Beautiful South Sea pearls. Certified from the source.
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 2 0
Atlas Pearl farm, Pungu Island, Flores
A L E T T E R F R O M
THE EXECUTIVE CHAIRMAN
Dear Shareholders
Whilst reporting a loss $8.1m for the 2019/20 financial year, Atlas has made major advancements in a
number of key areas to secure its future as a profitable producer of South Sea Pearls.
The COVID-19 pandemic has had a significant impact on the reported financial result with sales of $13.7m
down by $2.5m (15.4%) against 2018/19.
The pandemic presented Atlas with a range of unique challenges that required an immediate and nimble
organisational response. It also confirmed the importance of the operational improvement reforms already
underway and the need to re-align our distribution systems closer to our end-customers.
Achievements over the year include:
OPERATIONS
Seedings for the year were 821,000 – in line with expectations.
Improvements in retention rates (i.e. less mortalities) have
allowed us to settle at a seeding rate of around 800-850,000
animals for the production of 500-550,000 pearls. This has caused
a short-term drag on capital with more “animals in the water” but
ultimately will stabilise at a lower level of capital employed with
associated operational efficiencies.
Through improvements in hatchery processes, we can achieve
these production metrics by selecting larger animals for seeding
thus improving our minimum pearl size.
Our new key technical people are ensuring that all seeding
events are supervised and have introduced disciplined standard
operating procedures to minimise pearl impairment through
technical drift.
We have also taken steps to improve our herd genetics by
introducing larger and stronger breeding stock to address the
small pearl problem (at least to the extent it is not caused by
environmental factors).
By necessity, with the short-term reduction in sales, we have
moved towards a more optimal harvest cycle of 24 months
from seeding with measurable improvements in pearl size and
selling prices already in evidence.
We have also identified and secured a new farming site which
will enable us to consolidate operations to the best performing
farms.
SALES AND DISTRIBUTION
FUNDING
Our traditional distribution channels were challenged over the year
and numbers attending auctions in Kobe at any one time was limited
by social distancing guidelines. A key member of our sales team, a
former Kobe resident, was in the city at the time of the lock-down
and has remained there to oversee auctions and conduct continuous
private sales as loose pearl stocks become available.
With 80-90% of our sales ultimately reaching the Chinese market, this
has caused the Company to question the efficacy of the traditional
auction system and to examine more efficient wholesale paths to
reach our final customers.
Distributor and agency partnerships closer to the end market are
now under consideration as are novel channels for realising better
returns on our lower grade pieces.
The closure of all shop-front retail was completed during the year and
the Company has moved to an on-line model with a disciplined and
limited number of price-pointed pieces to meet a younger market
and show-case the beauty of our product. The same range will be
offered through our farm stores when the tourism industry recovers.
OPERATING EXPENSES
Following announcements by the World Health Organisation (WHO)
declaring the spread of COVID-19 as a Global Pandemic in March
2020, the Australian Government announced relief initiatives to
eligible businesses. As a result of the downturn in sales revenue,
the Company met selected criteria, qualifying for the Government’s
JobKeeper initiative, which has resulted in a direct cash injection
of $45k for the financial year. The Company also received $50k
from the ATO via the ‘Cash Flow Boost’ initiative. COVID-19 relief
measures include a waiver to payroll tax from March to June 2020,
additionally the Office of State Revenue (OSR) announced that the
JobKeeper Payment Scheme would be exempt from payroll tax.
Other commercial savings included a waiver for rent totalling $24k
and a deferral of $24k. From 9 April 2020, Australian and Indonesian
expatriate employees agreed to reduce their base employment
benefits and Directors’ fees by 20% for the period April 2020 to June
2020 and 10% effective July 2020 (ongoing) to assist the Company
manage its expenses.
Although the global pandemic of COVID-19 has had an adverse
impact to the business, key management has adapted and put in
place strategies such as reducing discretionary spending, reducing
the number of permanent positions no longer required and
increasing the focus on alterative distribution channels.
4 / ATLAS PEARLS LTD • ANNUAL REPORT
Reduced sales in 2019/20, the build-up of finished goods and oyster
inventory has increased the immediate requirement for working
capital. We have addressed this by:
1.
2.
3.
Selling the Company’s 50% ownership in the joint venture
Essential Oils of Tasmania realising a cash injection of $1,500,000;
Successful collaboration with a commercial partner allowing
the Company to renegotiate repayments on its short-term trade
loan;
Post year end, securing an additional $2m loan from the
Company’s largest shareholder.
Although Atlas has received an unqualified audit report, I would like
to draw shareholders attention to the Going Concern section of the
Annual Report on page 26 and the emphasis of matter paragraph in
the Auditors report on page 64.
I would like to conclude by acknowledging the extraordinary
contribution of all of our people over the past twelve months. Living
and managing operations in remote locations is challenging at the
best of times. COVID-19 has added to these challenges with regional
travel restrictions in Indonesia impacting both the movement of
employees and farm supplies.
The expressions of commitment from the Atlas team to the need to
make short-term cuts in remuneration was truly heartening and our
priority remains the health and safety of our employees, especially as
many of them are isolated on farm sites.
There are still many uncertainties with the impact of the pandemic
ongoing. We remain positive about the future based on key
achievements this year and are particularly hopeful about the early
indicators of improved harvests.
We would like to thank all shareholders for their support as we
navigate these unprecedented conditions.
Geoff Newman
Executive Chairman
FINANCIAL REPORT
2019/2020
ATLAS PEARLS 2020
SUMMARY OF FISCAL INDICATORS
30 JUNE 20
$’000
30 JUNE 19
$’000
13,740
178
1.29%
(626)
457
(6,704)
(20)
(6,655)
16,241
603
3.71%
(297)
(449)
(590)
14
(854)
(48.44%)
(5.26%)
(320)
(1,102)
(8,077)
(1.90)
13,468
22,300
4,583
13,642
33.59%
427.9
(321)
(2,408)
(3,582)
(0.84)
21,567
31,231
3,620
21,910
16.52%
427.9
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)
(Loss) before interest and tax (EBIT)
EBIT margin
Interest net (costs)
Tax (expense)
Net (loss) after tax (NPAT)
Basic (loss) per share (cents)
Net tangible assets (NTA)
Assets
Debt (current & non-current)
Shareholder funds
Debt/shareholder funds (%)
Number of shares on issue (million)
6 / ATLAS PEARLS LTD • ANNUAL REPORT
ATLAS PEARLS 2020
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 year ended 30 June 2020. 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 year 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. / EXECUTIVE CHAIRMAN
Mr. Newman has over 29 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 Executive Chairman on 1 October 2019
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 22 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.
