Apiam Animal Health Limited
Annual Report 2021

Plain-text annual report

Apiam Animal Health Limited Appendix 4E 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 2021 Previous period: For the year ended 30 June 2020 Apiam Animal Health Limited Appendix 4E 2 RESULTS FOR ANNOUNCEMENT TO THE MARKET Statutory Results Summary CHANGES FROM PERIOD ENDED 30 JUNE 2021 2020 $m $m To 126.2 from 118.4 % 7 24 To 5.1 from 24 To 5.1 From 4.1 4.1 up up up Revenue from ordinary activities Net profit attributable to members Profit from ordinary activities after tax attributable to members Underlying EBIT (Incl. non-controlling interests) Up 6 to 8.8 From 8.3 Underlying EBIT (Earnings Before Interest and Tax) is considered by Management to be a useful indicator of business profitability and excludes one-off corporate costs as well as integration 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 2021 Interim Dividend Amount per security cents Franked amount per security Cents 1.2 cents 1.2 cents 2021 Final Dividend (declared after balance date but not yet paid) 1.2 cents 1.2 cents Record date for determining entitlements to the dividend: 17 September 2021 Date dividend payable: 22 October 2021 Apiam Animal Health Limited Appendix 4E 3 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 27 September 2021. Shareholders who elect to participate in the DRP for the 2021 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 27 September 2021 and 1 October 2021 (‘Pricing Period’). The timetable in respect of the 2021 final dividend and DRP is as follows: Event / Action Record Date Date* 17 September 2021 Election Date: Last date for shareholders to make an election to participate in the DRP 5.00 pm (Melbourne time) on 27 September 2021 Pricing Period Commencement Date 27 September 2021 Last Day of Pricing Period Announcement of DRP issue price 1 October 2021 5 October 2021 Dividend Payment Date / Issue of DRP shares 22 October 2021 *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 2021 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 27 September 2021. An online election can be made by visiting www.boardroomlimited.com.au. Net Tangible Asset per Security Net Tangible assets per share Return to shareholders 2021 -$0.11 2020 -$0.14 Dividends of $2,850,296 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. Apiam Animal Health Limited Appendix 4E 4 Entities over which control has been gained or lost during the period: Refer to Note 32 and 33 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 2021 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. 2021 Apiam Animal Health ANNUAL REPORT Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 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 1 2 4 8 20 29 31 32 33 34 35 73 74 77 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 2 Chairman’s Message Dear Shareholder, In a year unlike any other, Apiam’s clear strategic pathway and previous investment in key infrastructure enabled our experienced and dedicated management team to efficiently navigate through the significant disruptions caused by the COVID-19 pandemic and deliver another successful financial year. Apiam recorded overall revenue growth of 6.6% and Net Profit After Tax growth of 24.1% compared to the previous financial year, supported by excellent growth across our dairy and mixed animal clinics, which now contributes 60% of group revenue. Our beef feedlot and pig segments are cyclical and faced challenges during FY21, such as the reduction in the number of cattle on feed caused by the rebuilding of the national cattle herd. To reduce the impact of lower animal numbers, we have continued to expand our offerings and have invested in the development of products that will leverage Apiam’s performance as these industries rebound over the coming months. As has been widely reported across the media, population rates as well as animal and pet ownership have rapidly accelerated across Australian regional growth corridors. Our Company’s on-going focus is to capitalise on this growth in regional veterinary markets, particularly in the fast-growth dairy and mixed animal clinic market. Over the financial year we announced the acquisition of five regional veterinary practices. Each of the acquisitions brought significant benefits to the Company. As well as increasing our veterinary presence in targeted fast-growth regional hubs, they presented attractive financial propositions for growth. Through this acquisition program, we also more than doubled our South- East Queensland clinic presence, which will be an important growth market for Apiam in the coming years. We further extended our market position in FY21 with the opening of two new purpose-built greenfield veterinary clinics, located in Shepparton and Torquay North. These locations were carefully chosen by management to capture rapid population growth and animal ownership in the local areas. While greenfield clinics do have a negative earnings impact in their initial year of operating, our prior experience tells us they are highly profitable within two to three years of opening. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 3 Organic growth initiatives also continued to prove successful at delivering business growth. Apiam’s ProDairy and Best Mates companion animal program, both devised and implemented in- house last year, have continued to deliver excellent growth outcomes in the current period. Management have recently completed the pilot program for new services designed for the Company’s pig industry customers, which will be rolled-out over the next twelve months. Apiam’s staff are our greatest asset, and we maintain a strong focus on improving the wellbeing and professional development of our people. For example, during the year our innovative tele- triage program, designed to reduce the burden of after-hours work for veterinarians, was enhanced; we trained additional mental health first aid officers across many of our locations, and we launched a comprehensive driver training program. Industry leading initiatives were also introduced to support and improve working conditions for our on-farm teams. We continue to navigate through the uncertainty of the COVID-19 pandemic with robust policy and procedures in place to maintain staff and community safety as well as business continuity. Going forward, the wellbeing of our team remains as a top priority. As a Company we remain well funded, continue to generate strong cash flows and are positioned to continue with our regional expansion initiatives. In April we undertook a successful $6.0M capital raise and welcomed new institutional investors onto our share register as well as received continued support from existing holders. This was our first capital raise since we listed on the ASX in 2015 and it consolidated our position to accelerate many of our recent expansion plans. In recognition of our strong capital position the Board have declared a final dividend of 1.2 cps, fully franked, bringing the full year dividend to 2.4 cps. Looking forward, I am confident our experienced and dedicated management team will continue to build on our leading regional veterinary market position and deliver another successful year in FY22. On behalf of the Board of Directors, I thank our shareholders for their continued support and look forward to updating you on the progress of the Company as we head into a new financial year. Yours sincerely, Professor Andrew Vizard Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 4 Managing Director’s Message Dear Shareholder, Apiam has continued to expand and grow the footprint of our business in FY21, while at the same time delivering revenue and profitability growth year-on-year. Our regional expansion strategy has targeted fast-growing regional veterinary markets, and has been underpinned by strategic acquisitions, the opening of new greenfield clinics as well as other organic business initiatives. Dairy & mixed animal clinics driving growth Apiam’s reported revenue in FY21 was $126.2 million, an increase of 6.6% on the prior comparable period (PCP). This performance occurred in the face of varying conditions across the animal segments in which we operate, with our dairy & mixed animal clinics being a principal driver of our growth. In FY21, the Company’s dairy & mixed animal clinics delivered 23.7% revenue growth buoyed by the rapid increase in animal ownership in regional and peri-urban growth corridors as well as the easing of drought conditions supporting strong dairy results. Additionally, we recorded strong operating leverage across this business delivering 44.2% EBIT growth. Our regional expansion strategy was executed to increase the Company’s market share in these attractive growth segments. Revenues from the pig and beef feedlot businesses declined 11.4% in FY21, with beef feedlot revenues impacted by reduced cattle numbers available for feedlots due to the rebuilding of the national breeder herd. It has been estimated by Meat & Livestock Australia that the national beef herd through 2020 and the early parts of 2021 has been at its lowest level since the early 1990’s. Early signs of recovery were however seen in Q4 FY21 with cattle availability to feedlots beginning to increase1. Industry capacity has also continued to increase in anticipation of further growth in FY22 and FY23. 1 Meat & Livestock Australia, August 2021, National Accredited Feedlot Survey Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 5 Revenues from the pig segment continued to reflect changes in our business mix, particularly our strategic transition to new and innovative antimicrobial and vaccine products across the intensive animal spectrum. This has led to reduced wholesale sales of lower-margin traditional products as we transition our business strategy in this area. During the year we have invested in the development of new vaccines, private label products and other services focused on the intensive animal segments to leverage growth as the industry rebounds. On a like-for-like basis (excluding acquisitions) our overall Group revenue fell 0.5% compared to the prior financial year, with like-for-like dairy & mixed animal clinic revenue growth of 12.5% offsetting the fall in feedlot and pig revenues. Apiam have delivered gross profit growth and margin expansion in FY21, as ongoing changes in the Company’s business mix and investment in systems delivered results. In FY21 Apiam’s gross profit increased 11.2% to $71.1 million (with gross margin of 56.3% vs 54.0% in FY20). Over the past 4-years, our business strategy has consistently delivered gross margin improvements, with gross profit increasing 37.8% since FY18. We also delivered growth in operating earnings over the financial year with EBIT growth of 11.7% and NPAT growth of 24.1% vs PCP. A strong focus on operating cost control was maintained over the period, with reported cost increases relating to acquisitions and employment costs in areas strategically targeted to generate future revenue streams. The opening of two new greenfield clinics in the second half of FY21 also had a negative impact on Apiam’s operating earnings growth, however based on our previous experience these clinics will deliver strong revenue and earnings outcomes for our shareholders within 2-3 years of opening. Apiam’s cash flow and financial position remain strong, with net cash flow from operating activities up 