ATLAS PEARLS AND PERFUMES LTD
A.B.N. 32 009 220 053
ANNUAL REPORT
2013
CORPORATE DIRECTORY
DIRECTORS
Stephen Paul BIRKBECK
Joseph James Uel TAYLOR
B.Sc. (Biology), Ph.D.
Geoff NEWMAN
B.Ec (Hons), M.B.A, F.C.P.A, F.A.I.C.D.
Timothy James MARTIN
B.Arts, M.B.A, G.A.I.C.D.
Appointed 4 February 2013
COMPANY SECRETARIES
Susan HUNTER
B.Com, ACA, F Fin, G.A.I.C.D, A.C.I.S, A.C.S.A.
Stephen GLEESON
B.BUS, CPA
REGISTERED OFFICE
47-49 Bay View Terrace
Claremont
Western Australia 6010
P.O. Box 1048
Claremont
Western Australia 6910
Telephone: +61(0)8 9284 4249
Facsimile: +61 (0)8 9284 3031
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
TAX ADVISERS
BDO Tax (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
BANKERS
Commonwealth Bank of Australia
150 St Georges Terrace
Perth
Western Australia 6000
SHARE REGISTRY
Computershare (WA) Pty Ltd
Level 2,
45 St George's Terrace
Perth
Western Australia 6000
HOME EXCHANGE
Australian Securities Exchange LTD
Exchange Plaza
2 The Esplanade
Perth
Western Australia 6000
Website:
http://www.atlaspearlsandperfumes.com.au
ASX Trading Code: ATP
E-mail: atlas@atlaspearlsandperfumes.com.au
1
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CHAIRMAN'S REPORT
Dear Shareholder
This report is in essence a one off 6 month commentary that provides for all further annual financial
reporting to be in line with the Australian financial year. Our strategic plan in relation to pearl selling events
meant a relatively modest revenue over the period which is reflected in the results; however, this strategy
has been vindicated by strong sales in July 2013 with the best average price on pearls achieved since
2007.
The period of January through to June 30, 2013 has been one of further consolidating our pearling efforts.
Our new technical hub in Lembata (Flores) is running at full commercial capacity and is balancing the
production effort of Bali. This provides great opportunity to further enhance the pearl oyster selection
process and improve our return on pearling investment. At the same time our pearl farms in Alyui (West
Papua), Alor (Nusa Tenggara Timur) and Punggu (Flores) have rationalised our overall stock position
resulting in clear cost savings for the group. Alyui in particular has had major cost reductions as it now
focuses on a more defined pearling effort with a lower staff base. Surplus equipment from Alyui has been
relocated to Alor, Punggu and elsewhere at minimal cost easing the expansion burden at the newer
locations. The benefits from this have been realised in several high quality harvests from all three sites. An
added benefit is risk mitigation and some new quality attributes being seen at each site. In short, the
pearling business blue print identified three years ago has been brought to full commercial reality.
Meanwhile, our new perfume and cosmetic division has completed some major R & D milestones and is
now in the process of commercialising new products and market strategies. Several unique formulations
that use Essential Oil of Tasmania’s new perfume extraction systems have resulted in a range of potential
end products such as skin care and perfume. These products are about to be trialled in the USA and
Europe to determine the best distribution and communication methods that can highlight the unique
properties of pure powdered pearl and the extracts (e.g. proteins and fragrance) obtained from this
powder.
In addition to pearl extracts Essential Oils of Tasmania is going through the same detailed evaluation and
strategic analysis for a range of new fragrance ingredients to complement their existing business that our
pearling venture has undertaken. Over the course of 2013/14 Atlas will support EOT to commission new
technologies and will use this period to commercialise existing product concepts and using consumer
feedback, define long term crop priorities. At the same time, World Senses has been working with large
international brands to secure contracts which will see EOT products enter an integrated selling stream.
To ensure our capacity in marketing and sales, several key appointments have been made following an
exhaustive search for individuals with the experience, energy and enthusiasm to grow our integrated
venture. We are proud to announce the appointments of;
Pierre Fallourd, a pearl jewellery specialist; and
Lisa Lods, a chemical engineer with a technical sales history in cosmetic raw materials.
These new roles will start in earnest over the next couple of months.
Summary of Results
6 Months
Ended
30 June 13
$'000
12 Months
Ended
31 Dec 12
$'000
12 Months
Ended
31 Dec 11
$'000
12 Months
Ended
31 Dec 10
$'000
Revenue from continuing operation
3,505
12,305
12,350
9,842
Normalised earnings before interest,
tax, depreciation and amortisation
(Normalised EBITDA)
(1,250)
1,345
1,555
943
EBITDA margin
(35.7%)
10.9%
12.6%
Depreciation & amortisation
(136)
(216)
(121)
9.6%
(54)
2
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CHAIRMAN'S REPORT
Summary of Results Cont.
6 Months
Ended
30 June 13
$'000
12 Months
Ended
31 Dec 12
$'000
12 Months
Ended
31 Dec 11
$'000
12 Months
Ended
31 Dec 10
$'000
Foreign exchange gains/(losses)
1,091
1,137
(919)
Revaluation and write-off of Agriculture
Assets (oysters, pearls and crops)
(2,908)
(3,147)
962
Other non-operating costs
(242)
(130)
(115)
Earnings/(loss) before interest and tax
(EBIT)
(3,445)
(1,011)
1,362
(412)
2,719
(202)
2,994
EBIT margin
(98.3%)
(8.2%)
10.9%
30.4%
Finance/interest net costs
Income tax benefit/(expense)
Net profit after tax (NPAT)
(222)
1,472
(2,195)
Basic earnings/(loss) per share (cents)
(0.81)
650
1,767
1,406
0.68
(264)
(504)
594
0.43
(192)
(412)
2,387
1.91
Assets
35,676
33,602
30,831
26,593
Debt (Current & Non-current)
5,274
4,936
5,720
3,596
Shareholder funds
25,797
24,217
20,284
19,307
Debt/shareholder funds (%)
20%
20%
28%
19%
Number of shares on issue (million)
287.04
237.14
142.86
136.36
Fiscal Results in 2013
1. Closed the period with $2.54M in liquidity (cash and headroom in bank facility access).
2. EBITDA of ($1.25M). Holding back the harvest and auction of the majority of 2013 production to
the second half of the 2013 calendar year has had a negative impact on Normalised EBITDA for
the six months to 30 June 2013 but will have reverse effect on the Normalised EBITDA for
2013/14.
3. New sales of essential oils of $503,076 were realised as a result of the acquisition of Essential Oils
of Tasmania in January 2013.
4. Gross Profit percentage overall increased to 60% for the first six months of 2013 from 56% in 2012
as loose pearl prices rose due to the reduced supply of white south sea pearls as a result of lower
global production.
3
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CHAIRMAN'S REPORT
Value Added Sales From Wholesale, Retail Sales and Direct Marketing Calendar Year
Wholesale
Retail
Essential Oils
Total Value Added
6 Months Ended
30 June 2013
12 Months Ended
31 Dec 2012
12 Months Ended
31 Dec 2011
$
$0.43M
$0.49M
$0.50M
$1.42M
$
$0.70M
$1.47M
nil
$2.17M
$
Nil
$1.21M
Nil
$1.21M
Value adding is a priority for Atlas to de-risk this business from future commodity price swings for pearls.
Value adding sales for the 12 months ended 31 December 2011 were $1.21M and lifted to $2.17M during
the 12 months ended 31 December 2012. Value added sales have increased further during the 6 months
ended 30 June 2013 to $1.42M. As the growing revenues demonstrate we have successfully built
alternate higher value sales methods and aim to continue to create increased demand for value added
pearls and perfumes that can be sold into uncontested niche luxury-market segments: perfumes to
jewellers and pearls to perfumeries.
Conclusion
The Atlas Company has had to with stand the most sustained economic challenges in its history due to the
prolonged impact of the GFC on the luxury pearl sector. In spite of revenue falling to $ 6.9 million during
the year ended 31 December 2009 and a general tightening of credit and investment in the last 4 years,
Atlas has maintained key growth objectives and quality improvements in pearl farming. In addition to
opening new farms, seeding sites and hatcheries, Atlas has proven the economic value of its pearl by-
products and completed the brand build of its consumer products.
We are currently working on increasing the productive capacity of EOT and through the production and
processing of a range of pearl and perfume raw materials have started to scope new revenue lines for
Atlas and EOT.
The Atlas Board have asked in the past for your patience. We are now commercialising key aspects of the
last four years and believe that the 2013/14 year will see growth of revenue and profits.
Stephen Birkbeck, Chairman
25th September 2013
4
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity (referred to hereafter as the Company)
consisting of Atlas Pearls and Perfumes Ltd (formerly Atlas South Sea Pearl Limited) and the entities it
controlled at the end of, or during, the period ended 30 June 2013.
1. DIRECTORS
The following persons were directors of Atlas Pearls and Perfumes Ltd during all or part of the financial
period and up to the date of this report except where stated:
STEPHEN PAUL BIRKBECK (Age – 53)
EXECUTIVE CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER (Remuneration Committee)
Mr Birkbeck was the founder and former CEO of Mt Romance, an Australian company that has become
one of the largest producers of sandalwood oil in the world. Mr Birkbeck has extensive marketing
expertise, especially in the luxury goods markets. He has been presented with a number of excellence
awards in relation to the success of Mt Romance and brings this extensive business development skill to
the Board.
Appointed Chief Executive Officer 16 January 2012
Appointed Director on 15 April 2005
Appointed Chairman of the board on 21 December 2009
(Last re-elected as a director – 31 May 2011)
Directorships of other listed companies held in the last three years:
∗ Nil
JOSEPH JAMES UEL TAYLOR, B.Sc. (Biology), Ph.D. (Age – 46)
NON EXECUTIVE DIRECTOR, TECHNICAL DIRECTOR (Audit Committee, Remuneration Committee)
Dr Taylor is a marine biologist and aquaculturist whose PhD research specialised in the husbandry of
Pinctada maxima pearl oysters. Since 1989, Dr Taylor has been involved in the management of
aquaculture operations, mainly associated with South Sea pearl farming. He has acquired extensive
knowledge about the biology of pearl oysters and has presented many research papers on this subject. Dr
Taylor commenced employment with the Company in 1996 as the Project Manager and has overseen the
development of the business to its current level of production.
Appointed Director on 13 September 2000
Managing Director from 31 August 2001 to 1 June 2009
(Last re-elected as a director – 31 May 2010)
Directorships of other listed companies held in the last three years:
∗ Nil
GEOFF NEWMAN, B.Ec (Hons),M.B.A, F.C.P.A ,F.A.I.C.D. (Age – 63)
INDEPENDENT NON EXECUTIVE DIRECTOR (Chair of Audit Committee, Chair of Remuneration
Committee)
Mr Newman has over 25 years experience in finance, marketing and general management roles in
organisations either directly involved in the resources sector or providing services and products to
businesses in that sector. In 1995, after managing Bunnings Pulpwood operations for a number of years,
he joined Coogee Chemicals Pty Ltd as Commercial Manager and then was appointed to the Board as
Finance Director in the following year. Until August 2005 he was Finance Director/CFO and Company
Secretary of both Coogee Chemicals and its oil and gas subsidiary Coogee Resources Ltd before he
retired from the Coogee group of companies at the end of June 2006.
Director since 15 October 2010
(Last re-elected as a director – 30 May 2013)
5
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1. DIRECTORS (CONT.)
GEOFF NEWMAN, B.Ec (Hons),M.B.A, F.C.P.A ,F.A.I.C.D. (Age – 63) (CONT.)
INDEPENDENT NON EXECUTIVE DIRECTOR (Chair of Audit Committee, Remuneration Committee)
Directorships of other listed companies held in the last three years:
∗ Mount Magnet South NL - appointed 31 May 2006, resigned 9 September 2010
∗ Neptune Marine Services LTD – appointed 16 October 2008, resigned 30 September 2011
TIMOTHY JAMES MARTIN, B.Arts, M.B.A, G.A.I.C.D. (Age – 41)
INDEPENDENT NON EXECUTIVE DIRECTOR (Remuneration Committee)
Mr Martin has over 15 years of experience in the chemical, manufacturing and property sectors in Australia
and south-east Asia. Mr Martin is Managing Director of Coogee Chemicals, a privately owned chemical
manufacturing and shore side Terminal and Distribution company, with operations throughout Australia
and in Asia.
He has experience in the resource sector as a Non-Executive Director of related company Coogee
Resources, where he was also a member of their Risk and Audit Committee until the company was sold to
PTTEP (the National Oil Company of Thailand).
Prior to this Tim worked in the wholesale food manufacturing and distribution business in senior
management positions, primarily servicing retail supermarket chains in Australia.
He is also Director Principal of a private company specialising in commercial property development and
leasing, with current projects in Port Hedland, Rockingham, and south Western Australia. He is also a
board member of the Kwinana Industries Council representing heavy industry to government and other
stakeholders as well as being a member of the Plastics and Chemicals Industry Association of Australia
(PACIA) strategic issues advisory council.
Appointed Director on 4 February 2013.
Elected as Director on 30 May 2013.
Directorships of other listed companies held in the last three years:
∗ Nil
2. COMPANY SECRETARY
The role of Company Secretary at the end of the financial period was shared by Mr Stephen Gleeson and
Ms Susan Hunter.
STEPHEN GLEESON, B.BUS, CPA
Prior to joining Atlas in 2012, Mr Gleeson held the position of CFO/Company Secretary of statewide
recruitment Company Skill Hire from 2008 to 2012. He also has international experience as CFO of Peter
Lik USA and has previously acted as Company Secretary for the ASX listed company Golden Valley Mines
NL. He has 25 years’ experience in corporate restructuring and business re-engineering, and is a member
of CPA Australia.
Appointed 24 April 2012.
6
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
2. COMPANY SECRETARY (CONT.)
SUSAN HUNTER, BCom; ACA; F Fin; G.A.I.C.D; A.C.I.S; A.C.S.A.
Ms Hunter has over 19 years experience in the corporate finance industry. She is founder and Managing
Director of consulting firm Hunter Corporate which specialises in the provision of corporate governance
and company secretarial advice to ASX listed companies and has held senior executive roles at Ernst &
Young and PricewaterhouseCoopers in their Corporate Finance divisions and at Bankwest in their
Strategy and Ventures division. She holds a Bachelor of Commerce, is a Member of the Australian
Institute of Chartered Accountants, a Fellow of the Financial Services Institute of Australasia, a Graduate
Member of the Australian Institute of Company Directors and a Member of the Institute of Chartered
Secretaries and Administrators and Chartered Secretaries Australia.
Appointed 19 December 2012.
3. DIRECTORS’ MEETINGS
The attendance at meetings of the Company's Directors including meetings of committees of Directors is
shown below:
Director
Period
Directors' Meetings
Audit Committee
Meetings
Held
Attended
Held
Attended
Remuneration
Committee Meeting
Attended
Held
S.P. Birkbeck
G. Newman
J.J.U. Taylor
T. Martin
01/01/13 –
30/06/13
01/01/13 –
30/06/13
01/01/13 –
30/06/13
01/01/13 –
30/06/13
3
3
3
3
3
3
3
3
-
1
1
-
-
1
1
-
2
2
2
2
2
2
2
2
7
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
The directors are pleased to present your Company’s 2013 remuneration report which sets out
remuneration information for Atlas Pearls and Perfumes Ltd’s non-executive directors, executive directors
and other key management personnel.
Non-executive and executive directors – see pages 5 to 7 above
Position
Other key management personnel
S Gleeson
JS Jorgensen
C Triefus
Changes since the end of the reporting period
Chief Financial Officer
Chief Operations Officer PT Cendana Indopearl
Retail Production Manager PT Cendana Indopearl
The following changes have been made to the remuneration of the following key management personnel
after 30 June 2013;
Chief Financial Officer – S Gleeson
Mr S Gleeson’s contract was renegotiated on 26 July 2013.
Base salary for the 2013/14 financial year of $225,516 inclusive of 9.25% superannuation, reviewed
annually.
Bonus based on achieving various milestones (STIP) relating to retail sales and budgets and
implementing new ERP System. Bonus of 1% - 1.5% of 2013/14 EBITDA paid twice yearly. The bonus
is only payable on an EBITDA above $1,345,000 for the calendar year ended 31 December 2013.
Non-Executive Directors - G Newman, T Martin, J Taylor
Base fees for Non-Executive Directors - $50,000 per annum as of 1 July 2013 ($30,000 per annum for
the period 1 January to 30 June 2013).
As of 1 July 2013 the fee payable to the Chairman of the Audit Committee Mr G Newman will increase
to $8,000 per annum.
Technical Director – J Taylor
As of 1 July 2013 the technical director will receive $750 per day for pearl technical and Indonesian
entity support.
Remuneration Governance
4.1
4.1.1 Role of the remuneration committee
The remuneration committee is a committee on the board. It is primarily responsible for making
recommendations to the board on:
• Non-executive director fees
• Remuneration levels of executive directors and other key management personnel
• The over-archiving executive remuneration framework and operation of the incentive plan, and
• Key performance indicators and performance hurdles for the executive team.
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned
with the long-term interest of the company.
8
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.1.2 Non-Executive Director Remuneration Policy
Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the directors. Non-executive directors’ fees are reviewed annually by the Board.
Consideration is given to the remuneration of comparable companies when setting fee levels.
The Non Executive Directors’ aggregate annual remuneration may not exceed $350,000 which is
periodically recommended for approval by shareholders. This limit was approved by shareholders at the
Annual General Meeting on 30th May 2007. In the period ending 30 June 2013, the total non-executive
directors’ fees including retirement benefit contributions were $91,862.
The following fees have applied:
•
•
Base fees for Non-Executive Directors - $30,000 per annum for the period 1 January to 30 June
2013.
Base fees for Non-Executive Directors - $50,000 per annum as of 1 July 2013.
Additional fees of $8,000 per annum for the Chairman of the Audit Committee.
•
• Chairman’s package is $175,000 per annum plus superannuation this includes the Chairman’s
remuneration for his role as Chief Executive Officer. The Chairman also receives an additional
directors fee from Essential Oils of Tasmania of $50,000 per annum plus superannuation.
•
The Technical Director received an additional $20,000 per annum for advice on pearl production
matters up to 30 June 2013. As of 1 July 2013 the technical director will receive $750 per day for
pearl technical and Indonesian entity support.
4.1.3 Executive remuneration policy and framework
In determining executive remuneration, the board aims to ensure that remuneration practices are:
• Competitive and reasonable, enabling the company to attract and retain key talent
•
•
•
Aligned to the company’s strategic and business objectives and the creation of shareholder value
Transparent, and
Acceptable to shareholders
The executive remuneration framework has three components;
Base pay and benefits, including superannuation
Short-term performance incentives, and
Long-term incentives through participation in the Atlas South Sea Pearl Limited Employee Share
Plan.
•
•
•
Employment contracts are in place between the Company (or its subsidiaries) and all key management
personnel. Under these contracts, key management personnel are paid a base salary (which may be
provided in the form of cash or non-financial benefits) in accordance with their skills and experience as
well as entitlements including superannuation and accrued annual leave and long service leave in the
event of termination.
Executives’ salaries are reviewed annually and are adjusted to take into consideration the individuals’
responsibilities and skills compared to others within the Company and the industry. There are no
guaranteed base pay increases in any executives contracts.
There were no short or medium term cash incentives provided to any executives of the company during
the last financial period except where noted in section 4.2 of this report. Short or medium cash incentives
are incorporated into some executives salary packages at the time of this report. The framework provides
a mix of fixed and variable pay with short and medium term incentives. As executives gain seniority with
the group, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards.
9
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.1.3 Executive remuneration policy and framework (cont.)
An Employee Share Plan (ESP) provides some senior executives with incentive over and above their base
salary (refer 4.5 below). The allocation of shares under the Employee Share Plan (ESP) is not subject to
performance conditions of the Company. The reasons for establishing the ESP were:
•
•
To align the interests of senior management with shareholders. The ESP provides employees with
incentive to strive for long term profitability which is in line with shareholder objectives; and
To provide an incentive for employees to extend their employment terms with the company. Pearl
farming is a long term business and the experience of long serving senior employees is an
important factor in the long term success of the Company.
Use of remuneration consultants
The Company engaged remuneration consultants Gerard Daniels during the period ended 30 June 2013
to provide an independent market review of the Chief Executive Officer/Executive Chairman and
Independent Non-Executive Director Fees. Total fees charged for this service was $15,000 + GST.
During the financial year ended 31 December 2012 the Company did not engage any remuneration
consultants.
• Gerard Daniels was engaged by, and reported directly to, the chair of the remuneration committee.
The agreement for the provision of remuneration consulting services was executed by the chair of
the remuneration committee under delegated authority on behalf of the board.
• The report containing the remuneration recommendations was provided by Gerard Daniels directly
to the chair of the remuneration committee; and
• Gerard Daniels was permitted to speak to management throughout the engagement to understand
company processes, practices and other business issues and obtain management perspectives.
However, Gerard Daniels was not permitted to provide any member of management with a copy of
their draft or final report that contained the remuneration recommendations.
As a consequence, the board is satisfied that the recommendations were made free from undue influence
from any members of the key management personnel.
Voting and comments made that the Company’s 2012 Annual General Meeting.
Atlas Pearls and Perfumes Ltd received more than 90% of “yes” votes on its remuneration report for the
2012 financial year. The Company did not receive any specific feedback at the AGM or throughout the
year on its remuneration.
Relationship between Key Management Personnel Remuneration and Performance.
Each Key Management Personnel is remunerated on an individual basis. Some Key Management
Personnel are entitled to bonuses based on a percentage of EBITDA.
10
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.2
Details of remuneration
The following tables show details of the remuneration received by the directors and the key management personnel of the Group for the current and
previous financial period.
Name
Cash
salary
& fees
Short term benefits
Short term incentive cash bonus
Non-cash
monetary benefit
Total cash
salary, fees
and short
term benefits
$
$
$
$
Post-
employment
benefits
Super-
annuation
benefit
$
Long
term
benefits
Long
service
leave
$
Share based
compensation
Total
$
$
Directors
(Non-
Executive)
G. Newman
6
J.J.U.
Taylor 1, 12
2013
20,487
2012
2013
37,500
56,625
T. Martin 7
2012
2013
2012
Total Non-Executive Directors
72,077
12,500
-
(Executive)
S.P.
Birkbeck
1,3,10,12
S.C.B.
Adams 1,2,11
Total
Total
2013
87,500
2012 175,000
-
2013
2012
72,502
2013 177,112
2012 357,079
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,627
-
-
20,487
37,500
56,625
73,704
12,500
-
-
12,000
2,250
7,972
-
-
-
87,500
7,875
10,424
-
-
-
12,051
15,337
-
8,469
10,125
43,778
185,424
-
72,502
177,112
369,130
11
-
-
-
-
-
-
-
-
-
21,595
-
21,595
-
-
-
-
-
-
20,487
49,500
58,875
81,676
12,500
-
-
95,375
- 200,761
-
-
- 102,566
- 187,237
- 434,503
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
Name
4.2 Details of remuneration (cont.)
Cash
salary
& fees
Short term benefits
Short term incentive cash bonus
Non-cash
monetary benefit
Total cash
salary, fees
and short
term benefits
$
$
$
$
Post-
employment
benefits
Super-
annuation
benefit
$
Long
term
benefits
Long
service
leave
$
Share based
compensation
Total
$
$
Other Key Management Personnel
S Gleeson
5,9,12
2013 103,211
2012 183,074
75,359
2013
2012 225,000
42,800
2013
JS
Jorgensen
4,10, 12
C Triefus
8,10,12
2012 107,000
J. Folan 5,11 2013
-
2012
33,538
2013 221,370
2012 548,612
Total
Total
-
36,902
-
-
-
-
-
-
-
36,902
-
103,211
9,289
6,735
9,971
226,711
85,330
16,477
-
36,235 261,235
54,105
11,305
29,685
-
-
21,276
72,655
136,685
-
33,538
242,646
658,169
14,014
-
-
-
3,018
9,289
33,509
-
-
-
-
-
-
-
-
-
-
- 112,500
- 243,188
85,330
-
- 275,249
54,105
-
- 136,685
-
-
-
36,556
- 251,935
- 691,678
Notes:
1.