Resigned 19 September 2019
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. / Independant NON-EXECUTIVE DIRECTOR
Mr. Buss has extensive experience in marketing, communications and advertising spanning 21 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
ANNUAL REPORT • ATLAS PEARLS LTD / 7
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 23 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 19 - 30 June 20
01 July 19 - 30 June 20
01 July 19 - 19 September 19
01 July 19 - 30 June 20
4
4
1
4
4
4
1
4
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, online retail and retail farm stores.
4.2.
REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
4.2.1. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 30 June 2020, the Company announced the sale of the 50% joint venture Essential Oils of Tasmania (EOT). Refer to note 24 for further
information.
30 JUNE
2020
$’000
(8,077)
(1.90)
Nil
Nil
30 JUNE
2019
$’000
(3,582)
(0.84)
Nil
Nil
30 JUNE
2018
$’000
(2,034)
(0.48)
Nil
Nil
4.2.2. SHAREHOLDER RETURNS
Net (loss) after tax
Basic EPS (cents)
Dividends paid
Dividends (per share) (cents)
8 / ATLAS PEARLS LTD • ANNUAL REPORT
The adjustments from NPAT to arrive at reported Normalised EBITDA for these periods are shown below:
DIREC TORS’ REPORT
Net (loss) after tax
Tax expense
Interest net costs
Depreciation & amortisation
Foreign exchange (gain)/loss
Agriculture standard revaluation 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
2020
$’000
30 JUNE
2019
$’000
(8,077)
1,102
(3,582)
2,408
320
626
(457)
6,704
(60)
20
178
321
297
449
590
134
(14)
603
30 JUNE
2018
$’000
(2,034)
50
283
256
149
612
-
150
(535)
30 JUNE
2020
$’000
30 JUNE
2019
$’000
30 JUNE
2018
$’000
22,300
(4,583)
(4,076)
13,642
34%
427.9
3.1
0.5
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
There has been a decrease in the net assets of the Group of $8.3M in the year ended 30 June 2020 (30 June 2019: $2.0M decrease).
4.2.4.
OPERATING RESULTS
The operating revenue for the year ended 30 June 2020 was $13.7M, a decrease of $2.5M (30 June 2019: $16.2M).
Administration, finance and marketing expense costs of $5.7M were $0.5M below prior year (30 June 2019: $6.2M). Atlas sucessfully established
an economical cost base during the FY2019 year and management responded efficiently to sales challenges faced as a result of COVID-19 by
implementing short-term cost saving measures. The Company continues to collaborate with clients and has negotiated an adjusted repayment
schedule on its short-term trade loan. Refer to note 18.4 for further details on current financing arrangements.
4.2.5.
REVIEW OF OPERATIONS
4.2.5.1.
PEARLING
The Company’s pearling operations includes two hatcheries, where oysters grow from 0-2 years, and four grow out farms, where the seeded
oysters grow pearls from 2-4 years. The extensive farm network ensures that the Company has a diverse biomass across several locations
decreasing the inherent risk of aquaculture.
At the end of 2019/20 the Company was impacted by the COVID-19 pandemic and responded by making the strategic decision to move the
pearl grow cycle to the industry ideal of 24 months. The Company extended the growing time of all of the seeded oysters and anticipates that
this will increase the overall size and weight of the pearls Atlas produces. Early indications that pearl quality has improved as a result of the
extended grow out are promising.
Oyster survival rate continues to show improvements and has allowed an operational shift to focus on the pre-operation selection of oysters.
Ensuring that only the best oysters are selected for pearl operation.
Atlas is continuing to focus on density management to provide oysters with improved access to nutrients.
ANNUAL REPORT • ATLAS PEARLS LTD / 9
DIREC TORS’ REPORT
4.2.5.2.
PEARLING VALUE ADDED
During the financial year, the retail market continued to show signs of decline and as a result the Company made the decision to close its
Claremont, Western Australia and Seminyak, Bali stores in November 2019. Retail farms store sales remained steady. The retail farm stores give
customers the opportunity to experience an incredible insight into village life and the beauty and diversity of the island, whilst meeting the
people behind our pearls. Atlas remains committed to providing this unique experience to facilitate the education of beautiful south sea pearls.
Trade sales will remain the key focus of the Company’s revenue. By-product sales are proving a positive venture, and the Company will explore
how best to maximise this avenue.
4.2.5.3. NATURAL EXTRACTS
On 30 June 2020, the Company announced the sale of the 50% joint venture, Essential Oils of Tasmania Pty (EOT).
Atlas has been actively reviewing the strategic options around the EOT joint venture. The growing need for additional funding in EOT to produce
the required commercial return has culminated in Atlas’ decision to sell it’s holding. Refer to note 24 for further information.
4.2.6
AUDIT OPINION
The financial report has been audited independantly and received an unmodified opinion. Refer to page 19 for the Independant Auditors Report
and page 64 onwards for the Auditors 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
2018
414
2019
248
2020
369
2018
486
2019
540
2020
491
2018
15
2019
17
2020
16
2018
13
2019
13
2020
8
5. Dividends
No dividends were declared and paid by the Company during the period ended 30 June 2020 (30 June 2019: nil).
6.
Events Since the end of the Financial Year
At report date, the impact of the Coronavirus (COVID-19) pandemic is ongoing and casts uncertainty over the Company’s ability to realise future
sales. It is not practical to reliably measure any future impact, as the situation continues to rapidly develop and is dependant on measures
imposed by each country’s Government. Travel restrictions, quarantine rules, social distancing regulations and commercial flight availability all
influence the Company’s ability to move pearls and people. Management are closely watching the situation and are proactively responding to
developments to ensure as minimum business disruption as possible.
