recognised at the beginning of the financial year and the total fair value
of livestock recognised as at the reporting date; less
– Costs expected to be incurred in realising the market value (including freight and selling costs).
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A3 LIVESTOCK (CONTINUED)
Fair Value Inputs are summarised as follows:
Level 1 Price Inputs – are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the
measurement date.
Level 2 Price Inputs – are inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 Price Inputs – are inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value input
Level 1
Level 2
Level 2
Level 2
Level 3
Average value per head
Cattle type
None
Commercial & stud
breeding herd
Trading cattle
Unbranded calves
Feedlot cattle
31 Mar 2021
$000
31 Mar 2021
Head
31 Mar 2020
$000
31 Mar 2020
Head
–
–
295,122
188,822
92,489
37,831
111,929
537,371
56,649
62,636
31,739
339,846
$1,581
–
262,150
80,912
18,474
111,433
472,969
–
197,463
70,740
42,721
35,161
346,085
$1,367
Type
Level
Valuation method
Commercial & Stud
Breeding Herd
2
Trading Cattle
2
70
Unbranded Calves
2
Feedlot Cattle
3
The value of these cattle (comprising principally females and breeding bulls) is determined by
independent valuations with reference to prices received from representative sales of breeding
cattle similar to the Company’s herd. Prices for these cattle generally reflect a longer-term view
of the cattle market. Independent valuations were undertaken by Elders Limited. In performing
the valuation, consideration is given to the class, age, quality and location of the herd. Direct
comparisons are made to recent sales evidence in relevant cattle markets.
Relevant market indicators used include Roma store cattle prices, MLA over-the hook market
indicators, and cattle prices received/quoted for the Company’s cattle at the reporting date. Prices
for these cattle generally reflect the shorter-term spot prices available in the market place and vary
based on the weight and condition of the animal.
Live export cattle (Victoria River Group, Anthony Lagoon & Darwin Group) are valued based on
market quotes available at each reporting date.
Wagyu trading cattle are valued on the basis of an independent valuation by Elders Limited. In
performing the valuation, consideration is given to class, age, quality, genetics, recent comparable
sales evidence and current market conditions for Crossbred Wagyu cattle.
The value of unbranded calves is determined with reference to Roma store calf prices at the
Company’s reporting date. The number of calves is determined by applying the percentage of
branding assessed each year to the number of productive cows and the results of pregnancy testing.
Feedlot cattle are valued internally by the Company as there is no observable market for them.
The value is based on the estimated entry price per kilogram and the value changes for the weight
of each animal as it progresses through the feedlot program. The key factors affecting the value of
each animal are price/kg and average daily gain of weight. The average daily gain of weight is in the
range of 0.7kgs to 1.9kgs. The value is determined by applying the average weight gain per day by the
number of days on feed from induction to exit at which point the cattle are delivered to market. The
value per animal is based on the breed and specifications of the animal and the market it is destined
for. Significant increases (decreases) in any of the significant unobservable valuation inputs for
feedlot cattle in isolation would result in a significantly higher (lower) fair value measurement.
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A3 LIVESTOCK (CONTINUED)
Unbranded calves
Calf accrual opening
Movement(1)
Calf accrual closing
Average value per head
31 Mar 2021
$000
31 Mar 2021
Head
31 Mar 2020
$000
31 Mar 2020
Head
18,474
19,357
37,831
42,721
19,915
62,636
$604
13,835
4,639
18,474
58,956
(16,235)
42,721
$432
(1) Unbranded calves are assessed at each reporting date based on information available at the time. The Company does not track individual calves until such
time as they have been branded and recorded in the livestock management system.
Feedlot Cattle
Opening values
Inductions
Sales
Attrition and rations
Fair value adjustments recognised
Closing values
Average value per head
A4 PROPERTY
31 Mar 2021
$000
31 Mar 2021
Head
31 Mar 2020
$000
31 Mar 2020
Head
111,433
73,288
(124,473)
(693)
52,374
111,929
35,161
36,760
(39,963)
(219)
–
31,739
$3,527
87,709
99,613
(134,249)
(1,381)
59,741
111,433
38,708
54,044
(57,035)
(556)
–
35,161
$3,169
Pastoral property and improvements at fair value
Industrial property and improvements at cost
Plant and equipment at cost
Capital work in progress
Total property, plant and equipment
Note
F1
F1
F1
31 Mar 2021
$000
31 Mar 2020
$000
915,800
32,950
25,684
1,482
975,916
810,560
30,998
26,084
3,010
870,652
71
Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A4 PROPERTY (CONTINUED)
Pastoral property and improvements at fair value
31 Mar 2021
Opening balance
Additions
Disposals
Net revaluation increment/(decrement) recognised in asset revaluation reserve (Note F5)
Depreciation
Closing balance
31 Mar 2020
Opening balance
Additions
Disposals
Net revaluation increment/(decrement) recognised in asset revaluation reserve (Note F5)
Depreciation
Closing balance
Total
$000
810,560
2,375
(34)
108,707
(5,808)
915,800
Total
$000
738,462
14,199
(243)
63,611
(5,469)
810,560
Accounting policies – Pastoral property and improvements at fair value
Freehold pastoral property and improvements, and pastoral property and improvements held under statutory leases with
government bodies, are carried at fair value at the date of the revaluation less any subsequent accumulated depreciation on
buildings and accumulated impairment losses.
Fair value is determined by the Directors with reference to work performed by external independent valuers and performed on
an annual basis with reference to market-based evidence, which is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date.
72
Any revaluation increment is credited to the asset revaluation reserve included in the equity section of the statement of financial
position, unless it reverses a revaluation decrement of the same asset previously recognised in the profit or loss. Any revaluation
decrement is recognised in the profit or loss unless it directly offsets a previous increment of the same asset in the asset
revaluation reserve.
In addition, any accumulated depreciation as at revaluation date is eliminated against the gross carrying amount of the asset and
the net amount is restated to the revalued amount of the asset. Upon disposal of property and improvements, any revaluation
reserve relating to the particular asset being sold is transferred to the capital profits reserve.
All initial lump sum payments in respect of pastoral and perpetual property leases have been classified as land. The remaining
lease payments are nominal and are therefore expensed to the profit or loss as incurred.
Pastoral landholdings are generally held under a leasehold agreement with the Crown. Leasehold properties in Queensland are
mainly pastoral holdings which are rolling term leases. In the Northern Territory, the pastoral leases held have been granted on a
perpetual basis by the Northern Territory Government. We treat statutory leases held with government bodies as perpetual leases.
Perpetual leases are specifically excluded from measurement under AASB 16 Leases.
This accounting policy excludes Right-of-use Assets disclosed in Note F2. Refer to note F1 and note G3 for the financial
information and accounting policies as they relate to property, plant and equipment at cost respectively.
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For the twelve months to 31 March 2021
A4 PROPERTY (CONTINUED)
Fair value
In determining the fair value of pastoral property and improvements, the Directors initiate periodic independent valuations
through registered property valuers. Once these valuations have been considered and reviewed by the Directors they are then
adopted as Directors’ valuations.
The following valuation techniques and key inputs are used for the level 3 (there are no level 1 and level 2) property and
improvement valuations:
31 Mar 2021
$000
31 Mar 2020
$000 Valuation technique
790,100
692,460
Direct Comparison
(Productive Unit
Approach)
Significant
Unobservable
Inputs
Number of adult
equivalents
Dollar per adult
equivalents
Number of properties
53,700
48,000
Direct Comparison
(Hectare Rate Approach)
Dollar per hectare
72,000
70,100
Direct Comparison
(Hectare Rate and
Standard Cattle Unit
Approach)
Number of properties
Dollar per hectare
Standard cattle units
31 Mar 2021
Range/
(Average)
31 Mar 2020
Range/
(Average)
5,350 – 89,200
25,568
5,350 – 89,200
25,553
$1,050 - $5,500
$2,099
$1,050 - $5,500
$1,856
18
$1,578
$1,578
1
18
$1,410
$1,410
1
$3,611 - $3,771
$3,691
$3,611 - $3,771
$3,691
16,000 – 45,000
30,500
16,000 – 45,000
30,500
Number of properties
2
2
An independent valuation of the pastoral properties was performed by valuers LAWD to determine the fair value using the market
based direct comparison method. One of three direct comparison method techniques were utilised, being either a Productive Unit
Approach, Hectare Rate Approach or a Summation Approach using Standard Cattle Units and Hectare Rate. Valuation of the
assets was determined by analysing comparable sales and allowing for size, location, rainfall, water supply, seasonal conditions,
structural capital works and other relevant factors specific to the property and improvements being valued. From the sales
analysed, an appropriate rate per adult equivalent or hectare has been applied to the subject property and improvements. The
effective date of the valuation is 31 March 2021.
73
Under the Productive Unit Approach, a dollar per Adult Equivalent is adopted inclusive of all structures. This method takes into
consideration the type and mix of land types, rainfall, extent of water, fencing and structural improvements, current carrying
capacity and potential, and location relative to markets and services. An external expert, Dr Steve Petty of Spektrum, was engaged
during FY21 as part of the valuation process to perform an independent assessment of adult equivalent carrying capacity using a
consistent methodology based on scientific analysis of grazing distribution, land system analysis, station and paddock stocking
history and published data for the relevant regions.
Under the Hectare Rate Approach, a range of dollar per hectare rates are applied to land components exclusive of all structures.
This method takes into consideration the land type composition of the property and therefore the proportion of land that lies
outside the watered area and its potential or lack thereof. The basis of assessment is direct comparison with sales evidence on an
analysed hectare rate, excluding structures. The improved market value is determined from the summation of land with the added
value of structures, such as residences, sheds and yards.
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A4 PROPERTY (CONTINUED)
Fair value (continued)
The Hectare Rate and Standard Cattle Unit Approach applies the same principles as the Hectare Rate Approach but includes a
dollar per Standard Cattle Unit rate which is applied to feedlot infrastructure. The basis of assessment is direct comparison with
sales evidence on an analysed Standard Cattle Unit rate. The improved market value is determined from the summation of land
and feedlot infrastructure with the added value of structures, such as residences, sheds and yards. The derived valuation amount
for the buildings and yards is obtained from analysis of comparable sales evidence.
