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 9
PB | ATLAS PEARLS LTD | ANNUAL REPORT
ANNUAL REPORT | ATLAS PEARLS LTD | 1
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FIND THE
ONE...
AS UNIQUE
AS HER.
For personal use only MESSAGE FROM THE CHAIRMAN
For personal use only ATLAS PEARLS LTD 2019
MESSAGE FROM THE CHAIRMAN
Dear Shareholders,
2018/19 was another demanding year for Atlas with the realised increases in pearl numbers not translating into targeted profit outcomes
due to ongoing issues with pearl size.
Over the past four years Atlas Pearls has implemented operational changes to increase oyster survival, increase harvest quantities and
decrease unit production costs. It is pleasing to report that these operational initiatives have been successfully implemented across the
Company’s operations. Although the year ended 30 June 2019 yielded promising harvest quantities, the disappointing size of pearls
continues to challenge revenue results which, in turn, has unfavourably impacted the Company’s year end profitability.
During the year, Atlas successfully established an economical cost base and diverse farm locations to secure the Company’s future
through varying environmental and market fluctuations. The Company’s trajectory is now encouraging, having achieved targets on both
production and cost base levels with a clear future focus on pearl quality, colour and size.
Important positives have materialised during the year including:
•
•
•
An understanding of the process drifts that have caused the decreasing pearl value and immediate rectification of those processes,
Confirmation of the Company’s ability to harvest increased quantities of pearls whilst decreasing unit production costs, and
Continuing strong market demand for high quality South Sea pearls of the right quality and size.
The shortfall in expected revenue gave rise to some challenges on the capital structure front. To manage this, the Company delayed
a $750,000 scheduled repayment to its major shareholder. The loan was approved at the 2017 AGM and was repayable in instalments
through to June 2020 which has now been extended to 30 October 2020. The balance of the shareholder loan at 30 June 2019 is $2.5M.
The Company retains an overdraft facility of $1.5M and collaboration with trade partners for short term trade loans.
The Company is now looking at strategic options to ensure a path to more profitable operations, which will flow from increased pearl
sizing.
Atlas Pearls’ 50% joint venture Essential Oils of Tasmania (“EOT”) made progress in expanding the range of services and products offered
domestically and internationally. Tasmanian products are continuing to receive international interest which is a strong reflection of the
high quality goods produced from the region. The Board continues to explore several prospective paths forward.
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 71.
The Board is confident that the successful implementation of operational changes will provide the Company with a solid foundation
to springboard into future profitability. Importantly, we would like to thank all shareholders for their support as we continue to build a
turnaround.
Geoff Newman
Chairman
ANNUAL REPORT | ATLAS PEARLS LTD | 5
For personal use only ATLAS PEARLS LTD 2019
CELEBRATING
A 25 YEAR
LOVE STORY
Passionate people from all corners of the world partnered in the early 1990’s to learn
the ropes of modern hatchery-based pearling with the same objective: producing
the best South Sea Pearls. Aligning a labour-intensive 4-year production cycle is no
easy task. Cultural intelligence and sustainability have been at the forefront of the
growth of Atlas Pearls since its inception.
1990
1993
THE FIRST PINCTADA MAXIMA HATCHERY
FIRST ATLAS PILOT VENTURE IN KUPANG
Triggering spawning through temperature shock was proven
relatively easy.
It is not clear which country or company can claim the set-up of
the first commercially viable hatchery.
Providing baby oysters with the right plankton cocktail at the
right time and interval on the other hand will remain a well
guarded secret within the industry for many years.
In 1993 Atlas opened its pilot pearling venture in Kupang - East
Nusa Tenggara. This coincided with Atlas listing on the Australian
Stock Exchange with the visionary objective of becoming an eco-
pearling venture. This provided the opportunity to the public to
own a piece of a pioneering industry located throughout the
pristine and wild waters of Indonesia.
The founding principles of the Company are anchored on
sustainability, and whilst this lengthens the business cycle from
two to four years, hatchery technology reduced greatly the
need for wild oysters and the industry became non-extractive.
6 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only CELEBRATING
A 25 YEAR
LOVE STORY
ATLAS PEARLS LTD 2019
1998
2000
ATLAS OPENS ALYUI PEARL FARM - RAJA AMPAT
ATLAS’ FIRST HUB IN BALI
The Indonesian archipelago of Raja Ampat lies in the Coral Triangle,
and covers an area from the Philippines to Timor to Papua New
Guinea.
In 2000 Atlas expanded operations to Bali with it’s first hub
for breeding and seeding in Penyabagan, North Bali and
commenced genetically based selective oyster breeding.
Many marine species that thrive here cannot be found anywhere
else in the world.
Atlas’ Alyui farm launched with just 15 staff sharing tents in the
jungle but quickly became a secluded and self-sustaining
hatchery-to-harvest pearling hub.
Specialised sites enabled the allocation of oysters at specific ages
to farm sites offering specific food sources as well as access to
qualified personnel at various production stages.
Each oyster is handled more than 600 times throughout it’s
productive life before producing a pearl at the end of the four
years.
The challenge of selective breeding has been, and remains, to
identify the best parent oysters to provide outstanding qualities
that will translate into the most desired pearl virtues (shape, size,
shade, surface and shine).
ANNUAL REPORT | ATLAS PEARLS LTD | 7
For personal use only ATLAS PEARLS LTD 2019
Indonesia
6
2
1
3
54
ATLAS PEARL OPERATIONS
1. BANYU BIRU
The South Seas
2. NORTH BALI
3. PUNGU ISLAND
4. LEMBATA
5. ALOR
6. ALYUI BAY
Australia
2005
2011
ATLAS HARVESTS 100,000 PEARLS
ATLAS EXPANDS, HARVESTS 300,000 PEARLS
By 2005 Atlas’ production doubled reaching 100,000 pearls.
The North Bali site became fully operational, and the Company
to validated it’s specialised technical hub concept. Atlas
implemented various reforms geared towards productivity
gains and consistency from hatchery until seeding focusing on
comparative and competitive gains.
In 2008-2009 the pearling industry was strongly disrupted by the
Global Financial Crisis (GFC). Pearl prices devalue at trade level
triggering an unprecedented consolidation move at production
level. Only a handful of passionate and innovative pearling
operators survived.
Listening and respecting natures’ cycles remains the main driver
for successful farmers, however, modern pearling requires
mastery at every corner of the process from hatchery-to-harvest
while operating at an economic scale.
By 2011, Atlas opened a second hub in Lembata – Solor, two
farms in Pungu - Flores and Alor and also a dedicated selective
breeding and research and development centre in Garogak -
North Bali.
Atlas further secured its competitive advantage and increased
geographical spread to diversify against environmental threats.
Pungu Island qualified as another ‘frontier’ in line with Alyui due
to it’s location in Labuan Bajo, right at the gate of the world famous
Komodo Dragon National Park.
8 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS LTD 2019
2018
ATLAS OPENS BANYUBIRU PEARL FARM
The pearl industry is now mature, nurturing competitive and
comparative advantages are a must within the industry.
Atlas opens a farm in Banyu Biru - East Java, the Company’s first
site with direct current flow from the Indian Ocean.
Global warming is no longer an epiphenomenon but a proven
fact triggering unusual and extreme weather occurrences such
as super typhoons or freak tides. Our climate and seasons are
primarily driven by surface and deep ocean currents which are
now more often disrupted by events called El Nino and La Nina.
This results in significant changes on plankton supply both in
quantity and quality, calling for sites with alternatives food supply.
Atlas aims to harvest 500,000 pearls in 2019 with an on going
focus on quality.
ANNUAL REPORT | ATLAS PEARLS LTD | 9
For personal use only PEOPLE.
PLANET.
PEARLS.
Atlas pearl farm, Pungu Island, Flores.
For personal use only For personal use only MESSAGE FROM THE MANAGING DIRECTOR
For personal use only ATLAS PEARLS 2019
MESSAGE FROM THE MANAGING DIRECTOR
It has been 25 years since Atlas opened its pilot farm in Kupang, Indonesia. 28 years since the perfection of hatchery technology applied
to Pinctada Maxima oysters allowed the industry to become non-extractive and Atlas to almost double in size every five years.
Next financial year will be the last year of Atlas’ five year growth plan, initiated in 15/16. Production increased 61% from 293,257 pearls in
14/15 and 15% compared with last year. Almost 500,000 pearls were harvested between July 2018 and June 2019. Revenue grew 14%
from $14.2M in 17/18 to $16.2M. Unfortunately, nacre growth and resulting average pearl size remained disappointing this year, calling
for further structural and operational adjustments. Operations delivered a loss before tax of $1.2M against a loss of $2.0M last year.
Team driven efficiencies and productivity gains along the value chain allowed the Company to contain operating expenses at the same
level as 17/18 in spite of a larger biomass and increased number of pearls to harvest, grade and bring to market.
Pearl trading remained stable for white South Sea pearls whilst prices for coloured South Sea pearls have been volatile as a result of the
increasing influence of the Chinese market and global trading uncertainties.
Trade loans from long standing clients have proven mutually beneficial this year to secure client’s pearl supply and allow Atlas to make
necessary adjustments to harvest and sales schedules. Atlas held four private auctions in Kobe, Japan and three complementary private
sales events in Hong Kong, both delivered satisfactory prices.
All operational efforts have been focused on the base objective of seeding the best oysters, within the ideal windows, utilising the best
techniques. Quality reforms have been implemented over the past few years to accompany and support the Company’s growth plan.
Current harvest profiles are necessitating for further knowledge and operation consolidations to enable the Company to adjust to ever
changing environmental and market conditions.
Key achievements for the year are:
•
•
•
•
Confirmed oyster survival rate now allows a more selective pre-operation process,
Sustained post-operation retention allows more efficient use of available resources,
Collaboration with trade partners and stable prices reflects the sustained demand for Atlas Pearls’ products, and
The Company’s newly opened pearl farm, Banyu Biru, East Java, shows promising shell nacre growth.
Going forward, Atlas is committed to increasing collaboration with industry partners to grow the pearl market, to increase knowledge of
the global environments and to become more relevant to clients whilst ensuring the safety and continuous development of our people.
Pierre Fallourd
Managing Director
ANNUAL REPORT | ATLAS PEARLS LTD | 13
For personal use only ATLAS PEARLS 2019
CORPORATE DIRECTORY
SUMMARY OF FISCAL INDICATORS
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Perth, Western Australia 6008
TAX ADVISORS
RSM Bird Cameron
8 St Georges Terrace
Perth, Western Australia 6008
BANKERS
National Australia Bank
100 St Georges Terrace
Perth, Western Australia 6000
SHARE REGISTERY
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
CHAIRMAN
Geoff NEWMAN
B.Ec (Hons), M.B.A, F.C.P.A, F.A.I.C.D.
DIRECTORS
Timothy MARTIN
B.A, 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.
COMPANY SECRETARY
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
14 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
SUMMARY OF FISCAL INDICATORS
Revenue from contracts with customers
Normalised earnings before interest, tax, depreciation and amortisation (Normalised EBITDA)
EBITDA margin
Depreciation and amortisation
Foreign exchange gains/(losses)
Revaluation and write-off of agriculture assets (oysters and pearls) gains/(losses)
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)
30 June 19
$’000
30 June 18
$’000
16,241
603
3.71%
(297)
(449)
(590)
14
(854)
14,211
(599)
(4.22%)
(256)
(149)
(612)
(150)
(1,701)
(5.26%)
(11.97%)
(321)
(2,408)
(3,582)
(0.84)
21,567
31,231
3,620
21,910
16.52%
427.9
(283)
(50)
(2,034)
(0.48)
23,899
31,710
4,060
23,899
16.99%
427.9
ANNUAL REPORT | ATLAS PEARLS LTD | 15
For personal use only ATLAS PEARLS 2019
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 2019. Referred to hereafter as, the Company, Atlas Pearls or the Group.
