ANNUAL
Report 2
9
1
0
corporate
directory
DIRECTORS
Professor Andrew Vizard
Dr Christopher Richards
Mr Michael van Blommestein
Mr Richard Dennis
Mr Charles Sitch
Professor Jan Tennent
Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
COMPANY SECRETARY
Sophie Karzis
REGISTERED OFFICE
27-33 Piper Lane
East Bendigo VIC 3550
T 03 5445 5999
F 03 5445 5914
E investorrelations@apiam.com.au
AUDITORS
Grant Thornton Australia
The Rialto, Level 30
525 Collins Street
Melbourne VIC 3000
BANKERS
National Australian Bank
Level 1, 55 Mitchell Street
Bendigo VIC 3550
STOCK EXCHANGE LISTING
Australian Securities Exchange
Level 4, North Tower, Rialto
525 Collins Street
Melbourne VIC 3000
SHARE REGISTRY
Boardroom Registry Pty Ltd
Level 12, 225 George Street
Sydney NSW 2000
T 1300 737 760
F 02 9279 0664
E enquiries@boardroomlimited.com.au
ASX CODE
AHX
WEBSITE
apiam.com.au
annual report 2019
a p i a m . c o m . a u
Apiam Animal Health Limited
ASX: AHX
APPENDIX 4E
PRELIMINARY FINAL REPORT
COMPANY DETAILS
Name of entity:
Apiam Animal Health Limited
ACN:
604 961 024
Reporting period:
For the year ended 30 June 2019
Previous period:
For the year ended 30 June 2018
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Statutory Results Summary
CHANGES FROM PERIOD ENDED 30 JUNE
%
5
3
3
up
down
down
to
to
to
2019 2018
$m
$m
111.7
from
106.6
3.2
from
3.2 From
3.3
3.3
Revenue from ordinary activities
Net profit attributable to members
Profit from ordinary activities after tax attributable to
members
Underlying EBITDA (Incl. non-controlling interests)
Up
2
to
10.0
From
9.8
Underlying EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) is Management’s
preferred measurement of business profitability and excludes one-off corporate restructuring costs as
well as integration, ERP and acquisition expenses.
Further commentary on the annual results can be found in the ‘Operating and Financial Review’ section
within the Directors’ report of the attached Annual Financial Report.
Dividends
2019 Interim Dividend
Amount per
security
cents
Franked
amount per
security
Cents
0.8 cents
0.8 cents
2019 Final Dividend (declared after balance date but not yet paid) 0.8 cents
0.8 cents
Record date for determining entitlements to the dividend:
20 September 2019
Date dividend payable:
24 October 2019
Dividend reinvestment plans
The Company initiated a Dividend Reinvest Plan (DRP) on the 25 August 2017 which provides
shareholders with the opportunity to utilise all or part of their dividends to purchase shares in the
Company. Shareholders electing to participate must nominate by 30 September 2019.
Shareholders who elect to participate in the DRP for the 2019 final dividend will be issued shares at a
DRP issue price which will be the average of the daily market price of Apiam’s shares over the period
of five trading days between 1 October 2019 and 7 October 2019 (‘Pricing Period’). The timetable in
respect of the 2019 final dividend and DRP is as follows:
Event / Action
Record Date
Date*
20 September 2019
Election Date: Last date for shareholders to make an election to participate in
the DRP
5.00 pm (Melbourne time) on
30 September 2019
Pricing Period Commencement Date
Last Day of Pricing Period
Announcement of DRP issue price
1 October 2019
7 October 2019
8 October 2019
Dividend Payment Date / Issue of DRP shares
24 October 2019
*All dates are subject to change
Details of the DRP can be downloaded from www.apiam.com.au. In order to participate in the DRP for
the 2019 final dividend, shareholders should ensure that their DRP Election Form is received, or an
online election is made, by no later than 5.00 pm (Melbourne time) on 30 September 2019. An online
election can be made by visiting www.boardroom.com.au.
Net Tangible Asset per Security
Net Tangible assets per share
Return to shareholders
2019
-$0.04
2018
-$0.06
Dividends of $1,679,748 were paid during the period; no share buy backs were conducted during the
year.
Basis of Preparation
This report is based on the consolidated financial statements which have been audited by Grant
Thornton Audit Pty Ltd. The audit report is included within the Company’s Annual Report which
accompanies this Appendix 4E.
Entities over which control has been gained or lost during the period:
Refer to Note 31 of the attached Financial Statements for details of entities over which control has been
gained. There were no entities over which control was lost.
Associates and Joint Venture Entities
The Company has no associate companies and 3 joint venture entities.
Other information required by Listing Rule 4.3A
Other information requiring disclosure to comply with Listing Rule 4.3A is contained in the 30 June 2019
Annual Report (which includes the Directors’ Report) which accompanies this Appendix 4E.
Accounting Standards
This Report has been compiled using Australian Accounting Standards and International Financial
Reporting Standards.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
Contents
Chairman’s Message
Managing Director’s Message
Director’s Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Consolidated Statement of Financial Position
Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report
Additional Information
3
4
6
9
21
28
30
31
32
33
34
72
73
76
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
4
Chairman’s Message
Dear Shareholder,
The 2019 financial year has been another significant year for Apiam. It has been a year of
progress in the face of varied, and sometimes challenging industry conditions for our rural and
regional customers. Despite these challenges, Apiam continued its commitment to its strategic
plan and remained focussed on our core business drivers to provide high-value products and
services leveraged across a growing animal footprint.
I am pleased to report Apiam delivered 4.8% year on year revenue growth during 2019 –
testament to the benefits of Apiam’s diversified business model, which features broad geographic
and animal species exposure. It is this model’s in-built portfolio effect that has provided business
resilience in the face of the dry and challenging industry conditions that we experienced,
particularly in the second half of the financial year.
The introduction of new and innovative product and service lines during the period also
supported Apiam’s financial performance, adding complementary
revenue streams and
improving our gross margins across all animal segments. Some of these initiatives were higher-
value service lines targeting our core domestic customers in sectors such as pigs, dairy and
companion animals. Others relate to product distribution, genetics and consulting, further
diversifying Apiam’s business operations. We expect these new complementary business
initiatives to continue to make an increasing financial contribution in the 2020 financial year.
Over the year we also continued to invest in growth via new clinic openings and acquisition
integration. However, these investments dampened Apiam’s short-term earnings performance,
and in combination with the challenging industry conditions we faced, resulted in Apiam not
delivering the growth in earnings we know the business is capable of. We do however remain
committed to our targeted growth strategy and during the year saw excellent revenue and
earnings growth from some of our recently acquired businesses such as Quirindi Vet Group
(acquired in 2016) and Gympie & District Vet Services (acquired in 2018). Going forward, targeted
acquisitions will remain as a fundamental pillar of our growth strategy. In the coming year, a key
focus will also be to maximise the cost efficiencies available from our consolidated corporate
infrastructure and technology systems, particularly in our dairy and companion animal clinics.
The outlook for Apiam in the year ahead remains strong. Our business model is strategically
designed to provide resilient revenues in the face of varying industry conditions, and the business
initiatives introduced this financial year, to strategically expand our product and service lines,
are also forecast to deliver growth.
The Board have declared a fully-franked final dividend of 0.8 cents per share, supported by the
cash flow performance the Company achieved in the 2019 financial year. This brings the full year
dividend to 1.6 cents per share. As in previous years, we will offer a Dividend Reinvestment Plan
to allow our shareholders the opportunity to reinvest in Apiam’s future performance.
On behalf of the Board, I thank Chris Richards, our Managing Director, and our team of
employees for their hard-work, dedication and expertise. Finally, to our investors, I thank you for
your on-going support.
Yours sincerely,
Professor Andrew Vizard
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
6
Managing Director’s Message
Dear Shareholder,
This year we have continued to execute on our strategic roadmap, which at its core is designed to
grow
our
revenues whilst leveraging our
cost
base
to
deliver
returns to
our
shareholders. Unfortunately,
the 2019
financial year (FY2019) has seen challenging
environmental and industry conditions that have impacted many operators within the Australian
farming and agricultural industries. This has meant despite delivering reported revenue growth, it
was not to the level we expected and therefore we have not delivered the earnings and
returns that we targeted.
FY2019 financial review
In FY2019, Apiam’s revenues grew by 4.8% to $111.7m delivered in the face of dry and
challenging conditions affecting many of our core domestic customers. Despite these conditions
it is pleasing to report that Apiam’s beef feedlot and companion animal segments reported strong
revenue growth, with our beef feedlot segment delivering double digit year-on-year growth. The
revenues from our pig and dairy segments were however negatively impacted by external
industry conditions, particularly in the second half of the financial year, where the rainfall that did
occur was too late to positively impact their performance in the period.
New business initiatives introduced in FY2019 and a business strategy to target higher-value
products and services resulted in gross margin expansion in FY2019 and gross profit of
$56.2m (FY2018: $51.6m). On a gross margin basis this represents an uplift from 48.4% in
FY2018 to 50.3% in FY2019. Importantly, gross margin improvement was also delivered across
each of Apiam’s animal segments.
Operating costs were a key focus of the company in FY2019, and cost efficiencies were delivered
in our underlying business over the period. While reported operating costs increased 10.6% in
FY2019, this was attributable solely to the impact of acquisitions and the opening of two new
clinics (Golden Square and Epsom) under the PETstock Joint Venture. These costs, in
combination with lower than expected second half revenues, resulted in a small decline in our
EBITDA margins, which fell to 8.9% in FY2019 (FY2018: 9.2%).
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
7
Reported Net Profit After Tax in FY2019 was $3.2m, representing a slight decrease from FY2018
where reported NPAT was $3.3m. This result was not in-line with our expectations and is a direct
result of the challenging industry conditions faced by our customers, particularly in the dairy and
pig segments.
Strategic review
Apiam has continued to focus on our core business drivers in FY2019 – to grow animal numbers,
expand our product and service range to improve margins, and enhance our operations process
and capacity.
Our animal numbers strategy is based on satellite clinic openings, business unit synergies and
our targeted acquisition program. In FY2019 we opened two new companion animal clinics with
our Joint Venture partner PETstock. Despite having associated opening costs these clinics have
performed extremely well, having been strategically selected for their regional locations where
companion animals had previously been under-serviced.
A number of other high-growth and complementary business initiatives have also been introduced
in FY2019 across the areas of genetic exports, product development and service expansion. We
entered into an agreement with Chinese based partner, Gansu Charming Sheep Breeder Co, to
provide consulting advice and genetic exports to establish a sheep genetics centre in China with
the goal of establishing breeds suitable for Chinese conditions and markets. Revenues have
commenced from this project and will continue to grow over the project term of 3-5 years. Other
initiatives over the year have included product development and distribution partnerships,
including in the US via a Joint Venture with a leading US-based swine veterinary company.
New programs based on recurring revenue models in dairy (ProDairy) and companion animals
(Best Mates) have also been introduced to drive further revenue growth in FY2020.
Investment in operating systems in FY2019 was focused on completing the roll-out of the Practice
Management System. This is the final piece of our enlarged corporate infrastructure and will be a
key driver of efficiencies over the coming years, particularly in our dairy and companion animal
clinics.
Outlook
Apiam has a resilient business model with a diversified animal species and geographic exposure.
We believe this business model is fundamental to delivering growth in the face of varying industry
conditions.
In FY2020 the outlook for
the segments most affected by
the dry conditions and
industry challenges encountered over FY2019 – pigs and dairy – is improving. Late autumn and
early winter rainfall are already having beneficial impacts on operators, and improving industry
conditions are expected to improve Apiam’s animal numbers.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
8
The new high-growth and complementary initiatives we have introduced are also expected
to make an increasing revenue contribution.
Finally, the capital deployed on our integrated corporate infrastructure and systems over the past
3-years has established an efficient platform to support future business growth. Our company’s
focus is now to deliver material EBITDA and NPAT enhancement moving forward.
Yours Sincerely,
Dr Chris Richards
Managing Director
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
9
Directors’ Report
The Directors present their report on the consolidated entity consisting of Apiam Animal Health
Limited (Apiam) and the entities it controlled at the end of, or during, the year ended 30 June
2019.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the
date of this report are as follows.
Professor Andrew Vizard
Non-Executive Chairman
Dr Christopher Richards
Managing Director
Mr Michael van Blommestein
Non-Executive Director
Mr Richard John Dennis
Non-Executive Director
Professor Jan Tennent
Non-Executive Director (appointed 1 August 2018)
The following person resigned as a director during the financial year
Mr Charles Sitch
Non-Executive Director (resigned 29 November 2018)
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
10
INFORMATION ON DIRECTORS
Professor Andrew Vizard
Dr Christopher Richards
Independent Non-Executive Chairman
Managing Director
BVSc(Hons), MVPM, FAICD
BSc, BVSc, MAICD
Professor Vizard is a Principal Fellow at the
Faculty of Veterinary and Agricultural
Sciences, University of Melbourne and
previously Associate Professor of Veterinary
Epidemiology and Director of The Mackinnon
Project, a recognised leader in sheep and beef
veterinary consultancy. An experienced
company director, he has previously held
directorships in Animal Health Australia, the
body responsible for coordinating Australia’s
animal health system, Primesafe, the statutory
authority
the
production of safe meat in Victoria and the
Australian Wool Corporation. In the previous 4
years, Professor Vizard was a non-executive
director of the Ridley Corporation Limited.
responsible
regulating
for
formation.
Chris has been Managing Director of Apiam
Animal Health since
Since
establishing a pig veterinary services business
in 1998, Chris has been responsible for the
strategic direction of the company including the
development, acquisition and integration of
other veterinary clinics, veterinary wholesale,
logistics and genetic services businesses that
form the integrated company that Apiam is
today. Chris is a Director of Apiam Animal
Health and its subsidiary and joint venture
companies.