On 27 August, the Group entered into a new loan agreement with Boneyard Investments Pty Ltd (Boneyard) which replaces its Existing Loan
Agreement and pursuant to which agreement, Boneyard has agreed to make a revolving loan facility available to Atlas. The aggregate of all
loans provided by Boneyard under the Facility will be an amount equal to $4.5M, being the $2.5M loan outstanding under the Existing Loan
Agreement as well as an additional loan in the amount of $2M. Refer note 18.4 for full details.
10 / ATLAS PEARLS LTD • ANNUAL REPORT
DIREC TORS’ REPORT
7.
Likely Developments and Expected Results of Operations
There are still many uncertainties as a result of the pandemic, the risk of further waves and imposed Government restrictions remain unclear. The
Company is making all efforts to protect the health and safety of our employees whilst ensuring sufficient pearl availability to respond to sales
events as and when they become available. Management are actively seeking alternative distribution channels, in the event that the traditional
auction halls are not available but financial performance will be entirely market dependant.
Oyster care and best practices remain at the forefront of farming operations, and oyster volumes will remain consistent with 19/20. The
company expects to increase biomass at the Banybiru pearl farm, purchased in 2018 to maximum capacity.
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 Securities 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 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 vested immediately, tranche two vested on 01 July 2019 and tranche three vested on 01 July 2020,
the employee remains engaged as an employee at the date of the prescribed vesting dates listed above
There were no listed or unlisted options issued during the year ended 30 June 2020.
AUSTRALIA
Refer to note 26.2 for further information.
10.
Indemnification and Insurance of Directors and Officers
10.1.
INDEMNIFICATION
The Company has agreed to indemnify the following current Directors and officers of the Company; Mr G Newman, Mr T Martin, Mr C Buss and
Ms D Kubicki and all former Directors and officers 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 $43,685 (30 June 2019: $43,722) in respect of Directors’
and Officers’ liability and legal expenses insurance contracts, for current and former Directors and Officers.
11. Non-Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (BDO) for audit and non-audit services provided during the period are set out below.
The Board of Directors is satisfied that the provision of non-audit services during the period is compatible with general standards of independence
for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external
auditor independence requirements of the Corporations Act 2001. The nature of the service provided do not compromise the general principles
relating to auditor independence because they relate to tax advice in relation to compliance issues and review of the tax provisions prepared
by the Company. None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
ANNUAL REPORT • ATLAS PEARLS LTD / 11
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:
DIREC TORS’ REPORT
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
TAX SERVICES
RSM AUSTRALIA FIRM
Tax compliance services and advice
RSM INDONESIA FIRM
Tax compliance services and advice
Total remuneration for tax services
30 JUNE
2020
$
30 JUNE
2019
$
87,100
101,148
43,955
46,786
131,055
147,934
3,725
3,725
2,328
2,328
30 JUNE
2020
$
30 JUNE
2019
$
19,500
24,000
8,589
4,665
28,089
28,665
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. Remuneration Report (Audited)
The Directors are pleased to present your Company’s 2020 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
Independant Non-Executive Chairman appointed to 1 October 2019
Executive Chairman appointed 1 October 2019
Non-Executive Director
Managing Director, resigned 19 September 2019
Independant Non-Executive Director
Chief Operations Officer PT Cendana Indopearl
Chief Financial Officer
In response to the Global Pandemic COVID-19, Atlas reduced the remuneration of Key Management personnel by 20% for the period1 April - 30
June 2020 and 10% effective 1 July 2020.
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 overarching 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.
12 / ATLAS PEARLS LTD • ANNUAL REPORT
DIREC TORS’ REPORT
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
independantly verifiably data such as financial measures, market share and data from independantly 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 2020, the
total Non-Executive Directors’ fees including retirement benefit contributions were $95,109 (30 June 2019: $178,114).
The following fees have applied:
•
•
Base fees for Non-Executive Directors is $50,000 per annum.
In response to the Global Pandemic, COVID-19, Atlas reduced Director fees by 20% effective 1 April 2020.
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.
Use of remuneration consultants
During the financial year ended 30 June 2020 the Company did not engage any remuneration consultants.
Voting and comments made at the Company’s 2019 Annual General Meeting
Atlas Pearls received 95% of “yes” votes on adoption of the remuneration report for the 2019 financial year. On the resolution to elect Director
Mr Timothy Martin, Atlas Pearls received 99% of “yes” votes. On the resolution to approve the approval of the Employee Share Option Plan, Atlas
Pearls received 91% of “yes” votes. The Company did not receive any specific feedback at the Annual General Meeting or throughout the year on
its remuneration.
Relationship between Key Management Personnel Remuneration and Performance
Each Key Management Personnel is remunerated on an individual basis. Some Key Management Personnel are entitled to bonuses based on a
percentage of EBITDA.
ANNUAL REPORT • ATLAS PEARLS LTD / 13
13.2. DETAILS OF REMUNERATION
DIREC TORS’ REPORT
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
SALARY
SACRIFICE
FOR SHARES
CASH
SALARY &
FEES
SHORT-
TERM
INCENTIVE
CASH
BONUS
NON-CASH
MONETARY
BENEFIT3
TOTAL CASH
SALARY,
FEES AND
SHORT-
TERM
BENEFITS5
POST-
EMPLOYMENT
BENEFITS
LONG TERM
BENEFITS
SHARE BASED
COMPENSATION
SUPER-
ANNUATION
BENEFIT
LONG
SERVICE
LEAVE
BONUS
SHARES
OPTIONS4
TOTAL
NAME
$
$
$
$
$
$
$
$
$
DIRECTORS (NON-EXECUTIVE)
T. Martin
C. Buss
2020
2019
2020
2019
DIRECTORS (EXECUTIVE)
G. Newman 1
P. Fallourd 2
2020
2019
2020
2019
47,609
50,114
47,500
50,000
124,025
78,000
198,340
240,000
OTHER KEY MANAGEMENT PERSONNEL
M Longhurst
D Kubicki
TOTAL 2020
TOTAL 2019
2020
2019
2020
2019
2020
2019
191,117
200,000
151,092
173,516
759,683
791,630
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,609
50,114
47,500
50,000
-
-
-
-
124,025
11,782
78,000
198,340
240,000
-
11,312
22,800
-
-
14,354
16,484
37,448
39,284
36,238
227,355
22,500
222,500
-
-
151,092
173,576
36,238
795,921
22,500
814,130
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,609
50,114
47,500
50,000
135,807
78,000
(10,050)
199,602
36,643
299,443
13,868
241,223
30,536
253,036
14,444
179,890
24,073
214,073
18,262
851,631
91,252
944,666
1.