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 28 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 Pty Ltd 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, B.A., 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
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 21 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 Pearls 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 Pearls since November 2014.
Appointed Managing Director 4 January 2016
Directorships of other listed companies held in the last three years: Nil
CADELL BUSS, M.B.A, M.P.M, 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
For personal use only
DIREC TORS’ REPORT
2.
Company Secretary
The Company Secretary for the financial year was Ms. Susan Hunter.
SUSAN HUNTER, BCom, ACA, F Fin, G.A.I.C.D, AGIA
Ms. Hunter has 22 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
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
G. Newman
T. Martin
P. Fallourd
C. Buss
01 July 18 - 30 June 19
01 July 18 - 30 June 19
01 July 18 - 30 June 19
01 July 18 - 30 June 19
6
6
6
6
6
6
6
6
MEETINGS HELD WHILST
IN OFFICE
ATTENDED
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.
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.
4.2.2. SHAREHOLDER RETURNS
Net profit/(loss) after tax
Basic EPS (cents)
Dividends paid
Dividends (per share) (cents)
30 JUNE
2019
$’000
(3,582)
(0.84)
Nil
Nil
30 JUNE
2018
$’000
(2,034)
(0.48)
Nil
Nil
30 JUNE
2017
$’000
901
0.21
Nil
Nil
ANNUAL REPORT | ATLAS PEARLS LTD | 17
For personal use only DIREC TORS’ REPORT
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
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
2019
$’000
(3,582)
2,408
321
297
449
590
134
(14)
603
30 JUNE
2018
$’000
(2,034)
50
283
256
149
612
-
150
(535)
30 JUNE
2017
$’000
901
(96)
409
470
(598)
206
286
(410)
1,167
30 JUNE
2019
$’000
30 JUNE
2018
$’000
30 JUNE
2017
$’000
31,231
(3,620)
(5,701)
21,910
17%
427.9
5.1
0.8
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
There has been a decrease in the net assets of the Group of $2.0M in the year ended 30 June 2019 (30 June 2018: $2.5M decrease).
4.2.4. OPERATING RESULTS
The operating revenue for the year ended 30 June 2019 was $16.2M, an increase of $2.0M (30 June 2018: $14.2M). The increase in harvest
quantities provided the Company with additional revenue this year, however the potential of this revenue was challenged as a result of
disappointing pearl sizes.
Administration, finance and marketing expense costs of $6.2M were consistent with prior year (30 June 2018: $6.3M) as a result of
management’s ability to maintain costs achieved during 30 June 2018 in response to the adverse environmental conditions which
impacted prior year harvest results.
The Company continues to collaborate with clients and has resecured a short term trade loan to manage the transition between seeding
and harvest. Refer to note 17.4 for further details on current financing arrangements.
4.2.5.
REVIEW OF OPERATIONS
4.2.5.1. PEARLING
Operational process improvements implemented in 17/18 have been validated, with confirmed oyster survival rate allowing for a more
selective pre-operation process.
After four years of dedicated growth, the Company has entered a consolidation phase to align processes and optimise current
infrastructure. The Company is now focusing on density management to provide oysters with improved access to nutrients. This,
combined with better oyster survival, improves Atlas Pearls competitive advantage and partially offsets potential future environmental
factors which may affect oyster and pearl cultivation.
The Company’s newly opened pearl farm, Banyu Biru, East Java, shows promising shell nacre growth validating reforms implemented.
The new site is less than three hours from the North Bali farm and is a cost efficient way of diversifying biomass.
Whilst implemented improvements increased oyster survival, nacre growth issues on oysters already seeded has resulted in another
demanding year for Atlas and realised increases in pearl numbers did not translate into targeted profit.
18 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
DIREC TORS’ REPORT
4.2.5.2. PEARLING VALUE ADDED
The Company’s revenue stream is split into the following categories;
•
•
•
Trade sales, achieved through a mix of auctions and private sales,
Australian wholesale sales, and
Retail sales.
Trade sales represent 90% of the Company’s revenue and will remain a key focus for 19/20 with the mix of sales events adjusted to allow
the Company to engage in more face-to-face negotiations to ensure maximum profit margins and increased customer service.
Demand has been stable for white South Sea pearls with Atlas Pearls harvests achieving over 97% white and silver pearls in 18/19.
The Australian retail market continues to show signs of decline and combined wholesale and retail revenues have decreased by 13% in
comparison to the prior year. As a result of the softening markets, an increased effort is being made to improve the Company’s online
presence.
Efforts towards improving the desirability of the Indonesian South Sea pearl will continue at all levels of the value chain.
4.2.5.3. NATURAL EXTRACTS
Essential Oils of Tasmania Pty (EOT), a 50% joint venture of Atlas Pearls, delivered an improved profit of $328k this financial year compared
to a profit of $78k last year.
EOT has experienced improved crop yields on existing crops, as well as of new extracts from native crop such as Kunzea. Over the past
year the joint venture has further integrated downstream processes.
Process and marketing efforts have strongly contributed to continuing international interest reflecting the high quality goods produced
from the region.
4.2.6
AUDIT OPINION
The financial report has been audited independently and received an unmodified opinion. Refer to page 29 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
2019
248
2016
422
2017
476
2018
486
2019
540
2016
22
2017
21
2018
15
2019
17
2016
19
2017
19
2018
13
2019
13
ANNUAL REPORT | ATLAS PEARLS LTD | 19
For personal use only DIREC TORS’ REPORT
5.
Dividends
No dividends were declared and paid by the Company during the period ended 30 June 2019 (30 June 2018: nil).
6.
Events Since the end of the Financial Year
On 3 July 2019, Atlas Pearls received ¥200M (AUD $2.6M) in short term financing from a commercial partner. The loan is repayable by 30
June 2020. There have been no other material events since the end of the financial year.
7.
Likely Developments and Expected Results of Operations
The Company’s ability to harvest increased quantities of pearls whilst decreasing unit production costs has been validated during the
financial year with the focus now on understanding the internal process drifts that have caused the decreased pearl value.
Distribution channels remain strong, with increased focus on customer relationships. Global demand remains strong for high quality
South Sea pearls.
Results from process improvements are expected to come to fruition in the second half of the upcoming financial year. The financial
outcome of this anticipated increase in quality will be harvest and market dependent.
Continued efforts are being made in the Tasmanian operations with the focus on expanding the range of services and products offered
domestically and internationally.
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.
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 were exercisable at $0.059 on or before 31 December 2018 and were 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
These options were forfeited due to performance criteria not being met by 31 December 2018.
During the year ended 30 June 2019 21,269,928 options were issued to certain employees, pursuant to the Atlas Pearls Employee Option
Plan. These options are exercisable at $0.027 on or before 30 June 2021 and are subject to the following vesting conditions;
•
•
vesting dates - tranche one will vest immediately, tranche two will vest on 01 July 2019 and tranche three will vest on 01 July 2020,
the employee remains engaged as an employee at the date of the prescribed vesting dates listed above
Refer to note 25.2 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 $43,722 (30 June 2018: $34,845) in respect of
Directors’ and Officers’ liability and legal expenses insurance contracts, for current and former Directors and Officers.
20 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only DIREC TORS’ REPORT
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 Company, its related practices and non-related audit
firms during the year 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
2019
$
30 JUNE
2018
$
101,148
93,279
46,786
147,934
2,328
2,328
30,781
124,060
5,100
5,100
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 2019 remuneration report which sets out remuneration information for Atlas Pearls
Non-Executive Directors, Executive Directors and other Key Management Personnel. The information provided in this Remuneration
Report has been audited as required by section 308(c) of the Corporations Act 2001.
NAME
Non-Executive and Executive Directors
POSITION
G. Newman
T. Martin
P. Fallourd
C. Buss
Other Key Management Personnel
M. Longhurst
D. Kubicki
Changes since the end of the reporting period
Independent Non-Executive Chairman
Non-Executive Director
Managing Director
Independent Non-Executive Director
Chief Operations Officer PT Cendana Indopearl
Chief Financial Officer
There have been no changes to the remuneration of Key Management Personnel after 30 June 2019.
ANNUAL REPORT | ATLAS PEARLS LTD | 21
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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 overarchiving Executive remuneration framework and the operation of incentive plans, and
Key performance indicators (“KPI’s”) 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 short-term incentives (“STI”) and long-term
incentives (“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
2019, the total Non-Executive Directors’ fees including retirement benefit contributions were $178,114 (30 June 2018: $148,947).
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.
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 section 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 section 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 Executives 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.
22 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only DIREC TORS’ REPORT
Use of remuneration consultants
During the financial year ended 30 June 2019 the Company did not engage any remuneration consultants.
Voting and comments made at the Company’s 2018 Annual General Meeting
Atlas Pearls received 91% of “yes” votes on adoption of the remuneration report for the 2018 financial year. On the resolution to re-elect
Chairman Mr Geoff Newman, Atlas Pearls received 94% of “yes” votes. On the resolution to elect Director Mr Cadell Buss, Atlas Pearls
received 98% of “yes” votes. On the resolution to approve the approval of the Employee Share Option Plan, Atlas Pearls received 91% of
“yes” votes. On the resolution to approve the issue of incentive options to Mr Pierre Fallourd, Atlas Pearls received 93% 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.
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.
SHORT TERM BENEFITS
CASH
SALARY &
FEES
SALARY
SACRIFICE
FOR
SHARES
SHORT
TERM
INCENTIVE
CASH
BONUS
NON CASH
MONETARY
BENEFITS
POST
EMPLOY-
MENT
BENEFITS
LONG
TERM
BENEFITS
SHARE BASED
COMPENSATION
SUPERAN-
NUATION
BENEFIT
LONG
SERVICE
LEAVE
BONUS
SHARES
OPTIONS4
TOTAL
NAME
YEAR
$
$
$
DIRECTORS (NON-EXECUTIVE)
G. Newman
T. Martin
C. Buss 1
2019
2018
2019
2018
2019
2018
78,000
78,000
50,114
50,114
50,000
20,833
DIRECTORS (EXECUTIVE)
P. Fallourd
2019
2018
240,000
240,000
OTHER KEY MANAGEMENT PERSONNEL
M. Longhurst 2
D. Kubicki 3
T. Harris 3
TOTAL 2019
TOTAL 2018
2019
2018
2019
2018
2019
2018
2019
2018
200,000
200,000
173,516
43,679
-
182,589
791,630
815,215
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
CASH
SALARY,
FEES &
SHORT
TERM
BENEFITS
$
78,000
78,000
50,114
50,114
50,000
20,833
$
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
240,000
240,000
22,800
22,800
22,500
22,500
222,500
222,500
-
-
-
-
-
-
173,516
16,484
43,679
4,121
-
-
182,589
17,346
22,500
814,130
39,284
22,500
837,714
44,267
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
$
78,000
78,000
50,114
50,114
50,000
20,833
36,643
10,925
299,443
273,725
30,536
253,036
5,463
227,963
24,073
214,073
-
-
-
47,800
-
199,935
91,252
944,666
16,388
898,369
Notes:
1. Mr C Buss was appointed 1 February 2018 as Non-Executive Director.
2. Non-Monetary benefits of other Key Management Personnel includes overseas living allowances as per individual employment contracts.