2.
3.
4.
Dr J Taylor and Mr S Birkbeck are Directors of the Company’s Malaysian subsidiary Aspirasi Satria Sdn Bhd. Mr S Adams resigned as Director on 5 April 2012.
Mr S Adams was one of the key management personnel of the Group with the title of Managing Director. Mr S Adams was appointed Managing Director as at 1 September 2010 and resigned 16 January 2012.
Mr S Birkbeck is a key management personnel of the Group with the title of Chief Executive Officer. Mr S Birkbeck was appointed Chief Executive Officer as at 16 January 2012.
Mr J Jorgensen is a key management personnel of the Group and was appointed to the position of Chief Operating Officer (COO) in September 2010. Mr J Jorgensen is the Chief Operations Officer of the
Company’s Indonesian subsidiary, P.T. Cendana Indopearls.
J Folan was the Chief Financial Officer. J. Folan commenced employment on 31 May 2011 and resigned 1 February 2012. S Gleeson was appointed Chief Financial Officer on the 1 February 2012.
G Newman appointed 15 October 2010.
T Martin appointed 4 February 2013.
Mr C Triefus is the Retail Production Manager. The Retail Production Manager manages the retail stores in Bali and co-ordinates all retail stock for the Group.
No bonuses/short term incentives were paid to the KMPs as their milestones were not achieved during the period. In 2012 Stephen Gleeson received his bonus based on achieving various milestones relating to
tax compliance and 2% of EBITDA paid twice yearly.
A number of key management took part in the 2012 salary sacrifice scheme. $50,000 of Stephen Birkbeck’s salary was accrued for under the ESSP scheme and was transferred to him in shares in 2013. In 2012,
$25,000 of Jan Jorgensen’s salary had been accrued for under the ESSP scheme and was transferred to him in shares in 2013. $17,000 of Colin Triefus’ salary had been accrued for under the ESSP scheme and
was transferred to him in shares in 2013.
In 2012 Mr S Adams and Mr J Folan no longer met the Company’s definition of Key Management Personnel.
11.
12. Non-Monetary benefits of other key management personnel included accommodation allowances, school fees and medical expenses, as per individual employment contracts.
5.
6.
7.
8.
9.
10.
12
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.3.
Service Agreements
On appointment to the board, all non-executive directors enter into a service agreement with
the Company.
Remuneration and other terms of employment for the Chief Executive Office, Chief Financial
Officer, Chief Operations Officer and other key management personnel are also formalised in
service agreements.
Details of key management personnel contracts are set out below:
4.3.1. Mr Stephen Birkbeck (Executive Chairman - CEO) )
• Mr S Birkbeck was appointed as CEO commencing from 16 January 2012.
• Base salary
financial period of $175,000 per annum plus
the 2013
for
superannuation, reviewed annually for CEO role of Atlas.
• Base salary for the 2013 financial period of $50,000 per annum plus superannuation,
reviewed annually for EOT Director’s Role.
• Termination conditions- either party may terminate the contract of employment by
giving six months’ notice or a lesser amount as mutually agreed.
4.3.2. Mr Jan Jorgensen (Chief Operating Officer)
• Base salary for the 2013 financial period of $165,000 per annum reviewed annually
and also subject to various non-financial allowances relating to living in Indonesia.
• Entitled to commission on Pearl Meat sales of 15% of sales excluding VAT or GST.
• Entitled to commission on Mother of Pearl sales of 5% for annual sales in excess of
$300,000 excluding VAT or GST.
• Termination conditions – either party may terminate the contract of employment by
giving two months’ notice or a lesser amount as mutually agreed.
4.3.3. Mr Colin Triefus (Retail Production Manager)
• Employed under a fixed term contract which was renewed 1 January 2013 and due to
expire on 31 December 2013.
• Base salary for the 2013 financial period of $85,600 per annum reviewed annually
and also subject to various non-financial allowances relating to living in Indonesia.
• Letter of Agreement signed 25 June 2013 that both parties agree that the current
employment contract which is dated 28 November 2012 should end at 30 September
2013.
• Agreement states from 1 October 2013 until 31 December 2013 Colin Triefus will
work two days each week.
• Base Salary 1 October 2013 until 31 December 2013 will be $3,000 per month.
During this time Colin Triefus will accrue no further holiday entitlement.
• Not entitled to any special termination payments under these contracts.
4.3.4. Mr Stephen Gleeson (Chief Financial Officer)
• Base salary for the 2013 financial period of $225,516 per annum inclusive of
superannuation, reviewed annually.
• Bonus based on achieving various milestones (STIP) relating to retail sales and
budgets and implementing new ERP System. Bonus of 1% - 1.5% of 2013 EBITDA
paid twice yearly. The bonus is only payable on an EBITDA above $1,345,000 for the
calendar year ended 31 December 2013.
• Termination conditions- either party may terminate the contract of employment by
giving six months’ notice or a lesser amount as mutually agreed.
4.3.5. Other executives (standard contracts)
• Contract terminates on retirement.
• The Company may terminate the executive’s employment agreement by providing 2
months written notice or providing payment in lieu of the notice period.
• Not entitled to any special termination payments under these contracts.
13
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.4.
Additional Information of the remuneration report
4.4.1. Loans to Directors and Executives
Details relating to the loans to directors and key management personnel including
amounts, interest rates and repayment terms are set out in note 25 to the financial
statements.
4.4.2. Options
There were no options issued to directors or key management personnel in the financial
period, or the previous financial year in their capacity as Directors or Key Management
Personnel. Directors and Key Management Personnel who chose to participate in the
January rights issue acquired free attaching options. Refer to note 25 for further details.
4.5.
Share based payments compensation
In 2006 and 2007 ordinary shares were issued to key management personnel of Atlas Pearls
and Perfumes Ltd under an Employee Share Plan (ESP) that was approved by shareholders
at the company’s annual general meeting in May 2006. These shares have been issued to
employees under the following terms:
4.5.1.
4.5.2.
In 2007 shares were issued at a price of 40 cents each, 900,000 were issued on 17th
April and 200,000 were issued on 10th May 2007 when the market price was 41 cents
and 48 cents per share respectively. In 2006, 2,150,000 shares were issued at a price of
29 cents each on 30th May when the market price was 31 cents per share.
Entitlement to 50% of the beneficial interest on the shares vested to employees after
they have completed two (2) years of employment with the company from the date of
issue of the shares, and entitlement to the remaining 50% of the beneficial interest in the
shares vested to employees after they have completed three (3) years of employment
with the company from the date of issue of the shares;
4.5.3.
Shares issued under the ESP have been paid for by employees who have been provided
with an interest free, non-recourse loan by the Company. This loan is to be repaid from
the proceeds of dividends paid in relation to these shares.
14
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.5.4.
The details relating to the allocation of shares to directors and key management personnel under the ESP are as follows:
Name
Date of
Issue
No. of
Shares
Issued (3)
Joseph Taylor
10/5/07
200,000
Shares
Vested to
end of
2010
100%
30/5/06
1,000,000
100%
Simon Adams
17/4/07
100,000
100%
30/5/06
400,000
100%
Shares
Forfeited
in the year
Financial Year
in which shares
vested
Nature of
shares
Minimum value
of grant yet to
be vested (1)
Maximum value
of grant yet to
be vested (2)
0%
0%
0%
0%
2009 – 50%
2010 – 50%
2008 – 50%
2009 – 50%
2009 – 50%
2010 – 50%
2008 – 50%
2009 – 50%
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
$-
$-
$-
$-
$-
$-
$-
$-
Notes –
1.
2.
3.
The minimum benefit is based on the fact that the vesting criteria for the shares on issue have not yet been met.
The maximum value is based on the value that is calculated at the time that the shares were issued.
The above named individuals are only entitled to these shares when the recourse loan is repaid. As at 30 June 2013, none of these
loans have been repaid. Hence, these shares remain as treasury shares in the employee share trust.
4.5.5.
In 2012 key management personnel were invited to participate in the Atlas South Sea Pearl Limited Non-Executive Director Fee
Sacrifice Share Plan and Employee Salary Sacrifice Share Plan that was approved by shareholders at the Company’s Annual General
Meeting on 30 May 2012. These shares have been issued to employees under the following terms.
This existing Employee Share Loan Plan was replaced by a new Employee Salary Sacrifice Share Plan and Non-Executive Director
Plan at the AGM on the 30 May 2012.
4.5.6.
The Atlas Employee Salary Sacrifice Share Plan
On 30 May 2012, the Atlas Employee Salary Sacrifice Share Plan was established. On the 4th of September 2012 6,064,000 shares
were issued into the Atlas South Sea Pearl Limited Employee Share Trust at $0.05 per share. On the 15th of March 2013, 2,931,616
shares were issued into the Atlas South Sea Pearl Limited Employee Share Trust at $0.05 per share. During the six months ended 30
June 2013 5,594,000 shares were issued out of the Atlas South Sea Pearl Limited Employee Share Trust to employees who
participated in the salary sacrifice plan.
Under the Salary Sacrifice Plan, the Company agrees to issue Shares to Eligible Employees, in lieu of the amount of remuneration that
each Eligible Employee has agreed to sacrifice from their monthly remuneration.
15
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.5.6. The Atlas Employee Salary Sacrifice Share Plan (Cont.)
To participate in the Salary Sacrifice Plan, Eligible Employees are required to salary
sacrifice a minimum of 10% of their annual base salary into Shares. There is no
maximum percentage or value cap to the amount that each Eligible Employee can
sacrifice.
The issue price for Shares under the Salary Sacrifice Plan will be determined from time
to time by the Board of Directors (in their discretion). For the participants who entered
into conditional salary sacrifice arrangements before the AGM on the 30th of May 2012,
the issue price per Share is 5 cents.
The Employee Share Plan is open to Eligible Participants being any Eligible Employee;
or conditional upon the company obtaining any necessary ASIC relief to extend the
operation of ASIC Class Order 03/184 (or similar class order) to them: any Eligible
Contractor; or Eligible Casual Employee, who is declared by the Board to be an Eligible
Participant for the purposes of the Plan.
There are no vesting conditions attached to the plan. Once an Employee has salary
sacrificed salary equivalent to the number of shares taken up under the plan the shares
are issued to the Employee.
An Eligible Employee means: a full time or part time employee (including an executive
director) of a Group Company. An Eligible Contractor means: an individual that has:
performed work for a Group Company, for more than 12 months; and received 80% of
more of their income in the preceding year from a Group Company; or a company where
each of the following are satisfied in relation to the company:
Throughout the previous 12 months the company has had a contract in place with a
Group Company, for the provision of the services of an individual (contracting individual)
to a Group Company;
• The contracting individual has performed work for a Group Company, for more
than 12 months;
• The contracting individual has been the only member for the company for more
than 12 months; and
• More than 80% of the aggregate income of the company and the contracting
individual from all sources (other than from each other) in the preceding 12 months
was received form a Group Company.
The Board may determine the terms and conditions of the Salary Sacrifice arrangement
for which Shares are offered in lieu of that Remuneration.
The number of Shares to be issued, transferred or allocated to the Trustee to be held on
behalf of a Participant will be the dollar amount of the Salary Sacrifice divided by the
issue price per Share outlined in the Invitation. In the case of fractional entitlements, the
number of Shares to be issue, transferred or allocated to the Trustee to be held on behalf
of a Participant will be rounded up to the nearest whole Share, unless otherwise
determined by the Board from time to time.
Shares to be acquired by Eligible Participants under the Salary Sacrifice plan are held in
the trust until such time that the Shares are fully paid for. Shares held by the trust and
not yet issued to employees at the end of the reporting period are shown as treasury
shares in the financial statements. As at 30 June 2013 5,594,000 of the shares issued
were issued out of the Atlas South Sea Pearl Limited Employee Share Trust to Eligible
Participants. The shares rank equally with other fully paid ordinary shares. Where shares
are issued to employees of subsidiaries of the Group, the transactions are treated in
accordance with the accounting policy at note 1.16.
16
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.5.7.
The details relating to the allocation of shares to directors and key management personnel under the Employee Salary Sacrifice Share
Plan are as follows:
Name
Date of
Entrance
Entitlement
No. of
Shares
No. of
Shares
Issued
Date of
Issue
Shares
Vested to
end of
2012
100%
Shares
Forfeited
in the
year
0%
Financial
Year in which
shares vested
Nature
of
shares
4/09/12
1,000,000 1,000,000
8/5/13
2012 – 100%
4/09/12
500,000
500,000
4/3/13
100%
0%
2012 – 100%
4/09/12
340,000
340,000 28/3/13
100%
0%
2012 – 100%
Share
issue
price
$0.05
Total
Value
Salary
Sacrificed
$50,000
$0.05
$25,000
$0.05
$17,000
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Stephen
Birkbeck
Jan
Jorgensen
Colin
Triefus
4.5.8.
The Atlas Non-Executive Director Fee Sacrifice Share Plan
On the 26 June 2012 828,000 shares were issued into the Atlas Pearls and Perfumes Ltd Non-Executive Director Trust at $0.05 per
share. These shares have since been issued to Non-Executive Directors. There were no new shares issued under the NED plan
during the period ended 30 June 2013.
The Non-Executive Director Salary Sacrifice Share Plan is open to Eligible Participants, being any Non-Executive Director who is
declared by the Board to be an Eligible Participant for the purpose of the Plan.
The Company’s Non-Executive Directors will receive a portion of their Director’s fee in the form of Shares.
The Company agrees to issue or procure the transfer of Shares to eligible Non-Executive Directors, in lieu of the amount of Directors’
fees that each eligible Non-Executive Director has agreed to sacrifice from their monthly Directors’ fees each financial year.
The issue price for Shares under the Salary Sacrifice Plan will be determined from time to time by the Board of Directors (in their
discretion). For the participants who entered into conditional salary sacrifice arrangements before the AGM on the 30th of May 2012,
the issue price per Share is 5 cents.
17
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
4. REMUNERATION REPORT (AUDITED)
4.5.9.
The details relating to the allocation of shares to directors and key management personnel under the Non-Executive Director Fee
Salary Sacrifice Share Plan are as follows:
Name
Date of
Entrance
Entitlement
No. of
Shares
No. of
Shares
Issued
Date of
Issue
Shares
Forfeited
in the year
Financial Year
in which
shares vested
Nature of
shares
Share
issue
price
Total Value
Salary
Sacrificed
Shares
Vested
to end
of 2012
100%
26/6/12
180,000 180,000 29/6/12
0%
2012 – 100%
26/6/12
648,000 648,000 29/6/12
100%
0%
2012 – 100%
Ordinary
Shares
Ordinary
Shares
$0.05
$9,000
$0.05
$32,400
Joseph
Taylor
Geoff
Newman
Notes –
1. These shares were issued under the NED plan described above directly to the NEDs, for past services rendered.
This is the end of the Audited Remuneration Report.
18
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES AND REVIEW OF OPERATIONS
1.1. Principal Activities
The Company is a producer of pearls and perfumes (and cosmetics) with administrative and
retail centres in Bali and Perth, pearl farms in Indonesia and a natural ingredients processing
plant in Tasmania for the processing of natural ingredients to extract essential oils, fragrances
and flavours. In addition, The Company has a joint venture, World Senses, with Nomad Two
Worlds in marketing and value adding.
19
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1.2.
Review of Operations and significant changes in the state of affairs
1.2.1. Six Months in Perspective.
This report is a one off six month financial report required as part of changing over to
Australian reporting year. The results reflect a strategic decision to move a major pearl
auction event from June to July in order to capitalise on improving market sentiment and
allowing a much greater number of pearls to be offered at a single sales event. Had the
original date of auction gone ahead the loss reported for this period would have been
reduced. The Company will next report for a full twelve months trading for the period 1st July
2013 to 30 June 2014.
Revenue of Loose Pearls were lower than the 2012 comparative with sales of $1,866,608 for
the six month period (6 months ended 30 June 2012 - $4,399,483) as the Company delayed
pearl sales events and some pearl harvests as previously explained. Holding back the harvest
and auction of the majority of 2013 production to the second half of the year has had a
negative impact on Normalised EBITDA for the six months to 30 June 2013 but will have
reverse effect on the Normalised EBITDA for 2013/14.
New sales of essential oils of $503,076 were realised as a result of the acquisition of
Essential Oils of Tasmania in January 2013.
1.2.2. Shareholder Returns
Net profit/(loss) after tax
Basic EPS (cents)
Dividends paid
Dividends (per share) (cents)
6 Months
Ending
12 Months
Ending
12 Months
Ending
30 June 2013
$'000
31 Dec 2012
$'000
31 Dec 2011
$'000
(2,195)
(0.81)
Nil
Nil
1,406
0.68
Nil
Nil
594
0.43
Nil
Nil
The adjustments from NPAT to arrive at reported Normalised EBITDA for these periods are
shown below:
Net profit/(loss) after tax
Tax expense/( benefit)
Finance/Interest net costs
Depreciation & amortisation
Foreign Exchange (gain)/loss
Agriculture Standard revaluation
(gain)/loss
Other Non-Operating
(income)/expense
Normalised EBITDA
6 Months
Ending
12 Months
Ending
12 Months
Ending
30 June 2013
$'000
31 Dec 2012
$'000
31 Dec 2011
$'000
(2,195)
(1,472)
222
136
(1,091)
2,908
1,406
(1,767)
(650)
216
(1,137)
3,147
242
130
594
504
264
121
919
(962)
115
(1,250)
1,345
1,555
20
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1.2.3. Financial Position
Total Assets
Debt (Current & Non-current)
Other Liabilities
Shareholder funds
Debt / Shareholder funds
30 June 2013
$'000
31 Dec 2012
$'000
31 Dec 2011
$'000
35,676
(5,274)
(4,605)
25,797
20%
33,602
(4,936)
(4,449)
24,217
20%
30,831
(5,720)
(4,828)
20,283
26%
Number of shares on issue (million)
287.039
237.135
142.858
Net tangible assets per share (cents)
Share price at reporting date (cents)
8.6
4.1
10.2
4.5
14.4
7.7
There has been an increase in the net assets of the group of $1.6M in the six months to
30 June 2013. Movements in the net worth of the economic entity are summarised
below:
• Cash reserves decreased to $1.8M (2012 - $2.1M) at 30 June 2013. During the
six months ended 30 June 2013 core debt was reduced by $446,257. The non-
renounceable rights issue opened on 30 November 2012 and closed on 18
January 2013 raised capital of $1,584,686. In addition to this share placement
1,100,000 convertible notes were also issued during the period for a period of 2
years at a face value of $1 per note. The convertibles notes are all exercisable
at the lower of $0.05 or 90% of the 10 day volume weighted average price of
Atlas Shares at the time of conversion.
• Trade receivables reduced to $1.1M (2012 - $3.3M) principally due to the
receipt of $2.3M funds from the PT Cendana Indopearls 2007 Tax Appeal which
was successfully award to the Company in December 2012 with funds received
in February 2013.
• Oyster assets value decreased by $0.6M during the six months ended 30 June
2013 despite an improvement in the market price of pearls from ¥7,296/momme
at 31 December 2012 to ¥8,250/momme at 30 June 2013. This was partly due
to a weaker Yen: ¥91.64 to AUD (30 June 2013) compared to ¥89.02 to AUD
(31 Dec 2012), and a lower number of Oysters harvestable within the next 12
months from 273K at 31 Dec 12 to 205K at 30 June 2013. The total change in
fair value less husbandry costs of oysters during the six months ended 30 June
2013 was $0.7M.
• Pearls on hand increased from 127,241 at 31 Dec 12 to 164,399 at 30 June
2013; the net realisable value increased from $1.7M at 31 Dec to $2.5M at 30
June 2013 as the auction originally schedule for June 2013 was held in early
July 2013 resulting in a build-up of stock at 30 June 2013. A write-off of $1.7M
was recognised in relation to pearls and jewellery costs for the period as
inventory is required to be valued at the lower of cost and net realisable value.
•
Jewellery inventory was $3.0M as at 30 June 2013, up from $2.5M at 31 Dec
2012 despite the Company improving inventory management controls. The
increase in stock is attributed to a weaker than expected retail market.
• Borrowings increased by $0.3M to $5.3M at 30 June 2013. This increase is due
to convertible notes with a fair value of $0.8M at 30 June 2013 offset by debt
capital reduction and a weaker Japanese Yen.
21
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1.2.3. Financial Position (Cont.)
• Essential oil finished product made up $1.1M of the inventory balance at 30
June 2013. Essential Oils of Tasmania’s crops made up $0.4M of the total
biological assets balance at 30 June 2013. During the six months ended 30
June 2013 the group recorded write-downs of Lavender and Boronia crops
totalling $0.4M. At 30 June 2013 the changes in fair value less husbandry cost
of crops resulted in an expense of $37K.
• Property plant and equipment increased to $4.5M at 30 June 2013 from $4.0M
at 31 Dec 2012. The increase is attributed to the 15 January 2013 acquisition
of Essential Oils of Tasmania, as at 30 June 2013 Essential Oils of Tasmania’s
property plant and equipment balance was $0.4M.
1.2.4. Operating Results
Atlas recorded a net loss after tax for the period ended 30 June 2013 of $2.2M, a reduction of
$3.6M (31 Dec 2012 – net profit after tax of $1.4M).
The operating revenue for the six months ended 30 June 2013 was $3.5M, compared to the
12 months ended 31 Dec 2012 ($12.3M). Pearl sales revenue was $1.9M, with retail and
wholesale sales revenue of $0.6M and essential oil sales of $0.5M. The number of jewellery
retail outlets in Bali remained consistent with 2012 at a total of seven.
Gross Profit percentage overall increased to 60% for the first six months of 2013 from 56% in
2012 as loose pearl prices rose due to the reduced supply of white south sea pearls as a
result of lower global production.
1.2.5. Pearl Oyster Production Results
The hatchery results for the period January to June were excellent and survival in the nursery
and grow-out systems has been above average and there is a current surplus of juvenile
pearl oyster stock. Results from operations have been well in line with expectation with the
added advantage of better stock selection compared with 2012. The Lembata hatchery and
grow-out systems are operating on par with Bali. Post operation results in Lembata have also
been above company expectations.
Oyster seeded for the period January to June 2013 totalled 134,477 with a further 74,000
seedings scheduled for July and August. The total projected seedings for calendar year 2013
are expected to reach 576,000, similar to the 2012 season. North Bali and Lembata seeding
programs have seen improved retention and general health of oysters.
Seeding programs at North Bali and Lembata have seen above average nuclei retention and
survival for the period up to August 2013.
Juvenile and Virgin stock remain stable with high growth and survival rates in the months
leading up to June 2013.
A new R&D Hatchery facility is currently being built in North Bali with a dedicated focus on
further
lines. Commercial hatchery production
recommenced in August after the seasonal dry-out period was completed.
improving selected Genetic Family
The transition to a multi-site pearl growing operation was completed this year with commercial
harvests from all 3 sites (Alyui, Alor and Pulau Punggu) and pearl quality has improved during
this transition. The new sites have reduced running costs, mitigated the risk relying on a
single pearl producing site and resulted in unique, site specific pearl characteristics
broadening the appeal of Atlas pearls.
22
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1.2.6.
“3000 Hands: Sharing and Sustaining
The introduction to our 3000 Hands: Sharing and Sustaining web series has been launched
with our first 4 minute video. Over the next 12 months we will be adding feature stories to the
series to help tell the unique position of Atlas in Indonesia and the relationship of creating
beautiful pearls and perfumes with community, people and environment. These stories reveal
the Atlas philosophy in terms of community engagement and sustainable practice and provide
a strong vehicle for marketing our luxury products to the world. If you haven't done so, please
take a moment to visit www.3000hands.com. New episodes will be available before the end of
the year.
1.2.7. Personnel
Atlas places a strong emphasis on training and retention of its workforce to ensure a more
efficient and cost effective operation. Staff numbers reduced slightly in 2013 as the Company
chose to consolidate its operations for the year.