Interests in Shares and Options
Interests in Shares and Options
214,153 shares
28,951,805 shares
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
11
Mr Michael van Blommestein
Mr Richard John Dennis
Independent Non-Executive Director
Independent Non-Executive Director
GAICD
BComm, LLB, CA, MAICD
Michael was a Vice President and Country
Manager of Australia and New Zealand for
Zoetis and managed the spin-off of Zoetis
from Pfizer Australia. An experienced director
in the animal health sector, Michael presided
over Animal Medicines Australia, the peak
industry body for five years and was a
member of the board for nearly a decade.
Michael played an integral role in leading and
overseeing the transition of Animal Health
Alliance into Animal Medicines Australia and
has also served on the board of Animal Health
Association Japan.
Rick held a number of senior roles over 35
years with Ernst & Young (EY) and was the
Managing Partner of EYs Queensland
practice on two occasions from 2001-2007
and from 2014-15. Rick also held a number
of executive management roles at EY,
including Deputy COO and CFO for the Asia-
Pacific practice where he was responsible for
financial and operational
overseeing
integration of EYs Australian and Asian
member firms. Rick is a member of Australian
Super’s Queensland Advisory Board, a
member of the Advisory Board of EWM Group
and HLB Chessboard, and an external
member of the Audit & Risk Committee of
Racing Queensland. He is also a non-
executive director of ASX-listed Motorcycle
Holdings Limited.
the
Interests in Shares and Options
Interests in Shares and Options
101,174 shares
20,912 shares
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
12
Mr Charles Sitch
(resigned 29 November 2018)
Professor Jan Tennent
(appointed 1 August 2018)
Non-Executive Director
BComm, LLB, MBA, GAICD
Non-Executive Director
GCertMgt, GAICD, PHD, BSc (Hons)
Charles is currently a director of Spark New
Zealand Ltd and a member of their audit risk
and finance committee. Previously Charles
spent 24 years at McKinsey and Company
New York, London and Melbourne. He was a
senior director, primarily working with CEOs
and Boards on strategy and operations
turnarounds before retiring in 2010. In 2002,
Charles was awarded the President’s Medal
for services to the Royal Agricultural Society of
Victoria. Charles has previously held listed
public company directorships in Pacific Edge
Limited (NZX Listed) and Bellamy’s Australia
Limited.
the
Jan
and
for Microbiology.
Jan is an alumnus of Monash and Deakin
universities, was appointed in 2017 as a
Collaborative Professor at the University of
Osaka, is a Principal Fellow at the University of
Melbourne and a Fellow of the Australian
Society
is an
internationally-recognised
researcher with
specialist knowledge of antibiotic resistance
and
mechanisms
commercialisation of vaccines (biologicals) to
prevent infectious diseases through stimulation
is
of protective
currently the CEO of Bio21 Australia Limited
(t/a Biomedical Research Victoria), a non-
executive director of AusBiotech Limited and
David J. Curnow Pty Ltd and a member of the
Industry Advisory Board of the Medicines
Manufacturing
Innovation Centre, Monash
University. Jan is also the founder and principal
of ConnectBio consultancy.
immune responses. She
discovery
Interests in Shares and Options
Interests in Shares and Options
154,917 shares
35,000 shares
Company Secretary
Sophie Karzis
B. Juris, LLB
Sophie is a practising lawyer with over 20 years’ experience as a corporate and commercial
lawyer, and Company Secretary and General Counsel for a number of private and public
companies. Sophie is the General Manager of Corporate Counsel, a corporate secretarial
business with a focus on ASX Listing Rule and Corporations Act compliance. Sophie is the
Company Secretary of a number of ASX-listed and unlisted entities and is a member of the Law
Institute of Victoria as well as the Governance Institute of Australia.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
13
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board committee held
during the year and the number of meetings attended by each Director or their alternate were as
follows:
Directors
Board Meetings
Audit & Risk Management
Committee
Remuneration & Nomination
Committee
A
Andrew Vizard
10
Chris Richards
10
B
10
10
A
4
N/A
Michael van
Blommestein
10
10
N/A
Richard Dennis
10
Charles Sitch*
3
Jan Tennent**
10
10
3
10
4
1
3
B
4
N/A
N/A
4
1
3
A
3
B
3
N/A
N/A
3
3
N/A
N/A
1
2
1
2
Column A denotes the number of meetings the Director was entitled to attend and column B
denotes the number of meetings the Director attended.
*Charles Sitch resigned from the Board on 29 November 2018.
**Jan Tennent was appointed to the Board on 1 August 2018.
COMMITTEE MEMBERSHIP
As at the date of this report, the Company has an Audit & Risk Management Committee and a
Remuneration & Nomination Committee of the Board of Directors
Members of the Audit & Risk Management Committee during the period were:
Richard Dennis (Chair)
Andrew Vizard
Jan Tennent
Charles Sitch
Members of the Remuneration & Nomination Committee during the period were:
Michael van Blommestein (Chair)
Andrew Vizard
Jan Tennent
Charles Sitch
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
14
PRINCIPAL ACTIVITIES
The Group operates in the segment of provision of veterinary products and services to production
and companion animals. Apiam services production animals throughout their life cycle, including
the provision of:
-
-
-
-
-
-
-
-
-
-
-
systems to assist in herd health programs;
production advice;
consulting services and products to assist in the prevention of animal diseases;
technologies to manage compliance with legislative requirements on pharmaceutical use;
advice and services in respect of animal welfare compliance;
retail animal health product sales;
on-farm delivery of products via its own logistics capability;
third party auditing services of industry quality assurance programs;
technology development for animal health management;
ancillary services such as sales and/or delivery of genetics and associated products;
on-farm and on-line training programs for clients; and
REVIEW OF OPERATIONS
Apiam reported revenue of $111.7m in FY2019, an increase of 4.8% on FY2018, the prior
comparable period (pcp). This was achieved despite dry and challenging industry conditions
which negatively affected some of Apiam’s operating segments, particularly pigs and
dairy. Revenues in beef feedlot and companion animals performed strongly with the feedlot
segment recording double-digit revenue growth in FY2019 compared to pcp.
Revenue growth on a like-for-like basis, excluding the impact of acquisitions, was (1.5)% in
FY2019. This reflects the industry factors outlined above which resulted in Apiam’s revenues
achieved in the second half of FY2019 not being typical of half-on-half revenue phasing as
seen in prior financial years.
Despite the challenging revenue environment, Apiam’s gross margins improved in FY2019, with
gross profit increasing to $56.2m, an increase of 9.0% on pcp (FY2018 : $51.6m). This was driven
by a targeted change in Apiam’s business mix towards higher value transactions as well as new
product and service initiatives introduced over the period. Gross margin expansion was recorded
across all of Apiam’s animal segments.
Underlying EBITDA (excluding one-off costs1)
increased 2.2% on FY2018 and was
below Apiam’s budget expectations, adversely impacted by lower than expected revenue growth,
particularly in the second half of FY2019. Apiam’s strict focus on limiting operating cost
growth continued during the year, with the increased operating expenses in FY2019 relating to
the impact of acquisitions and new clinic costs (Epsom and Golden Square). Operating costs
excluding the impact of these growth initiatives declined 0.6% year-on-year reflecting the
realisation of cost efficiencies.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
15
Depreciation & amortisation expense in FY2019 was $3.1m, an increase of 28.5% on
the pcp (FY2018: $2.4m). This was a direct result of the significant investment in the fixed asset
base that occurred throughout FY2018 as the foundations of the enlarged Company were put in
place. This investment has slowed significantly in FY2019 as these projects have been
completed, and consequently depreciation and amortisation expense growth has declined in the
second half of the financial year. Management expect this trend to continue into FY2020.
Reported Net Profit After Tax (NPAT) in FY2019 was $3.2m in FY2019 representing a small
reduction from $3.3m NPAT achieved in FY2018. This is a result of the challenging external
industry conditions outlined above as well as the increase in reported operating costs associated
with acquisitions and new clinic costs.
The following tables are presented to assist in the interpretation of the underlying performance
of Apiam during FY2019. This information is additional and provided using non-IFRS information
and terminology.
FY2019 Financial Result Summary – Reported
Total Revenue
Gross Profit
Operating expenses
Underlying EBITDA 1
One-off expenses
EBITDA
Depreciation & Amortization
EBIT
Interest
Tax
Other (incl. minorities) 2
NPAT attributable to members
Gross Margin (%)
Underlying EBITDA margin (%)
Notes:
1.
2.
Total Revenue
Gross Profit
Operating expenses
Underlying EBITDA
Depreciation & amortisation
Underlying EBIT
Underlying NPAT
Notes:
1.
FY2019
111.7
56.2
(46.2)
10.0
(1.2)
8.8
(3.1)
5.7
(1.1)
(1.4)
0.0
3.2
50.3%
8.9%
FY2018
106.6
51.6
(41.8)
9.8
(1.6)
8.2
(2.4)
5.7
(0.9)
(1.5)
0.0
3.3
48.4%
9.2%
Variance
5.1
4.6
(4.4)
0.2
0.5
0.7
(0.7)
(0.0)
(0.2)
0.1
0.0
(0.1)
%
4.8%
9.0%
10.6%
2.2%
(28.0)%
8.1%
28.5%
(0.6)%
24.6%
(8.1)%
-
(3.4)%
FY2019
111.7
56.2
(46.2)
10.0
(3.1)
6.8
4.0
FY2018
106.6
51.6
(41.8)
9.8
(2.4)
7.3
4.4
Variance
5.1
4.6
(4.4)
0.2
(0.7)
(0.5)
(0.4)
%
4.8%
9.0%
10.6%
2.2%
28.5%
(6.6)%
(10.2)%
Underlying EBITDA excludes one-off acquisition, integration, restructuring and other non-recurring expenses
Includes partner business activities of Sth West Equine JV, Apiam Solutions, PETstock Joint Venture and Portec
Apiam FY2019 Financial Result Summary – Underlying1
Underlying earnings exclude one-off acquisition, integration, restructuring and other non-recurring expenses totaling
$1.2M in FY19 and $1.6M in FY18 (tax effected where applicable at NPAT level)
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
16
Strategic review
Apiam’s strategic focus in FY2019 was to leverage the Company’s performance through a focus
on three key areas: i) services, product range & margins; ii) increasing animal numbers; and iii)
operations, process and capacity.
Apiam’s services and product range expansion strategy resulted in a number of new initiatives
implemented during FY2019, as well as entry into new international markets. In its core domestic
veterinary business Apiam successfully undertook a targeted change in business mix and
offering to
focus on “higher-value” products and services, which was instrumental
in
delivering gross margin expansion. Attractive high-growth international expansion was also
undertaken during the year with the execution of the Allmate Cooperation Agreement with Gansu
Charming Sheep Breeder Co in China. This is an agreement to provide consultancy services to a
state-of-the-art sheep genetics centre in China focused on establishing breeds suited to Chinese
conditions and markets. Revenues from this project commenced in FY2019, and the project has
a term of 3-5 years with significant revenue growth from the Agreement expected over this time.
Other product distribution initiatives were also entered into in FY2019, with Plumbline Life
Sciences and the US-based Swine Veterinary Centre, and these are expected to deliver greater
returns in FY2020.
To drive growth in animal numbers in FY2019, Apiam focused on a mix of organic
and greenfields opportunities. Two new companion animal focussed clinics were opened under
the Joint Venture with PETstock and while they have had associated set up costs, their first-
year revenue performance has been very strong. A pipeline of acquisition clinics has also been
identified and assessed based on the Company’s strict acquisition criteria and will continue to
form a key pillar of our animal numbers growth strategy in the coming year.
Improving operations, process & capacity has been a key focus for Apiam over the past 3.5-
years since IPO. The final component of investment required under this programme was
completed in FY2019, being the implementation of the Practice Management System at the
individual clinic level. Management expect to see increasing benefits from clinic efficiencies in
FY2020.
Balance sheet
Working capital management has remained a key focus and as at the balance date improvements
were made across both
Inventories and Receivables, compared
to
the pcp.
Accounts payable were adversely impacted due to a change in phasing of procurement versus
the prior year.
Apiam’s net debt reduced by $0.9m as at 30 June 2019 compared to the pcp and as at the
balance date Apiam’s operating leverage ratio was 2.7x, against a covenant requirement
of 4.0. Apiam also announced in July 2019 that it has increased its acquisition facility with NAB
from
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
17
$25m to $39m, providing headroom for future acquisitions of $25.9m. Several other covenants
were amended and/or removed to allow additional acquisition financing flexibility.
Cash flow
Apiam’s operating cash flow was $4.9m in FY2019, lower than the FY2018 operating cash flow
of $9.2m. Cash conversion to underlying EBITDA for FY2019 remained solid at 87% but was
lower
than expected due
to a change
in phasing of procurement versus
the prior
year. FY2018 cash conversion to underlying EBITDA (136%) benefited from the one-off impact
of new company-wide working capital policies that were implemented in early FY2018.
FY2018
$M
Net cash used in operating activities
9.2
Acquisition of subsidiary, net of cash
(4.7)
Purchases of property, plant and equipment
(4.5)
Proceeds from disposals of PP&E
0.0
Purchases of intangible assets
(0.4)
Net cash used in investing activities
(9.5)
Net changes in financing
2.5
Dividends paid to shareholders
(1.0)
Other
(0.7)
Net cash inflow from financing activities
0.8
Net change in cash and cash equivalents
0.5
Notes: This information is additional and provided using non-IFRS information and terminology
FY2019
4.9
(0.3)
(2.4)
0.0
(0.4)
(3.1)
0.2
(1.0)
(0.6)
(1.4)
0.4
Dividend
The Apiam Board of Directors have declared a final dividend of 0.8 cents per share, 100% fully
franked. This brings total dividends paid in respect of FY2019 to 1.6 cents per share. The final
dividend will be paid on 24 October 2019. This represents a 53.6% payout ratio of reported
NPAT.
