A T L A S P E A R L S L T D - A S X A T P - A N N U A L R E P O R T • 2 0 1 8
For personal use only Like each pearl, every woman is unique!
FIND THE
ONE...
AS UNIQUE
AS HER.
For personal use only A M E S S A G E F R O M
THE MANAGING DIRECTOR
2 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only A M E S S A G E F R O M
THE MANAGING DIRECTOR
Better Together
It has been almost three years since we embarked on the ambitious journey of turning our business
around through further improvements in pearl quality and increased production volumes to
ensure Atlas’ relevance as a significant supplier to the market with sustained profitability. The main
challenge this year has been to look after a large number of oysters whilst harvesting smaller pearls
than expected.
Revenue dropped from $16.3M last year to $14.2M this year with a similar number of pearls harvested
and sold. Market conditions and foreign exchange have been stable or favourable throughout the
year, but harvested pearl size decreased significantly over the financial year. A thorough operational
review performed in April and May established that a 6 month long adverse environmental condition
at the time of seeding in 2015/16 affected host oysters across the Indonesian Archipelago as well
as the Philippines and to a lesser extent Myanmar. This was further confirmed by the early harvest
of a representative sample of oysters seeded over the past 18 months to better gauge harvests to
come. The outcome of the exercise was positive and confirmed that both pearl growth and oyster
condition have normalised and so should harvests going forward.
Management and staff reacted positively early on to the challenges from smaller pearl sizes to
contain and reduce cost where and when possible without impairing the company’s ability to grow.
Clients helped and agreed to secure their purchase position via trade loans granted to protect their
pearl supply, hence providing bridge funding to manage the transition until oysters seeded last year
and this year are harvested.
Gross Profit dropped from $7.4M to $5.3M. Whilst administration, finance and marketing costs were
reduced by almost $1M, operations delivered a loss before tax of $1.9M against a profit before tax
of $800K last year.
This year’s financial outcome is disappointing but there are various reasons to look forward to a
brighter future thanks to positive achievements delivered by the Atlas team this year:
• A 15% increase in oysters seeded compared to last year,
• A sustained improvement in oyster survival rate at spat and juveniles’ stages,
• A further improved post-seeding nuclei retention rate,
• A progressive consolidation of all our CSR initiatives,
• A solid demand and firming up of prices for Atlas Pearls,
• A positive trend towards a more collaborative supply chain.
The sum of all is making Atlas Pearls a more robust business proposition, a strong learning organisation
and better prepared to react to unavoidable market and environmental fluctuations. Pearling is a
collaborative industry by essence and Atlas Pearls was founded in 1993 around the principle of
sustainability. We would like to share with you how the people of Atlas Pearls, shareholders and
stakeholders alike are doing their part to bring nature’s gift from our hands to your hearts.
Once again, thank you to all.
Pierre Fallourd
Managing Director
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 3
For personal use only “Give a man a fish and you feed him for a day.
Teach a man to fish and you feed him for a lifetime”
For personal use only For personal use only Transfer of Knowledge
PEOPLE
With a 25-year history in pearling, Atlas Pearls is a global leader in eco-
pearling & one of the top producers of the highly sought after silver & white
South Sea pearls, commonly known as the queen of all gems.
The Company operates five farms dotted throughout the
nutrient-rich waters of the Indonesian Archipelago from the
famous Island of Bali through to the intriguing West Papua.
The people behind the pearls and the environment where
they grow are integral and critical to their story and heritage.
Each Atlas pearl is made of thousands of concentric layers
of aragonite crystal deposited around a spherical nucleus
carefully inserted into a host mother of pearl oyster by a skilled
and inspired master grafter.
Over the years, Atlas Pearls has managed to build a strong
culture around a set of cohesive and stimulating values such
as Respect & Integrity, Care & Understanding, Community, &
Teamwork, Passion & Commitment, Intuition & Initiatives.
The pearling cycle is four years long and labour intensive.
Each oyster is manipulated more than 500 times over the
course of its productive life. It is crucial to continue to fuel the
passion of the people behind the pearls and empower them.
Continuous on-the-job training, regular talent promotion,
stimulating career paths and gender equality are cornerstone
to achieving our goal as an organisation.
6 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only For personal use only Environmentally Responsible
PLANET
“It is the story of nature, passionate men and women working
together harmoniously that will give each gem its unique
lustre and orient, the inner glow or beauty from within. There
is no shortcut in the careful process of giving birth to quality
South Sea Pearls. Modern technology sometimes helps
through the process but producing good quality pearls takes
time for a sufficient number of layers of aragonite crystals
to build and properly refract light, ensuring lustre is long-
lasting”, said Mark Longhurst, a passionate veteran Australian
Pearler, now based in Indonesia and Chief Operating Officer
of Atlas Pearls.
Over the years, the Company experienced the same challenges
the whole pearl industry went through with various
successive global economic crises, fast pace environmental
changes and ever accelerating fashion cycles, but the passion
for the core business remains. Atlas Pearls production grew
steadily in volume and quality from a promising 50,000
pearls in 2000 to an estimated 500,000 pearls 20 years later.
The Company supplies quality South Sea pearls primarily to
selected prominent pearl trading companies but also caters
to leading global retailers and fashion houses.
Beyond the numbers, it is important to note that modern
pearling became non-extractive with the perfection of
hatchery technology. Pearlers can now select spawners and
breed oysters to suit specific attributes without affecting
natural resources. Pinctada maxima, mother of pearl oysters,
feed on microorganisms or plankton born of photosynthesis
in the ocean.
Those same filter feeders also retain polluting agents such
as heavy metals and cyanides within their gills and in doing
so restore balance within the environment they grow in. Our
oysters are held in nets hanging on underwater long lines
which constitute both substrate and shelter for life to flourish.
Juvenile fish and bivalves, soft fouling and crawling animals
are thriving on those structures which act as artificial reefs
in addition to their primary duty to secure pearl bearers and
provide easy access for maintenance.
Last but not least, a significant portion of sub-tropical reef areas
have been threatened by human predation. Destructive and
illegal fishing practices using dynamite or cyanide have lead
to long term damage. Pearling requires an environment free
of harm, making pearl farms natural sanctuaries. Fish catches
within or at the fringe of pearl farms are often multiplied
several fold when compared to non-protected areas.
8 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only For personal use only Transfer of Wealth
PEARLS
“We have developed over the years, the ability to extend the
life of our pearls beyond the farm and ensure that through
the skills and talent of our clients they continue to radiate for
many years and adorn women with discerning taste around
the world” said Tim Jones, Atlas Pearls Distribution Manager.
The emerging collaborative economic global trend is calling
for a better alignment and improved communication among
the key players along the pearling and luxury value chain. The
customers of tomorrow are calling for more transparency and
direct access “behind the scenes”. Three of Atlas’ Pearl farms
-Bali, Flores and West Papua- are open to the public and offer
an immersive experience, as well as a variety of fine and
fashion pearl jewellery. Atlas Pearls is the only active pearling
company listed on the Australian Stock Exchange, which
gives everyone a chance to own a piece of the dream as well.
Another example of active collaboration within the industry
is the acknowledgment of the need for more and better
education on pearls, both at consumer and trade level, but also
from government authorities who support the industry in their
respective countries. Pearling is not getting any easier with time
and one should not regard those pearls as commodities, but as
a very valuable little miracle of nature. Atlas Pearls is committed
to disseminate the good word and help its customers make
the right choice when it comes to pearls.
“Modern luxury customers tend to privilege experience over
products. We feel very fortunate to live the life we live and get
the opportunity to share it with others. Producing pearls is
such a diverse, challenging and exciting experience that we do
not have to make anything up to sell the story, everything is
true” said Pierre Fallourd, Managing Director. “It has been quite
a journey since the founders’ set-up operations in Kupang in
1993: Atlas Pearls roughly doubled in size every five years,
managing economic downturns and shifts in supply and
demand thanks to our People and Nature’s goodwill. Believe
me, there is never a dull day when you choose pearling!”
Making the most of our available resources constitute
the path towards sustainability which in turn allows Atlas
Pearls to provide jobs to over 900 people on a permanent,
contractual and casual basis. Pearling also offers stable and
direct employment to local communities in remote areas
where there are little alternatives as a result of isolation. Those
benefits extend to a variety of joint building, supply, repair
and even oyster grow-out activities.
10 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only For personal use only For personal use only A L E T T E R F R O M
THE CHAIRMAN
Dear Shareholder
2017/18 was a mixed year for Atlas Pearls marked by some key achievements in operating performance being over-
shadowed by disappointing harvest outcomes towards the end of the second half of the financial year.
Smaller pearl sizes in the first half of the financial year were largely forecasted, however, expectations that profitability would
improve in the second half of the financial year were not met. Over the past couple of years Atlas Pearls has initiated hatchery
reforms with the Company’s focus to improve survival rates and increase pearl sizes. Unfortunately due to adverse weather
and food supply affecting the 15/16 seeded oysters, harvested pearls were smaller than anticipated. These conditions were
not unique to Atlas Pearls and appeared to affect growers in Indonesia, Philippines and Myanmar.
Despite this specific challenge, some important positives have emerged during 17/18 including:
•
•
•
Confirmation of improved survival rates which will ultimately result in fewer resources being employed to produce the
same number of pearls.
A substantial lift in seeded pearls numbers which will lead to higher sales revenue and a larger, more robust business.
Firming pearl prices particularly in the latter part of the year.
These challenging circumstances have also cemented an acknowledgment and acceptance across the entire organisation
of the need to target and achieve unit production costs that will ensure company profitability over the most difficult of
operating and market conditions.
With sampled results and preliminary harvesting for 2018/19 seeming to confirm that the latter part 2017/18 results were
a “one-off”, the cost focus and operational improvements achieved in this year position the Company well for improved
profitability next year.
Atlas Pearls’ 50% joint venture Essential Oils of Tasmania (“EOT”) made progress in growing sales and expanding the range of
services and products offered domestically and internationally. On a positive note, EOT returned a profit of $78k, a promising
result in light of the strengthening demand for Tasmanian products. The Board and Senior Management continue to explore
a number of prospective paths forward for EOT in the medicinal cannabis industry to capitalise on the Company’s undoubted
extraction expertise and production capabilities.
On the capital structure front, the Company secured a $3.5M debt facility in FY2017 from its major shareholder to replace
the prior existing bank debt facility. The loan was approved at the 2017 AGM and is repayable in a number of installments
through to June 2020. At 30 June 2018 the balance of the shareholder loan is $3.25M. Atlas Pearls was also successful in
the traditional bank lending market securing an increase in the existing overdraft facility to $1.5M (30 June 2017: $1.0M) to
accommodate the historically slower cash flows in the first part of the year.
In addition to the shareholder loan and the overdraft facility, Atlas Pearls successfully collaborated with trade partners to
secure short term trade loans that support harvest schedules.
Although Atlas Pearls has received an unqualified audit report, I would like to draw shareholders attention to the Going
Concern section of the Annual Report on page 36 and the emphasis of matter paragraph in the Auditors report on page 74.
In conclusion, while the financial performance in 2017/18 was undoubtedly disappointing, key operational improvements
were achieved in the Company which will support future profitability.
Geoff Newman
Chairman
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 13
For personal use only CORPORATE DIRECTORY
DIRECTORS
AUDITORS
Geoff NEWMAN
B.Ec (Hons), M.B.A, F.C.P.A, F.A.I.C.D.
Timothy MARTIN
B.Arts, M.B.A, G.A.I.C.D.
Pierre FALLOURD
M.B.A, G.A.I.C.D.
Cadell BUSS
M.B.A, M.P.M, G.A.I.C.D.
BDO Audit (WA) Pty Ltd
38 Station Street
Perth
Western Australia 6008
TAX ADVISERS
RSM Bird Cameron
8 St Georges Terrace
Perth
Western Australia 6008
COMPANY SECRETARY
BANKERS
Susan HUNTER
B.Com, ACA, F Fin, G.A.I.C.D, AGIA
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
WEBSITE www.AtlasPearls.com.au
E-MAIL Atlas@Atlaspearls.com.au
National Australia Bank
100 St Georges Terrace
Perth
Western Australia 6000
SHARE REGISTRY
Computershare (WA) Pty Ltd
Level 11, 172 St George’s Terrace
Perth
Western Australia 6000
HOME EXCHANGE
Australian Securities Exchange Ltd
Exchange Plaza
2 The Esplanade
Perth
Western Australia 6000
ASX TRADING CODE ATP
14 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only SUMMARY OF FISCAL INDICATORS 2017/18
Revenue from continuing operations
30 June 18
$’000
30 June 17
$’000
14,211
16,355
Normalised earnings before interest, tax, depreciation and amortisation (Normalised EBITDA)
(561)
1,016
EBITDA margin
Depreciation and amortisation
Foreign exchange gains/(losses)
Revaluation and write-off of agriculture assets (oysters and pearls) gains/(losses)
Other non-operating benefits/(costs)
Derivative instruments gains/(losses)
Earnings/(loss) before interest and tax (EBIT)
EBIT margin
Interest net income/(costs)
Tax benefit/(expense)
Net profit/(loss) after tax (NPAT)
Basic earnings/(loss) per share (cents)
Net tangible assets (NTA)
Assets
Debt (current & non-current)
Shareholder funds
Debt/shareholder funds (%)
Number of shares on issue (million)
(3.95%)
6.21%
(256)
(149)
(612)
-
(150)
(1,728)
(12%)
(256)
(50)
(2,034)
(0.48)
(470)
598
(206)
(286)
410
1,062
6.5%
(257)
96
901
0.21
23,899
26,443
31,710
34,178
4,060
3,529
23,899
26,443
17%
427.9
13%
427.9
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 15
For personal use only
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity consisting of Atlas Pearls Ltd and the entities it controlled at the end of,
or during, the period ended 30 June 2018. Referred to hereafter as, the Company or Atlas Pearls.