Staff numbers at the end of the year were as follows:
2013
15
613
149
30
807
Expatriates – Indonesia
Indonesian nationals – permanent
Indonesian nationals – part time
Australia
Total Personnel
2012
20
629
178
13
840
2011
18
571
256
10
855
1.2.8. Marketing
Atlas continues to place an increasing emphasis on auctions as an effective distribution
channel. This policy has been vindicated with improved results from the May and July
auctions in 2013 with the latter experiencing sales prices in some categories not seen in six
years. Demand for places at these auctions is now double the capacity of the facility, allowing
Atlas to create some serious competitive tension amongst the forty or so best Japanese
wholesale companies that are selected to attend. Two further auctions are planned for
October and December.
Europe and the U.S. remain fairly sluggish markets for pearl sales whilst Australia has
become increasingly important for Atlas with select sales made directly to jewellers and
retailers at significantly better margins. The Company has more than quadrupled the number
of Australian accounts in the past twelve months and continues to increase ‘value-add’
(strands and matched pairs) sales to these customers. Atlas anticipates further sales growth
as demand for its high quality pearls in the 9-12mm size range continues to firm due to the
general scarcity for this category.
This new sales stream in strategic domestic sales of pearl strands and selected loose pearls
has helped offset a poor retail environment.
1.2.9. Research and Development
Research and development remains a cornerstone of the company’s success and never more
so since the acquisition of EOT. Atlas is working in the following areas:
• Pearl oyster genetics and selective breeding
• Novel pearl growth enhancement technology utilising various natural and organic
compounds
• Fouling and predation control systems
• Materials and equipment for pearling
• Plant genetics and production
23
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
1.2.9. Research and Development (Cont.)
• Plant and pearl (volatile) extraction and distillation
• Pearl and plant processing (protein) and bioactive extractive (non volatile) extraction
• Crushing, anti-aging and infusion of nacre
• Perfume accords and compounding
• Perfume and cosmetic product formulation
Many of the above programs are targeted at creating new products for more diverse revenue
streams and are being partially funded by R&D tax incentives.
During 2013 Atlas will seek ways of combining the research talents between the pearl and new
perfume divisions.
2. DIVIDENDS
No dividends were declared and paid by the Company during the six month period ended 30 June
2013 or the 12 month period ended 31 December 2012.
3. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD
There are no matters subsequent to the period end, which require disclosure.
4. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
All of Atlas’s Eastern sites have been fully rationalised and are now operating at commercial capacity.
Our two technical hubs in Bali and Lembata (Flores) have been optimised and the group is currently
sitting with a virgin oyster stock surplus at a time when most Indonesian producers have insufficient
pearl oysters to maintain seeding targets. This is a commanding position allowing our management
team to apply greater selection pressure to the seeding programme and to further lift quality. A
measure of this has been the significant size increase in pearl oysters presented to our skilled
technicians. Record seeding numbers are anticipated over the next 2 seasons.
The success of the Atlas breeding programme can be directly attributed to our long-term research
collaboration with James Cook University. Atlas now has the equivalent to thoroughbred stock with a
unique and genetically traceable heritage. Work has also commenced on a specialised research
hatchery and development of an independent R & D department that will operate an experimental
pearl farm located near the existing North Bali operations. This new hatchery will be operational by
April 2014 with the hope of commissioning trials before the end of the 2013/14 breeding season.
Harvests at all three pearl growing sites have generated high quality pearls to a market hungry for the
colour and size that Atlas is best known for (9-13 mm white and silver pearls). The July auction result
delivered the best pearl price average since 2007 (pre GFC). There are now significantly lower
numbers of pearls (estimated global reduction in South Sea Pearl Production >25%) in the market
place fuelling demand for quality goods. Barring any major global economic shifts, we expect further
improvement in average pearl prices.
The first cosmetics have been released (Dream Sea Lip Gloss and PerlMist) and are currently part of
a consumer trial. Atlas intends having these products as part of a combined online pearl and
perfume/cosmetic virtual store, which will be launched by the end of 2013. World Senses is close to
finalizing some international agreements, which will see Essential Oils of Tasmania (EOT) supplying
high quality, refined extracts into a global market.
24
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
5. DIRECTORS’ INTERESTS
The relevant interest of each current Director in the share capital of the Company, as notified by the
Directors to the Australian Stock Exchange in accordance with S205G (1) of the Corporations Act
2001, at the date of this report is as follows:
Ordinary Shares
Unlisted Options
S.P. Birkbeck(3)
J.J.U. Taylor (1),(2)
G. Newman(2)
T. Martin(4)(5)
Direct
-
200,000
-
2,856,545
Indirect
37,109,027
1,200,000
1,411,295
13,771,600
Direct
-
-
-
400,000
Indirect
6,018,172
-
128,000
2,128,600
1. The 1,200,000 shares held indirectly by Dr J Taylor are held in trust under the rules of the Employee
Share Plan. These shares have now vested. Dr Taylor is only entitled to the shares once the loan is
repaid in full (Refer Note 23).
2. Dr J Taylor acquired 180,000 shares, and G Newman acquired 648,000 shares in 2012 under the Non-
Executive Director Fee Salary Sacrifice Share Plan (Refer to Note 4.5.9 of Remuneration Report).
3. 1,000,000 shares held in trust in the ESP for Stephen Birkbeck were issued on 8 May 2013 (Refer to
Note 4.5.7).
4. Mr T Martin was appointed director 4 February 2013.
5. 13,771,600 indirect ordinary shares and 2,128,600 indirect unlisted options held by Mr T Martin are held
by a private entity which Mr T Martin is 1 of 4 directors. This entity is classified as a related party.
6. OPTIONS
The Company had 32,582,005 options granted over unissued shares at the 30 June 2013 (31
December 2012 – nil). As part of the rights issue on 18 January 2013 a total of 30,240,735 unlisted
options expiring 29 January 2014 exercisable at $0.05 each were issued pursuant to the Company’s
non-renounceable entitlements Prospectus dated 16 November 2012. An additional 2,452,979 options
were issued when the shortfall was taken up in March and April 2013. These options expire on 29
January 2014 and are exercisable at $0.05 each. Options exercised during the six months ended 30
June 2013 totalled 111,709.
7.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
7.1.
Indemnification
The Company has agreed to indemnify the following current directors of the Company; Mr S
Birkbeck, Dr J Taylor, Mr G Newman and Mr T Martin and the following former directors; Mr S
Adams, Mr RP Poernomo , Mr G Snow, Mr R Wright and Mr I Murchison, against all liabilities to
another person (other than the Company or a related body corporate) that may arise from their
position as directors of the Company, except where the liability arises out of conduct which
involves negligence, default, breach of duty or a lack of good faith. The agreement stipulates that
the Company will meet the full amount of any such liabilities, including costs and expenses.
7.2.
Insurance Premiums
Since the end of the previous financial year the Company has paid insurance premiums of $16,498
(2012 - $16,548) in respect of directors' and officers' liability and legal expenses insurance
contracts, for current and former Directors and Officers.
25
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
8. NON-AUDIT SERVICES
The company may decide to employ the auditor on assignments additional to their statutory audit
duties where the auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (BDO) for audit and non-audit services provided
during the period are set out below.
The Board of Directors, in accordance with advice from the audit committee, is satisfied that the
provision of non-audit services during the period is compatible with general standards of independence
for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services
disclosed below did not compromise the external auditor independence requirements of the
Corporations Act 2001. The nature of the service provided do not compromise the general principles
relating to auditor independence because they relate to tax advice in relation to compliance issues and
review of the tax provisions prepared by the Company. None of the services undermine the general
principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants.
The following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms during the period ended 30 June:
AUDIT SERVICES
BDO Australian Firm:
Audit and review of financial reports
Related practices of BDO Australian Firm
Total remuneration for audit services
TAXATION SERVICES
BDO Australian Firm:
Tax compliance services and advice
Related practices of BDO Australian Firm
Total remuneration for taxation services
Consolidated
6 Months
Ending
12 Months
Ending
30 June
2013
$
31 Dec
2012
$
74,765
-
74,765
82,007
30,917
112,924
28,449
-
28,449
54,119
-
54,119
Total remuneration for non-audit and taxation
28,449
54,119
services
9. PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied under section 237 of the Corporations Act 2001 for leave of court to bring
proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a
party for the purpose of taking responsibility on behalf of the Company for all or part of those
proceedings. The Company has not been a party to any proceedings during the period.
26
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DIRECTORS’ REPORT
10. AUDITORS INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations
Act 2001 is set out on page 28.
Signed in accordance with a resolution of the Directors.
S.P Birkbeck
Chairman
25 September 2013
27
For personal use only
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
25 September 2013
Board of Directors
Atlas Pearls and Perfumes Ltd
Shop 1, 47-49 Bayview Terrace
CLAREMONT WA 6010
Dear Sirs,
DECLARATION OF INDEPENDENCE BY CHRIS BURTON TO THE DIRECTORS OF
ATLAS PEARLS AND PERFUMES LTD
As lead auditor of Atlas Pearls and Perfumes Ltd for the six month period ended 30 June 2013, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(cid:127)
(cid:127)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Atlas Pearls and Perfumes Ltd and the entities it controlled during
the period.
CHRIS BURTON
Director
BDO Audit (WA) Pty Ltd
Perth, Western Australia
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
28
For personal use only ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013
6 Months
Ending
12 Months
Ending
30 June 2013
30 June 2012
Note
$
$
2
2
3
3
3
4
Revenue from continuing operations
Cost of goods sold
Gross profit
Other income
Marketing expenses
Administration expenses
Finance costs
Other expenses
Profit/(Loss) before income tax
Income tax (expense)/benefit
Profit/(Loss) for the period from continuing
operations
Other comprehensive income/(expenses)
Items that will be reclassified as profit or loss:
Exchange differences on translation of foreign
operations
Share of other comprehensive income of joint
ventures
Income tax on items that will be reclassified to
profit or loss
Other comprehensive income/(expenses) for
the period, net of tax
Total comprehensive income/(expenses) for
the period
Profit/(loss) is attributable to:
Owners of the Company
Total comprehensive income/(expenses) is
attributable to:
Owners of the Company
Overall operations :
3,505,125
12,304,756
(1,389,004)
(5,403,943)
2,116,121
1,754,041
(88,221)
6,900,813
2,051,581
(157,668)
(3,444,476)
(4,625,963)
(240,532)
(266,541)
(3,763,505)
(4,262,875)
(3,666,572)
(360,653)
1,471,927
1,766,803
(2,194,645)
1,406,150
1,181,648
(1,795,785)
-
-
-
-
1,181,648
(1,795,785)
(1,012,997)
(389,635)
(2,194,645)
1,406,150
(1,012,997)
(389,635)
Earnings per share for profit/(loss) from continuing operations attributable to
the ordinary equity holders of the Company
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
5
5
(0.81)
N/A
0.68
0.67
The accompanying notes form part of these financial statements.
29
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
Current assets
Note
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Biological assets
Total current assets
Non-current assets
Loans joint venture entities
Equity accounted for investments
Other investments
Inventories
Biological assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Short-term provisions
Total current liabilities
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits/(accumulated losses)
Total equity
6
7
8
9
10
30
9
10
11
14
12
13
8
14
15
8
13
14
16
17
18
30 June 2013
$
1,767,156
1,074,871
-
7,115,790
5,914,682
31 Dec
2012
$
2,127,414
3,335,254
181,327
4,632,909
7,613,044
15,872,499
17,889,948
313,926
280,984
-
223,399
11,535,561
4,513,455
2,936,629
127,816
554,766
89,107
176,936
8,821,501
4,040,748
1,900,919
19,803,955
15,711,793
35,676,454
33,601,741
2,329,224
4,436,797
14,479
234,884
92,037
2,148,962
4,755,043
-
368,091
1,805
7,107,421
7,273,901
390,148
837,646
1,544,570
2,772,364
-
180,879
1,930,243
2,111,122
9,879,785
9,385,023
25,796,669
24,216,718
30,203,033
(7,284,974)
2,878,610
27,610,085
(8,466,622)
5,073,255
25,796,669
24,216,718
The accompanying notes form part of these financial statements.
30
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013
Attributable to owners of Atlas Pearls and Perfumes Ltd
Contributed equity
Share based
payment reserve
Foreign currency
translation reserve
Retained earnings
Total equity
Note
$
$
$
$
$
Balance at 1 January 2012
Profit/(loss) for the year
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Dividends provided for or paid
Employee share scheme
Balance at 31 December 2012
Balance at 1 January 2013
Profit/(loss) for the period
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Dividends provided for or paid
Employee share scheme
18
17
16
19
17
18
17
16
19
17
23,287,552
581,029
(7,251,866)
-
-
-
4,322,533
-
-
4,322,533
27,610,085
-
-
-
-
-
-
-
-
(1,795,785)
(1,795,785)
-
-
-
-
27,610,085
581,029
(9,047,651)
-
-
-
2,592,948
-
-
2,592,948
-
-
-
-
-
-
-
-
1,181,648
1,181,648
-
-
-
-
Balance at 30 June 2013
30,203,033
581,029
(7,866,003)
The accompanying notes form part of these financial statements.
31
3,667,105
1,406,150
-
1,406,150
-
-
-
-
5,073,255
(2,194,645)
(2,194,645)
-
-
-
20,283,820
1,406,150
(1,795,785)
(389,635)
4,322,533
-
-
4,322,533
24,216,718
24,216,718
(2,194,645)
1,181,648
(1,012,997)
2,592,948
-
-
-
2,878,610
2,592,948
25,796,669
581,029
(9,047,651)
5,073,255
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2013
6 Months
Ending
30 June 2013
$
12 Months
Ending
31 Dec 2012
$
Note
Cash flows from operating activities
Proceeds from pearl, jewellery and oyster
sales
Proceeds from essential oil sales
Proceeds from other operating activities
Interest paid
Interest received
Payments to suppliers and employees
Income tax (paid)/received
2,336,290
11,358,557
682,947
299,375
(169,515)
22,221
-
45,906
(239,661)
33,329
(6,637,748)
(11,111,972)
2,321,163
(390,105)
Net cash provided by/(used in) operating
activities
24.2
(1,145,267)
(303,946)
Cash flows from investing activities
Cash obtained on business combination
Payments for property, plant and equipment
Joint venture partnership contributions
(paid)/received
Other loans
Net cash provided by/(used in) investing
activities
Cash flows from financing
activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares
Share transaction costs
Proceeds from convertible notes
Net cash provided by/(used in) financing
activities
142,221
(233,328)
-
(900,576)
(186,109)
(100,000)
-
(89,105)
(277,216)
(1,089,682)
-
(1,646,257)
1,640,271
(43,688)
1,100,000
-
(997,466)
4,235,055
(105,923)
-
1,050,326
3,131,666
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the financial period
Effects of exchange rate changes on cash and
cash equivalents
Cash and cash equivalents at the end of the
financial period
6
(372,157)
1,738,039
2,127,414
409,871
11,899
(20,496)
1,767,156
2,127,414
The accompanying notes form part of these financial statements.
32
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards
Board and the Corporations Act 2001. Atlas Pearls and Perfumes Ltd is a for-profit entity for the
purpose of preparing the financial statements.
The financial statements cover the consolidated entity of Atlas Pearls and Perfumes Ltd and its
subsidiaries. Atlas Pearls and Perfumes Ltd is a listed public company, incorporated and domiciled in
Australia.
A description of the nature of the consolidated entity’s operations and its principal activities is included
in the review of operations and activities in the directors report which is not part of these financial
statements.
The financial statements were authorised for issue by the directors on 25th September 2013. The
directors have the power to amend and reissue the financial statements.
The principal accounting policies adopted in the preparation of these consolidated financial statements
are set out below. The accounting policies have been consistently applied to all the periods presented,
unless otherwise stated.
1.2 Compliance with IFRS
The consolidated financial statements of the Atlas Pearls and Perfumes Ltd group also comply with
International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
1.3 New and amended standards by the group
None of the new standards and amendments to standards that are mandatory for the first time for the
financial period beginning 1 January 2013 affected any of the amounts recognised in the current
period or any prior period and are not likely to affect future periods. However amendments made to
AASB 101 Presentation of Financial Statements effective 1 July 2012 now require the statement of
Comprehensive Income to show items of Comprehensive Income grouped into those that are not
permitted to be reclassified to the Profit or Loss in a future period, and those that may have to be
reclassified if certain conditions are met.
1.4 Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the reporting
period beginning 1 January 2013.
1.5 Historical Cost Convention
These financial statements have been prepared under the historical cost convention, as modified by
the revaluation of available for sale financial assets, financial assets and liabilities (including derivative
instruments and biological assets) at fair value through profit or loss.
1.6 Critical Accounting Estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are disclosed in note 1.34.
33
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.7 Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Atlas
Pearls and Perfumes Ltd (“Company” or “parent entity”) as at 30 June 2013 and the results of its
subsidiaries for the six month period then ended. Atlas Pearls and Perfumes Ltd and its subsidiaries
together are referred to in this financial statements as the consolidated entity.
Intercompany transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Subsidiaries are those entities over which the Group has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one half of the voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the
Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of profit or loss and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of financial performance respectively.
(i)
Employee Share Trust
The Group has formed a trust to administer the Group’s employee share scheme. The trust is
consolidated, as the substance of the relationship is that the trust is controlled by the Group.
Shares held by Atlas South Sea Pearl Limited Employee Share Trust are disclosed as treasury shares
and deducted from contributed equity.
(ii)
Joint Ventures
Joint venture entities
The interest in a joint venture entity is accounted for using the equity method after initially being
recognised at cost. Under the equity method, the share of the profits or losses of the entity is
recognised in the profit or loss, and the share of post-acquisition movements in reserves is recognised
in other comprehensive income. Details relating to the entity are set out in note 31.
Profits of losses of transactions establishing the joint venture entity and transactions with the joint
venture are eliminated to the extent of the Group’s ownership interest until such time as they are
realised by the joint venture entity on consumption or sale. However, a loss on the transaction is
recognised immediately if the loss provides evidence of a reduction in the net realisation value of
current assets, or an impairment loss.
34
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.8 Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable
income based on the applicable tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the company’s subsidiaries operate
and generate taxable income. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred tax is credited in the consolidated statement of profit or loss and other comprehensive income
except where it relates to items that may be credited directly to equity, in which case the deferred tax is
adjusted directly against equity.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only to
the extent that it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
1.9 Inventories
(a)
Pearls – The cost of pearls grown by the Group is the fair value less husbandry costs at the
time the pearls are harvested. At each reporting date they are valued at the lower of cost and
net realisable value.
(b) Nuclei - quantities on hand at the period end are valued at the lower of cost and net realisable
value.
(c) Oysters – refer note 1.10.
(d) Crops – refer note 1.10.
(e)
(f)
Essential Oils - quantities on hand at the period end are valued at the lower of cost and net
realisable value.
Other inventories – including jewellery, fuel, mechanical parts and farm spares at the period end
are valued at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs necessary to make the sale.
1.10 Biological Assets
Oysters and Crops are measured at their fair value less estimated husbandry costs. The fair value of
these biological assets is determined by using the present value of expected net cash flows from the
oysters/crops, discounted using a pre-tax market determined rate.
Changes in fair value less estimated husbandry costs of these assets are recognised in the
consolidated statement of profit or loss and other comprehensive income in the period they arise.
35
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.10 Biological Assets (Cont.)
The details of the Biological assets that are held by the economic entity as at 30 June 2013 are
provided at Note 10.
1.11 Property, Plant & Equipment
Each class of property, plant & equipment is stated at historical cost less, where applicable, any
accumulated depreciation and impairment losses.
Property
Freehold land and buildings are shown at their cost, less subsequent depreciation for buildings.
Leasehold property is shown at cost and amortised over the shorter of the term of the unexpired lease
on the property or the estimated useful life of the improvements on the property.
Plant and Equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying value of plant and equipment and their useful lives are reviewed annually by Directors to
ensure it is not in excess of the recoverable amount of these assets which is assessed on the basis of
the expected net cash flows that will be received from the assets employed and subsequent disposal.
The cost of fixed assets constructed within the economic entity includes the cost of materials and
direct labour. Repairs and maintenance carried out on the assets are expensed unless there is a
future economic benefit that will flow to the Group which can be reliably measured, in which case the
value of the asset is increased.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These
are included in the consolidated statement of profit or loss and other comprehensive income.
Depreciation
Depreciation on property, plant and equipment is calculated on a straight line basis so as to write off
the cost or valuation of property, plant and equipment over their estimated useful lives commencing
from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset
Depreciation rate
Freehold land
Leasehold land & buildings & improvements
Vessels
Plant & equipment
2013
5-10%
5-10%
10%
10-50%
2012
5-10%
5-10%
10%
10-50%
36
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.12 Investments and Other Financial Assets
The Group classifies its investments in the following categories: financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial
assets. The classification depends on the purpose for which the investments were acquired.
Management determines the classification of its investments at initial recognition and re-evaluates this
designation at each reporting date.
(a)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial
asset is classified in this category if acquired principally for the purpose of selling in the short term.
Derivatives are classified as held for trading unless they are designated as hedges. Assets in this
category are classified as current assets. Realised and unrealised gains and losses arising from
changes in the fair value of these assets are included in the consolidated statement of profit or loss
and other comprehensive income in the period in which they arise.
(b)
Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for those with maturities
greater than 12 months after the reporting date which are classified as non-current assets. Loans and
receivables are included in receivables in the statement of financial position.
(c)
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-
derivatives that are either designated in this category or not classified in any of the other categories.
They are included in non-current assets unless management intends to dispose of the investment
within 12 months of the reporting date. Unrealised gains and losses arising from changes in fair value
are taken directly to equity. Investments are designated as available-for-sale if they do not have fixed
maturities and fixed or determinable payments and management intends to hold them for the medium
to long term.
(d) Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date, the date on which the
Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets
carried at fair value through profit or loss are initially recognised at fair value and transaction costs are
expensed in the consolidated statement of profit or loss and other comprehensive income. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the economic entity has transferred substantially all the risks and
rewards of ownership.
(e) Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in the profit or loss.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the
effective interest rate method.
Available-for-sale financial assets and financial assets at fair value through profit and loss are
subsequently carried at fair value. Gains or losses arising from changes in the fair value of the
financial assets at fair value through profit or loss category are presented in the consolidated
statement of profit or loss and other comprehensive income within other income or other expenses in
the period in which they arise.
37
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.12 Investments and Other Financial Assets (Cont.)
(f)
Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial asset
or group of financial assets is impaired. In the case of equity securities classified as available-for –
sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an
indicator that the securities are impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the asset ( a ‘loss’ event) and that loss
event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost, the
loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows. The cash flows are discounted at the financial asset’s original effective
interest rate. The loss is recognised in the consolidated statement of profit or loss and other
comprehensive income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised, the reversal of the
previously recognised impairment loss is recognised in the consolidated statement of profit or loss
and other comprehensive income.
1.13 Derivative instruments
Derivative instruments are initially measured at fair value on the date a derivative contract is entered
into and are subsequently remeasured to their fair value at each reporting date. Gains and losses
arising from changes in fair value are taken to the consolidated statement of profit or loss and other
comprehensive income.
1.14 Impairment of assets
Other assets 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 assets carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. Non financial assets other than
goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.
1.15 Foreign Currency Translation
(a) Functional and presentation currency
Items included in the financial statements of each of the subsidiaries within the Group’s entities are
measured using the currency of the primary economic environment in which the entity operates (“the
functional currency”). The consolidated financial statements are presented in Australian dollars,
which is Atlas Pearls and Perfumes Ltd’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the consolidated statement
of profit or loss and other comprehensive income, except when they are deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net
investment in a foreign operation.
38
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.15 Foreign Currency Translation (Cont.)
(b)
Transactions and balances (cont.)
Translation differences on assets and liabilities carried at fair value are reported as part of the fair
value gain or loss. Translation differences on non-monetary assets and liabilities such as equities held
at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary assets such as equities classified as available for sale
financial assets are included in the fair value reserve in equity.
All foreign exchange gains and losses are presented in the Statement of Profit of Loss and Other
Comprehensive Income within other income or other expenses unless they relate to financial
instruments.
(c) Group Companies
The results and financial position of all group entities (none of which has the currency of a
hyperinflation economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
1. Assets and liabilities for each statement of financial position presented are translated at the
closing rate at the date of that statement of financial position;
2.
Income and expenses for each statement of profit or loss and other comprehensive income are
translated at average exchange rates;
3. and all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign
entities, and of borrowings and other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings are
repaid, a proportional share of such exchange differences are recognised in the statement of profit or
loss and other comprehensive income as part of the gain or loss on sale.