82.5% during the period supported by robust working capital management, and a return to normalised inventory levels following the strategic investment in private-label products and inventory build to mitigate potential supply issues in the prior year. The Company reported an excellent cash conversion to earnings ratio of 117% and significant funding remains available to execute on our growth strategies in the year ahead. Acquisitions & greenfield clinics in targeted regional locations Our growth strategy in FY21 has centred around investing in regional expansion and extending our national footprint with a particular focus on our dairy operations and mixed animal veterinary clinics, given the rapid growth in these underlying markets. In FY21 we successfully executed four business acquisitions, which added 2 new clinics to our network in regional NSW and 4 new clinics in Southern Queensland. This represented a material increase in the scale of our Queensland operations, more than doubling our clinic presence year- on-year. Southern Queensland is an important market in the Company’s regional expansion Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 6 strategy with many areas adjacent to our acquisition locations also being identified as underserviced by veterinarians. Following the reporting period, we also completed the acquisition of Scenic Rim Veterinary Service and Boonah Animal Hospital (Scenic Rim Vets) which will add a further two clinics to Apiam’s Queensland presence, taking our total presence in this state to 10 clinics. This acquisition will also add further equine expertise which we can leverage across the broader client base throughout the region. Apiam opened two new greenfield clinics during FY21, located in the rapidly growing Victorian regional towns of Shepparton and Torquay North where major housing developments are occurring. While there is a first-year earnings impact as the clinics get established, we expect these clinics to break even within two years of opening and generate strong returns for our shareholders within three-years of operations. Organic business initiatives Apiam reported another excellent year of growth in its subscription programs, implemented across the Group in early FY20. ProDairy, our innovative end-to-end service for dairy farmers delivered 108% growth in dairy farm enrolments and it is estimated approximately 11.2% of Australia’s dairy cows are enrolled in the program, leaving plenty of room for further market penetration. Opportunities for further expansion into Tasmania and New South Wales have been identified for further action in FY22. Similarly, Apiam’s Best Mates annual subscription animal wellness program reported 76% membership growth this financial year. Apiam estimate that 7.3% of their active client base are Best Mates members and we see increased client conversion to this program as a key goal in the year ahead. During FY21 we have also developed in-house a novel data system for the pig segment (Data Pig), designed to enhance antimicrobial stewardship, better monitor pig health and improve quality assurance for farmers. A pilot program was completed in Western Australian piggeries in FY21 and we have commenced commercialisation of this platform to the Australian pig industry. Trials continued during the year in relation to the Zoono Microbe Shield product for which we have the exclusive licence for veterinary and agricultural applications in the USA. The application of Zoono Microbe Shield has been demonstrated after 21 days applied to a surface to provide a significant reduction in the levels of porcine epidemic diarrhoea virus (PEDv) and porcine reproduction and respiratory syndrome virus (PRRSv), which are significant issues in the North American pig industry. This study was undertaken by an independent US university. These results provide the potential for a significant market opportunity, and Apiam has entered into an agreement with a US pharmaceutical company to expand its sales and marketing footprint to the US veterinary market, expected to commence in Q2 of FY22. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 7 Positive outlook In FY22 management are focussed on continuing to execute the Company’s regional expansion strategy, especially in areas where we have identified rapid population growth that are underserviced by vets. Further acquisitions are expected in the first half of the financial year, and we recently announced that we have acquired or entered into agreements to acquire Golden Plains Group in the fast- growth Greater Geelong region and Harbour City Veterinary Surgery in Gladstone, Queensland. We have also recently opened an additional greenfield clinic in Highton, Geelong (VIC) in July, to capture the significant market opportunity in this peri-urban growth region. I would like to conclude by thanking our team of dedicated staff for their energy and commitment to delivering on the Company’s business and professional development goals, whilst maintaining exceptional levels of service to our clients and their animals. Yours sincerely, Dr Chris Richards Managing Director Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 8 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 2021. 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 Dr Jan Tennent Non-Executive Director Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 9 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. held directorships An experienced company director, he has previously in ASX companies, statutory bodies and research including Animal Health organisations Australia, for body coordinating Australia’s animal health system; Primesafe, the statutory authority responsible for regulating the production of safe meat in Victoria; and the Australian Wool Corporation. responsible the He is currently Chair of the Vizard Foundation and Executive Secretary for the Hermon Slade Foundation and the Australia & Pacific Science Foundation. Dr Chris Richards is the Managing Director of ASX listed Apiam Animal Health Ltd, as well as the Australian subsidiary entities and joint venture companies, which provide veterinary services rural communities. to Australian regional and Chris is also a Director of registered charity, Fur Life Foundation Ltd, which raises funds to support people in rural, regional, and remote communities Chris is also a Director of Apiam Solutions LLC, a JV company based in the USA that provides product solutions to the Northern American production animal industries. Chris is responsible for the strategic direction of Apiam, which has seen the develop, grow, acquire and integrate production and companion animal veterinary clinics, veterinary wholesale, logistics, laboratory and genetics services businesses since 1998 into the Apiam of today. Chris is a member of Australian Pork Limited’s Biosecurity Strategic Review Panel and ASF Advisory Group. Interests in Shares and Options Interests in Shares and Options 229,366 shares 31,400,000 shares 165,430 performance rights Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 10 Mr Michael van Blommestein Mr Richard John Dennis Independent Non-Executive Director Independent Non-Executive Director GAICD BComm, LLB 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. Michael is an experienced director in the animal health sector. He 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 for 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. the Rick is a member of Australian Super’s Queensland Advisory Board, a member of the Advisory Boards 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 Open Minds and ASX-listed Motorcycle Holdings Limited and ASX-listed Cettire Limited Interests in Shares and Options Interests in Shares and Options 108,360 shares 22,395 shares Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 11 Dr Jan Tennent Independent Non-Executive Director PhD, BSc (Hons), GCertMgt, FTSE, FASM, GAICD Jan is a Fellow of the Australian Academy of Technology and Engineering and the Australian Society for Microbiology and, a Principal Fellow at the University of Melbourne. She is an internationally recognised researcher with specialist knowledge of antimicrobial resistance mechanisms and the discovery and commercialisation of vaccines. Jan has held senior roles at CSIRO, CSL, and Pfizer Animal Health where she was the Director of Business Development and Global Alliances in the APAC region. Her most recent executive management role was CEO of Biomedical Research Victoria is also a non-executive (2012-2019). Jan director of AusBiotech Limited and eviDent Foundation Limited. Interests in Shares and Options 57,780 shares Company Secretary Eryl Baron (appointed 30 November 2020) Company Secretary AGIA Eryl has 20 years’ experience working in the corporate sector as a Company Secretary in a number of industries. She is the appointed Company Secretary to a portfolio of ASX- listed companies across a range of industries. Eryl is an Associate member of the Governance Institute of Australia. She is experienced in company secretarial and governance management of listed and unlisted companies. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 12 Todd Richards (resigned 30 November 2020) Todd (BBus, Accounting) is a Certified Practicing Accountant (FCPA) and Company Secretary. His background includes experience in completing IPOs, M&A transactions and capital raising for ASX listed companies. He is Company Secretary for a number of listed and private companies and his corporate secretarial experience in the listed space includes roles in fin-tech, digital media, agri-business, e-commerce and building services. 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 Andrew Vizard Chris Richards Michael van Blommestein Richard Dennis Jan Tennent A 13 13 13 13 13 B 13 13 12 13 13 A 5 B 5 A 3 B 3 N/A N/A N/A N/A N/A N/A 3 3 5 5 5 5 N/A N/A 3 3 Column A denotes the number of meetings the Director was entitled to attend and column B denotes the number of meetings the Director attended. 