Significant increases (decreases) in any of the significant unobservable valuation inputs under the Productive Unit Approach,
Hectare Rate Approach or Hectare Rate and Standard Cattle Units Approach in isolation would result in a significantly higher
(lower) fair value measurement. Permanent shifts in long-term climate and weather conditions could result in a lower or higher
carrying capacity, dollar per adult equivalent and dollar per hectare.
Deemed Cost
If freehold land, pastoral leases, buildings and improvements were measured using the deemed cost model (the fair value of the
assets in 2005 plus subsequent acquisitions at cost) the carrying amounts would be as follows:
Deemed cost
Accumulated depreciation
Net carrying amount
A5 SEGMENT INFORMATION
31 Mar 2021
$000
31 Mar 2020
$000
360,296
(68,787)
291,509
357,921
(62,979)
294,942
Identification of reportable segments
AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of
the Company, that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and
to assess its performance. The Group has identified its operating segments based on the internal reports that are reviewed and
used by the Managing Director/Chief Executive Officer (the chief operating decision maker) in assessing performance and in
determining the allocation of resources. The operating segments are identified by management based on the nature of the product
produced and the reporting structure within the Group. Discrete financial information for each of the operating segments is
reported to the Managing Director/Chief Executive Officer (MD/CEO) on at least a monthly basis.
74
Reportable segments
Following the suspension of Livingstone Beef processing plant in prior years, management no longer view the business as
two distinct operating segments of Livingstone Beef and AACo excluding Livingstone Beef as Livingstone has not been in
operation during this financial year or the comparative. The internal reporting to the Board and executive team (chief operating
decision makers) is viewed as one segment for all of the Company until such a time as the Livingstone Beef processing plant
is unsuspended.
The prior period comparative information has been restated to reflect the revised operating segment on the following pages.
Accounting policies and inter-segment transactions
The accounting policies used in reporting segments are the same as those contained in note G3 to the financial statements and in
the prior period, except as follows:
– Inter-entity sales
Inter-entity sales are recognised based on arm’s length market prices.
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For the twelve months to 31 March 2021
A5 SEGMENT INFORMATION (CONTINUED)
Accounting policies and inter-segment transactions (continued)
Operating Profit is the key indicator used to monitor and manage the Company. It eliminates the potential distraction caused by
unrealised livestock and inventory valuation adjustments being recorded in the financial results, and is a better reflection of actual
financial performance under the control of management. Operating Profit assumes movement in livestock and inventory volume
at cost of production, whilst Statutory EBITDA results include revaluations based on market prices for livestock movements.
The following table presents the revenue and profit information regarding operating segments (incorporating a reconciliation
of Operating Profit/(Loss) to Statutory NPAT) for the twelve months to 31 March 2021 and 31 March 2020. Segment assets and
liabilities are not reported to the MD/CEO and therefore segment assets and liabilities are not separately disclosed.
Segment revenue
Inter-segment revenue
Revenue from external customers
Operating Profit/(Loss)
Reverse: Movement in inventory at cost of production
Other income/expenses
Change in livestock value
Statutory EBITDA profit/(loss)
Depreciation and amortisation
Loss on equity investments
Statutory EBIT profit/(loss)
Net finance costs
Income tax expense
Net profit after tax
Revenues from external customers
Meat sales revenues
South Korea
Australia
USA
Canada
China
Other countries
31 Mar 2021
$000
31 Mar 2020
$000
265,522
–
265,522
24,360
14,630
(4,060)
64,396
99,326
(18,619)
(385)
80,322
(14,275)
(20,573)
45,474
334,146
–
334,146
15,194
17,067
(1,764)
49,632
80,129
(17,894)
(172)
62,063
(14,935)
(15,811)
31,317
75
31 Mar 2021
$000
31 Mar 2020
$000
68,842
26,183
23,805
14,060
11,790
55,294
68,873
33,476
14,177
2,413
34,005
76,663
Total meat sales revenue per Income Statement
199,974
229,607
Meat sales revenues of $62.7 million were derived from one of the Company’s major external customers (31 March 2020: $63.9
million from this customer). No other customer contributed to more than 10% of the Company’s revenue.
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
A5 SEGMENT INFORMATION (CONTINUED)
Revenues from external customers (continued)
Cattle sales revenues
Australia
Total cattle sales revenue per Income Statement
B WORKING CAPITAL
B1 NET WORKING CAPITAL
Cash
Inventory and consumables
Trade and other receivables
Trade and other payables
Net working capital
B2 CASH
Note
B3
B4
B5
Reconciliation of net profit/(loss) after tax to net cash flows from operations
Net profit/(loss) after income tax
Adjustments for:
Depreciation and amortisation
(Increment)/decrement in fair value of livestock
Income tax expense reported in equity
76
Derivative movement reported in equity
Other non-cash adjustments
Changes in assets and liabilities:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments and other assets
(Decrease)/increase in deferred tax liabilities
(Decrease)/increase in trade and other payables
(Decrease)/increase in derivatives
(Decrease)/increase in provisions
Net cash inflow from operating activities
31 Mar 2021
$000
31 Mar 2020
$000
65,548
65,548
104,539
104,539
31 Mar 2021
$000
31 Mar 2020
$000
8,875
26,543
7,202
(16,457)
26,163
18,125
26,571
9,907
(22,358)
32,245
31 Mar 2021
$000
31 Mar 2020
$000
45,474
31,317
18,619
(64,402)
(33,676)
9,909
77
28
2,872
1,009
54,249
(5,901)
(10,426)
591
18,423
17,894
(49,632)
(17,677)
(7,238)
(638)
7,113
8,629
(1,797)
33,786
(7,460)
7,946
(2,123)
20,120
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FINANCIAL STATEMENTS
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B3 INVENTORY AND CONSUMABLES
Meat inventory
Feedlot commodities
Bulk stores
Other inventory
B4 TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for impairment of receivables
Other receivables
31 Mar 2021
$000
31 Mar 2020
$000
8,164
10,303
6,699
1,377
26,543
8,304
10,632
6,088
1,547
26,571
31 Mar 2021
$000
31 Mar 2020
$000
5,693
(185)
5,508
1,694
7,202
9,402
(896)
8,506
1,401
9,907
Trade receivables are non-interest bearing. Provision for impairment of receivables is the loss allowance for trade receivables
and is measured at an amount equal to lifetime expected credit losses. The ageing of trade receivables and the provision for
impairment of receivables is outlined below:
Trade receivables aging
Current or past due under 30 days
Past due 31-60 days
Past due 61+ days
Total trade receivables
Provision for impairment of receivables aging
Current or past due under 30 days
Past due 31-60 days
Past due 61+ days
Total provision for impairment of receivables
31 Mar 2021
$000
31 Mar 2020
$000
5,572
15
106
5,693
9,041
14
347
9,402
77
31 Mar 2021
$000
31 Mar 2020
$000
(89)
(1)
(95)
(185)
(717)
(7)
(172)
(896)
Our maximum exposure to credit risk is the net carrying value of receivables. We do not hold collateral as security, nor is it our
policy to transfer (on-sell) receivables to special purpose entities. Refer to section D for more information on the risk management
policy of the Company.
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B5 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Deferred revenue
31 Mar 2021
$000
31 Mar 2020
$000
8,800
7,174
483
16,457
15,380
6,265
713
22,358
Trade payables are non-interest bearing and are normally settled on agreed terms which are generally up to 30 days. Other
payables are non- interest bearing. Deferred revenue relates to payments received in advance on sales.
Trade payables includes amounts due to entities previously considered associates, as shown below. During FY 21, the Company
fully disposed of its investments in these associates. Refer to note F7 for further details.
Trade payables
Trade payables to others
Trade payables to associate – Pyxle (Private) Limited
Trade payables to other individually not material associates
C FUNDING AND CAPITAL MANAGEMENT
C1 INTEREST-BEARING LIABILITIES
78
Current
Other interest-bearing liabilities
Non-Current
Secured bank loan facility
Other interest-bearing liabilities
31 Mar 2021
$000
31 Mar 2020
$000
16,457
22,300
–
–
46
12
16,457
22,358
31 Mar 2021
$000
31 Mar 2020
$000
1,856
1,824
364,448
2,725
367,173
379,768
3,090
382,858
Other interest-bearing liabilities are chattel mortgages over vehicles, plant and equipment. Liabilities relating to chattel
mortgages are discounted using the interest rate implicit in the financing arrangements. The average rate is 3.36%.
Secured bank loan facility
Facility A and Facility B loans are repayable on 8 September 2022. The interest on these facilities is charged at the applicable
BBSY rate + Margin. The facility is currently drawn down by $365 million (31 March 2020: $380.7 million) and is offset in the
Statement of Financial Position by a prepaid facility participation fee of $0.6 million (31 March 2020: $0.9 million).
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C1 INTEREST-BEARING LIABILITIES (CONTINUED)
Secured bank loan facility (continued)
Financing facilities are provided on a secured basis, with security given over all fixed and floating assets. Financial covenants are
in place over the Company’s Loan to Value Ratio (LVR). We have the following financing facilities available:
Borrowing Capacity under Facility A and Facility B
Guarantee Facility Capacity
Facility A and B Drawn-down
Bank guarantee utilised
Unused
C2 DERIVATIVES
Current Assets
Foreign currency contracts
Current Liabilities
Interest rate swap contracts
Foreign currency contracts
Non-Current Liabilities
Interest rate swap contracts
Foreign currency contracts
Foreign currency contract
Sell FX/Buy AUD
Sell USD Maturity 0-12 months
Sell USD Maturity 12-24 months
31 Mar 2021
$000
31 Mar 2020
$000
550,000
3,000
(365,000)
(1,454)
186,546
550,000
3,000
(380,700)
(1,454)
170,846
31 Mar 2021
$000
31 Mar 2020
$000
2,196
–
5,351
11
5,362
2,675
–
2,675
4,629
4,312
8,941
6,943
381
7,324
79
Notional Amounts
(AUD)
31 Mar 2021
$000
Notional Amounts
(AUD)
31 Mar 2020
$000
Average
Exchange Rate
31 Mar 2021
$000
Average
Exchange Rate
31 Mar 2020
$000
37,799
–
37,799
42,709
2,894
45,603
0.7143
–
0.6790
0.6912
Foreign currency contracts are attributed to forecast meat sales. As these contracts are hedge accounted, effectiveness was
assessed under the requirements of AASB 9 Financial Instruments. The effective portion of the movement has been accounted for
in Other Comprehensive Income and the ineffective portion posted to the income statement. Forward currency contracts can have
maturities of up to 36 months. These contracts are in US dollars. The total notional value of these contracts at 31 March 2021 was
AUD $37.8 million (31 March 2020: AUD $45.6 million).