1.16 Employee Benefits
Wages and salaries, annual leave, sick leave and long service leave
Provision is made for the Group’s liability for employee entitlements arising from services rendered by
employees to reporting date. Employee entitlements expected to be settled within one year together
with entitlements arising from wages and salaries, annual leave and sick leave which will be settled
after one year have been measured at their nominal amount. Other employee entitlements payable
later than one year have been measured at the present value of the estimated future cash outflows to
be made for those entitlements. Liabilities due to be paid within 12 months of the reporting date are
recognised in other payables. The liability for long service leave is recognised in the provision for
employee benefits.
Wages and salaries, annual leave, sick leave and long service leave
Contributions are made by the Group to employee superannuation funds and are charged as
expenses when incurred.
Share-based payments
Share-based compensation benefits are provided to employees via the Atlas Pearls and Perfumes Ltd
Employee Share Plan. Information relating to this scheme is set out in note 23.
The fair value of shares granted under the Employee Share Plan is recognised as an employee
expense with a corresponding increase in equity. The fair value is measured at the date that the
employee enters into the plan and is recognised over the period during which the employee becomes
unconditionally entitled to the shares.
39
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.17 Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the
group has a present legal or constructive obligation as a result of a past event; it is more likely than not
that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated.
1.18 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions,
other short-term, high liquid investments with original maturity or three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of change in value,
and bank overdrafts.
1.19 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed
as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third
parties.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
(a)
(b)
Sales Revenue comprises of revenue earned from the sale of products or services to entities
outside the economic entity. Sales revenue is recognised when the goods are provided or
when the fee in respect of services provided is receivable.
Interest Income is recognised as it accrues.
1.20 Leases
Lease payments for operating leases, where substantially all the risk and benefits remain with the
lessor, are charged as expenses in the period in which they are incurred.
1.21 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method, less provision for impairment. All trade receivables are generally
due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off by reducing the carrying amount directly. An allowance account – provision
for impairment of trade receivables, is used when there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, financial reorganisation, and default and delinquency in
payments, more than 30 days overdue, are considered indicators that the trade receivable is impaired.
The Group also considers the long term history of the debtor. The amount of the impairment allowance
is the difference between the assets carrying amount and the present value of estimated future cash
flows, discounted at the effective interest rate. Cash flows relating to short term receivables are not
discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the statement of profit or loss and other
comprehensive income within other expenses. When a trade receivable for which an impairment
allowance had been recognised becomes uncollectible in a subsequent period, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited against
other expenses in the statement of profit or loss and other comprehensive income.
40
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.22 Trade and other payables
These amounts represent liabilities for goods and services provided to the group prior to the end of
financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition.
1.23 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds and the redemption
amount is recognised in the statement of profit or loss and other comprehensive income over the
period of the borrowings using the effective interest rate method. Fees paid on the establishment of
loan facilities, which are not an incremental cost relating to the actual draw down of the facility, are
recognised in the statement of profit or loss and other comprehensive income.
Borrowings are removed from the statement of financial position when the obligation specified in the
contract is discharged, cancelled or expired.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date.
1.24 Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period
of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing
costs are expensed.
1.25 Convertible notes
The fair value of the liability portion of a convertible note is determined using a market interest rate for
an equivalent non-convertible note. This amount is recorded as a liability on an amortised cost basis
until extinguished on conversion or maturity of the notes. The remainder of the proceeds is allocated
to the conversion option. This is recognised and included in shareholders’ equity, net of income tax
effects.
1.26 Contributed Equity
Ordinary share capital is recognised at the fair value of the consideration received by the Company
and recognised in equity.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a
reduction of the share proceeds received.
1.27 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no
longer at the discretion of the entity, on or before the end of the period but not distributed at reporting
date.
1.28 Goods and Service Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except where the GST
incurred on a purchase of goods & services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and where receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables in the statement of financial position.
Cash flows are included in the statement of cashflows on a gross basis and the GST component of
cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.
41
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.28 Goods and Service Tax (GST) (Cont.)
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable
to, the taxation authority.
1.29 Earnings Per Share
(a) Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members
of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial period, adjusted for bonus
elements in ordinary shares issued during the period.
(b) Diluted earnings per share
Diluted earnings per share adjusts the figure used in determination of basic earnings per share to take
into account the after income tax effect of interest and other financial costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued
for no consideration in relation to dilutive potential ordinary shares.
1.30 Segment Reporting
The Group has identified its operating segments based on internal reports that are reviewed and used
by the board of Directors and management team (the chief operating decision makers) in assessing
performance and in determining the allocation of resources.
The operating segments are identified by management based on the manner in which the product is
sold, whether retail or wholesale. Management also considers the business from a geographical
perspective and has identified four reportable segments. Discrete financial information about each of
these operating businesses is reported to the board of Directors and management team on at least a
monthly basis.
The wholesale business is a producer and supplier of pearls within the wholesale market. The retail
business is the manufacture and sale of pearl jewellery and related products within the retail market.
The accounting policies used by the Group in reporting segments are the same as those contained in
note 1 to the accounts and in the prior period except as detailed below:
Inter-entity sales
Inter-entity sales are recognised based on an internally set transfer price. These transactions are
eliminated within the internal reports. The revenue from external parties reported to the chief operating
decision maker is measured in a manner consistent with that in the statement of profit or loss and
other comprehensive income.
Biological assets and pearl inventories
These are recognised at cost within the internal reports.
It is the Group’s policy that if items of revenue and expense are not allocated to operating segments
then any associated assets and liabilities are also not allocated to segments. This is to avoid
asymmetrical allocations within segments which management believe would be inconsistent.
1.31 Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial period.
42
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.32 Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of
whether equity instruments or other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the group. The consideration transferred also includes the fair value
of any asset or liability resulting from a contingent consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary. Acquisition related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are, with limited exceptions, measured initially at their fair values at the acquisition date. On an
acquisition by acquisition basis, the group recognises any non – controlling interest in the acquiree
either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net
identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of
the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the subsidiary acquired and the measurements
of all amounts have been reviewed, the difference is recognised directly in profit and loss as a bargain
purchase.
Where settlement of any part of cash contribution is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in profit or
loss.
1.33 Parent entity financial information
The financial information for the parent entity, Atlas Pearls and Perfumes Ltd, disclosed in note 32 has
been prepared on the same basis as the consolidated financial statements, except as set out below:
(i)
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Atlas Pearls and
Perfumes Ltd.
(ii) Share-based payments
The grant by the company of ordinary shares to the employees of subsidiary undertakings in the group
is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services
received, measured by reference to the grant date fair value, is recognised over the vesting period as
an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
1.34 Critical accounting estimates and judgments
The resulting accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below. The directors
evaluate estimates and judgements incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of
future events and are based on current trends and economic data, obtained both externally and within
the Group.
43
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.34 Critical accounting estimates and judgments (cont.)
Key estimates – Impairment
The group assesses impairment at each reporting date by evaluating conditions specific to the group
that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of
the asset is determined. Value-in-use calculations performed in assessing recoverable amounts
incorporate a number of key estimates.
Critical judgements in applying the entity’s accounting policies
– Doubtful debts provision
No provision has been recognised in respect of receivables owed to the group for the period ended 30
30 June 2013 or 31 December 2012.
– Write-off of pearl inventories
There was a write-off of $1,730,274 as at 30 June 2013 (31 Dec 2012 – $3,869,374).
– Determination of net market value of inventories and biological assets
Agricultural assets include pearl oysters, both seeded and unseeded and pearls that have been
harvested from the oysters which remain unsold. Seeded oysters are measured at their fair value
using the net present value of expected future net cash flows attributed to this inventory less the
estimated husbandry costs. The fair value of unseeded oysters is determined by reference to market
prices for this type of asset in Indonesia. Pearls are measured at their fair value husbanrdy costs by
reference to anticipated market prices for pearls.
Key assumptions that have been used to determine the fair market value of the oysters at 30 June
2013 are as follows:
30 June 2013
31 December 2012
Average selling price for pearls1
¥8,250 per momme
¥7,296 per momme
¥ exchange rate
Average pearl size
¥91.64:AUD1.00
¥89.02:AUD1.00
0.60 momme
0.68 momme
Proportion of market grade pearls
Discount rate applied to cash flow
61%
20%
51%
20%
Mortality & Rejection rates
Historical comparison
Historical comparison
Average unseeded oyster value
$1.90
$1.86
1. Average pearl prices are based on historical averages discounted for potential market
volatility
Biological assets are valued using estimated future yen rates. Biological assets recognised as
current assets on the Statement of Financial Position represent the estimated value of the pearls to
be harvested within the next 12 months. The yen rate used is based on the estimated yen rates for
the next 18 months from Commonwealth Bank of Australia.
44
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
1.34 Critical accounting estimates and judgments (Cont.)
Key assumptions that have been used to determine the fair market value of the crops at 30 June 2013
are as follows:
Boronia
30 June 2013
Discount rate applied to cash flow
Estimated life
Flower yield per ha
Oil Yield per kg of flower
Farm gate price per kg
JV Grower Share
Lavender
Discount rate applied to cash flow
Estimated life
Oil Yield per ha
Selling price per kg
3-6%
10 years
2,000kg
60%
$2,500
50% of profit after production and
harvesting costs
30 June 2013
3-6%
10 years
Year 1 – nil
Year 2 – 10%
Year 3 – 25%
Year 4:10 – 40%
$300
- Determination of derivative liability within Convertible Notes
The fair value of the embedded derivative outstanding is measured using models that require the
exercise of judgements in relation to variables such as expected volatility and future share price. Any
changes in the variables will affect the fair value of the derivative post reporting date.
45
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
2. REVENUE FROM CONTINUING OPERATIONS
Sales Revenue
Sale of goods
Other Revenue
Interest income
Other revenues
Revenue
Consolidated
6 Months
Ending
12 Months
Ending
30 June 2013
31 Dec 2012
$
$
3,252,608
11,232,428
18,629
233,888
916,881
155,447
3,505,125
12,304,756
Change in net market value of biological assets
Change in fair value less husbandry costs of oysters
-
751,169
Other Income
Foreign exchange gains realised
Foreign exchange gains unrealised
Gain on financial instruments realised
Gain on financial instruments unrealised
Gain on sale of intangible
Gain on acquisition of EOT
Gain on derivative liability
Insurance refund
Write back of dividend provision
Other Income
3. PROFIT/(LOSS) BEFORE INCOME TAX
INCLUDES THE FOLLOWING SPECIFIC
ITEMS
Administration expenses from
ordinary activities
Salaries and wages
Depreciation property, plant and equipment
Operating lease rental costs
Compliance and finance
Other
400,792
885,945
-
-
-
59,911
32,177
114,431
260,785
703,711
73,893
31,402
327,777
163,627
-
-
-
-
1,754,041
2,051,581
1,479,544
136,160
172,094
657,450
999,228
3,444,476
2,167,526
215,522
496,988
471,443
1,274,484
4,625,963
46
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
3. PROFIT/(LOSS) BEFORE INCOME TAX
INCLUDES THE FOLLOWING SPECIFIC
ITEMS (CONT.)
Other expenses
Loss on financial instruments unrealised
Provision for employee entitlements
Change in fair value less husbandry costs of oysters
Write-off of pearl and jewellery costs
Changes in fair value less husbandry costs of crops
Write-off of crops
Share of loss on joint ventures
Write-down on investments
Other
Finance costs
Interest and finance charges payable
Net loss/(profit) on foreign currency
derivatives not qualifying as hedges
4.
INCOME TAX EXPENSE
a) The components of tax expense/(benefit)
comprise:
Current tax
Deferred tax
Prior period under/(over) provision
b) Deferred income tax (revenue) expense
included in income tax expense comprises:
Decrease(increase) in deferred tax assets
(excluding tax losses) (note 14)
(Decrease)increase in deferred tax
liabilities (note 14)
6 Months
Ending
12 Months
Ending
30 June 2013
31 Dec 2012
$
$
195,806
135,128
735,322
1,745,978
36,616
405,566
273,781
84,693
150,615
3,763,505
-
13,313
-
3,898,114
-
-
83,154
-
268,294
4,262,875
240,532
240,532
266,541
266,541
195,806
(359,179)
(308,328)
(786,208)
(377,391)
(969,597)
(797,206)
-
(1,471,927)
(1,766,803)
(400,535)
(512,393)
(385,673)
(284,813)
(786,208)
(797,206)
47
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
4. INCOME TAX EXPENSE (CONT.)
c) Numerical
reconciliation of
income
tax
expense to prima facie tax payable:
Profit/(loss) before income tax expense
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not
deductible in calculating taxable income:
Non deductible expenses
Tax losses not brought to account
Sundry items
Permanent Differences (Indonesia)
Difference in overseas tax rates
Indonesian Tax Refund*
Income tax under/(over) provided in prior
years
Income tax expense/(benefit)
6 Months
Ending
12 Months
Ending
30 June 2013
31 Dec 2012
$
$
(3,666,572)
(360,653)
(1,099,972)
(108,196)
(26,114)
114,723
(216)
(34,848)
(48,110)
-
15,023
100,683
-
62,951
(170,280)
(1,452,530)
(377,390)
(1,471,927)
(214,454)
(1,766,803)
Weighted average effective tax rates
40%
489%
Refer note 22 regarding income tax under/(over) provided for prior years for details in relation to double taxation
relating to 2007 fiscal period.
*Refer to note 7.
d) Deferred income tax at 30 June relates to the
following:
Deferred tax liabilities
Accrued interest
Fair value adjustment on biological assets
and agricultural produce
Prepayments
Convertible notes
Other
Unrealised foreign exchange gain
Deferred tax assets
Difference in accounting and tax
depreciation
Stock
Accruals
Provisions
Unrealised foreign exchange losses
Unrealised foreign exchange gains
Other
Tax losses
-
(541,261)
(52)
(342,374)
(1,080)
9,653
-
147,950
1,164
-
2,147
54,302
(90,740)
(274,151)
(6,450)
215,041
(69,323)
-
(193,789)
(617,232)
154,450
-
(510)
(15,906)
32,549
-
(653,594)
(29,381)
Deferred tax (income)/expense
(1,421,382)
(797,206)
For details of the franking account, refer to Note 19.
48
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
5. EARNINGS /(LOSS) PER SHARE
Basic earnings/(loss) per share (cents per share)
Diluted earnings per share (cents per share)
Earnings reconciliation
Net profit/(loss) used for basic earnings
After tax effect of dilutive securities
Diluted earnings/(loss)
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
(0.81)
N/A
$
0.68
0.67
30 June 2013
31 Dec 2012
$
(2,194,645)
-
(2,194,645)
$
1,406,150
-
1,406,150
Weighted average number of ordinary shares outstanding during the
period used for calculation of basic earnings per share
Adjustments for calculation of diluted earnings per share: Employee
Share Plan shares
Weighted average number of potential ordinary shares outstanding
during the period used for calculation of diluted earnings per share
271,638,917
206,854,705
N/A
N/A
3,855,060
210,709,765
Diluted earnings per share is calculated after taking into consideration all options and any other securities
that were on issue that remain unconverted at 31 December as potential ordinary shares which may have a
dilutive effect on the profit of the Consolidated Group.
Ordinary shares issued to employees under the Employee Share Plan are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share to the extent that they are
dilutive.
6. CASH AND CASH EQUIVALENTS
Cash at bank
Interest rate risk exposure
2013
$
2012
$
1,767,156
1,767,156
2,127,414
2,127,414
The Group’s exposure to interest rate risk is disclosed in note 33. The maximum exposure to credit risk at the
reporting date is the carrying amount of each class of cash and cash equivalents mentioned above.
Cash not available for use
The Group has cash held as a guarantee as part of their obligations under their lease agreement totalling
$106,441 (2012; $104,799).
49
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
7. TRADE & OTHER RECEIVABLES
CURRENT
Trade receivables
Income tax receivable*
Sundry debtors & prepayments
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
355,464
-
719,407
1,074,871
68,024
2,336,460
930,770
3,335,254
* 31 December 2012 includes $1,452,530 corporate tax refund, VAT refund of $176,809 from the Indonesian Taxation Authority
for 2007 tax overpayments, plus interest charges on overpayments of $707,121.
(a) Impaired trade receivables
There were no impaired trade receivables for the group during the period ended 30 June 2013 or 31
December 2012.
(b) Past due but not impaired
As at 30 June 2013, trade receivables of $220,576 (2012: $16,831) were past due but not impaired in the
Group. Within the Group these relate to a small number of independent customers for whom there is no
recent history of default. Given the past history with this customer no impairment has been recognised in the
financial period. The ageing analysis of these trade receivables is as follows:
Up to one month
2-3 months
3 months and above
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
143,378
23,002
54,196
220,576
10,196
3,397
3,238
16,831
The other classes within trade and other receivables do not contain impaired assets other than those
disclosed and are not past due.
(c) Other receivables
These amounts generally arise from transactions outside the normal operating activities of the Group.
Collateral is not normally obtained.
50
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
7. TRADE AND OTHER RECEIVABLES (CONT.)
(d) Foreign exchange and interest rate risk
The Group’s exposure to interest rate risk and foreign exchange risk in relation to trade and other
receivables is disclosed in note 33.
(e) Fair value and credit risk
Due to the short term nature of these receivables, their carrying amount is assumed to approximate
their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of
receivables mentioned above. Refer to note 33 for more information on the risk management
policy of the Group and the credit quality of the entity’s trade receivables.
8. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial assets
Forward foreign exchange contracts
Derivative financial liabilities
Forward foreign exchange contracts
Convertible notes
(a)
Instruments used by the Group
30 June 2013
31 Dec 2012
$
$
-
181,327
14,479
390,148
404,627
-
-
-
The Group is party to derivative financial instruments in the normal course of business in order to hedge
a proportion of the exposure to fluctuations in foreign exchange rates in accordance with the Groups
financial risk policies (refer note 33).
Derivative financial assets and liabilities comprise forward exchange contracts and an embedded
derivative in the convertible note agreements (refer to note 13 for convertible note terms). Gains and
losses arising from changes in fair value of foreign exchange hedging contracts and convertible notes
are recognised in the statement of profit or loss and other comprehensive income in the period in which
they arise.
The Groups operating expenses mainly consist of materials and services purchased in Indonesian
Rupiah. In order to protect against exchange rate movements, during the year ended 31 December
2012 the Group had entered into forward exchange contracts to purchase Indonesian Rupiah during the
year. During the period ended 30 June 2013 the Group did not enter into any forward exchange
contracts to purchase Indonesian Rupiah. In addition the sale of pearls is denominated in Japanese Yen
and so the Group has entered into forward exchange contracts and options to sell Japanese Yen and
receive Australian Dollars.
See note 1.13 for details of accounting policy in relation to derivatives.
(b) Risk exposures
Information about the Group’s exposure to credit risk, foreign exchange risk and interest rate risk is
provided in note 33.
51
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
9.
INVENTORIES
CURRENT
Pearls – at fair value
Essential oil finished products – at cost
Other – at cost
Jewellery
Pearl Meat
Mother of Pearl
Farm Consumables & Fuel
NON CURRENT
Nuclei – at cost
TOTAL INVENTORY
30 June 2013
31 Dec 2012
$
$
2,454,602
1,742,005
1,140,927
-
3,010,595
46,464
160,268
302,934
3,520,261
2,495,533
4,273
98,215
292,883
2,890,904
7,115,790
4,632,909
223,399
176,936
7,339,189
4,809,845
Inventories write-off expense of $1,730,273 (2012: 3,869,375) is included within other expenses in the
statement of profit or loss and other comprehensive income. Write-off of pearls occurred when reviewing net
realisable value versus cost.
10. BIOLOGICAL ASSETS
CURRENT
Oysters – at fair value
Crops – at fair value
NON CURRENT
Oysters – at fair value
Crops – at fair value
5,818,298
96,384
5,914,682
11,204,083
331,478
11,535,561
7,613,044
-
7,613,044
8,821,501
8,821,501
Total Biological Assets
17,450,243
16,434,545
During the six month ended 30 June 2013 no significant events occurred which impacted on oyster mortalities.
In November 2012, Atlas incurred a loss of 19,701 seeded oysters in transport with a total loss incurred of
$121,372. This is the second mortality event from transportation that the Company has experienced.
Management believes that similar to the incident experienced in November 2011 when 32,000 seeded oysters
died in transport that the incident is due to a toxic substance or algae bloom.
In October 2012, Atlas incurred a loss of 24,024 seeded oysters when what is thought to be a whale, swam into
lines at the farm in Alor. The total loss incurred was $154,321.
52
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
10. BIOLOGICAL ASSETS (CONT.)
The details of the Biological Assets that are held by the Group as at period end are as follows:
Nature:-
Oysters (Pinctada Maxima)
Quantity held within the Group operations:-
Juvenile and mature oysters which are not seeded
Nucleated oysters
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
No.
No.
1,276,824
696,030
1,972,854
1,086,313
781,321
1,867,634
During the period ended 30 June 2013, the Group harvested approximately 109,037 (2012: 282,949) pearls.
A reconciliation of the movement in the fair market value of the oysters during the period is reflected as
follows:
Oysters
Carrying amount at beginning of the period
Value of new juvenile oysters recognised into stock
Increase in value of stock from change in pearl
oyster development
Decrease in value through mortality
Decrease in value of Agriculture asset from harvest
of pearls
Gain/(Loss) from changes to fair value less
estimated husbandry costs
Exchange adjustment
Carrying amount at end of the period
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
16,434,545
17,451,016
1,414,911
1,622,948
3,210,849
11,321,798
(1,733,834)
(5,171,002)
(2,926,974)
(8,305,702)
(735,322)
751,169
1,358,206
(1,235,682)
17,022,381
16,434,545
Sensitivity analysis - Oysters
The mark to market estimation of the value of the biological assets (Oysters) is determined using the net
present value of expected future net cash flows attributed to this inventory less the estimated husbandry
costs. The primary assumptions used for this estimate are shown in Note 1.33. The following table
summarises the potential impact of changes in the key non-production related variables:
-10%
¥7,425 (Sellable Grade)
¥1,473 (Commercial
Grade)
Profit $
($2,134,269)
($1,949,421)
($1,758,537)
Selling Price (¥/momme)
No Change
¥8,250 (Sellable Grade)
¥1,637 (Commercial
Grade)
Profit $
($212,662)
-
$219,630
Discount rate
22%
20%
18%
+10%
¥9,075 (Sellable Grade)
¥1,801 (Commercial Grade)
Profit $
$1,708,935
$1,949,412
$2,197,788
53
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
10. BIOLOGICAL ASSETS (CONT.)
Sensitivity analysis – Oysters (Cont.)
-10%
¥7,425 (Sellable Grade)
¥1,473 (Commercial
Grade)
Profit $
($3,568,783)
($1,949,421)
$36,579
Selling Price (¥/momme)
No Change
¥8,250 (Sellable Grade)
¥1,637 (Commercial
Grade)
Profit $
($1,800,005)
-
$2,206,668
FX rate
¥100.80
¥91.64
¥82.48
+10%
¥9,075 (Sellable Grade)
¥1,801 (Commercial Grade)
Profit $
($29,809)
$1,949,412
$4,376,746
The Group is exposed to financial risk in respect of its involvement in primary production which consists of
the breeding and rearing of oysters for the purpose of producing pearls. The primary financial risk
associated with this activity occurs due to the length of time between the expenditure of cash in relation to
the operation of the farm and the harvesting of the pearls and realisation of cash receipts from the sales to
third parties. The Group ensures that it maintains sufficient working capital to ensure that it can sustain its
operation through any delays in cash flow that may be reasonably foreseen.