2.
3.
4.
5.
Mr G Newman was appointed Executive Chairman 1 October 2019.
Mr P Fallourd resigned 19 September 2019.
Non-Monetary benefits of other Key Management Personnel includes overseas living allowances as per individual employment contracts.
Share based remuneration related to options being recognised over the respective vesting period.
In response to the Global Pandemic, COVID-19, Atlas reduced the remuneration of Directors and Key Managment Personnel by 20%, effective 1 April 2020 - 30 June 20.
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 2020
% PERFORMANCE
30 JUNE 2019
% PERFORMANCE
(5.00%)
5.75%
8.03%
12.24%
12.07%
11.25%
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
Basic earnings per share
Dividend payments
Decrease in share price
Total KMP incentives as a percentage profit/(loss) %
14 / ATLAS PEARLS LTD • ANNUAL REPORT
30 JUNE
2020
30 JUNE
2019
30 JUNE
2018
30 JUNE
2017
30 JUNE
2016
(8,076,827)
(3,582,461)
(2,034,099)
900,581
968,103
(1.90)
-
(38%)
(0.2%)
(0.84)
-
(67%)
(2.5%)
(0.48)
-
(8%)
(0.8%)
0.21
-
(19%)
3%
0.23
-
(27%)
12%
DIREC TORS’ REPORT
13.3.
SERVICE AGREEMENTS
On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company. Remuneration and other terms
of employment for the Chief Executive 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 GEOFFERY NEWMAN (Executive Chairman - Appointed 1 October 2019)
•
•
•
•
•
Base salary for the 2020 financial period of $112,590 per annum inclusive of superannuation for three days per week, reviewed
annually.
Chairman fees of $85,410 per annum including superannuation.
In response to the Global Pandemic, COVID-19, salaries were reduced 20% effective 01 April 2020.
No bonus has been accrued as payable for 19/20.
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
13.3.2. MR PIERRE FALLOURD (Managing Director and Chief Executive Office - Appointed 4 January 2016 - Resigned 19 September 2019)
Base salary for the 2020 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 19/20.
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
•
•
•
•
13.3.3. MR MARK LONGHURST (Chief Operating Officer - Appointed 1 March 2016)
•
•
•
•
•
Base salary for the 2020 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 19/20.
In response to the Global Pandemic, COVID-19, salaries were reduced 20% effective 01 April 2020.
Either party may terminate the contract of employment by giving six months ‘notice or a lesser amount as mutually agreed.
13.3.4. MS DIANA KUBICKI (Chief Financial Officer - Appointed 26 March 2018)
•
•
•
Base salary for the 2020 financial period of $190,000 per annum inclusive of superannuation.
In response to the Global Pandemic, COVID-19, salaries were reduced 20% effective 01 April 2020.
Either party may terminate the contract of employment by giving three months’ notice or a lesser amount as mutually agreed.
13.3.5. OTHER NON - EXECUTIVES (STANDARD CONTRACTS)
•
•
•
Contract terminates on retirement.
The Company may terminate the Executive’s employment agreement by providing two months’ written notice or providing
payment in lieu of the notice period.
No entitlement to any special termination payments under these contracts.
13.4.
ADDITIONAL INFORMATION OF THE REMUNERATION REPORT
13.4.1. LOANS FROM 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.
During the year ended 30 June 2019, Mr. Martin was discharged from the loan and the outstanding balance was repayable to
Boneyard Investments Pty Ltd, a related party of Mr. Martin.
Refer note 18.4 for further details of the loan arrangement.
As at 30 June 2020 the balance of the loan was $2.5M (30 June 2019: $2.5M)
As at 30 June 2020 interest accrued and payable on loans from related parties is $46,747 (30 June 2019: 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 13.5.3 for details.
13.4.3. OTHER KEY MANAGEMENT PERSONNEL TRANSACTIONS
•
As at 30 June 2020, Director fees of $3,333 are payable (30 June 2019: $10,667).
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 2020.
13.5.2 NON-EXECUTIVE DIRECTOR FEE SACRIFICE SHARE PLAN
Please refer to Note 26 in the financial statements for details.
ANNUAL REPORT • ATLAS PEARLS LTD / 15
DIREC TORS’ REPORT
13.5.3. 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 20 November 2018, is independantly 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.
NAME
Pierre Fallourd
1
1
Mark Longhurst
1
Pierre Fallourd
1
Mark Longhurst
DATE OF
GRANT
ENTITLEMENT
NO. OF
OPTIONS
VESTING
DATE
EXPIRY DATE
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
Diana Kubick1
20/11/18
1,567,340
01/07/19
30/06/21
1
Pierre Fallourd
1
Mark Longhurst
1
Diana Kubicki
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
FINANCIAL
YEAR IN
WHICH
SHARES VEST
SHARE PRICE
AT GRANT
DATE
OPTION
EXERCISE
PRICE
VOLATILITY
RISK FREE
RATE
2019
2019
2020
2020
2020
2021
2021
2021
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.019
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
$0.027
100%
100%
100%
100%
100%
100%
100%
100%
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
$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
Notes:
1. 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 nil options issued to Key Management Personnel as remuneration during the year ended 30 June 2020
(30 June 2019: 13,854,456).