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C2 DERIVATIVES (CONTINUED)
Foreign currency contract (continued)
The net fair value gain on foreign currency derivatives during the twelve months to 31 March 2021 was $2,185,000 with
$1,981,600 effective and $203,400 ineffective (12 months to 31 March 2020: $4,693,000 loss with $4,381,000 effective and
$311,000 ineffective).
Interest rate swap contracts
The Company has entered into interest rate swaps which are economic hedges. The Company fair values these contracts
by comparing the contracted rate to the market rates for contracts with the same length of maturity. Interest rate swaps are
entered in order to manage the mix of borrowings between fixed and floating rates as per our Treasury Policy. The $235 million
of swaps (swap floating rate debt for fixed) and have been designated as effective and therefore satisfy the accounting standard
requirements for hedge accounting. The swaps expire on 8 September 2022 in line with the expiry date of the bank facility.
As at the reporting date, the notional principal amounts and period of expiry of the interest rate swap contracts were as follows:
0-1 years
1-5 years
31 Mar 2021
$000
31 Mar 2020
$000
–
235,000
–
235,000
The gain or loss from remeasuring the interest rate swaps at fair value is recognised in other comprehensive income and deferred
in the hedging reserve component of equity, to the extent that the hedge is effective. It is reclassified into profit or loss when the
hedged interest expense is recognised. In the twelve months to 31 March 2021 the related loss recognised in profit or loss was
$5.1 million (twelve months to 31 March 2020: $2.7 million). There was no hedge ineffectiveness in the current or prior year.
C3 EQUITY
Opening balance
596,361,472
595,963,611
528,822
528,822
Treasury shares issued on exercise of performance
rights
80
257,043
397,861
–
–
Total contributed equity
596,618,515
596,361,472
528,822
528,822
31 Mar 2021
Shares
31 Mar 2020
Shares
31 Mar 2021
$000
31 Mar 2020
$000
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C4 CAPITAL MANAGEMENT
When managing capital, our objective is to safeguard our ability to continue as a going concern as well as to maintain optimal
returns to shareholders and benefits for other stakeholders. We also aim to maintain a capital structure that ensures the lowest
cost of capital.
We monitor capital using the gearing ratio (net debt divided by total capital plus net debt), and our target gearing ratio remains
between 20.0% to 35.0%, excluding any impacts of the adoption of AASB 16 Leases. We include within net debt, interest-bearing
loans and borrowings. For the Company’s financial risk management objectives and policies refer to section D.
Assets and capital structure
Current debt
Interest-bearing liabilities
Lease liabilities
Non-current debt
Interest-bearing liabilities
Lease liabilities
Bank loan facility (1)
Bank guarantees
Cash
Net debt
Net equity
Total capital employed
Gearing (net debt/net debt+equity)
Gearing (net debt/net debt+equity) pre-AASB 16 adoption
31 Mar 2021
$000
31 Mar 2020
$000
1,856
4,171
2,725
18,035
365,000
1,454
(8,875)
384,366
1,044,625
1,428,991
26.90%
25.74%
1,824
5,776
3,090
22,701
380,700
1,454
(18,125)
397,420
913,389
1,310,809
30.32%
28.79%
(1) The gearing ratio is calculated utilising the drawn-down balance of the bank loan facility. This is not offset for $0.6 million of prepaid borrowing costs.
C5 EARNINGS PER SHARE
81
The following reflects the income used in the basic and diluted earnings per share computations:
Net profit/(loss) attributable to ordinary equity holders of the parent (basic)
Net profit/(loss) attributable to ordinary equity holders of the parent (diluted)
31 Mar 2021
$000
31 Mar 2020
$000
45,474
45,474
31,317
31,317
The following reflects the weighted average number of ordinary shares used in the basic and diluted earnings per
share computations:
Weighted average number of ordinary shares (basic)
Adjustments for calculation of diluted earnings per share:
Weighted average options and rights
Weighted average number of ordinary shares (diluted) as at 31 March
31 Mar 2021
Shares
31 Mar 2020
Shares
596,519,923
596,208,818
625,230
2,183,354
597,145,153
598,392,172
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
C6 DIVIDENDS
No final or interim dividends were declared and/or paid during the twelve months to 31 March 2021 (twelve months to 31 March
2020: nil). There are no franking credits available for the subsequent financial years (31 March 2020: nil).
D FINANCIAL RISK MANAGEMENT
Exposure to key financial risks are managed in accordance with our financial risk management policy. The objective of the
policy is to support the delivery of the Company’s financial targets while protecting future financial security. The Audit and Risk
Management Committee under the authority of the Board hold primary responsibility for identification and control of financial
risks. The Board reviews and agrees policies for managing each of the risks identified. Different methods are used to measure
and manage the different types of risks to which the Company is exposed. The main risks arising from financial instruments are
interest rate, foreign currency, commodity, credit and liquidity risk.
As at 31 March 2021 and 31 March 2020, the only financial instruments recognised at fair value were interest rate swaps and
forward foreign currency contracts. These are valued using a level 2 method (refer to note C2) which estimates fair value using
inputs that are observable either directly (as prices) or indirectly (derived from prices). The carrying amount of all other financial
assets and liabilities approximates the fair value.
D1 INTEREST RATE RISK
Our policy is to manage our finance costs using a mix of fixed and variable rate debt. In accordance with our Treasury Policy,
we maintain at least 50% of our borrowings at fixed rates which are carried at amortised cost. It is acknowledged that fair
value exposure is a by-product of our attempt to manage our cash flow volatility arising from interest rate changes. To manage
this mix in a cost-efficient manner, we enter into interest rate swaps, in which we agree to exchange, at specified intervals, the
difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.
We regularly analyse our interest rate exposure taking into consideration potential renewals of existing positions, alternative
financing and the mix of fixed and variable interest rates.
In 2018 the Company entered into interest rate swaps totalling $235 million. These swaps expire on 8 September 2022 in line
with the expiry date of the bank facility. The swaps have been designated as effective interest rate swaps and therefore satisfy
the accounting standard requirements for hedge accounting. The net unrealised fair value loss on interest rate swaps during the
twelve months to 31 March 2021 was $8.0 million (31 March 2020: $11.6 million). The Company fair values these contracts by
comparing the contracted rate to the future market rates for contracts with the same length of maturity. At 31 March 2021, after
taking into account the effect of interest rate swaps, approximately 64.4% (31 March 2020: 61.7%) of our borrowings are at a fixed
rate of interest.
82
At the reporting date, we had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk:
Financial assets:
Cash assets
Financial liabilities:
Bank loan
Interest rate swaps
Net exposure
31 Mar 2021
Shares
31 Mar 2020
Shares
8,875
18,125
(130,000)
(8,026)
(129,151)
(145,700)
(11,572)
(139,147)
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D1 INTEREST RATE RISK (CONTINUED)
The following sensitivity analysis is based on reasonably possible changes in interest rates applied to the interest rate risk
exposures in existence at the reporting date. Such a reasonably possible change is determined using historical interest rate
movements for the preceding two-year period.
Judgements of reasonably possible movements:
31 Mar 2021
+1% (100 basis points)
–1% (100 basis points)
31 Mar 2020
+1% (100 basis points)
–1% (100 basis points)
(1) Figures represent an increase/(decrease) in other components of equity.
D2 FOREIGN CURRENCY RISK
Effects
on profit
before tax
$000
Effects
on other
Components
of equity(1)
$000
(1,300)
1,300
(1,457)
1,457
3,525
(3,525)
5,875
(5,875)
A significant portion of our revenue is received in US dollars and the prices received are influenced by movements in exchange
rates, particularly that of the US dollar relative to the Australian dollar.
We have transactional currency exposures (refer note C2) arising from sales of meat in currencies other than in Australian
dollars. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the functional currency of the relevant group entity. The risk is measured through a forecast of highly probable
US dollar sales. The risk is hedged with the objective of minimising the volatility of the Australian currency revenue of highly
probable forecast US dollar denominated sales.
In compliance with our Treasury Policy we have hedged our foreign exchange exposure arising from forecasted cash flows from
sales less the forecast cash outflows from purchases, through forward currency contracts or foreign exchange contracts. These
foreign exchange contracts have been designated as effective hedges and therefore satisfy the accounting standard requirements
for hedge accounting. This resulted in a $2,185,000 movement in other comprehensive income and a $203,400 movement in profit
and loss in the twelve months to 31 March 2021 (31 March 2020: $4,693,000 movement in other comprehensive income and a
$311,000 movement in profit and loss).
83
Our Treasury Policy is to hedge between 50% and 90% of net US dollar cash flows up to one quarter in advance, and between 25%
and 75% of net cash inflows for the period three months to 12 months in advance. It also allows us to hedge between 0% and 50% of
net cash inflows for period 13 months to 24 months in advance. For the year ended 31 March 2021, approximately 58% and 33% of
highly probable net cash inflows were hedged for the periods 0-3 months in advance and 3-12 months in advance, respectively.
At reporting date, we had the following mix of financial assets and liabilities exposed to foreign exchange risk.