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 Members of the Remuneration & Nomination Committee during the period were: Michael van Blommestein (Chair) Andrew Vizard Jan Tennent Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 13 PRINCIPAL ACTIVITIES Apiam Animal Health Limited and subsidiaries’ (‘the Group’) principal activities include the provision of veterinary products and services to production animals and companion animals. There have been no significant changes in the nature of these activities during the year. REVIEW OF OPERATIONS In FY21, Apiam delivered growth in its key financial and operating metrics, and from a strategic perspective pursued its regional expansion plan, targeting the rapid growth in rural and regional veterinary markets. Apiam reported revenue of $126.2m for FY21, an increase of 6.6% versus FY20, the previous corresponding period (PCP). This result was driven by excellent growth in the Company’s dairy and mixed animal segment where revenue increased 23.7% vs PCP. This segment also accounted for 60% of the Company’s revenue in FY21 and has been the focus of Apiam’s regional expansion in FY21, particularly its acquisition pipeline and greenfields clinic roll-out program. This strategy is discussed in more detail in the section below. Apiam’s pig and beef feedlot revenues fell by 11.4% in FY21 with a reduction in the number of cattle on feed occurring this past year as a result of the rebuilding of the national cattle herd. The Company’s revenues from the pig segment continue to reflect strategic changes in the business mix to reduce low margin products as it transitions to alternative technologies to further enhance its antimicrobial stewardship programs. Group like-for-like revenue, excluding the impact of acquisitions, fell by 0.5% in FY21 reflecting the impact of the trends as outlined above. The Company continued to deliver sustained gross profit improvement with gross profit of $71.1m in FY21, a 11.2% increase on PCP. This is the second year Apiam has delivered double-digit gross profit growth, and since FY18 gross profit has increased 37.8%. The growing contribution of the dairy & mixed animal clinics have been a key driver of this trend over the past 12-months. Operating earnings grew on both a reported and underlying basis in FY21, as gross profit growth offset the increased operating expenses associated with the greenfield clinic roll-out program and acquisitions. Operating expense growth (excluding the impact of the acquisitions and greenfield clinic expenses) increased 3.4%, mostly related to increased employment costs to support the strong organic growth in the dairy and mixed segment. In FY21, Apiam’s reported Earnings Before Interest and Tax (EBIT) increased 11.7% and Net Profit After Tax (NPAT) increased 24.1% vs PCP. The following tables are presented to assist in the interpretation of the underlying performance of Apiam during FY21. This information is additional and provided using non-IFRS information and terminology. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 14 Apiam FY21 Financial Result Summary – Reported Total revenue Gross profit Operating expenses One-off expenses EBITDA Amortisation ROU assets Depreciation & amortisation EBIT Interest Tax Other (including minorities) 1 NPAT attributable to members Gross margin EBIT margin FY21A FY20A Variance % 7.8 7.2 (6.3) 0.3 1.2 (0.1) (0.2) 0.9 0.2 (0.3) 0.2 1.0 6.6% 11.2% 12.8% (32.8)% 8.6% 4.5% 5.3% 11.7% (14.0)% 17.2% - 24.1% 126.2 71.1 (55.9) (0.7) 14.5 (2.5) (3.8) 8.1 (1.2) (2.0) 0.2 5.1 56.3% 6.4% 118.3 63.9 (49.5) (1.1) 13.3 (2.4) (3.6) 7.3 (1.4) (1.7) (0.1) 4.1 54.0% 6.2% Notes: 1. Includes a range of partner business activities incl. Sth West Equine JV, Apiam Solutions, PETstock Joint Venture, Portec etc Apiam FY21 Financial Result Summary – Underlying FY21 FY20 Variance % Total Revenue Gross Profit Operating expenses Underlying EBITDA 1 Depreciation & amortisation Underlying EBIT 1 Underlying NPAT 1 Notes: 1. Underlying earnings exclude one-off corporate, acquisition & integration expenses (tax effected where applicable at NPAT 6.6% 11.2% 12.8% 5.6% 5.0% 6.1% 15.4% 118.3 63.9 (49.5) 14.4 (6.1) 8.3 4.8 126.2 71.1 (55.9) 15.2 (6.4) 8.8 5.6 7.8 7.2 (6.3) 0.8 (0.3) 0.5 0.7 level) Regional expansion strategy In FY21, Apiam have executed its regional expansion strategy, designed to capture accelerating growth in regional veterinary markets. Many of Australia’s regions have experienced a significant demographic shift over recent years with populations growing rapidly as people migrate from larger cities to regional areas. There has also been the favourable broader trend of increased animal ownership right across Australia, following COVID-19 impacts. Easing of drought conditions has also supported growth in many dairy farms over the past 12 months. In order to capture this market growth, and expand market share, Apiam implemented its regional expansion strategy and has pursued growth via acquisitions, the roll-out of greenfields clinics as well as organic growth initiatives. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 15 Acquisitions In FY21 Apiam completed the following four acquisitions:  Don Crosby Vet Surgeons, NSW, (1 December 2020)  Knox Veterinary Clinic, QLD, (1 April 2021)  Clermont Veterinary Surgery, QLD (1 June 2021)  Samford Valley Veterinary Hospital, QLD (1 June 2021) Following the reporting period, Apiam also completed the acquisition of Scenic Rim Veterinary Hospital, an equine focussed practice in South-East Queensland and the Golden Plains Animal Hospital located in the fast growth Greater Geelong region. Apiam has also announced that it has entered into an agreement to acquire Harbour City Veterinary Surgery at Gladstone (QLD) and Smythesdale Animal Hospital (Vic). Each of these acquisitions was identified as meeting Apiam’s acquisition financial thresholds and strategic criteria. In addition to the market expansion and revenue capture opportunities, Apiam also identified the opportunity to leverage its existing support systems and realise efficiencies between acquired clinics and existing clinics. Greenfields clinic roll-out During FY21 Apiam opened two new state-of-the-art greenfields veterinary clinics, under the “Fur Life Vet” brand – at Torquay North (VIC) and Shepparton (VIC). These clinics, while requiring investment in the first year, are expected to reach break-even profit in the second year of opening and full financial maturity during the third year of operations. The Company chooses greenfield clinic locations carefully, and targets both large regional cities and peri-urban growth locations within a daily commute of a capital city. Other factors taken into account are species mix in the region and the ability to leverage existing Apiam staff, services and infrastructure. An additional greenfield clinic was opened in Highton (Geelong, VIC) in July 2021 and further clinics are in the planning and building stage, due to open in FY22. Organic growth initiatives Apiam continued the successful rollout of its ProDairy and Best Mates companion animal subscription programs in FY21. Both programs were organic initiatives implemented by Apiam’s management team in FY20 and both have delivered excellent membership growth in FY21. Apiam has also recently launched an innovative proprietary data platform designed for its pig customers to enhance antimicrobial stewardship, better monitor pig health as well as improve quality assurance. A pilot program undertaken in WA piggeries has been successfully completed and this is in the early stages of being commercialised across the broader Apiam pig client base. Balance sheet Apiam’s balance sheet at the end of FY21 remains strong and reflects investment during the year in acquisitions and business expansion. Net debt as at 30 June 2021 was $37.2 million (up from $35.9 million at 30 June 2020). The cash consideration component for Apiam’s acquisitions during the period was $11.7 million and Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 16 was funded via strong operating cash flow generation and a successful $6 million capital raising undertaken by the Company in April 2021. Cash flow Apiam reported operating cashflow in FY21 of $13.7 million, with operating cash flow conversion of earnings of 117%, a result of strong working capital practices and a return to normalised inventory levels following significant product investment in FY20. Apiam’s investing and financing cash flows in FY21 reflect the impact of the four acquisitions settled in FY21, and the capital raise undertaken by the Company in Q4 FY21. $M Net cash provided by operating activities Acquisition of subsidiary, net of cash Purchases of property, plant and equipment Purchases of Intangible assets Net cash used in investing activities Net changes in financing Dividends paid to shareholders Repayment of lease liabilities Proceeds from share issue Other Net cash inflow from financing activities Net change in cash and cash equivalents Dividend FY21A FY20A 13.7 (11.7) (4.7) (0.2) (16.6) 1.6 (1.9) (2.9) 5.7 0.1 2.6 (0.4) 7.5 (13.1) (1.6) (0.3) (15.0) 12.4 (1.2) (3.2) 0.0 0.1 8.1 0.6 Apiam’s Board of Directors have declared a final fully franked interim dividend of 1.2 cents per share (cps), supported by the Company’s solid balance sheet and growth in earnings. This takes total dividends in respect of FY21 to 2.4 cps and implies an overall 60% payout ratio of NPAT. The dividend will be paid on 22 October 2021 and Apiam’s Dividend Reinvestment Plan will be maintained. Outlook Apiam expect to deliver continued revenue and earnings growth in FY22, as the Company continues to execute its regional expansion strategy via the acquisition of high-performing veterinary businesses and the roll-out of new greenfield clinics in targeted, high-growth areas. Business growth investment will be carefully evaluated against return on capital thresholds. Management will also focus on the commercialisation of recent investments in new services, technologies and products expected to underpin recovery in intensive animals (feedlot and pigs) as market cycles improve in the coming year. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 17 DIVIDENDS An interim dividend of $1,450,906 is 1.2c per share and was paid in April 2021. The Apiam Board of Directors have declared the Company’s final dividend of 1.2c per share fully franked on the 30 August 2021. The final dividend of $1,604,808 will be paid on the 22 October 2021. 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 The Apiam Board of Directors declared the Company’s final dividend of 1.2c per share fully franked on 30 August 2021. The final dividend of $1,604,808 will be paid on the 22 October 2021. The Group acquired two veterinary businesses and entered into agreements for the acquisition of two further veterinary businesses post reporting date. Further details of these acquisitions are disclosed in Note 38 of the Financial Statements. Apart from these events, 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. Should COVID-19 restrictions result in the extended closure of a material number of veterinary clinics, or if veterinary services and/or agriculture were not deemed essential services, the Groups financial performance may be adversely impacted. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 18 Any recurring or prolonged disruption to the supply of the key products that Apiam Animal Health sells, particularly vaccines, may have an adverse effect on the financial performance of the Company. No single client or buying group accounts for more than 10% of Apiam Animal Health’s FY21 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’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, Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 19 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. 