(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. Buss
Mr P. Fallourd2
OTHER KEY MANAGEMENT PERSONNEL
Mr M. Longhurst
Ms D. Kubicki
BALANCE
01/07/19
GRANTED AS
COMPENSATION
OPTIONS
EXERCISED
OTHER
CHANGES
BALANCE
30/06/20
2,563,443
108,326,550
-
3,866,762
-
-
114,756,795
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,563,443
108,326,550
-
3,866,762
-
-
114,756,755
Notes:
1. 4,997,428 shares are directly held by Mr T Martin. The balance of 103,329,122 shares, are related party share holdings.
2. Mr P Fallourd resigned 19 September 2019.
16 / ATLAS PEARLS LTD • ANNUAL REPORT
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 2020 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 Buss
Mr P. Fallourd1
OTHER KEY MANAGEMENT PERSONNEL
Mr M. Longhurst
Ms D. Kubicki
BALANCE
01/07/19
GRANTED
2
VESTED
EXERCISED
LAPSED/
FORFEITED/
OTHER
1
BALANCE
30/06/20
-
-
-
4,335,755
3,613,130
3,918,349
11,867,234
-
-
-
-
-
-
-
-
-
-
1,625,908
1,354,924
1,567,340
4,548,172
-
-
-
-
-
-
-
-
-
-
2,709,847
-
-
-
-
-
-
2,258,206
2,351,009
2,709,847
4,609,215
Notes:
1. Mr. P Fallourd resigned 19 September 2019, his options were forfeited upon resignation.
2. These unlisted options were approved by the Board of Directors on 20 November 2018.
This is the end of the Audited Remuneration Report.
ANNUAL REPORT • ATLAS PEARLS LTD / 17
14. Auditor’s Independence Declaration
DIREC TORS’ REPORT
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 19.
Signed in accordance with a resolution of the Directors.
Geoff Newman
Chairman
31 August 2020
18 / ATLAS PEARLS LTD • ANNUAL REPORT
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
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
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF ATLAS PEARLS LIMITED
As lead auditor of Atlas Pearls Limited for the year ended 30 June 2020, I declare that, to the best of
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF ATLAS PEARLS LIMITED
my knowledge and belief, there have been:
As lead auditor of Atlas Pearls Limited for the year ended 30 June 2020, I declare that, to the best of
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
my knowledge and belief, there have been:
relation to the audit; and
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
2. No contraventions of any applicable code of professional conduct in relation to the audit.
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.
This declaration is in respect of Atlas Pearls Limited and the entities it controlled during the period.
Dean Just
Director
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 31 August 2020
BDO Audit (WA) Pty Ltd
Perth, 31 August 2020
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.
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.
ANNUAL REPORT • ATLAS PEARLS LTD / 19
ATLAS PEARLS 2020
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS & OTHER COMPREHENSIVE INCOME
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
(LOSS) BEFORE INCOME TAX
Income tax (charge) 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)
NOTES
2020
$
2019
$
3
3
5
5
5
7
6
6
13,740,385
16,240,725
(8,546,266)
(9,884,321)
5,194,119
1,005,310
6,356,404
668,625
(5,116,483)
(5,561,172)
(368,301)
(196,306)
(373,354)
(294,687)
(4,280,249)
1,741,557
(2,423,906)
(2,331,340)
(789,252)
(1,380,887)
(6,975,068)
(1,174,854)
(1,101,760)
(2,407,607)
(8,076,828)
(3,582,461)
(67,431)
(67,431)
1,458,792
1,458,792
(8,144,259)
(2,123,669)
(8,076,828)
(3,582,461)
(8,144,259)
(2,123,669)
(1.90)
-
(0.84)
-
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
20 / ATLAS PEARLS LTD • ANNUAL REPORT
ATLAS PEARLS 2020
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
Right-of-use assets
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Borrowings
Lease Liabilities
Current tax liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
(Accumulated losses)
TOTAL EQUITY
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
NOTES
2020
$
2019
$
8
10
9
4
23
4
12
13
7
11
11
14
13
7
14
7
11
15
16
718,302
358,361
-
1,718,211
5,410,284
1,017,220
791,797
20,405
2,227,798
7,299,854
8,205,158
11,357,074
173,410
-
7,373,444
5,288,247
569,603
689,873
243,902
1,364,851
9,730,810
5,517,912
-
3,016,446
14,094,577
19,873,921
22,299,735
31,230,995
927,393
2,260,371
4,268,989
269,203
393,200
1,100,718
2,074,104
2,870,140
-
421,675
8,119,156
6,466,638
313,631
116,657
108,747
539,035
8,658,191
750,000
1,842,223
131,300
2,854,822
9,321,460
13,641,544
21,909,535
36,857,415
36,857,415
(7,787,970)
(7,758,487)
(15,427,901)
(7,189,393)
13,641,544
21,909,535
ANNUAL REPORT • ATLAS PEARLS LTD / 21
ATLAS PEARLS 2020
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
ATTRIBUTABLE TO OWNERS OF ATLAS PEARLS
CONTRIBUTED
EQUITY
REVALUATION
RESERVE
SHARE BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
(ACCUMULATED
LOSS)
TOTAL EQUITY
NOTES
$
$
$
$
$
$
BALANCES AT 1 JULY 2019
LOSS FOR THE YEAR
Exchange differences on translation of foreign operations
16
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Adjustment from the adoption of AASB16
BALANCE AT 01 JULY 2019 - RESTATED
Employee share scheme
BALANCE AT 30 JUNE 2020
BALANCES AT 1 JULY 2018
LOSS FOR THE YEAR
13
15
16
Exchange differences on translation of foreign operations
16
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
15
16
36,857,415
179,179
873,267
(8,810,933)
(7,189,393)
21,909,535
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,076,828)
(8,076,828)
(67,431)
-
(67,431)
(67,431)
(8,076,828)
(8,144,259)
-
(161,680)
(161,680)
36,857,415
179,179
873,267
(8,810,933)
(7,351,073)
(21,747,855)
-
-
37,948
-
-
37,948
36,857,415
179,179
911,215
(8,878,364)
(15,427,901)
13,641,544
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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
22 / ATLAS PEARLS LTD • ANNUAL REPORT
ATLAS PEARLS 2020
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
Net cash (outflow)/inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of joint venture
Payments for property, plant and equipment
Acquisition of subsidiary PT Disthi Mutiara Suci
Net cash inflow/(outflow) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings
Proceeds from borrowings
Repayment of lease liabilities