Sensitivity analysis - Crops
The mark to market estimation of the value of the biological assets (Crops) is determined using the net
present value of expected future net cash flows attributed to this inventory less the estimated husbandry
costs. The primary assumptions used for this estimate are shown in Note 1.33. The following table
summarises the potential impact of changes in the key non-production related variables:
Discount rate
3.3 – 6.6%
3 – 6%
2.7% - 5.4%
Discount rate
3.3 – 6.6%
3 – 6%
2.7% - 5.4%
-10%
$2,250/kg
Profit $
(111,246)
(34,166)
118,979
-10%
$270/kg
Profit $
(26,462)
(24,191)
(21,863)
Boronia
Farm Gate Price
No Change
$2,500/kg
Profit $
(89,656)
-
178,497
Lavender
Farm Gate Price
No Change
$300/kg
Profit $
(2,575)
-
2,645
+10%
$2,750/kg
Profit $
(68,067)
34,160
238,013
+10%
$330/kg
Profit $
23,313
24,198
27,156
The Group is exposed to financial risk in respect of its involvement in primary production which consists of
the tending to crops the purpose of producing essential oils. The primary financial risk associated with this
activity occurs due to the length of time between the expenditure of cash in relation to the operation of the
farm and the harvesting of the crops and realisation of cash receipts from the sales to third parties. The
Group ensures that it maintains sufficient working capital to ensure that it can sustain its operation through
any delays in cash flow that may be reasonably foreseen.
54
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
11. PROPERTY, PLANT AND EQUIPMENT
(a) Non-Pearling Assets
Plant and equipment
- at cost
- accumulated depreciation
Leasehold improvements
- at cost
- accumulated depreciation
Total non-pearling assets
(b) Pearling project
Land (leasehold and freehold) and
buildings
- at cost
- accumulated depreciation
Plant and equipment, vessels, vehicles
- at cost
- accumulated depreciation
Total pearling project
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
1,818,830
(899,219)
919,611
944,630
(252,391)
692,240
1,611,851
865,893
(308,068)
557,825
909,273
(206,875)
702,398
1,260,223
1,126,188
(200,644)
925,544
4,786,972
(2,810,913)
1,976,059
2,901,603
962,254
(165,281)
796,973
4,362,779
(2,379,227)
1,983,552
2,780,525
Total property, plant and equipment
4,513,455
4,040,748
Included in Pearling project land (leasehold and freehold) and buildings is $168,699 (2012 - $100,368) which
represents construction of buildings in progress at cost.
Reconciliations of the carrying amount for each
class of property, plant and equipment are set
out below:
(a) Non-Pearling Assets
Plant and equipment
Carrying amount at beginning of the year
Additions
Reclassifications /Disposals
Foreign exchange movement
Depreciation
Carrying amount at end of the year
Leasehold Improvements
Carrying amount at beginning of the year
Additions
Foreign exchange movement
Reclassifications/Disposals
Depreciation
Carrying amount at end of the year
557,825
464,269
-
(4,731)
(97,752)
919,611
702,398
11,792
12,738
-
(34,688)
692,240
634,992
46,369
-
3,420
(126,956)
557,825
732,974
48,832
(9,754)
-
(69,654)
702,398
55
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
11. PROPERTY, PLANT AND EQUIPMENT (CONT.)
(b) Pearling project
Leasehold land and buildings
Carrying amount at beginning of the year
Additions
Acquisition of pearling operation
Disposals/reclassifications
Depreciation
Foreign exchange movement
Carrying amount at end of the year
Plant and equipment, vessels, vehicles
Carrying amount at beginning of the year
Additions
Acquisition of pearling operation
Disposals / reclassifications
Depreciation
Foreign exchange movement
Carrying amount at end of the year
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
796,974
79,950
-
(114)
(21,189)
69,923
925,544
1,983,552
60,184
-
(1,427)
(219,045)
152,795
1,976,059
719,775
174,831
-
(7,943)
(34,618)
(55,072)
796,973
1,919,659
619,351
-
-
(413,121)
(142,337)
1,983,552
Total Carrying amount
4,513,454
4,040,748
Reconciliation of depreciation to the Statement of Profit of Loss and Other Comprehensive Income:
Depreciation charge (Note 11)
Capitalised depreciation charge
Depreciation charge (Note 3)
Balance
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
(372,674)
236,514
(136,160)
(136,160)
-
$
(644,349)
428,827
(215,522)
(215,522)
-
Refer note 33 for information on non-current assets pledged as security by the Group.
56
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
12. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
ESSP accrual*
Other payables and accrued expenses
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
559,092
18,883
1,751,249
2,329,224
255,291
79,500
1,814,171
2,148,962
* $56,000 of the ESSP accrual above is for shares salary sacrificed by Stephen Birkbeck ($50,000) and his daughter Kristie Birkbeck
($6,000) during the year ended 31 December 2012 under the Atlas South Sea Pearl Employee Share Plan.
(a) Amounts not expected to be settled within the next 12 months
Other payables includes accruals for annual leave of $933,945 and $1,125,964 in the consolidated
entity for 30 June 2013 and 31 December 2012 respectively. The entire obligation is presented as
current, since the Group does not have an unconditional right to defer settlement. All amounts are
expected to be settled within the next 12 months.
(b) Risk Exposure
Information about the Groups exposure to foreign exchange risk is provided in note 33.
13. BORROWINGS
CURRENT
Secured
Bank loan
Other bank loan
Lease liabilities
Total secured current borrowings
Unsecured
Other
Total current borrowings
NON CURRENT
Secured
Other bank loan
Lease liabilities
Total secured non current borrowings
Unsecured
Convertible notes
Total non current borrowings
(a) Security and fair value disclosure
2013
$
2012
$
4,226,864
-
126,033
4,352,897
83,900
4,436,797
-
52,868
52,868
784,778
837,646
4,303,195
95,400
121,951
4,520,546
234,497
4,755,043
70,470
110,409
180,879
-
180,879
Information about the security relating to secured liabilities and the fair value is provided in note 33.
(b) Risk Exposure
Information about the Group’s exposure to risks arising from borrowings is provided in note 33.
57
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
13. BORROWINGS (CONT.)
During the reporting period Atlas issued new Convertible Notes for a total value of $1,100,000. The
Convertible Notes have a maturity date of 2 years after issue (therefore maturing between January and
June 2015), attract an interest rate of 6% payable six monthly in arrears and are redeemable for
ordinary shares in Atlas at any time during the 10 Business Days prior to the first anniversary of the
Issue Date for the Convertible Notes; or the Maturity Date of the Convertibles Notes, or such other
period as agreed in writing between the Company and the Noteholder. If the Noteholder exercises its
conversion right, the Company must comply by redeeming all of the convertibles notes referred to in the
Conversion Notice at their Face Value; and applying the Conversion Amount as subscription funds for
the Conversion Shares which are to be issued to the Noteholder at a price per Conversion Share equal
to the lower of: 5 cents or 90% of the 10 day volume weighted average.
14. TAX
(a) Liabilities
CURRENT
Income tax payable
NON-CURRENT
Deferred tax liabilities comprises temporary differences
attributable to -
Agricultural and biological assets at fair value
Prepayments
Accrued interest income
Convertible notes
Other
Unrealised foreign exchange gains
Total deferred tax liabilities
(b) Assets
Deferred tax assets comprises temporary differences
attributable to -
Tax allowances relating to property, plant &
equipment
Agricultural and biological assets at fair value
Accruals
Provisions
Impairment of assets
Unrealised foreign exchange losses
Other
Tax losses recognised
Total deferred tax assets
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
234,884
368,091
1,324,075
2,147
-
9,653
84
208,611
1,544,570
1,865,336
2,147
-
1,164
61,596
1,930,243
1,059
1,188,341
24,300
82,912
-
82,589
205,540
1,584,741
1,351,888
2,936,629
(89,681)
914,190
17,850
298,888
-
13,266
11,750
1,166,263
734,656
1,900,919
58
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
14. TAX (CONT.)
The Company believes that the deferred tax asset relating to tax losses recognised is available to be carried
forward based upon the Company’s projections of future taxable amounts.
(c) Reconciliations
The overall movement in deferred tax account is as
follows:
Opening balance
(Charge)/credit to statement of profit or loss and
other comprehensive income
Other movements
Closing balance
15. PROVISIONS
CURRENT
Employee benefits
Total current provisions
Number of employees
(29,323)
1,421,382
-
(1,392,059)
(826,529)
797,206
-
(29,323)
30 June 2013
31 Dec 2012
$
$
92,037
92,037
807
1,805
1,805
840
Employee benefits provisions have been recognised in relation to long service leave for Australian and
expatriate employees. The current provision for long service leave includes all unconditional entitlements
where employees have completed the required period of service and also those where employees are entitled
to pro-rata payments in certain circumstances. The amount presented as non-current represents amounts
where an agreement is in place to pay the entitlements over a period of time longer than the next 12 months.
Reconciliation of provisions:
Balance at beginning of period
Provision used
Unused provisions reversed
Provisions added
Closing balance
1,805
-
(1,746)
91,978
92,037
23,399
(21,594)
-
-
1,805
2013
2012
No. of shares No. of shares
2013
$
2012
$
16. CONTRIBUTED EQUITY
Issued and fully paid-up capital
281,737,162
229,171,072
30,203,033
27,610,085
Ordinary Shares
Balance at beginning of period
Shares issued (1)(2)(3)(4)(5)(6)(7)(10)(11)
Balance at end of period
Treasury Shares
Balance at beginning of period
Acquisition of shares by Trust
under Plan (8)
Shares released
Balance at end of period
229,171,072
52,566,090
281,737,162
140,958,097
88,212,975
229,171,072
27,610,085
2,592,948
30,203,033
23,287,552
4,322,533
27,610,085
7,964,000
1,900,000
2,931,616
(5,594,000)
5,301,616
6,064,000
-
7,964,000
59
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
16. CONTRIBUTED EQUITY (CONT.)
(1) Atlas undertook a rights issue which closed on 18th of January 2013.
(2) On 15 January 2013, 10,000,000 fully paid ordinary shares were issued at an issue price of $0.05 as
consideration of all of the shares in Essential Oils of Tasmania Pty Ltd, as announced by the Company
on 22 October 2012 and ratified at the 2012 AGM.
(3) On 15 January 2013, 3,333,334 fully paid ordinary shares were issued to extinguish the existing debt in
Essential Oils of Tasmania and increase the Group’s working capital balance. The 3,333,334 fully paid
ordinary shares were issued at an issue price of $0.05 and rank equally with the Company’s existing
issued shares.
(4) On 29 January 2013 the Company issued 30,240,735 fully paid ordinary shares at an issue price of
$0.05 each and 30,240,735 free attaching options were issued to raise $1,512,037 before costs. The
shares rank equally with the Company’s existing issued shares. The unlisted options are exercisable at
$0.05 each on or before 29 January 2014.
(5) On 1 March 2013, 1,116,800 shares at an issue price of $0.05 each were issued to sophisticated
investors as part of the rights issue shortfall.
(6) On 1 March 2013, 103,709 shares were issued at an issue price of $0.05 after multiple shareholders
exercised their unlisted options acquired in the January 2013 rights issue.
(7) On 1 March 2013, 833,333 shares were issued at an issue price of $0.06 each to Abermac Pty Ltd the
former owner of Essential Oils of Tasmania, as remuneration for continued services provided in the
financial period.
(8) On 15 March 2013, 2,931,616 fully paid ordinary shares were issued to the Atlas South Sea Pearl
Employee Share Trust pursuant to the Company’s Employee Share Sacrifice Share Plan, as approved
by shareholders at the Annual General Meeting held on 30 May 2012.
(9) On 15 March 2013, 1,116,800 free attaching options were issued in relation to the 1,116,800 fully paid
ordinary shares issued on 1 March 2013.
(10) On 17 April 2013, 1,336,179 shares at an issue price of $0.05 and 1,336,179 free attaching options
were issued to sophisticated investors as part of the rights issue shortfall.
(11) On 17 April 2013, 8,000 shares were issued at an issue price of $0.05 after multiple shareholders
exercised their unlisted options acquired in the January 2013 rights issue.
(ii) Rights
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary
shareholders rank after all other shareholders (where applicable) and creditors and are fully entitled to any
proceeds of liquidation in proportion to the number of shares held.
Treasury shares are shares in Atlas Pearls and Perfumes Ltd that are held by the Atlas South Sea Pearl
Limited Executive Share Plan Trust for the purpose of issuing shares under the Atlas South Sea Pearl
Employee Share Plan.
(iii) Share Buyback
The share buy-back has been terminated as at the date of this report and no shares had been bought back
during the financial period ended 30 June 2013 or 31 December 2012.
60
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
16. CONTRIBUTED EQUITY (CONT.)
(iv) Capital Risk Management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern,
so that they can continue to provide returns to shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
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 Group has no external requirements imposed upon it in relation to capital structure except those noted in
note 33 as part of the covenants relating to the financing arrangements with Commonwealth Bank and has
no set gearing ratios upon which to monitor its capital.
17. RESERVES
Foreign Currency Translation Reserve
Employee Share Reserve
Total Reserves
Movements :
Foreign Currency Translation Reserve -
Balance at beginning of period
Currency translation differences arising
during the period
Balance at end of period
The foreign currency translation reserve
records exchange differences arising on
translation of foreign controlled subsidiaries to
the reporting currency.
Employee Share Reserve -
Balance at beginning of period
Movement in Employee Share Reserve
Balance at end of period
The employee share reserve records the value of equity portion of
remuneration paid to employees in the form of shares or other equity
instruments.
18. RETAINED PROFITS
Reconciliation of retained
earnings/(Accumulated losses):
Balance at beginning of period
Net profit/(loss) for the period
Movement in equity distribution account
Dividends paid
Balance at end of period
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
(7,866,003)
581,029
(7,284,974)
(9,047,651)
581,029
(8,466,622)
(9,047,651)
(7,251,866)
1,181,648
(7,866,003)
(1,795,785)
(9,047,651)
581,029
-
581,029
581,029
-
581,029
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
5,073,255
(2,194,645)
-
-
2,878,610
3,667,105
1,406,150
-
-
5,073,255
61
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
19. DIVIDENDS
No dividends have been paid or declared in respect of the 2012 financial year or the period ended 30 June
2013.
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
Dividend Franking Account
Franking credits available to shareholders of the Company for
subsequent financial years based on a tax rate of 30%.
1,278,704
1,278,704
The above amounts represent the balance of the franking account as at the end of the financial period
adjusted for:
(i) Franking credits that will arise from the payment of the amount of the provision for income tax;
(ii) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting
date; and
(iii) Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting
date.
20. OPTIONS
The Company had 32,582,005 options granted over unissued shares at the 30 June 2013 (31 December
2012 – nil). As part of the rights issue on 18 January 2013 a total of 30,240,735 unlisted options expiring 29
January 2014 exercisable at $0.05 each were issued pursuant to the Company’s non-renounceable
entitlements Prospectus dated 16 November 2012. An additional 2,452,979 options were issued when the
shortfall was taken up in March and April 2013. Options exercised during the six months ended 30 June
2013 totalled 111,709.
21. COMMITMENTS
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year, but not later than five years
Later than five years
2013
2012
375,737
313,321
1,976,866
1,815,717
710,794
998,372
3,063,397
3,127,410
Non - cancellable operating leases
The Group leases premises under non-cancellable operating leases expiring in 8 years. On renewal the
terms of the leases are renegotiated.
There are no capital commitments in place in relation to the acquisition of property, plant and equipment.
Fixed assets are replaced in the normal course of business operations and the company does not anticipate
any material capital outlay for such replacement costs in the coming year.
62
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
22. CONTINGENCIES
The 2008 tax audit for PT Cendana Indopearls was completed during the reporting period and a liability in the
order of IDR 3,504,206,185 or AUD$350,000 has been assessed by the Indonesian Tax Office. PT Cendana
Indopearls are in agreement with an amount in the order of AUD$50,000 and plan to dispute the balance of
AUD $300,000 via an appeal process.
Amounts totalling approximately AUD $180,000 are in dispute with the Indonesian Tax Office for deductions
made from the 2007 Income Tax Refund.
23. SHARE BASED PAYMENTS
In May 2006, an employee share plan was established which entitles the Board of Directors to offer shares
to key management personnel within the Group. A total of 1,100,000 shares were issued during 2007 to six
(6) employees including the managing director at a price of 40 cents per share which was a one (1) cent and
eight (8) cent discount to the market at the dates of issue being 17th April 2007 and 10th May 2007
respectively. An interest free, non-recourse loan was provided to the key management staff to pay for these
shares. This loan will be repaid by the employees from the proceeds of dividends that they are entitled to
from the ownership of the shares. 50% of the shares vested to the employees after two (2) years
employment from the time of issuing the shares and the remaining 50% vested to the employees after they
have completed three (3) years of employment from the time of issuing the shares. Employees are only
entitled to the shares if the loan is repaid in full.
1,900,000 shares remain on issue as at 30 June 2013 with debt of $428,500 outstanding by employees from
the initial loan of $1,063,500 that was made when the shares were allocated to employees. Refer note 25 for
details of equity held and loans outstanding to Key Management Personnel.
Shares issued to the employees are acquired and held in trust for the employees. Shares held by the trust
and not yet issued to employees at the end of the reporting period are shown as treasury shares in the
financial statements.
The fair value of shares issued under the scheme is independently determined using a Black-Scholes pricing
model that takes into account the exercise price, the term of the share, the impact of dilution, the share price
at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the share.
The shares rank equally with other fully paid ordinary shares.
Where shares are issued to employees of subsidiaries of the Group, the transactions are treated in
accordance with the accounting policy at note 1.16.
At the company’s annual general meeting in May 2007, shareholders approved the allocation of a maximum
of 4,000,000 shares to senior executives under the employee share plan within three years of the approval of
the plan. No shares were issued in the current year under this allocation.
There were no shares issued under the plan in 2011. In 2012 the plan was replaced with a new Employee
Salary Sacrifice Share Plan and Non-Executive Director Fee Salary Sacrifice Share Plan.
63
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
23. SHARE BASED PAYMENTS (CONT.)
At the AGM on the 30 May 2012 it was resolved to cease issuing Shares under this existing Employee Share
Loan Plan that was approved by Shareholders at the Company’s annual general meeting in May 2006.
This existing Employee Share Loan Plan was replaced by a new Employee Salary Sacrifice Share Plan and
Non-Executive Director Plan at the AGM on the 30 May 2012.
The Atlas Employee Salary Sacrifice Share Plan
On 30 May 2012, the Atlas Employee Salary Sacrifice Share Plan was established. On the 29th of June
2012 506,000 shares were issued into the Atlas South Sea Pearl Limited Employee Share Trust at $0.055
per share. Also, on the 4th of September 2012 5,814,000 shares were issued into the Atlas South Sea Pearl
Limited Employee Share Trust at $0.05 per share.
On 15 March 2013 a further 2,931,616 shares were issued into the Atlas South Sea Pearl Limited Employee
Share Trust at $0.05 per share.
During the period ended 30 June 2013, 5,594,000 shares were issued out of the Atlas South Sea Pearl
Limited Employee Share Trust to employees.
Of the 5,594,000 shares issued out of the trust, 300,000 shares were issued to employees who did not salary
sacrifice shares but were instead issued shares out of the trust in lieu of cash bonuses. The total value of
the bonuses issued was $15,000.
Under the Salary Sacrifice Plan, the Company agrees to issue Shares to Eligible Employees, in lieu of the
amount of remuneration that each Eligible Employee has agreed to sacrifice from their monthly
remuneration.
To participate in the Salary Sacrifice Plan, Eligible Employees are required to salary sacrifice a minimum of
10% of their annual base salary into Shares. There is no maximum percentage or value cap to the amount
that each Eligible Employee can sacrifice.
The issue price for Shares under the Salary Sacrifice Plan will be determined from time to time by the Board
of Directors (in their discretion). For the participants who entered into conditional salary sacrifice
arrangements before the AGM on the 30th of May 2012, the issue price per Share is 5 cents.
The Employee Share Plan is open to Eligible Participants being any Eligible Employee; or conditional upon
the company obtaining any necessary ASIC relief to extend the operation of ASIC Class Order 03/184 (or
similar class order) to them:
i.
ii.
any Eligible Contractor; or
Eligible Casual Employee,
Who is declared by the Board to be an Eligible Participant for the purposes of the Plan.
An Eligible Employee means: a full time or part time employee (including an executive director) of a Group
Company.
An Eligible Contractor means:
(a) An individual that has:
i.
ii.
Performed work for a Group Company, for more than 12 months; and
Received 80% of more of their income in the preceding year from a Group Company; or
(b) A company where each of the following are satisfied in relation to the company:
i.
ii.
Throughout the previous 12 months the company has had a contract in place with a Group
Company, for the provision of the services of an individual (contracting individual) to a Group
Company;
The contracting individual has performed work for a Group Company, for more than 12 months;
64
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
23. SHARE BASED PAYMENTS (CONT.)
iii.
The contracting individual has been the only member for the company for more than 12 months;
and;
iv. More than 80% of the aggregate income of the company and the contracting individual from all
sources (other than from each other) in the preceding 12 months was received form a Group
Company.
The Board may determine the terms and conditions of the Salary Sacrifice arrangement for which Shares are
offered in lieu of that Remuneration.
The number of Shares to be issues, transferred or allocated to the Trustee to be held on behalf of a
Participant will be the dollar amount of the Salary Sacrifice divided by the issue price per Share outlined in
the Invitation. In the case of fractional entitlements, the number of Shares to be issue, transferred or
allocated to the Trustee to be held on behalf of a Participant will be rounded up to the nearest whole Share,
unless otherwise determined by the Board from time to time.
Shares to be acquired by Eligible Participants under the Salary Sacrifice plan are held in the trust until such
time that the Shares are fully paid for. Shares held by the trust and not yet issued to employees at the end of
the reporting period are shown as treasury shares in the financial statements. As at 30 June 2013 5,594,000
of the shares issued to the Atlas South Sea Pearl Limited Employee Share Trust had been issued to Eligible
Participants (31 December 2012 – 256,000 shares).
The shares rank equally with other fully paid ordinary shares.
Where shares are issued to employees of subsidiaries of the Group, the transactions are treated in
accordance with the accounting policy at note 1.16.
The Atlas Non-Executive Director Fee Sacrifice Share Plan
On the 26 June 2012 828,000 shares were issued into the Atlas South Sea Pearl Limited Non-Executive
Director Trust at $0.05 per share. A further 250,000 shares were issued on the 4 September 2012 into the
Atlas South Sea Pearl Limited Non-Executive Director Trust at $0.05 per share. As at 30 June 2013 200,000
of the 250,000 shares issued to the NED trust have been issued to eligible participants.
The Non-Executive Director Salary Sacrifice Share Plan is open to Eligible Participants, being any Non-
Executive Director who is declared by the Board to be an Eligible Participant for the purpose of the Plan.
The Company’s Non-Executive Directors will receive a portion of their Director’s fee in the form of Shares.
The Company agrees to issue or procure the transfer of Shares to eligible Non-Executive Directors, in lieu of
the amount of Directors’ fees that each eligible Non-Executive Director has agreed to sacrifice from their
monthly Directors’ fees each financial year.
The issue price for Shares under the Salary Sacrifice Plan will be determined from time to time by the Board
of Directors (in their discretion). For the participants who entered into conditional salary sacrifice
arrangements before the AGM on the 30th of May 2012, the issue price per Share is 5 cents.
Total shares issued to directors during the period under the NED fee sacrifice share plan is 200,000 for a fair
value of $10,000. Total shares issued to directors during the year ended 31 December 2012 is 828,000
shares at a fair value of $45,540.
Refer to Note 16 for movement in share plan, under treasury shares.
65
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
23. SHARE BASED PAYMENTS (CONT.)
Other Share Based Payments
On 15 January 2013, 10,000,000 fully paid ordinary shares were issued at an issue price of $0.05 as
consideration of all of the shares in Essential Oils of Tasmania Pty Ltd, as announced by the Company on 22
October 2012 and ratified at the 2012 AGM.
On 15 January 2013, 3,333,334 fully paid ordinary shares were issued to extinguish the existing debt in
Essential Oils of Tasmania ($166,000) and increase the Group’s working capital balance. The 3,333,334
fully paid ordinary shares were issued at an issue price of $0.05 and rank equally with the Company’s
existing issued shares.
On 1 March 2013, 833,333 shares were issued at an issue price of $0.06 each to Abermac Pty Ltd the
former owner of Essential Oils of Tasmania, as remuneration for continued services provided in the financial
period.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expense were as follows:
Shares issued under the employee share plan
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
-
-
-
-
The share based payment expenses arising from the salary sacrifice share plan is nil as the plan does not
give additional benefit to the employees as shares are issued in lieu of cash salary and cash bonus. The
value of the shares originally issued to the trust is at the value sacrificed by the employee under the plan.