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D2 FOREIGN CURRENCY RISK (CONTINUED)
Financial assets
Derivatives
Trade receivables
Financial liabilities
Derivatives
Net exposure
31 Mar 2021
USD $000
31 Mar 2020
USD $000
2,196
1,552
(11)
3,737
–
3,033
(4,693)
(1,660)
At 31 March 2021, had the Australian Dollar moved and all other variables held constant, profit before tax and equity would
have been affected as illustrated in the table below. The sensitivity analysis is based on a reasonably possible movement using
observations of historical spot rates for the preceding two-year period.
Judgements of reasonably possible movements:
31 Mar 2021
AUD/USD +10%
AUD/USD -10%
31 Mar 2020
AUD/USD +10%
AUD/USD -10%
D3 COMMODITY PRICE RISK
Effects on profit
before tax
$000
Effects on equity
$000
301
(368)
304
(371)
2,936
(3,589)
4,269
(5,217)
We have transactional commodity price risk primarily in the sale of cattle and beef. Other commodity price exposures include feed
inputs for our feedlot operations and diesel. Purchases of commodities may be for a period of up to 12 months and partial hedging
of these inputs may be for periods of up to 24 months.
84
Our exposure to derivative commodity price risk is minimal. We do not currently apply hedge accounting to our beef commodity
price exposures as the derivatives do not meet the accounting standard requirements for hedge accounting. However, we have
a policy whereby we will forward sell a significant proportion of our feedlot cattle sales for a period of up to 6 months. These
contracts are entered into and continue to be held for the purpose of delivery of feedlot cattle arising from our expected sale
requirements; they are classified as non-derivative and are not required to be fair valued.
We mitigate the price risk for the Company through internal production, on-site storage & entering into forward purchase
contracts for grain & roughage commodities. As at 31 March 2021, stock on hand was approximately 33% (31 March 2020: 31%) of
our expected grain & roughage usage for the coming 12 months. We had forward purchased approximately 63% (31 March 2020:
55%) of our expected grain & roughage purchases for the coming 12 months. These forward purchases include expected Internal
Supply. Without the Internal Supply, we had forward purchased approximately 21% (31 March 2020: 25%) of our expected grain
& roughage purchases for the coming 12 months. These contracts are entered into and continue to be held for the purpose of grain
purchase requirements; they are classified as non-derivative and are not required to be fair valued. At the reporting date we had no
commodity price exposures on forward sales and purchase contracts that are not designated as cash flow hedges.
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
D4 CREDIT RISK
Credit risk arises from our financial assets, which comprise cash, trade and other receivables and derivative instruments. Our
exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of
the financial assets (as outlined in each applicable note). We do not hold any credit derivatives to offset our credit exposure.
We manage our credit risk by maintaining strong relationships with a limited number of quality customers. The risk is also
mitigated by paying an annual insurance premium in relation to certain sales overseas. In addition, receivable balances are
monitored on an ongoing basis with the result that our experience of bad debts has not been significant. We have no significant
concentrations of credit risk. Credit risk and expected credit loss relating to trade receivables is disclosed in note B4.
D5 LIQUIDITY RISK
Liquidity risk arises from our financial liabilities and our subsequent ability to repay the financial liabilities as and when they fall
due. Our objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and leases.
We manage our liquidity risk by monitoring the total cash inflows and outflows expected on a monthly basis. We have established
comprehensive risk reporting covering our business units that reflect expectations of management of the expected settlement of
financial assets and liabilities.
The Company is exposed to counterparty credit risk from its operating activities (primarily from trade receivables) and from
its financing activities. As at 31 March 2021, the mark-to-market value of derivative asset positions is net of a credit valuation
adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on
the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised
at fair value.
The following liquidity risk disclosures reflect all contractually fixed repayments and interest resulting from recognised financial
liabilities and derivatives as of 31 March 2021. The timing of cash flows for liabilities is based on the contractual terms of the
underlying contract. However, where the counterparty has a choice of when the amount is paid, the liability is allocated to the
earliest period in which we can be required to pay. When we are committed to make amounts available in instalments, each
instalment is allocated to the earliest period in which we are required to pay.
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows of financial
instruments. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used
in our ongoing operations such as property, plant and equipment and investments in working capital (e.g. inventories and trade
receivables). These assets are considered in the Company’s overall liquidity risk.
85
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
D5 LIQUIDITY RISK (CONTINUED)
31 Mar 2021
Financial assets
Cash
Trade and other receivables
Derivatives
Financial liabilities
Trade and other payables
Lease liabilities
Interest-bearing liabilities
Derivatives
Net maturity
31 Mar 2020
Financial assets
Cash
Trade and other receivables
Derivatives
Financial liabilities
Trade and other payables
Lease liabilities
Interest-bearing liabilities
86
Derivatives
Net maturity
E UNRECOGNISED ITEMS
E1 COMMITMENTS
Less
than
6 months
$000
8,875
7,202
–
(16,457)
(2,656)
(4,727)
(2,748)
6-12
months
$000
1-2
years
$000
2-5
years
$000
Total
$000
Carrying
amount
$000
–
–
–
–
–
–
–
–
–
–
–
–
8,875
7,202
–
8,875
7,202
–
(16,457)
(16,457)
(2,236)
(3,945)
(15,227)
(24,064)
(22,206)
(4,206)
(373,473)
(11,230)
(393,636)
(369,029)
(2,748)
(2,748)
–
(8,244)
(8,037)
(10,511)
(9,190)
(380,166)
(26,457)
(426,324)
(399,652)
18,125
9,907
–
(22,358)
(3,071)
(5,458)
(2,136)
–
–
–
–
–
–
–
–
–
–
–
–
18,125
9,907
–
18,125
9,907
–
(22,358)
(22,358)
(3,081)
(4,892)
(19,172)
(30,216)
(28,477)
(5,307)
(165,935)
(241,300)
(418,000)
(384,682)
(2,136)
(4,272)
(6,407)
(14,951)
(16,265)
(4,991)
(10,524)
(175,099)
(266,879)
(457,493)
(423,750)
We have entered into forward purchase contracts for $7.8 million worth of grain commodities as at 31 March 2021 (31 March 2020:
$7.3 million) and forward purchase contracts for $12 million worth of cattle as at 31 March 2021 (31 March 2020: $39.5 million).
The contracts are expected to be settled within 12 months from balance date.
Capital expenditure of $0.7 million has been contracted in respect of property, plant and equipment as at 31 March 2021
(31 March 2020: $nil).
E2 CONTINGENCIES
At 31 March 2021, there are a number of long standing native title claims over our pastoral holdings. Settlement negotiations
between the Government, claimants and pastoral interests are ongoing, and we do not expect any material impact on our
operations to result from this.
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F OTHER
F1 PROPERTY, PLANT AND EQUIPMENT AT COST
31 Mar 2021
Opening balance
Additions and transfers
Disposals
Depreciation
Closing balance
Cost
Accumulated depreciation and impairment
31 Mar 2020
Opening balance
Additions and transfers
Disposals
Depreciation
Closing balance
Cost
Accumulated depreciation and impairment
Industrial property
and improvement
$000
Plant and
equipment
$000
Capital work
in progress
$000
30,998
2,361
–
(409)
32,950
80,374
(47,424)
26,084
6,296
(394)
(6,302)
25,684
165,452
(139,768)
3,010
(1,528)
–
–
1,482
1,482
–
Industrial property
and improvement
$000
Plant and
equipment
$000
Capital work
in progress
$000
31,278
120
–
(400)
30,998
78,013
(47,015)
24,380
8,313
(206)
(6,403)
26,084
159,550
(133,466)
1,221
1,789
–
–
3,010
3,010
–
Total
$000
60,092
7,129
(394)
(6,711)
60,116
247,308
(187,192)
Total
$000
56,879
10,222
(206)
(6,803)
60,092
240,573
(180,481)
Impairment of property, plant and equipment at cost
The Livingstone Beef Cash-Generating Unit (CGU) is the only location with property and improvements measured under the cost
model by the Company per AASB 116 Property, Plant and Equipment. Under the requirements of AASB 136 Impairment of Assets,
at each reporting period an assessment of internal and external factors must be made to determine whether there are indicators of
impairment. Where indicators exist, a formal estimate of the recoverable amount of these assets is undertaken.
87
During FY21 operations continue to be suspended at Livingstone Beef. Management have not noted any indicators of impairment
as at 31 March 2021.
The calculation of the recoverable amount for Livingstone Beef requires management to make key estimates with relation to a
number of assumptions that are inherently uncertain. The recoverable amount is sensitive to changes in these key assumptions
and accordingly the estimate of the recoverable amount could change in future reporting periods.
F2 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Right-of-use assets
Non-current
Lease liabilities
Current
Non-current
31 Mar 2021
$000
31 Mar 2020
$000
21,612
28,159
(4,171)
(18,035)
(22,206)
(5,776)
(22,701)
(28,477)
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F2 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED)
When measuring lease liabilities for Property the Company discounts payments using the incremental borrowing rate as at the
commencement date of the lease. When measuring lease liabilities for Property leases previously classified as operating leases, the
Company discounted lease payments using its incremental borrowing rate at 1 April 2019. The average rate applied is 3.85%.
Reconciliations of movements in Right-of-use assets and amounts recognised in the Income Statement relating to leases are
shown below.
Right of use assets
Balance at 30 March 2020
Depreciation charge for the year
Derecognition of terminated lease
$000
28,159
(5,725)
(822)
21,612
Right-of-use assets relate to buildings, property and vehicles leased by the Company excluding Pastoral property held under
perpetual leases. During the period the Company chose to not exercise a lease option for Airlie, a central QLD pastoral property,
and the lease agreement therefore terminated. The right of use asset relating to this lease was derecognised.
Amounts recognised in the income statement relating to leases
Interest on lease liabilities
Expenses relating to short term and low-value leases
$000
941
1,175
The Company has elected to expense short-term and low value leases on a straight-line basis over the lease term, as permitted
under the recognition exemptions of AASB 16. The amount expensed during the period relating to short-term and low value lease
assets was $1.2 million.
Amounts recognised in the statement of cash flows relating to leases
Payment of interest and finance costs
Principal repayments of leases
88
Total cash outflow relating to leases
Refer to note D5 for contractual cashflows and maturity analysis.