1. Directors
The following persons were Directors of Atlas Pearls during all or part of the financial period and up to the date of this report except
where stated:
GEOFF NEWMAN, B. Ec (Hons), M.B.A, F.C.P.A ,F.A.I.C.D.
INDEPENDENT NON-EXECUTIVE CHAIRMAN
Mr. Newman has over 27 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/Chief Financial Officer and Company Secretary of both Coogee Chemicals
and its oil and gas subsidiary Coogee Resources Pty Ltd before he retired from the Coogee Group at the end of June 2006.
Appointed Chairman on 16 February 2015
Director since 15 October 2010
Directorships of other listed companies held in the last three years: Nil
TIMOTHY MARTIN, BA, M.B.A, G.A.I.C.D.
NON-EXECUTIVE DIRECTOR
Mr. Martin has been an Executive Manager at Coogee Chemicals Pty Ltd since 2005, held the position of Managing Director from 2012 – 2015
and was appointed Executive Chairman in July 2015.
Prior to working at Coogee, Mr. Martin worked in management roles within the packaged food manufacturing sector supplying to
national supermarket chains, and has ongoing interests in commercial property development.
Appointed Director on 4 February 2013.
Directorships of other listed companies held in the last three years: Nil
PIERRE FALLOURD, M.B.A, G.A.I.C.D
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
Mr. Fallourd has over 20 years’ experience in pearling and is highly recognised in the pearl and jewellery industry for his role in developing
and marketing golden pearls globally. He is a specialist in managing the pearl value chain and maximising the use and value of each pearl
harvested. Pierre is fundamental to Atlas’ cradle to cradle strategy of extracting and maximising all aspects of the pearl and its by-products.
Mr. Fallourd joined the Company in March 2013 as Vice President of Pearling and has been Chief Executive Officer of Atlas since November 2014.
Appointed Managing Director 4 January 2016
Directorships of other listed companies held in the last three years: Nil
CADELL BUSS, MBA, MPM, G.A.I.C.D.
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Buss has extensive experience in marketing, communications and advertising spanning 20 years in the industries of Fast Moving
Consumer Goods, Sports Administration and Local Government. His career commenced in sales, progressing into senior leadership
engagements at leading commercial enterprises, including Fosters Group Limited, Guinness International and DJ Carmichael Pty Ltd.
Appointed Director on 1 February 2018.
Directorships of other listed companies held in the last three years: Nil
16 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only DIRECTORS’ REPORT
2. Company Secretary
The role of Company Secretary for the financial year was shared by Ms. Susan Hunter and Mr. Trevor Harris, until Mr. Harris resigned 29 January
2018.
SUSAN HUNTER, BCom, ACA, F Fin, G.A.I.C.D, AGIA
Ms. Hunter has 21 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 the Corporate Finance divisions and at Bankwest in the 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
Governance Institute of Australia.
Appointed 19 December 2012.
TREVOR HARRIS, BCom, CPA, GDip Comp Law_ACG, AGIA
Mr. Harris joined Atlas on 31 August 2015 as Chief Financial Officer and was appointed joint Company Secretary 4 January 2016. Mr. Harris
has over 20 years’ experience in financial management in a wide variety of industry sectors. As well as being a qualified CPA accountant, he
holds a postgraduate qualification in Commercial Law and is a Chartered Company Secretary. Mr. Harris has filled multi-disciplinary roles with
companies such as Alcyone Resources Ltd, Shield Mining Ltd, Sphere Minerals Limited, BGC Australia and Toll Holdings.
Appointed 4 January 2016.
Resigned 29 January 2018.
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
Meetings
Held Whilst
in Office
Attended
G. Newman
01/07/17-30/06/18
T. Martin
P. Fallourd
C. Buss
01/07/17-30/06/18
01/07/17-30/06/18
01/02/18- 30/06/18
6
6
6
3
6
6
6
3
4. Principal Activities and Review of Operations
4.1.
PRINCIPAL ACTIVITIES
Atlas Pearls is a Company that produces South Sea Pearls, with farming operations throughout Indonesia and retail stores in Perth and
Bali. The Company has a 50% joint venture in Essential Oils of Tasmania, a Company providing essential oils, pearl shell by-products and
perfumes to local and international markets.
4.2.
REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
4.2.1. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 17
For personal use only DIRECTORS’ REPORT
4.2.2. SHAREHOLDER RETURNS
Net profit/(loss) after tax
Basic EPS (cents)
Dividends paid
Dividends (per share) (cents)
30 June 2018
$’000
30 June 2017
$’000
30 June 2016
$’000
(2,034)
(0.48)
Nil
Nil
901
0.21
Nil
Nil
968
0.23
Nil
Nil
The adjustments from NPAT to arrive at reported Normalised EBITDA for these periods are shown below:
Net profit/(loss) after tax
Tax (benefit)/expense
Interest net costs
Depreciation & amortisation
Foreign exchange (gain)/loss
Agriculture standard revaluation (gain)/loss
Other non-operating (income)/expense
Derivative instrument (gain)/loss
Impairment of JV loan
Normalised EBITDA
4.2.3. FINANCIAL POSITION
Total Assets
Debt (Current & Non-current)
Other Liabilities
Shareholder funds / Net Assets
Debt / Shareholder funds
Number of shares on issue (million)
Net tangible assets per share (cents)
Share price at reporting date (cents)
30 June 2018
$’000
(2,034)
50
256
256
149
612
-
150
-
(561)
30 June 2017
$’000
30 June 2016
$’000
901
(96)
257
470
(598)
206
286
(410)
-
1,016
968
1,819
288
399
750
(1,827)
281
268
816
3,762
30 June 2018
$’000
30 June 2017
$’000
30 June 2016
$’000
31,710
(4,060)
(3,750)
23,899
17%
427.9
5.6
2.4
34,178
(3,529)
(4,207)
26,443
13%
427.9
6.2
2.6
34,808
(4,225)
(4,759)
25,825
16%
425.4
6.1
3.2
There has been a decrease in the net assets of the Group of $2.5M in the year ended 30 June 2018 (30 June 2017: $0.6M increase).
4.2.4. OPERATING RESULTS
Atlas Pearls recorded a net loss after tax for the period ended 30 June 2018 of $2.0M, a decrease of $2.9M (30 June 2017: profit $0.9M).
The operating revenue for the year ended 30 June 2018 was $14.2M, a decrease of $2.2M (30 June 2017: $16.4M). Market conditions
remained stable but harvested pearl size decreased significantly due to adverse environmental conditions.
Management and staff reacted effectively to the challenges of the smaller pearls, reducing operating expenses without impairing
the Company’s ability to protect pearl supply. Administration, finance and marketing expenses for the year ended 30 June 2018 were
$6.3M a decrease of $0.8M (30 June 2017: $7.1M).
Additionally, the Company embarked on a more collaborative supply chain with the assistance of clients and secured short term trade
loans to manage the transition between seeding and harvest. Refer to note 18.4 for further details on current financing arrangements.
18 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
DIRECTORS’ REPORT
4.2.5. REVIEW OF OPERATIONS
4.2.5.1.
PEARLING
Further improvements of operational processes have been at the forefront of 17/18 Management efforts.
The Hatchery Team extended its attention from larvae management to the nursery with the objective to improve oyster survival
on transfer to the sea and ensure stronger animals that deliver better pearls. Both North Bali and Lembata based hatcheries
and nurseries outperformed their previous results successfully doubling survival rates. This means that not only will oysters be
stronger, but fewer will be required to meet seeding targets.
The seeding team has been restructured to ensure that Technicians are performing tasks best suited to their specific skills and
abilities which has translated into an average post-operation retention rate above 80%.
Significant efforts have been invested in oyster management, specifically cleaning with extensive re-training being conducted
on all sites. Training was delivered to ensure only oysters requiring cleaning were selected, as opposed to a standard cleaning
roster. Atlas Pearls is hopeful that this cleaning method will reduce undue stress on the oysters.
Whilst these improvements are expected to deliver gains both in quality and cost going forward, the profile of this years’ harvest
remained disappointing.
The 15/16 El Nino occurrence and water temperature increase resulting from underwater current changes stalled oyster growth
and by extension pearl growth for harvests for the latter half of the financial year. To verify the suspected environmental impacts
a representative sample harvest was performed across all seeded oysters. The sample revealed that oysters in the water were
growing, indicating that harvests should progressively return to normal in 18/19.
Project capital sourced in January 2017 to support shell purchases and provide infrastructure to host the increasing number of
oysters was efficiently allocated and harvests resulting from this effort are expected during the first half of 18/19. The volume
increase from this project should reduce the cost-per-pearl.
4.2.5.2.
PEARLING VALUE ADDED
Trading remained a primary focus of the Company with improving prices as a result of a perceived shortage of loose pearls in
the market in the white south sea pearls 9-12mm category. Unfortunately, the proportion of smaller pearls did negatively impact
revenue per piece and overall revenue.
The most noticeable evolution of pearl distribution this year has been a strong interest expressed by trade clients to secure pearl
supply through a collaborative supply chain. For Atlas Pearls, this came in the form of trade loans to secure the right of first sight
of future harvests. This is encouraging and may mark a turn-around in the traditional supply-demand relationships which usually
leads to negative price tension.
Wholesale revenues grew 19% due to continuous efforts to understand and serve the Australian market as well as new initiatives
launched in Asia. Singapore has proven to be a solid market. Hong Kong, Tokyo and Jakarta will be an upcoming focus for the
Company.
Retail in Australia has been quiet throughout the year but attention to detail and focus on design and merchandising has
enabled the Company’s gross profit in this division to improve from prior year. By contrast, retail in Indonesia delivered in line
with expectations with a special mention to our farm-based immersive experience stores at three sites; North Bali, Labuan Bajo
and Raja Ampat. All three destinations delivered record sales from increased promotion by the Indonesia Tourism Department.
4.2.5.3.
NATURAL EXTRACTS
Essential Oils of Tasmania Pty Ltd, a 50% joint venture of Atlas Pearls, delivered a profit of $78k. This is as a result of a focused
strategy and realignment of the value chain.
By having a downstream model and providing a refined product in smaller quantities, Essential Oils of Tasmania Pty Ltd is aiming
at progressively moving away from the bulk commodity end of the essential oil market. Due to an increased appetite globally
for products derived from Tasmania, the joint venture was able to diversify its services to Tasmanian native crops extracts such as
Native Pepper, Boronia, Kunzea and South Rosalina.
Whilst Fennel and Peppermint remain the two main revenue drivers, Essential Oils of Tasmania Pty Ltd is also actively pursuing
projects involving more exotic crops such as Cannabis and Cherries and the by-products to chase highly valuable extracts aimed
at health and medical benefits.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 19
For personal use only DIRECTORS’ REPORT
4.2.6 AUDIT OPINION
The financial report has been audited independently and received an unmodified opinion. Refer to page 30 for the Independent
Auditors Report and Opinion.
4.2.7 PERSONNEL
Staff numbers at the end of the year were as follows:
INDONESIAN NATIONALS PART TIME
INDONESIAN NATIONALS PERMANENT
EXPATRIATES INDONESIA
AUSTRALIA
2016
444
2017
544
2018
414
2016
422
2017
476
2018
486
2016
22
2017
21
2018
15
2016
19
2017
19
2018
13
5. Dividends
No dividends were declared and paid by the Company during period ended 30 June 2018 (30 June 2017: nil).
6. Events Since the end of the Financial Year
On 1 July 2018, Atlas Pearls secured ¥165M in short-term financing from a commercial partner. The loan is repayable by 30 June 2019.
There have been no other material events since the end of the financial year.
7. Likely Developments and Expected Results of Operations
The Company will continue to focus on the core pearling business from both a cost and revenue perspective. Production is growing on a
strong platform where both best practice and operational efficiencies will deliver quality and cost gains. Distribution is improving on the
back of a strong and more sophisticated global demand.
Results from the growth strategy initiated in January 2017 are expected to deliver a double digit increase in volume this year. The financial
outcome of this significant change will be harvest profile and market dependent.
Efforts will be invested in further consolidating Tasmanian operations and focus on more efficient operations and higher value extraction
opportunities.
8. 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, are detailed in Section 13.5.5 of the Remuneration Report.
20 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only DIRECTORS’ REPORT
9. Options
During the year ended 30 June 2015 5,500,000 unlisted options were issued to certain employees, pursuant to the Atlas Pearls Employee
Option Plan. These options are exercisable at $0.059 on or before 31 December 2018 and are subject to the following vesting conditions;
achieving a minimum A$2.75M average normalised EBITDA for the 3 years ended 30 June 2018,
the employee remains directly engaged as an employee until 30 June 2018.
-
-
There were no listed or unlisted options issued during the year ended 30 June 2018.
EXPATRIATES INDONESIA
AUSTRALIA
Refer to note 26.4 for further information.
10. Indemnification and Insurance of Directors and Officers
10.1.
INDEMNIFICATION
The Company has agreed to indemnify the following current Directors of the Company; Mr G Newman, Mr T Martin, Mr C Buss and
Mr P Fallourd and all former Directors 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.