24. NOTES TO THE CASH FLOW STATEMENT
24.1 Reconciliation of cash
For the purposes of the statement of cashflows, cash includes cash on hand and in banks, and
investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the
financial period as shown in the statement of cashflows is reconciled to the related items in the
Statement of Financial Performance as follows:
Cash at bank (Note 6)
Balances per statement of cashflows
2013
$
2012
$
1,767,156
2,127,414
1,767,156
2,127,414
66
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
24. NOTES TO THE CASH FLOW STATEMENT (CONT.)
24.2 Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities
Profit/(loss) after income tax
Depreciation and amortisation
Gains/(Losses) on Equity Investments
Share based payments
Gain on sale of intangible
Gain on extinguishment
Foreign exchange gains/(losses) unrealised
Inventory revaluations gains/(losses)
Derivative instrument gains/(losses) unrealised
Gain on bargain
Agricultural asset fair value gains/(losses) and
inventory write-offs
Provision for dividend
Change in operating assets (net of impairment form
purchase of controlled entity)
Decrease in trade and other debtors
Decrease in other assets
(Increase) in inventories
Increase in trade and other
creditors
(Decrease) in Provision
Increase in taxes
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
$
(2,194,645)
136,160
273,781
65,000
-
(33,333)
(690,139)
15,705
(32,177)
(59,911)
1,406,150
643,522
83,154
395,534
(163,627)
-
(73,893)
28,739
(327,777)
2,907,779
(260,785)
3,393,899
-
234,162
85,978
(2,238,868)
(248,895)
(2,971,184)
(2,025,148)
64,556
(101,787)
683,257
148,757
299,529
(284,813)
Net cash provided by/(used in) operating activities
(1,145,267)
(303,946)
As at the date of this report the Company has not entered into any non-cash financing or investing
activities except as follows:
During the period ended 30 June 2013, the Company did not enter any new loans to acquire property,
plant and equipment. The Company did enter into the following non-cash transactions in acquiring
Essential Oils of Tasmania Ltd on the 15 January 13:
• On 15 January 2013, 10,000,000 fully paid ordinary shares were issued at an issue price of $0.05
as consideration of all of the shares in Essential Oils of Tasmania Pty Ltd, as announced by the
Company on 22 October 2012 and ratified at the 2012 AGM. The total value of the shares issued
was $500,000.
• On 15 January 2013, 3,333,334 fully paid ordinary shares were issued to extinguish the existing
debt in Essential Oils of Tasmania and increase the Group’s working capital balance. The
3,333,334 fully paid ordinary shares were issued at an issue price of $0.05 and rank equally with
the Company’s existing issued shares. The total value of the shares issued was $166,667.
• On 1 March 2013, 833,333 shares were issued at an issue price of $0.06 each to Abermac Pty Ltd
the former owner of Essential Oils of Tasmania, as remuneration for continued services provided in
the financial period. The total value of the shares issued was $50,000.
Also, during the period ended 30 June 2013, 5,594,000 shares were issued out of the Atlas South Sea
Pearl Limited Employee Share Trust to employees. Of the 5,594,000 shares issued out of the trust,
300,000 shares were issued to employees who did not salary sacrifice shares but were instead issued
shares out of the trust in lieu of cash bonuses. The total value of the bonuses issued was $15,000. The
total value of the other shares transferred from the trust to employees was $264,700.
During the year ended 31 December 2012, the Company did not enter any new loans to acquire
property, plant and equipment. During the year ended 31 December 2012, the Company did not issue
any ordinary shares to acquire any new investments.
67
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
24.3 Credit facilities
As at 30 June 2013, the Company had in place a loan facility with the Commonwealth Bank with a limit
of $5,000,000. This facility has been partially utilised, see note 33 for further disclosure. Information
about the security relating to secured liabilities and the fair value is provided in note 33.
25. KEY MANAGEMENT PERSONNEL DISCLOSURE
a. Key management personnel compensation -
Short-term employment benefits
Post-employment benefits
Long–term benefits
6 Months
12 Months
Ending
Ending
30 June 2013
31 Dec 2012
$
419,758
19,414
-
$
1,027,299
77,287
21,595
1,126,181
Detailed remuneration disclosures are provided in section 4.2 of the remuneration report on pages 11 to
12.
439,172
b. Equity instrument disclosures relating to key management personnel
i. Options and rights granted as compensation
No options were issued to key management personnel as remuneration during the period ended 30
June 2013 or 31 December 2012.
ii. Option holdings
There were no options on issue to key management personnel during the period ended 30 June
2013 or 31 December 2012.
c. Loans to key management personnel
Details of loans made to directors of the company and other key management personnel of the Group
under the Employee Salary Sacrifice Plan, including their personally related parties, are set out below.
i. Aggregates for key management personnel
Group
Balance at
the start of
the period
Loans
provided
during the
period
Interest paid
and payable
for the
period
Interest
not
charged
Balance at
the end of
the period
No in Group
at the end of
the period
$
$
$
30 Jun 2013
375,000
31 Dec 2012
375,000
$
$
-
-
-
-
6,864
11,250
375,000
375,000
2
2
68
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
25. KEY MANAGEMENT PERSONNEL DISCLOSURE (CONT.)
c. Loans to key management personnel (cont.)
ii.
Individuals with loans above $100,000 during the financial year
30 Jun 2013
Name
J. Taylor*
S. Adams*
31 Dec 2012
Name
J. Taylor*
S. Adams*
Balance at
the start of
the period
$
263,000
112,000
375,000
Balance at
the start of
the year
$
263,000
112,000
375,000
Loans
provided
during the
period
$
Interest paid
and payable
for the
period
Interest
not
charged
Balance at
the end of
the period
$
$
Highest
indebted-
ness during
the period
$
-
-
-
$
-
-
-
4,787
2,077
6,864
263,000
112,000
375,000
263,000
112,000
375,000
Loans
provided
during the
year
$
-
-
-
Interest paid
and payable
for the year
Interest
not
charged
Balance at
the end of
the year
$
-
-
-
$
7,890
3,360
11,250
$
263,000
112,000
375,000
Highest
indebted-
ness during
the year
$
263,000
112,000
375,000
All loans to key management persons are under terms and conditions as set out in note 23 relating to
the employee share plan.
The amounts shown for interest not charged in the tables above represent the difference between the
amount paid and payable for the period and the amount of interest that would have been charged on
an arms length basis.
*These loans have been provided for in a prior period.
69
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
25. KEY MANAGEMENT PERSONNEL DISCLOSURE (CONT.)
d. Shareholdings
The number of shares in the company held during the financial period by each director of the company
and the other key management personnel of the Group, including their personally related parties, are
set out below.
Details of shares that were granted as compensation during the reporting period are provided at note 23
and in the Remuneration Report contained at section 4 of the Directors’ Report.
Balance
1/1/13
Options
Exercised
Other
Changes (1)
Balance 30/06/13
Parent Entity
Directors
Mr S.P. Birkbeck
Mr J.J.U. Taylor
Mr G. Newman
Mr T. Martin (2)
30,090,855
1,400,000
1,283,295
-
Other key management personnel
Mr J. Jorgensen
Mr S. Gleeson
Mr C. Triefus
124,400
2,500,000
875,000
36,273,550
-
-
-
-
-
-
-
-
7,018,172
-
128,000
16,628,145
37,109,027
1,400,000
1,411,295
16,628,145
500,000
600,000
340,000
25,214,317
624,400
3,100,000
1,215,000
61,487,867
(1) Other changes refers to shares purchased or sold during the financial period. Removal of balance on resignation of
directors or balance held at appointment of Directors.
(2) Director appointed in the financial period.
Balance
1/1/12
Options
Exercised
Other
Changes (1)
Balance 31/12/12
Parent Entity
Directors
Mr S.P. Birkbeck
Mr J.J.U. Taylor
Mr S.C.B. Adams (2)
Mr G. Newman
17,155,581
1,220,000
666,666
400,000
Other key management personnel
Mr J. Jorgensen
Mr S. Gleeson (3)
Mr J. Folan (2)
Mr C. Triefus
2,000
-
-
775,000
20,219,247
-
-
-
-
-
-
-
-
-
12,935,274
180,000
766,000
883,295
30,090,855
1,400,000
1,432,666
1,283,295
122,400
2,500,000
-
100,000
17,486,969
124,400
2,500,000
-
875,000
37,706,216
(1) Other changes refers to shares purchased or sold during the financial period.
(2) Director/KMP retired or resigned in the financial period.
(3) KMP appointed in the financial period.
70
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
25. KEY MANAGEMENT PERSONNEL DISCLOSURE (CONT.)
e. Option holding
The number of options over ordinary shares in the parent entity held during the six months ended 30 June
2013 by each director and other members of key management personnel of the consolidated entity,
including their personally related parties, is set out below:
Balance
1/1/13
Granted
Exercised
Expired/
forfeited/other
Balance
30/06/13
Parent Entity
Directors
Mr S.P. Birkbeck
Mr J.J.U. Taylor
Mr G. Newman
Mr T. Martin (1)
-
-
-
-
6,018,172
-
128,000
2,528,000
Other key management personnel
Mr J. Jorgensen
Mr S. Gleeson
Mr C. Triefus
-
-
-
-
-
500,000
-
9,174,172
(1) Director appointed in the financial period
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,018,172
-
128,000
1,200,000
1,411,295
2,528,000
-
500,000
-
9,174,172
There were no options on issue during the year ended or as at 31 December 2012.
f. Other transactions
Key management personnel
I.
During the six months ended 30 June 2013 none of the directors salary sacrificed into the
Non Executive Director Fee Salary Sacrifice Share plan.
During the period, sales of individual pearls of small quantities were made to some staff and
Directors on normal commercial terms.
Aggregate amounts of each of the above types of other transactions with key management
personnel of the Group are:
Amounts recognised as expense
Research and development
Marketing consultancy
Amounts recognised as liability
Payables
6 Months
Ending
12 Months
Ending
30 June 2013
31 Dec 2012
$
$
-
-
-
13,000
30,000
-
71
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
26. RELATED PARTY TRANSACTIONS
i. Subsidiaries
Interests in subsidiaries are set out in note 29.
ii. Joint venture
World Senses Pty Ltd was formed on the 29th November 2012 as a joint venture between Nomad Two
Worlds Global Trading Pte Ltd and Atlas Pearls and Perfumes Ltd.
At 30 June 2013, there is loan balance of $258,851 owing from World Senses to Atlas. This balance consists
of salary and administration recharges of $236,690, accounting charges of $7,579, pearl jewellery and loose
pearls sold to World Senses for $11,173, freight recharges of $1,381 and other operating expenditure paid
for by Atlas on behalf of World Senses totalling $2,028.
At 30 June 2013, there is loan balance of $55,075 owing from World Senses to Perl’Eco. This balance
consists of pearl jewellery sold to World Senses for $77,148. This is offset by a balance of $22,073 which
relates to a World Senses owned jewellery item sold by Perl’Eco.
No provisions for doubtful debts have been raised in relation to any outstanding balances during the period
ended 30 June 2013 or 31 December 2012, and no expense has been recognised in respect of bad and
doubtful debts due from related parties.
iii. Key Management Personnel
Disclosures relating to Key Management Personnel are set out in Note 25.
72
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
27. REMUNERATION OF AUDITORS
During the period, the following fees were paid or payable for services provided by the auditor of the parent
entity, its related practices and non-related audit firms:
a. BDO Australia
Audit and other assurance services
Audit and review of financial reports
Total remuneration for audit and other
assurance services
Taxation Services
Tax compliance services and advise
Total remuneration for taxation services
2013
$
2012
$
74,765
82,007
74,765
82,007
28,449
28,449
54,119
54,119
Total remuneration of BDO Australia
103,214
136,126
b. Related practices of BDO Australia
Audit and other assurance services
Audit and review of financial reports
Total remuneration for audit and other
assurance services
Taxation Services
Tax compliance services and advise
Total remuneration for taxation services
Total remuneration of related practices of
BDO Australia
Total remuneration of BDO Australia
and related practices
-
-
-
-
-
30,917
30,917
-
-
30,917
103,214
167,043
73
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
28. SEGMENT REPORTING
(a) Segment information provided to the Board of Directors and management team
(i) The segment information provided to the Board of Directors and management team for the
reportable segments for the period ended 30 June 2013 is as follows:
30 June 2013 Wholesale Loose Pearl
Jewellery
Essential
Oils
All other
segments
Total
Australia
$
Indonesia Australia
Indonesia Australia
$
$
$
$
$
$
Total segment
revenue
Inter-segment
revenue
Revenue from
external
customers
Normalised
EBITDA
Adjusted net
operating
profit/(loss)
before income
tax
Depreciation
and
amortisation
Revaluation of
Biological
Assets
Totals
segment
assets
Total assets
includes:
Additions to
non – current
assets (other
than financial
assets or
deferred tax)
Total segment
liabilities
1,875,635
4,357,536
204,863
399,257
503,076
-
(4,087,760)
-
-
-
-
-
7,340,368
(4,087,760)
1,875,635
269,776
204,863
399,257
503,076
-
3,252,608
(1,781,708)
1,355,106
(184,713)
(447,815)
(190,929)
-
(1,250,057)
(2,053,237)
991,165
(210,584)
(121,995)
(195,037)
-
(1,589,688)
59,204
26,116
22,427
23,460
4,953
597,959
735,322
-
-
36,616
-
-
136,160
1,369,897
8,064,039 20,266,417
990,205 1,088,218 2,532,429
- 32,941,308
7,476
14,879
140,134
12,256
441,450
(773,822)
(907,729)
(96,161)
(167,658)
645,092
-
-
616,195
(2,590,461)
Included within the net operating profit for wholesale loose pearls in Indonesia is an impairment charge of
$15,705 in relation to the impairment of oysters.
74
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
28. SEGMENT REPORTING (CONT.)
(ii) The segment information provided to the Board of Directors and management team for the
reportable segments for the year ended 31 December 2012 is as follows:
31 Dec 2012 Wholesale Loose Pearl
Jewellery
Essential
Oils
All other
segments
Total
Australia
$
Indonesia Australia
Indonesia Australia
$
$
$
$
$
$
Total segment
revenue
Inter-segment
revenue
Revenue
from external
customers
Normalised
EBITDA
Adjusted net
operating
profit/(loss)
before
income tax
Depreciation
and
amortisation
Revaluation of
Biological
Assets
Totals
segment
assets
Total assets
includes:
Additions to
non – current
assets (other
than financial
assets or
deferred tax)
Total
segment
liabilities
9,037,383
7,435,048
796,131
1,135,233
-
(7,171,367)
-
-
9,037,383
263,681
796,131
1,135,233
(281,836)
2,835,128
(263,153)
(647,584)
(661,678)
3,404,437
(309,263)
(694,932)
109,713
18,638
39,218
47,953
-
(751,169)
-
-
6,450,385
19,093,198 1,445,489
2,285,023
30,354
794,183
2,246
62,601
702,112
1,141,771
104,542
199,606
-
-
-
-
-
-
-
-
-
-
- 18,403,795
-
(7,171,367)
- 11,232,428
-
1,642,554
-
-
-
1,738,563
215,523
(751,169)
- 29,274,096
-
-
889,384
2,148,032
Included within the net operating profit for wholesale loose pearls in Indonesia is an impairment
charge of $275,693 in relation to the impairment of oysters.
75
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
28. SEGMENT REPORTING (CONT.)
(b) Other segment information
(i) Segment revenue
Segment revenue reconciles to total revenue from continuing operations in the statement of
profit or loss and other comprehensive income as follows:
Total segment revenue
Intersegment eliminations
Interest income
Other revenues
Total revenue from continuing operations (note 2)
6 Months
Ending
30 June 2013
$
7,340,368
(4,087,760)
18,629
233,888
3,505,125
12 Months
Ending
31 Dec
2012
$
18,403,795
(7,171,367)
916,881
155,447
12,304,756
Major customers
A Japanese wholesaler accounted for 37% of external revenue in the six months to 30 June 2013
(12 months ended 31 December 2012 - 31%). These revenues are attributable to the Australian
wholesale loose pearl segment.
The entity is domiciled in Australia. The result of its revenue from third party customers in Australia
is $299,243 (12 months ended 31 Dec 2012: $ 1,081,412) in relation to wholesale loose pearl
sales. Revenue for wholesale loose pearls from third party customers based in other countries
during the six months to 30 June 2013 was $1,577,091 (12 months ended 31 Dec 2012:
$7,737,723). 68% of the total loose pearl sales revenue during the period ended 30 June 2013 (12
months ended 31 Dec 2012:85%) was to Japanese based customers.
In relation to retail jewellery sales the above segment reporting is based on the location of the sale,
whether in Australia or Indonesia as the nature of the retail business relies on one off sales
transactions with customers from a variety of locations.
76
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
28. SEGMENT REPORTING (CONT.)
(b) Other segment information (cont.)
(ii) Adjusted net operating profit
Segment net operating profit/(loss) before income tax reconciliation to the statement of profit or
loss and other comprehensive income.
The Board of Directors and the management team review on a monthly basis the performance of
each segment by analysing the segment’s net operating profit before tax. A segment’s net
operating profit before tax excludes non-operating income and expense such as interest paid and
received, foreign exchange gains and losses whether realised or unrealised, fair value gains and
losses and impairment charges.
A reconciliation of adjusted net operating profit/(loss) before income tax is provided as follows:
Net operating profit /(loss) before tax
Intersegment eliminations
Changes in fair value of biological and agricultural assets
Change in pearl inventory
Interest revenue/(expense)
Impairment expense
Foreign exchange gains
Foreign exchange losses
Other
Profit/(loss) before income tax from continuing operations
6 Months
Ending
30 June
2013
$
(1,589,688)
(2,727)
(2,907,773)
-
-
(15,705)
1,286,737
(195,806)
(241,610)
(3,666,572)
12 Months
Ending
31 Dec
2012
$
1,738,563
1,149,611
(4,075,228)
(28,739)
-
(275,693)
2,251,502
(1,114,809)
(5,860)
(360,653)
(ii) Segment assets
Assets are allocated based on the operations of the segment and the physical location of the
asset.
Reportable segments’ assets are reconciled to total assets as follows:
Segment assets
Intersegment eliminations
Unallocated:
Other
Investments
Joint Venture Loans
Deferred tax assets
Fair value adjustments on biological and agricultural
assets
Derivative financial instruments
Total assets as per the statement of financial position
30 June
2013
$
32,941,308
(529,407)
622
280,984
313,925
2,936,629
31 Dec 2012
$
29,274,096
(955,709)
565
643,871
127,816
1,900,919
(267,607)
-
35,676,454
2,610,183
-
33,601,741
The total of non-current assets other than financial instruments and deferred tax assets located in
Australia is $1,791,365 (2012: $1,022,006). The total located in Indonesia is $14,553,360 (2012:
$11,993,953).
77
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
28. SEGMENT REPORTING (CONT.)
(b) Other segment information (cont.)
(iii) Segment liabilities
Liabilities are allocated based on the operations of the segment and the physical location of the
asset.
Reportable segments’ liabilities are reconciled to total liabilities as follows:
Segment liabilities
Intersegment eliminations (note 28(a))
Unallocated:
Other
Current tax liabilities
Borrowings
Deferred tax liabilities
Derivative financial instruments
Total liabilities as per the statement of financial
position
30 June
2013
$
31 Dec
2012
$
2,590,461
232,877
2,148,032
(111)
2,550
234,884
5,274,443
1,544,570
-
9,598
361,339
4,935,922
1,930,243
-
9,879,785
9,385,023
78
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
29. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1.7.
Name of entity
Class of
shares
Percentage
owned
30 June
2013
Percentage
owned
31 Dec
2012
Place of incorporation
Perl’Eco Pty Ltd
(1)
Tansim Pty Ltd
P.T. Cendana
Indopearls
P.T. Cahaya
Bali (2)
Aspirasi Satria
Sdn Bhd
Essential Oils of
Tasmania (3)
Ord
Ord
Ord
Ord
Ord
Ord
(1) Previously named Sharcon Pty Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
-
Australia
Australia
Indonesia
Indonesia
Malaysia
Australia
(2) Bali retail operations have been set up in a separate company structure P.T. Cahaya Bali as of 1 May
2013 in order to comply with Indonesian rules and regulations.
(3) Essential Oils of Tasmania Ltd was acquired on 15 January 2013.
The ultimate parent entity, Atlas Pearls and Perfumes Ltd, is incorporated in Australia.
30. NON-CURRENT ASSETS – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Share in joint venture partnership (note 31)
30 June 2013
$
280,984
280,948
31 Dec 2012
$
554,766
554,766
79
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
31. INTERESTS IN JOINT VENTURES
(a) Joint venture
The parent entity has a 50% interest in World Senses Pty Ltd, which is a resident in Australia and the
principal activity of which is the commercialisation of Atlas and Essential Oils of Tasmania’s R&D, products
and export markets. This vehicle will commercialise the production of new emerging extracts from
Essential Oils of Tasmania and pearls from Atlas with an intimal focus on pearl micronized powder, pearl
perfume extracts, pearl cosmetic extracts, Perl’fumeTM technology and Australian indigenous perfume
ingredients such as Sandalwood, Boronia and Fire Tree (Zanthorrhoea preissii).
The interest in World Senses Pty Ltd is accounted for in the financial statements using the equity method of
accounting (refer to note 30). Information regarding to the joint venture is set out below.
Joint Ventures’ assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Joint Venture’s revenues, expenses and results
Revenues
Expenses
Loss before income tax
Share of Joint Venture’s capital commitments
(b) Contingent liabilities relating to joint ventures
6 Months
Ending
30 June 2013
$
12 Months
Ending
31 Dec 2012
$
679,714
507,496
1,187,210
13,204
593,822
607,026
420,884
287,178
708,062
450
26,403
26,853
580,183
681,209
32,559
(814,792)
(782,233)
6,491
(89,645)
83,154
Each of the partners in World Senses Pty Ltd are jointly and severally liable for the debts of the joint
venture. The assets of the joint venture exceed its debts.
There have been no legal claims lodged against the joint venture. The joint venture does not have any
contingent liabilities in respect of a legal claim lodged against the joint venture.
80
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
32. Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders equity
Issued capital
Reserves
Share-based payment reserve
Retained earnings/(Accumulated losses)
6 Months
Ending
12 Months
Ending
30 June 2013
31 Dec 2012
$
$
3,746,564
5,725,950
27,255,309
29,274,444
5,692,923
6,185,797
5,673,761
6,652,455
30,203,035
27,913,287
581,029
581,029
(8,005,438)
(5,872,327)
22,778,626
22,621,989
Profit / (loss ) for the period
(1,709,114)
269,273
Total comprehensive income/(loss)
(1,709,114)
269,273
(b) Contingent liabilities
The parent entity did not have any contingent liabilities as at 30 June 2013 or 31 December 2012.
The parent entity did not provide financial guarantees during the period (2012: Nil).
81
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate
risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts
and options to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, ie not as
trading or speculative instruments. The Group uses different methods to measure different types of risk to which
it is exposed. The Group uses sensitivity analysis in the case of interest rate and foreign exchange risks and
aging analysis for credit risk.
Risk management is carried out by the Board of Directors.
The Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Financial Liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Market Risk
(i)
Foreign exchange risk
30 June 2013
31 Dec 2012
$
$
1,767,156
578,556
-
2,345,712
1,395,280
5,274,443
404,627
7,074,350
2,127,414
2,592,414
181,327
4,901,155
1,023,001
4,935,922
-
5,958,923
The Group operates internationally and are exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the Japanese Yen, Indonesian Rupiah, US Dollar and Euro.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities
denominated in a currency that is not the entity’s functional currency and net investments in foreign operations.
The risk is measured using sensitivity analysis and cash flow forecasting.
Management manages their foreign exchange risk against their functional currency. Group companies are
required to hedge a proportion of their foreign exchange risk exposure arising from future commercial
transactions and recognised assets and liabilities using forward exchange contracts and options under the
guidance of the Board of Directors.
The majority of the Group’s cash reserves are held in Australian banks with AAA ratings.