31 Mar 2021
$000
31 Mar 2020
$000
(924)
(5,181)
(6,105)
(763)
(3,618)
(4,381)
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F3 TAX
The major components of tax are:
Income statement
Current income tax
Current income tax charge/(benefit)
Deferred income tax
Relating to origination and reversal of temporary differences
Under/(over) provision in prior years
Research and development claims from prior years
Income tax expense/(benefit) in the income statement
Statement of changes in equity
Deferred income tax
Net gain/(loss) on cash flow hedges
Net gain on revaluation of land and buildings
Income tax expense reported in equity
Tax reconciliation
Accounting profit/(loss) before tax
At the statutory income tax rate of 30%
Research and development offsets
Other items (net)
Income tax expense/(benefit) in the income statement
Deferred income tax in the balance sheet relates to:
Deferred tax liabilities
Adjustments to land, buildings and improvements
Revaluations of trading stock for tax purposes
Other
Offsetting deferred tax asset
Table continued overleaf
31 Mar 2021
$000
31 Mar 2020
$000
–
–
20,573
–
–
20,573
(217)
32,612
32,395
66,047
19,814
–
759
20,573
(123,028)
(32,577)
(2,499)
39,337
15,837
(26)
-
15,811
677
19,083
19,760
47,128
14,138
–
1,673
15,811
(90,387)
(9,098)
(7,212)
42,179
89
(118,767)
(64,518)
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F3 TAX (CONTINUED)
The major components of tax are:
Deferred tax assets
Accruals and other
Capitalised expenses accelerated for book purposes
Interest rate swaps
Leave entitlements and other provisions
Franking deficit tax
Research and development offsets
Carried forward losses
Deferred income
Individually insignificant balances
Total deferred tax asset (offset against deferred tax liability)
Deferred income tax in the income statement relates to:
Revaluations of trading stock for tax purposes
Accruals and other
Capitalised expenses accelerated for book purposes
Other
Total deferred tax expense/(benefit)
F4 OTHER EARNINGS DISCLOSURES
90
Other income(1)
Total other income
Interest expense
Other finance costs
Total finance costs
Remuneration and on-costs
Superannuation and post-employment benefits
Other employment benefits
Share-based payments expense
Total employee expenses
Other earnings information:
Lease payments – short term and low value leases
Commodity and foreign currency expense/(benefit)
31 Mar 2021
$000
31 Mar 2020
$000
84
33
1,605
3,332
1,012
4,610
28,395
145
121
39,337
24,518
204
32
(4,181)
20,573
288
65
1,389
3,080
1,012
4,610
29,434
214
2,087
42,179
15,456
–
38
343
15,837
31 Mar 2021
$000
31 Mar 2020
$000
9,700
9,700
13,776
499
14,275
40,578
2,921
3,013
148
46,660
1,175
1,825
4,174
4,174
14,556
379
14,935
40,745
2,976
3,927
255
47,903
2,122
2,295
(1) Other income includes the JobKeeper Wage Subsidy payments ($6.7 million) and the recognition of 78,243 Australian Carbon Credit Units (ACCUs)
awarded during the year.
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F5 RESERVES
At 1 April 2019
Revaluation of land and buildings
Tax effect on revaluation of land and buildings
Net movement in cash flow hedges, net of tax
Revaluation of foreign currency operations
Share based payment
At 31 March 2020
At 1 April 2020
Revaluation of land and buildings
Tax effect on revaluation of land and buildings
Net movement in cash flow hedges, net of tax
Revaluation of foreign currency operations
Share based payment
At 31 March 2021
Asset
revaluation
reserve
$000
Capital
profits
reserve
$000
Cash flow
hedge
reserve
$000
Foreign
currency
translation
reserve
$000
Employee
equity
Benefits
reserve
$000
Total
$000
350,257
84,762
(6,177)
(10)
6,537
435,369
63,611
(19,083)
–
–
–
–
–
–
–
–
–
–
(6,305)
–
–
–
–
–
(762)
–
–
–
–
–
255
63,611
(19,083)
(6,305)
(762)
255
394,785
84,762
(12,482)
(772)
6,792
473,085
394,785
84,762
(12,482)
(772)
6,792
473,085
108,707
(32,612)
–
–
–
–
–
–
–
–
–
–
8,845
–
–
470,880
84,762
(3,637)
–
–
–
674
–
(98)
–
–
–
–
148
108,707
(32,612)
8,845
674
148
6,940
558,847
The asset revaluation reserve is used to record increments and decrements in the fair value of property and improvements to the
extent that they offset one another. The reserve can only be used to pay dividends in limited circumstances.
The capital profits reserve is used to accumulate realised capital profits. The reserve can be used to pay dividends.
The cash flow hedge reserve is used to record the portion of movements in fair value of a hedging instrument in a cash flow hedge
that is recognised in other comprehensive income.
The foreign currency translation reserve is used to accumulate the net impact of translating our US denominated foreign currency
balances and transactions into our functional currency, Australian dollars. The employee equity benefits reserve is used to record
the value of equity benefits provided to employees as part of their remuneration. Refer to note F8 for further details of these plans.
91
F6 INVESTMENTS
Equity accounted investments in associate – Pyxle (Private) Limited
Other equity accounted investments in individually not material associates
Other investments
31 Mar 2021
$000
31 Mar 2020
$000
–
50
238
288
1,765
1,271
366
3,402
Disposal of Investments in Associates
At 31 March 2020, The Company held a 31.82% interest in Pyxle (Private) Limited, an IT support services entity considered to be
an associate due to the Company having held significant but not controlling influence over the entity. Additionally, a number of
other investments were held in individually not material associates as at 31 March 2020.
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F6 INVESTMENTS (CONTINUED)
Disposal of Investments in Associates (continued)
In September 2020, the Company fully disposed of its interest in this entity, and other individually not material associates as part
of a bundle sale. Cash proceeds from this sale amounted to $2.6 million and a corresponding loss on disposal of $0.4 million has
been recorded in the statement of profit and loss.
F7 RELATED PARTIES
Compensation for key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payment
Termination benefits
Long-term benefits
Total compensation
31 Mar 2021
$000
31 Mar 2020
$000
5,859
207
104
363
9
6,542
4,498
180
178
–
3
4,859
Transactions with other related parties
During the year, the Company transacted with associates and other related parties. Associates are entities considered to be related
parties, due to the Company having significant but not controlling influence over the entity.
Transactions with associates for the year ended 31 March
Purchase of goods or services from associates – Pyxle (Private) Limited
Other transactions with individually not material associates
Transactions with individually not material associates for the year ended 31 March
92
Sales of goods or services to associates
Purchase of goods or services from other associates
Dividends received from associates
Other transactions with associates
(1)
During the year ended 31 March 2021, AACo fully disposed of its interest in these associates
31 Mar 2021
$000
31 Mar 2020
$000
(125)(1)
(3)
(128)
(1,572)
(299)
(1,871)
31 Mar 2021
$000
31 Mar 2020
$000
–
(52)(1)
–
49
(3)
–
(486)
187
-
(299)
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F8 SHARE-BASED PAYMENTS
The share-based payment plans are described below. During 2021, expenses arising from equity settled share-based payment
transactions were $148,000 (31 March 2020: $255,000).
Executive Option Plan (EOP)
The Company has one Executive Option Plan (EOP) for the granting of non-transferable options to the Managing Director/ Chief
Executive Officer, senior executives and middle management with more than twelve months’ service at the grant date. There will
be no further grants under this Plan, including none for 2020 and 2021.
Performance rights plan (PRP)
The Company’s Performance Rights Plan has been in place since 2011 and has taken the place of the option plan for future
incentive awards comprising performance rights. The performance rights will remain until such time as they are either exercised
or the rights lapse. The performance rights have a nil exercise price. Vesting of the performance rights is dependent on the
satisfaction of a service vesting condition and/or a performance condition. Any performance rights which fail to meet the service
condition on the vesting date will lapse immediately. Performance rights issued are subject to: external performance conditions
(TSR outperformance of S&P/ASX Small Ordinaries Accumulated Index; ASX Code: AXSOA); internal performance conditions
(EPS performance based on compound % growth rates over 3 financial years following issue of the performance rights); and
termination/change of control provisions. Once the performance rights have vested, they are automatically exercised and shares
in AACo issued to either the AACo Employee Share Scheme Trust (EST) or acquired on-market by the EST Trustee on behalf of
the participant.
Long-term incentives
Following an extensive review of its remuneration practises for employees and executives, the Board approved the Company’s
adoption of a Long Term Incentive (LTI) Plan on 9 May 2017 (LTI plan implementation date). The LTI Plan better aligns
remuneration of the Company’s senior executives with the long-term strategic goals of the Company.
The introduction of an LTI Plan is consistent with the Company’s objectives for remuneration, which include providing
competitive total rewards to attract and retain high calibre senior executives, having a meaningful portion of remuneration “at
risk” and, above all, creating value for shareholders.
It is anticipated that performance rights under the LTI Plan will be granted in a number of rounds. The number of performance
rights (if any) granted to eligible persons in each grant round and the performance conditions applying to the vesting of those
performance rights will be determined at the discretion of the Board.
93
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F8 SHARE-BASED PAYMENTS (CONTINUED)
Performance rights plan (PRP) (continued)
Long-term incentives (continued)
It was determined by the Board that there will be four grant rounds in total. The following summary reflects the key features of the
first grant round and what is currently contemplated by the Board with respect to subsequent grant rounds:
Feature
Description
Timing of grant
Performance condition
Performance period
Determination of market capitalisation of the Company
for the purposes of the LTI Plan
Vesting period
94
Number of available performance rights
Grants of performance rights in a grant round will not be made unless and until the
specific ‘commencing’ market capitalisation of the Company for that grant round
is achieved.
The commencing market capitalisation of the Company for the first grant round was
the market capitalisation of the Company on the LTI Plan Implementation Date.
The performance condition which applies to the vesting of performance rights in a
grant round is the achievement of the specific ‘target’ market capitalisation of the
Company during the performance period for that grant round.