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 2021 20 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) Jan Tennent Director (Independent Non-executive) (II) EXECUTIVES Matthew White Chief Financial Officer Brian Scutt Chief Operating 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 2021 21 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 and Nomination Committee (the 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 Committee has met 3 times in the FY21 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 key talent 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;   Long term incentives; and  short term incentives, being bonuses. The 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. The company’s key financial metrics are as follows: Item 2021 2020 2019 2018 2017 EPS (cents) 4.22c 3.63c 3.01c 3.21c 5.00c Dividends (cents per share) Net profit before tax ($’000) Share price ($) 2.4c 1.6c 1.6c 1.6c 0.8c $7,036 $5,956 $4,569 $4,831 $6,315 $0.96 $0.46 $0.52 $0.75 $0.70 Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 22 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 Michael van Blommestein Independent Jan Tennent Independent Employees Matthew White Chief Financial Officer Brian Scutt Chief Operating Officer 2021 Total 2020 Total Year 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Short term employee benefits Salary and fees (i) $ Accrued annual leave $ Non-monetary benefits $ Post-employment benefits Superannuation $ Long-term benefits Accrued long service leave) $ Share-based Payment Performance Rights (ii) $ 120,000 120,000 70,000 70,000 360,860 354,740 54,795 54,795 60,000 60,000 231,934 228,000 233,096 61,923 1,130,685 949,458 - - - - - - - - 26,860 9,104 11,394 8,307 - - - - 3,652 6,315 23,460 9,479 53,972 24,898 - - - - - - - - 11,394 8,307 - - - - 21,694 21,003 5,205 5,205 - - 21,694 21,003 21,108 5,251 69,701 52,462 - - - - - - - - 8,902 8,668 25,533 9,451 - - - - 19,655 2,798 15,738 - - - - - 4,608 3,011 290 39 13,800 11,718 Total $ 120,000 120,000 70,000 70,000 455,243 411,273 60,000 60,000 60,000 60,000 281,543 261,127 293,692 76,692 Performance based percentage of remuneration % 0% 0% 0% 0% 6% 2% 0% 0% 0% 0% 7% 1% 5% 0% 5% 1% 60,926 1,340,478 12,249 1,059,092 (i) (ii) Salary and fees include salaries and allowances. Share based payment performance rights are long term incentive performance plans which will lapse if they are not vested within three years of grant date. The performance rights will vest annually over three years upon the Company achieving a minimum of 12% share price growth per year. The amount recognised for the Managing Director, Chief Financial Officer and Chief Operating Officer is the proportion expensed in that year based on the Monte Carlo valuation model. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 23 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 Brian Scutt Fixed remuneration At risk – LTI 94% 93% 95% 6% 7% 5% 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 $360,860 $231,934 $233,096 Term of agreement Twelve month fixed term No fixed term No fixed term Notice period Twelve (12) months Six (6) months Three (3) months Name Chris Richards Matthew White Brian Scutt Bonus provisions Chris Richards: Matthew White: Brian Scutt: Nil Nil Nil Bonuses included in remuneration d There were no short-term incentive cash bonuses awarded or made available as remuneration to each key management personnel during the financial year. Long Term Incentive Plan e Remuneration of key management personnel includes performance rights which are offered as part of long term incentive plans. The long term incentive plans run for periods of three years. The performance measures are assessed annually and are based on the share price growth of the company and subject to continued employment. The annual share price growth requirement is set out below for each financial year during the performance period. Share Price Growth Less than 12% Above 12% but less than 31% % of Performance Rights that may vest Nil – Tranche lapses and Performance Rights cancelled Between 50% and 100%, as determined on a pro-rata, straight line basis At or above 31% 100% allocation of Tranche Share Price Growth shall be measured by comparing the Baseline Share Price against the Closing Share Price in each year of the Performance Period. The baseline share price will be calculated by assessing the volume weighted average price (VWAP) of shares for the 30 calendar days following the lodgement of the annual report in the prior financial year. The closing share price shall be calculated by assessing the VWAP of shares for the 30 calendar days following the lodgement of the annual report for the current financial year of the performance period. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 24 The performance rights are allocated equally over a three-year period. The performance rights for each financial year during the performance period will vest subject to meeting the share price growth rate and remaining in continuous employment through to the annual vesting date of 31 October. Details of the number of performance rights granted are as follows: Name Grant Perform- FY2020 Fair Value Fair Value FY2021 Fair Value Fair Value FY2022 Fair Value Fair Value FY2023 Fair Value Fair Value Date ance Tranche per Right Tranche per Right Tranche per Right Tranche per right Rights granted Chris Richards 28/11/19 248,144 82,714 $16,411 $0.1984 82,715 $22,338 $0.2701 82,715 $23,873 $0.2886 Matthew White 19/03/20 106,326 35,442 $ 4,021 $0.1135 35,442 $ 8,831 $0.2492 35,442 $ 9,099 $0.2567 - - - - - - Matthew White 06/04/21 67,303 Brian Scutt 23/10/20 97,510 - - - - - - 22,434 $14,700 $0.6553 22,434 $ 8,410 $0.3749 22,435 $ 8,305 $0.3702 32,503 $15,193 $0.4674 32,503 $10,359 $0.3187 32,504 $10,612 $0.3265 Each tranche of performance rights which have not vested will expire if the applicable performance measures are not met during the performance period. The company has chosen share price growth as the performance measure as it believes the fundamental driver for executive remuneration should be long term financial performance that generates value for Apiam shareholders. Non-Executive Director remuneration f 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 2021 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 g Options held by key management personnel There were no options to acquire shares in the Company held during the 2021 reporting period of 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 2021 held by each of the Groups key management personnel, including their related parties, is set out below. Personnel Balance at 1/07/2020 Granted as remuneration Received on exercise Chris Richards 30,000,000 Andrew Vizard Richard Dennis Michael van Blommestein Jan Tennent Matthew White Brian Scutt Total 221,695 21,647 104,737 36,231 120,735 383,224 30,888,269 - - - - - - - - - - - - - - - - Other changes Held as at 30/06/2021 1,400,000 31,400,000 7,671 748 3,623 21,549 3,010 229,366 22,395 108,360 57,780 123,745 230,000 613,224 1,666,601 32,554,870 None of the shares included in the table above are held nominally by key management personnel Performance rights held by key management personnel: The number of performance rights held at 30 June 2021 by each of the Group’s key management personnel, including their related parties, is set out below. Personnel Chris Richards Matthew White Brian Scutt Total Balance at 1/07/2020 Granted as remuneration Vested/ exercised 248,144 106,326 - 67,303 - 97,510 354,470 164,813 Forfeited/ lapsed during year 82,714 35,442 Held as at 30/06/2021 165,430 138,187 - 97,510 118,156 401,127 - - - - Loans to key management personnel The Group did not enter into any loans with key management personnel during the 2021 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 FY21 amounted to $364,514 (2020: $333,600). Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 26 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 $139,725 (2020: $125,232). The Group leases an artificial insemination facility in Victoria from entities associated with Chris Richards. Lease payments made amounted to $116,462 (2020: $105,000). The Group leases premises at Midland Highway, Lethbridge, Victoria from entities associated with Chris Richards. Lease payments made amounted to $nil (2020: $2,018). The Group leased premises at Midland Highway, Epsom, Victoria from entities associated with Chris Richards. Lease payments made amounted to $nil (2020: $7,753). All related party rentals are based on commercial rates and the terms of the lease are standard commercial terms. End of audited Remuneration Report. Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 27 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 28 to the financial statements. A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act 2001 is included on page 29 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 Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 28 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 30 August 2021 29 Collins Square, Tower 5 727 Collins Street Docklands. Victoria 3008 Correspondence to: GPO Box 4736 Melbourne, Victoria 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 2021, 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 C S Gangemi Partner – Audit & Assurance Melbourne, 30 August 2021 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 2021 30 Apiam Animal Health Limited Financial Statements For the year ended 30 June 2021 Apiam Animal Health Limited Financial Statements for the year ended 30 June 2021 31 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 Revenue Other income Expenses Changes in inventory Cost of materials Costs of consumables and services Employee benefit expenses 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 Interest on lease liabilities 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 7 28 14,15 8 8 9 25 2021 $’000 126,181 23 (1,624) (53,474) (821) (43,262) (167) (1,684) (2,135) (6,336) (24) (8,544) 79 (363) (813) 2020 $’000 118,335 82 6,718 (61,130) (927) (37,681) (460) (1,496) (2,120) (5,961) (98) (7,983) 45 (388) (980) 7,036 5,956 (2,040) 4,996 (1,741) 4,215 4,996 4,215 5,082 (86) 4,996 4,095 120 4,215 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 26 26 4.22 4.16 3.63 3.58 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 2021 32 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2021 Current assets Note Cash and cash equivalents Trade and other receivables Tax receivable 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 Lease liabilities Other current liabilities Current tax liabilities Borrowings Employee benefit obligations Total current liabilities Non-current liabilities Borrowings Lease liabilities 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 re-organisation reserve Non-controlling interest acquisition reserve Share based payment reserve Foreign currency translation reserve Retained earnings Non-controlling interest Total equity 10 11 12 13 15 14 17 18 16 22 19 20 21 20 16 21 17 23 24 24 24 24 25 2021 $’000 2,150 13,543 - 16,041 1,577 33,311 95,077 24,536 - 220 3,487 123,320 2020 $’000 2,509 11,868 225 17,666 1,096 33,364 84,916 19,805 123 140 3,319 108,303 156,631 141,667 9,748 2,911 192 1,494 2,818 7,211 8,795 2,683 4,153 1,300 3,400 5,865 24,374 26,196 34,887 14,426 338 1,328 415 51,394 75,768 33,565 11,453 280 1,436 300 47,034 73,230 80,863 68,437 101,010 (26,692) (6,615) 595 (79) 11,642 79,861 1,002 80,863 91,107 (26,692) (6,615) 223 (20) 9,410 67,413 1,024 68,437 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 33 STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2021 Note 23 23 Balance at 1 July 2019 Issue of new share capital Issue of shares to vendors of business acquired Employee share plan Foreign currency translation adjustment Dividends paid Transactions with owners Profit / (Loss) for the period Total comprehensive income for the period Balance at 30 June 2020 Issue of new share capital Share placement Transaction costs on issue of new share capital Issue of shares to vendors of business acquired Issue of shares on achievement of earnout for prior year acquisition Employee share plan Foreign currency translation adjustment Dividends paid 23 23 23 23 23 Transactions with owners Profit / (Loss) for the period Total comprehensive income for the period Share