Net cash inflow/(outflow) 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
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
NOTES
2020
$
2019
$
13,026,422
15,950,602
1,362,575
387,188
(14,944,263)
(14,560,264)
(460,406)
(364,595)
87,202
8
(1,293,065)
(661,125)
(359,154)
6,607
763,854
24
1,500,000
-
(946,327)
(1,144,875)
(129,321)
(197,087)
424,352
(1,341,962)
(2,678,023)
(3,813,087)
3,273,124
3,140,235
(503,081)
-
92,020
(672,852)
(776,693)
(1,250,960)
1,017,220
1,278,873
477,775
718,302
989,307
1,017,220
8
ANNUAL REPORT • ATLAS PEARLS LTD / 23
ATLAS PEARLS 2020
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: NON-FINANCIAL ASSETS AND LIABILITIES
12. Property, plant and equipment
13. Leases
PART G: FUNDING, CAPITAL MANAGEMENT AND EQUITY
14. Borrowings
15. Contributed equity
16. Reserves
17. Dividends
PART H: FINANCIAL RISK MANAGEMENT
18. Financial risk management
PART I: UNRECOGNISED ITEMS
19. Events occurring after the reporting period
20. Commitments
21. Contingencies
PART J: OTHER
22. Subsidiaries
23. Related party transactions
24. Interests in joint ventures
25. Parent entity financial information
26. Share based payments and options
27. Remuneration of auditors
28. Accounting policies
25
27
30
31
33
34
35
37
38
38
39
39
41
43
43
44
45
46
50
50
50
51
51
52
54
54
56
57
24 / ATLAS PEARLS LTD • ANNUAL REPORT
ATLAS PEARLS 2020
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
31 August 2020. 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 (AASB), 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 2019 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 16 Leases (refer note 28 for accounting policy and note 13 for impact of the transition).
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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) Pandemic has had, or may have, on the Company
based on known information. This consideration extends to the nature of products offered, customers, supply chain and employees. Other
than as addressed in specific notes, there does not appear to be either any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the Company unfavourably at the reporting date or subsequently as a
result of the Coronavirus (COVID-19) Pandemic.
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
Assessment of Lease Liabilities - see note 13
ANNUAL REPORT • ATLAS PEARLS LTD / 25
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.
During the year, the Group recorded a net loss of $8.1M (30 June 2019: $3.6M loss). At 30 June 2020 the Group had a working capital deficit of
($0.6M) (30 June 2019 $3.7M); $5.4M of this balance comprised of current unharvested oysters (30 June 2019: $7.3M).
Based on future cashflow forecasts, the Group will require additional funding within the next 12 months to enable it to continue its normal
business activities to ensure the realisations of assets and extinguish liabilities as and when they fall due. Post year end, an additional $2M loan
was received from the Company’s lender, Boneyard Investments Pty Ltd (Boneyard).
During the year, the Company restructured its current funding. Atlas sold its 50% ownership in the joint venture Essential Oils of Tasmania (EOT)
realising a cash injection of $1.5M Successful collaboration with a commercial partner allowed the Company to renegotiate repayments on its
short-term trade loan. A $250k long term loan was also received from National Australian Bank (NAB) as part of the Australian Government’s SME
COVID-19 loan scheme.
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 showing signs of recovery post COVID-19,
the quality of harvested pearls meeting valuation expectations, and
the Group achieving profitable operations with positive operating cash flows.
On 31 January 2019, the COVID-19 pandemic announced by the World Health Organisation (WHO) is having a negative impact on world stock
markets, currencies, and general business activity. There are still many uncertainties, at report date the impact of the pandemic is still ongoing
and the possibility of further waves and imposed Government restrictions remain unclear making it impractical to reliability measure any future
impact to the Groups financial performance.
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.
Th Directors have reasonable grounds to believe that the Group will continue as a going concern due to the realisation of cash from the sale of
the joint venture, the restructure of short-term loan and additional funds received post year end.
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.
26 / ATLAS PEARLS LTD • ANNUAL REPORT
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 2019 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 1 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)
Major customers by country
295,056
698,782
3,609,833
3,490,673
2020
$
2019
$
27,951,111
31,056,073
(14,210,726)
(14,853,766)
-
38,418
13,740,385
16,240,725
2020
10,346,745
2019
12,051,270
Australia
Japan
Other Countries
Australia
Japan
Other Countries
ANNUAL REPORT • ATLAS PEARLS LTD / 27
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 2020 is as follows:
30 JUNE 2020
Total segment revenue
Inter-segment revenue
REVENUE FROM EXTERNAL CUSTOMERS
TIMING OF REVENUE RECOGNITION
At a point in time
Over time
NORMALISED EBITDA
WHOLESALE LOOSE PEARLS
JEWELLERY
AUSTRALIA
$
INDONESIA
$
AUSTRALIA
$
INDONESIA
$
TOTAL
11,790,536
15,421,224
402,930
336,421
27,951,111
-
(14,210,726)
-
-
(14,210,726)
11,790,536
1,210,498
402,930
336,421
13,740,385
11,790,536
1,210,498
402,930
336,421
13,740,385
-
-
-
-
-
11,790,536
1,210,498
402,930
336,421
13,740,385
(1,752,609)
2,165,041
(67,854)
(166,676)
177,902
ADJUSTED NET OPERATING PROFIT/(LOSS) BEFORE INCOME TAX
(2,455,713)
1,982,090
(157,035)
(175,227)
(805,884)
Depreciation and amortisation
Revaluation of Biological Assets
TOTAL SEGMENT ASSETS
Total assets include:
Additions to non–current assets
TOTAL SEGMENT LIABILITIES
357,568
179,245
80,254
8,946
626,012
-
-
-
-
-
1,054,485
20,177,948
488
376,336
21,609,257
40,089
906,237
(601,255)
(2,681,089)
-
-
-
946,326
(14,168)
(3,296,511)
(ii)
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:
Additions to non–current assets
assets or deferred tax.