The performance condition for the first grant round was satisfied on 5 June 2017.
The performance period for each grant round is calculated by reference to the target
market capitalisation of the Company for that grant round and an assumed annualised
growth rate of 20%.
For the purposes of calculating the market capitalisation of the Company in order
to determine if the commencing market capitalisation of the Company or the target
market capitalisation of the Company for each grant round has been achieved, the
twenty day volume weighted average price (VWAP) of ordinary shares in the capital of
the Company will be used.
In respect of each grant round, there is a four-year staggered vesting period for
performance rights in that grant round which commences on satisfaction of the
performance condition for that grant round.
In each grant round, eligible persons may be offered a percentage of the
“Total Available
Performance Rights” for that grant round (rounded down to the nearest
whole number).
In respect of each grant round, the number of “Baseline Shares” will be the number
of ordinary shares in the Company acquired on market by the AACo Employee Share
Trust in respect of that grant round having an aggregate share acquisition price of
$5 million.
In respect of each grant round, the number of “Total Available Performance Rights”
will be
(a) the number of Baseline Shares for that grant round; plus
(b) the number of any Total Available Performance Rights for previous grant rounds
which, at the time of completion of acquisition of all of the Baseline Shares for
that grant round and all previous grant rounds, are not notionally allocated to a
previous grant round
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For the twelve months to 31 March 2021
F8 SHARE-BASED PAYMENTS (CONTINUED)
Performance rights plan (PRP) (continued)
Long-term incentives (continued)
Feature
Description
Lapsing conditions
Change of control event
On market acquisition of shares
Holders of performance rights will be entitled to exercise those performance rights if
they have vested and have not otherwise lapsed.
The circumstances in which performance rights may lapse include non-satisfaction of
performance conditions or ceasing employment with the Company group. If the holder
of performance rights ceases to be an employee as a result of an “Uncontrollable Event”
(e.g. death, permanent disablement, retirement, retrenchment, or such other circumstances
which the Board determines is an Uncontrollable Event), any unvested performance
rights held by that person are expected to continue to be subject to the requirements
for vesting and exercise applying to those performance rights, unless the Board
determines that the vesting conditions applying to some or all of those performance
rights will be waived or that some or all of those performance rights will lapse.
If a change of control event for the Company occurs, the treatment of any unvested
performance rights will be within the discretion of the Board to determine
The requirement to deliver shares in the Company upon the vesting and exercise
of performance rights under the LTI Plan must be satisfied by way of on market
acquisition of shares in the Company.
The applicable commencing market capitalisation of the Company, performance condition and performance period for each
contemplated grant round are as set out in the following table:
Commencing market
capitalisation of the company
Performance condition
(targeted market capitalisation
of the company)
Performance period (calculated
using an assumed annualised
growth rate of 20%)
First grant round
The market capitalisation of
the Company on the LTI Plan
Implementation Date
$1 billion
Second grant round
$1 billion
$1.5 billion
Third grant round
$1.5 billion
$2 billion
Fourth grant round
$2 billion
$2.5 billion
95
Within 2 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 September 2017)
Within 9 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 June 2019)
Within 16 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
31 March 2021)
Within 22 quarters of the LTI
Plan Implementation Date
(i.e. performance period ends
30 September 2022)
The total number of shares purchased for the LTI Plan grant rounds one and two was 6,764,848 at an average price per share of $1.478.
The performance condition for the first grant round of targeted market capitalisation of $1 billion was achieved on 5 June 2017.
The rights associated to the first grant round have been granted to the relevant senior executives at a fair value per right of $1.07.
The second grant round was forfeited on 30 June 2019 as the performance condition of target market capitalisation of $1.5 billion
was not met. The third grant round it was forfeited on 31 March 2021 as the performance condition of target market capitalisation
of $2 billion was not met.
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F8 SHARE-BASED PAYMENTS (CONTINUED)
Equity settled awards outstanding:
The table below shows the number (No.) and weighted average exercise prices (WAEP) of options under the Executive Option
Plan (EOP) and performance rights outstanding under the Performance Right Plans (PRP). There have been no cancellations or
modifications to any of the plans during the twelve months to 31 March 2021.
31 Mar 2021
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average remaining contractual life (days)
Weighted average fair value at grant date
Range of exercise prices ($)
31 Mar 2020
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average remaining contractual life (days)
96
Weighted average fair value at grant date
Range of exercise prices ($)
EOP
No.
EOP
WAEP $
–
–
–
–
–
–
–
–
–
–
–
–
–
–
EOP
No.
EOP
WAEP $
–
–
–
–
–
–
–
–
–
–
–
–
–
–
PRP
No.
793,046
–
–
(269,251)
523,795
–
69
1.07
–
PRP
No.
6,127,573
–
(4,936,666)
(397,861)
793,046
–
305
1.07
–
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
F9 CONTROLLED ENTITIES
The consolidated financial statements include the following controlled entities:
Name of entity
Parent Entity
Australian Agricultural Company Limited
Controlled Entities
A. A. Company Pty Ltd
Austcattle Holdings Pty Ltd
A. A. & P. Joint Holdings Pty Ltd
Shillong Pty Ltd
James McLeish Estates Pty Limited
Wondoola Pty Ltd
Waxahachie Pty Ltd
Naroo Pastoral Company Pty Limited
AACo Nominees Pty Limited
Chefs Partner Pty Ltd
Polkinghornes Stores Pty Limited
Northern Australian Beef Limited
AACo Innovation Pty Ltd
AACo Innovation (US) Pty Ltd
AACo Innovation (US) LLC
AACo Operations (US) LLC
AACo Singapore Holdings Pty Ltd
Notes
Country of
incorporation
31 Mar 2021
% of shares held
31 Mar 2020
% of shares held
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
of America
United States
of America
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(a) These companies have entered into a deed of cross guarantee dated 22 November 2006 (amended 1 April 2015) with
Australian Agricultural Company Limited which provides that all parties to the deed will guarantee to each creditor payment
in full of any debt of each company participating in the deed on winding-up of that company. As a result of a Class Order issued
by the Australian Securities and Investments Commission, these companies are relieved from the requirement to prepare
financial statements. The Consolidated Income Statement and consolidated Statement of Financial Position of all entities
included in the class order “closed Group” are set out in (b).
97
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
F9 CONTROLLED ENTITIES (CONTINUED)
(b) Financial information for class order Closed Group:
Current Assets
Cash
Trade and other receivables
Inventories and consumables
Livestock
Other assets
Total Current Assets
Non-Current Assets
Livestock
Property, plant and equipment
Intangible assets
Right-of-use assets
Investments
Intercompany receivable
Total Non-Current Assets
Total Assets
98
31 Mar 2021
$000
31 Mar 2020
$000
8,087
7,201
26,543
202,730
4,084
248,645
334,641
975,916
2,895
21,612
283
3,376
17,505
9,907
26,571
186,995
2,895
243,873
285,974
870,652
1,995
28,159
127
6,689
1,338,723
1,587,368
1,193,596
1,437,469
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FINANCIAL STATEMENTS
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F9 CONTROLLED ENTITIES (CONTINUED)
(b) Financial information for class order Closed Group (continued):
Current Liabilities
Trade and other payables
Provisions
Interest Bearing Liabilities
Lease liabilities
Derivatives
Total Current Liabilities
Non-Current Liabilities
Provisions
Interest Bearing Liabilities
Lease liabilities
Derivatives
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity:
Contributed equity
Reserves
Retained earnings/(losses)
Total Equity
31 Mar 2021
$000
31 Mar 2020
$000
6,888
3,562
1,856
4,171
5,362
14,536
2,962
1,824
5,776
8,941
21,839
34,039
2,881
367,173
18,035
2,675
118,767
509,531
531,370
1,055,998
526,964
558,940
(29,906)
1,055,998
2,891
382,858
22,701
7,324
64,518
480,292
514,331
923,138
526,964
473,859
(77,685)
923,138
99
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
F9 CONTROLLED ENTITIES (CONTINUED)
(b) Financial information for class order Closed Group (continued):
Income Statement of the Closed Group
Meat sales
Cattle sales
Cattle fair value adjustments
Cost of meat sold
Deemed cost of cattle sold
Cattle and feedlot expenses
Gross operating margin
Other income
Employee expenses
Administration and selling costs
Other operating costs
Property costs
Depreciation and amortisation
Profit/(Loss) before finance costs and income tax expense
Net finance costs
Profit/(Loss) before income tax
Income tax benefit
100
Net Profit/(Loss) after tax
31 Mar 2021
$000
31 Mar 2020
$000
199,974
65,548
265,522
218,037
483,559
(150,045)
(63,257)
(76,674)
193,583
9,697
(45,449)
(32,913)
(21,039)
(2,638)
(18,619)
82,622
(14,270)
68,352
(20,573)
47,779
229,607
104,539
334,146
285,810
619,956
(199,779)
(99,428)
(130,001)
190,748
4,174
(45,044)
(35,807)
(25,756)
(3,258)
(17,894)
67,163
(14,928)
52,235
(15,811)
36,424
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FINANCIAL STATEMENTS
For the twelve months to 31 March 2021
F10 PARENT ENTITY
Current assets
Non-Current assets
Total Assets
Current liabilities
Non-Current liabilities
Total Liabilities
Net Assets
Contributed equity
Reserves
Accumulated losses
Total Equity
Profit/(Loss) of the parent entity
Total comprehensive profit/(loss) of the parent entity
31 Mar 2021
$000
31 Mar 2020
$000
4,167
661,395
665,562
8,038
364,448
372,486
293,076
538,822
27,376
(273,122)
293,076
(74,779)
(66,074)
15,710
739,219
754,929
16,291
379,768
396,059
358,870
538,822
18,391
(198,343)
358,870
(12,118)
(20,053)
Australian Agricultural Company Limited and the wholly owned entities listed in note F9 are parties to a deed of cross guarantee
as described in F9. The nature of the deed of cross guarantee is such that each Company which is party to the deed guarantees, to
each creditor, payment in full of any debt in accordance with the deed of cross guarantee. No deficiency of net assets existed for
the Company as at 31 March 2021. No liability was recognised by Australian Agricultural Company Limited in relation to these
guarantees, as the fair value of the guarantees is immaterial.