Apiam’s Dividend Reinvestment Plan will be maintained in respect of Apiam’s final dividend.
Outlook
Apiam remains confident in its outlook and growth opportunities for FY2020 despite the external
environmental factors that have had an impact of Apiam’s revenue and earnings performance
over the past twelve months.
Apiam has a strategic plan in place to continue to deliver growth organically, through product and
service expansion, as well as through targeted acquisitions. Apiam also continues to diversify its
operations to enhance the revenue resilience of the business.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
18
DIVIDENDS
An interim dividend of $842,197 is 0.8 cps and was paid in April 2019. The Apiam Board of
Directors have declared the Company’s final dividend of 0.8c per share fully franked on the 26
August 2019. The final dividend of $847,182 will be paid on the 24 October 2019.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors there were no significant changes in the state of affairs of the
consolidated entity during the financial period, except as otherwise noted in this Report.
SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL
YEAR
Apart from the final dividend declared, there are no other matters or circumstances that have
arisen since the end of the year that have significantly affected or may significantly affect either:
the entity’s operations in future financial years
the results of those operations in future financial years; or
the entity’s state of affairs in future financial years.
LIKELY DEVELOPMENTS, BUSINESS STRATEGIES AND PROSPECTS
The Company’s strategy is to build on the solid foundation it has established as an integrated
animal health business servicing the rural production and companion animal sectors, and ensure
we can meet the needs of a market which is experiencing strong growth.
The Company expects to continue to invest through acquisition, new greenfield sites, partnerships
and further recruitment of leading expertise to ensure we have the capability required to prosper
in the expanding global animal health industry.
KEY RISKS AND BUSINESS CHALLENGES
Apiam Animal Health operates in the Production Animal industry and in particular the pig, feedlot
cattle and dairy cattle sectors. Any downturn or disruption in these sectors, particularly if it results
in substantial reductions in livestock numbers or production volume, will adversely impact the
Company.
Any recurring or prolonged disruption to the supply of the key products that Apiam Animal Health
sells, particularly vaccines for pigs, may have an adverse effect on the financial performance of
the Company.
No single client or buying group is expected to account for more than 10% of Apiam Animal
Health’s FY20 pro-forma forecast revenue. However, if there is consolidation within Apiam Animal
Health’s client base, this may lead to a concentration of the Company’s client exposure risk and
may adversely affect the margins that the Company is able to generate on the sale of its products
and services to these client groups.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
19
Apiam Animal Health’s business model depends substantially on its senior management team
and key personnel to oversee the day-to-day operations and strategic management of the
Company. There is a risk that operating and financial performance of the Company would be
adversely affected by the loss of one or more key persons.
ENVIRONMENTAL REGULATION
The Managing Director reports to the Board on any environmental and regulatory issues at each
Directors meeting, if required. There are no matters that the Board considers need to be reported
in this report.
GREENHOUSE GAS AND ENERGY DATA REPORTING REQUIREMENTS
The Group is not subject to the reporting requirements of either the Energy Efficiency
Opportunities Act 2006 or the National Greenhouse and Energy Reporting Act 2007.
UNISSUED SHARES UNDER OPTION
There were no unissued ordinary shares of Apiam under option at the date of this report.
SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT
OF EXERCISE OF OPTIONS
During the financial year, the Company did not issue ordinary shares as a result of the exercise
of options.
DEEDS OF ACCESS, INDEMNITY AND INSURANCE FOR DIRECTORS AND
OFFICERS
Access
The Company has entered into deeds of access, indemnity and insurance with each Director
which contain rights of access to certain books and records of the Company.
Indemnification
Under the constitution of the Company, the Company is required to indemnify all Directors and
officers, past and present, against all liabilities allowed under law. Under the deed of access,
indemnity and insurance, the Company indemnifies parties against all liabilities to another person
that may arise from their position as an officer of the Company or its subsidiaries to the extent
permitted by law. The deed stipulates that the Company will meet the full amount of any such
liabilities, including reasonable legal costs and expenses.
The company has agreed to indemnify its auditors, Grant Thornton Audit Pty Ltd, to the extent
permitted by law, against any claim by a third party arising from the Company’s breach of its
agreement. The indemnity requires the Company to meet the full amount of any such liabilities
including a reasonable amount of legal costs.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
20
Insurance
Under the constitution of the Company, the Company may arrange and maintain directors’ and
officers’ insurance for its Directors to the extent permitted by law and under the deed of access,
indemnity and insurance, the Company must maintain insurance cover for each Director for the
duration of the access period.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
21
Remuneration Report
REMUNERATION REPORT (AUDITED)
This remuneration report outlines the director and executive remuneration arrangements of the
Company and the Group in accordance with the requirements of the Corporations Act 2001 and
its Regulations. For the purposes of this report, key management personnel (KMP) of the Group
are defined as those persons having authority and responsibility for planning, directing, and
controlling major activities of the Company and the Group, directly or indirectly, including any
director (whether executive or otherwise) of the parent.
For the purposes of this report, the term “executive” encompasses the senior executives and
general managers of the Group.
Details of Key Management Personnel
(I) DIRECTORS
Andrew Vizard
Chairman (Independent Non-executive)
Chris Richards
Managing Director (Executive)
Michael van Blommestein
Director (Independent Non-executive)
Richard Dennis
Director (Independent Non-executive)
Charles Sitch (resigned 29 November 2018)
Director (Independent Non-executive)
Jan Tennent (appointed 1 August 2018)
(II) EXECUTIVES
Matthew White
Chief Financial Officer
The Remuneration Report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration;
Details of remuneration;
Service agreements;
Share-based remuneration;
Bonuses included in remuneration;
Non-executive director remuneration; and
Other information.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
22
a
Principles used to determine the nature and amount of remuneration
The principles of the Group’s executive strategy and supporting incentive programs and
frameworks are:
•
•
•
to align rewards to business outcomes that deliver value to shareholders;
to drive a high performance culture by setting challenging objectives and rewarding high
performing individuals; and
to ensure remuneration is competitive in the relevant employment market place to
support the attraction, motivation and retention of executive talent.
The Group has structured a remuneration framework that is market competitive and
complementary to the reward strategy of the Group.
The Remuneration Committee operates in accordance with its charter as approved by the Board
and is responsible for reviewing and recommending compensation arrangements for the Directors
and the Executive Team. The remuneration committee has met 3 times in the FY19 reporting
period.
The Committee engaged the services of Korn Ferry Hay Group to undertake bench-marking for
the executive team remuneration in FY17. The Committee has also engaged Grant Thornton
Australia Limited and HRAscent to formulate an equity management plan for principal and senior
vets which was approved in FY17 and implemented in FY18.
The remuneration structure that has been adopted by the Group consists of the following
components:
fixed remuneration being annual salary; and
•
• short term incentives, being bonuses.
However, the Remuneration Committee is considering long term incentives (LTI) to be
implemented in the future. The Remuneration Committee assesses the appropriateness of the
nature and amount of remuneration on a periodic basis by reference to recent employment market
conditions with the overall objective of ensuring maximum stakeholder benefit from the retention
of a high quality Board and Executive Team.
Item
2019
2018
2017
2016
EPS (cents)
3.01c
3.21c
5.00c
0.08c
Dividends
(cents per
share)
Net profit
before tax
($’000)
1.6c
1.6c
0.8c
-
$4,569
$4,831
$6,315
$1,068
Share price ($)
$0.52
$0.75
$0.70
$1.49
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
23
b
Details of remuneration
Details of the nature and amount of each element of the remuneration of each Key Management Personnel (KMP) of Apiam are shown in the table
below:
Directors
Andrew Vizard
Chairman Independent
Richard Dennis
Independent
Chris Richards
Managing Director
Charles Sitch
Independent
Michael van Blommestein
Independent
Jan Tennent
Independent
Employees
Matthew White
Chief Financial Officer
2019 Total
2018 Total
Short term employee benefits
Salary
and fees (i)
$
Cash bonus
$
Non-monetary
benefits
$
Post-employment
benefits
Superannuation
$
Long-term
benefits
Long service
leave (ii)
$
Share-based
payments
Shares
$
Total
$
120,000
120,000
70,000
70,000
350,072
350,072
22,416
54,795
54,795
54,795
55,000
-
225,000
223,484
897,283
873,146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,674
13,419
-
-
-
-
-
-
-
-
13,674
13,419
-
-
-
-
20,531
27,125
2,129
5,205
5,205
5,205
-
-
20,532
21,231
48,397
58,766
-
-
-
-
5,208
5,854
-
-
-
-
-
-
1,293
923
6,501
6,777
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
120,000
70,000
70,000
389,485
396,470
24,545
60,000
60,000
60,000
55,000
-
246,825
245,638
965,855
952,108
Performance
based
percentage of
remuneration
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(i)
(ii)
Salary and fees includes salaries and allowances.
Long term benefits include long service leave entitlement accruals.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
24
The relative proportions of remuneration that are linked to performance and those that are fixed
are as follows:
Name
Executive Directors
Chris Richards
Other Key Management Personnel
Matthew White
Fixed remuneration
At risk – STI
100%
100%
-
-
Service agreements
c
Remuneration and other terms of employment for the Executive Directors and other key
management personnel are formalised in a Service Agreement. The major provisions of the
agreements relating to remuneration are set out below:
Base salary
Term of agreement
Notice period
$350,072
$225,000
5 years from listing
Twelve (12) months
No fixed term
Six (6) months
Name
Chris Richards
Matthew White
Bonus provisions
Chris Richards:
Matthew White
Nil
Nil
Bonuses included in remuneration
d
Details of the short-term incentive cash bonuses awarded as remuneration to each key
management personnel, the percentage of the available bonus that was paid and payable in the
financial year, and the percentage that was forfeited because the person did not meet the service
and performance criteria is set out below.
Included in
remuneration ($)
Percentage vested
during the year
Percentage forfeited
during the year
Executive Directors
Chris Richards
Other Key Management Personnel
Matthew White
-
-
-
-
-
-
Non-Executive Director remuneration
e
Clause 13.1(a) of the Company’s Constitution (Constitution) provides the limit for the aggregated
remuneration of non-executive directors which is currently set at $750,000. The Directors of the
Company are entitled to apportion and distribute this aggregate Non-Executive Directors’
remuneration as they determine.
The Non-Executive Directors of the Company receive the following fees (which total $310,000):
• Chairman (One): $120,000 per annum;
• Directors (Three): $60,000 per annum, each; and
• Chair of the Audit and Risk Management Committee $10,000 (in addition to the directors
fees), such amounts being inclusive of any superannuation payments.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
25
The ASX Listing Rules and Constitution allows the Company to increase the aggregate amount
of remuneration payable to Non-Executive Directors of the Company pursuant to Shareholder
approval at a general meeting.
Other information
f
Options held by key management personnel
There were no options to acquire shares in the Company held during the 2019 reporting period
by key management personnel of the Group; including their related parties.
Shares held by key management personnel
The number of ordinary shares held in the Company at 30 June 2019 held by each of the Group’s
key management personnel, including their related parties, is set out below:
Personnel
Chris Richards
Andrew Vizard
Charles Sitch
Richard Dennis
Michael van
Blommestein
Jan Tennent
Matthew White
Balance at
1/07/2018
27,926,077
107,196
152,995
20,300
98,212
-
115,315
28,420,095
Granted as
remuneration
Received on
exercise Other changes
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,025,728
106,957
1,922
612
2,962
35,000
2,461
Held as at
30/06/2019
28,951,805
214,153
154,917
20,912
101,174
35,000
117,776
1,175,642
29,595,737
None of the shares included in the table above are held nominally by key management personnel.
Loans to key management personnel
The Group did not enter into any loans with key management personnel during the 2019 year.
The number of key management personnel included in the Group aggregate at year end is Nil.
The Group does not have an allowance account for receivables relating to outstanding loans and
has not recognised any expense for impaired receivables during reporting period.
Other transactions with key management personnel
The Group rents premises at Piper Lane, Bendigo East, Victoria. The premises are owned by an
entity associated with Chris Richards. Rental payments in FY19 amounted to $333,600 (2018:
$310,800).
The Group rents premises at Rubicon Street, Smithton, Tasmania. The premises are owned by
an entity associated with Chris Richards. Rent payments made amounted to $125,232 (2018:
$132,961).
The Group leases an artificial insemination facility in Victoria from entities associated with Chris
Richards. Lease payments made amounted to $105,000 (2018: $105,000).
The Group leases premises at Midland Highway, Lethbridge, Victoria from entities associated
with Chris Richards. Lease payments made amounted to $16,818 (2018: $nil)
The Group leases premises at Hoskin Street, Quarry Hill, Victoria from entities associated with
Chris Richards. Lease payments made amounted to $15,002 (2018: $11,887).
The Group leases premises at Midland Highway, Epsom, Victoria from entities associated with
Chris Richards. Lease payments made amounted to $18,652 (2018: $12,164).
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
26
All related party rentals are based on commercial rates and the terms of the lease are standard
commercial terms.
End of audited Remuneration Report.
Environmental legislation
Apiam operations are not subject to any particular or significant environmental regulation under a
law of the Commonwealth or of a State or Territory in Australia.
Indemnities given to, and insurance premiums paid for, auditors and officers
Insurance of officers
During the year, Apiam paid a premium to insure officers of the Group. The officers of the Group
covered by the insurance policy include all Directors. The liabilities insured are legal costs that
may be incurred in defending civil or criminal proceedings that may be brought against the officers
in their capacity as officers of the Group, and any other payments arising from liabilities incurred
by the officers in connection with such proceedings, other than where such liabilities arise out of
conduct involving a wilful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else to cause detriment
to the Group.