TOTAL SEGMENT LIABILITIES
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
300,314
245,521
450,357
16,202,307
624,298
286,259
(258,969)
24,177
183,323
(294,179)
144,435
106,105
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
-
1,132,878
3,595
8,401
1,144,874
(1,870,442)
(2,248,279)
(27,345)
(41,356)
(4,187,422)
28 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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.
A reconciliation of adjusted net operating profit/(loss) before income tax is provided as follows:
NET OPERATING (LOSS) BEFORE TAX
Changes in fair value of biological and agricultural assets
Foreign exchange gains
Foreign exchange losses
Other
(LOSS) BEFORE INCOME TAX FROM OPERATIONS
(ii)
Segment assets
2020
$
2019
$
(805,884)
(6,704,155)
625,052
(149,804)
(589,783)
552,334
(168,064)
(1,001,542)
77,985
13,940
(6,975,068)
(1,174,854)
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
2020
$
2019
$
21,609,257
26,849,086
605
1,365,463
689,873
3,016,446
22,299,735
31,230,995
The total of non-current assets other than financial instruments and deferred tax assets located in Australia is $941,927 (30 June 2019: $2,890,036).
The total located in Indonesia is $14,468,195 (30 June 2019: $15,203,333).
Segment liabilities
(iii)
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
Lease liabilities
Deferred tax liabilities
TOTAL LIABILITIES AS PER THE STATEMENT OF FINANCIAL POSITION
(iv)
Normalised EBITDA reconciliation
Net (Loss) 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
2020
$
2019
$
3,296,511
4,187,422
393,200
421,675
4,582,620
2,870,140
269,203
116,657
8,658,191
-
1,842,223
9,321,460
2020
$
2019
$
(6,975,068)
(1,174,854)
319,828
626,012
(456,988)
6,704,155
(60,441)
20,404
177,902
321,147
297,255
449,207
589,783
134,080
(13,940)
602,878
ANNUAL REPORT • ATLAS PEARLS LTD / 29
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
3.
Revenue from Contracts with Customers
3.1.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Sale of goods
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS
3.2. OTHER INCOME
Foreign exchange gains
Grant funds1
Gain on derivative financial instruments
Interest income
Gain on sale of joint venture
COVID-19 rent relief
Other Income
TOTAL OTHER INCOME
2020
$
2019
$
13,740,385
16,202,307
13,740,385
16,202,307
2020
$
625,052
169,366
-
48,473
98,390
23,577
40,452
1,005,310
2019
$
552,334
50,144
13,940
52,207
-
-
38,418
707,043
1. Grant funds includes export market development grant, Job Keeper payment scheme and BAS cashflow boost.
SIGNIFICANT ACCOUNTING POLICY
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.
Government Grants
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the loss
they are intended to compensate.
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.
30 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
4.
Biological Assets
CURRENT
Oysters – at fair value
TOTAL CURRENT BIOLOGICAL ASSETS
Oysters – at fair value
TOTAL NON-CURRENT BIOLOGICAL ASSETS
TOTAL BIOLOGICAL ASSETS
2020
$
2019
$
5,410,284
5,410,284
7,299,854
7,299,854
7,373,444
7,373,444
9,730,810
9,730,810
12,783,728
17,030,664
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
1,385,583
NUCLEATED OYSTERS
1,260,437
2018
2019
2020
2018
2019
2020
2018
2019
2020
2020: 2,648,040
2019: 2,745,934
2018: 2,329,278
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.
SIGNIFICANT JUDGEMENT
Fair value should reflect market participant views and market data at the measurement date under current market conditions. The
valuation of oysters contains both observable and unobservable inputs impacted by COVID-19. Looking ahead, the impact of COVID-19
on the global economy and financial markets is expected to continue to evolve. The Group carefully considered these impacts when
assessing the fair value of oyster stocks. A fair valuation expense of $4,280,249 (2019: $1,741,557 increase) is included in the valuation of
biological assets.
ANNUAL REPORT • ATLAS PEARLS LTD / 31
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
The Group is exposed to financial risk in respect of its involvement in primary production which consists of the breeding and rearing of oysters
for the purpose of producing pearls. The primary financial risk associated with this activity occurs due to the length of time between the
expenditure of cash in relation to the operation of the farm and the harvesting of the pearls and realisation of cash receipts from the sales to
third parties. The Group ensures that it maintains sufficient working capital to ensure that it can sustain its operation through any delays in cash
flow that may be reasonably foreseen.
Level 3 analysis: The finance and operations departments undertake the valuation of the oysters. The calculations are considered to be level 3
fair values. The data is taken from internal management reporting and work completed by the executive within the respective field teams to
determine the material inputs to the model. The key production inputs are confirmed with the relevant executives and agreed with the Board
of Directors every six months. These are listed in note 4.1.
4.1.
KEY PRODUCTION ASSUMPTIONS
The key assumptions utilised to determine the fair market value of oysters are detailed below:
INPUT
2020
2019
COMMENTARY
Average selling price
¥9,413 - ¥12,383
per momme
¥13,200
per momme
Obtained by analysing sales prices achieved and the trend analysis of the past
12 months of average sales prices.
Yen exchange rate
¥76.60: AUD 1
¥75.73: AUD 1
Based on forward Yen price per a financial institution.