capital Corporate re- organisation reserve $’000 86,432 770 3,905 - - - 4,675 - - 91,107 853 6,000 (300) 2,535 815 - - - 9,903 - - $’000 (26,692) - - - - - - - - (26,692) - - - - - - - - - - - Non- controlling interest acquisition reserve $’000 (6,615) - - - - - - - - (6,615) - - - - - - - - - - - Balance at 30 June 2021 101,010 (26,692) (6,615) The above statement should be read in conjunction with the accompanying notes Share based payment reserve Foreign Currency Translation Reserve Retained earnings Total attributable to owners of parent Non- controlling interest $’000 330 - - (107) - - (107) - - 223 - - - - - 372 - - 372 - - 595 $’000 - - - - (20) - (20) - - (20) - - - - - - (59) - (59) - - (79) $’000 7,092 - - - (1,777) (1,777) 4,095 4,095 9,410 - - - - - - - (2,850) (2,850) 5,082 5,082 11,642 $’000 60,547 770 3,905 (107) (20) (1,777) 2,771 4,095 4,095 67,413 853 6,000 (300) 2,535 815 372 (59) (2,850) 7,366 5,082 5,082 79,861 $’000 762 142 - - - - 142 120 120 1,024 64 - - - - - - - 64 (86) (86) 1,002 Total equity $’000 61,309 912 3,905 (107) (20) (1,777) 2,913 4,215 4,215 68,437 917 6,000 (300) 2,535 815 372 (59) (2,850) 7,430 4,996 4,4996 80,863 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2021 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 Purchase of intangible assets Proceeds from disposals of property, plant & equipment Acquisition of subsidiaries, net of cash acquired Payment of earnout for prior year acquisitions Net cash (outflow)/inflow from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Lease payments Proceeds from issue of share capital Capital contribution of non-controlling interest Transaction costs on issue of share capital 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 The above statement should be read in conjunction with the accompanying notes Note 27 32 10 2021 $'000 137,284 (120,431) 16,853 (1,153) (167) (1,844) 13,689 (4,737) (244) 99 (8,629) (3,110) (16,621) 10,657 (9,011) (2,894) 6,000 65 (300) (1,944) 2,573 (359) 2,509 2,150 34 2020 $'000 133,977 (123,721) 10,256 (1,347) (460) (942) 7,507 (1,646) (340) 82 (13,097) - (15,001) 22,583 (10,171) (3,242) - 142 - (1,182) 8,130 636 1,873 2,509 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 35 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 animals, companion animals and equine. The Group is vertically integrated with strategic sourcing of products, custom manufacture of vaccines, in-house laboratory services and on farm delivery with its own logistics service. 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 Limited 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 Piper Lane, East Bendigo, Victoria 3550. The consolidated financial statements for the year ended 30 June 2021 were approved and authorised for issue by the Board of Directors on 30 August 2021. 3 Changes in accounting policies New Accounting Standards and Interpretations adopted during the year The amended accounting standards and interpretations issued by the Australian Accounting Standards Board during the year that were mandatory were adopted. None of these amendments or interpretations materially affected any of the amounts recognised or disclosures in the current or prior year. The following IFRS Interpretations Committee (IFRIC) agenda decisions were adopted during the year. IFRIC agenda decision on Software-as-a-Service (SaaS) arrangements The IFRIC has issued two final agenda decisions which impact SaaS arrangements:  Customer’s right to receive access to the supplier’s software hosted on the cloud (March 2019) – this decision considers whether a customer receives a software asset at the contract commencement date or a service over the contract term.  Configuration or customisation costs in a cloud computing arrangement (April 2021) – this decision discusses whether configuration or customisation expenditure relating to SaaS arrangements can be recognised as an intangible asset and if not, over what time period the expenditure is expensed. The adoption of the above agenda decisions has not had a material impact on the Group. Accounting Standards issued but not yet effective and not been adopted early by the Group At the date of authorisation of these financial statements, several new, but not effective Standards and amendments to existing Standards, and Interpretations have been published by the AASB. None of these Standards or amendments to existing Standards have been adopted early by the Group. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 36 4 Restatement of prior period intangibles provisionally accounted Apiam acquired Animal Consulting Services Pty Ltd (ACE) in the financial year ended 30 June 2020. The acquisition was provisionally accounted for in that period. The total consideration for ACE amounted to $15,757,000, which included contingent consideration (earnout payment) of $3,625,000. During the year total contingent consideration was paid by the Group. Subsequent to the acquisition, it was noted that there were customer relationships within ACE and that a portion of goodwill recognised upon acquisition must be reclassified and recognised as an intangible asset which is amortised over the useful life of the asset. This resulted in a restatement of each of the affected financial statement line items for prior periods as follows: 30 June 2020 Statement of financial position (extract) Previous amount $'000 Adjustment $'000 Restated amount $'000 Goodwill 79,750 (1,746) Trademarks and trade names Customer relationships Accumulated amortisation of customer relationships Deferred tax liabilities Total equity - 3,223 (824) (720) 68,513 1,773 721 (108) (716) (76) 78,004 1,773 3,944 (932) (1,436) 68,437 30 June 2020 Statement of profit or loss and other comprehensive income (extract) Previous amount $'000 Adjustment $'000 Restated amount $'000 Depreciation and amortisation of non-financial assets Profit before income tax Income tax expense Total comprehensive income (5,852) 6,065 (1,774) 4,291 (109) (109) 33 (76) (5,961) 5,956 (1,741) 4,215 5 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 2021. 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 37 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. 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 38 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 segments are aggregated for reporting purposes on the basis that each 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. 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 8. Intangible assets Goodwill Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See Note 5.3 for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 5.12 for a description of impairment testing procedures. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 39 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. Trademarks & Trade Names Trademarks & Trade Names represents the future economic benefits arising from within a business combination that have been identified and separately recognised. Trademarks & Trade Names are carried at cost less accumulated impairment losses. 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 5.11). 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. Leased assets For any new contracts entered into, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:  the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group  the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 40  the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been recognised as current and non-current. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 41 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. 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 AASB 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 42 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 AASB 139. 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. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’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 AASB 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 43 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 34.3 for a detailed analysis of how the impairment requirements of AASB 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. 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 44 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. 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 Group. 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. Share based payments reserve Recognises share-based payments accrued in employee incentive share plan. Foreign currency translation reserve Exchange differences relating to the translation of the Group’s controlled entities from their functional currencies into Australian dollars are brought to account directly to the foreign currency translation reserve. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 45 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. 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 46 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. 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 5.15). 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 makes determination with regard to the allocation of groups of cash generating units for the purpose of impairment testing. 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 5.12). 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 47 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 5.3). Particularly, the fair value of contingent consideration is dependent on the outcome of many variables that affect future profitability. Leases – determination of the appropriate discount rate to measure lease liabilities The Group enters into leases with third-party landlords and as a consequence the rate implicit in the relevant lease is not readily determinable. Therefore, the Group uses its incremental borrowing rate as the discount rate for determining its lease liabilities at the lease commencement date. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over similar terms which requires estimations when no observable rates are available. Leases - Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 48 6 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 segments are aggregated for reporting purposes on the basis that each 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 7 Revenue Sales revenue Goods transferred at a point in time Services transferred over time Total revenue 2021 2020 $'000 126,181 (116,015) 10,166 $'000 118,335 (108,785) 9,550 10,166 23 (1,770) (167) (119) (1,176) 79 7,036 (2,040) 4,996 2021 $'000 84,859 41,322 126,181 9,550 82 (1,640) (460) (253) (1,368) 45 5,956 (1,741) 4,215 2020 $'000 84,782 33,553 118,335 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 8 Expenses Profit before income tax includes the following specific expenses: Depreciation Leased buildings(i) Leasehold improvements Plant and equipment Motor vehicles Biological assets Amortisation of intangibles Total depreciation and amortisation (i) Right of use assets Finance costs Interest expense on borrowings Interest expense on lease liabilities Share-based payments expense Rental expense 49 2020 $’000 2,419 128 1,860 935 98 619 6,059 980 388 1,368 (29) 153 2021 $’000 2,528 258 1,946 825 24 779 6,360 813 363 1,176 335 97 9 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 the Group at 30% (2020: 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% (2020 - 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 17 provides information on deferred tax assets and liabilities. 