Details of the amount of the premium paid in respect of insurance policies are not disclosed as
such disclosure is prohibited under the terms of the contract.
The Group has not otherwise, during or since the end of the financial year, except to the extent
permitted by law, indemnified or agreed to indemnify any current or former officer of the Group
against a liability incurred as such by an officer.
Non-audit services
During the year, the Company’s auditors performed certain other services in addition to their
statutory audit duties.
The Board has considered the non-audit services provided during the year by the auditor and, in
accordance with written advice provided by resolution of the Audit and Risk Management
Committee, is satisfied that the provision of those non-audit services during the year is compatible
with, and did not compromise, the auditor independence requirements of the Corporations Act
2001 for the following reasons:
•
• all non-audit services were subject to the corporate governance procedures adopted by the
Company and have been reviewed by the Audit and Risk Management Committee to ensure
they do not impact upon the impartiality and objectivity of the auditor; and
the non-audit services do not undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants, as they
did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as an advocate for the Company or jointly
sharing risks and rewards.
Details of the amounts paid to the auditors of the Company and its related practices for audit and
non-audit services provided during the year are set out in Note 27 to the financial statements.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
27
A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations
Act 2001 is included on page 28 of this financial report and forms part of this Directors’ Report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of the Company, or to intervene in any proceedings to which the
Company is a party, for the purpose of taking responsibility on behalf of the Company for all or
part of those proceedings.
Rounding of amounts
Apiam is a type of Company referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the
financial report have been rounded to the nearest $1,000 (where rounding is applicable), or in
certain cases, to the nearest dollar under the option permitted in the Instrument.
Signed in accordance with a resolution of the Directors:
Dr Christopher Irwin Richards
Managing Director
Melbourne
26 August 2019
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Apiam Animal Health Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of
Apiam Animal Health Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there
have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
A C Pitts
Partner – Audit & Assurance
Melbourne, 26 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Apiam Animal Health Limited
Financial Statements for the year ended 30 June 2019
29
Apiam Animal Health Limited
Financial Statements
For the year ended 30 June 2019
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
30
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue
Other income
Expenses
Changes in inventory
Cost of materials
Costs of consumables and services
Employee benefit expenses
Listing and acquisition expenses
Property expenses
Freight, vehicle and transport expenses
Depreciation and amortisation expense
Depreciation of biological assets
Other operating expenses
Share of profit from equity accounted investments
Finance costs
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit from continuing operations
Profit for the year
Profit attributable to:
Owners of Apiam Animal Health Limited
Non-controlling interests
Total comprehensive income/ (loss) for the period
Note
6
26
13,14
7
8
23
2019
$’000
111,720
19
(308)
(55,324)
(970)
(33,085)
(392)
(3,452)
(1,899)
(3,147)
(46)
(7,425)
18
(1,140)
2018
$’000
106,597
21
(208)
(54,828)
(1,012)
(30,121)
(499)
(2,998)
(1,532)
(2,432)
-
(7,251)
23
(929)
4,569
4,831
(1,419)
3,150
(1,545)
3,286
3,150
3,286
3,165
(15)
3,150
3,278
8
3,286
Earnings per share for profit attributable to the
ordinary equity holders of the company:
Note Cents
Cents
Basic earnings per share
Diluted earnings per share
24
3.01
3.21
3.01
3.21
1
The above statement of profit or loss should be read in conjunction with the accompanying notes
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
31
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Biological assets
Investments
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other current liabilities
Current tax liabilities
Borrowings
Employee benefit obligations
Total current liabilities
Non-current liabilities
Borrowings
Employee benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
- share capital
- corporate reorganisation reserve
- non-controlling interest acquisition reserve
- share based payment reserve
- retained earnings/ accumulated losses
non-controlling interest
Total equity
Note
9
10
11
12
14
13
15
16
20
17
18
19
18
19
21
22
22
22
23
2019
$’000
1,873
13,906
10,947
1,003
27,729
65,225
8,381
220
95
2,796
76,717
2018
$’000
1,436
14,744
11,256
851
28,287
64,515
9,418
-
75
3,109
77,117
104,446
105,404
9,596
400
230
3,707
4,852
18,785
12,269
400
594
3,930
4,253
21,446
23,035
23,336
273
784
260
24,352
43,137
810
867
220
25,233
46,679
61,309
58,725
86,432
(26,692)
(6,615)
330
7,092
60,547
762
61,309
85,775
(26,692)
(6,615)
-
5,607
58,075
650
58,725
The above statement should be read in conjunction with the accompanying notes
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
32
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Share
capital
Corporate re-
organisation
reserve
Non-
controlling
interest
acquisition
reserve
Share
based
payment
reserve
Retained
earnings
Total
attributable to
owners of
parent
Non-
controlling
interest
Total
equity
Note
$’000
$’000
$’000
$’000
83,066 (26,692)
(6,615)
2,041
668
-
-
-
-
-
-
-
$’000
3,956
-
-
$’000
53,715
2,041
668
$’000
$’000
642
54,357
-
-
2,041
668
- -
-
- (1,627)
(1,627)
- (1,627)
2,709
-
-
- (1,627)
1,082
-
1,082
Balance at 1 July 2017
Issue of shares to vendors of business acquired
Issue of new share capital
Dividends paid
Transactions with owners
Profit / (Loss) for the period
-
-
-
Total comprehensive income for the period
- -
-
Balance at 30 June 2018
Issue of new share capital
Employee share plan
Dividends paid
Transactions with owners
Profit / (Loss) for the period
21
85,775
(26,692)
(6,615)
657
-
-
657
-
-
-
-
-
-
-
-
Total comprehensive income for the period
Balance at 30 June 2019
Note: This statement should be read in conjunction with the notes to the financial statements.
86,432
(26,692)
(6,615)
-
-
-
-
330
-
330
-
-
330
3,278
3,278
3,278
3,278
5,607
58,075
-
-
(1,680)
(1,680)
3,165
3,165
7,092
657
330
(1,680)
(693)
3,165
3,165
60,547
8
8
650
127
-
-
127
(15)
(15)
762
3,286
3,286
58,725
784
330
(1,680)
(566)
3,150
3,150
61,309
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest paid
Transaction costs relating to acquisition of subsidiary
Income taxes paid
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for biological assets
Purchase of intangible assets
Proceeds from disposals of property, plant & equipment
Acquisition of subsidiaries, net of cash acquired
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment lease liabilities
Capital contribution of non-controlling interest
Dividends paid to company shareholders
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of the year
Note: This statement should be read in conjunction with the notes to the financial statements.
Note
25
9
2019
$'000
123,800
(115,838)
7,962
(1,140)
(385)
(1,553)
4,884
(1,860)
(266)
(706)
19
(254)
(3,067)
15,516
(15,301)
(699)
127
(1,023)
(1,380)
437
1,436
1,873
33
2018
$'000
117,715
(105,161)
12,554
(914)
(499)
(1,924)
9,217
(4,545)
-
(354)
21
(4,659)
(9,537)
25,796
(23,346)
(674)
-
(988)
788
468
968
1,436
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
34
Notes to the Consolidated Financial Statements
1
Nature of operations
Apiam Animal Health Limited and subsidiaries’ (‘the Group’) principal activities include the provision of veterinary products
and services to production and companion animals. Apiam services production animals throughout their life cycle, including
the provision of:
-
-
-
-
-
-
-
-
-
-
-
-
systems to assist in herd health programs;
production advice;
consulting services and products to assist in the prevention of animal diseases;
technologies to manage compliance with legislative requirements on pharmaceutical use;
advice and services in respect of animal welfare compliance;
retail animal health product sales;
on-farm delivery of products via its own logistics capability;
third party auditing services of industry quality assurance programs;
technology development for animal health management;
ancillary services such as sales and/or delivery of genetics and associated products;
on-farm and on-line training programs for clients; and
veterinary services for companion animals
There have been no significant changes in the nature of these activities during the year.
2
General information and statement of compliance
The consolidated general purpose financial statements of the Group have been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of
the Australian Accounting Standards Board (AASB). Compliance with Australian Accounting Standards results in full
compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB). Apiam Animal Health Ltd is a for-profit entity for the purpose of preparing the financial statements.
Apiam Animal Health Limited is the Group’s Ultimate Parent Company. Apiam Animal Health Limited is a Public Company
incorporated and domiciled in Australia. The address of its registered office and principal place of business is 27-33 Pipers
Lane, East Bendigo, Victoria 3550.
The consolidated financial statements for the year ended 30 June 2019 were approved and authorised for issue by the
Board of Directors on 26 August 2019.
3
Changes in accounting policies
New standards adopted as at 1 July 2018
AASB 15 Revenue from contracts with customers
AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations. The
new Standard has been applied as at 1 July 2018 using the modified retrospective approach. Under this method, the
cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings at 1 July
2018 and comparatives are not restated. In accordance with the transition guidance, AASB 15 has only been applied to
contracts that are incomplete as at 1 July 2018.
The adoption of AASB 15 did not have a material impact on the transactions and balances recognised in the financial
statements.
AASB 9 Financial Instruments
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement requirements. It
makes major changes to the previous guidance on the classification and measurement of financial assets and introduces
an ‘expected credit loss’ model for impairment of financial assets.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
35
When adopting AASB 9, the Group has applied transitional relief and elected not to restate prior periods. Rather, differences
arising from the adoption of AASB 9 in relation to classification, measurement, and impairment are recognised in opening
retained earnings as at 1 July 2018.
The adoption of AASB 9 did not have a material impact to the financial instruments held by the Group. The following
classification was impacted by the adoption of AASB 9.
Financial Assets
AASB 139 Classification
AASB 9 Classification
Trade and other receivables
Loans and receivables
Amortised cost
Impairment of financial assets:
AASB 9’s new impairment model use more forward looking information to recognize expected credit losses - the ‘expected
credit losses (ECL) model’. The application of the new impairment model depends on whether there has been a significant
increase in credit risk.
The Group considers a broader range of information when assessing credit risk and measuring expected credit losses,
including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of
the future cash flows of the instrument.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
36
Accounting Standards issued but not yet effective and not been adopted early
by the Group
3.2.1 Revised pronouncement : AASB 16 Leases
Superseded pronouncement - AASB 117 Leases, Effective date - 1 January 2019
Nature of change
•
•
replaces AASB 117 Leases and some lease-related Interpretations
requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases
• provides new guidance on the application of the definition of lease and on sale and lease back accounting
•
•
largely retains the existing lessor accounting requirements in AASB 117
requires new and different disclosures about leases
Likely impact on initial application
Based on the entity’s assessment, it is expected that the first-time adoption of AASB 16 for the year ending 30 June 2020
will have a material impact on the transactions and balances recognised in the financial statements, in particular:
•
•
lease assets and financial liabilities will increase by $9,080,729 based on the facts at the date of the assessment.
there will be a reduction in the reported equity as the carrying amount of the lease assets will reduce more quickly than
the carrying amount of lease liabilities.
• EBIT in the statement of profit and loss and other comprehensive income will be higher as the implicit interest in lease
payments for former off balance sheet leases will be presented as part of finance costs rather than being included in
operating expenses.
• operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal
repayments on all lease liabilities will now be included in financing activities rather than operating activities. Interest can
also be included within financing activities.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
37
4
Summary of accounting policies
Overall considerations
The consolidated financial statements have been prepared using the significant accounting policies and measurement
bases summarised below.
Basis of consolidation
The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2019.
The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary
and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30
June.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and
losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted
by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from
the effective date of acquisition, or up to the effective date of disposal, as applicable.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets
that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners
of the parent and the non-controlling interests based on their respective ownership interests.
Business combination
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the
Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred,
liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising
from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and
liabilities assumed are generally measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of:
(a) fair value of consideration transferred, (b) the recognised amount of any non-controlling interest in the acquiree, and (c)
acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable
net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on a
bargain purchase) is recognised in profit or loss immediately.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at acquisition date. The measurement period ends on
either the earlier of (i) 12 months from the date of acquisition or (ii) when the acquirer receives all the information possible
to determine fair value.
Business combinations under common control are accounted for in the accounts prospectively from the date the group
obtains the ownership interest.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
38
Assets and liabilities are recognised upon consolidation at their existing carrying amount in the financial statements of the
Acquiree. Any difference between the fair value of the consideration paid and the book value / carrying amount at which the
assets and liabilities are recorded is recognised directly in the Corporate re-organisation reserve in equity.
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian Dollars ($AUD), which is also the functional currency of
the Parent Company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange
rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from
the settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are
recognised in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange
rates at the date of the transaction), except for non-monetary items measured at fair value which are translated using the
exchange rates at the date when fair value was determined.
Segment reporting
Apiam identifies its operating segments based on the species to which the Group provide veterinary services and supply
animal health products. The Group’s three (3) operating segments are:
• Dairy and Mixed;
• Feedlots;
• Pigs;
The operating segments are aggregated for reporting purposes on the basis that each business segment has sales
consisting predominantly of S4 products, over the counter products and service revenue and that these products and
services exhibit similar economic characteristics across each business.
Revenue
Revenue arises mainly from the sale of veterinary products and services.
To determine whether to recognise revenue, the Group follows a 5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied
When the Group enters into transactions involving its products and services, the total transaction price for a contract is
allocated amongst the various performance obligations. Revenue is recognised either at a point in time or over time, when
the Group satisfies performance obligations by transferring the promised goods or services to its customers.
Sale of veterinary products and services
Revenue from the sale of veterinary products is recognised when the Group transfers control of the goods to the customer
and/or as contractual performance obligations are satisfied. Revenue from the sale of veterinary services is recognised as
the services are provided.