10.2.
INSURANCE PREMIUMS
Since the end of the previous financial year the Company has paid insurance premiums of $34,845 (30 June 2017 : $32,500) in respect of
Directors’ and Officers’ liability and legal expenses insurance contracts, for current and former Directors and Officers.
11. 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 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
BDO Indonesian Firm
Audit and review of financial reports
Total remuneration for audit services
Other Services
Total remuneration for other services
30 June
2018
$
30 June
2017
$
93,279
94,349
30,781
35,704
124,060
130,053
5,100
5,100
18,544
18,544
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 21
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DIRECTORS’ REPORT
12. 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.
13. Renumeration Report (Audited)
The Directors are pleased to present your Company’s 2018 remuneration report which sets out remuneration information for Atlas Pearls
Non-Executive Directors, Executive Directors and other Key Management Personnel.
Name
Non-Executive and Executive Directors
Position
G. Newman
T. Martin
S. Arrow
P. Fallourd
C. Buss
Other Key Management Personnel
M. Longhurst
D. Kubicki
T. Harris
Independent Non-Executive Chairman
Non-Executive Director
Independent Non-Executive Director (until 22 September 2016)
Managing Director
Non-Executive Director (appointed 1 February 2018)
Chief Operations Officer Pt Cendana Indopearl
Chief Financial Officer (appointed 26 March 2018)
Chief Financial Officer (resigned 29 January 2018)
Changes since the end of the reporting period
There have been no changes to the remuneration of Key Management Personnel after 30 June 2018.
13.1.
REMUNERATION GOVERNANCE
13.1.1. ROLE OF THE BOARD IN REMUNERATION GOVERNANCE
Remuneration governance is the responsibility of the full the Board as per a resolution passed on 27 February 2017. Primary
responsibilities include recommendations including;
•
•
•
•
Non-Executive Director fees
Remuneration levels of Executive Directors and other Key Management Personnel
The over-archiving Executive remuneration framework and the operation of incentive plans, and
Key performance indicators and performance hurdles for the Executive team.
The objective is to ensure that Remuneration policies and structures are fair and competitive and aligned with the long-term interest
of the Company.
Assessing performance and claw-back of remuneration
The Board is responsible for assessing performance against KPIs and determining the STI and LTI to be paid. To assist in this assessment,
the Board receives detailed reports on performance from management which are based on independently verifiably data such as
financial measures, market share and data from independently run surveys.
In the event of serious misconduct or a material misstatement in the Company’s financial statements, the Board may cancel or defer
performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years.
13.1.2. 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 30 May 2007. In the
period ending 30 June 2018, the total Non-Executive Directors’ fees including retirement benefit contributions were $148,947
(30 June 2017: $139,404).
22 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
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DIRECTORS’ REPORT
The following fees have applied:
•
•
•
Base fees for Non-Executive Directors is $50,000 per annum.
The Independent Non-Executive Chairman’s fee is $78,000 per annum.
The Managing Directors base package is $240,000, with an additional $22,800 per annum including superannuation payable
for Directors’ duties.
13.1.3.
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
Executive remuneration framework has three components;
•
•
•
Base pay and benefits, including superannuation
Short-term performance incentives (refer 13.3 for individual detail), and
Long-term incentives through participation in the Atlas South Sea Pearl Limited Employee Share Plan and Employee Option 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.
Executive 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 of the Executives’ contracts.
There were no short or medium-term cash incentives provided to any Executives of the Company during the last financial year
except where noted in section 13.2 of this report. Short or medium-term 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.
An Employee Share Plan (ESP) provides some Senior Executives with incentive over and above their base salary (refer 13.2). 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 an important factor in the long-term success of the Company.
Use of remuneration consultants
During the financial year ended 30 June 2018 the Company did not engage any remuneration consultants.
Voting and comments made at the Company’s 2017 Annual General Meeting
Atlas Pearls received more than 93% of “yes” votes on adoption of the remuneration report for the 2017 financial year. On the
resolution to re-elect Director Mr Tim Martin, Atlas Pearls received 98% of “yes” votes. The Company did not receive any specific
feedback at the Annual General Meeting 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.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 23
For personal use only DIRECTORS’ REPORT
13.2.
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
Short Term Benefits
Cash
Salary &
Fees
$
Salary
Sacrifice
for Shares
$
Short Term
Incentive
Cash
Bonus
$
Non-cash
Monetary
Benefits
$
Post-
Employment
Benefits
Long
Term
Benefits
Share
Based
Compensation
Total
Super-
annuation
Benefit
$
Long
Service
Leave
$
Bonus
Shares
$
Options5
$
$
Total Cash
Salary,
Fees and
Short
Term
Benefits
$
Directors (Non-Executive)
G. Newman
T. Martin
S. Arrow 1
C. Buss 2
2018
2017
2018
2017
2018
2017
2018
2017
78,000
78,000
50,114
50,114
-
11,290
20,833
-
Directors (Executive)
P. Fallourd
2018
2017
240,000
240,000
Other Key Management Personnel
M. Longhurst 3
D. Kubicki 4
T. Harris 4
Total 2018
Total 2017
Notes:
2018
2017
2018
2017
2018
2017
2018
2017
200,000
206,608
43,679
-
182,589
185,693
815,215
771,705
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,500
22,500
-
-
-
-
78,000
78,000
50,114
50,114
-
11,290
20,833
-
240,000
240,000
222,500
229,108
43,679
-
182,589
185,693
22,500
837,714
22,500
794,205
-
-
-
-
-
-
-
-
22,800
22,800
-
-
4,121
-
17,346
17,641
44,267
40,441
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
78,000
78,000
50,114
50,114
-
11,290
20,833
-
10,925
10,925
273,725
273,725
5,463
5,463
-
-
-
8,194
227,963
234,571
47,800
-
199,935
211,528
16,388
898,369
24,582
859,228
1. Mr S Arrow was appointed as Non-Executive Director on 2 January 2014. Mr S Arrow resigned from his position on 22 September 2016.
2. Mr C Buss was appointed 1 February 2018 as Non-Executive Director.
3. Non-Monetary benefits of other Key Management Personnel includes overseas living allowances as per individual employment contracts.
4.
Mr T Harris was appointed Chief Financial Officer on 31 August 2015. Mr T Harris resigned from his position on 29 January 2018. Ms D Kubicki was appointed Chief Financial
Officer on 26 March 2018.
5.
Share based remuneration related to options, relates to options issued in prior periods, being recognised over the respective vesting period.
24 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
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DIRECTORS’ REPORT
13.2.1. DETAILS OF REMUNERATION – PERFORMANCE ANALYSIS
The following table indicates the percentage of remuneration relating to options and performance:
Name
P. Fallourd
M. Longhurst
D. Kubicki
T. Harris
30 June 2018
% Performance
30 June 2017
% Performance
3.99%
2.40%
0.00%
0.00%
3.99%
2.33%
N/A
3.87%
13.2.2. RELATIONSHIP BETWEEN REMUNERATION AND ATLAS PERFORMANCE
The following table shows performance indicators as prescribed by the Corporations Act 2001 over the past five reporting periods:
Profit/(loss) for the year / period
(2,034,099)
900,581
968,103
(8,134,049)
1,813,922
30 June
2018
30 June
2017
30 June
2016
30 June
2015
30 June
2014
Basic earnings per share
Dividend payments
Decrease in share price
Total KMP incentives as a percentage profit/loss %
13.3.
SERVICE AGREEMENTS
(0.48)
-
(8%)
0%
0.21
-
(19%)
3%
0.23
-
(27%)
12%
(2.4)
-
(48%)
(0.8%)
0.61
-
53%
4.4%
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:
13.3.1. Mr Pierre Fallourd (Managing Director and Chief Executive Office – appointed 4 January 2016.)
•
•
•
•
Base salary for the 2018 financial period of $240,900 per annum inclusive of superannuation, reviewed annually.
Directors fees of $21,900 per annum including superannuation, payable from appointment (4 Jan 2016)
No bonus has been accrued as payable for 17/18.
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
13.3.2. Mr Mark Longhurst (Chief Operating Officer – Appointed 1 March 2016)
•
•
•
•
Base salary for the 2018 financial period of $200,000 per annum inclusive of superannuation.
Non-Financial allowances related to living in Indonesia are also included, to a maximum allowance of $22,500 annually.
No bonus has been accrued as payable for 17/18.
Either party may terminate the contract of employment by giving six months’ notice or a lesser amount as mutually agreed.
13.3.3. Ms Diana Kubicki (Chief Financial Officer – Appointed 26 March 2018)
•
•
Base salary for the 2018 financial period of $190,000 per annum inclusive of superannuation
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
13.3.4. Mr Trevor Harris (Chief Financial Officer – Appointed 31 August 2015; Resigned 29 January 2018)
•
•
Base salary for the 2018 financial period of $200,000 per annum inclusive of superannuation
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 25
For personal use only DIRECTORS’ REPORT
13.3.5. OTHER NON - EXECUTIVES (STANDARD CONTRACTS)
•
•
•
Contract terminates on retirement.
The Company may terminate the Executive’s employment agreement by providing two months’ written notice or
providing payment in lieu of the notice period.
No entitlement to any special termination payments under these contracts.
13.4.
ADDITIONAL INFORMATION OF THE REMUNERATION REPORT
13.4.1. LOANS TO DIRECTORS AND EXECUTIVES
•
•
•
The Company obtained a debt financing package of $3.5M from Tim Martin (Non-Executive Director) and the Martin
Family (related party) in June 2017. The loan is repayable in staged payments to be completed by 30 June 2020.
An interest charge of 7.5% is payable quarterly on the loan balance. The Martin Family facility is currently secured as a
second priority charge over the Company’s assets as approved by shareholders at a General Meeting held on
13 September 2017.
As at 30 June 2018 the balance of the Martin Family loan was $3.25M (30 June 2017: $3.5M)
As at 30 June 2018 interest accrued and payable on loans from related parties is Nil (30 June 2017: $1,233)
13.4.2. OPTIONS
•
Performance options were issued to Directors and Key Management Personnel during the financial period end
30 June 2015. The options were issued at nil cost to employees and will respectively expire on 31 December 2018. The
options are exercisable based on the completion of KPI’s specific to each individual.
13.4.3. OTHER KEY MANAGEMENT PERSONNEL TRANSACTIONS
•
As at 30 June 2018, Director fees of $10,767 are payable (30 June 2017: $8,236).
13.5.
SHARE BASED PAYMENTS COMPENSATION
13.5.1. EMPLOYEE SALARY SACRIFICE SHARE PLAN
There was no salary sacrifice scheme undertaken for the year ended 30 June 2018. The details below relate to the issuing of shares to
Directors and Key Management Personnel during the year ended 30 June 2017 and year ended 30 June 2016 under the employee
salary sacrifice share plan. Please refer to Note 26 in the financial statements for further details.
Name
Date of
Entrance
Entitlement
No. of Shares
No. of
Shares to
be Issued
Date of
Issue
Pierre Fallourd
17/11/14
213,667
213,667
28/11/16
Pierre Fallourd
17/11/14
341,889
341,889
28/11/16
Shares
Forfeited
in the
Year
0%
0%
Financial
Year in
Which
Shares
Vested
2016 –
100%
2015 –
100%
Nature of
Shares
Share Issue
Price
Total Value
Salary
Sacrificed
Ordinary
Shares
Ordinary
Shares
$0.045
$9,615
$0.045
$15,385
13.5.2 NON-EXECUTIVE DIRECTOR FEE SACRIFICE SHARE PLAN
Please refer to Note 26 in the financial statements for details.
26 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
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DIRECTORS’ REPORT
13.5.3. DIRECTOR FEE SALARY SACRIFICE PLAN
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
Vested
to End of
2017
Shares
Forfeited
in the
Year
Geoff Newman
1/11/14
716,289
716,289
28/11/16
100%
Tim Martin
1/11/14
518,512
518,512
28/11/16
100%
0%
0%
Financial
Year in
Which
Shares
Vested
2016 –
100%
2016 –
100%
Nature
of
Shares
Ordinary
Shares
Ordinary
Shares
Share
Issue
Price
Total
Value
Salary
Sacrificed
$0.045
$32,233
$0.045
$23,333
Notes:
These shares were issued under the Non-Exectutive Directors’ plan described above directly to Non-Exectutive Directors’ for past services rendered.
13.5.4. PERFORMANCE OPTIONS
The details relating to the allocation of performance options to Directors and Key Management Personnel under the Atlas Pearls
Employee Option Plan are as follows:
Name
Date of
Grant
Entitlement
No. of
Options
Vesting
Date
Expiry
Date
Shares
Forfeited
in the
Year
Financial
Year in
Which
Shares
Vest
Pierre Fallourd1
30/06/15
2,000,000
30/06/18
31/12/18
0%
2018
Trevor Harris1,2
30/06/15
1,500,000
30/06/18
31/12/18
100%
2018
Mark Longhurst1
30/06/15
1,000,000
30/06/18
31/12/18
0%
2018
Value Per
Options
at
30 June
18
Value Per
Options
at
30 June
17
Option
Exercise
Price
$32,805
$21,880
$0.059
-
$16,410
$0.059
$16,403
$10,940
$0.059
Nature
of
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Notes:
1.
2.
These unlisted options were approved by the Board of Directors on 29 May 2015.
Mr T Harris resigned from his position on 29 January 2018 hence 100% of his unlisted options were forfeited upon resignation.