3. Mr T Harris resigned from his position on 29 January 2018. Ms D Kubicki was appointed Chief Financial Officer on 26 March 2018.
4. Share based remuneration related to options being recognised over the respective vesting period.
ANNUAL REPORT | ATLAS PEARLS LTD | 23
For personal use only DIREC TORS’ 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
30 JUNE 2019
% PERFORMANCE
30 JUNE 2018
% PERFORMANCE
12.24%
12.07%
11.25%
3.99%
2.40%
0.00%
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
(3,582,461)
(2,034,099)
900,581
968,103
(8,134,049)
30 JUNE
2019
30 JUNE
2018
30 JUNE
2017
30 JUNE
2016
30 JUNE
2015
Basic earnings per share
Dividend payments
Decrease in share price
Total KMP incentives as a percentage profit/loss %
13.3. SERVICE AGREEMENTS
(0.84)
-
(67%)
(2.5%)
(0.48)
-
(8%)
(0.8%)
0.21
-
(19%)
3%
0.23
-
(27%)
12%
(2.4)
-
(48%)
(0.8%)
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 Officer, 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 2019 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 18/19.
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 2019 financial period of $200,000 per annum.
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 18/19.
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 2019 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. 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.
24 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only DIREC TORS’ REPORT
•
•
•
•
•
•
During the period ended 30 June 2019 the Company agreed to extend the debt financing package with the Martin
Family by deferring the $750,000 principal payment due in June 2019 to October 2020.
The loan originally commenced in January 2017 and was repayable over a three-year period at a 7.5% interest rate, in
staged repayments to be completed by 30 June 2020. Due to the deferral of the 30 June 2019 repayment to 30
October 2020 the initial loan term has been extended from 3 years to 3 years and 4 months. There are no other
variations to the “Varied Loan Agreement” that was approved by shareholders on 13 September 2017.
Mr. Martin (Non-Executive Director) has been discharged from the loan and the outstanding loan balance at 30 June
2019 of $2,500,000 is repayable to the Martin Family (a related party) at a 7.5% interest rate, in staged repayments to be
completed by 30 October 2020.
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 2019 the balance of the Martin Family loan was $2.5M (30 June 2018: $3.25M)
As at 30 June 2019 interest accrued and payable on loans from related parties is Nil (30 June 2018: nil)
13.4.2. OPTIONS
•
•
Performance options were issued to Directors and Key Management Personnel during the financial period end 30 June
2019. The options were issued at nil cost to employees and expire on 30 June 2021. The options are exercisable based
on graduated vesting dates. Refer to section 13.5.4 for details.
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 expired on 31 December 2018. The options were exercisable
based on the completion of KPI’s specific to each individual. These options were forfeited due to performance criteria
not being met by 31 December 2018.
13.4.3. OTHER KEY MANAGEMENT PERSONNEL TRANSACTIONS
•
As at 30 June 2019, Director fees of $10,667 are payable (30 June 2018: $10,767).
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 2019. The details below relate to the issuing of shares to
Directors and Key Management Personnel during the year ended 30 June 2018 and year ended 30 June 2017 under the employee salary
sacrifice share plan. Please refer to Note 25 in the financial statements for further details.
NAME
DATE OF
ENTRANCE
ENTITLE-
MENT
NO. OF
SHARES
NO. OF
SHARES TO
BE ISSUED
DATE OF
ISSUE
SHARES
FORFEITED
IN THE
YEAR
FINANCIAL YEAR
IN WHICH SHARES
VESTED
NATURE
OF
SHARES
SHARE
ISSUE
PRICE
TOTAL VALUE
SALARY
SACRIFICED
Pierre Fallourd
17/11/14
213,667
213,667
28/11/16
Pierre Fallourd
17/11/14
341,889
341,889
28/11/16
0%
0%
2016 – 100%
Ordinary Shares
2015 – 100%
Ordinary Shares
$0.045
$0.045
$9,615
$15,385
13.5.2 NON-EXECUTIVE DIRECTOR FEE SACRIFICE SHARE PLAN
Please refer to Note 25 in the financial statements for details.
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
ENTITLE-
MENT
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
TOTAL
VALUE
SALARY
SACRI-
FICED
SHARE
ISSUE
PRICE
$0.045
$32,233
$0.045
$23,333
Notes:
These shares were issued under the Non-Executive Directors’ plan described above directly to Non-Executive Directors’ for past services rendered.
ANNUAL REPORT | ATLAS PEARLS LTD | 25
For personal use only DIREC TORS’ REPORT
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.
The fair value at grant date, for options issued 30 June 2015, is independently determined using a Black & Scholes valuation model which
takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value at grant date, for options issued 20 November 2018, is independently determined using a Hoadley Trading & Investment valuation
model which takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
ENTITLE-
MENT
NO. OF
OPTIONS
DATE OF
GRANT
VESTING
DATE
EXPIRY
DATE
FINANCIAL
YEAR IN
WHICH
SHARES
VEST
SHARE
PRICE AT
GRANT
DATE
OPTION
EXERCISE
PRICE
VOLATILITY
RISK FREE
RATE
30/06/15
2,000,000
30/06/18
31/12/18
2018
30/06/15
1,000,000
30/06/18
31/12/18
20/11/18
1,083,940
30/11/18
30/06/21
20/11/18
903,282
30/11/18
30/06/21
20/11/18
1,625,908
01/07/19
30/06/21
20/11/18
1,354,924
01/07/19
30/06/21
20/11/18
1,567,340
01/07/19
30/06/21
20/11/18
2,709,847
01/07/20
30/06/21
20/11/18
2,258,206
01/07/20
30/06/21
20/11/18
2,351,009
01/07/20
30/06/21
2018
2019
2019
2020
2020
2020
2021
2021
2021
$0.044
$0.044
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.059
$0.059
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
60%
60%
100%
100%
100%
100%
100%
100%
100%
100%
3.06%
3.06%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
2.13%
TOTAL
VALUE OF
OPTIONS
AT GRANT
DATE
FAIR
VALUE
$32,806
$0.016403
$16,403
$0.016403
$10,666
$0.00984
$8,888
$0.00984
$15,999
$0.00984
$13,332
$0.00984
$15,423
$0.00984
$26,665
$0.00984
$22,221
$0.00984
$23,134
$0.00984
NAME
Pierre Fallourd1
Mark Longhurst1
Pierre Fallourd2
Mark Longhurst2
Pierre Fallourd2
Mark Longhurst2
Diana Kubicki2
Pierre Fallourd2
Mark Longhurst2
Diana Kubicki2
Notes:
1. These unlisted options were approved by the Board of Directors on 29 May 2015.
2. These unlisted options were approved by the Board of Directors on 20 November 2018. and are subject to the following vesting conditions:
i. vesting dates - tranche one will vest immediately, tranche two will vest on 01 July 2019 and tranche three will vest on 01 July 2020; and
ii. the employee remains engaged as an employee at the date of the prescribed vesting above in (i)
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 13,854,456 options issued to Key Management Personnel as remuneration during the year ended 30 June 2019
(30 June 2018: nil).
(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.
The details relating to the equity instruments held by Key Management Personnel are as follows:
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
BALANCE
01/07/18
GRANTED AS
COMPENSATION
OPTIONS
EXERCISED
OTHER
CHANGES
BALANCE
30/06/19
2,563,443
113,086,550
-
3,866,762
-
-
119,516,755
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,563,443
113,086,550
-
3,866,762
-
-
119,516,755
Notes:
1. 4,997,428 shares are directly held by Mr T Martin. The balance of 108,089,122 shares, are related party share holdings.
2. Mr. C Buss was appointed 1 February 2018 as a Non-Executive Director.
3. Ms. D Kubicki was appointed 26 March 2018 as Chief Financial Officer.
26 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
DIREC TORS’ REPORT
(C)
OPTION HOLDING
The number of options over ordinary shares in the parent entity held during the 12 months ended 30 June 2019 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 M. Longhurst
Ms D. Kubicki2
BALANCE
01/07/18
GRANTED
3
VESTED
EXERCISED
LAPSED/
FORFEITED/
OTHER
4
BALANCE
30/06/19
-
-
-
-
-
-
-
-
-
2,000,000
5,419,695
1,083,940
1,000,000
-
4,516,412
3,918,349
903,282
-
3,000,000
13,854,456
1,987,222
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
4,335,755
1,000,000
-
3,613,130
3,918,349
3,000,000 11,867,234
Notes:
1. Mr. C Buss was appointed 1 February 2018 as Non-Executive Director.
2. Ms. D Kubicki was appointed 26 March 2018 as Chief Financial Officer.
3. These unlisted options were approved by the Board of Directors on 20 November 2018.
4. Options forfeited due to performance criteria attached to options exercise not being met by 31 December 2018.
This is the end of the Audited Remuneration Report.
ANNUAL REPORT | ATLAS PEARLS LTD | 27
For personal use only
DIREC TORS’ REPORT
14. Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 29.
Signed in accordance with a resolution of the Directors.
Geoff Newman
Chairman
27 August 2019
Geoff Newman
Chairman
27 August 2019
28 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF ATLAS PEARLS LIMITED
As lead auditor of Atlas Pearls Limited for the year ended 30 June 2019, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Atlas Pearls Limited and the entities it controlled during the period.
Glyn O’Brien
Director
BDO Audit (WA) Pty Ltd
Perth, 27 August 2019
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
29 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS & OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Revenue from contracts with customers
Cost of goods sold
GROSS PROFIT
Other income
Administration expenses
Finance costs
Marketing expenses
Change in fair value less husbandry costs of oysters
Change in fair value of pearl and jewellery
Other expenses
PROFIT/(LOSS) BEFORE INCOME TAX
Income tax /(charge) benefit current year
PROFIT/(LOSS) AFTER INCOME TAX FOR THE PERIOD
OTHER COMPREHENSIVE INCOME/(LOSSES)
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 CONTRACTS WITH CUSTOMERS ATTRIBUTABLE
TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY
Basic earnings profit/(loss) per share (CENTS)
Diluted earnings per share (CENTS)
NOTE
2019
$
2018
$
3
3
5
5
5
7
6
6
16,240,725
14,162,190
(9,884,321)
(8,909,878)
6,356,404
5,252,312
668,625
579,621
(5,561,172)
(5,586,504)
(373,354)
(294,687)
1,741,557
(2,331,340)
(1,380,887)
(331,386)
(344,577)
(287,128)
(324,982)
(941,472)
(1,174,854)
(1,984,116)
(2,407,607)
(49,983)
(3,582,461)
(2,034,099)
1,458,792
1,458,792
(509,503)
(509,503)
(2,123,669)
(2,543,602)
(3,582,461)
(2,034,099)
(2,123,669)
(2,543,602)
(0.84)
-
(0.48)
-
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
30 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Biological assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Intangibles
Loans to joint venture entities
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
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
(Accumulated losses)
TOTAL EQUITY
NOTES
2019
$
2018
$
8
10
9
4
22
4
12
7
11
13
7
13
7
11
14
15
1,017,220
1,278,873
791,797
20,405
2,227,798
7,299,854
872,865
6,465
1,968,744
9,204,890
11,357,074
13,331,837
243,902
1,364,851
9,730,810
5,517,912
3,016,446
-
1,262,848
8,080,344
5,035,034
3,999,752
19,873,921
18,377,978
31,230,995
31,709,815
3,174,823
2,870,140
421,675
2,299,323
2,310,482
115,691
6,466,638
4,725,496
750,000
1,842,223
131,300
131,299
2,854,822
1,750,000
1,207,104
128,091
1,207,104
4,725,496
9,321,460
7,810,691
21,909,535
23,899,124
36,857,415
36,857,415
(7,758,487)
(9,351,359)
(7,189,393)
(3,606,932)
21,909,535
23,899,124
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
ANNUAL REPORT | ATLAS PEARLS LTD | 31
For personal use only ATLAS PEARLS 2019
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
ATTRIBUTABLE TO OWNERS OF ATLAS PEARLS
CONTRIB-
UTED
EQUITY
REVAL-
UATION
RESERVE
SHARE
BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
TRANS-
LATION
RESERVE
(ACCU-
MULATED
LOSS)
TOTAL
EQUITY
NOTE
$
$
$
$
$
$
BALANCES AT 1 JULY 2018
PROFIT FOR THE YEAR
Exchange differences on translation of foreign operations
Revaluation of property, plant and equipment
15
15
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 2019
BALANCES AT 1 JULY 2017
PROFIT FOR THE YEAR
Exchange differences on translation of foreign operations
Revaluation of property, plant and equipment
14
15
15
15
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
14
15
36,857,415
179,179
739,187
(10,269,725)
(3,606,932)
23,899,124
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
134,080
-
(3,582,461)
(3,582,461)
1,458,792
-
-
-
1,458,792
-
1,458,792
(3,582,461)
(2,123,669)
-
-
-
-
-
134,080
36,857,415
179,179
873,267
(8,810,933)
(7,189,393)
21,909,535
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.