2021 $’000 2020 $’000 7,036 2,111 (120) 1,991 1,991 49 2,040 2,314 (274) 2,040 5,956 1,787 (13) 1,774 1,774 (33) 1,741 2,385 (644) 1,741 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 10 Cash and cash equivalents Cash at bank and in hand Cash and cash equivalents 11 Trade and other receivables Trade receivables, gross Less: allowance for expected credit losses Other receivables Rebates receivable 50 2020 $'000 2,509 2,509 2020 $'000 12,145 (334) 26 31 11,868 2021 $'000 2,150 2,150 2021 $'000 12,708 (309) 176 968 13,543 All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. An allowance for expected credit losses has been recognised using a provision matrix based on historical credit loss rates. Refer to Note 34.3 Credit risk analysis. Balance at 1 July Impairment loss Balance 30 June 12 Inventories Stock on hand, at cost Less provision for obsolescence Stock in transit, at cost 13 Other current assets Prepayments Security deposits 2021 $'000 334 (25) 309 2021 $'000 15,986 (365) 420 16,041 2021 $'000 1,411 166 1,577 2020 $'000 367 (33) 334 2020 $'000 17,560 (87) 193 17,666 2020 $'000 1,029 67 1,096 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 51 14 Property, plant and equipment Details of the Group’s property, plant and equipment and their carrying amount are as follows: Leased Buildings (i) Leasehold improve- ments Plant and equipment Motor vehicles (ii) Assets under construction Total $’000 $’000 $’000 $’000 $’000 $’000 15,143 (2,373) 12,770 12,770 3,660 1,529 At 30 June 2020 At cost Accumulated depreciation Net book value Year ended 30 June 2021 Opening net book value Additions Additions through business combinations Depreciation charge Closing net book value At 30 June 2021 Cost Accumulated depreciation Net book amount i) Right of use Assets ii) Includes leased and owned motor vehicles 860 (296) 564 11,037 5,380 36 32,456 (6,308) (3,674) - (12,651) 4,729 1,706 36 19,805 564 1,649 4,729 2,179 1,706 932 1 253 85 36 19,805 - - - 8,420 1,868 (5,557) (2,528) (258) (1,946) (825) 15,431 1,956 5,215 1,898 36 24,536 20,138 (4,707) 2,498 (542) 12,496 6,309 36 41,477 (7,281) (4,411) - (16,941) 15,431 1,956 5,215 1,898 36 24,536 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 15 Intangible assets At 30 June 2020 Cost Accumulated amortization and impairment Carrying amount at 30 June 2020 At July 1 2020 Opening net book value Additions Additions through business combinations Sale of business Amortisation Closing net book value At 30 June 2021 Cost Accumulated amortization and impairment Net book value Goodwill (i) $'000 Customer Relation- ships (i) $’000 Trademarks & Trade Names (i) $’000 Capitalised develop- ment costs $'000 78,004 - 78,004 78,004 - 10,720 (100) - 88,624 3,944 (932) 3,012 3,012 51 - - (364) 2,699 88,624 - 88,624 3,995 (1,296) 2,699 1,773 - 1,773 1,773 - - - - 1,773 1,773 - 1,773 2,675 (548) 2,127 2,127 269 - - (415) 1,981 2,941 (960) 1,981 i) Opening balances have changed due to a restatement of a prior period. Refer to Note 4. 52 Total $'000 86,396 (1,480) 84,916 84,916 320 10,720 (100) (779) 95,077 97,333 (2,256) 95,077 Impairment testing Goodwill is allocated to groups of 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 operating segment level. Goodwill impairment testing has been completed for each CGU Group. Refer to 15.4 for the goodwill allocated to each CGU Group. The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a detailed one year forecast with annual growth rates applied over a five year term, 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 group of CGUs is determined by applying the following key assumptions: Annual sales growth % Annual operating expenses growth rate % Long-term growth rate % Post-tax discount rate % 2021 5.00% 2.00% 2.50% 9.33% 2021 $’000 2020 5.00% 2.00% 2.50% 9.33% 2020 $’000 Goodwill allocation across groups of CGUs 88,624 78,004 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 annual sales growth rate of 5%, annual operating expense growth rate of 2% and the long-term growth rate of 2.50% reflect the average growth rates for the industry. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 53 Discount rates The post-tax discount rate of 9.33% reflect appropriate adjustments relating to market risk and other risk factors. The discount rate is applied to the three groups of CGU’s because the CGU groups share common risks. 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 groups of 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 groups of cash generating unit’s level which is also reflective of the level of operating segment being Pig, Feedlot, Dairy and mixed. The following is a summary of the groups of cash generating unit’s to which goodwill is allocated. Feedlot Dairy and mixed Pig (a) Balance 1 July 2020 Acquisitions Sale of business 30 June 2021 $’000 13,330 - - 13,330 $’000 55,997 10,720 (100) 66,617 $’000 8,677 - - Total $’000 78,004 10,720 (100) 8,677 88,624 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 54 16 Leasing Lease liabilities are presented in the statement of financial position as follows: Lease liabilities (current) Lease liabilities (non-current) 30 June 2021 $’000 30 June 2020 $’000 2,911 14,426 17,337 2,683 11,453 14,136 The Group has leases for its warehouses, clinics, offices, motor vehicles and equipment. With the exception of short-term leases and leases of low-value assets, each lease is reflected in the balance sheet as a right-of-use asset and a lease liability. The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2021 were as follows: Minimum lease payments due Within one year One to two years $’000 $’000 Two to three years $’000 Three to four years $’000 Four to five years $’000 After five years $’000 Total $’000 30 June 2021 Lease payments Finance charges 3,308 (397) 3,009 (326) 2,907 2,891 (256) (187) 2,100 (123) 4,554 (143) 18,769 (1,432) Net present values 2,911 2,682 2,651 2,704 1,977 4,411 17,337 Lease payments not recognised as a liability The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. The expense relating to payments not included in the measurement of the lease liability is as follows: Short term leases Leases of low value assets 30 June 30 June 2021 $’000 42 55 97 2020 $’000 51 102 153 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 55 17 Deferred tax assets and liabilities Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows: The balance of deferred tax assets comprises temporary differences attributable to: Current assets Trade and other receivables Inventories Current liabilities Provisions Other Unused tax losses Right of use assets Depreciation Listing and acquisition costs Equity raising costs The balance of deferred tax liabilities comprises temporary differences attributable to: Intangible assets Customer relationships Trademarks and trade names 2021 $'000 2020 $'000 110 109 164 237 2,267 1,896 1,440 123 (745) 111 72 3,487 2021 $'000 796 532 1,328 1,022 - - - - 3,319 2020 $'000 904 532 1,436 All deferred tax assets (including tax losses and other tax credits) have been recognised in the statement of financial position. At 1 July 2019 (Charged)/credited: to P&L at 30 June 2020 (Charged)/credited: to P&L At 30 June 2021 Tax losses $'000 747 275 1,022 Provis- ions $'000 1,561 335 1,896 418 1,440 371 2,267 Borrow- ing costs $'000 (5) Trade receiv- ables $'000 141 Listing & acquis- ition costs $'000 46 5 - - - 23 164 (54) 110 (46) - 111 111 Equity raising costs $'000 181 (181) - Invent- ory $'000 125 112 237 Right of use assets $’000 - Deprec- iation $’000 - Total $'000 2,796 - - - - 523 3,319 72 72 (128) 109 123 123 (745) (745) 96 3,487 All deferred tax liabilities have been recognised in the statement of financial position. At 1 July 2019 (Charged)/credited to P&L at 30 June 2020 (Charged)/credited to P&L At 30 June 2021 Customer relationships $'000 1,316 120 1,436 (108) 1,328 Total $'000 1,316 120 1,436 (108) 1,328 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 18 Trade and other payables Trade payables Sundry payables and accrued expenses 56 2020 $'000 5,583 3,212 8,795 2021 $'000 6,246 3,502 9,748 All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable approximation of fair value. 19 Current tax liabilities Current tax payable 20 Borrowings Current: Bank loans (a) less capitalized costs Total current borrowings Non-current bank loans (a) less capitalized costs Total non-current borrowings Refer to Note 35 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 Assets pledged as security 2021 $'000 1,494 2020 $'000 1,300 2021 $'000 2020 $'000 2,838 (20) 2,818 34,887 - 34,887 3,419 (19) 3,400 33,589 (24) 33,565 2021 $’000 37,725 (20) 37,705 2020 $’000 37,008 (43) 36,965 (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 of a ratio of 45% (ratio of net debt to net debt & equity): and Maximum operating leverage ratio of a ratio of 3.0 times (ratio of net debt to EBITDA): The Group complied with all bank covenants during the period. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 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 Unused at reporting date Bank - term loan facilities Bank - master asset finance agreement for equipment finance Bank - overdraft facility Bank - credit card facility 21 Employee benefit obligations Leave obligations current Leave obligations non-current Employee benefits 57 2020 $'000 59,700 3,500 1,000 300 64,500 36,965 1,299 38,264 22,735 2,201 1,000 300 26,236 2020 $'000 5,865 280 6,145 2021 $'000 63,700 3,500 1,000 300 68,500 37,725 1,631 39,356 25,975 1,869 1,000 300 29,144 2021 $'000 7,211 338 7,549 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 $7,211 (2020: $5,865) 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. 22 Other current liabilities Contingent consideration for acquisitions Net payable to vendors on acquisition Contract revenue Make good provision . 2021 $'000 - 13 16 163 192 2020 $'000 3,925 - 54 174 4,153 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 58 23 Equity 23.1 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 · shares issued on achievement of earnout for prior year acquisition · issued under dividend reinvestment plan · share placement · transaction costs on issue of new share capital · employee shares issued · shares held in employee share trust(a) Shares issued and fully paid 2021 Shares 2020 Shares 2021 $'000 2020 $’000 116,597,135 105,897,728 91,107 86,432 3,383,552 8,768,510 2,535 3,785 1,249,470 251,994 815 120 1,295,340 7,500,000 - 179,933 (308,537) 129,896,893 1,298,025 - - 380,878 - 116,597,135 906 6,000 (300) 102 (155) 101,010 595 - - 175 - 91,107 91,107 Total shares authorised at the end of the period 129,896,893 116,597,135 101,010 Each share has the same right to receive dividend and the repayment of capital and represents one vote at the shareholders’ meeting of Apiam. a) Shares held in the employee share trust at 30 June 2020. The number of shares held in the employee share trust at 30 June 2021 was 2,158,604. 