13.5.5. EQUITY INSTRUMENTS
The details relating to the equity instruments held by Key Management Personnel are as follows:
(a)
Equity instrument disclosures relating to Key Management Personnel
1. Options and rights granted as compensation
There were no options issued to Key Management Personnel as remuneration during the year ended 30 June 2018.
2. Option holdings
There are 3,000,000 options on issue to Key Management Personal at 30 June 2018. None were issued during the year
ended 30 June 2018.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 27
For personal use only
DIRECTORS’ REPORT
(b)
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 26 and in the
remuneration report contained at section 13.5 of the Directors’ report.
The details relating to the equity instruments held by Key Management Personnel are as follows:
Balance
01/07/17
Granted as
Compensation
Options
Exercised
Other
Changes
Balance
30/06/18
Parent Entity Directors
Mr G. Newman
Mr T. Martin1
Mr C. Buss2
Mr P. Fallourd
Other Key Management Personnel
Mr M. Longhurst
Ms D. Kubicki3
Mr T. Harris3
2,563,443
108,326,550
-
3,866,762
-
-
-
114,756,755
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,563,443
108,326,550
-
3,866,762
-
-
-
114,756,755
Notes:
1.
2.
3.
4,997,428 shares are directly held by Mr T Martin. The balance of 103,329,122 shares, are related party share holdings.
Mr. C Buss was appointed 1 February 2018 as a Non-Executive Director.
Mr. T Harris resigned on 29 January 2018. Ms. D Kubicki was appointed 26 March 2018 as Chief Financial Officer.
(c)
Option holding
The number of options over ordinary shares in the parent entity held during the twelve months ended 30 June 2018 by each
Director and other members of Key Management Personnel of the consolidated entity, including their personally related parties, is
set out below:
Parent Entity Directors
Mr G. Newman
Mr T. Martin
Mr. C Buss1
Mr P. Fallourd
Other key management personnel
Mr T. Harris3
Ms D. Kubicki2
Mr M. Longhurst
Balance
01/07/17
Granted
Exercised
Lapsed/
Forfeited/
Other3
Balance
30/06/18
-
-
2,000,000
1,500,000
-
1,000,000
4,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
1,500,000
-
-
-
-
1,000,000
1,500,000
3,000,000
Notes:
1.
2.
3.
Mr. C Buss was appointed 1 February 2018 as Non-Executive Director.
Ms. D Kubicki was appointed 26 March 2018 as Chief Financial Officer.
Mr T Harris resigned from his position on 29 January 2018 hence 100% of his unlisted options were forfeited upon resignation.
This is the end of the Audited Remuneration Report.
28 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
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DIRECTORS’ REPORT
14. Auditor’s Independance Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 30.
Signed in accordance with a resolution of the Directors.
Geoff Newman
Chairman
30 August 2018
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 29
For personal use only For personal use only CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Revenue from continuing operations
Cost of goods sold
Gross profit
Other income
Administration expenses
Finance costs
Marketing expenses
Change in fair value less husbandry costs of oysters
Write-off of pearl and jewellery costs
Other expenses
Share of equity accounted investment
Profit/(Loss) before income tax
Income tax /(charge) benefit current year
Profit/(Loss) after income tax for the period from continuing operations
Other comprehensive income/(losses)
Items that will not be reclassified as profit or loss:
Revaluation of land and buildings
Items that will be reclassified as profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income/(losses) for the period, net of tax
Total comprehensive income/(losses) for the period
Profit/(loss) is attributable to:
Owners of the Company
Total comprehensive income/(losses) 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 profit/(loss) per share (cents)
Diluted earnings per share (cents)
Note
2018
$
2017
$
3
3
5
5
5
7
6
6
14,210,795
16,355,404
(8,909,878)
(8,938,039)
5,300,917
531,016
7,417,365
1,800,532
(5,586,504)
(6,144,142)
(331,386)
(344,577)
(287,128)
(324,982)
(941,472)
-
(1,984,116)
(49,983)
(2,034,099)
(462,683)
(484,778)
57,074
(263,441)
(931,695)
(183,744)
804,487
96,094
900,581
-
179,179
(509,503)
(509,503)
(2,543,602)
(2,034,099)
(2,543,602)
(645,139)
(465,960)
434,621
900,581
434,621
(0.48)
0.21
-
0.21
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 31
For personal use only
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
Note
2018
$
2017
$
8
10
14
9
4
23
9
4
12
7
11
13
7
13
7
15
16
1,278,873
2,184,968
872,865
6,465
1,968,744
9,204,890
856,382
156,639
1,508,465
8,728,104
13,331,837
13,434,558
1,262,848
-
8,080,344
5,035,034
3,999,752
18,377,978
31,709,815
2,299,323
2,310,482
115,691
4,725,496
1,750,000
1,207,104
128,091
3,085,195
7,810,691
1,226,871
108,901
10,471,069
5,298,579
3,638,436
20,743,856
34,178,414
2,612,940
278,722
260,538
3,152,200
3,250,000
1,316,458
17,030
4,583,488
7,735,688
23,899,124
26,442,726
36,857,415
(9,351,359)
(3,606,932)
23,899,124
36,857,415
(8,841,856)
(1,572,833)
26,442,726
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Biological assets
Total current assets
Non-current assets
Loans to joint venture entities
Inventories
Biological assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
(Accumulated losses)
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
32 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Attributable to Owners of Atlas Pearls
Contributed
Equity
Revaluation
Reserve
Share Based
Payment
Reserve
Foreign
Currency
Translation
Reserve
(Accumulated
loss)
Total
Equity
Note
$
$
$
$
$
$
Balance at 1 July 2016
Profit for the year
Exchange differences on translation of foreign operations
Revaluation of property, plant and equipment
Total comprehensive income for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Employee share scheme
Balance at 30 June 2017
Balances at 1 July 2017
Profit for the year
Exchange differences on translation of foreign operations
Revaluation of property, plant and equipment
Total comprehensive income / (loss) for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Employee share scheme
Balance at 30 June 2018
16
16
15
16
16
16
15
16
36,698,536
-
-
-
-
-
-
-
179,179
179,179
158,879
-
-
-
714,605
(9,115,083)
(2,473,414) 25,824,644
-
-
-
-
-
24,582
-
900,581
900,581
(645,139)
-
-
-
(645,139)
179,179
(645,139)
900,581
434,621
-
-
-
-
158,879
24,582
36,857,415
179,179
739,187 (9,760,222)
(1,572,833) 26,442,726
36,857,415
179,179
739,187
(9,760,222)
(1,572,833) 26,442,726
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,034,099)
(2,034,099)
(509,503)
-
-
-
(509,503)
-
(509,503)
(2,034,099)
(2,543,602)
-
-
-
-
-
-
36,857,415
179,179
739,187 (10,269,725)
(3,606,932) 23,899,124
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 33
For personal use only
CONSOLIDATED STATEMENT OF
CASH FLOWS
Cash flows from operating activities
Proceeds from pearl, jewellery and oyster sales
Proceeds from other operating activities
Payments to suppliers and employees
Income tax (paid)
Interest paid
Interest received
Net cash (used) in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Joint venture partnership contributions (paid)
Net cash (used) in investing activities
Cash flows from financing activities
Net repayment of borrowings
Proceeds from borrowings
Net cash provided (used) in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Note
2018
$
2017
$
13,834,132
15,875,707
341,750
402,952
(14,175,404)
(15,529,227)
(433,886)
(270,677)
3,005
(701,080)
(517,023)
(310,669)
8,183
(70,077)
(675,794)
(1,307,180)
-
(221,748)
(675,794)
(1,528,928)
(1,507,622)
(3,990,904)
1,935,411
3,500,000
427,789
(490,904)
(949,085)
2,184,968
42,990
1,278,873
(2,089,909)
4,343,407
(68,530)
2,184,968
8
8
34 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
INDEX OF NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
PART A: BASIS OF PREPERATION
1.
Basis of preperation
PART B: FINANCIAL PERFORMANCE
2.
3.
4.
5.
6.
Segment reporting
Revenue from continuing operations and other income
Biological assets
Profit / (loss) before income tax includes the following specific items
Earnings profit / (loss) per share
PART C: TAX
7.
Tax
PART D: CASH FLOW INFORMATION
8. Cash and cash equivalents
PART E: WORKING CAPITAL
9.
Inventories
10. Trade and other receivables
11. Trade and other payables
PART F: FIXED ASSETS
12. Property, plant and equipment
PART G: FUNDING, CAPITAL MANAGEMENT AND EQUITY
13. Borrowings
14. Derivative financial instruments
15. Contributed equity
16. Reserves
17. Dividends
PART H: FINANCIAL RISK MANAGEMENT
18. Financial risk management
PART I: UNRECOGNISED ITEMS
19. Events occurring after the reporting period
20. Commitments
21. Contingencies
PART J: OTHER
22. Subsidiaries
23. Related party transactions
24.
Interests in joint ventures
25. Parent entity financial information
26. Share based payments and options
27. Remuneration of auditors
28. Accounting policies
36
37
40
40
42
43
44
46
48
48
49
50
52
52
53
54
54
55
60
60
60
61
61
63
65
66
69
69
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 35
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART A BASIS OF PREPERATION
1. Basis of Preperation
1.1.
BASIS OF PREPARATION
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, and
other authoritative pronouncements of the Australian Accounting Standards Board, IFRS and the Corporations Act 2001. Atlas Pearls
is a for-profit entity for the purpose of preparing the financial statements.
The financial statements cover the consolidated entity of Atlas Pearls and its subsidiaries. Atlas Pearls 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 30 August 2018. 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.
GOING CONCERN
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and
the realisation of assets and the settlement of liabilities in the ordinary course of the business.
The net loss after tax for the Group for the year ended 30 June 2018 amounts to a loss of $2.0M (30 June 2018: $0.9M profit). At 30 June
2018 the Group had a working capital balance of $7.3M (30 June 2017: $8.1M); $9.2M (30 June 2017: $8.7M) of this balance comprised
of unharvested oysters due for harvest during the next 12 months. At 30 June 2018, the Group had a net asset position of $23.9M
(30 June 2017: $26.4M); $17.3M (30 June 2017: $19.2M) of this balance comprised of unharvested oysters.
During the year ended 30 June 2017, the Group’s debt was restructured and new investment obtained to increase oyster stocks and
drive the Group’s long term strategic plan. This strategy remains on course, with higher seeding targets and increased oyster stock.
Oyster stocks on hand (seeded and unseeded) at 30 June 2018 is 2.3M shells (30 June 17: 2.0M shells).
The Group, however, has not met its revenue forecasts for the year. Whilst the number of pieces expected to be harvested, as well as
selling prices achieved at market, have been on target, the proportion of goods harvested at a sellable grade and the overall weight of
the harvests have been lower than expected. This had an impact on the revenue result and oyster valuation for the year, as well as on
cash flow receipts.
Consequently, further cash flow funding will be required to bridge working capital requirements until the benefits of the growth strategy
can be realised. The Company has secured short term funding arrangements with commercial partners, with a view for these to be
repaid in full over the next 12 months. Funding of US$600,000 was obtained in May 2018, repayable by 30 April 2019. Funding of ¥165M
was obtained in July 2018, repayable by 30 June 2019.
The Group’s core debt facility remains in place and repayments are expected to be made on schedule. The balance of the debt owing
to the Martin Family is $3.25M at 30 June 2018. A payment of $250k was made in February 2018 as scheduled. The loan is to be repaid
in staggered payments by June 2020.
The ability of the Group to both meet its debt repayments and continue to fund its working capital requirements are dependent upon:
•
•
•
•
•
the international market for wholesale loose white south sea pearls maintaining existing demand levels and pricing;
the Group meeting its auction forecasts;
the quality of harvested pearls meeting valuation expectations;
the Group achieving profitable operations with positive operating cash flows; and
obtaining short term funding to bridge working capital requirements
These conditions indicate a material uncertainty that may cast a significant doubt about the Group’s ability to continue as a going
concern and, therefore, it may be unable to realise its assets and discharge its’ liabilities in the normal course of business.
Management have reasonable grounds to believe that the Group will continue as a going concern. The profile of the most recent pearl
harvest is an improvement on the previous six month average. Short term funding has been obtained and will enable the Company to
effectively manage its harvest schedule.
Should the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other
than in the normal course of business and at amounts different to those stated in the financial statements. This financial report does
not include any adjustments relating to the recovery and classification of recorded asset amounts or the amounts or classification of
liabilities and appropriate disclosure that may be necessary should the Group be unable to continue as a going concern.
36 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART B FINANCIAL PERFORMANCE
2. 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 detailed throughout the financial statements 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.
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.
2.1.