32 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
CONSOLIDATED STATEMENT
OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from pearl and jewellery sales
Proceeds from other operating activities
Payments to suppliers and employees
Income tax (paid)
Interest paid
Interest received
NOTE
2019
$
2018
$
15,950,602
13,834,132
387,188
341,750
(14,560,264)
(14,175,404)
(661,125)
(359,154)
6,607
(433,886)
(270,677)
3,005
Net cash inflow/(outflow) from operating activities
8
763,854
(701,080)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Acquisition of subsidiary PT Disthi Mutiara Suci
Net cash (outflow) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of borrowings
Proceeds from borrowings
Net cash (outflow)/inflow from 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
(1,144,875)
(675,794)
(197,087)
-
(1,341,962)
(675,794)
(3,813,087)
(1,507,622)
3,140,235
1,935,411
(672,852)
427,789
(1,250,960)
1,278,873
989,307
(949,085)
2,184,968
42,990
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
8
1,017,220
1,278,873
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
ANNUAL REPORT | ATLAS PEARLS LTD | 33
For personal use only ATLAS PEARLS 2019
INDEX OF NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
PART A: BASIS OF PREPARATION
1. Basis of preparation
PART B: FINANCIAL PERFORMANCE
2. Segment reporting
3. Revenue from contracts with customers and other income
4. Biological assets
5. Profit / (loss) before income tax includes the following specific items
6. Earnings profit / (loss) per share
PART C: TAX
7. Tax
PART D: CASH FLOW INFORMATION
8. Cash and cash equivalents
PART E: WORKING CAPITAL
Inventories
9.
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. Contributed equity
15. Reserves
16. Dividends
PART H: FINANCIAL RISK MANAGEMENT
17. Financial risk management
PART I: UNRECOGNISED ITEMS
18. Events occurring after the reporting period
19. Commitments
20. Contingencies
PART J: OTHER
21. Subsidiaries
22. Related party transactions
23. Interests in joint ventures
24. Parent entity financial information
25. Share based payments and options
26. Remuneration of auditors
27. Accounting policies
35
37
40
41
43
44
45
47
48
48
49
49
51
52
53
53
54
59
59
59
60
60
61
63
64
66
66
34 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
NOTES TO & FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
PART A BASIS OF PREPARATION
1.
Basis of Preparation
1.1.
BASIS OF PREPARATION
The financial statements cover the consolidated entity of Atlas Pearls Ltd 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.
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.
These financial statements have been prepared under the historical cost basis, financial assets and liabilities (including derivative
instruments) at fair value through profit or loss and biological assets and inventories at fair value less cost to sell.
The accounting policies are consistent with those disclosed in the 2018 financial statements, except for the impact of all new or amended
standards and interpretations. The following new standards and interpretations have been adopted by the Group:
•
•
AASB 15 Revenue from Contracts with Customers (refer note 3 for accounting policy)
AASB 9 Financial Instruments (refer note 27 for accounting policy)
The adoptions of these standards and interpretations did not result in any material changes to the Group’s accounting policies.
1.2.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise
its judgment 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)
(b)
(c)
(d)
(e)
Determination of market value of biological assets – see note 4
Write off of inventories – see note 9
Recoverability of deferred tax asset - see note 7
Property, plant and equipment depreciation rates - see note 12
Impairment of joint venture receivables – see note 22
ANNUAL REPORT | ATLAS PEARLS LTD | 35
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
1.3. 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 2019 amounts to a loss of $3.6M (30 June 2018: $2.0M loss). At
30 June 2019 the Group had a working capital balance of $3.7M (30 June 2018: $7.3M); $7.3M (30 June 2018: $9.2M) of this balance
comprised of unharvested oysters due for harvest during the next 12 months. At 30 June 2019, the Group had a net asset position of
$21.9M (30 June 2018: $23.9M); $17.0M (30 June 2018: $17.3M) of this balance comprised of unharvested oysters.
During the year, the Company delayed a $750,000 scheduled repayment to its major shareholder. The loan was approved at the 2017
AGM and was repayable in instalments through to June 2020 which has now been extended to 30 October 2020. The Group’s long-term
strategic plan remains on course, with higher seeding targets and increased oyster stock. Oyster stocks on hand (seeded and unseeded)
at 30 June 2019 is 2.7M shells (30 June 2018: 2.3M 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, 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 of ¥200M (AUD $2.6M) in July 2019, which is repayable by 30 June 2020.
The Group’s core debt facility remains in place. The balance of the debt owing to the Martin Family is $2.5M at 30 June 2019. A payment
of $250k was made in February 2019 and $500k in April 2019. The remainder of the loan is to be repaid in staggered payments by
October 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, and
the Group achieving profitable operations with positive operating cash flows.
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. 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
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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 consistent with the 2018 Financial Statements.
DISAGGREGATION OF REVENUE
The Group derives revenue from the transfer of goods at a point in time in major product lines and geographical regions as shown below.
The operating segments are identified by management based on the manner in which the product is sold, whether wholesale or
retail. 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 on a cost-plus arrangement as per the Advance Pricing Agreement (APA) effective 01 July 2017 through
to 30 June 2020. The transfer price terms per the APA are between 11.8% and 16.47%. 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.
Segment revenue reconciles to total revenue from contracts with customers in the statement of profit or loss and other comprehensive
income as follows:
Total Segment Revenue
Inter-segment eliminations
Other revenues
Total revenue from contracts with customers (Note 3)
3,490,673
698,782
3,721,662
763,888
2019
$
2018
$
31,056,073
26,841,664
(14,853,766)
(12,681,580)
38,418
88
16,240,725
14,162,190
2019
Australia
Japan
Other Countries
2018
Australia
Japan
Other Countries
12,051,270
9,676,640
Major customers by country
ANNUAL REPORT | ATLAS PEARLS LTD | 37
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
2.1.
SEGMENT INFORMATION PROVIDED TO THE BOARD OF DIRECTORS AND MANAGEMENT TEAM
(i)
The segment information provided to the Board of Directors and management team for the reportable segments for the
period ended 30 June 2019 is as follows:
30 JUNE 2019
Total segment revenue
Inter-segment revenue
REVENUE FROM EXTERNAL CUSTOMERS
TIMING OF REVENUE RECOGNITION
At a point in time
Over time
NORMALISED EBITDA
ADJUSTED NET OPERATING PROFIT/(LOSS) BEFORE INCOME TAX
Depreciation and amortisation
Revaluation of Biological Assets
TOTAL SEGMENT ASSETS
Total assets include:
WHOLESALE LOOSE PEARLS
JEWELLERY
AUSTRALIA
$
INDONESIA
$
AUSTRALIA
$
INDONESIA
$
TOTAL
15,206,115
15,154,080
245,521
450,357
31,056,073
-
(14,853,766)
-
-
(14,853,766)
15,206,115
300,314
245,521
450,357
16,202,307
15,206,115
300,314
245,521
450,357
16,202,307
-
15,206,115
624,298
24,177
144,435
-
-
300,314
286,259
183,323
106,105
-
-
-
-
245,521
450,357
16,202,307
(258,969)
(294,179)
32,330
-
(48,910)
(63,125)
14,385
-
602,678
(149,804)
297,255
-
1,185,456
24,217,500
366,040
1,080,091
26,849,086
Additions to non–current assets (other than financial
assets or deferred tax.
-
1,132,878
3,595
8,401
1,144,874
TOTAL SEGMENT LIABILITIES
(1,870,442)
(2,248,279)
(27,345)
(41,356)
(4,187,422)
(ii)
the period ended 30 June 2018 is as follows:
The segment information provided to the Board of Directors and management team for the reportable segments for
30 JUNE 2018
Total segment revenue
Inter-segment revenue
WHOLESALE LOOSE PEARLS
JEWELLERY
AUSTRALIA
$
INDONESIA
$
AUSTRALIA
$
INDONESIA
$
TOTAL
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
TIMING OF REVENUE RECOGNITION
At a point in time
Over time
NORMALISED EBITDA
Depreciation and amortisation
Revaluation of Biological Assets
TOTAL SEGMENT ASSETS
Total assets include:
ADJUSTED NET OPERATING PROFIT/(LOSS) BEFORE INCOME TAX
(2,669,656)
2,006,307
(345,686)
13,145,811
281,135
221,473
511,665
14,160,084
-
-
-
-
-
13,145,811
281,135
221,473
(2,262,887)
2,062,341
(312,602)
149,610
56,662
33,084
-
(287,128)
-
511,665
(48,120)
(64,292)
16,246
-
14,160,084
(561,269)
(1,073,328)
255,602
(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)
2.2. OTHER SEGMENT INFORMATION
(i)
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
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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 OPERATIONS
(ii)
Segment assets
2019
$
2018
$
(149,804)
(1,073,328)
(589,783)
(612,110)
552,334
(1,001,542)
13,940
473,996
(622,501)
(150,174)
(1,174,854)
(1,984,116)
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
2019
$
2018
$
26,849,086
26,446,622
1,365,463
3,016,446
1,263,441
3,999,752
31,230,995
31,709,815
The total of non-current assets other than financial instruments and deferred tax assets located in Australia is $2,890,036
(30 June 2018: $916,388). The total located in Indonesia is $15,203,333 (30 June 2018: $15,400,741).