24 Reserves Details of reserves are as follows: Balance at 1 July 2019 Employee share plan incentive Foreign currency translation Balance at 30 June 2020 Employee share plan incentive Foreign currency translation Balance at 30 June 2021 25 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 Foreign Currency Translation reserve Total $’000 330 (107) - 223 372 - 595 $’000 - $’000 (32,977) - (20) (20) - (59) (79) 2021 $’000 909 (86) 179 1,002 (107) (20) (33,104) 372 (59) (32,791) 2020 $’000 845 120 59 1,024 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 59 26 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 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 weighted average number of performance rights weighted average number of shares used in diluted earnings per share Dividends During the year, the following dividends were declared and paid. fully franked final dividend (1.2 cents a share) fully franked interim dividend (1.2 cents a share) 2021 Number 120,501,108 1,570,642 2020 Number 112,902,256 1,447,744 122,071,750 114,350,000 2021 $'000 1,399 1,451 2,850 2020 $'000 849 928 1,777 In addition and since the end of the financial year, Directors have declared a fully franked final dividend of 1.2c per ordinary share to be paid on 22 October 2021 (2020: 1.2c) 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 2021 $'000 9,500 2020 $'000 9,601 (679) (400) 1,494 10,315 1,301 10,502 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 60 27 Reconciliation of cash flows from operating activities a) 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 · Net changes in working capital: · decrease/(increase) in trade and other receivables · decrease/(increase) in tax receivable · 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 employee benefit obligations · increase/(decrease) in other liabilities · increase/(decrease) in other current liabilities · increase/(decrease) in foreign currency translation reserve Net cash received in operating activities 28 Employee remuneration Employee benefits expense Expenses recognised for employee benefits are analysed below: Employee benefits – expense Wages and salaries expense Bonus expense Share-based payment expense (a) Superannuation expense Employee benefits expense 2021 $’000 4,996 6,361 125 277 22 319 (23) (79) (1,501) 225 1,894 (469) (3) 741 82 (108) 988 115 (212) (61) 13,689 2021 $’000 39,746 43 335 3,138 43,262 2020 $’000 4,215 6,059 62 (330) 21 68 (82) (45) 3,400 282 (5,257) (93) (301) (2,162) 927 (97) 593 40 227 (20) 7,507 2020 $’000 34,847 116 (29) 2,747 37,681 a) The share based payment expense in 2020 of $(29) reflects the reversal of an over accrued expense in the prior year. Share-based employee remuneration As at 30 June 2021, the Group maintained two share-based payment schemes for employee remuneration, the Future Leaders Long Term Incentive Plan and the Senior Executive Long Term Incentive Plan. Performance rights under these Plans will vest if certain conditions are met. Participants have to achieve performance targets and have to be employed until the end of the agreed vesting period. Upon vesting, each participant will be issued with ordinary shares as defined in the Incentive Plan. The fair value of rights offered for the Future Leaders Long Term Incentive Plan is based on the share price at grant date. The fair value of rights offered for the Senior Executive Long Term Incentive Plan is determined using the Monte Carlo valuation model. The number of performance rights held by employees of the Group at 30 June 2021 is set out below: Type Performance rights Balance at 1/07/2020 1,355,104 Granted 1,029,280 Vested and Exercised (148,447) Forfeited (175,272) Held as at 30/06/2021 2,060,665 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 61 29 Auditor remuneration Audit services – Grant Thornton Audit Pty Ltd Remuneration for audit or review of financial statements Other services – Grant Thornton  taxation services  due diligence services Total other services remuneration Total auditor’s remuneration 2021 $ 2020 $ 190,294 206,905 3,148 56,000 59,148 249,442 4,730 108,500 113,230 320,135 30 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. The Group provided short term finance to its joint venture entity, South West Equine in the 2020 financial year. The amount owing is $Nil (2020: $79,285) this year. 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 accrued annual leave entitlements non-monetary benefits Total short-term employee benefits Long- term employee benefits: Accrued long service leave entitlements Share based payments expense Total long-term employee benefits Post-employment benefits: superannuation Total post-employment benefits Total remuneration 2021 $ 1,130,685 53,972 11,394 1,196,051 13,800 60,926 74,726 69,701 69,701 2020 $ 949,458 24,898 8,307 982,663 11,718 12,249 23,967 52,462 52,462 1,340,478 1,059,092 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 $364,514 (2020: $333,600). 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 $139,725 (2020: $125,232). The Group leases an artificial insemination facility in Victoria from entities associated with Chris Richards. Lease payments made amounted to $116,462 (2020: $105,000). Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 62 The Group leases premises at Midland Highway, Lethbridge, Victoria from entities associated with Chris Richards. Lease payments made amounted to $nil (2020: $2,018) The Group leases premises at Midland Highway, Epsom, Victoria from entities associated with Chris Richards. Lease payments made amounted to $nil (2020: $7,753). All related party rentals are based on commercial rates and the terms of the lease are standard commercial terms. 31 Contingent liabilities In the Directors’ view, there are no contingent assets or liabilities that will have a material effect on the Group. 32 Business combination On 1 December 2020 the Group acquired 100% of the issued share capital and voting rights of Crosvet Pty Ltd (DCVS). On 1 April 2021, the Group acquired the business assets of Knox Veterinary Clinic (KNX). On 1 June 2021, the Group acquired the business assets of Clermont Veterinary Surgery (CVS) On 1 June 2021, the Group acquired the business assets of Samford Valley Veterinary Hospital (SVVH) The following detailed table highlights the fair value of the identifiable assets acquired and liabilities assumed as at the date of acquisition for each of the business combinations undertaken in the period. The acquisitions of these veterinary businesses expands Apiam’s presence in regional New South Wales and Queensland. On the acquisition of DCVS, 2,207,506 fully paid shares were issued at a fair value of $0.6795 per share. On the acquisition of KNX, 322,086 shares were issued at a fair value of $0.82 per share. On the acquisition of CVS, 504,696 shares were issued at a fair value of $0.905 per share. On the acquisition of SVVH, 349,264 shares were issued at a fair value of $0.90 per share. Each of these business combinations have initially been accounted for on a provisional basis as at 30 June 2021. The measurement period for provisional accounting ends on either the earlier of 12 months from the date of acquisition or when the acquirer receives all the information possible to determine the fair value. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 Fair value of consideration transferred Amounts settled in cash Amount settled by issue of shares at fair value Final settlement payable / (receivable) Total fair value of consideration transferred Recognised amounts of identifiable net assets Property plant and equipment Deferred tax assets Total non-current assets Cash and equivalents Inventories Trade and other receivables Other current assets Total current assets Provisions Total non-current liabilities Provisions Current tax liabilities Trade and other payables Lease liabilities Total current liabilities Identifiable net assets Goodwill on acquisition Net cash outflow on acquisition DCVS $’000 3,349 1,500 - 4,849 947 22 969 10 144 144 12 310 13 13 90 112 53 830 1,085 181 4,668 3,339 KNX $’000 981 264 - 1,245 CVS $’000 SVVH $’000 1,715 457 (202) 1,970 2,594 314 215 3,123 261 44 305 - 75 86 - 161 17 17 128 - - 39 167 282 963 981 532 27 559 - 150 14 - 164 24 24 65 - 29 532 626 128 72 200 - 176 55 - 231 37 37 205 - 130 128 463 73 1,897 1,715 (69) 3,192 2,594 63 Total $’000 8,639 2,535 13 11,187 1,868 165 2,033 10 545 299 12 866 91 91 488 112 212 1,529 2,341 467 10,720 8,629 Contribution to the Group results For each acquisition, the period between the beginning of the reporting period and the date of acquisition was not business as usual due to the acquisition, making it impractical to determine revenue and profit or loss generated in the period. The period from acquisition to the end of the reporting period remains impractical to report business as usual for each acquisition due to various integration activities impacting results within the first year of operations and the introduction of ongoing charges for shared services within the group. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 64 33 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 Clinics NSW & QLD 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 Fur Life Foundation Ltd South Yarra Pharma Pty Ltd Animal Consulting Enterprises Pty Ltd The Trustee for Grampians Animal Health Unit Trust CrosVet Pty Ltd Significant judgements and assumptions 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 Australia Australia Australia 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 Charity Veterinary Services Manufacturing Australia Veterinary Services Australia Veterinary Services Group proportion of ownership interests 2021 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% 100% 100% 100% 100% 100% 2020 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% 100% 100% 100% 100% 0% 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 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 65 34 Financial instrument risk Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. 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 2021, 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% (2020: +/- 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-21 30-Jun-20 Profit for the year Equity $’000 +1% 373 319 $’000 -1% (373) (319) $’000 +1% 373 319 $’000 -1% (373) (319) Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 66 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: Cash and cash equivalents trade and other receivables 2021 $’000 2,150 13,543 15,693 2020 $’000 2,509 12,093 14,602 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 11) 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 2021 $’000 1,365 475 997 2,837 2020 $’000 1,332 1,007 1,550 3,889 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 67 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 2021, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2021 Bank borrowings Trade and other payables Total Current Within 6 months $’000 6 - 12 months 1 - 4 years $’000 $’000 2,818 9,748 12,566 - - - 34,887 - 34,887 This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows: 30 June 2020 Bank borrowings Trade and other payables Total Current Within 6 months $’000 6 - 12 months $’000 1 - 4 years $’000 3,400 8,795 12,195 - - - 33,565 - 33,565 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 2021 68 35 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 2021 and 30 June 2020: 30 June 2021 Financial liabilities Contingent consideration Total liabilities Net fair value 30 June 2020 Financial liabilities Contingent consideration Total liabilities Net fair value Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - - - - - - - - Level 1 $'000 Level 2 $'000 Level 3 $'000 - - - - - - 3,925 3,925 3,925 - - - Total $'000 3,925 3,925 3,925 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 and Risk Management 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. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 69 The following table provides information about the sensitivity of the fair value measurement to changes in the most significant inputs: 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 2020 Contingent consideration / (contingent consideration paid) for acquisitions Balance at 30 June 2021 2021 $’000 3,925 (3,925) - 2020 $’000 400 3,525 3,925 36 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 net debt to net debt and 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 2021 $'000 80,863 2,150 83,013 80,863 37,705 118,568 70% 2020 $'000 68,437 2,509 71,022 68,437 36,965 105,478 67% 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 2021 70 37 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 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 2021 (2020: $nil). 2021 $’000 2020 $’000 1,234 141,526 4,025 39,795 101,731 100,226 1,505 101,731 1,486 133,311 8,367 42,652 90,659 91,107 (448) 90,659 4,287 79 4,366 2,723 45 2,768 38 Post-reporting date events The Apiam Board of Directors have declared the Company’s final dividend of 1.2c per share fully franked on the 30 August 2021. The final dividend of $1,604,808 will be paid on the 22 October 2021. On 30 July 2021 the Group acquired the business assets of Scenic Rim Veterinary Service (SRVS). The consideration consisted of an initial cash payment of $13,741,300 and 1,678,495 fully paid shares issued at a fair value of $0.93 per share. On 2 August 2021, the Group acquired the business assets of Golden Plains Animal Hospital (GPAH). The consideration consisted of an initial cash payment of $1,076,073. The Group has signed a business sale agreement to acquire the business assets of Smythesdale Animal Hospital (SAH). The agreed consideration to be made on acquisition is an initial cash payment of $865,719. The Group has also signed a business sale agreement to acquire the business assets of Harbour City Veterinary Surgery (HCVS). The agreed consideration to be made on acquisition is an initial cash payment of $1,960,000 and 883,653 shares issued at a fair value of $0.95 per share. The acquisitions of these veterinary businesses expands Apiam’s presence in regional Queensland and Victoria. At this time the acquisitions have not been finalised and the goodwill cannot be quantified. Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 71 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 Clinics NSW & QLD 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. 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 2021 Continuing operations Revenue Other income Expenses Changes in inventory Cost of materials 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 Share of profit from equity accounted investments Profit/(loss) before income tax Income tax (expense)/benefit Profit from continuing operations Profit for the year 2021 $'000 89,636 23 (1,751) (34,528) (32,303) (167) (1,239) (2,474) (4,661) (6,709) (1,064) 79 2020 $'000 84,589 82 3,089 (40,121) (28,973) (460) (1,178) (1,805) (4,690) (6,754) (1,294) 45 4,842 2,530 (1,360) 3,482 (760) 1,770 3,482 1,770 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 Set out below is a consolidated statement of financial position of the parties to the Deed. Statement of Financial Position as at 30 June 2021 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 Lease liabilities Provisions Total current liabilities Non-current liabilities Borrowings Lease liabilities Provisions 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 Total Equity 72 2020 $’000 1,420 7,407 13,572 1,178 23,577 81,613 15,181 123 136 2,528 99,581 2021 $’000 1,317 11,229 11,822 1,228 25,596 91,144 18,877 - 216 2,491 112,728 138,324 123,158 8,390 13 959 2,838 1,050 5,760 19,010 34,887 12,908 106 47,901 66,911 7,169 3,925 536 3,798 - 4,689 20,117 44,539 - 135 44,674 64,791 71,413 58,367 99,996 (26,692) (5,615) 3,724 71,413 89,852 (26,692) (5,594) 801 58,367 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 73 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 2021 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. c There are reasonable grounds to believe that the members of the extended closed group identified in Note 39 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 39. 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 2021. 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 30 August 2021 74 Collins Square, Tower 5 727 Collins Street Docklands, Victoria 3008 Correspondence to: GPO Box 4736 Melbourne, Victoria 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 2021, 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 Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2021 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 Group 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 (including Independence Standards) (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. 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. 75 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 of 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. Key audit matter How our audit addressed the key audit matter Intangible Assets – Note 15 At 30 June 2021, the carrying value of goodwill, customer relationships and trademarks is $88 million, $2.7 million and $1.8 million respectively, and is allocated to three separate group 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 Group’s CGUs. Our procedures included, amongst others:  Assessing management’s determination of the Group’s CGUs 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;  Assessing management's allocation of goodwill resulting from the acquisitions amongst the three CGUs;  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 2021, 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. 76 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: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.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 20 to 26 of the Directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Apiam Animal Health Limited, for the year ended 30 June 2021 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 C S Gangemi Partner – Audit & Assurance Melbourne, 30 August 2021 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 77 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 14 August 2021 (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, 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 CJOEA FAMILY COMPANY PTY LTD PETSTOCK INVESTMENTS PTY LTD Ordinary Shares Ordinary Shares 30,219,451 22.597 21,240,500 15.883 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 78 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 Number of holders 1,591 Fully paid ordinary shares restricted until 1 October 2021 and quoted on ASX Fully paid ordinary shares restricted until 30 November 2021 and quoted on ASX Fully paid ordinary shares restricted until 2 December 2021 and quoted on ASX Fully paid ordinary shares restricted until 7 April 2022 and quoted on ASX Fully paid ordinary shares restricted until 27 May 2022 and quoted on ASX Fully paid ordinary shares restricted until 1 June 2022 and quoted on ASX Fully paid ordinary shares restricted until 30 July 2022 and quoted on ASX Fully paid ordinary shares restricted until 30 November 2022 and quoted on ASX Fully paid ordinary shares restricted until 7 April 2023 and quoted on ASX Fully paid ordinary shares restricted until 27 May 2023 and quoted on ASX Fully paid ordinary shares restricted until 1 June 2023 and quoted on ASX Fully paid ordinary shares restricted until 30 July 2023 and quoted on ASX Performance Rights 4 1 3 1 1 2 3 1 1 1 2 3 44 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 1,600 holders of a total of 133,733,992 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 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 79 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 – 999,999,999 306 493 260 430 111 189,174 1,281,538 2,060,417 13,113,346 117,089,517 Totals 1,600 133,733,992 Distribution of performance rights holders 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 Totals 0 2 10 23 9 44 0 6,820 71,512 871,970 1,103,501 % 0.14 0.96 1.54 9.81 87.55 100.00 % 0.000 0.330 3.480 42.460 53.730 2,053,803 100.000 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 133,733,992 37,820 126 0.02828 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 80 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 CJOEA FAMILY COMPANY PTY LTD PETSTOCK INVESTMENTS PTY LTD CITICORP NOMINEES PTY LIMITED CS THIRD NOMINEES PTY LIMITED SCOLEXIA COMMODITY PTY LTD DONALD CROSBY & SHARRON CROSBY CERTANE CT PTY LTD Balance as at Reporting Date % 30,219,451 22.597 21,240,500 15.883 5,852,675 4.376 3,008,926 2.250 2,755,777 2.061 2,207,506 1.651 2,139,938 1.600 COBASH PTY LIMITED 1,872,006 1.400 HAMILTON ANIMAL HEALTH PTY LTD 1,564,270 1.170 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 1,409,907 1.054 FOUR POST INVESTMENTS PTY LTD AILEEN MARY VANDERFEEN MR LINCOLN O'MEARA RACHEL LOUISE O'MEARA MR ROGER CHARLES CARMODY & MRS MARIS MOORE CARMODY 1,386,700 1.037 1,377,888 1.030 1,377,888 1.030 1,377,888 1.030 1,258,650 0.941 MRS KATE JUDITH MALIN 1,229,161 0.919 SONJASWRIGHT PTY LIMITED 1,211,846 0.906 DAVID FRITH PTY LTD 1,104,909 0.826 MR NEIL LEIGHTON & MRS HELEN LEIGHTON 1,104,131 0.826 CINDY JANE PTY LTD 1,045,701 0.782 Total number of shares of Top 20 Holders Total Remaining Holders Balance 84,745,718 63.369 48,988,274 36.631 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 81 Company Secretary The Company’s secretary is Eryl Baron. 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 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: (02) 9290 9600 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 2,894,060 1 October 2021 Ordinary shares Voluntary escrow 1,103,753 30 November 2021 Ordinary shares Voluntary escrow 1,490,194 2 December 2021 Ordinary shares Voluntary escrow 161,043 7 April 2022 Ordinary shares Voluntary escrow 252,348 27 May 2022 Ordinary shares Voluntary escrow 174,632 1 June 2022 Ordinary shares Voluntary escrow 839,248 30 July 2022 Ordinary shares Voluntary escrow 1,103,753 30 November 2022 Ordinary shares Voluntary escrow 161,043 7 April 2023 Ordinary shares Voluntary escrow 252,348 27 May 2023 Ordinary shares Voluntary escrow 174,632 1 June 2023 Ordinary shares Voluntary escrow 839,247 30 July 2023 Apiam Animal Health Limited Financial statements for the year ended 30 June 2021 82 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 2,053,803 44 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. CORPORATE DIRECTORY DIRECTORS Professor Andrew Vizard Dr Christopher Richards Mr Michael van Blommestein Mr Richard Dennis Dr Jan Tennent Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director COMPANY SECRETARY Eryl Baron 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 Collins Square, Tower 5 727 Collins Street Melbourne VIC 3008 BANKERS National Australia Bank 500 Bourke 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 STOCK EXCHANGE LISTING Australian Securities Exchange Level 4, North Tower, Rialto 525 Collins Street Melbourne VIC 3000 ASX CODE AHX WEBSITE apiam.com.au ANNUAL REPORT 2021 A P I A M . 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