Interest and dividend income
Interest income and expenses are reported on an accrual basis using the effective interest method. Dividends, other than
those from investments in associates, are recognised at the time the right to receive payment is established.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
39
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. Expenditure
for warranties is recognised and charged against the associated provision when the related revenue is recognised.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during
the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs
are expensed in the period in which they are incurred and reported in finance costs Note 7.
Intangible assets
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and
separately recognised. See Note 4.2 for information on how goodwill is initially determined. Goodwill is carried at cost less
accumulated impairment losses. Refer to Note 4.11 for a description of impairment testing procedures.
Customer Relationships
Customer Relationships represents the future economic benefits arising from existing customers within a business
combination that have been individually identified and separately recognised. Customer relationships are amortised over
the anticipated life of the relationship.
Capitalised development costs
Capitalised development costs represent costs that are directly attributable to the development of the Group’s IT
infrastructure and intellectual property. Capitalised development costs are measured at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is recognised on a straight-line basis over its expected useful life.
Property, plant and equipment
Leasehold improvements, plant and equipment, motor vehicles and assets under construction
Leasehold improvements, plant and equipment, motor vehicles and assets under construction are initially recognised at
acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and
condition necessary for it to be capable of operating in the manner intended by the Group’s management. Plant and
equipment and motor vehicles also include property held under finance lease (see Note 4.10). Leasehold improvements,
plant and equipment and motor vehicles are subsequently measured using the cost model, cost less subsequent
depreciation and impairment losses.
Depreciation is recognised on a straight-line basis to write down the cost less estimated residual value of buildings, IT
equipment and other equipment. The following useful lives are applied:
•
•
Leasehold improvements: 10 - 33%
Plant & equipment: 10 – 33%
• Motor vehicles: 20 - 25%
In the case of leasehold property, expected useful lives are determined by reference to comparable owned assets or over
the term of the lease, if shorter.
Assets under construction commence depreciation once the asset is put into service.
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the
disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other
expenses.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
40
Leased assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and
rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is
recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease
payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability. Leases of
land and buildings are classified separately and are split into a land and a building element, in accordance with the relative
fair values of the leasehold interests at the date the asset is recognised initially.
See Note 4.9 for the depreciation methods and useful lives for assets held under finance lease. The corresponding finance
lease liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a
constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of
the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements
are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and
insurance, are expensed as incurred.
Impairment testing of goodwill, other intangible assets and property, plant and
equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash
inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies
of the related business combination and represent the lowest level within the Group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual
assets, customer relationships or cash-generating units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use,
management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate
in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly
linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and
asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s
assessment of respective risk profiles, such as market and asset-specific risks factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-
generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With
the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount
exceeds its carrying amount.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
41
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised
when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable). Financial assets other than those designated and effective as hedging instruments are classified into the
following categories:
•
•
•
amortised cost
fair value through profit and loss (FVTPL)
fair value through other comprehensive income (FVOCI)
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial asset
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as
FVTPL):
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash
flows
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall
into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under
IAS39.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are
categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual
cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments
fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting
requirements apply.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial
assets in this category are determined by reference to active market transactions or using a valuation technique where no
active market exists.
Financial assets at fair value through other comprehensive income (FVOCI)
The Group accounts for financial assets at FVOCI if the assets meet the following conditions:
•
•
they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell and
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
42
Impairment of financial assets
IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected
credit loss (ECL) model’. This replaced IAS 39’s ‘incurred loss model’. Instruments within the scope of the new requirements
included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract
assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the
issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group
considers a broader range of information when assessing credit risk and measuring expected credit losses, including past
events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the instrument. In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit
risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is
not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised
for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the
expected life of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and
records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its
historical experience, external indicators and forward-looking information to calculate the expected credit losses using a
provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk
characteristics they have been grouped based on the days past due. Refer to Note 33.3 for a detailed analysis of how the
impairment requirements of IFRS 9 are applied.
Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or loss.
Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial
liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognised
in profit or loss. All derivative financial instruments that are not designated and effective as hedging instruments are
accounted for at FVTPL.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are
included within finance costs or finance income.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned on the basis of weighted average
cost. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling
expenses.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
43
Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other
comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, the Australian Taxation Office
(ATO) and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date.
Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current
tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of
assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on
the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or
accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is
not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable
income, based on the Group’s forecast of future operating results which is adjusted for significant non-taxable income and
expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in
full.
Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and
liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except
where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly
in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes
in value.
Equity, reserves and dividend payments
Share capital
Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing
of shares are deducted from share capital, net of any related income tax benefits.
Corporate re-organisation reserve
The Corporate re-organisation reserve represents the difference between the fair value of the consideration paid and the
fair value of assets and liabilities acquired in a business combination whereby the business acquired was under common
control at the date of acquisition.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
44
Non-controlling interest acquisition reserve
The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate
reserve within equity attributable to owners.
Non-controlling interest
Represents the portion of the net assets of subsidiary’s that are not 100% owned by the Company.
Retained earnings
Retained earnings include all current and prior period retained profits.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved
in a general meeting prior to the reporting date.
All transactions with owners of the parent are recorded separately within equity.
Employee benefits
Short-term employee benefits
Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within
twelve (12) months after the end of the period in which the employees render the related service. Examples of such benefits
include wages and salaries, non-monetary benefits and accumulating sick leave. Short-term employee benefits are
measured at the undiscounted amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The Group’s liabilities for annual leave and long service leave are included in other long term benefits as they are not
expected to be settled wholly within twelve (12) months after the end of the period in which the employees render the related
service. They are measured at the present value of the expected future payments to be made to employees. The expected
future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of
service, and are discounted at rates determined by reference to market yields at the end of the reporting period on high
quality corporate bonds that have maturity dates that approximate the timing of the estimated future cash outflows. Any re-
measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the
periods in which the changes occur.
The Group presents employee benefit obligations as current liabilities in the statement of financial position if the Group does
not have an unconditional right to defer settlement for at least twelve (12) months after the reporting period, irrespective of
when the actual settlement is expected to take place.
Post-employment benefit plans
The Group provides post-employment benefits through various defined contribution plans.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
45
Share-based employee remuneration
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature
any options for a cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair values of employees’ services are determined
indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and
excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance
conditions).
Provisions, contingent liabilities and contingent assets
Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a
present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will
be required from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and
implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not
recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable
evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where
there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations. Provisions are discounted to their present values, where the time value of money is
material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is
recognised as a separate asset. However, this asset may not exceed the amount of the related provision.
No liability is recognised if an outflow of economic resources as a result of present obligation is not probable. Such situations
are disclosed as contingent liabilities unless the outflow of resources is remote in which case no liability is recognised.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is
not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the
asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown
inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and
financing activities, which are disclosed as operating cash flows.
Rounding of amounts
The Parent Entity has applied the relief available to it under ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instruments 2016/191 and accordingly, amounts in the financial statements and directors’ report have been rounded off to
the nearest $1,000, or in certain cases, the nearest dollar.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
46
Significant management judgement in applying accounting policies
When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions
about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgement
The following are significant management judgements in applying the accounting policies of the Group that have the most
significant effect on the financial statements.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s
future taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required
in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions (see Note 4.14).
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of
assets, liabilities, income and expenses is provided below. Actual results may be substantially different.
Impairment
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on
expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about
future operating results and the determination of a suitable discount rate (see Note 4.11).
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected
utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain
software and IT equipment.
Trade receivables
Management estimates the recoverable amount of any outstanding trade receivable balances at reporting date and
recognises an allowance for expected credit losses based on past due amounts and prior trading history.
Inventories
Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at
each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven
changes that may reduce future selling prices.
Customer relationships
Management reviews its estimate of the carrying value of customer relationships at reporting date and recognises an
allowance for impairment if required.
Business combinations
Management uses valuation techniques in determining the fair values of the various elements of a business combination
(see Note 4.2). Particularly, the fair value of contingent consideration is dependent on the outcome of many variables that
affect future profitability.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
47
5
Segment reporting
Identification of reportable operating segments
Management identifies operating segments based on the species to which the Group provide veterinary services and supply
animal health products. The Group’s three (3) operating segments are:
• Dairy and Mixed;
• Feedlots;
• Pigs;
Each of these operating segments is managed separately as each species group requires specific veterinary expertise
resources and marketing approach. These operating segments are monitored and strategic decisions are made on the basis
of adjusted segment operating results.
The operating segments are aggregated for reporting purposes on the basis that each business segment has sales
consisting predominantly of S4 products (prescription based pharmaceuticals), over the counter products and veterinary
service revenue and that these products and services exhibit similar economic characteristics across each segment.
Corporate overheads that cannot be allocated to a specific segment are disclosed separately.
The revenues and profit generated by the Group’s operating segments are summarised as follows:
Segment information
Revenue from external customers
Segment operating costs
Segment adjusted operating profit before tax
Total reporting segment operating profit
Other income
Corporate overheads
Acquisition and integration costs
Restructure costs
Finance costs
Share of profit from equity accounted investments
Net profit before tax
Income tax
Net profit after tax
6
Revenue
Sales revenue
Goods transferred at a point in time
Services transferred over time
Total revenue
2019
2018
$'000
111,720
(104,138)
7,582
7,582
19
(1,388)
(392)
(130)
(1,140)
18
4,569
(1,419)
3,150
$'000
106,597
(98,486)
8,111
8,111
21
(1,304)
(499)
(607)
(914)
23
4,831
(1,545)
3,286
2019
$'000
2018
$'000
76,768
34,952
70,558
36,039
111,720
106,597
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
7
Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Biological assets
Assets under construction
Amortisation of intangibles
Total depreciation
Finance costs
Interest expenses for borrowings at amortised cost:
Other borrowings at amortised cost
Interest expenses for finance lease arrangements
Other financial items – amortisation of borrowing costs
Share-based payments expense
Rental expense relating to operating leases
48
2018
$’000
47
1,249
921
-
-
215
2,432
847
67
914
15
929
40
1,842
2019
$’000
101
1,686
992
46
118
250
3,193
1,060
66
1,126
14
1,140
302
2,193
8
Income tax expense
The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective
tax rate of Apiam at 30% (2018: 30%) and the reported tax expense in profit or loss are as follows:
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2018 - 30%)
Adjustments for non-deductible expenses:
Sundry items
Income tax expense
Adjustment for current tax in prior periods
Total current tax expense
Tax expense comprises
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Tax expense/(benefit)
Note 15 provides information on deferred tax assets and liabilities.
2019
$’000
2018
$’000
4,569
1,371
(1)
1,370
1,370
49
1,419
1,106
313
1,419
4,831
1,449
12
1,461
1,461
84
1,545
1,216
329
1,545
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
9
Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents
10 Trade and other receivables
Trade receivables, gross
Less: allowance for expected credit losses
Other receivables
Tax receivable
Rebates receivable
49
2018
$'000
1,436
1,436
2018
$'000
13,137
(400)
47
523
1,437
14,744
2019
$'000
1,873
1,873
2019
$'000
12,637
(367)
184
507
945
13,906
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair
value.
All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables
were found to be impaired and an allowance for credit losses of ($33) (2018: ($60)) has been recorded accordingly within
other expenses.
Balance at 1 July
Impairment loss
Balance 30 June
11
Inventories
Stock on hand, at cost
Less provision for obsolescence
Stock in transit, at cost
12 Other current assets
Prepayments
Security deposits
2019
$'000
400
(33)
367
2019
$'000
11,352
(417)
12
10,947
2019
$'000
947
56
1,003
2018
$'000
460
(60)
400
2018
$'000
11,586
(655)
325
11,256
2018
$'000
784
67
851
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
50
13
Property, plant and equipment
Details of the Group’s property, plant and equipment and their carrying amount are as follows:
Year ended 30 June 2018
Opening net book value
Acquired through business combinations
Additions
Depreciation charge for year
Closing net book value
At 30 June 2018
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book value
Additions
Depreciation charge for year
Closing net book value
At 30 June 2019
Cost or fair value
Accumulated depreciation
Net book amount
Leasehold
improvements
Plant & equipment
Motor
vehicles
Assets
under
construction
Total
$’000
$’000
$’000
$’000
$’000
135
-
342
(47)
430
498
(68)
430
430
74
(101)
403
572
(169)
403
3,360
688
2,867
(1,182)
5,733
8,475
(2,742)
5,733
5,733
826
(1,686)
4,873
9,301
(4,428)
4,873
2,574
16
1,062
(921)
2,731
4,586
(1,855)
2,731
2,731
405
(992)
2,144
4,991
(2,847)
2,144
331
-
260
(67)
524
591
(67)
524
524
555
(118)
961
1,146
(185)
961
6,400
704
4,531
(2,217)
9,418
14,150
(4,732)
9,418
9,418
1,860
(2,897)
8,381
16,010
(7,629)
8,381
Leased assets
Furniture, fittings and equipment includes the following amounts where the group is a lessee under a finance lease
Leased equipment
Cost
accumulated depreciation
Net book amount
Refer to Note 30 for capital commitments relating to vehicle leases.
2019
$'000
2,542
(995)
1,547
2018
$'000
2,606
(722)
1,884
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
14 Intangible assets
At 30 June 2018
Cost
Accumulated amortization and impairment
Carrying amount at 30 June 2018
At July 1 2018
Opening net book value
Additions
Amortisation
Closing net book value
At 30 June 2019
Cost
Accumulated amortization and impairment
Net book value
51
Total
$'000
64,909
(394)
64,515
64,515
960
(250)
65,225
65,869
(644)
65,225
Customer
Relation-
ships
$’000
Capitalised
develop-
ment costs
$'000
Goodwill
$'000
61,252
-
61,252
61,252
254
-
61,506
61,506
-
61,506
3,223
(394)
2,829
2,829
-
(215)
2,614
3,223
(609)
2,614
434
-
434
434
706
(35)
1,105
1,140
(35)
1,105
Impairment testing
Goodwill is allocated to cash generating units (CGU) for the purpose of impairment testing. The allocation is made to those
cash generating units that are expected to benefit from the business combination in which the goodwill arose. The units are
identified at the lowest level at which goodwill is monitored for internal management purposes, which is also the segment
level.