(iii)
Segment liabilities
Liabilities are allocated based on the operations of the segment and the physical location of the asset. Reportable segments’ liabilities
are reconciled to total liabilities as follows:
SEGMENT LIABILITIES
Unallocated:
Current tax liabilities
Borrowings
Deferred tax liabilities
Other
TOTAL LIABILITIES AS PER THE STATEMENT OF FINANCIAL POSITION
(iv)
Normalised EBITDA reconciliation
Net profit before tax
Finance/interest paid
Depreciation/amortisation
FX (gain)/loss
Agriculture standard revaluation (gain)/loss
Other non-operating (income)/expense
(Gain) / loss on derivative instruments
NORMALISED EBITDA
2019
$
2018
$
4,187,422
2,382,222
421,675
2,870,140
1,842,223
-
115,691
4,060,482
1,207,104
45,192
9,321,460
7,810,691
2019
$
2018
$
(1,174,854)
(1,984,116)
321,147
297,255
449,207
589,783
134,080
(13,940)
602,878
282,781
255,601
148,504
612,110
-
150,174
(534,946)
ANNUAL REPORT | ATLAS PEARLS LTD | 39
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
3.
Revenue from Contracts with Customers
3.1.
REVENUE FROM CONTRACTS WITH CUSTOMERS
SALES REVENUE
Sale of goods
OTHER REVENUE
Other Revenues
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS
3.2. OTHER INCOME
Foreign exchange gains
Grant funds
Gain on derivative financial instruments
Interest income
Gain on sale of assets
TOTAL OTHER INCOME
2019
$
2018
$
16,202,307
14,160,084
38,418
2,106
16,240,725
14,162,190
2019
$
552,334
50,144
13,940
52,207
-
668,625
2018
$
473,996
56,721
-
48,605
299
579,621
SIGNIFICANT ACCOUNTING POLICY
AASB 15 Revenue from Contracts with Customers replaces AASB 118 Revenue. AASB 15 requires an entity to recognise revenue in
a manner that represents the transfer of promised goods or services in an amount that reflects the consideration to which the
entity expects to be entitled. This means that revenue will be recognised when control of goods and/or services is transferred,
rather than on transfer of risks and rewards.
The Directors have reviewed and assessed the Group’s recognition and measurement of revenue from 1 July 2018 based on the
facts and circumstances that existed from this date and concluded that the application of AASB 15 has had no material impact on
the recognition or measurement of the revenue for the Group in the current reporting period.
Revenue from contracts with customers
Revenue is recognised when the Group transfers control of products to a customer at the amount to which the Group expects
to be entitled. Revenue shall be measured at the fair value of the consideration received or receivable. The amount of revenue
arising on a transaction is usually determined by an agreement between the Group and the customer.
Sale of Goods - Wholesale
The Group produces and sells pearls in the wholesale market. Revenue from the sale of goods is recognised at a point in time
when control of the product is transferred to the customer, which is typically on delivery.
Sale of Goods - Retail
The Group operates a chain of retail stores selling pearl jewellery. Revenue from the sale of goods is recognised when the Group
transfers control of the product to the customer, which is typically at the point of sale.
40 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
2019
$
2018
$
7,299,854
7,299,854
9,204,890
9,204,890
9,730,810
9,730,810
8,080,344
8,080,344
17,030,664
17,285,234
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
NUMBER OF PEARLS
JUVENILE AND MATURE OYSTERS
2017
1,592,684
NUCLEATED OYSTERS
1,153,250
2017
2018
2017
2018
2019
2019
2018
2019
No significant events occurred which impacted on oyster mortalities during the financial year.
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.
ANNUAL REPORT | ATLAS PEARLS LTD | 41
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
4.1.
KEY PRODUCTION ASSUMPTIONS
The key assumptions utilised to determine the fair market value of oysters are detailed below:
INPUT
2019
2018
COMMENTARY
Average selling price
¥13,200
per momme
¥12,600
per momme
Obtained by analysing sales prices achieved and the trend analysis
of the past 12 months of average sales prices.
Yen exchange rate
¥75.73: AUD 1
¥81.90: AUD 1
Based on forward Yen price per a financial institution.
Average pearl size
Proportion of marketable grade
Discount rate
Mortality
0.37
36%
20%
0.44
41%
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
Costs to complete
$2.46
$0.77
$2.04
$0.76
Based on historical independent valuation.
Based on historical averages of costs to complete and sell pearls
per momme.
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:
-10%
¥11,880 (SELLABLE GRADE)
¥1,800 (COMMERCIAL GRADE)
SELLING PRICE (¥/MOMME)
NO CHANGE
¥13,200 (SELLABLE GRADE)
¥2,000 (COMMERCIAL GRADE)
+10%
¥14,250 (SELLABLE GRADE)
¥2,200 (COMMERCIAL GRADE)
DISCOUNT RATE
PROFIT $
PROFIT $
PROFIT $
22%
20%
18%
FX RATE
83.31
75.73
68.16
(2,991,785)
(2,634,846)
(2,262,560)
(409,190)
-
(426,808)
2,173,405
2,634,846
3,116,176
-10%
¥11,880 (SELLABLE GRADE)
¥1,800 (COMMERCIAL GRADE)
SELLING PRICE (¥/MOMME)
NO CHANGE
¥13,200 (SELLABLE GRADE)
¥2,000 (COMMERCIAL GRADE)
+10%
¥14,250 (SELLABLE GRADE)
¥2,200 (COMMERCIAL GRADE)
PROFIT $
PROFIT $
PROFIT $
(4,695,677)
(2,634,846)
(140,447)
(2,289,812)
-
2,771,555
116,053
2,634,846
5,683,557
-10%
28% (SELLABLE %)
62% (COMMERCIAL %)
SELLABLE %
NO CHANGE
31% (SELLABLE %)
69% (COMMERCIAL %)
+10%
34% (SELLABLE %)
76% (COMMERCIAL %)
AV. WEIGHT
PROFIT $
PROFIT $
PROFIT $
0.44
0.40
0.36
543,443
(1,901,276)
(4,228,187)
2,634,846
-
(2,507,570)
4,732,026
1,906,527
(782,227)
42 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
Travel
Other
TOTAL ADMINISTRATION EXPENSES
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
2019
$
2018
$
3,401,080
3,242,808
297,255
510,680
360,662
383,297
608,198
255,602
612,062
558,600
385,021
532,411
5,561,172
5,586,504
2019
$
373,354
373,354
2018
$
331,386
331,386
2019
$
2018
$
1,001,542
-
123,985
134,080
121,280
1,380,887
622,501
150,174
92,641
-
76,156
941,472
ANNUAL REPORT | ATLAS PEARLS LTD | 43
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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)
Weighted average number of ordinary shares outstanding during the period used for calculation
of basic earnings per share
2019
$
(0.84)
-
2018
$
(0.48)
-
2019
$
2018
$
(3,582,461)
(2,034,099)
-
-
(3,582,461)
(2,034,099)
2019
$
2018
$
424,809,620
422,218,298
Adjustments for calculation of diluted earnings per share: options (note 25)
20,306,013
3,000,000
WEIGHTED AVERAGE NUMBER OF POTENTIAL ORDINARY SHARES OUTSTANDING DURING THE PERIOD
USED FOR CALCULATION OF DILUTED EARNINGS PER SHARE
445,115,663
425,218,298
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 2019 as potential ordinary shares which may have a dilutive effect on the profit of the 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 25.1 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 in-
come 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
25.1 for further detail.
44 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
Previously recognised deferred tax assets
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
Other
Deferred tax assets
Difference in accounting and tax depreciation
Stock
Accruals
Provisions
Other
Tax losses
Investment
Previously recognised deferred tax assets
DEFERRED TAX/(INCOME)
For details of the franking account, refer to Note 16
2019
$
2018
$
789,180
1,618,427
2,407,607
520,651
(470,668)
49,983
983,310
(1,044,821)
-
635,117
1,618,427
687,483
(113,330)
(470,668)
(1,174,854)
(1,984,116)
(323,085)
(545,632)
134,990
440,475
(24,222)
(60,391)
-
2,239,840
2,407,607
-205%
(548,669)
313
(3,833)
(82,927)
(19,265)
525,130
(3,775)
126,192
19,871
608,376
-
(2,239,840)
(1,618,427)
72,586
183,827
(24,691)
(3,544)
367,437
-
49,983
-3%
63,859
277
45,214
-
(6,167)
18,711
1,900
46,689
615
324,881
(25,311)
-
470,668
ANNUAL REPORT | ATLAS PEARLS LTD | 45
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
Other
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
Previously recognised deferred tax assets
Tax losses recognised
TOTAL DEFERRED TAX ASSETS
2019
$
2018
$
421,675
115,691
1,753,554
1,204,885
128
5,611
82,930
441
1,778
-
1,842,223
1,207,104
-
613,570
18,375
569,598
277,908
67,637
1,547,088
(2,239,840)
3,709,198
3,016,446
19,265
88,440
22,150
443,406
277,908
47,763
898,932
-
3,100,820
3,999,752
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
2,792,650
(1,618,427)
-
1,174,223
2,321,982
1,158,151
(687,483)
2,792,650
SIGNIFICANT JUDGEMENT
Deferred tax assets
Deferred tax assets and liabilities have been bought to account after considering the level of tax losses carried forward and
available to the Group against future taxable profits and the probability within the future that taxable profits will be available
against which the benefits of the deductible temporary difference can be claimed.
The deferred tax assets include an amount of $3,709,198 which relates to carried forward tax losses. During the year ended 30
June 2019 the Group converted an intercompany quasi-equity loan to equity, crystallising tax losses relating to foreign exchange
movements. As a result of this transaction the Group has concluded that the total value of the tax losses available to the Group
will not be fully utilised within the next five years and have reversed $2,239,840 of previously recognised deferred tax assets. The
losses can be carried forward indefinitely and have no expiry date.
46 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART D CASH FLOW INFORMATION
8. Cash and Cash Equivalents
Cash at bank
BALANCES PER STATEMENT OF CASH FLOWS
RISK EXPOSURE
2019
$
2018
$
1,017,220
1,017,220
1,278,873
1,278,873
The Group’s exposure to interest rate risk is disclosed in note 17. 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 2018: $100,000).
8.1. NOTES TO THE CASH FLOW STATEMENT
8.1.1. RECONCILIATION OF CASH
For the purposes of the statement of cash flows, 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.
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
Investment income
Share based payments
Foreign exchange (gain)/losses unrealised
Income tax expense/(benefit)
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
2019
$
2018
$
(3,582,461)
(2,034,099)
297,255
(45,600)
134,080
277,954
2,407,607
(13,940)
589,783
149,767
1,338,228
420,902
408,707
(1,618,427)
763,855
255,602
(45,600)
-
244,839
-
150,174
612,110
(29,552)
950,451
(188,879)
37,598
(653,723)
(701,080)
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 2019, the Company had in place a bank overdraft loan facility with the National Australia Bank with a limit of $1.5M
(30 June 2018: $1.5M).
ANNUAL REPORT | ATLAS PEARLS LTD | 47
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
8.1.4. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
NON-CASH CHANGES
OPENING
BALANCE
2018
$
CASH FLOWS
$
ACQUISITION
$
FOREIGN
VALUE
CHANGES
$
FAIR VALUE
CHANGES
$
Long term borrowings
1,750,000
-
Short term borrowings
2,310,482
(672,852)
Lease liabilities
Assets held to hedge
Total liabilities from
financing activities
-
-
-
-
4,060,482
(672,852)
-
-
-
-
-
-
232,510
-
-
232,510
RECLASS-
IFICATION
IN BALANCE
SHEET
$
(1,000,000)
1,000,000
-
-
-
-
-
-
-
-
CLOSING
BALANCE
2019
$
750,000
2,870,140
-
-
3,620,140
PART E WORKING CAPITAL
9.