(i)
SEGMENT INFORMATION PROVIDED TO THE BOARD OF DIRECTORS AND MANAGEMENT TEAM
The segment information provided to the Board of Directors and management team for the reportable segments for the
period ended 30 June 2018 is as follows:
30 June 2018
Australia
Indonesia
Australia
Indonesia
Wholesale Loose Pearls
Jewellery
Total
Total segment revenue
Inter-segment revenue
$
$
$
$
$
13,145,811
12,962,715
221,473
511,665
26,841,664
-
(12,681,580)
-
-
(12,681,580)
Revenue from external customers
13,145,811
281,135
221,473
511,665
14,160,084
Normalised EBITDA
(2,262,887)
2,062,341
(312,602)
(48,120)
(561,269)
Adjusted net operating profit/(loss) before income tax
(2,669,656)
2,006,307
(345,686)
(64,292)
(1,073,328)
Depreciation and amortisation
Revaluation of Biological Assets
Totals segment assets
Total assets include:
149,610
56,662
33,084
16,246
255,602
-
(287,128)
-
-
(287,128)
1,921,577
23,387,021
301,816
836,207
26,446,622
Additions to non – current assets (other than financial
assets or deferred tax)
-
657,065
226
18,503
675,794
Total segment liabilities
(539,440)
(1,812,958)
(8,928)
(20,896)
(2,382,222)
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 37
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
(ii)
The segment information provided to the Board of Directors and management team for the reportable segments for
the period ended 30 June 2017 is as follows:
30 June 2017
Australia
Indonesia
Australia
Indonesia
Wholesale Loose Pearls
Jewellery
Total
Total segment revenue
Inter-segment revenue
$
$
$
$
$
15,343,728
12,141,560
370,470
351,104
28,206,862
-
(11,905,271)
-
-
(11,905,271)
Revenue from external customers
15,343,728
236,289
370,470
351,104
16,301,591
Normalised EBITDA
(288,056)
1,843,201
(394,221)
(145,670)
1,015,254
Adjusted net operating profit/(loss) before income tax
(938,190)
1,719,381
(433,026)
(161,670)
Depreciation and amortisation
Revaluation of Biological Assets
Totals segment assets
Total assets include:
Additions to non – current assets
(other than financial assets or deferred tax)
309,420
-
106,455
57,074
38,125
16,030
-
-
3,267,839
24,722,448
450,387
871,896
29,312,571
-
1,464,843
3,109
18,409
1,486,361
186,495
470,030
57,074
Total segment liabilities
(656,239)
(1,914,665)
(34,023)
(20,594)
(2,625,521)
2.2.
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 3)
Major customers by country
2018
$
2017
$
26,841,664
28,206,862
(12,681,580)
(11,905,271)
48,605
2,106
53,813
-
14,210,795
16,355,404
(ii)
Adjusted net operating profit
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.
38 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of adjusted net operating profit/(loss) before income tax is provided as follows:
Net Operating Profit Before Tax
Changes in fair value of biological and agricultural assets
Foreign exchange gains
Foreign exchange losses
Other
Profit/(loss) before income tax from continuing operations
(iii)
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
Unallocated:
Joint Venture Loans
Deferred tax assets
Total assets as per the statement of financial position
2018
$
2017
$
(1,073,328)
186,495
(612,110)
(206,367)
473,996
1,331,955
(622,501)
(733,814)
(150,174)
(1,984,116)
226,218
804,487
2018
$
2017
$
26,446,622 29,312,571
1,263,441
1,227,407
3,999,752
3,638,436
31,709,815 34,178,414
The total of non-current assets other than financial instruments and deferred tax assets located in Australia is $916,388
(30 June 2017: $1,139,452). The total located in Indonesia is $15,400,741 (30 June 2017: $16,389,934).
(iv)
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
Unallocated:
Current tax liabilities
Borrowings
Deferred tax liabilities
Other
Total liabilities as per the statement of financial position
(v)
Normalised EBITDA reconciliation
Net profit before tax
Finance/Interest paid
Depreciation/Amortisation
FX (gain)/loss
Agriculture standard revaluation
Other non-operating (income)/expense
(Gain) / Loss on derivative instruments
Normalised EBITDA
2018
$
2017
$
2,382,222
2,625,521
115,691
260,538
4,060,482
3,528,722
1,207,104
1,316,453
45,192
4,454
7,810,691
7,735,688
2018
$
2017
$
(1,984,116)
256,458
255,601
804,487
256,886
470,030
148,504
(598,095)
612,110
-
206,367
285,812
150,174
(409,963)
(561,269)
1,015,524
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 39
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
3.
Revenue from Continnuing Operations
3.1.
REVENUE FROM CONTINUING OPERATIONS
SALES REVENUE
Sale of goods
OTHER REVENUE
Interest income
Other Revenues
Total revenue from continuing operations
3.2. OTHER INCOME
Foreign exchange gains
Grant funds
Gain on derivative financial instruments
Gain on sale of assets
Total other income
SIGNIFICANT ACCOUNTING POLICY
2018
$
2017
$
14,160,084 16,301,591
48,605
2,106
53,813
-
14,210,795 16,355,404
2018
$
2017
$
473,996
1,331,955
56,721
-
299
58,614
409,963
-
531,016
1,800,532
Revenue from sales is recognised at the fair value of consideration received or receivable, after deducting sales taxes, when the control of a good or service
transfers to the customer. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The following specific recognition criteria must also be met before revenue is recognised:
a)
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.
b)
Interest Income is recognised as it accrues.
4. Biological Assets
CURRENT
Oysters – at fair value
Total current biological assets
NON CURRENT
Oysters – at fair value
Total non-current biological assets
Total biological assets
40 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
2018
$
2017
$
9,204,890
8,728,104
9,204,890
8,728,104
8,080,344 10,471,069
8,080,344 10,471,069
17,285,234 19,199,173
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
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 details of the Biological Assets that are held by the Group as at period end are as follows:
QUANTITY HELD WITHIN THE GROUP OPERATIONS
NUMBER OF PEARLS HARVESTED
Juvenile & mature oysters not seeded 2017 : 1,035,169
Juvenile & mature oysters not seeded 2018 : 1,182,571
Nucleated oysters 2017 : 950,588
Nucleated oysters 2018 : 1,146,707
No significant events occurred which impacted on oyster mortalities during the financial year.
2017: 374,046
2018: 410,411
SIGNIFICANT ACCOUNTING POLICY
Agricultural assets include pearl oysters, both seeded and unseeded. Seeded oysters 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, discounted using a pre-tax
market determined rate. The fair value of unseeded oysters is determined by reference to market prices for this type of asset in Indonesia.
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.
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.
Level 3 analysis: The finance and operations departments undertake the valuation of the oysters. The calculations are considered to be
level 3 fair values. The data is taken from internal management reporting and work completed by the executive within the respective
field teams to determine the material inputs to the model. The key production inputs are confirmed with the relevant executives and
agreed with the Board of Directors every six months. These are listed in note 4.1.
4.1.
KEY PRODUCTION ASSUMPTIONS
The key assumptions utilised to determine the fair market value of oysters are detailed below:
Input
2018
2017
Commentary
Average selling price
¥12,600 per
momme
¥12,300 per
momme
Obtained by analysing sales prices achieved and the trend analysis of the
past 12 months of average sales prices.
Yen exchange rate
¥81.90: AUD 1
¥86.15: AUD 1
Based on forward Yen price per a financial institution.
Average pearl size
0.44
Proportion of marketable grade
41%
20%
Discount rate
Mortality
0.49
48%
20%
Based on technical assessment of expected harvest output, and taking
into account historical actual results over the past 12 months
Based on historical data for pearl grade over the last 12 months
Based on analysis of comparable primary producers.
Historical
Historical
Based on historical harvest mortality rates
Average unseeded oyster value
$2.04
Costs to complete
$0.76
$1.50
$0.76
Based on independent valuation
Based on historical averages of costs to complete and sell pearls per
momme.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 41
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
4.2.
SENSITIVITY ANALYSIS - OYSTERS
The following tables summarise the potential impact of changes in the key non-production related variables on the oyster valuation:
Selling Price (¥/momme)
-10%
No Change
+10%
¥11,340 (Sellable Grade)
¥1,800 (Commercial Grade)
¥12,600 (Sellable Grade)
¥2,000 (Commercal Grade)
¥13,860 (Sellable Grade)
¥2,200 (Commercial Grade)
Discount rate
22%
20%
18%
Profit $
($856,429)
($452,776)
($31,931)
Profit $
($403,653)
-
$420,845
Profit $
$49,123
$452,776
$873,622
-10%
No Change
+10%
Selling Price (¥/momme)
¥11,340 (Sellable Grade)
¥1,800 (Commercial Grade)
¥12,600 (Sellable Grade)
¥2,000 (Commercal Grade)
¥13,860 (Sellable Grade)
¥2,200 (Commercial Grade)
FX Rate
90.09
81.90
73.71
Av. Weight
0.49
0.44
0.40
Profit $
($3,062,503)
($452,776)
$2,777,044
-10%
37% (Sellable %)
63% (Commercial %)
Profit $
$605,353
($1,964,032)
($4,434,750)
Profit $
($2,653,045)
($287,129)
$3,283,405
Sellable %
No Change
41% (Sellable %)
59% (Commercial %)
Profit $
$2,765,788
($287,129)
($2,659,396)
Profit $
($2,243,587)
$452,776
$3,789,766
+10%
45% (Sellable %)
55% (Commercial %)
Profit $
$4,933,707
$1,970,835
($877,919)
5. Profit / (loss) before income tax includes the following specific items
5.1.
ADMINISTRATION EXPENSES FROM ORDINARY ACTIVITIES
Salaries and wages
Depreciation property, plant and equipment and amortisation of intangible assets
Operating lease rental costs
Compliance and Accounting
Other
Total administration expenses
2018
$
2017
$
3,242,808
3,530,469
255,602
470,030
612,062
522,288
558,600
474,951
917,432
1,146,404
5,586,504
6,144,142
42 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
5.2.
FINANCE COSTS
Interest and finance charges payable
Total finance costs
5.3.
OTHER EXPENSES
Loss on foreign exchange
Loss on derivative financial instruments
Provision for employee entitlements
Share option expense
Other
Total other expenses
6. Earnings profit / (loss) per share
Basic earnings/(loss) per share (cents per share)
Diluted earnings per share (cents per share)
6.1. EARNINGS RECONCILIATION
Net profit/(loss) used for basic earnings
After tax effect of dilutive securities
Diluted earnings/(loss)
2018
$
331,386
331,386
2017
$
462,683
462,683
2018
$
622,501
150,174
2017
$
733,814
-
92,641
116,670
-
76,156
24,582
56,629
941,472
931,695
2018
$
(0.48)
-
2017
$
0.21
0.21
2018
$
2017
$
(2,034,099)
900,581
-
-
(2,034,099)
900,581
2018
No.
2017
No.
Weighted average number of ordinary shares outstanding during the period used for calculation of basic earnings per share
422,218,298 421,525,077
Adjustments for calculation of diluted earnings per share: options
Weighted average number of potential ordinary shares outstanding during the period used for calculation
of diluted earnings per share
3,000,000 4,500,000
425,218,298 426,025,077
Diluted earnings per share is calculated after taking into consideration all options and any other securities that were on issue that remain
unconverted at 30 June 2018 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.
SIGNIFICANT ACCOUNTING POLICY
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. Refer to Note 26.1 for further detail.
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. Refer to Note 26.1 for further detail.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 43
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
7. Tax
7.1.
INCOME TAX EXPENSE
PART C TAX
(a) The components of tax expense/(benefit) comprise:
Current tax
Deferred tax
Income tax expense/(benefit)
(b) Deferred income tax (revenue) expense included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (excluding tax losses) (note 7.2)
Decrease/(increase) to opening balances
(Decrease)/increase in deferred tax liabilities (note 7.2)
Deferred tax expense/(benefit)
(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 27.5%
Tax effect of amounts which are not deductible in calculating taxable income:
Non-deductible expenses
Sundry items
Permanent differences
Difference in overseas tax rates
De-recognition of assets
Income tax under(over) provided in prior years
Income tax expense/(benefit)
Weighted average effective tax rates
(d) Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Fair value adjustment on biological assets
Prepayments
Derivative financial instruments
Investment in subsidiary
Unrealised foreign exchange gain
Deferred tax assets
Difference in accounting and tax depreciation
Stock
Accruals
Provisions
Other
Tax losses
Investment
Intangible Asset
Deferred tax/(income)
For details of the franking account, refer to Note 17
44 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
2018
$
2017
$
520,651 505,893
(601,986)
(96,094)
(470,668)
49,983
(1,044,821)
687,483
(113,330)
(470,668)
(602,629)
-
643
(601,986)
(1,984,116)
(545,632)
804,487
241,346
72,586
183,827
(24,691)
(3,544)
367,437
-
49,983
66,750
22,322
(34,331)
(93,566)
400,840
(699,454)
(96,094)
-3%
-3%
63,859
277
45,214
-
-
14,270
189
(1,120)
(11,302)
(1,394)
(6,167)
18,711
1,900
46,689
615
324,881
(7,934)
24,935
(18,884)
(37,265)
(15,036)
1,010,482
(25,311)
(285,669)
-
(69,287)
470,668
601,986
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
7.2.
TAX ASSETS AND LIABILITIES
(a) Liabilities
CURRENT
Income tax payable
NON-CURRENT
Deferred tax liabilities comprises temporary differences attributable to:
Agricultural and biological assets at fair value
Prepayments
Current derivative instruments
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 loans
Other
Tax losses recognised
Total deferred tax assets
2018
$
2017
$
115,691
260,538
1,204,885
1,268,744
441
1,778
718
46,996
1,207,104
1,316,458
19,265
88,440
22,150
443,406
277,908
47,763
25,432
69,731
20,250
396,717
303,219
47,150
898,932
862,499
3,100,820
2,775,937
3,999,752
3,638,436
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
(Charge)/credit for adjustment to Australian tax
Closing balance
2,321,982
1,719,996
1,158,151
601,986
(687,483)
2,792,650
2,321,982
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 45
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICY
The income tax expense or benefit 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.