The accounting policies of the parent entity, which have been applied in determining the financial information shown above, are
the same as those applied in the consolidated financial statements except for investments in subsidiaries are accounted for at cost
in the financial statements of Australian Agricultural Company Limited.
F11 AUDITOR’S REMUNERATION
Remuneration received, or due and receivable, by KPMG for:
An audit or review of the financial report of the entity and any other entity in the
consolidated Group
Review of draft sustainability report
Total
F12 SIGNIFICANT EVENTS AFTER BALANCE DATE
31 Mar 2021
$
31 Mar 2020
$
101
365,000
–
365,000
380,000
19,600
399,600
There have been no other significant events after the balance date which require disclosure in the financial report.
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G POLICY DISCLOSURES
G1 CORPORATE INFORMATION
Australian Agricultural Company Limited is a company limited by shares, incorporated and domiciled in Australia. The
Company’s shares are publicly traded on the Australian Securities Exchange (ASX).
The consolidated financial statements of Australian Agricultural Company Limited (AACo, the Company or parent Company) for
the year ended 31 March 2021 were authorised for issue in accordance with a resolution of the Directors on 20 May 2021.
We recommend the financial statements be considered together with any public announcements made by the Company during the
year ended 31 March 2021 in accordance with the Company’s continuous disclosure obligations arising under the Corporations
Act 2001 and ASX listing rules.
The nature of the operations and principal activities of Australian Agricultural Company Limited are described in the
Directors’ Report.
G2 BASIS OF PREPARATION
The financial statements are general purpose financial statements, prepared by a for-profit entity, in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the
Australian Accounting Standards Board.
(a) Terminology used in the financial statements
In these financial statements, any references to we, us, our, AACo, the Company and consolidated, all refer to Australian
Agricultural Company Limited and the entities it controlled at the financial year end or from time to time during the financial year.
Any references to subsidiaries or controlled entities in these financial statements refer to those entities that are controlled and
consolidated by Australian Agricultural Company Limited.
(b) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for land and buildings (with the exception of
industrial land), livestock and derivative financial instruments, which have been measured at fair value. Under the historical cost
basis, assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire
them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or
in some circumstances, at the amounts of cash expected to be paid to satisfy the liability in the normal course of business.
102
(c) Compliance with IFRS
The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).
(d) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the
relevant notes.
(e) Rounding amounts in the financial statements have been rounded to the nearest thousand dollars for presentation
where noted ($000)
This has been completed under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.
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FINANCIAL STATEMENTS
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G3 ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
(a) New accounting standards and interpretations
The Company adopted no new and amended Australian Accounting Standards and AASB Interpretations during the year ended
31 March 2021.
(b) Basis of consolidation
The consolidated financial statements comprise the financial statements of Australian Agricultural Company Limited, and its
subsidiaries (as outlined in note F9) as at 31 March each year or from time to time during the year. All intra-group balances and
transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries are all those entities which we control as a result of us being exposed, or have rights, to variable returns from our
involvement with the subsidiary and we have the ability to affect those returns through our power over the subsidiary. Such
control generally accompanies a shareholding of more than one-half of the subsidiaries voting rights. We currently hold 100% of
the voting rights of all our subsidiaries. We consolidate subsidiaries from the date on which control commences and up until the
date on which there is a loss of control.
We account for the acquisition of our subsidiaries using the acquisition method of accounting. The acquisition method of
accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities
assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are
measured at their acquisition date fair values. Any excess of the fair value of consideration over our interest in the fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities is recognised as goodwill.
(c) Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires us to make judgements, estimates and assumptions that affect the reported
amounts in the financial statements. We continually evaluate our judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. We base our judgements and estimates on historical experience and on other various
factors we believe are reasonable under the circumstances, the result of which form the basis of the carrying values of assets and
liabilities that are not readily apparent from other sources.
We have identified the following accounting policies for which significant judgements, estimates and assumptions have
been made:
103
– Fair value determination of pastoral property and improvements, refer to note A4
– Fair value determination of livestock, refer to note A3
– Impairment of non-financial and financial assets, refer to note F1
Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial
results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may
be found in the relevant notes to the financial statements.
(d) Foreign currency translation
(i) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is the functional and presentation currency of
Australian Agricultural Company Limited and all its subsidiaries.
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(d) Foreign currency translation (continued)
(ii) Transactions and balances
Transactions in foreign currencies are converted into Australian dollars by applying the exchange rates applicable at the date of
the transactions. Amounts payable and receivable in foreign currencies are converted into Australian dollars at the exchange rate
ruling at the reporting date.
All differences arising on settlement or translation of amounts payable and receivable in foreign currencies are taken to the
statement of profit and loss.
(e) Cash
Cash in the Statement of Financial Position comprise cash at bank and in hand which are subject to an insignificant risk
of changes in value. For the purposes of the Statement of Cash Flows, cash is as defined above, net of outstanding bank
overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the Statement
of Financial Position.
(f ) Trade and other receivables
Trade and other receivables are considered financial assets. They are recognised initially at the fair value of the amounts to be
received and are subsequently measured at amortised cost using the effective interest method, less an allowance for doubtful
debts. These financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and we have transferred substantially all the risks and rewards of ownership.
We review the collectability of trade receivables on an ongoing basis at the Company level. Individual debts that are known to be
uncollectible are written off when identified. An allowance for doubtful debts is recognised to reduce the carrying amount of trade
receivables when there is objective evidence that we will not be able to collect the receivable. Financial difficulties of the debtor,
default payments or debts significantly overdue are considered indicators that the trade receivable may not be recoverable. The
amount of the allowance for doubtful debts is the receivable carrying amount compared to the present value of estimated future
cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the
effect of discounting is immaterial.
The allowance for doubtful debts is recognised in the income statement within administration costs. When a trade receivable for
which an allowance for doubtful debts had been recognised becomes uncollectible in a subsequent period, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited against administration costs.
104
(g) Inventories and consumables
Inventories and consumables held for use in our operations are valued at the lower of cost and net realisable value. Cost is
determined on the average cost basis and comprises the cost of purchase including transport cost.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale. The quality of inventories is taken into account in the assessment of net
realisable value.
(h) Derivative financial instruments and hedge accounting
We use derivative financial instruments, such as forward currency contracts, interest rate swaps and forward commodity
contracts, to hedge our foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when
the fair value is negative.
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(h) Derivative financial instruments and hedge accounting (continued)
Any gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement, except for the
effective portion of cash flow hedges, which is recognised in other comprehensive income.
For the purpose of hedge accounting, hedges are classified as:
(a) Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised
firm commitment.
(b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment.
At the inception of a hedge relationship, we formally designate and document the hedge relationship to which we wish to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how we will
assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged
item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated. Hedges that meet the strict criteria for hedge
accounting are accounted for as described below:
Cash flow hedges
AASB 9 Financial Instruments addresses classification, measurement, and derecognition of financial assets and financial
liabilities, sets out new rules for hedge accounting, and introduces a new expected-loss impairment model.
All derivatives are recognised in the balance sheet at fair value and are classified as FVTPL except where they are designated as
part of an effective hedge relationship and classified as hedging derivatives. The carrying value of a derivative is remeasured at fair
value throughout the life of the contract. Derivatives are carried as assets when the fair value is positive and as liabilities when the
fair value is negative.
The method of recognising the resulting fair value gain or loss on a derivative depends on whether the derivative is designated as a
hedging instrument and, if so, the nature of the item being hedged.
105
The Company designates its derivatives as hedges of highly probable future cash flows attributable to a recognised foreign
currency asset or liability or a highly probably foreign currency forecast transaction (cash flow hedges).
The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items,
the risk being hedged and the Company’s risk management objective and strategy for undertaking these hedge transactions. The
effectiveness of the cash flow hedge is measured throughout the life of the hedging relationship. Ineffectiveness arises in the event
of over hedging, whereby the notional amount of the designated hedge instrument exceeds the notional amount of the hedged
item attributable to the hedged risk, or timing mismatches. Where ineffectiveness is identified, any revaluation gains or loss on
the ineffective portion of the hedging instrument are immediately recognised in the statement of profit or loss in foreign exchange
gains or foreign exchange losses.
The effective portion of changes in the fair value of derivatives that are designated as cash flow hedges are recognised in the cash
flow hedge reserve within equity. Upon recognition of the forecast transaction (“hedged item”) the carrying value is not adjusted.
Amounts accumulated in equity are transferred to the statement of profit or loss in the period(s) in which the hedged item affects
the statement of profit or loss.
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G3 ACCOUNTING POLICIES (CONTINUED)
(i) Plant and equipment
(i) Recognition and measurement
Refer to note A4 for the accounting policy note for Pastoral property and improvements held at fair value. Plant and equipment
and industrial land and buildings are stated at historical cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is
incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement only if it is eligible for capitalisation. Directly attributable costs for the acquisition and construction
of an asset are capitalised if the relevant recognition criteria are met. All other repairs and maintenance are recognised in the
income statement as incurred.
We review and adjust, if appropriate, the residual values, useful lives and amortisation methods of all property, plant and
equipment at the end of each financial year.
(ii) Depreciation
Depreciation is calculated on a straight line basis over the estimated useful life of the asset as follows:
Property, plant and equipment
Land (freehold lease, pastoral/perpetual lease, industrial)
Buildings
Fixed improvements
Owned plant and equipment
Plant and equipment under lease
( j) Leases
(i) AACo as a lessee
Average useful life
Not depreciated
30 years
30 years
3-10 years
2-5 years
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted
for certain remeasurements of the lease liability. When a right-of-use asset meets the definition of investment property, it is
presented in investment property.
106
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group’s incremental borrowing rate is used as the discount rate. The lease liability is subsequently
increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable
under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is
reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
Judgement has been used to determine the lease term for some lease contracts in which it is a lessee, that include renewal options.