Inventories
Pearls
Jewellery
TOTAL INVENTORY
2019
$
2018
$
1,046,377
1,161,282
1,181,421
808,462
2,227,798
1,968,744
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 2019, a write off of pearl
stocks of $2,331,340 has been recorded (30 June 2018: $324,982) to bring the value in line with the assessed 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
Trade receivables
Provision for loss allowance
Net trade receivables
Sundry debtors & prepayments
TOTAL TRADE & OTHER RECEIVABLES
SIGNIFICANT ACCOUNTING POLICY
2019
$
2018
$
288,798
-
288,798
502,999
791,797
341,036
(3,665)
337,371
535,494
872,865
The Group’s customers are required to pay in accordance with agreed payment terms. Depending on the capture of the sales,
settlement terms are either cash on delivery or 30 days from the date of invoice. Trade receivables are recognised initially at the
amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at
fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures
them subsequently at amortised costs using the effective interest method. Details about the Group’s impairment policies and the
calculation of the loss allowance are provided in Note 27.
48 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
TOTAL TRADE AND OTHER PAYABLES
2019
$
2018
$
822,720
2,352,103
3,174,823
425,668
1,745,564
2,171,232
131,299
131,299
128,091
128,091
3,306,122
2,299,323
Other payables include accruals for annual leave and employee benefits of $1,979,601 (30 June 2018: $1,574,103) in the consolidated
entity. Non-current other payables comprise 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.
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
2019
$
2018
$
1,087,569
(946,771)
140,798
1,058,057
(745,476)
312,581
453,379
1,096,538
(851,950)
244,588
1,032,844
(654,949)
377,895
622,483
2,615,703
(567,581)
2,048,122
2,211,080
(436,722)
1,774,358
8,831,433
7,376,010
(5,815,021)
(4,737,817)
3,016,412
5,064,534
5,517,913
2,638,193
4,412,551
5,035,034
Included in pearling project land (leasehold and freehold) and buildings is $669,709 (30 June 2018: $532,797) which represents
construction of buildings in progress at cost.
ANNUAL REPORT | ATLAS PEARLS LTD | 49
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
(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)
50 | ATLAS PEARLS LTD | ANNUAL REPORT
2019
$
2018
$
244,588
11,997
(911)
354,940
18,730
(5,536)
(115,394)
(123,260)
518
140,798
(286)
244,588
377,895
459,303
-
-
(76,305)
10,991
312,581
-
-
(75,616)
(5,792)
377,895
2019
$
2018
$
1,774,358
878,604
(665,318)
(79,469)
139,947
2,469,513
509,576
(1,068,764)
(57,471)
(78,496)
2,048,122
1,774,358
2,638,193
254,274
642,000
(711,663)
193,607
3,016,411
5,517,912
2019
$
(982,831)
685,576
(297,255)
(233,070)
(64,185)
2,014,822
147,488
1,068,764
(528,837)
(64,044)
2,638,193
5,035,034
2018
$
(785,184)
529,582
(255,602)
(255,602)
-
(297,255)
(255,602)
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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%).
The estimations of useful lives, residual values and depreciation methods require significant management judgements and are
regularly reviewed. If they need to be modified, the depreciation and amortisation expense is accounted for prospectively from
the date of the assessment until the end of the revised useful life (for both the current and future years).
PART G FUNDING, CAPITAL MANAGEMENT & EQUITY
13. Borrowings
CURRENT
Other loans
TOTAL CURRENT BORROWINGS
NON CURRENT
Other loans
TOTAL NON-CURRENT BORROWINGS
TOTAL BORROWINGS
2019
$
2018
$
2,870,140
2,870,140
2,310,482
2,310,482
750,000
750,000
3,620,140
1,750,000
1,750,000
4,060,482
Refer to Note 17.4 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,
canceled 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.
ANNUAL REPORT | ATLAS PEARLS LTD | 51
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
14. 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
2019
No. of Shares
2018
No. of shares
2019
$
2018
$
422,909,620
422,909,620
38,857,415
38,857,415
424,809,620
424,809,620
36,857,415
36,857,415
-
-
-
-
-
-
-
-
424,809,620
424,809,620
36,857,415
36,857,415
3,062,138
3,062,138
-
-
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 2019 to employees as part of the Atlas employee share salary sacrifice plan (30 June 2018: nil).
(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 20,306,013 unlisted options on issue at 30 June 2019. 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 25.
(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 20% at 30 June 2019 (30 June 2018 : 17%)
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.
52 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
15. Reserves
Foreign Currency Translation Reserve
Employee Share Reserve
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
2019
$
2018
$
(8,810,933)
(10,269,725)
873,267
179,179
739,187
179,179
(7,758,487)
(9,351,359)
(10,269,725)
(9,760,222)
1,458,792
(509,503)
(8,810,933)
(10,269,725)
739,187
134,080
873,267
179,179
-
179,179
739,187
-
739,187
179,179
-
179,179
NOTES:
1. The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries to the reporting currency.
2. The employee share reserve records the value of equity portion of remuneration paid to employees in the form of shares or other equity instruments.
3. The revaluation reserve records the value of increase in the carrying value of assets as a result of revaluation.
16. Dividends
Dividend Franking Account
2019
$
2018
$
Franking credits available to shareholders of the Company for subsequent financial years based on a tax rate of 27.5%
1,305,572
1,305,572
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 2019 financial year or the period ended 30 June 2018.
ANNUAL REPORT | ATLAS PEARLS LTD | 53
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART H FINANCIAL RISK MANAGEMENT
17. 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
17.1. MARKET RISK
(I)
FOREIGN EXCHANGE RISK
2019
$
2018
$
1,017,220
1,278,873
310,502
20,405
361,707
6,465
1,348,127
1,647,045
824,821
3,620,140
4,444,961
426,668
4,060,482
4,487,150
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Japanese Yen (“JPY”) , Indonesian Rupiah (“IDR”) and US Dollars (“USD”).
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.
54 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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 2019
30 JUNE 2018
-10%
10%
-10%
10%
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
FINANCIAL ASSETS
2019
2018
Cash
1,017,220 1,278,873
63,182
Trade and other receivables
310,502
361,707
27,143
Derivatives
20,405
6,465
2,267
FINANCIAL LIABILITIES
Trade and other payables
824,821
426,668
(37,374)
Borrowings
Derivatives
3,620,140 4,060,482
-
-
Total Increase/(Decrease)
-
-
55,218
-
-
-
-
-
-
-
(51,694)
(22,208)
(1,855)
30,579
-
-
(45,178)
-
-
-
-
-
-
-
17,236
27,992
1,460
(4,431)
(90,054)
(741)
(48,538)
-
-
-
-
-
-
-
(14,102)
(22,902)
(1,194)
3,626
73,680
607
39,715
-
-
-
-
-
-
-
Trade debtors relates to sales made in JPY. Current borrowings are all held in AUD. 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 2019 was $2,736,848 (30 June 2018: AUD$2,606,814). 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 June 2020 and non-current
borrowings are repayable by 30 October 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.
17.2. 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 below. 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.
Impairment of financial assets
The Group hold trade receivables that are subject to the expected credit loss model. While cash and cash equivalents are also subject to
the impairment requirements of AASB 9, the identified impairment loss was immaterial.
Trade receivables
The Group applies the AASB 9 simplified approach to measuring the expected credit losses which uses a lifetime expected loss allowance
for all trade receivables. The expected credit losses have been grouped based on shared credit risk characteristics and the days past due.
ANNUAL REPORT | ATLAS PEARLS LTD | 55
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 30 June 2019 or 1 July 2018
respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect
current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
On that basis, the loss allowance as at 30 June 2019 and 1 July 2018 (on adoption of AASB 9) was determined to be nil.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation
of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group and failure to make contractual
payments for a period of greater than 120 days past due.
Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of
amounts previously written off are credited against the same line item.
TRADE RECEIVABLES
Wholesale customers – existing customers with no previous defaults
Derivative financial assets
17.3.
LIQUIDITY RISK
2019
$
2018
$
288,798
20,405
312,055
6,465
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.
17.4. FINANCING ARRANGEMENTS
The Group had access to the following fixed rate borrowing facilities at the reporting date.
Foreign currency trade loans
Overdraft facility (NAB)
2019
$
-
1,500,000
1,500,000
2018
$
810,482
1,500,000
2,310,482
•
•
•
•
•
•
During the year ended 30 June 2019, the Company maintained the existing $1,500,000 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 2019, $1,120,140 (30 June 2018: Nil) has been drawn down on this facility.
During the year ended 30 June 2019, repayments of $750,000 have been made to the debt financing package from Mr. Martin (Non-
Executive Director) and the Martin Family (a related party). $250,000 in February 2018 and $500,000 in April 2019 in accordance
with the loan contract.
During the year ended 30 June 2019 the Company agreed to extend the debt financing package with the Martin Family (related
party) by deferring the $750,000 principal payment due in June 2019 to October 2020. The loan originally commenced in January
2017 and was repayable over a three year period at a 7.5% interest rate, in staged repayments to be completed by 30 June 2020.
Due to the deferral of the 30 June 2019 repayment to 30 October 2020 the initial loan term has been extended from 3 years to
3 years and 4 months. There are no other variations to the “Varied Loan Agreement” that was approved by shareholders on 13
September 2017. Mr. Martin (Non-Executive Director) has been discharged from the loan and the outstanding loan balance at
30 June 2019 of $2,500,000 is repayable to the Martin Family (a related party) at a 7.5% interest rate, in staged repayments to be
completed by 30 October 2020.
During the year ended 30 June 2018, the Company agreed to two 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 on 25 June 2018.
The US$600,000 was drawn down in May 2018 and was repaid in full on 30 April 2019.
On 1 July 2018, the Company agreed to an unsecured short term loan of ¥165,000,000. The loan was repaid in full on 17 June 2019.
On 9 April 2019, the Company agreed to an unsecured short term loan of ¥200,000,000. The loan is to be repaid in full on or before
30 June 2020.
56 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
17.5. 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 un-discounted cash flows.
Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
30 JUNE 2019
30 JUNE 2018
LESS
THAN 6
MONTHS
6 - 12
MONTHS
BETWEEN
1 & 2
YEARS
BETWEEN
2 & 5
YEARS
TOTAL
CONTRAC-
TUAL
CASH
FLOWS
CARRYING
AMOUNT
(ASSET)/
LIABILITIES
LESS
THAN 6
MONTHS
6 - 12
MONTHS
BETWEEN
1 & 2
YEARS
BETWEEN
2 & 5
YEARS
TOTAL
CONTRAC-
TUAL
CASH
FLOWS
CARRYING
AMOUNT
(ASSET)/
LIABILITIES
$
$
$
$
$
$
$
$
$
$
$
$
CONSOLIDATED
ENTITY
NON-DERIVATIVES
Trade payables
824,821
-
-
-
1,750,000
750,000
-
-
824,821
824,821
426,668
-
-
-
426,668
426,668
2,500,000
2,500,000
-
2,310,482
1,250,000
500,000
4,060,482
4,060,482
Borrowings
TOTAL NON-
DERIVATIVES
DERIVATIVES
Net settled
(Non deliverable
forwards)
Gross settled
-(inflow)
-outflow
TOTAL
DERIVATIVES
824,821 1,750,000
750,000
- 3,324,821 3,324,821
426,668 2,310,482 1,250,000
500,000 4,487,150 4,487,150
20,405
2,334,223
(2,313,818)
20,405
-
-
-
-
-
-
-
-
-
-
-
-
20,405
20,405
6,465
2,334,223
2,334,223
4,150,000
(2,313,818)
(2,313,818)
(4,143,535)
20,405
20,405
6,465
-
-
-
-
-
-
-
-
-
-
-
-
6,465
6,465
4,150,000
4,150,000
(4,143,535)
(4,143,535)
6,465
6,465
(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)
(c)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2), and
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 2019
and 30 June 2018 on a recurring basis:
30 JUNE 2019
ASSETS
Forward foreign exchange contracts
Biological Assets
TOTAL ASSETS
30 June 2018
ASSETS
Forward foreign exchange contracts
Biological Assets
TOTAL ASSETS
LEVEL 1
$
LEVEL 2
$
LEVEL 3
$
TOTAL
$
LEVEL 1
$
-
-
-
-
-
-
20,405
-
20,405
-
17,030,664
17,030,664
20,405
17,030,664
17,051,069
LEVEL 2
$
LEVEL 3
$
TOTAL
$
6,465
-
6,465
-
17,285,234
17,285,234
6,465
17,285,234
17,291,699
ANNUAL REPORT | ATLAS PEARLS LTD | 57
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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 2019 there are no level 3 related instruments in place.
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.
The Group is exposed to financial risk in respect of its involvement in primary production which consists of 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 expenditure of cash in relation to the operation of the farm and the harvesting if the pearls and realisation of cash receipts from
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 work and work completed by the executive within the
respective field teams to determine the material inputs in the model. The key production inputs are confirmed with the relevant
executives and agree with the Board of Directors every six. These are listed in point (C) below.
(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 2019 or 30 June 2018.
(C)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
The following table presents the changes in level 3 instruments for the period ended 30 June 2019:
OPENING BALANCE 30 JUNE 2018
Additions
Gains recognised through ‘change in fair value’
Losses recognised through ‘change in fair value’
CLOSING BALANCE AT 30 JUNE 2019
BIOLOGICAL
ASSETS
$
TOTAL
$
17,285,234
17,285,234
1,315,037
1,315,037
4,386,073
4,386,073
(5,956,580)
(5,956,580)
17,030,664
17,030,664
INPUT
2019
2018
COMMENTARY
Average selling price
Yen exchange rate
Average pearl size
Proportion of marketable grade
Discount rate
Mortality
¥13,200 per
momme
¥12,600 per
momme
Obtained by analysing sales prices achieved and the trend analysis of the past
$
12 months of average sales prices.
¥75.73: AUD 1
¥81.90: AUD 1
Based on forward Yen price per a financial institution.
0.37
36%
20%
0.44
41%
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
Costs to complete
$2.46
$0.77
$2.04
$0.76
Based on historical independent valuation.
Based on historical averages of costs to complete and sell pearls per momme.
58 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(D)
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 2019:
Debt Financing
TOTAL NON-CURRENT BORROWING
CARRYING
CARRYING
2019
2019
2018
2018
AMOUNT
FAIR VALUE
AMOUNT
FAIR VALUE
750,000
750,000
750,000
1,750,000
750,000
1,750,000
1,750,000
1,750,000
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.
PART I UNRECOGNISED ITEMS
18. Events occurring after the reporting period
On 1 July 2019, Atlas received ¥200M (AUD $2.6M) in short term financing from a commercial partner. The loan is repayable on or before
30 June 2020. 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.
19. 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
2019
$
2018
$
344,702
370,920
-
344,740
680,671
-
715,622
1,025,411
Non - cancellable operating leases
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 2019 (30 June 2018: $100,000). 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.
20. 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.
ANNUAL REPORT | ATLAS PEARLS LTD | 59
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART J OTHER
21. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 27.2.
Name of entity
Class of Shares
Percentage Owned
Percentage Owned
30 June 2019
30 June 2018
Place of Incorporation
Perl’Eco Pty Ltd
Tansim Pty Ltd
P.T. Cendana Indopearls
P.T Disthi Mutiara Suci
P.T Chaya Bali
Aspirasi Satria Sdn Bhd
Ord
Ord
Ord
Ord
Ord
Ord
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
Australia
Australia
Indonesia
Indonesia
Indonesia
Malaysia
The ultimate parent entity, Atlas Pearls Ltd, is incorporated in Australia.
22. Related party transactions
(A)
SUBSIDIARIES
Interests in subsidiaries are set out in note 21.
(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 2019, there is a net loan balance of $698,212 owing from World Senses Pty Ltd to Atlas (30 June 2018: $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.
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
TOTAL LOANS TO JOINT VENTURES
Significant estimates and judgements
Expected credit losses of loan receivable
2019
$
2018
$
771,173
(72,961)
(698,212)
2,180,879
(816,028)
1,364,581
771,173
(72,961)
(698,212)
2,078,876
(816,028)
1,262,848
Loss allowances for financial assets are based on assumptions about risk of default, expected loss rates and whether there has been a
significant increase in credit risk (“SICR”) since initial recognition. The Group uses judgement in making these assumptions and selecting
the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking
estimates at the end of each reporting period. In relation to the $2,180,879 loan receivable from EOT, the Group have determined that
there was an increase in SICR since initial recognition, therefore they were required to recognise the lifetime expected credit loss and
recognise interest on a gross basis. The probability of default estimated by management was 15%, therefore the calculated allowance for
credit loss is not material and has not been brought to account.
60 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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
(E) LOANS FROM RELATED PARTIES
2019
$
814,130
39,284
136,328
989,742
2018
$
837,714
44,267
16,388
898,369
2019
$
2018
$
10,667
10,767
Refer to Note 17.4 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
23.
Interests in Joint Ventures
(A)
JOINT VENTURE
2019
$
2018
$
3,250,000
3,501,233
-
-
(750,000)
(250,000)
229,829
(229,829)
2,500,000
254,846
(256,079)
3,250,000
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 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.
ANNUAL REPORT | ATLAS PEARLS LTD | 61
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
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
62 | ATLAS PEARLS LTD | ANNUAL REPORT
2019
$
2018
$
304,246
441,333
745,579
41,491
1,760,292
1,801,783
305,114
441,333
746,447
41,641
1,760,292
1,801,933
(1,056,204)
(1,055,486)
-
(718)
(718)
7,272
(6,342)
930
(1,055,486)
(1,056,416)
(718)
930
(1,056,204)
(1,055,486)
50%
(359)
-
50%
465
-
2019
$
2018
$
4,262,277
4,117,109
1,181,730
5,444,007
473,693
4,706,483
5,180,176
263,831
1,150,631
5,267,740
357,893
4,973,766
5,331,659
(63,919)
3,832,172
4,104,275
(3,504,422)
(4,026,394)
327,750
77,881
(63,919)
327,750
263,831
50%
163,875
-
(141,800)
77,881
(63,919)
50%
38,941
-
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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.
24. 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
2019
$
2018
$
1,638,652
1,840,553
22,229,455
24,440,639
6,596,130
5,361,007
5,459,679
5,221,347
36,857,417
36,857,417
823,270
739,188
(18,377,313)
(15,594,139)
19,353,373
22,002,467
(2,484,924)
(2,783,174)
(2,484,924)
(2,783,174)
The parent entity did not have any contingent liabilities as at 30 June 2019 (30 June 2018: Nil). The parent entity did not provide financial
guarantees during the period (30 June 2018: 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 and reviewed at each reporting
period for impairment indicators.
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 | ATLAS PEARLS LTD | 63
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
25. Share Based Payments and Options
25.1. EMPLOYEE SALARY SACRIFICE SHARE PLAN
At the Annual General Meeting on 20 November 2018 it was resolved by the shareholders to approve the Atlas Pearls Ltd Employee
Option Plan (“Plan”). The Board adopted the 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) Reward Directors, Executives, employees, consultants and contractors for their past performance
(b) Provide long term incentives for participation In the Company’s future growth
(c) Motivate Directors, Executives, employees, consultants and contractors and general loyalty; and
(d) 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, consultants and contractors. Under
the Plan, participants are granted options which can only vest if share price increases 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 receive any guaranteed benefits.
The Corporate Governance Council Guidelines recommend that remuneration packages involve a balance between fixed and incentive
pay reflecting shirt and long-term performance objectives appropriate to the Company’s circumstance 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.
An option which has not vested will immediately lapse upon the first to occur of:
I. The expiry of the option period;
II. If an eligible person’s employment or engagement with the Company ceases because of an uncontrollable event, the last
day of any period specified in clause 25(b); and
iii. If an eligible Person’s employment or engagement with the Company ceases because of a controllable event, the last day
of any period specified in clause 25(b), subject to clause 25(a).
25.2. OPTIONS ON ISSUE
On 20 November 2018 21,269,928 options exercisable at $0.027 each, on or before 30 June 2021 (expiry date), were issued to employees
of the Company on the terms and conditions set out in the Explanatory Memorandum ratified at the Annual General Meeting held on
20 November 2018.
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 the options is based on 142.8% of the volume
weighted average share price at which the Company’s shares are traded on the Australian Stock Exchange (ASX) during the 30 trading
days prior to the date of the grant.
AS AT 30 JUNE 2018
Granted during the period
Exercised during the period
Expired during the period
Forfeited during the period
AS AT 30 JUNE 2019
ISSUE DATE
30 June 2015
20 November 2018
TOTAL
EXERCISE PRICE PER SHARE
OPTION
NUMBER OF OPTIONS
0.059
0.027
-
0.059
0.027
0.027
3,000,000
21,269,928
-
3,000,000
963,917
20,306,013
Expiry Date
EXERCISE PRICE
SHARE OPTIONS
30 JUNE 2019
SHARE OPTIONS
30 JUNE 2018
31 December 2018
30 June 2021
0.0590
0.0270
-
20,306,013
20,306,013
3,000,000
-
3,000,000
2.0 years
0.5 years
Weighted average remaining contractual life of options outstanding
at the end of the period
64 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
25.3. FAIR VALUE OF OPTIONS GRANTED
The assessed fair value at grant date of options granted during the year ended 30 June 2019 was $0.00984 (21,269,928 options). This
valuation imputes a total value of approximately $209,296 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 Hoadley Trading & Investment valuation model which 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 2019 are detailed below:
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
and three-year trading periods.
Options are granted for no consideration;
Vesting dates - Tranche one will vest immediately, Tranche two will vest on 01 July 2019 and Tranche 3 will vest on 01 July 2020;
Exercise price - $0.0270,
Grant date - 20 November 2018,
Share price at grant date - $0.019,
Expected price volatility of the Company’s shares - 100%,
Expected dividend yield - 0%, and
Risk-free Interest rate - 2.13%.The expected price volatility is based on the historical weekly volatility of the Company over two
Where options are issued to employees of subsidiaries within the Group, the subsidiaries compensate Atlas Pearls for the amount
recognised as an 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
TOTAL SHARE-BASED PAYMENT EXPENSE
2019
$
134,080
-
134,080
2018
$
20,518
(20,518)
-
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.
ANNUAL REPORT | ATLAS PEARLS LTD | 65
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
26. 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
27. Accounting policies
27.1. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
2019
$
2018
$
101,148
93,279
46,786
30,781
147,934
124,060
2,328
2,328
5,100
5,100
150,262
129,160
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 2019 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 16 eliminates the operating and finance lease classifi-
cations 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
AASB 16
Leases
IMPACT ON INITIAL APPLICATION:
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.