In April 2017, the Australian Government passed legislation which reduces the corporate rate for small and medium business entities from 30% to 25%
over the next decade. As Atlas Pearls has a turnover of more than $10M but less than $50M it qualifies as a medium business entity and the effective tax
rate of 27.5%. Atlas Pearls will be subject to the reduced rates from the 2016-17 income year onwards.
Consequently, Atlas Pearls has remeasured its deferred tax balances based on the effective tax rate that will apply in the year the temporary differences
are expected to reverse. The impact of the change in tax rate has been recognised as a tax expense in profit or loss, except to the extent that it relates to
items previously recognised outside profit or loss.
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.
PART D CASH FLOW INFORMATION
8. Cash and Cash Equivalents
Cash at bank
Balances per statement of cash-flows
Risk exposure
2018
$
2017
$
1,278,873
2,184,968
1,278,873
2,184,968
The Group’s exposure to interest rate risk is disclosed in note 18. 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 $100,000 (30 June 2017: $100,000).
8.1.
NOTES TO THE CASH FLOW STATEMENT
8.1.1. RECONCILIATION OF CASH
For the purposes of the statement of cashflows, and in line with the accounting policy, 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.
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 noted above.
46 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
8.1.2. 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
Investment income
Share based payments
Foreign exchange (gain)/losses unrealised
Derivative instrument (gains)/losses unrealised
Agricultural asset fair value (gains)/losses
Decrease/(increase) in trade and other debtors
Decrease/(increase) in inventories
(Decrease)/increase in trade and other creditors
Increase/(decrease) in provision
Increase/(decrease) in taxes
Net cash obtained/ (used in) operating activities
2018
$
2017
$
(2,034,099)
255,601
-
(45,600)
-
244,839
900,581
470,030
183,744
(57,896)
24,582
(16,644)
150,174
(409,963)
612,110
206,367
(29,552)
(130,366)
950,451
(340,220)
(188,879)
37,598
53,223
50,042
(653,723)
(1,003,557)
(701,080)
(70,077)
As at the date of this report the Company has not entered into any non-cash financing or investing activities.
8.1.3. CREDIT FACILITIES
As at 30 June 2018, the Company had in place a bank overdraft loan facility with the National Australia Bank with a limit of $1.5M
(30 June 2017: $1.0M).
8.1.4. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Opening
Balance
2017
$
Cash
Flows
$
Acquisition
$
Foreign
Exchange
Movements
$
Fair Value
Changes
$
Reclassification
in Balance
Sheet
$
Closing
Balance
2018
$
Non-Cash Changes
Long-term borrowings
3,250,000
-
Short-term borrowings
278,722
427,789
Lease liabilities
Assets held to hedge
long-term borrowings
Total liabilities from
financing activities
-
-
-
-
3,528,722
427,789
-
-
-
-
-
-
103,971
-
-
103,971
-
-
-
-
-
(1,500,000)
1,500,000
1,750,000
2,310,482
-
-
-
-
-
4,060,482
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 47
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART E WORKING CAPITAL
9. Inventories
CURRENT
Pearls
Jewellery
Other inventory
Total current inventory
NON CURRENT
Nuclei
Total non-current inventory
2018
$
2017
$
1,161,282
495,532
808,462
939,062
-
73,871
1,968,744
1,508,465
-
108,901
1,968,744
1,617,366
SIGNIFICANT ACCOUNTING POLICY
Pearls: Pearl inventory is held at cost and value assessed based on the cost of oyster stock at time of harvest. At each reporting date, pearl inventory is
reviewed to ensure it is valued at the lower of cost and net realisable value. At 30 June 2018, a write off of pearl stocks of $324,982 has been recorded
(30 June 2017: $263,441) to bring the value in line with the assessed net realisable value.
Nuclei: Quantities on hand at the period end are valued at the lower of cost and net realisable value.
Other inventory: Including cosmetics, fuel, mechanical parts and farm spares at the period end are valued at the lower of costs and net realisable value.
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.
10. Trade and Other Receivables
CURRENT
Trade receivables
Provision for doubtful debts
Net trade receivables
Sundry debtors & prepayments
Total trade & other receivables
(a) Impaired trade receivables
2018
$
2017
$
341,036
349,331
(3,665)
(43,090)
337,371
306,241
535,494
550,141
872,865
856,382
At 30 June 2018, an impairment of $3,665 has been booked in relation to trade receivables. This relates to debts owing from a
wholesale customer which is past due by more than three months and which management have deemed at risk of not being collected.
Management are actively pursuing recovery of the debt.
48 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
(b) Past due but not impaired
As at 30 June 2018, trade receivables of $12,363 (30 June 2017: $56,726) 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
these customers 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
(c) Risk exposure
2018
$
2017
$
5,108
2,868
4,387
53,546
3,180
-
12,363
56,726
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.
Refer to note 18 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.
11. Trade and Other Payables
CURRENT
Trade payables
Other payables and accrued expenses
Total current trade and other payables
NON-CURRENT
Other payables and accrued expenses
Total non-current trade and other payables
2018
$
2017
$
425,668
520,963
1,745,564
2,091,977
2,171,232
2,612,940
128,091
128,091
-
-
Other payables include accruals for annual leave and employee benefits of $1,574,103, and (30 Jue 2017: $1,647,565) in the consolidated
entity. Non-current other payables comprises of accrued long service leave for employees with more than five year tenure with the Company
and provision for make good of commercial rent.
SIGNIFICANT ACCOUNTING POLICY
Trade Payables represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. These amounts
are unsecured and are usually settled within 30 days of recognition.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 49
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART F FIXED ASSETS
12. 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
Total property, plant and equipment
2018
$
2017
$
1,096,538
1,137,838
(851,950)
(782,898)
244,588
354,940
1,032,844
1,045,347
(654,949)
(586,044)
377,895
622,483
459,303
814,243
2,211,080
2,861,215
(436,722)
(391,702)
1,774,358
2,469,513
7,376,010
6,361,985
(4,737,817)
(4,347,162)
2,638,193
2,014,823
4,412,551
4,484,336
5,035,034
5,298,579
Included in Pearling project land (leasehold and freehold) and buildings is $532,797 (30 June 2017: $1,519,873) 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
Depreciation
Foreign exchange movement
Carrying amount at end of the year
Leasehold Improvements
Carrying amount at beginning of the year
Additions
Reclassifications/Disposals
Depreciation
Foreign exchange movement
Carrying amount at end of the year
50 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
2018
$
2017
$
354,940
18,730
(5,536)
457,918
21,518
-
(123,260)
(107,936)
(286)
244,588
(16,560)
354,940
459,303
543,894
-
-
(75,616)
(5,792)
377,895
-
-
(76,066)
(8,525)
459,303
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
(b) Pearling project
Leasehold land and buildings
Carrying amount at beginning of the year
Additions
Revaluation of freehold land
Depreciation
Foreign exchange movement
Carrying amount at end of the year
Plant and equipment, vessels, vehicles
Carrying amount at beginning of the year
Additions
Disposals / reclassifications
Depreciation
Foreign exchange movement
Carrying amount at end of the year
Total Carrying amount
Reconciliation of depreciation to the Statement of Profit or Loss and Other Comprehensive Income:
Depreciation charge (Note 12)
Capitalised depreciation charge
Depreciation of property, plant and equipment
Depreciation of PPE
Amortisation of Intangible Asset
Depreciation charge (Note 5)
2018
$
2017
$
2,469,513
1,327,333
509,576
1,073,500
(1,068,764)
179,179
(57,471)
(54,376)
(78,496)
(56,123)
1,774,358
2,469,513
2,014,822
2,411,670
147,488
212,164
1,068,764
-
(528,837)
(506,807)
(64,044)
(102,204)
2,638,193
2,014,823
5,035,034
5,298,579
2018
$
2017
$
(785,184)
(745,185)
529,582
437,124
(255,602)
(308,061)
(255,602)
(308,061)
-
(161,969)
(255,602)
(470,030)
SIGNIFICANT ACCOUNTING POLICY
Each class of property, plant & equipment is stated at historical cost less, where applicable, any accumulated depreciation and impairment losses. The
carrying value of property, plant and equipment and their useful lives are reviewed annually by management 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 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 unchanged: Freehold Land (5-10%), Leasehold land & buildings improvements (5-10%), Vessels (10%), and Plant and Equipment (10-50%).
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 51
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART G FUNDING, CAPITAL MANAGEMENT AND EQUITY
13. Borrowings
CURRENT
Other loans
Total current borrowings
NON CURRENT
Other loans
Total non-current borrowings
Total borrowings
2018
$
2017
$
2,310,482
2,310,482
278,722
278,722
1,750,000
3,250,000
1,750,000
3,250,000
4,060,482
3,528,722
Refer to Note 18.4 for disclosures on financing arrangements currently in place.
SIGNIFICANT ACCOUNTING POLICY
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.
14. Derivative Financial Instruments
Forward foreign exchange contracts
SIGNIFICANT ACCOUNTING POLICY
2018
$
6,465
2017
$
156,639
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. 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 18).
Derivative financial assets and liabilities comprise forward exchange contracts and non-deliverable forwards. Gains and losses arising from changes in fair
value of foreign exchange hedging contracts 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. During the period ended 30 June 2018 the
Group has entered into non deliverable forwards to sell Australian Dollars and receive Indonesian Rupiah. 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.
52 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
15. Contributed equity
Issued and fully paid-up capital
Ordinary Shares
Balance at beginning of period
Shares issued
Share transaction costs
Balance at end of period
Treasury Shares
Balance at beginning of period
Shares released
Balance at end of period
2018
2017
No. of Shares
No. of shares
2018
$
2017
$
422,909,620
424,809,620
38,857,415
38,857,415
424,809,620
421,280,906
36,857,415
36,698,536
-
-
3,528,714
-
-
-
158,879
-
424,809,620
424,809,620
36,857,415
36,857,415
3,062,138
4,117,694
-
(1,055,556)
3,062,138
3,062,138
Treasury shares are shares in Atlas Pearls that are held by the Atlas Pearls Ltd Executive Share Plan Trust for the purpose of issuing shares
under the Atlas South Sea Pearl Employee share plan. No treasury shares were issued over the course of financial year ended 30 June 2018 to
employees as part of the Atlas employee share salary sacrifice plan (30 June 2017: 1,055,556).
(i)
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.
(ii)
Options
There are 3,000,000 unlisted options on issue at 30 June 2018. Information relating to the Atlas Limited Employee Option Plan, including
details of options issued, exercised and lapsed during the financial year and the options outstanding at the end of the reporting period, is
set out in note 26.
(iii)
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 a net gearing ratio of 17% at 30 June 2018
(30 June 2017 : 13%)
The Group has no external requirements imposed upon it in relation to capital structure.
SIGNIFICANT ACCOUNTING POLICY
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.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 53
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
16. Reserves
Foreign Currency Translation Reserve
Employee Share wReserve
Revaluation Reserve
Total Reserves
Movements:
Foreign Currency Translation Reserve1
Balance at beginning of year
Currency translation differences arising during the Year
Balance at end of year
Employee Share Reserve2
Balance at beginning of period
Movement in Employee Share Reserve
Balance at end of year
Revaluation Reserve3
Balance at beginning of period
Movement in Revaluation Reserve
Balance at end of year
2018
$
2017
$
(10,269,725)
(9,760,222)
739,187
179,179
739,187
179,179
(9,351,359)
(8,841,856)
(9,760,222)
(9,115,083)
(509,503)
(645,139)
(10,269,726)
(9,760,222)
739,187
714,605
-
24,582
739,187
739,187
179,179
-
179,179
-
179,179
179,179
1.
2.
3.
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries to the reporting currency.
The employee share reserve records the value of equity portion of remuneration paid to employees in the form of shares or other equity instruments.
The revaluation reserve records the value of increase in the carrying value of assets as a result of revaluation.
17. Dividends
Dividend Franking Account
2018
$
2017
$
Franking credits available to shareholders of the Company for subsequent financial years based on a tax rate of 27.5%.
1,305,572
1,278,704
The above amounts represent the balance of the franking account as at the end of the financial period adjusted for:
(i)
(ii)
(iii)
Franking credits that will arise from the payment of the amount of the provision for income tax;
Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
SIGNIFICANT ACCOUNTING POLICY
A 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.
No dividends have been paid or declared in respect of the 2018 financial year or the period ended 30 June 2017.
54 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART H FINANCIAL RISK MANAGEMENT
18. 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 to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. 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
and Senior Management.
The Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total financial assets
Financial Liabilities
Trade and other payables
Borrowings
Total financial liabilities
18.1.
MARKET RISK
(i) Foreign exchange risk
2018
$
2017
$
1,278,873
2,184,968
361,707
326,396
6,465
156,639
1,647,045
2,668,003
426,668
525,009
4,060,482
3,528,722
4,487,150
4,053,731
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Japanese Yen, Indonesian Rupiah and US Dollars.
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.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 55
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Group Sensitivity Analysis
Sensitivity analysis is based on exchange rates in US Dollars and Japanese Yen increasing or decreasing by 10% and the effect on profit
and equity.