82
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
The Groups exposure to foreign currency risk at the reporting date expressed in Australian dollars, was as follows:
30 June 2013
31 December 2012
JPY
$
USD
$
EUR
$
JPY
$
USD
$
EUR
$
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Borrowings
Forward exchange contracts –
buy foreign currency
Forward exchange contracts –
sell foreign currency
31,048
5,032
5,546
4,226,864
-
(14,568)
105,986
34,756
3,637
-
-
-
15,335
2,174
-
-
-
-
103,985
2,201
-
4,303,195
-
182,722
134,419
-
86,356
-
-
-
5,544
-
-
-
-
-
83
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
Group Sensitivity Analysis
Sensitivity analysis is based on exchange rates in US Dollars, Japanese Yen and Euro increasing or decreasing by 10% and the affect on profit and equity.
Statement of Financial
Position Amount
AUD
2013
2012
30 June 2013
31 December 2012
-10%
10%
-10%
10%
Foreign Exchange Rate Risk
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
Financial Assets
Cash
1,767,156
2,127,414
16,930
Trade and other receivables
578,556
2,592,414
4,421
Derivatives
-
181,327
-
Financial Liabilities
Trade and other payables
1,395,280
1,023,001
1,020
Borrowings
Derivatives
5,274,443
4,935,922
(411,818)
404,627
-
78,376
Total Increase/(Decrease)
(311,071)
Majority of the exposure above relates to the borrowings held in Yen.
-
-
-
-
-
-
(13,852)
(3,617)
-
(835)
431,578
(95,793)
317,482
-
-
-
-
-
-
29,673
(96)
(200,954)
45,179
(472,011)
-
(598,209)
-
-
-
-
-
-
-
(20,076)
(479)
163,983
(36,965)
396,208
-
502,671
-
-
-
-
-
-
-
Not shown in the table above, is the exposure to exchange movements on the intercompany loan denominated in Australian dollars made to the Indonesian subsidiaries. At
the period end this loan stood at AUD$5,733,204. The intercompany loans are eliminated on consolidation. The impact for the current year on the profit or loss was a gain
of $792,947 because the Indonesian Rupiah strengthened against the Australian dollar. If the Indonesian Rupiah strengthens or weakens against the Australian dollar by
10%, there would be an effect on the (profit) or loss of ($521,200) or $637,023 respectively.
84
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
(ii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from its borrowings. Given that borrowings are all due within 12
months and are at fixed interest rates the Group considers that any fair value interest rate risk or cash flow
risk will be immaterial.
(iii) Price risk
The Group is exposed to fluctuations in pearl prices. This product is not traded as a commodity on an open
market and as such the price risk cannot be hedged.
Credit risk
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative
financial instruments, as well as credit exposures to wholesale and retail customers, including outstanding
receivables. The Group considers the credit quality of the customer, taking into account its financial
position, past experience and other factors. Sales to retail customers are required to be settled in cash or
using major credit cards, thus mitigating credit risk.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as
summarised on page 51. For retail customers without credit rating the Group generally retains title over the
goods sold until payment is received in full.
All cash balances held at banks are held at internationally recognised institutions. The Australian
Government has guaranteed all deposits held with Australian banks, cash held in Indonesia is not covered
by this guarantee. The majority of other receivables held are with related parties and within the Group.
Given this the credit quality of financial assets that are neither past due or impaired can be assessed by
reference to historical information about default rates.
The credit quality of trade receivables that are neither past due nor impaired can be assessed by reference
to historical information about counterparty default rates.
Trade receivables
Retail customers – no credit history
Wholesale customers – existing customers
with no defaults in the past
Total trade receivables
Derivative financial assets
Liquidity risk
30 June 2013
31 Dec 2012
$
$
-
14,331
121,729
121,729
-
53,694
68,025
-
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an
adequate amount of committed credit facilities and the ability to close out market positions. The Group
manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. Group management aims at maintaining flexibility in funding by
keeping committed credit lines available. Surplus funds are generally only invested in instruments such as
term deposits that are highly liquid.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn borrowing
facilities below) and cash and cash equivalents (note 6) on the basis of expected cash flows. This is
generally carried out by the Board of Directors on a Group basis. In addition, the Group’s liquidity
management policy involves projecting cash flows in major currencies and considering the level of liquid
assets necessary to meet these and monitoring debt financing plans.
85
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
Financing arrangements
The Group had access to the following borrowing facilities at the reporting date.
Fixed rate
Expiring within one year – Foreign currency loan trade
30 June 2013
$
31 Dec 2012
$
5,000,000
5,000,000
5,000,000
5,000,000
Bank loans are secured by a registered company charge by Commonwealth Bank of Australia over the
whole of the assets and undertakings including uncalled capital of Atlas Pearls and Perfumes Ltd and its
related entities except for the shares and assets of Essential Oils of Tasmania Pty Ltd and World Senses
Pty Ltd. The bank loans are provided under a Japanese Yen Domestic Foreign Currency Advance facility
with a fixed interest rate which currently stands at 3.66% repayable on 31 May 2016 and an undrawn
Australian Dollar Bills Discount facility with a bank bill rate of BBSY plus a margin of 3.55% repayable one
year from the draw down date. As at the reporting date the Company had drawn down $4,226,864 (31
Dec 2012: $ 4,303,195) and had undrawn facilities available of $773,136 (31 Dec 2012: $696,805). The
loans can be drawn at any time and are subject to annual review.
The other bank loan (secured) also provided by Commonwealth Bank of Australia was repaid during the
period ended 30 June 2013.
Lease liabilities have been provided by St George Bank and Esanda and are effectively secured by the
rights to the leased assets, recognised in the financial statements, which revert to the lessor in the event of
default. The value of the loans relating to Lease liabilities as at the reporting date was $178,901 (31 Dec
2012: $232,360).
During the reporting period Atlas issued new Convertible Notes for a total value of $1,100,000. The
Convertible Notes have a maturity date of 2 years after issue, attract an interest rate of 6% payable six
monthly in arrears and are redeemable for ordinary shares in Atlas at any time during the 10 Business
Days prior to the first anniversary of the Issue Date for the Convertible Notes; or the Maturity Date of the
Convertibles Notes, or such other period as agreed in writing between the Company and the Noteholder.
If the Noteholder exercises its conversion right, the Company must comply by redeeming all of the
convertibles notes referred to in the Conversion Notice at their Face Value; and applying the Conversion
Amount as subscription funds for the Conversion Shares which are to be issued to the Noteholder at a
price per Conversion Share equal to the lower of: 5 cents or 90% of the 10 day volume weighted average.
If the Noteholder does not exercise its conversion right the face value is redeemable in cash at the date of
expiry.
The company is required to meet three financial undertakings to comply with the lending conditions as
follows:
Earnings before interest, tax, depreciation, amortisation and exceptional items (Normalised EBITDA) will
be greater than and at least equal to;
$1,500,000 for the 12 months 1 July 2013 to 30 June 2014; and
$1,500,000 for the 12 months 1 July 2014 to 30 June 2015; and
$1,500,000 for the 12 months 1 July 2015 to 30 June 2016.
Minimum net worth of the borrower (Atlas) will at all times be greater than $18,000,000; and
The ratio of net worth of the borrower to total tangible assets of the borrower will at all times be equal to or
greater than 60%.
The fair value of bank loans equals their carrying amount, as the impact of discounting is not significant.
The fair value of convertible notes is reviewed half-yearly to determine the fair value of the derivative
liability component.
86
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities, net and gross settled derivative financial instruments into relevant maturity groupings based on their remaining
period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows.
Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
CONSOLIDATED
ENTITY
Less
than
6 Months
6-12
months
30 June 2013
Between
1 & 2
years
Between
2 & 5
years
Total
contractual
cash flows
Carrying
amount
(asset)/
Liabilities
Less than
6 Months
6-12
months
31 December 2012
Between
1 & 2
years
Between
2 & 5
years
Total
contractual
cash flows
Carrying
amount
(asset)/
Liabilities
$
$
$
$
$
$
$
$
$
$
$
$
Non-Derivatives
Trade payables
Borrowings
Total non-
derivatives
Derivatives
Net settled ( Non
deliverable
forwards)
Gross settled
-(inflow)
-outflow
1,371,888
1,371,888 1,371,888
1,023,001
-
-
-
1,023,001
1,023,001
4,364,831 137,966 1,204,618
14,250
5,721,665 5,271,665
4,517,184
213,988
171,807
32,943
4,935,922
4,935,922
5,736,719 137,966 1,204,618
14,250
7,093,553 7,093,553
5,540,185
213,988
171,807
32,943
5,958,923
5,958,923
(14,568)
850,000
(864,568)
-
-
-
-
-
-
-
-
-
-
-
-
(14,568)
182,722
850,000
2,000,000
(864,568)
(1,817,278)
-
-
-
-
-
-
-
-
-
-
-
-
182,722
2,000,000
(1,817,278)
Total
Derivatives
182,722
Borrowings, includes the loan to the Commonwealth Bank (CBA), and is classified as an amount due within 6 months. This loan is drawn as a bank bill facility which has
various maturity dates during the period 1 July 2013 to 31 December 2013. Bank bills which expire during the period 1 July 2013 to 31 December 2013 will be rolled over
into a new loan with a revised maturity date within 6-12 months.
(14,568)
(14,568)
182,722
-
-
-
-
-
-
-
-
87
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
33. FINANCIAL RISK MANAGEMENT (CONT.)
Fair value measurements
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for
disclosure purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
(a)
(b)
(c)
quoted prices (unadjusted) in active markets for identical assets or liabilities ( level 1)
inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices) (level 2) ,and
inputs for the asset or liability that are not based on observable market data (unobservable
inputs) (level 3)
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30
June.
CONSOLIDATED ENTITY –
Level 1
Level 2
Level 3
Total
as at 30 June 2013
Liabilities
Derivatives
Total Liabilities
$
-
-
$
404,627
404,627
$
-
-
$
404,627
404,627
CONSOLIDATED ENTITY –
Level 1
Level 2
Level 3
Total
as at 31 December 2012
Assets
Derivatives
Total Assets
$
-
-
$
181,327
181,327
$
-
-
$
181,327
181,327
The fair value of financial instruments traded in active markets is based on quoted market prices at the
reporting date. The quoted market prices used for financial assets held by the Group is the current bid
price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market such as unlisted investments
and subsidiaries is determined using valuation techniques where applicable. Where this is unable to be
done they are held at cost.
The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques such as estimated discounted cash flows. The fair value of forward exchange contracts is
determined using forward exchange market rates at the reporting date. These instruments are included in
level 2 and comprise derivative financial instruments.
The carrying value of trade receivables and payables are assumed to approximate their fair values due to
their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to the
Group for similar financial instruments. The fair value of current borrowings approximates the carrying
amount, as the impact of discounting is not significant.
88
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
34. BUSINESS COMBINATION
On 15 January 2013 the parent entity acquired 100% of the issued share capital of Essential Oils of
Tasmania Ltd, a grower and producers of essential oils. The acquisition is a strategic move for the Group
further extending its supply chain to encompass an established manufacturer of essential oils that has the
technical knowledge to manufacture cosmeceutical products.
Details of the purchase consideration, the net assets acquired and gain on acquisition are as follows:
Purchase consideration:
Cash paid
Share based payment consideration (refer below)
Total purchase consideration
The asset and liabilities recognised as a result of the acquisition are as follows:
Cash
Trade receivables
Other current assets
Income tax receivable
Inventories
Biological assets
Land and buildings
Plant and equipment
Other non-current assets
Trade payables
Loans to directors
Borrowings
Deferred tax liability
Net identified assets acquired
Gain on acquisition
(i) Share based payment consideration
$
-
500,000
500,000
Fair value
$
142,221
351,450
30,150
70,124
922,588
430,801
5,980
368,712
24,429
(300,974)
(200,000)
(1,200,000)
(85,570)
559,911
59,911
Atlas acquired Essential Oils of Tasmania by way of issuing 10,000,000 fully paid ordinary shares
in Atlas. The fully paid ordinary shares in Atlas issued to the owners of Essential Oils of Tasmania
must be recorded at fair value. The share price of Atlas at the date of settlement being the 15th of
January 2013 was $0.05. The fair value of the 10,000,000 fully paid ordinary shares is $500,000.
(ii) Revenue and profit contribution
The acquired business contributed revenues of $503,076 and a net loss of ($533,446) to the group
for the period 1 January to 30 June 2013.
(iii) Information not disclosed as not yet available
The Group has reported a provisional gain on acquisition as part of the purchase of Essential Oils
of Tasmania Pty Ltd (see above) as the final assessment of the fair value of assets is yet to be
determined.
89
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2013
35. CHANGE IN ACCOUNTING POLICIES
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2013
unless disclosed in Note 1. The Group’s and the parent entity’s assessment of the impact of these new
standards and interpretations is set out below. The initial application of the following Standards and
Interpretations is not expected to have any material impact on the financial report of the consolidated entity
and the company.
AASB
Amendment
AASB 2012-6
(issued
September
2012)
Affected Standard(s)
Nature of Change to
Accounting Policy
Amendments to Australian
Accounting Standards -
Mandatory Effective Date of
AASB 9 and Transition
Disclosures
Defers the effective date of
AASB 9 to 1 January 2015
Application
Date of
Standard*
Application
Date for
Group
1 Jan 15
1 Jan 15
AASB 9
Financial Instruments
AASB 10
Consolidated Financial
Statements
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests in Other
Entities
AASB 13
Fair Value Measurement
Employee Benefits
AASB 119
(reissued
September
2011)
Changes to classification and
measurement requirements of
financial instruments.
Changes to classification and
measurement requirements of
entities requiring consolidation.
Changes to classification and
measurement requirements of
joint arrangements.
Introduces new disclosure
requirements for interest in
associates and joint
arrangements.
AASB 13 establishes a single
framework for measuring fair
value of financial and non
financial items recognised at
fair value in the statement of
financial position or disclosed
in notes in the financial
statements.
Changes to measurement of
defined benefit plans and
timing of recognition of
liabilities
1 Jan 15
1 Jan 15
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
1 Jan 13
Any other amendments are not applicable to the Group and therefore have no impact.
36. POST REPORTING DATE EVENTS
There are no events subsequent to the period ended 30 June 2013 which require disclosure.
37. ECONOMIC DEPENDENCY
All of the company’s pearls are purchased from its wholly owned subsidiary PT Cendana Indopearls.
90
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
DECLARATION BY DIRECTORS
The Directors of the Company declare that:
(a)
the financial statements comprising the statement of profit or loss and other comprehensive income,
statement of financial position, statement of cash flows, statement of changes in equity and
accompanying notes are in accordance with the Corporations Act 2001 and :
(i) give a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of the
performance for the period ended on that date; and
(ii) comply with Accounting Standards, and the Corporations Regulations 2001 and other mandatory
professional reporting requirements.
the Company has included in the notes to the financial statements an explicit and unreserved statement
of compliance with International Financial Reporting Standards.
the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A.
in the Directors opinion there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
the remuneration disclosures included on pages 8 to 18 of the Directors’ Report (as part of audited
remuneration report) for the period ended 30 June 2013 comply with section 300A of the Corporations
Act 2001.
(b)
(c)
(d)
(e)
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on
behalf of the Directors by:
S.P. Birkbeck
Chairman
Perth, Western Australia
25th September 2013
91
For personal use only
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ATLAS PEARLS AND PERFUMES LTD
Report on the Financial Report
We have audited the accompanying financial report of Atlas Pearls and Perfumes Ltd, which
comprises the consolidated statement of financial position as at 30 June 2013, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the six month period then ended, notes
comprising a summary of significant accounting policies and other explanatory information, and the
directors’ declaration of the consolidated entity comprising the company and the entities it
controlled at the period’s end or from time to time during the financial period.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the
company’s preparation of the financial report that gives a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Atlas Pearls and Perfumes Ltd, would be in the same terms
if given to the directors as at the time of this auditor’s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
92
For personal use only Opinion
In our opinion:
(a)
the financial report of Atlas Pearls and Perfumes Ltd is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June
2013 and of its performance for the six month period ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the six month period
ended 30 June 2013. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Atlas Pearls and Perfumes Ltd for the six month period
ended 30 June 2013 complies with section 300A of the Corporations Act 2001.
BDO Audit (WA) Pty Ltd
CHRIS BURTON
Director
Perth, Western Australia
Dated this 25th day of September 2013
93
For personal use only ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
ADDITIONAL INFORMATION - UNAUDITED
NORMALISED EBITDA
Profit/(Loss) for the period
Less: Net Forex Gains
Add: Net Interest
Add: Depreciation/Amortisation
Add: Income tax expense
Add: Other taxes
12 Months
Ending
12 Months
Ending
30 June 2013
30 Jun 2012
$
$
(944,694)
(918,122)
(2,058,701)
607,824
(519,086)
243,928
267,227
192,388
(3,293,213)
(499,788)
(70,015)
(21,051)
Add: Revaluation of Biological Assets and Inventory
5,906,702
1,416,159
Add: Other non-operating (income/expense)
404,179
122,972
Less: Gain on derivative
Normalised EBITDA
(32,177)
-
(363,078)
1,167,610
94
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
UNAUDITED NORMALISED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013
12 Months
Ending
12 Months
Ending
30 June 2013
30 Jun 2012
$
$
10,453,703
11,462,999
(4,223,494)
(4,964,695)
6,230,209
6,498,304
3,376,326
973,589
(148,860)
(598,500)
(5,930,665)
(4,980,006)
(359,517)
(302,343)
(7,405,399)
(3,008,954)
(4,237,906)
(1,417,910)
3,293,212
499,788
(944,694)
(918,122)
(303,133)
(378,713)
-
-
(303,133)
(378,713)
(1,247,827)
(1,296,835)
(944,694)
(918,122)
(1,247,827)
(1,296,835)
Revenue from continuing operations
Cost of goods sold
Gross profit
Other income
Marketing expenses
Administration expenses
Finance costs
Other expenses
Profit/(Loss) before income tax
Income tax (expense)/benefit
Profit/(Loss) for the period from continuing
operations
Other comprehensive income/(expenses)
Items that will be reclassified as profit or loss:
Exchange differences on translation of foreign
operations
Income tax on items that will be reclassified to profit
or loss
Other comprehensive income/(expenses) for the
period, net of tax
Total comprehensive income/(expenses) for the
period
Profit/(loss) is attributable to:
Owners of the Company
Total comprehensive income/(expenses) is
attributable to:
Owners of the Company
Overall operations :
Earnings per share for profit/(loss) from continuing operations attributable to the
ordinary equity holders of the Company
Basic earnings/(loss) per share (cents)
Diluted earnings per share (cents)
(0.38)
n/a
(0.56)
n/a
95
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
UNAUDITED NORMALISED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
30 June 2013
$
30 June 2012
$
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Biological assets
Total current assets
Non-current assets
Loans joint venture entities
Equity accounted for investments
Inventories
Biological assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Short-term provisions
Total current liabilities
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits/(accumulated losses)
Total equity
1,767,156
1,074,871
-
7,115,790
5,914,682
2,719,917
925,478
103,203
6,764,024
4,608,827
15,872,499
15,121,449
313,926
280,984
223,399
-
-
220,396
11,535,561
13,072,486
4,513,455
2,936,629
19,803,955
4,032,835
1,579,604
18,905,320
35,676,454
34,026,769
2,329,224
4,436,797
14,479
234,884
92,037
1,734,835
4,993,669
-
129,416
11,714
7,107,421
6,869,631
390,148
837,646
1,544,570
2,772,364
-
291,443
2,358,029
2,111,122
9,879,785
9,385,023
25,796,669
24,216,718
30,203,033
(7,284,974)
2,878,610
27,666,203
(6,981,841)
3,823,304
25,796,669
24,507,666
96
For personal use only
Consolidated
Attributable to owners of Atlas Pearls and Perfumes Limited
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
UNAUDITED NORMALISED STATEMENT OF CHANGES IN EQUITY
AS AT 30 JUNE 2013
Balance at 1 July 2012
Profit/(loss) for the period
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Dividends provided for or paid
Employee share scheme
Balance at 30 June 2013
Balance at 1 July 2011
Profit/(loss) for the period
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Dividends provided for or paid
Employee share scheme
Balance at 30 June 2012
Contributed equity
Share based
payment reserve
Foreign currency
translation reserve
Retained earnings/
(accumulated
losses)
Total equity
$
$
$
$
$
27,666,203
581,028
(7,562,869)
-
-
-
2,536,830
-
-
2,536,830
30,203,033
-
-
-
-
-
-
-
-
(303,133)
(303,133)
-
-
-
-
581,028
(7,866,003)
23,287,552
581,028
(7,184,156)
-
-
-
4,378,651
-
-
4,378,651
-
-
-
-
-
-
-
-
(378,713)
(378,713)
-
-
-
-
3,823,304
(944,694)
-
24,507,666
(944,694)
(303,133)
(944,694)
(1,247,827)
-
-
-
-
2,878,610
4,741,426
(918,122)
-
2,536,830
-
-
2,536,830
25,796,669
21,425,850
(918,122)
(378,713)
(918,122)
(1,296,835)
-
-
-
-
4,378,651
-
-
4,378,651
27,666,203
581,028
(7,562,869)
3,823,304
24,507,666
97
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
UNAUDITED NORMALISED STATEMENT OF CASHFLOW
AS AT 30 JUNE 2013
12 Months
Ending
30 June 2013
$
12 Months
Ending
30 June 2012
$
Cash flows from operating activities
Proceeds from pearl, jewellery and oyster sales
8,485,855
11,244,308
Proceeds from essential oil sales
Proceeds from other operating activities
Interest paid
Interest received
682,947
282,168
-
50,588
(300,472)
(237,209)
30,624
36,164
Payments to suppliers and employees
(11,598,895)
(12,855,095)
Income tax (paid)/received
Net cash provided by/(used in) operating activities
Cash flows from investing activities
2,186,701
(163,090)
(231,072)
(1,924,334)
Cash obtained on business combination
142,221
-
Payments for property, plant and equipment
(687,301)
(1,980,053)
Joint venture partnership contributions (paid)/received
Other loans
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
(286,109)
(89,105)
(920,294)
-
-
(1,980,053)
-
(6,371,712)
(2,337,833)
7,318,114
Proceeds from issue of shares
1,588,329
4,286,997
Share transaction costs
Proceeds from convertible notes
Net cash provided by/(used in) financing activities
(149,611)
1,100,000
200,885
-
-
5,233,399
Net increase/(decrease) in cash and cash equivalents
(950,481)
1,329,012
Cash and cash equivalents at the beginning of the
financial period
Effects of exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at the end of the financial
period
2,719,917
1,397,996
(2,280)
(7,091)
1,767,156
2,719,917
98
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Atlas Pearls and Perfumes Ltd (“Atlas” or “the Company”) is responsible for the
corporate governance of the Company and its subsidiaries and the Board has adopted a manual of corporate
governance policies and procedures based on control systems and accountability. The Board of the Company
review the Atlas' Corporate Governance Plan annually. The Corporate Governance Plan is available in the
corporate governance information section of the Company’s website at www.atlaspearlsandperfumes.com.au.
A summary of the Company’s corporate governance policies and procedures is included in this Statement.
The Company’s corporate governance policies and procedures are in line with the ASX Corporate
Governance Council’s Corporate Governance Principles and Recommendations (“the Principles &
Recommendations”). The Company has followed the Principles & Recommendations where the Board has
considered the recommendation to be an appropriate benchmark for its corporate governance practices.
Where, after due consideration by the Board, the Company’s corporate governance practices depart from the
Principles & Recommendations, the Board has fully disclosed the departure and the reason for the adoption
of its own practice, in compliance with the “if not, why not” exception reporting regime.
Further information about the Company’s corporate governance practices including the information on the
Company’s charters, code of conduct and other policies and procedures is set out on the Company’s website.