27.2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Atlas Pearls as at 30 June 2019 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.
66 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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.
27.3.
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.
ANNUAL REPORT | ATLAS PEARLS LTD | 67
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
27.4. COMPARATIVE FIGURES
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial period.
27.5.
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.
27.6. 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 12 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 at the present value of the estimated future cash outflows to be made for those entitlements.
Liabilities due to be paid within 12 months of the reporting date are recognised in other payables. The liability for long service is
recognised 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 25.
27.7. 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.
27.8. 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.
27.9. FINANCIAL INSTRUMENTS
AASB 9 Financial Instruments replaces the provisions of AASB 139 Financial Instruments: Recognition and Measurement that relate to
the recognition, classification and measurement of financial assets and financial liabilities, de-recognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of AASB 9 Financial Instruments from 1 July 2018 did not give rise to any material transitional adjustments.
In accordance with the transitional provisions in AASB 9 (7.2.15) and (7.2.26), comparative figures have not been restated.
Classification and measurement
Except for certain trade receivables the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
Under AASB 9 financial assets are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through
other comprehensive income (FVOCI). The classification is based on two criteria: The Group’s business model for managing the assets;
and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount
outstanding (the ‘SPPI criterion’).
68 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
The new classification and measurement of the Group’s financial assets are, as follows:
Debt instruments at amortised cost, for financial assets that are held within a business model with the objective to hold the financial
assets in order to collect contractual cash flows that meet the ‘SPPI criterion’. This category includes the Group’s trade and other
receivables and long-term loan receivable.
On transition to AASB 9 the assessment of the Group’s business models was made as of the date of initial application, 1 July 2018. The
assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on
the facts and circumstances as at the initial recognition of the assets.
Impairment
From 1 July 2018 the Group assesses, on a forward-looking basis, the expected credit losses (ECLs) associated with its debt instruments
carried at amortised cost and FVOCI. ECLs are based on the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the asset’s
original effective interest rate.
For trade receivables, the Group has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected
credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment. The loss allowance calculated for 30 June 2019 is $nil
due to past history with Customers who have never previously defaulted on amounts due.
For other debt financial assets including long term loan receivables, the ECL is based on either the 12-month or lifetime ECL. The
12-month ECL is the portion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months
after the reporting date. When there has been a significant increase in credit risk since origination, the allowance will be based on the
lifetime ECL. In all cases, the Group considers that there has been a significant increase in credit risk when contractual payments are
more than 30 days past due.
The Group considers a financial asset in default when contractual payment are 90 days past due. However, in certain cases, the Group
may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive
the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.
27.10. INCOME TAX
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.
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 assets and liabilities have been bought to account after considering the level of tax losses carried forward and available
to the Group against future taxable profits and the probability within the future that taxable profits will be available against which the
benefits of the deductible temporary difference can be claimed.
ANNUAL REPORT | ATLAS PEARLS LTD | 69
For personal use only NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
(a)
(b)
(c)
(d)
(e)
the financial statements comprising the statement of profit or loss and other comprehensive income, statement of financial
position, statement of cash flows, statement of changes in equity and accompanying notes are in accordance with the
Corporations Act 2001 and:
i. give a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of the performance for the
period ended on that date; and
ii. comply with Accounting Standards, and the Corporations Act 2001 and other mandatory professional reporting requirements.
the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with
International Financial Reporting Standards.
the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A.
in the Directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
the remuneration disclosures included in the Directors’ Report (as part of audited remuneration report) for the period ended
30 June 2019 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
27 August 2019.
70 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Atlas Pearls Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Atlas Pearls Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1.3 in the financial report which describes the events and/or conditions
which give rise to the existence of a material uncertainty that may cast significant doubt about the
group’s ability to continue as a going concern and therefore the group may be unable to realise its
assets and discharge its liabilities in the normal course of business. Our opinion is not modified in
respect of this matter.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
71 | ATLAS PEARLS LTD | ANNUAL REPORT
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
The Group’s biological assets, as disclosed in Note 4 to
Our audit procedures included, but were not limited
the financial report, was a key audit matter as the
to:
calculation of the fair value of the oysters requires
significant estimates and judgements by management.
The Australian Accounting Standards require biological
assets to be measured at fair value less costs to sell or,
in the absence of a fair value, at cost less impairment.
The Group have valued the biological assets at fair
value less costs to sell. The valuation requires
management’s judgement in relation to estimating the
future selling prices, exchange rates, pearl size,
sellable percentage of pearls, mortality, costs to
complete and discount rate.
(cid:127)
(cid:127)
(cid:127)
(cid:127)
considering the appropriateness of the
valuation methodology against the relevant
Australian Accounting Standards;
testing the mathematical accuracy of the fair
value model used by management;
counting a sample of oysters on hand at the
year-end as part of our year end site visit
and agreeing this to the fair value model;
assessing the key inputs contained within the
fair value model, including the future selling
prices, exchange rates, pearl size, sellable
percentage of pearls, mortality, costs to
complete and discount rate;
(cid:127)
performing a sensitivity analysis of the key
inputs including the discount rate, foreign
exchange rate, selling price, pearl size and
sellable percentage of pearls as these are
the key assumptions against which the model
is most sensitive to; and
(cid:127)
evaluating the adequacy of the related
disclosure in Note 4 to the financial report.
72 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only Recoverability of Deferred Tax
Key audit matter
How the matter was addressed in our audit
The Group’s deferred tax assets, as disclosed in Note 7
Our procedures included, but were not limited to:
to the financial report was a key audit matter due to
the recognition of these assets involving judgement by
management as to the likelihood of the realisation of
these assets.
The Australian Accounting Standards require deferred
tax assets to only be recognised to the extent that it is
probable that they will be utilised against future
taxable profits.
(cid:127)
reviewing the calculation of the deferred tax
assets prepared by the Group’s tax specialist
as well as assessing the competency and
objectivity of the specialist;
(cid:127)
assessing and challenging management’s
judgements relating to the forecast of future
taxable profits and evaluating the
reasonableness of the assumptions
underlying the preparation of the forecasts
against actual performance of the Group;
and
(cid:127)
evaluating the adequacy of the related
disclosures in Note 7 to the financial
report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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.
73 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only 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 21 to 27 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Atlas Pearls Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Glyn O'Brien
Director
Perth, 27 August 2019
74 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only ATLAS PEARLS 2019
ADDITIONAL ASX INFORMATION
The following additional information is required by the Australian Securities Exchange. The information is current as at 22 August 2019.
(A)
DISTRIBUTION SCHEDULE AND NUMBER OF HOLDERS OF EQUITY SECURITIES AS AT 22 AUGUST 2019
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
TOTAL
Fully Paid Ordinary
Shares (ATP)
Unlisted Options - 2.7c
30/06/2021
134
-
395
-
291
-
843
-
357
15
2,020
15
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 22 August 2019 is 1,033
(B)
20 LARGEST HOLDERS OF QUOTED EQUITY SECURITIES AS AT 22 AUGUST 2019
The names of the twenty largest holders of fully paid ordinary shares (ASX code: ATP) as at 22 August 2019 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
HSBC Custody Nominees (Australia) Limited
Raintree Pearls & Perfumes Pty Ltd
SP & K Birkbeck Holdings Pty Ltd
Jingie Investments Pty Ltd
Abermac Pty Ltd
Westwood Properties Pty Ltd
Mr Nelson Michel Pierre Rocher
Citicorp Nominees Pty Limited
Five Talents Limited
Mr Paul Michael Butcher
Chembank Pty Limited
Coakley Pastoral Co Pty Ltd
Miss Kristie Birkbeck
Queensridge Investments Pty Ltd
Mr Timothy James Martin
Ms Jennifer Michelle Roughan
Mr Gerald Francis Pauley + Mr Michael James Pauley
Mr Pierre Fallourd
TOTAL
53,048,882
32,400,000
22,718,119
20,718,834
20,529,202
17,880,240
17,833,333
8,000,000
6,712,185
6,492,237
5,620,000
5,000,000
5,000,000
4,744,717
3,818,536
3,549,072
3,540,883
3,360,000
3,312,706
3,311,206
12.40
7.57
5.31
4.84
4.80
4.18
4.17
1.87
1.57
1.52
1.31
1.17
1.17
1.11
0.89
0.83
0.83
0.79
0.77
0.77
247,590,152
57.87
Stock Exchange Listing – Listing has been granted for 427,871,758 ordinary fully paid shares of the Company on issue on the Australian
Securities Exchange.
The unquoted securities on issue as at 22 August 2019 are detailed below in part (D).
ANNUAL REPORT | ATLAS PEARLS LTD | 75
For personal use only ADDITIONAL ASX INFORMATION
(C)
SUBSTANTIAL HOLDERS
Substantial shareholders in Atlas Pearls Limited and the number of equity securities over which the substantial shareholder has a relevant
interest as disclosed in substantial holding notices provided to the Company are listed below:
NAME
SHARES
% VOTING POWER
DATE OF NOTICE
Boneyard Investments Pty Ltd &
Associates *
Raintree Pearls & Perfumes Pty Ltd
& Associates **
112,345,667
30,090,855
27.09%
13.12%
4 May 2015
8 June 2012
*Includes shares held by Boneyard Investments Pty Ltd, Chemco Superannuation Fund Pty Ltd, Jingie Investments Pty Ltd, T. Martin, T. &
W. Martin, J. Martin and J & B Martin.
**Includes shares held by Raintree Pearls & Perfumes Pty Ltd and SP & K Birkbeck Holdings Pty Ltd .
(D)
UNLISTED SECURITIES
The number of unquoted securities on issue as at 22 August 2019;
SECURITY
NUMBER ON ISSUE
Unlisted options exercisable at 2.7 cents on or before 30 June 2021
21,269,928
(E)
HOLDER DETAILS OF UNQUOTED SECURITIES
All unquoted securities were issued under an employee incentive scheme. Therefore, no disclosure is required in relation to people that
hold more than 20% of a given class of unquoted securities as at 22 August 2019.
(F)
RESTRICTED SECURITIES AS AT 22 AUGUST 2019
There were no restricted securities on issue as at 22 August 2019.
(G)
VOTING RIGHTS
All fully paid ordinary shares carry one vote per ordinary share without restriction.
(H)
ON-MARKET-BUY-BACK
The Company is not currently performing an on-market buy-back.
(I)
CORPORATE GOVERNANCE
The Board of Atlas Pearls Ltd is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board
is responsible to its shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The
Board believes that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability.
In accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance
with them on its website, rather than in the Annual Report. Accordingly, information about the Company’s Corporate Governance
practices is set out on the Company’s website at https://www.atlaspearls.com.au/corporate-governance-statement.
76 | ATLAS PEARLS LTD | ANNUAL REPORT
For personal use only URBAN BOUTIQUES
AUSTRALIA, Perth
BALI, Seminyak
FARM BOUTIQUES
NORTH BALI, Penyabangan
FLORES, Labuan Bajo, Pungu Island
RAJA AMPAT, Alyui Bay
FARMS
EAST NUSA TENGGARA, Lembata Bay
EAST NUSA TENGGARA, Alor Bay
WWW.ATLASPEARLS.COM.AU
FIND US ONFor personal use only