Statement of
Financial Position
Amount
AUD
Foreign Exchange Rate Risk
30 June 2018
30 June 2017
-10%
10%
-10%
10%
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
Financial Assets
Cash
2018
2017
1,278,873
2,184,968
Trade and other receivables
361,707
326,396
Derivatives
Financial Liabilities
6,465
156,639
17,236
27,992
1,460
Trade and other payables
426,668
525,009
(4,431)
Borrowings
Derivatives
4,060,482
3,528,722
(90,054)
-
-
(741)
Total Increase/(Decrease)
(48,539)
-
-
-
-
-
-
-
(14,102)
(22,902)
(1,194)
3,626
73,680
607
39,714
-
-
-
-
-
-
-
5,249
20,650
17,404
(4,091)
-
-
39,212
-
-
-
-
-
-
-
(4,294)
(16,895)
(14,240)
3,347
-
-
(32,082)
-
-
-
-
-
-
-
The majority of the exposure above relates to borrowings held in USD. Trade debtors relates to sales made in JPY. Current borrowings
are all held in AUD and USD. Not shown in the table above is the exposure to exchange movements on the intercompany loans made
to the Indonesian subsidiaries. The loans are held in IDR and revalued to AUD at each year end. The loan balance as at 30 June 2018 was
$2,606,814 (30 June 2017: AUD$2,463,005). The intercompany loans are eliminated on consolidation.
(ii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from its borrowings. Current borrowings are repayable by 30 April 2019 and non-current
borrowings are repayable by 30 June 2020, both are at fixed interest rates. As such 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.
18.2.
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 55. 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.
Trade receivables
Wholesale customers – existing customers previous defaults
Derivative financial assets
56 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
2018
$
2017
$
312,055
305,348
6,465
156,639
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
18.3.
LIQUIDITY RISK
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. 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 8) on the basis of expected cash flows. This is generally carried out by
the Senior Management and 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.
18.4.
FINANCING ARRANGEMENTS
The Group had access to the following borrowing facilities at the reporting date.
Fixed rate
Foreign currency trade loans
Overdraft facility (NAB)
2018
$
2017
$
810,482
-
1,500,000
1,000,000
2,310,482
1,000,000
•
•
•
•
During the period ended 30 June 2018, the Company has agreed to an additional $500,000 to the existing $1,000,000 working
capital overdraft facility with the National Australia Bank (NAB). The overdraft facility will be secured by a registered company
charge over the Company’s Assets. As at 30 June 2018, no amount has been drawn down on this facility.
A repayment of $250,000 has been made to the debt financing package of $3,500,000 from Mr. Martin (Non-Executive Director) and the
Martin Family (a related party) in February 2018. The loan commenced in January 2017 and is repayable over a three year period at a
7.5% interest rate, in staged repayments to be completed by 30 June 2020. The outstanding loan balance at 30 June 2018 is $3,250,000.
On the resolution to the General Meeting held on 13 September 2017, the loan agreement with the Martin Family has been granted
security as a second priority charge over the Company’s assets, behind the NAB facility. It has been approved by the shareholders in the
event the Company defaults on its repayment terms as noted above, the outstanding debt and interest will only be convertible into
ordinary shares with convertibility being at the lender’s election. In that event, the conversion price will be at a 15% discount to 30 day
VWAP, with a minimum conversion price of 1.5c.
During the year, the Company has agreed two new unsecured short-term loans of US$600,000 and ¥100,000,000 provided by two
commercial partners. The ¥100,000,000 loan commenced in February 2018 and was repaid in full by 25 June 2018. The US$600,000 was
drawn down in May 2018 and is repayable in full by 30 April 2019.
•
On 1 July 2018, the Company agreed to an unsecured short-term loan of ¥165,000,000. The loan is repayable by 30 June 2019.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 57
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
18.5.
MATURITIES OF FINANCIAL LIABILITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
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 twelve months equal their carrying balances as the impact of discounting is not significant.
30 June 2018
30 June 2017
Consolidated
Entity
Less than
6 Months
6-12
Months
Between
1 & 2
Years
Between
2 & 5
Years
Total
Contractual
Cash Flows
Carrying
Amount
(Asset)/
Liabilities
Less than
6 Months
6-12
Months
Between
1 & 2
Years
Between
2 & 5
Years
Total
Contractual
Cash Flows
Carrying
Amount
(Asset)/
Liabilities
$
$
$
$
$
$
$
$
$
$
$
$
Non-Derivatives
Trade payables
426,668
-
-
-
426,668
426,668
525,009
-
-
-
525,009
525,009
Borrowings
Total non-
derivatives
Derivatives
-
2,310,482
1,250,000
500,000
4,060,482
4,060,482
22,057
256,665
1,500,000
1,750,000
3,528,722
3,528,722
426,668 2,310,482 1,250,000
500,000
4,487,150 4,487,150
547,066
256,665 1,500,000 1,750,000
4,053,731 4,053,731
Net settled
(Non deliverable
forwards)
6,465
Gross settled
-(inflow)
-outflow
4,150,000
(4,143,535)
Total Derivatives
6,465
-
-
-
-
-
-
-
-
-
-
-
-
6,465
6,465
156,639
4,150,000
4,150,000
3,300,000
(4,143,535)
(4,143,535)
(3,143,361)
6,465
6,465
156,639
-
-
-
-
-
-
-
-
-
-
-
-
156,639
156,639
3,300,000
3,300,000
(3,143,361)
(3,143,361)
156,639
156,639
(a) Fair value hierarchy
AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly
(level 2), and
(c) inputs for the asset/liability that are not based on observable market data (unobservable inputs) (level 3).
The following table presents the group’s financial assets and financial liabilities measured and recognised at fair value at 30 June 2018
and 30 June 2017 on a recurring basis:
30 June 2018
LEVEL 1
Assets
Forward foreign exchange contracts
Total Assets
30 June 2017
Assets
Forward foreign exchange contracts
Total Assets
$
-
-
LEVEL 1
$
-
-
LEVEL 2
$
6,465
6,465
LEVEL 2
$
156,639
156,639
LEVEL 3
TOTAL
$
-
-
$
-
-
LEVEL 3
TOTAL
$
-
-
$
-
-
58 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
(b) Valuation techniques used to derive level 2 and level 3 fair values
The fair value of financial instruments that are not traded in an active market (for example, over–the– counter derivatives) is
determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3. This is the case for unlisted equity securities. As at 30 June 2018 there are no level 3 related instruments in place.
(i) Transfers between levels 2 and 3 and changes in valuation techniques
There were no transfers between the levels of the fair value hierarchy in the period ended 30 June 2018 or 30 June 2017.
(c) Fair values of other financial instruments
The Group also has a number of financial instruments which are not measured at fair value in the statement of financial position. These
had the following fair values as at 30 June 2018:
Debt Financing
Total non-current borrowing
2018
$
Carrying
Amount
2018
$
Fair Value
2017
$
Carrying
Amount
1,750,000
1,750,000
3,250,000
1,750,000
1,750,000
3,250,000
2017
$
Fair Value
3,250,000
3,250,000
Due to their short-term nature, the carrying amounts of the current receivables, current payables and current borrowings are assumed
to approximate their fair value.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 59
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART I UNRECOGNISED ITEMS
19. Events occuring after the reporting period
On 1 July 2018, Atlas secured ¥165M in short term financing from a commercial partner. The loan is repayable on or before 30 June 2019.
The loan funding provides the Company with short term working capital which will aide in the effective management of its harvest schedule.
There have been no other material events since the end of the financial year.
20. 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
Non - cancellable operating leases
2018
$
2017
$
344,740
344,740
680,671
1,066,427
-
-
1,025,411
1,411,167
The Group leases premises under non-cancellable operating leases expiring in May 2021. 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.
Other commitments/guarantees
Atlas Pearls had a bank guarantee with the National Bank of Australia for AUD$100,000 at 30 June 2018 (30 June 2017: $100,000) which was
transferred over from Commonwealth Bank of Australia after the end of financial year 2017. This guarantee has been taken out to secure the
rental of the Atlas Pearls corporate offices in Claremont, Western Australia.
SIGNIFICANT ACCOUNTING POLICY
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.
21. Contingencies
The Company’s historical tax affairs are regularly subject to audit by the Indonesian Tax Office and this process remains ongoing. There is a
possibility that this review programme may result in future tax liabilities in relation to prior year tax returns. All assessments received to date
have been brought to account. Currently there are no periods under review.
60 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
22. Subsidiaries
PART J OTHER
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 28.3.
Name of entity
Class of Shares
Percentage Owned
Percentage Owned
30 June 2018
30 June 2017
Place of Incorporation
Perl’Eco Pty Ltd
Tansim Pty Ltd
P.T. Cendana Indopearls
Aspirasi Satria Sdn Bhd
Ord
Ord
Ord
Ord
100%
100%
100%
100%
100%
100%
100%
100%
Australia
Australia
Indonesia
Malaysia
The ultimate parent entity, Atlas Pearls, is incorporated in Australia.
23. Related party transactions
(a)
Subsidiaries
Interests in subsidiaries are set out in note 22.
(b)
Joint ventures
World Senses Pty Ltd was formed on 29 November 2012 as a joint venture between Nomad Two Worlds Global Trading Pte Ltd and Atlas
Pearls Ltd.
At 30 June 2018, there is a net loan balance of $698,212 owing from World Senses Pty Ltd to Atlas (30 June 2017: $698,212). This balance
consists of salary and administration recharges and accounting charges, offset by pearl cosmetic products, pearl jewellery and pearl
protein extraction assets transferred to Atlas. The net loan receivable balance for Atlas from World Senses Pty Ltd of $698,212 has been fully
impaired due to the net liability position of the World Senses Pty Ltd accounts.
Essential Oils of Tasmania Pty Ltd was acquired in January 2013 as a 100% subsidiary. On 20 April 2015 50% of the investment in the entity
was sold to Westwood Properties Pty Ltd. Post this sale Essential Oils of Tasmania Pty Ltd has been deemed a joint venture and accounted
for using the equity method.
As at 30 June 2018, there is a loan balance of $2,078,876 (30 June 2017: $2,042,450) owing from Essential Oils of Tasmania Pty Ltd to
Atlas Pearls. This balance consists of admin and expense recharges, and funding advances. The provision represents a write-down to the
director’s best estimate of the recoverable value and is deemed a prudent assessment.
The parent entity has a 50% interest in Brookfield Tasmania Pty Ltd. At 30 June 2018, there is nil loan balance (30 June 2017: $449) owing
from Brookfield Tasmania Pty Ltd.
Due from World Senses Pty Ltd
Due to World Senses Pty Ltd
Impairment of World Senses asset
Due from Essential Oils of Tasmania Pty Ltd
Impairment of Essential Oils of Tasmania Pty Ltd Receivable
Due from Brookfield Tasmania Pty Ltd
2018
$
2017
$
771,173
771,173
(72,961)
(72,961)
(698,212)
(698,212)
2,078,876
2,042,450
(816,028)
(816,028)
-
449
1,262,848
1,226,871
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 61
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
(c) Key management personnel compensation
Detailed remuneration disclosures are provided in section 13.2 of the remuneration report.
Short-term employment benefits
Post-employment benefits
Share based compensation
(d) Transactions with other related parties
The following balances are outstanding at the end of the reporting period in transactions with related parties:
Director fees payable
2018
$
2017
$
837,714
794,205
44,267
16,388
40,441
24,582
898,369
859,228
2018
$
2017
$
10,767
8,286
(e) Loans from Related Parties
Refer to Note 18.4 for detailed disclosures on financing arrangements. Loans detailed below are accounted for under current and non-
current liabilities (see note 13).
Beginning of the year
Loans advanced from
Principal repayments
Interest charged
Interest paid
End of year
2018
$
2017
$
3,501,233
-
-
3,500,000
(250,000)
-
254,846
49,623
(256,079)
(48,390)
3,250,000
3,501,233
62 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
24. 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 Pty Ltd’s research and development, products and export markets.
The parent entity has a 50% interest in Brookfield Tasmania Pty Ltd, which is a resident in Australia and the principal activity of which is to
develop a manufacturing and tourism facility.
The parent entity has a 50% interest in Essential Oils of Tasmania Pty Ltd, which is a resident in Australia and the principal activity of which is
to grow and produce essential oils.
The interest in World Senses Pty Ltd and Essential Oils of Tasmania Pty Ltd is accounted for in the financial statements using the equity
method of accounting (refer to note 22). The joint venture is unlisted hence no quoted fair value is disclosed. Information regarding to the
joint ventures are set out below.
World Senses Pty Ltd
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
Profit/(loss) for the period
Reconciliation to carrying value
Opening net asset 1 July
Profit/(loss) for the period
Closing net assets (liabilities)
Group’s share in percentage
Group share in profit/(loss)
Carrying value
2018
$
2017
$
305,114
304,334
441,333
441,333
746,447
745,667
41,641
41,791
1,760,292
1,760,292
1,801,933
1,802,083
(1,055,486)
(1,056,416)
7,272
8,165
(6,342)
(189,629)
930
(181,464)
(1,056,416)
(874,952)
930
(181,464)
(1,055,486)
(1,056,416)
50%
465
-
50%
(90,732)
-
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 63
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Essential Oils of Tasmania Pty Ltd
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
Profit/(loss) for the period
Reconciliation to carrying value
Opening net asset 1 July
Profit/(loss) for the period
Closing net assets (liabilities)
Group’s share in percentage
Group share in profit/(loss)
Carrying value
2018
$
2017
$
4,117,109
3,031,525
1,150,631 1,061,804
5,267,740
4,093,329
357,893
340,446
4,973,766
3,894,684
5,331,659
4,235,130
(63,919)
(141,801)
4,104,275
3,227,576
(4,026,394)
(4,213,771)
77,881
(986,195)
(141,800)
844,395
77,881
(986,195)
(63,919)
(141,800)
50%
50%
38,941
(493,098)
-
-
(b)
Contingent liabilities relating to joint ventures
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
do not exceed its’ debts.