The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a
detailed five (5) year forecast, followed by an extrapolation of expected cash flows for the units’ remaining useful lives using
the growth rates determined by management. The present value of the expected cash flows of each CGU is determined by
applying the following key assumptions:
Annual sales growth %
Annual operating expenses growth rate %
Long-term growth rate %
Post-tax discount rate %
2019
5.00%
2.00%
2.50%
9.33%
2019
$’000
2018
5.00%
2.00%
2.50%
10.60%
2018
$’000
Goodwill allocation at 30 June across sixteen (16) individual veterinary clinic
entities
61,506
61,252
The Directors and management have considered and assessed reasonably possible changes for key assumptions and have
not identified any instances that could cause the carrying amount for any of the segments to exceed its recoverable amount.
Growth rates
The growth rates reflect the long-term average growth rates for the industry.
Discount rates
The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each unit.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
52
Cash flow assumptions
Management’s key assumptions include stable profit margins, based on experience in this market. The Group’s
management believes that this is the best available input for forecasting this mature market. Cash flow projections reflect
stable profit margins achieved immediately before the budget period. Efficiency improvements have been taken into account
and prices and wages reflect publicly available forecasts of inflation for the industry.
Apart from the considerations described in determining the value-in-use of the cash-generating units described above,
management is not currently aware of any other probable changes that would necessitate changes in its key estimates.
Goodwill is managed at the CGU level which is also reflective of the level of operating segment being Pig, Feedlot, Dairy
and mixed.
A CGU summary of the goodwill allocation is presented below.
Balance 1 July 2018
Payment to vendors
30 June 2019
Feedlot
Dairy and mixed
$’000
12,788
-
12,788
$’000
48,464
254
48,718
Pig (a)
$’000
-
-
-
Total
$’000
61,252
254
61,506
(a) Pig CGU does not have any goodwill subscribed to it as on acquisition of the businesses associated with this CGU the
difference between the fair value and consideration paid and fair value of assets and liabilities were booked to the Corporate
Reorganisation Reserve as the businesses were under common control.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
15 Deferred tax assets and liabilities
Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows:
The balance comprises temporary differences attributable to:
Current assets
Trade and other receivables
Inventories
Current liabilities
Provisions
Borrowing costs
Other
Unused tax losses
Equity raising costs
Listing and acquisition costs
2019
$'000
141
125
1,561
(5)
747
181
46
2,796
53
2018
$'000
198
196
1,520
(9)
751
362
91
3,109
All deferred tax assets (including tax losses and other tax credits) have been recognised in the statement of financial
position.
At 1 July 2017
(Charged)/credited:
to P&L
Recognized in
business
combination
at 30 June 2018
(Charged)/credited:
to P&L
acquisition of a
subsidiary
•
•
•
•
Tax
losses
$'000
1,031
Provisions
$'000
1,389
Borrowing
costs
$'000
(14)
Trade
receivables
$'000
233
Listing &
acquisition
costs
$'000
137
Equity
raising
costs
$'000
543
Inventory
$'000
119
Total
$'000
3,438
(280)
68
5
(35)
(46)
(181)
77
(392)
-
751
(4)
63
1,520
-
(9)
198
91
362
196
63
3,109
-
-
-
41
4
(57)
(45)
(181)
(71)
(313)
At 30 June 2019
747
1,561
(5)
141
46
181
125
2,796
16 Trade and other payables
Trade payables
Sundry payables and accrued expenses
Other payables
2019
$'000
7,482
2,114
-
9,596
2018
$'000
9,249
2,566
454
12,269
All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable
approximation of fair value.
17 Current tax liabilities
Current tax payable
2019
$'000
230
2018
$'000
594
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
18 Borrowings
Current:
Bank loans (a)
less capitalized costs
lease liability (b)
less deferred interest charges
Total current borrowings
Non-current
bank loans (a)
less capitalized costs
lease liability (b)
less deferred interest charges
Total non-current borrowings
Refer to Note 38 for information on financial instruments.
Secured liabilities and assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Bank loans
Less capitalised borrowing costs
Lease liability
Less deferred interest charges
54
2018
$'000
3,198
(20)
815
(63)
3,930
22,260
(43)
1,171
(52)
23,336
2019
$'000
2,983
(20)
793
(49)
3,707
22,123
(29)
986
(45)
23,035
2019
$’000
25,106
(49)
1,779
(94)
26,742
2018
$’000
25,458
(63)
1,986
(115)
27,266
Assets pledged as security
(a) Bank loans are secured by first ranking general security agreements in relation to the current and future assets
of Apiam and each wholly-owned subsidiary.
(b) The lease liabilities are effectively secured over the assets to which the lease relates.
Banking covenants
The key financial covenants applicable to bank facilities are:
-
-
-
Maximum gearing ratio changed from a ratio of 35% to 45% (ratio of gross debt to gross debt & equity):
Maximum operating leverage ratio changed from 3.5 times to 4.0 times (ratio of gross debt to EBITDA): and
Minimum interest cover removed and no longer applicable from a prior ratio of 5.0 times (ratio of EBIT to gross
interest expense).
The Group complied with all bank covenants during the period.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank - term loan facilities
Bank - master asset finance agreement for equipment finance
Bank - overdraft facility
Bank - credit card facility
Used at reporting date
Bank - term loan facilities
Bank - master asset finance agreement for equipment finance
Bank - overdraft facility
Bank - credit card facility
Unused at reporting date
Bank - term loan facilities
Bank - master asset finance agreement for equipment finance
Bank - overdraft facility
Bank - credit card facility
19 Employee benefit obligations
Leave obligations current
Leave obligations non-current
Employee benefits
55
2018
$'000
45,700
3,500
1,000
300
50,500
25,396
1,870
-
-
27,266
20,304
1,630
1,000
300
23,234
2019
$'000
59,700
3,500
1,000
300
64,500
25,057
1,684
-
-
26,741
34,643
1,816
1,000
300
37,759
2019
$'000
4,852
273
5,125
2018
$'000
4,253
810
5,063
The provision for employee benefits relates to the group’s liability for long service leave and annual leave.
Amounts not expected to be settled within the next 12 months
The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service
leave where employees have completed the required period of service and also those where employees are entitled to pro-
rata payments in certain circumstances. The entire amount of the provision of $4,852 (2018: $4,253) is presented as current,
since the group does not have an unconditional right to defer settlement for any of these obligations. However, based upon
experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the
next twelve months. The group does not expect $2,356 (2018: $2,502) of this liability to be taken or paid within the next 12
months.
20 Other current liabilities
Opening Balance
Contingent consideration for acquisition
This relates to contingent consideration on businesses acquired during the the prior year.
2019
$'000
400-
-
400
2018
$'000
-
400
400
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
56
21 Equity
21.1 Share capital
The share capital of Apiam consists only of fully paid ordinary shares; the shares do not have a par value. All shares are
equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders’ meeting of
Apiam.
Shares issued and fully paid
· beginning of the period
· shares issued as consideration for business
acquisitions
· employee shares issued
Shares issued and fully paid
· issued under dividend reinvestment plan
1,203,885
2019
Shares
2018
Shares
2019
$'000
2018
$’000
104,693,843
101,177,947
85,775
83,066
-
2,683,462
792,434
40,000
105,897,728
104,693,843
-
657
-
86,432
86,432
2,041
638
30
85,775
85,775
Total shares authorised at the end of the period
105,897,728
104,693,843
Each share has the same right to receive dividend and the repayment of capital and represents one vote at the shareholders’
meeting of Apiam.
22 Reserves
Details of reserves are as follows:
Balance at 1 July 2017
Balance at 1 July 2018
Employee share plan incentive
Balance at 30 June 2019
23 Non-controlling interests
Issued capital
Current year earnings
Retained profits carried forward
Total non-controlling interests
Corporate
reorganisation
reserve
$’000
(26,692)
Non-
controlling
Interest
acquisition
reserve
$’000
(6,615)
(26,692)
-
(26,692)
(6,615)
-
(6,615)
Share
based
Payment
reserve
$’000
-
-
330
330
Total
$’000
(33,307)
(33,307)
330
(32,977)
2019
$’000
703
(15)
74
762
2018
$’000
576
8
66
650
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
57
24 Earnings per share and dividends
Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the Parent
Company as the numerator.
The reconciliation of the weighted average number of shares for the purposes of diluted earnings per share to the weighted
average number of ordinary shares used in the calculation of basic earnings per share is as follows:
• weighted average number of shares used in basic earnings per share
105,204,602
102,122,567
• weighted average number of shares used in diluted earnings per share
105,204,602
102,122,567
2019
2018
Number
Number
Dividends
During the year, the following dividends were declared and paid.
fully franked final dividend (0.8 cents a share)
fully franked interim dividend (0.8 cents a share)
2019
$'000
838
842
2018
$'000
809
818
1,680
1,627
In addition and since the end of the financial year, Directors have declared a fully franked final dividend of 0.8c per
ordinary share to be paid on 24 October 2019 (2018: 0.8c)
Franking credits
The amount of the franking credits available for
subsequent:
Balance at the end of the reporting period
Franking debits that will arise from the payment of
dividends recognised as a liability at the end of the
reporting period
franking credits that will arise from the payment of the
amount of provision for income tax
2019
$'000
7,950
(363)
230
2018
$'000
7,069
(359)
594
7,817
7,304
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
25 Reconciliation of cash flows from operating activities
(a) Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit / (Loss) for the period
Adjustments for:
· depreciation and amortisation expense
· doubtful debt expense
· obsolete stock provision
· amortisation of borrowing expenses
· share benefits expense
· profit on sale of fixed assets
· share of profit in equity accounted investments
· gains on derecognition of contingent consideration payable
Net changes in working capital:
· decrease/(increase) in trade and other receivables
· decrease/(increase) in inventories
· decrease/(increase) in other assets
· decrease/(increase) in deferred tax asset
· increase/(decrease) in trade and other payables
· increase/(decrease) in income tax payable
· increase/(decrease) in deferred tax liability
· increase/(decrease) in provisions
Net cash received in operating activities
58
2018
$’000
3,286
2,432
3
258
15
70
(21)
(23)
-
(108)
302
(101)
392
2,777
(202)
(46)
183
9,217
2019
$’000
3,150
3,193
102
(238)
16
330
(19)
(18)
726
546
(158)
313
(2,674)
(364)
(83)
62
4,884
(b) Non cash financing transactions
During the financial year, the Group acquired vehicles to the value $nil (2018: $998) via finance leases. These
transactions are not reflected in the Statement of Cash Flows.
26 Employee remuneration
Employee benefits expense
Expenses recognised for employee benefits are analysed below:
Employee benefits – expense
Wages and salaries expense
Bonus expense/(reversal)
Share-based payment expense
Superannuation expense
Employee benefits expense
2019
$’000
30,288
42
302
2,453
33,085
2018
$’000
27,907
(85)
40
2,259
30,121
Share-based employee remuneration
In 2019, nil (2018 - 40,000) shares at a fair value of $nil cents (2018 - $0.75 cents) per share were issued to the Trustee of
the Company’s Employee Share Trust, in anticipation of future allocations of Shares to participants under the Company’s
Equity Incentive Plan.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
59
27 Auditor remuneration
Audit services – Grant Thornton Audit Pty Ltd
Remuneration for audit or review of financial statements
177,934
193,289
2019
$
2018
$
Other services – Grant Thornton
•
taxation services
• other
Total other services remuneration
Total auditor’s remuneration
29,160
61,715
90,875
268,809
38,755
64,575
103,330
296,619
28 Related party transactions
The Group’s related parties include key management, post-employment benefit plans for the Group’s employees and others
as described below.
Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given
or received. Outstanding balances are usually settled in cash.
Transactions with key management personnel
Key management of the Group are the executive members of Apiam’s Board of Directors and members of the Executive
Team. Key management personnel remuneration includes the following expenses:
Short-term employee benefits:
• salaries including bonuses and non-monetary benefits
• non-monetary benefits
Total short-term employee benefits
Long- term employee benefits:
•
long service leave
Total long-term employee benefits
Post-employment benefits:
• superannuation
Total post-employment benefits
Total remuneration
2019
$
897,283
13,674
910,957
6,501
6,501
48,397
48,397
965,855
2018
$
873,146
13,419
886,565
6,777
6,777
58,766
58,766
952,108
Other transactions with key management personnel
The Group rents premises at Piper Lane, Bendigo East, Victoria. The premises are owned by an entity associated with Chris
Richards. Rental payments made amounted to $333,600 (2018: $310,800).
The Group rents premises at Rubicon Street, Smithton, Tasmania. The premises are owned by an entity associated with
Chris Richards. Rent payments made amounted to $125,232 (2018: $132,961).
The Group leases an artificial insemination facility in Victoria from entities associated with Chris Richards. Lease payments
made amounted to $105,000 (2018: $105,000).
The Group leases premises at Midland Highway, Lethbridge, Victoria from entities associated with Chris Richards. Lease
payments made amounted to $16,818 (2018: $nil)
The Group leases premises at Hoskin Street, Quarry Hill, Victoria from entities associated with Chris Richards. Lease
payments made amounted to $15,002 (2018: $11,887).
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
60
The Group leases premises at Midland Highway, Epsom, Victoria from entities associated with Chris Richards. Lease
payments made amounted to $18,652 (2018: $12,164).