Board of Directors
Role of the Board and Management
The Board is responsible for promoting the success of the Company in a way which ensures that the interests
of shareholders and stakeholders are promoted and protected. The Board may delegate some powers and
functions to the Managing Director or CEO for the day-to-day management of the Company. Powers and
functions not delegated remain with the Board. The key responsibilities and functions of the Board include the
following:
appointment of the Managing Director/CEO and other senior executives and the determination of their
terms and conditions including remuneration and termination;
driving the strategic direction of the Company, ensuring appropriate resources are available to meet
objectives and monitoring management’s performance;
reviewing and ratifying systems of risk management and internal compliance and control, codes of
conduct and legal compliance;
approving and monitoring the progress of major capital expenditure, capital management and significant
acquisitions and divestitures;
approving and monitoring the budget and the adequacy and integrity of financial and other reporting;
approving the annual and half yearly accounts;
approving significant changes to the organisational structure;
approving the issue of any shares, options, equity instruments or other securities in the Company;
ensuring a high standard of corporate governance practice and regulatory compliance and promoting
ethical and responsible decision making;
recommending to shareholders the appointment of the external auditor as and when their appointment or
re-appointment is required to be approved by them; and
meeting with the external auditor, at their request, without management being present.
The Board’s role and the Company’s corporate governance practices are periodically reviewed and improved
as required.
The role of the senior management of the Company is to progress the strategic direction provided by the
Board. Senior management will be responsible for supporting the Board in implementing the running of the
general operations and financial business of the Company in accordance with the delegated authorities for
expenditure levels and materiality thresholds in place.
The Company has a Performance Evaluation policy which outlines the performance evaluation of the Board,
its Committees and its individual Directors. The Nomination Committee is responsible for evaluation of the
Board its Committees and its individual Directors, if required, on an annual basis.
99
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
No formal reviews of the Board, its Committees and its individual Directors were undertaken during the
financial year. Next financial year, a formal review of the role of the Board is proposed to be conducted to
assess the performance of the Board over the previous twelve (12) months and examine ways of assisting
the Board in performing its duties more effectively. The review may include:
comparing the performance of the Board with the requirements of its Charter;
examination of the Board’s interaction with management;
the nature of information provided to the Board by management; and
management’s performance in assisting the Board to meet its objectives.
A similar formal review will be conducted for each Committee, if relevant, by the Board with the aim of
assessing the performance of each Committee and identifying areas where improvements can be made.
Next financial year, a review may be conducted for each Director to assess performance of that Director and
to identify areas where improvements can be made.
The Board with assistance from the Remuneration Committee oversee the performance evaluation of the
executive team. This evaluation is based on specific criteria, including the performance of the Company,
whether strategic objectives are being achieved and the development of management and personnel.
Performance and remuneration reviews of the executive team were conducted during the financial year and
these reviews are undertaken at least annually. Senior executives are reviewed against a number of
qualitative and quantitative factors relevant to their role and position.
The Board Charter including matters reserved for the Board and senior management and the Performance
Evaluation Policy is available on the Company’s website.
Composition of the Board
The Company has adopted a policy on assessing the independence of Directors which is consistent with the
guidelines detailed in the ASX Principles & Recommendations and detailed in the Board Charter and is
attached as Annexure A to the Corporate Governance Plan. The materiality thresholds in this policy are
assessed on a case-by-case basis, taking into account the relevant Director’s specific circumstances, rather
than referring to a general materiality threshold.
The Board includes an executive Chairman/CEO, Mr. Stephen Birkbeck and three non-executive Directors,
Mr. Geoff Newman, Mr. Timothy Martin and Dr. Joseph Taylor. The Board considers Mr. Newman and Dr.
Taylor to be independent based on the criteria for independence included in the Company’s Policy on
Assessing the Independence of Directors and the ASX Principles & Recommendations. Mr. Birkbeck being
an executive of the Company and a substantial holder via his controlled entities is not considered to be
independent. Mr. Martin being a substantial holder via his controlled entities is not considered to be
independent. Therefore, the Company currently has two independent Directors and two Directors who are not
considered to be independent and does not have a majority of independent Directors.
The role of CEO/Managing Director and Chairman are both fulfilled by Mr. Birkbeck. Mr. Birkbeck brings
specific skills and industry experience relevant to the Company. Given the size of the Company and the size
of the Board, the Board considers that this appointment is appropriate.
Any changes to the composition of the Board will be determined by the Board, subject to the Company’s
Constitution, any applicable laws and the resolutions of Shareholders. The Board will seek to nominate
persons for appointment to the Board with the appropriate mix of skills and experience to ensure an effective
decision-making body and to ensure that the Board is comprised of Directors who contribute to the successful
management of the Company and discharge their duties having regard to the law and the highest standards
of corporate governance. The Board should comprise Directors with a mix of qualifications, experience and
expertise which will assist the Board in fulfilling its responsibilities, as well as assisting the Company in
achieving growth and delivering value to shareholders.
As required by the Constitution of Atlas, at the Company's annual general meeting in every year, one-third of
the Directors for the time being, or, if their number is not a multiple of 3, then the number nearest one-third,
shall retire from office, provided always that no Director (except the Managing Director) shall hold office for a
period in excess of 3 years, or until the third annual general meeting following his or her appointment,
whichever is the longer, without submitting himself or herself for re-election. Any Director (except the
100
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Managing Director) appointed by the Directors since the date of the last annual general meeting must also
stand for re-election at the next annual general meeting following their appointment. Prior to the Board
proposing re-election of non-executive Directors, their performance will be evaluated to ensure that they
continue to contribute effectively to the Board.
The Company’s policy for re-election of Directors and selection and appointment of new Directors is available
in the Board Charter and Nomination Committee Charter in the Corporate Governance Plan on the
Company’s website.
A profile of each Director containing their skills, experience and expertise is set out in the Directors’ Report.
Statement concerning availability of Independent Professional Advice
The Board considers that to assist Directors with independent judgement a Director may consider it
necessary to obtain independent professional advice to properly discharge the responsibility of their office as
a Director. Provided the Director first obtains approval for incurring such expense from the Chairman, the
Company will pay the reasonable expenses associated with obtaining such advice.
Nomination Committee
Given the present size of the Company, the whole Board acts as the Nomination Committee. The Board
believes no efficiencies or other benefits could be gained by establishing a separate Nomination Committee.
To assist the Board to fulfill its function as the Nomination Committee, the Board has adopted a Nomination
Committee Charter. The responsibilities of the Committee include the periodic review and consideration of the
structure and balance of the Board and the making of recommendations regarding appointments, retirements
and terms of office of Directors.
The Nomination Committee Charter is available on the Company’s website.
Remuneration Committee
The Board has established a Remuneration Committee which is comprised of Mr. Newman (Chairman of the
Committee and independent Non-executive Director), Dr. Taylor (independent Non-executive Director), Mr.
Timothy Martin (Non-executive Director) and Mr. Birkbeck (Chairman of the Board and CEO). Mr. Birkbeck, in
his capacity as CEO does not attend the Remuneration Committee Meetings that involve matters that pertain to
him. The Committee does not have a majority of independent Directors but is chaired by an independent
Director.
To assist the Committee to fulfill its function as the Remuneration Committee, the Board has adopted a
Remuneration Committee Charter. The Remuneration Committee Charter is available on the Company’s
website.
Remuneration of Directors and senior management is determined with regard to the performance of the
Company, the performance and skills and experience of the particular person and prevailing remuneration
expectations in the market. Details of remuneration of Directors and Key Management Personnel are
disclosed in the Remuneration Report.
The performance of the Managing Director/CEO and the executive team is reviewed annually by the
Remuneration Committee. The performances of the other staff are reviewed on an annual basis by the
Managing Director/CEO in consultation with the Remuneration Committee.
There are no termination or retirement benefits for non-executive Directors (other than for superannuation).
Executives are prohibited from entering into transactions or arrangements which limit the economic risk of
participating in unvested entitlements.
101
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Code of Conduct
The Company has adopted a Code of Conduct that outlines how the Company expects its Directors and
employees of the Company to behave and conduct business in the workplace on a range of issues. The
Company is committed to the highest level of integrity and ethical standards in all business practices.
The purpose of the Code of Conduct is to provide a framework for decisions and actions in relation to ethical
conduct in employment. It underpins the Company’s commitment to integrity and fair dealing in its business
affairs and to a duty of care to all employees, clients and stakeholders.
It sets out the Company’s expectations of its Directors and employees with respect to a range of issues
including personal and professional behaviour, conflicts of interest, public and media comment, use of
Company resources, security of information, intellectual property and copyright, discrimination and
harassment, corrupt conduct, occupational health and safety, fair dealing and insider trading.
A breach of the Code is subject to disciplinary action which may include punishment under legislation and/or
termination of employment. The Code of Conduct is available on the Company’s website.
Ethical Standards
The Board considers that the success of the Company will be enhanced by a strong ethical culture within the
Company. Accordingly, the Board is committed to the highest level of integrity and ethical standards in all
business practices. Employees must conduct themselves in a manner consistent with current community and
corporate standards and in compliance with all legislation.
Conflicts of Interest
In accordance with the Corporations Act 2001, Directors must keep the Board advised, on an ongoing basis,
of any interest that could potentially conflict with those of the Company. Where the Board believes that a
significant conflict exists, the Director concerned does not receive the relevant Board papers and is not
present at the meeting whilst the item is considered.
Guidelines for Trading in the Company’s Securities
The Trading Policy adopted by the Board prohibits trading in shares by a Director, officer or employee during
certain blackout periods (in particular, prior to release of the half yearly and annual financial results) except in
exceptional circumstances and subject to procedures set out in the Guidelines.
Outside of these blackout periods, a Director, officer or employee must first obtain clearance in accordance
with the Guidelines before trading in shares. For example:
A Director must receive clearance from the Managing Director/CEO or Chairman before he may buy or
sell shares.
If the Chairman wishes to buy or sell shares he must first obtain clearance from the Board.
Other officers and employees must receive clearance from the Managing Director/CEO or Chairman
before they may buy or sell shares.
Directors, officers and employees must observe their obligations under the Corporations Act 2001 not to buy
or sell shares if in possession of price sensitive non-public information and that they do not communicate
price sensitive non-public information to any person who is likely to buy or sell shares or communicate such
information to another party.
The Trading Policy is available on the Company’s website.
102
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Continuous Disclosure
The Company is a “disclosing entity” for the purposes of Part 1.2A of the Corporations Act 2001. As such, the
Company has a Continuous Disclosure Policy. The purpose of this Continuous Disclosure Policy is to ensure
the Company complies with continuous disclosure requirements arising from legislation and the Listing Rules
of the Australian Securities Exchange (“ASX”). The Policy sets out the procedure for:
protecting confidential information from unauthorised disclosure;
ensuring the Company achieves best practice in complying with its continuous disclosure obligations
identifying material price sensitive information and reporting it to the Company Secretary for review;
under legislation and the Listing Rules; and
ensuring the Company and individual officers do not contravene legislation or the Listing Rules.
The Company has obligations under the Corporations Act 2001 and ASX Listing Rules to keep the market
fully informed of information which may have a material effect on the price or value of the Company’s
securities and to correct any material mistake or misinformation in the market. Atlas discharges these
obligations by releasing information to the ASX in the form of an ASX release or disclosure in other relevant
documents (e.g. the Annual Report).
The Company recognises that the maintenance of confidentiality is also of paramount importance to the
Company both to protect its trade secrets and to prevent any false market for the Company’s shares from
developing.
All relevant information provided to ASX in compliance with the continuous disclosure requirements of
legislation and the Listing Rules is promptly posted on the Company’s web site.
The Continuous Disclosure Policy is available on the Company’s website.
Audit Committee
The Board has established an Audit Committee which is comprised of Mr. Newman (Chairman of the
Committee and independent Non-executive Director) and Dr. Taylor (independent Non-executive Director).
The Committee consists only of independent Non-executive Directors and is chaired by an independent chair,
who is not the chair of the Board. Mr. Newman, the Chairman of the Committee, has extensive financial
experience. Dr. Taylor has a good understanding of business and is financially literate.
The Committee only had two members during the financial year. The Board believes no efficiencies or other
benefits could be gained by establishing a larger Audit Committee.
To assist the Committee to fulfill its function as the Audit Committee, the Board has adopted an Audit
Committee Charter.
The Audit Committee provides recommendations in relation to the initial appointment of the external auditor
and the appointment of a new external auditor should a vacancy arise. Any appointment of a new external
auditor made by the Board must be ratified by shareholders at the next annual general meeting of the
Company.
Proposed external auditors must be able to demonstrate complete independence from the Company and an
ability to maintain independence through the engagement period. In addition, the successful candidate for
external auditor must have arrangements in place for the rotation of the lead audit engagement partner on a
regular basis. Other than these mandatory criteria, the Board may select an external auditor based on other
criteria relevant to the Company such as references, cost and any other matters deemed relevant by the
Board.
A formal Audit Committee Charter has been adopted, a copy of which is available on the Company’s website.
103
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Communication to Shareholders
The Company has a Shareholder Communications Strategy that promotes effective communication with
shareholders and encourages presentation of information to shareholders in a clear, concise and effective
manner. The Board aims to ensure that Shareholders are informed of all major developments affecting the
Company’s state of affairs. Information will be communicated to Shareholders through the annual report, half
yearly report, disclosures and announcements made to the ASX, the annual general meeting and general
meetings and through the Company’s website.
The Company considers general meetings to be an effective means to communicate with shareholders and
encourages shareholders to attend the meeting. Information included in the notice of meeting sent to
shareholders will be presented in a clear, concise and effective manner.
The Shareholder Communications Strategy is available on the Company’s website.
Risk Management
The Board determines the Company’s “risk profile” and is responsible for overseeing and approving risk
management strategy and policies, internal compliance and internal control.
The Board delegates to the Managing Director/CEO responsibility for implementing the risk management
system who will submit particular matters to the Board for its approval or review. The Chairman and
Managing Director/CEO are required to report on the management of risk as a standing agenda item at each
Board meeting. This involves the tabling of a risk register which is monitored and updated by management
periodically.
The responsibility for undertaking and assessing risk management and internal control effectiveness is
delegated to management. Management is required to assess risk management and associated internal
compliance and control procedures and regularly report back to the Board.
The Board will regularly review assessments of the effectiveness of risk management and internal compliance
and control. The Board also receives an assurance from management that the Company’s management of
its material business risks is effective.
The Company’s Risk Management Policy is available on the Company’s website.
Integrity of Financial Reporting
The Board has received assurance in writing from Mr. Birkbeck, Executive Chairman and CEO and Mr.
Stephen Gleeson, Chief Financial Officer, in accordance with section 295A of the Corporations Act 2001 that:
the consolidated financial statements of the Company and its controlled entities for the financial year
present a true and fair view, in all material aspects, of the Company’s financial condition and operational
results and are in accordance with accounting standards;
the above statement is founded on a sound system of risk management and internal compliance and
control which implements the policies adopted by the Board; and
the Company’s risk management and internal compliance and control framework is operating efficiently
and effectively in all material respects.
Diversity Policy
The Company recognises the benefits arising from employee and Board diversity, including a broader pool of
high quality employees, improving employee retention, accessing different perspectives and ideas and
benefiting from all available talent. Given the present size of the Company, the Board has not adopted a
Diversity Policy. The Board believes no efficiencies or other benefits could be gained by establishing a formal
Diversity Policy. The Board will consider the adoption of a formal Diversity Policy if deemed appropriate in
future.
104
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Given the size of the Company, no measurable diversity objectives or strategies have been set however the
current proportion of women employees in the Company, in senior executive positions and on the Board is
included below.
Board
Senior Management
Staff
Male
100.0%
83.4%
60.0%
Female
-
16.6%
40.0%
ASX LISTING RULE DISCLOSURE – EXCEPTION REPORTING
As required by ASX Listing Rules, the following table discloses the extent to which Atlas has not followed the
best practice recommendations set by the ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations.
Principle
No.
Best Practice
Recommendation
Compliance
Reasons for Non-compliance
2.1
2.2
2.3
2.4
2.5
A majority of the Board
should be independent
directors.
Currently, Atlas
has two
independent
and two non-
independent
Directors.
The Board considers that the current composition of the
Board is appropriate in the context of the size of the Board
and the Company and the scope and scale of the
Company’s operations. Further, the Company considers that
each of the non-independent Directors possess skills and
experience suitable for building the Company. The Board
may consider the appointment of independent Directors if
deemed appropriate in future.
The Chair should be
an independent
Director.
Currently, Atlas
has a non-
independent
Chair.
The role of Chair and
CEO should not be
exercised by the same
individual.
The Board should
establish a nomination
committee.
Companies should
disclose the process
for evaluating the
performance of the
Board, its committee
and individual
Directors.
Currently,
Atlas' Chair
also fulfils the
role of
Managing
Director/CEO.
The Board has
not established
a nomination
committee.
The role of the
nomination
committee is
carried out by
the full Board.
The Board did
not undertake a
formal process
for the
evaluation of
the board,
individual
Directors or
committees
during the
financial year.
The Board considers that the non-independent Chair
possesses skills and experience suitable for leading the
Board and considers a non-independent Chair to be
appropriate in the context of the Company’s operations. Mr.
Birkbeck brings specific skills and industry experience
relevant to the Company. The Board may consider the
appointment of an independent Director as the Chair if
deemed appropriate in future.
The Board considers Mr. Birkbeck brings specific skills and
industry experience relevant to the Company and considers
a Chair/CEO to be appropriate in the context of the
Company’s operations and the size of the Board and the
Company. The Board may consider splitting the role of
Chairman and CEO/Managing Director if deemed
appropriate in future.
Given the present size of the Company and the Board, the
whole Board acts as a nomination committee. The Board
believes no efficiencies or other benefits could be gained by
establishing a separate Nomination Committee. However, it
is noted the Board has adopted a Nomination Committee
Charter.
The Board plans to undertake a formal process process for
evaluating the performance of the Board, its committees and
individual Directors in the coming financial year.
105
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
CORPORATE GOVERNANCE STATEMENT
Principle
No.
Best Practice
Recommendation
Compliance
Reasons for Non-compliance
The Board has
not adopted a
formal diversity
policy.
Given the size
of the
Company, no
measurable
objectives for
achieving
gender
diversity have
been set.
The Audit
Committee
currently only
has two
members.
Given the present size of the Company, the Board has not
adopted a Diversity Policy. The Board believes no
efficiencies or other benefits could be gained by establishing
a formal Diversity Policy. The Board will consider the
adoption of a formal Diversity Policy if deemed appropriate in
future given the size of the Company, the Board, the
workforce and the activities of the Company. It is noted that
the Company recognises the benefits arising from employee
and Board diversity, including a broader pool of high quality
employees, improving employee retention, accessing
different perspectives and ideas and benefiting from all
available talent.
Whilst no measurable objectives have been set for achieving
gender diversity, the Company has disclosed in this Annual
Report the proportion of women employees in the Company,
in senior executive positions and on the Board. The Board
will consider the setting of measurable objectives for
achieving gender diversity as the size of the Company,
Board, workforce and the activity of the Company increase.
The Board believes that given the Board and the Company’s
size, no efficiencies or other benefits could be gained by
establishing a larger Audit Committee. It is noted that the
members of the Audit Committee possess the relevant
experience and financial literacy appropriate for their position
as a member of the Audit Committee.
3.2
3.3
4.2
Companies should
establish a diversity
policy and include
measurable objectives
for achieving gender
diversity for the Board
to assess annually
both the objectives and
progress in achieving
them.
Companies should
disclose achievement
of measurable
objectives for gender
diversity.
The Audit Committee
should be structured
so that it consists only
of non-executive
directors, consists of a
majority of
independent directors,
is chaired by an
independent chair,
who is not the chair of
the board and has at
least three members.
106
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
ADDITIONAL ASX INFORMATION
The following additional information is required by the Australian Securities Exchange. The
information is current as at 20 September 2013.
(a) Distribution schedule and number of holders of equity securities as at 20 September 2013
Fully Paid
Ordinary Shares
(ATP)
Unlisted Options
– 5c 29/1/14
Convertible Notes
1 –
1,000
1,001 –
5,000
5,001 –
10,000
10,001 –
100,000
100,001 –
and over
Total
125
446
339
940
336
2,186
58
-
144
-
96
-
192
1
41
3
531
4
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 20
September 2013 is 764.
(b) 20 Largest holders of quoted equity securities as at 20 September 2013
The names of the twenty largest holders of fully paid ordinary shares (ASX code: ATP) as at 20
September 2013 are:
Rank Name
Shares
% of Total
Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
RAINTREE PEARLS & PERFUMES PTY LTD
19,883,997
6.93
CHEMCO SUPERANNUATION FUND PTY LTD
19,200,000
6.69
SP & K BIRKBECK HOLDINGS PTY LTD
16,225,030
5.65
JINGIE INVESTMENTS PTY LTD
12,771,600
4.45
WARMAN (NOMINEES) PTY LIMITED
11,920,546
4.15
ABERMAC PTY LTD
QUIET VOICE LIMITED
FARJOY PTY LTD
MR CHRIS CARR + MRS BETSY CARR
FIVE TALENTS LIMITED
10,833,333
8,000,000
7,099,412
5,000,000
4,220,000
3.77
2.79
2.47
1.74
1.47
COAKLEY PASTORAL CO PTY LTD
4,000,000
1.39
FORSYTH BARR CUSTODIANS LTD
3,974,255
1.38
BYRON BAY CELEBRANT PTY LTD
3,970,589
1.38
107
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
ADDITIONAL ASX INFORMATION
Rank Name
14
15
16
17
18
19
20
DORRAN PTY LTD
QUEENSRIDGE INVESTMENTS PTY LTD
MR PAUL FRANCIS MURRAY
MR TIMOTHY JAMES MARTIN
NEJEKA PTY LTD
MS JENNIFER MICHELLE ROUGHAN
FITZPATRICK (WA) PTY LTD
TOTAL
Shares
% of Total
Shares
3,000,000
1.05
3,000,000
1.05
2,620,000
2,400,000
2,400,000
2,400,000
2,175,000
0.91
0.84
0.84
0.84
0.76
145,093,762
50.55
Stock Exchange Listing – Listing has been granted for 287,038,778 ordinary fully paid shares of the
Company on issue on the Australian Securities Exchange.
The unquoted securities on issue as at 20 September 2013 are detailed below in part (d).
(c)
Substantial shareholders
Substantial shareholders in Atlas Pearls and Perfumes Limited and the number of equity securities
over which the substantial shareholder has a relevant interest as disclosed in substantial holding
notices provided to the Company are listed below:
Name
W. G. MARTIN & ASSOCIATES **
Shares
31,971,600
RAINTREE PEARLS & PERFUMES PTY LTD & ASSOCIATES *
30,090,855
T. J. MARTIN & ASSOCIATES ***
16,628,145
*
**
***
Includes shares held by Raintree Pearls & Perfumes Pty Ltd and SP & K Birkbeck Holdings Pty
Ltd .
Includes shares held by Chemco Superannuation Fund Pty Ld
and Jingie Investments Pty Ltd.
Includes shares held by Timothy James Martin and Jingie Investments Pty Ltd.
108
For personal use only
ATLAS PEARLS AND PERFUMES LTD AND ITS SUBSIDIARIES
ADDITIONAL ASX INFORMATION
(d) Unquoted Securities
The number of unquoted securities on issue as at 20 September 2013:
Security
Number on
issue
Unlisted options exercisable at 5 cents, on or before 29 January 2014.
32,582,005
Convertible notes.
1,100,000
(e) Names of persons holding more than 20% of a given class of unquoted securities as at 20
September 2013
Security
Holder Name
Convertible notes
Chemco Superannuation Fund Pty Ltd
Number of
Securities
% Held
500,000
45.4%
Convertible notes
Abermac Pty Ltd
350,000
32.0%
(f) Restricted Securities as at 20 September 2013
There were no restricted securities on issue as at 20 September 2013.
(g) Voting Rights
All fully paid ordinary shares carry one vote per ordinary share without restriction.
Unquoted options and convertible notes have no voting rights.
(h) Company Secretary
The Joint Company Secretaries are Mr Stephen Gleeson and Ms Susan Hunter.
(i) Registered Office
The Company’s Registered Office is 47 - 49 Bay View Terrace, Claremont, Western Australia 6010.
Telephone: +61 8 9284 4249
Facsimile: +61 8 9284 3031
(j) Share Registry
The Company’s Share Registry is Computershare Investor Services Pty Ltd of Level 2, 45 St Georges
Terrace, Perth WA 6000.
Telephone: 1300 557 010 (from within Australia); +61 3 9415 4000 (from outside Australia).
(k) On-Market Buy-back
The Company is not currently performing an on-market buy-back.
109
For personal use only