Each of the partners in Essential Oils of Tasmania Pty Ltd are jointly and severally liable for the debts of the joint venture. The assets of the
joint venture do not exceed its’ debts.
There have been no legal claims lodged against the joint ventures. The joint ventures do not have any contingent liabilities in respect of a
legal claim lodged against the joint venture.
64 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
25. 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
Accumulated losses
Loss for the period
Total comprehensive loss
(b)
Contingent liabilities
2018
$
2017
$
1,840,553
2,852,239
24,440,639
26,803,398
5,459,679
3,650,070
5,221,347
4,800,932
36,857,417
36,857,417
739,188
739,188
(15,594,139)
(15,428,708)
22,002,467
22,167,825
(2,783,174)
(165,359)
(2,783,174)
(165,359)
The parent entity did not have any contingent liabilities as at 30 June 2018 (30 June 2017: Nil).
The parent entity did not provide financial guarantees during the period (30 June 2017: Nil).
SIGNIFICANT ACCOUNTING POLICY
The financial information for the parent entity, Atlas Pearls, has been prepared on the same basis as the consolidated financial statements, except as set
out below:
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of Atlas Pearls.
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.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 65
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
26. Share Based Payments and Options
26.1.
EMPLOYEE SALARY SACRIFICE SHARE PLAN
On 30 May 2012, the Atlas Employee Salary Sacrifice Share Plan was established. 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.
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 shares rank equally with other fully paid ordinary shares.
To participate in the Salary Sacrifice Plan, eligible employees are required to salary sacrifice a portion 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 at the discretion of the Board of Directors.
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.
iii.
iv.
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.
26.2.
NON-EXECUTIVE DIRECTOR FEE SACRIFICE SHARE PLAN
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 at the discretion of the Board of Directors.
66 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
26.3.
ATLAS PEARLS LTD EMPLOYEE OPTION PLAN
At the EGM on 13 May 2014 it was resolved by the shareholders to approve the Atlas Pearls Ltd Employee Option Plan. On 24 February
2014, the Board adopted the Atlas Pearls Ltd Employee Option Plan (Plan) under which eligible participants may be granted Options to
acquire Shares in the Company. The Directors consider that the Plan is an appropriate method to:
(a)
(b)
(c)
(d)
Reward Directors, executives, employees, consultants and contractors for their past performance;
Provide long term incentives for participation in the Company’s future growth;
Motivate Directors, executives, employees, consultants and contractors and general loyalty; and
Assist to retain the services of valued Directors, Executives, employees, consultants and contractors.
The Plan will be used as part of the remuneration planning for Directors, executives, employees and contractors. Under the Plan,
participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the Board’s
discretion and no individual has a contractual right to participate in the Plan or to receive any guaranteed benefits.
The Corporate Governance Council Guidelines recommend that remuneration packages involve a balance between fixed and incentive
pay reflecting short and long-term performance objectives appropriate to the Company’s circumstances and goals. The Board considers
that the Plan will assist the Company in structuring the remuneration packages of its executives in accordance with the Guidelines.
The amount of options that will vest depends on the individual’s Key Performance Indicators. An option which has vested but has not
been exercised will immediately lapse upon the first to occur of:
i.
ii.
iii.
iv.
Close of business on the Expiry Date;
The transfer or supported transfer of the Option in breach of Clause 7(a) of the Plan;
Termination of the Participant’s employment or engagement with the Company or an Associate Body Corporate on the
basis that the Participant acted fraudulently, dishonestly, in breach of the Participant’s obligations or otherwise for cause; and
The day which is six months after an event which gives rise to a vesting under clauses 4(a) to 4(d) of the plan.
26.4.
OPTIONS ON ISSUE
On 30 June 2015 5,500,000 options exercisable at $0.059 each, on or before 31 December 2018 (expiry date), were issued to employees
of the Company on the terms and conditions set out in the Explanatory Memorandum ratified at the Extraordinary General Meeting
held on 13 May 2014.
Options are granted under the plan for no consideration. Options granted under the plan carry no dividend or voting rights. When
exercisable, each option is convertible into one ordinary share. The exercise price of options is based on 143% (June 2017: 143%) of the
volume weighted average share price at which the Company’s shares are traded on the Australian Stock Exchange (ASX) during the
week up to and including the date of the grant.
As at 1 July 2017
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June 2018
2015 Average exercise
price per share option
Number of options
0.066
4,500,000
-
-
-
0.066
-
-
1,500,000
3,000,000
- There were no options issued during the year ended 30 June 2018 (2017: nil).
Issue Date
30 June 2015
Total
Expiry Date
Exercise Price
31 December 2018
0.0590
Share Options
30 June 2018
Share Options
30 June 2017
3,000,000
3,000,000
4,500,000
4,500,000
Weighted average remaining contractual life of options outstanding at end of period
0.6 years
0.6 years
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 67
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
26.5. FAIR VALUE OF OPTIONS GRANTED
The assessed fair value at grant date of options granted during the year ended 30 June 2015 was $0.016 (5,500,000 options). This
valuation imputes a total value of approximately $90,215 for the proposed Options. The value may go up or down as it will depend in
part on the future price of a Share.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, 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 option. The model inputs for options granted during the
year ended 30 June 2015 are detailed below.
The Black & Scholes methodology has been used, together with the following assumptions:
i. Options are granted for no consideration and vest based on the individual’s Key Performance Indicators. Vested options are
exercisable for a period of six months after vesting or the earlier of 31 December 2018.
ii. Exercise price - $0.0590;
iii. Grant date – 30 June 2015;
iv. Share price at grant date: $0.044
v. Expected price volatility of the Company’s shares: 60%;
vi. Expected dividend yield: 0%;
vii. Risk-free interest rate: 3.06%
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
Where options are issued to employees of subsidiaries within the Group, the subsidiaries compensate Atlas Pearls for the amount
recognised as expense in relation to these options.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions and option related valuation expenses recognised during the period as
part of employee benefit expense were as follows:
Option expense
Option release for forfeited options
2018
$
20,518
(20,518)
2017
$
24,582
-
-
24,582
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.
SIGNIFICANT ACCOUNTING POLICY
Share Based Payments: 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.
68 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
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:
AUDIT SERVICES
BDO Australia Firm:
Audit and review of financial reports
BDO Indonesia Firm:
Audit and review of financial reports
Total remuneration for audit and other assurance services
Other Services
Total remuneration for other services
Total remuneration of BDO for audit and other related services
28. Accounting policies
28.1.
HISTORICAL COST CONVENTION
2018
$
2017
$
93,279
94,349
30,781
124,060
5,100
5,100
35,704
130,053
18,544
18,544
129,160
148,596
These financial statements have been prepared under the historical cost basis, as modified by the revaluation of available for sale
financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss and biological assets
at fair value less cost to sell.
28.2.
NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
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 2018 unless disclosed separately. The Group’s and the parent
entity’s assessment of the impact of these new standards and interpretations is set out below.
AASB
Amendment
Affected Standard(s)
Nature of Change to Accounting Policy
Application
Date of
Standard*
Application
Date for
Group
AASB 9
Financial Instruments
Changes to classification and measurement requirements of
financial instruments.
1 Jan 18
1 July 18
AASB 16
Leases
AASB 16 eliminates the operating and finance lease
classifications for lessees currently accounted for under
AASB 117 Leases. Leases with terms greater than 12 months,
unless the underlying asset is immaterial, will be recognised
as a lease liability and a right of use asset in the statement of
financial position.
1 Jan 19
1 July 19
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 69
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Impact on initial application:
AASB 9
The Company enters into forward hedge contracts to manage foreign currency risk but it currently does not apply hedge accounting.
Derivative instruments are fair valued at each reporting date and gain or loss recognised in the statement of profit or loss and other
comprehensive income. It is expected that the application of the new amendments will not have an impact on the entity’s financial
statements.
AASB 16
To the extent that the Company, as lessee, has significant operating leases outstanding at the date of initial application, 1 July 2019,
right-of-use assets will be recognised for the amount of the unamortised portion of the useful life, and lease liabilities will be recognised
at the present value of the outstanding lease payments.
Thereafter EBITDA will increase as a result of operating lease expenses currently included in EBITDA which will be recognised instead
as amortisation of the right-of-use asset, and interest expense on the lease liability. However, there will be an overall reduction in net
profit before tax in the early years of a lease because the amortisation and interest charges will exceed the current straight-line expense
incurred under AASB 117 Leases. This trend will reverse in the later years.
Atlas Pearls has identified the following lease where this standard change will have an impact:
• Claremont office lease held by the parent entity.
Any other amendments are not applicable to the Group and therefore have no impact.
28.3.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Atlas Pearls as at 30 June 2018 and the
results of its subsidiaries for the period then ended. Atlas Pearls and its subsidiaries together are referred to in this financial statement as
the consolidated entity.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of business combinations 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 statement of profit or loss and other
comprehensive income, statement of changes in equity and statement of financial position respectively.
The interest in a joint venture entity is accounted for using the equity method after initially being recognised at cost in the consolidated
statement of financial position. Under the equity method of accounting, the investments are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share
of movements in other comprehensive income of the investee in other comprehensive income. When the Group’s share of losses in
an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the
Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the Group. The Group treats transactions with non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts
of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount
of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity
attributable to the owners.
70 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
28.4.
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 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. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial
results or the financial position reported in future periods.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are detailed below:
(a) Determination of market value of biological assets – see note 4
(b) Write off of inventories – see note 9
(c) Impairment of debtors – see note 10
(d) Impairment of joint venture receivables – see note 24
28.5.
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 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.
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 or 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:
•
•
•
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;
Income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange
rates;
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.
28.6.
COMPARATIVE FIGURES
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial period.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 71
For personal use only NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
28.7.
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 impairment are reviewed for possible reversal of the impairment at each reporting date.
28.8.
EMPLOYEE BENEFITS
Short Term Obligation
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly
within twelve months after the end of the period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities
are settled. The liability for accumulating sick leave is recognised in the provision for employee benefits. All other short-term employee
benefit obligations are presented as payables.
Wages and salaries, annual leave, sick leave, long service leave and superannuation
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 ayt the present bvalue 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 is recosgnised in the provision for employee benefits.
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 Employee Share Plan Pty Ltd. Information relating to
this scheme is set out in note 26.
28.9.
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.
28.10.
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.
72 | ATLAS PEARLS LTD | ANNUAL REPORT 2018
For personal use only DIRECTORS’ DECLARATION
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.
ii.
give a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of the performance for the
period ended on that date; and
comply with Accounting Standards, and the Corporations Act 2001 and other mandatory professional reporting
requirements.
(b)
(c)
(d)
(e)
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 in the Directors’ Report (as part of audited remuneration report) for the period ended 30 June
2018 comply with section 300A of the Corporations Act 2001.
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:
Geoff Newman
Chairman
Perth, Western Australia
30 August 2018.
ANNUAL REPORT 2018 | ATLAS PEARLS LTD | 73
For personal use only
For personal use only Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Valuation of Biological Assets
Key audit matter
How the matter was addressed in our audit
As at 30 June 2018, the carrying value of biological
Our audit procedures included, but were not
assets inventory of the Group was $17,285,234 as
limited, to the following:
disclosed in note 4.
AASB 141 Agriculture requires the Group to value their
biological assets at fair value less costs to sell. The
Considering the appropriateness of the valuation
methodology against the relevant Australian
Accounting Standards;
determination of the value of the biological asset
Testing the mathematical accuracy of the fair
requires significant management judgements and
value model used by management;
estimates as detailed in note 4.
Physically counting the numbers of oysters on
We considered this issue to be a Key Audit Matter, due
hand at the year end.
to the significance of the balance to the reported
Performing analytical procedures and sensitivity
financial position and performance of the Group, and
the extent to which management judgements and
estimates determine the final valuation.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
analysis in order to determine the inputs of most
significance to the final valuation, including the
extent to which they may have changed from
previous years, and focused our substantive
testing on those items.
In the case of specific inputs, we performed the
following:
Obtaining historical farming data, and comparing
this to forecasts used in the model;
Obtaining sales data, including where available
post-year-end data, and comparing these to
forecast sales prices;
Comparing the expected exchange rates to
futures prices and other financial data;
Obtaining written representation over the
suitability of the assumptions used from senior
management.
Considering the completeness and accuracy of
the disclosures made in note 3, including
sensitivity disclosures.
75
For personal use only For personal use only In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 28 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Atlas Pearls Ltd, for the year ended 30 June 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Glyn O'Brien
Director
Perth, 30 August 2018
77
For personal use only ADDITIONAL ASX INFORMATION
The following additional information is required by the Australian Securities Exchange. The information is current as at 18 September 2018.
(a) Distribution schedule and number of holders of equity securities as at 18 September 2018
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Fully Paid
Ordinary Shares
(ATP)
Unlisted Options
– 5.9c 31/12/18
132
-
400
-
300
-
872
-
100,001 – and
over
373
2
Total
2,077
2
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 18 September 2018 is 1,208.
(b) 20 Largest holders of quoted equity securities as at 18 September 2018
The names of the twenty largest holders of fully paid ordinary shares (ASX code: ATP) as at 18 September 2018 are:
Rank
Name
Shares
% of Total Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Boneyard Investments Pty Ltd
Chemco Superannuation Fund Pty Ltd
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