All related party rentals are based on commercial rates and the terms of the lease are standard commercial terms.
The group took up an option during FY2018 to purchase the iVet technology from iVet Pty Ltd, a company controlled by
Chris Richards. The Group had previously entered into an intellectual property licence with iVet Pty Ltd to use the iVet
intellectual property. The Group were to pay iVet Pty Ltd a royalty of 10% of net sales revenue received by the Group for
the use of the intellectual property licence. The agreement was for an initial term of 10 years. Payment by the group to take
up the option to purchase iVet Pty Ltd in FY2019 was the sum of $nil (2018: $93,157).
29 Contingent liabilities
In the Directors’ view, there are no contingent assets or liabilities that will have a material effect on the Group.
30 Capital commitments
Property, plant and equipment
31 Interests in subsidiaries
Composition of the Group
Set out below details of the subsidiaries held directly by the Group:
Name of the Subsidiary
Chris Richards & Associates Pty Ltd
Country Vet Wholesaling Pty Ltd
Apiam Logistics Services Pty Ltd
Apiam Management Pty Ltd
Southern Cross Feedlot Services Pty Ltd
Westvet Wholesale Pty Ltd
Portec Veterinary Services Pty Ltd
Pork Storks Australia Pty Ltd
McAuliffe Moore & Perry Pty Ltd
Warrnambool Veterinary Clinic Pty Ltd
Scottsdale Veterinary Services Pty Ltd
Smithton Veterinary Service Pty Ltd
AAH - Dubbo Vet Hospital Pty Ltd
AAH - Bell Vet Services Pty Ltd
CVH Gippsland Pty Ltd
CVH Southern Riverina Pty Ltd
AAH Veterinary Services Pty Ltd
CVH iVet Pty Ltd
Tasvet Wholesale Pty Ltd
Quirindi Feedlot Services Pty Ltd
Quirindi Veterinary Clinic Pty Ltd
Quipolly Equine Centre Pty Ltd
AAH Veterinary Clinics Pty Ltd
Gympie & District Veterinary Services Pty Ltd
Apiam Solutions LLC
Country of
incorporation
and principal
place of
business
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
Principal activity
Veterinary services
Wholesale supply
Transport
Payroll
Veterinary services
Wholesale supply
Veterinary services
Genetics
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Veterinary services
Dormant
Dormant
Veterinary services
Veterinary services
Veterinary services
Veterinary Services
Veterinary Services
Distribution
2019
$'000
-
-
2018
$'000
39
39
Group proportion of
ownership interests
2019
100%
100%
100%
100%
100%
100%
49%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
51%
2018
100%
100%
100%
100%
100%
100%
49%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
0%
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
61
South Yarra Pharma Pty Ltd
Australia
Dormant
100%
0%
Significant judgements and assumptions
The Group holds 49% of the ordinary shares and voting rights in Portec Veterinary Services Pty Ltd (‘Portec’).
One (1) other investor holds 51% in order to ensure compliance with statutory laws applicable in Western Australia where
Portec Veterinary Services Pty Ltd (Portec) conducts its operations. Management has assessed its involvement in Portec
in accordance with AASB 10’s revised control definition and guidance. It was concluded that the Apiam Group has outright
control. In making its judgement, management considered the Group’s voting rights, the relative size and dispersion of the
voting rights held by the other shareholder and the extent of participation by the shareholder in general meetings.
Experience demonstrates that the other shareholder participates such that they do not prevent the Group from having the
practical ability to direct the relevant activities of Portec unilaterally.
Losing control over a subsidiary during the reporting period
There was no loss of control over a subsidiary during the reporting period.
Interests in unconsolidated structured entities
The Group has no interests in unconsolidated structured entities.
32
Leases
Finance leases as lessee
The Group’s main motor vehicles and certain items of plant and equipment are held under finance lease arrangements. As
of 30 June 2019, the net carrying amount of the motor vehicles held under finance lease arrangements (included as part of
motor vehicles) is $1,502,269 (2018; $1,883,974); and the net carrying amount of the plant and equipment held under
finance lease arrangements (included as part of plant and equipment) is $44,925 (2018: $25,560) (see Note 13).
The Group’s finance lease liabilities, which are secured by the related assets held under finance leases, are classified as
follows:
Current:
•
finance lease liabilities
Non-current:
•
finance lease liabilities
2019
$’000
744
941
2018
$’000
752
1,119
Future minimum finance lease payments at the end of each reporting period under review were as follows:
30 June 2019
Lease payments
Finance charges
Net present values
30 June 2018
Lease payments
Finance charges
Net present values
Minimum lease payments due
Within 1
year
$’000
1-5 years After 5 years
$’000
$’000
Total
$’000
793
(49)
744
815
(63)
752
986
(45)
941
1,171
(52)
1,119
-
-
-
-
-
-
1,779
(94)
1,685
1,986
(115)
1,871
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
62
Operating leases as lessee
Non-cancellable operating leases
Within one year
later than one year but less than five years
later than five years
2019
$’000
2,281
5,202
2,636
10,119
2018
$’000
2,255
5,582
3,385
11,222
The group leases various offices, warehouses and retail stores under non-cancellable operating leases expiring within one
to ten years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases
are renegotiated. The group also has a 5 year agreement for the provision of the IT ERP system for the financials as
previously communicated.
33
Financial instrument risk
Risk management objectives and policies
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by
category are summarised in Note 38.1. The main types of risks are market risk, credit risk and liquidity risk.
The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board of Directors, and
focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets.
Long-term financial investments are managed to generate lasting returns.
The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options.
The most significant financial risks to which the Group is exposed are described below.
Market risk analysis
The Group is exposed to market risk through its use of financial instruments and specifically to interest rate risk, which result
from both its operating and investing activities.
Interest rate sensitivity
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. At 30 June 2019, the Group
is exposed to changes in market interest rates through bank borrowings at variable interest rates.
The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1%
(2018: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions.
The calculations are based on a change in the average market interest rate for each period, and the financial instruments
held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
30-Jun-19
30-Jun-18
Profit for the year
Equity
$’000
+1%
270
290
$’000
-1%
(270)
(290)
$’000
+1%
270
290
$’000
-1%
(270)
(290)
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
63
Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to credit risk
from financial assets including cash and cash equivalents held at banks, trade and other receivables. The Group’s maximum
exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised
below:
Classes of financial assets
Carrying amounts:
Cash and cash equivalents
trade and other receivables
2019
$’000
2018
$’000
1,873
1,436
13,906
14,744
15,779
16,180
The credit risk is managed on a group basis based on the Group’s credit risk management policies and procedures.
The credit risk in respect of cash balances held with banks and deposits with banks are managed via only banking with
major reputable financial institutions.
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group
and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings
and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with
creditworthy counterparties.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single
counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of
customers in various industries and geographical areas. Based on historical information about customer default rates
management consider the credit quality of trade receivables that are not past due or impaired to be good.
Trade receivables are written off (ie. derecognised) when there is no reasonable expectation of recovery.
The Group’s management considers that all of the above financial assets that are not impaired or past due for each of the
30 June reporting dates under review are of good credit quality.
At 30 June, the Group has made an allowance for expected credit losses (see Note 10) based on past due amounts and
prior trading history. The amounts at 30 June analysed by the length of time past due, are:
Past due under 30 days
Past due 30 days to under 60 days
Past due 60 days and over
Total
2019
$’000
2,279
594
1,470
4,343
2018
$’000
2,440
530
1,476
4,446
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
64
Liquidity risk analysis
Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by
monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows
due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual
maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as
well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period
are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom
or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.
The Group’s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at
a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured
by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its
cash resources and trade receivables. The Group’s existing cash resources and trade receivables significantly exceed the
current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within one (1)
month.
As at 30 June 2019, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments
where applicable) as summarised below:
30 June 2019
Bank borrowings
Finance lease obligations
Trade and other payables
Total
Current
Within 6
months
$’000
6 - 12
months 1 - 4 years
$’000
$’000
3,003
409
9,596
13,008
-
335
-
335
23,672
941
-
24,613
This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows:
30 June 2018
Bank borrowings
Finance lease obligations
Trade and other payables
Total
Current
Within 6
months
$’000
6 - 12
months
$’000
1 - 4 years
$’000
3,188
342
12,269
15,799
-
473
-
473
24,995
1,171
-
26,166
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the
liabilities at the reporting date.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
65
34
Fair value measurement
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three
(3) levels of a fair value hierarchy. The three (3) levels are defined based on the observability of significant inputs to the
measurement, as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly
•
Level 3: unobservable inputs for the asset or liability
The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a
recurring basis at 30 June 2019 and 30 June 2018:
30 June 2019
Financial liabilities
Contingent consideration
Total liabilities
Net fair value
30 June 2018
Financial liabilities
Contingent consideration
Total liabilities
Net fair value
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
-
-
-
-
400
400
400
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
-
-
-
-
400
400
400
Total
$'000
400
400
400
Total
$'000
400
400
400
Measurement of fair value of financial instruments
The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair
values, in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based
on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The
finance team reports directly to the Chief Financial Officer (CFO) and to the Audit Committee. Valuation processes and fair
value changes are discussed among the Audit Committee and the valuation team at least every year, in line with the Group’s
reporting dates.
The valuation techniques used for instruments categorised in Level 3 are described below:
Contingent consideration (Level 3)
The fair value of contingent consideration related to the acquisition of business combinations is considered to be face value
as the payments become due within the next six (6) months.
The following table provides information about the sensitivity of the fair value measurement to changes in the most significant
inputs:
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
66
Significant unobservable input
Estimate of the input
Sensitivity of the fair value measurement to input
Probability of meeting target
100%
-
Level 3 Fair value measurements
The reconciliation of the carrying amounts of financial instruments classified
within Level 3 is as follows:
Contingent consideration
Balance at 1 July 2018
Payable business combination
Balance at 30 June 2019
2019
$’000
400
-
400
2018
$’000
-
400
400
35 Capital management policies and procedures
The Group’s capital management objectives are:
•
•
to ensure the Group’s ability to continue as a going concern, and
to provide an adequate return to shareholders;
by pricing products and services commensurately with the level of risk.
The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on
the face of the statement of financial position. The Group’s goal in capital management is to maintain a gearing ratio below
45% (ratio of debt to equity). This is in line with the Group’s covenants resulting from the banking facilities it has taken out
from December 2015.
Management assesses the Group’s capital requirements in order to maintain an efficient overall financing structure while
avoiding excessive leverage. This takes into account the subordination levels of the Group’s various classes of debt. The
Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the
risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
The amounts managed as capital by the Group for the reporting periods under review are summarised as follows:
Total equity
Cash and cash equivalents
Capital
Total equity
Borrowings
Overall financing
Capital-to-overall financing ratio
2019
$'000
61,309
1,873
63,182
61,309
26,742
88,051
72%
2018
$'000
58,725
1,436
60,161
58,725
27,266
85,991
70%
The Group has honoured its covenant obligations, including maintaining capital ratios, since the banking loans were taken
out in December 2015.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
67
36 Parent entity information
Information relating to Apiam Animal Health Limited (‘the Parent Entity’):
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings / (Accumulated losses)
Total equity
Statement of profit or loss and other comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
2019
$’000
2018
$’000
1,363
1,044
112,886
112,079
5,517
27,553
85,333
86,488
(1,155)
85,333
2,597
18
2,615
5,222
28,576
83,503
85,775
(2,272)
83,503
1,540
23
1,563
The Parent Entity has capital commitments of $nil to purchase motor vehicles (2018: $38,589). Refer Note 30 for further
details of the commitment.
The Parent Entity has entered into a deed of cross guarantee. Refer Note 39 for details.
The Parent Entity had no contingent liabilities at 30 June 2019 (2018: $nil).
37 Post-reporting date events
The Apiam Board of Directors have declared the Company’s final dividend of 0.8c per share fully franked on the 26
August 2019. The final dividend of $847,182 will be paid on the 24 October 2019.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
68
38
Financial assets and liabilities
Categories of financial assets and liabilities
Note 4.12 provides a description of each category of financial assets and financial liabilities and the related accounting
policies.
A description of the Group’s financial instrument risks, including risk management objectives and policies is given in Note
33.
The methods used to measure financial assets and liabilities reported at fair value are described in Note 34.1.
The carrying amounts of financial assets and financial liabilities in each category are as follows:
30-Jun-19
Financial assets
cash and cash equivalents
Trade and other receivables
Financial liabilities
Non-current borrowings
Current borrowings
Trade and other payables
Other current liabilities
Other liabilities
Current tax liabilities
30-Jun-18
Financial assets
cash and cash equivalents
Trade and other receivables
Financial liabilities
Non-current borrowings
Current borrowings
Trade and other payables
Other current liabilities
Other liabilities
Current tax liabilities
notes
9
10
18
18
16
20
17
Note
9
10
18
18
16
20
17
Financial
assets at
amortised cost
$'000
1,873
13,906
15,779
Other liabilities
at amortised
cost
23,035
3,707
9,596
400
260
230
37,228
Financial
assets at
amortised cost
$'000
1,436
14,744
16,180
Other liabilities
at amortised
cost
23,336
3,930
12,269
400
220
594
40,749
Total
$'000
1,873
13,906
15,779
23,035
3,707
9,596
400
260
230
37,228
Total
$'000
1,436
14,744
16,180
23,336
3,930
12,269
400
220
594
40,749
Borrowings
Borrowings include the following financial liabilities:
Financial liabilities
Carrying amount at amortised cost:
• bank borrowings (Note 18)
•
finance lease liabilities (Note 32)
All borrowings are denominated in $AUD.