The assessment of whether it is reasonably certain the Company will exercise such options impacts the lease term, which can
significantly affect the amount of lease liabilities and right-of-use assets recognised.
(ii) Pastoral and perpetual property leases
Freehold pastoral property and improvements and pastoral property and improvements held under statutory leases with
government bodies have been included in Property, Plant and Equipment (Refer note A4).
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G3 ACCOUNTING POLICIES (CONTINUED)
(k) Trade and other payables
Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent
liabilities for goods and services provided to us prior to the end of the financial year that are unpaid and arise when we become
obliged to make future payments in respect of the purchase of these goods and services. Trade payables are unsecured and are
usually paid within 30 days of recognition. Other payables are unsecured and are usually paid within 90 days of recognition.
(l) Borrowings
Borrowings are included as non-current liabilities except for those with maturities less than 12 months from the reporting date,
which are classified as current liabilities.
We recognise borrowings initially on the trade date, which is the date we become a party to the contractual provisions of the
instrument. We derecognise borrowings when our contractual obligations are discharged or cancelled or expire.
All borrowings are initially recognised at fair value plus any transaction costs that are directly attributable to the issue of the
instruments and are subsequently measured at amortised cost. Any difference between the final amount paid to discharge the
borrowing and the initial borrowing proceeds (including transaction costs) is recognised in the income statement over the
borrowing period using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral
part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the income statement.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that
asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that we
incur in connection with the borrowing of funds.
(m) Share-based payment transactions
We provide benefits to our employees (including key management personnel) in the form of share based payments, whereby
employees render services in exchange for shares or rights over shares (equity settled transactions).
We recognise an expense for all share based remuneration determined with reference to the fair value at the grant date of the
equity instruments. We calculate the fair value using the Black Scholes model or other applicable models. The fair value is charged
to the income statement over the relevant vesting periods, adjusted to reflect actual and expected levels of vesting. In valuing
equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the
shares of Australian Agricultural Company Limited (market conditions).
107
(n) Contributed equity
Ordinary shares are classified 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.
(o) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
(i) Livestock and meat sales
Revenue is recognised to the extent that the Company has satisfied a performance obligation and the transaction price can
be readily identified. Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duty.
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G3 ACCOUNTING POLICIES (CONTINUED)
(o) Revenue recognition (continued)
(i) Livestock and meat sales (continued)
Revenue from the sale of livestock and meat is recognised when:
– the performance obligation of passing control of meat or livestock at an agreed upon delivery point to the customer has
been satisfied
(ii) Interest revenue
We record interest revenue on an accruals basis. For financial assets, interest revenue is determined by the effective yield on
the instrument.
(p) Income tax and other taxes
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a consequence, all
members of the tax- consolidated group are taxed as a single entity. The Company is the head entity within the tax-consolidated
group. Foreign entities are taxed individually within their respective tax jurisdictions. Income tax expense represents the sum of
current tax and deferred tax.
Current tax
Current tax is calculated on accounting profit after allowing for non-taxable and non-deductible items based on the amount
expected to be paid to taxation authorities on taxable profit for the period. Our current tax is calculated using tax rates that have
been enacted or substantively enacted at the reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
Deferred tax
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes. Deferred tax is calculated at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
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– When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss.
– When the taxable temporary difference is associated with investments in subsidiaries and the timing of the reversal
of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
– When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
– When the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference
will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.
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G3 ACCOUNTING POLICIES (CONTINUED)
(p) Income tax and other taxes (continued)
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
(q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated as net profit attributable to ordinary shareholders divided by the weighted average number
of ordinary shares outstanding during the period.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
– The after tax effect of interest and other financing costs associated with dilutive potential ordinary shares that have been
recognised as expenses
– The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all
dilutive potential ordinary shares
(r) Other income - government grants
Revenue from government grants, including Australian Carbon Credit Units (ACCUs) received, is recognised at fair value
when there is a reasonable assurance that the grants or carbon credits will be received and all attaching conditions will be
complied with.
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Our OperationsSustainabilityDirectors' ReportFinancial ReportCompany InformationASX Additional InformationFinancial Report DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of the Australian Agricultural Company Limited, we state that:
1.
In the opinion of the Directors:
a. The financial statements, notes and remuneration report of Australian Agricultural Company Limited for the year ended
31 March 2021 are in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of its financial position as at 31 March 2021 and of its performance for the year ended on
that date.
ii. Complying with Australian Accounting Standards and Corporations Regulations 2001.
b. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in note G2.
c. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the year to 31 March 2021.
3. In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members
of the Closed Group identified in note F9 will be able to meet any obligations or liabilities to which they are or may become
subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Donald McGauchie
Chairman
110
Brisbane
20 May 2021
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Independent Auditor’s Report
To the shareholders of Australian Agricultural Company Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Australian Agricultural Company Limited
(the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Group’s financial position as at 31
March 2021 and of its financial
performance for the year ended on
that date; and
•
•
The Financial Report comprises:
• Consolidated statement of financial position as at 31
March 2021;
• Consolidated income statement, Consolidated
statement of comprehensive income, Consolidated
statement of changes in equity, and Consolidated
statement of cash flows for the year then ended;
• Notes including a summary of significant accounting
policies; and
• Directors’ Declaration.
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
111
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of
the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with
the Code.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
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Key Audit Matters
The Key Audit Matters we identified are:
• quantity and valuation of livestock; and
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
• valuation of pastoral property and
improvements.
These matters were addressed in the context of our audit
of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
Quantity and valuation of livestock $537,371,000
Refer to Note A3 Livestock to the Financial Report
The key audit matter
How the matter was addressed in our audit
The quantity and valuation of livestock is
considered a key audit matter due to:
•
•
•
the size of the balance (being 33.9% of total
assets);
the significant audit effort as a result of the
risk of error associated with quantifying
livestock at year end. In quantifying
livestock the Group uses estimates of birth
rates, animal growth rates and rates of
attrition; and
the level of judgement required by us in
evaluating the market prices for livestock
used by the Group where there is no readily
observable market price.
The judgements made by the Group in
assessing the quantity and value of livestock
have a significant impact on the Group’s
financial performance and financial position.
In assessing this key audit matter, we involved
senior audit team members who understand
the industry and the complexities involved in
quantifying and valuing livestock.
Our procedures included:
• visiting five of the Group’s cattle properties to
understand and observe key controls in the
livestock accounting process;
•
testing the Group’s reconciliation of the number of
livestock at the beginning of the year to the
number recorded at the end of the year, including
checking a sample of cattle purchases and sales
transactions, and natural increase in the herd to
various sources of evidence, for example,
purchase invoices and sales documentation;
• comparing estimates of birth rates, animal growth
rates and rate of attrition to historical data and our
industry understanding;
• comparing a sample of livestock market prices
adopted by the Group to a range of recent
observable market prices, such as from the Meat
and Livestock Australia Market Information
reports;
• evaluating the competence, experience and
objectivity of the external valuer used by the
Group; and
• evaluating the report of the external valuer for
consistency with our understanding of the
business, industry and environmental conditions,
trends in historical livestock prices and other
information available to us.
112
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INDEPENDENT AUDIT REPORT
Valuation of pastoral property and improvements $915,800,000
Refer to Note A4 Property in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Our procedures included:
• evaluating the competence, experience and
objectivity of external valuers and other external
experts used by the Group;
• working with our valuation specialists, reading the
reports of the external valuers and other external
experts and evaluating their work regarding Adult
Equivalent carrying capacity of each property and
the dollar per Adult Equivalent, Standard Cattle
Unit or hectare for consistency with our
understanding of the properties, environmental
conditions, recent comparable market transactions
and other information available to us; and
• using our valuation specialist to assess the
valuation report and compare the valuation
methodology for each property to accepted
market practices, industry norms, and criteria in
the accounting standards.
The valuation of pastoral property and
improvements is considered a key audit matter
due to:
•
•
the size of the balance (being 57.8% of total
assets); and
the level of judgement required by us in
evaluating the Group’s assessment of the
fair value of pastoral property and
improvements.
The Group’s assessment of the fair value of
pastoral property and improvements involves
significant judgements, including determination
of:
•
•
•
the valuation methodology applied to each
property;
the Adult Equivalent carrying capacity of
each property; and
the corresponding dollar per Adult
Equivalent, Standard Cattle Unit or hectare.
The Group has appointed external valuers and
other external experts to assist in the
determination of these key valuation inputs.
The judgements made by the Group in
assessing the fair value of property and
improvements have a significant impact on the
Group’s financial position.
In assessing this key audit matter, in particular
the complex inputs involved, we involved
senior audit team members, including valuation
specialists, who understand the nature of the
Group’s properties and recent comparable
market transactions.
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INDEPENDENT AUDIT REPORT
Other Information
Other Information is financial and non-financial information in Australian Agricultural Company Limited’s
annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The
Directors are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report,
including the Remuneration Report, ASX Additional Information and Company Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s ability to continue as a going concern and whether the use
of the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our Auditor’s Report.
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Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Australian Agricultural Company
Limited for the year ended 31 March
2021, complies with Section 300A of the
Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 40 to 55 of the Directors’ report for the year ended
31 March 2021.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Scott Guse
Partner
Brisbane
20 May 2021
115
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INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in the Financial Report is as
follows. The information is current as at 2 June 2021.
(a) Distribution of equity securities
Ordinary share capital
602,766,747 fully paid ordinary shares are held by 8,338 individual Shareholders. All ordinary shares carry one vote per share and
carry the rights to dividends. The number of shareholders, by size of holding is:
Number of Shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
Number of Shareholders
2,185
3,089
1,206
1,613
163
8,256
Unquoted equity securities
As at 2 June 2021, there were 523,795 unlisted performance rights granted over unissued ordinary shares in the Company.
116
The AACo StoryMessage from the ChairmanOur People Our Brands Regional PerformanceLetter from MD and CEOOur Strategy2021 AACO ANNUAL REPORT - ASX Additional Information (b) Twenty largest holders of quoted equity securities
The names of the twenty largest holders of quoted shares as shown in the Company’s Share Register are:
Number
Percentage
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
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