2019
$’000
2,963
744
3,707
Current
2018
$’000
3,178
752
3,930
Non-current
2018
$’000
22,217
1,119
23,336
2019
$’000
22,094
941
23,035
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
69
Borrowings at amortised cost
Other bank borrowings are secured by first ranking general security agreements in relation to the current and future assets
of Apiam Animal Health Limited and each wholly owned subsidiary. Current interest rates are variable and average 3.1%
(2018 3.7%). The carrying amount of the other bank borrowings is considered to be a reasonable approximation of the fair
value.
Other financial instruments
The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value:
•
•
•
trade and other receivables
cash and cash equivalents; and
trade and other payables
39 Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the
others:
Chris Richards & Associates Pty Ltd
Country Vet Wholesaling Pty Ltd
Apiam Logistics Services Pty Ltd
Apiam Management Pty Ltd
Southern Cross Feedlot Services Pty Ltd
Westvet Wholesale Pty Ltd
Pork Storks Australia Pty Ltd
McAuliffe Moore & Perry Pty Ltd
Warrnambool Veterinary Clinic Pty Ltd
Scottsdale Veterinary Services Pty Ltd
Smithton Veterinary Service Pty Ltd
AAH - Dubbo Vet Hospital Pty Ltd
AAH - Bell Vet Services Pty Ltd
CVH Gippsland Pty Ltd
CVH Southern Riverina Pty Ltd
CVH Border Pty Ltd
Tasvet Wholesale Pty Ltd
By entering into the deed, the wholly-owned entities have been relieved of the requirement to prepare financial statements
and a directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments
Commission.
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
70
Set out below is a consolidated statement of profit or loss and other comprehensive income of the parties to the Deed.
Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019
Continuing operations
Revenue
Other income
Expenses
Changes in inventory
Cost of materials
Costs of consumables and services
Employee benefit expenses
Listing and acquisition expenses
Property expenses
Freight, vehicle and transport expenses
Depreciation of property, plant and equipment
Other operating expenses
Finance costs
Other financial items
Share of profit from equity accounted investments
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit from continuing operations
Profit for the year
2019
$'000
91,416
9
(536)
(42,536)
(912)
(27,920)
(392)
(3,003)
(1,754)
(2,551)
(6,540)
(1,138)
(15)
18
2018
$'000
91,916
-
(208)
(44,775)
(711)
(28,009)
(181)
(2,848)
(1,592)
(1,985)
(6,552)
(929)
(15)
23
4,146
4,134
(1,326)
2,820
(1,356)
2,778
2,820
2,778
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
Set out below is a consolidated statement of financial position of the parties to the Deed.
Statement of Financial Position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Biological assets
Investments
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Amounts payable to vendors for business acquisitions
Current tax liabilities
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
- share capital
- corporate reorganization reserve
- non-controlling interest acquisition reserve
- retained earnings
71
2018
$’000
677
16,566
11,020
763
29,026
61,987
7,943
-
73
3,008
73,011
2019
$’000
1,389
11,836
10,483
960
24,668
62,912
7,094
220
91
2,344
72,661
97,329
102,037
8,893
400
105
3,707
4,298
17,403
23,035
222
-
23,257
40,660
14,605
454
471
3,859
3,785
23,174
23,337
756
18
24,111
47,285
56,669
54,752
85,630
(26,692)
(5,856)
3,587
56,669
84,912
(26,692)
(5,968)
2,500
54,752
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
72
Directors’ Declaration
1
In the opinion of the Directors of Apiam Animal Health Limited:
a The consolidated financial statements and notes of Apiam Animal Health Limited are in
accordance with the Corporations Act 2001, including
i Giving a true and fair view of its financial position as at 30 June 2019 and of its performance
for the financial year ended on that date; and
ii Complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
b There are reasonable grounds to believe that Apiam Animal Health Limited will be able to
pay its debts as and when they become due and payable.
2 The Directors have been given the declarations required by Section 295A of the
Corporations Act 2001 from the Managing Director and Chief Financial Officer for the
financial year ended 30 June 2019.
3 Note 2 confirms that the consolidated financial statements also comply with International
Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dr Christopher Irwin Richards
Managing Director
Melbourne
26 August 2019
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Apiam Animal Health Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Apiam Animal Health Limited (the Company), and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2019 the consolidated statement of profit
or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001,
including:
a Giving a true and fair view of the Company’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
b Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. 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 Company in accordance with the auditor independence requirements of 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 (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. 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.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Key audit matter
Intangible Assets – Note 14
At 30 June 2019 the carrying value of goodwill and customer
relationships is $61.5M and $2.6M respectively, and is
allocated to two separate cash-generating units (“CGU’s”).
In accordance with AASB 136 Impairment of Assets, the
Group is required to assess if there are any indicators of
impairment and in respect to goodwill, assess if the carrying
value of each CGU is in excess of the recoverable value.
This area is a key audit matter due to the high level of
management judgement and estimation required to determine
the recoverable value of the CGU’s.
How our audit addressed the key audit matter
Our procedures included, amongst others:
• Assessing managements determination of the Group
CGU's based on the nature of the business and the
economic environment in which the units operate;
• Reviewing the impairment model for compliance with
AASB 136 Impairment of Assets;
• Assessing whether management has the requisite
expertise to prepare the impairment model;
• Assessing the reasonableness and appropriateness of
inputs and assumptions to the model by;
• Evaluating managements future cash flow forecasts
and obtain an understanding of the process by which
they were developed;
• Assessing managements key assumptions for
reasonableness by comparing long term growth rates
to historical results and economic and industry
forecasts;
• Considering the reasonableness of the revenue and
cost forecasts against current year actuals;
• Obtaining from management available evidence to
support key assumptions;
• Performing a sensitivity analysis on the key
assumptions; and
• Utilising an auditor's expert to assess the
reasonableness of the certain key inputs and
assumptions used in the model;
• Testing the underlying calculations for mathematical
accuracy of the model;
• Assessing customer relationships for indicators of
impairment; and
• Evaluating the disclosures in the financial statements for
appropriateness and consistency with accounting
standards.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s financial report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are 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 the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 this 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/ar2.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 21 to 25 of the Directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Apiam Animal Health Limited, for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
A C Pitts
Partner – Audit & Assurance
Melbourne, 26 August 2019
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
76
ASX Additional Information
Additional Securities Exchange Information
In accordance with ASX Listing Rule 4.10, the Company provides the following information to
shareholders not elsewhere disclosed in this Annual Report. The information provided is current
as at 5 August 2019 (Reporting Date).
Corporate Governance Statement
The Company’s Directors and management are committed to conducting the Group’s business in
an ethical manner and in accordance with the highest standards of corporate governance. The
Company has adopted and substantially complies with the ASX Corporate Governance Principles
and Recommendations (Third Edition) (Recommendations) to the extent appropriate to the size
and nature of the Group’s operations.
The Company has prepared a statement which sets out the corporate governance practices that
were in operation throughout the financial year for the Company, identifies any Recommendations
that have not been followed, and provides reasons for not following such Recommendations
(Corporate Governance Statement).
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will
be available for review on Apiam’s website (http://www.apiam.com.au/corporate-governance/) and
will be lodged together with an Appendix 4G with ASX at the same time that this Annual Report is
lodged with ASX.
The Appendix 4G will particularise each Recommendation that needs to be reported against by
Apiam and will provide shareholders with information as to where relevant governance disclosures
can be found.
The Company’s corporate governance policies and charters are all available on Apiam’s website
(http://www.apiam.com.au/corporate-governance/).
Substantial holders
As at the Reporting Date, the names of the substantial holders of the Company and the number
of equity securities in which those substantial holders and their associates have a relevant
interest, as disclosed in substantial holding notices given to the Company, are as follows:
Holder of Equity Securities
Class of
Equity
Securities
Number of
Equity
Securities held
% of total
issued
securities
Christopher Richards
Ordinary Shares
28,951,805
27.34%
Regal Funds Management Pty Limited Ordinary Shares
15,115,726
14.27%
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
77
Number of holders
As at the Reporting Date, the number of holders in each class of equity securities:
Class of Equity Securities
Fully paid ordinary shares
Fully paid ordinary shares restricted until 1 November 2019 and quoted on
ASX
Fully paid ordinary shares restricted until 19 March 2020 and quoted on
ASX
Fully paid ordinary shares restricted until 8 June 2020 and quoted on ASX
Performance Rights vested on 3 April 2018 (vested not yet exercised)
Performance Rights vesting on 31 October 2019
Performance Rights vesting on 31 October 2020
Number of
holders
1,174
4
1
3
1
43
43
Voting rights of equity securities
The only class of equity securities on issue in the Company which carries voting rights is ordinary
shares.
As at the Reporting Date, there were 1,176 holders of a total of 105,897,728 ordinary shares of
the Company.
At a general meeting of the Company, every holder of ordinary shares present in person or by
proxy, attorney or representative has one vote on a show of hands and on a poll, one vote for each
ordinary share held. On a poll, every member (or his or her proxy, attorney or representative) is
entitled to vote for each fully paid share held and in respect of each partly paid share, is entitled to
a fraction of a vote equivalent to the proportion which the amount paid up (not credited) on that
partly paid share bears to the total amounts paid and payable (excluding amounts credited) on that
share. Amounts paid in advance of a call are ignored when calculating the proportion.
Distribution of holders of equity securities
The distribution of holders of equity securities on issue in the Company as at the Reporting Date
is as follows:
Distribution of ordinary shareholders
Holdings Ranges
Holders
Total Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 999,999,999
140
334
218
373
110
74,662
944,831
1,799,202
11,393,686
91,685,347
Totals
1,175
105,897,728
%
0.071
0.892
1.699
10.759
86.579
100
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
78
Distribution of Performance Rights shareholders
Holders of
Performance
Rights Vested on 3
April 2018 (Vested
not yet exercised)
Holders of
Performance
Rights Vesting on
31 October 2019
Holders of
Performance
Rights Vesting
on 31 October
2020
0
0
0
1
0
1
0
0
0
43
0
43
0
0
0
43
0
43
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 999,999,999
Totals
Distribution of holders of escrowed shares
Less than marketable parcels of ordinary shares (UMP Shares)
The number of holders of less than a marketable parcel of ordinary shares based on the closing
market price at the Reporting Date is as follows:
Total Shares
UMP Shares
UMP Holders
% of issued shares
held by UMP holders
104,555,999
91,684
156
0.08769
Twenty largest shareholders
The Company only has one class of quoted securities, being ordinary shares. The names of the
20 largest holders of ordinary shares, and the number of ordinary shares and percentage of
capital held by each holder is as follows:
Holder Name
Balance as at
Reporting Date
%
CJOEA FAMILY COMPANY PTY LTD
28,215,006 26.644%
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
8,111,094
7.659%
UBS NOMINEES PTY LTD
4,339,702
4.098%
COBASH PTY LIMITED
3,872,006
3.656%
BRISPOT NOMINEES PTY LTD
3,413,964
3.224%
CITICORP NOMINEES PTY LIMITED
2,364,618
2.233%
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
79
CS FOURTH NOMINEES PTY LIMITED
1,591,587
1.503%
CS THIRD NOMINEES PTY LIMITED
1,461,443
1.380%
MRS KATE JUDITH MALIN
1,389,161
1.312%
FOUR POST INVESTMENTS PTY LTD
MR NEIL LEIGHTON & MRS HELEN LEIGHTON
MR ROGER CHARLES CARMODY & MRS MARIS MOORE
CARMODY
SONJASWRIGHT PTY LIMITED
DAVID FRITH PTY LTD
1,386,700
1.309%
1,354,131
1.279%
1,258,650
1.189%
1,211,846
1.144%
1,137,866
1.074%
TONY BATTERHAM PTY LTD
1,066,439
1.007%
MR KEVIN FRANCIS SULLIVAN & MRS JANE MAREE SULLIVAN
1,010,000
0.954%
CINDY JANE PTY LTD
DR MARTIN HUGH FOREMAN & MRS SUSAN MARY
JOHNSTON
K F J SULLIVAN PTY LTD
MRS COLEEN STEWART
Total number of shares of Top 20 Holders
Total Remaining Holders Balance
976,341
0.922%
915,216
0.864%
884,900
0.836%
872,568
0.824%
66,833,238
63.10
39,064,490
36.90
Company Secretary
The Company’s secretary is Ms Sophie Karzis.
Registered Office
The address and telephone number of the Company’s registered office is:
27- 33 Piper Lane
East Bendigo VIC 3550
Telephone: +61 (0)3 5445 5999
Apiam Animal Health Limited
Financial statements for the year ended 30 June 2019
80
Share Registry
The address and telephone number of the Company’s share registry, Boardroom Pty Limited,
are:
Street Address:
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Telephone: 1300 737 760
Stock Exchange Listing
The Company’s ordinary shares are quoted on the Australian Securities Exchange (ASX issuer
code: AHX).
Escrow
Class of restricted
securities
Type of restriction
Number of
securities
End date of escrow
period
Ordinary shares
Voluntary escrow
292,005
1 November 2019
Ordinary shares
Voluntary escrow
129,102
19 March 2020
Ordinary shares
Voluntary escrow
920,622
8 June 2020
Unquoted equity securities
The number of each class of unquoted equity securities on issue, and the number of their holders,
are as follows:
Class of restricted
securities
Number of unquoted Equity
Securities
Number of holders
Performance Rights
2,333,033
43
Other Information
The Company is not currently conducting an on-market buy-back.
There are no issues of securities approved for the purposes of item 7 of section 611 of the
Corporations Act which have not yet been completed.
No securities were purchased on-market during the reporting period under or for the purposes of
an employee incentive scheme or to satisfy the entitlements of the holders of options or other
rights to acquire securities granted under an employee incentive scheme.
Local knowhow.
Global knowledge.
Local knowledge.
Global knowhow.