Average pearl size
Proportion of marketable grade
Discount rate
Mortality
0.39
35%
20%
0.37
36%
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
$2.04
$0.76
$2.46
$0.77
Based on historical independant 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:
AVERAGE SELLING PRICE (¥/MOMME)
-10%
¥9,541 (SELLABLE GRADE)
¥921 (COMMERCIAL GRADE)
NO CHANGE
¥10,601 (SELLABLE GRADE)
¥1,023 (COMMERCIAL GRADE)
+10%
¥11,661 (SELLABLE GRADE)
¥1,126 (COMMERCIAL GRADE)
DISCOUNT RATE
PROFIT $
PROFIT $
PROFIT $
22%
20%
18%
FX RATE
84.26
76.60
68.94
(460,307)
(274,288)
(80,711)
(191,467)
-
199,259
AVERAGE SELLING PRICE (¥/MOMME)
77,374
274,288
479,229
-10%
¥9,541 (SELLABLE GRADE)
¥921 (COMMERCIAL GRADE)
NO CHANGE
¥10,601 (SELLABLE GRADE)
¥1,023 (COMMERCIAL GRADE)
+10%
¥11,661 (SELLABLE GRADE)
¥1,126 (COMMERCIAL GRADE)
PROFIT $
PROFIT $
PROFIT $
(2,365,850)
(274,288)
2,281,683
(2,116,572)
-
2,586,564
(1,867,294)
274,288
2,891,445
-10%
32% (SELLABLE %)
58% (COMMERCIAL %)
SELLABLE %
NO CHANGE
35% (SELLABLE %)
65% (COMMERCIAL %)
+10%
39% (SELLABLE %)
71% (COMMERCIAL %)
AV. WEIGHT
PROFIT $
PROFIT $
PROFIT $
0.43
0.39
0.36
257,933
(1,877,792)
(3,988,902)
2,322,677
-
(2,296,379)
4,389,593
1,879,732
(602,110)
32 / ATLAS PEARLS LTD • ANNUAL REPORT
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 occupancy costs
Amortisation of intangible asset
Amortisation of right-of-use asset
Occupany Costs
Compliance and accounting
Travel
Other
TOTAL ADMINISTRATION EXPENSES
5.2.
FINANCE COSTS
Interest and finance charges payable
Interest from lease Liabilities
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
2020
$
2019
$
3,004,855
3,401,080
294,598
102,803
228,611
158,711
405,965
318,308
602,632
233,070
64,185
-
510,680
360,662
383,297
608,198
5,116,483
5,561,172
2020
$
2019
$
342,017
373,354
26,284
-
368,301
373,354
2020
$
2019
$
168,064
1,001,542
20,404
254,854
37,948
307,982
-
123,985
134,080
121,280
789,252
1,380,887
ANNUAL REPORT • ATLAS PEARLS LTD / 33
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
6. Earnings profit / (loss) per share
Basic (loss) per share (cents per share)
Diluted earnings per share (cents per share)
6.1.
EARNINGS RECONCILIATION
Net (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
Adjustments for calculation of diluted earnings per share: options (note 26)
WEIGHTED AVERAGE NUMBER OF POTENTIAL ORDINARY SHARES OUTSTANDING DURING THE PERIOD USED FOR
CALCULATION OF DILUTED EARNINGS PER SHARE
2020
$
(1.90)
-
2019
$
(0.84)
-
2020
$
2019
$
(8,076,828)
(3,582,461)
-
-
(8,076,828)
(3,582,461)
2020
$
2019
$
424,809,620
424,809,620
-
-
424,809,620
424,809,620
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 2020 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 26.1 for further detail.
Diluted earnings per share
Diluted earnings per share adjusts the figure used in determination of basic earnings per share to take into account the after income tax
effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Refer to Note 26.1 for further detail.
34 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART C TAX
7. Tax
7.1.
INCOME TAX EXPENSE
(A) THE COMPONENTS OF TAX EXPENSE/(BENEFIT) COMPRISE:
Current tax
Deferred tax
Prior period (over) provision
INCOME TAX EXPENSE
(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 in deferred tax liabilities (note 7.2)
DEFERRED TAX EXPENSE
(C) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE:
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
Prior period (over) provision
Capital losses not recognised
Previously recognised deferred tax assets
Adjustment to Australian tax rate
INCOME TAX EXPENSE
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 (INCOME)
For details of the franking account, refer to Note 17
2020
$
2019
$
543,587
601,006
(42,833)
789,180
1,618,427
-
1,101,760
2,407,607
2,326,571
(1,725,565)
983,310
635,117
601,006
1,618,427
(6,975,068)
(1,174,854)
(1,918,144)
(323,085)
84,217
109,653
(13,750)
(49,846)
(42,833)
(262,835)
134,990
440,475
(24,222)
(60,391)
-
-
2,800,658
2,239,840
394,640
-
1,101,760
2,407,607
(16%)
(205%)
1,726,026
(548,669)
128
5,611
(6,200)
73,350
(7,596)
238
66,719
(54,220)
673,504
(277,908)
313
(3,833)
(82,927)
(19,265)
525,130
(3,775)
126,192
19,871
608,376
-
(2,800,658)
(2,239,840)
(601,006)
(1,618,427)
ANNUAL REPORT • ATLAS PEARLS LTD / 35
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:
Agricultural and biological assets at fair value
Accruals
Provisions
Impairment of loans
Tax allowances relating property, plant & equipment
Other
Previously recognised deferred tax assets
Tax losses recognised
TOTAL DEFERRED TAX ASSETS
(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
CLOSING BALANCE
2020
$
2019
$
393,200
421,675
27,528
1,753,554
-
-
128
5,611
89,129
82,930
116,657
1,842,223
605,976
613,570
18,613
18,375
636,317
569,598
-
277,908
73,350
13,413
-
67,637
1,347,669
1,547,088
(5,040,498)
(2,239,840)
4,382,702
3,709,198
689,873
3,016,446
1,174,223
2,792,650
(601,006)
(1,618,427)
573,217
1,174,223
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.
During the year ended 30 June 2019 the Group converted an inter-company 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 reversed $2,239,840 of previously recognised deferred tax assets.
As a result of COVID-19, the Group assessed the carrying value of deferred tax assets relating to carry forward losses. The Group has
determined that it is no longer probable that future tax profits will be available to utilise the carrying balance of tax losses within the next
five years. Therefore a further reversal of previously recognised deferred tax assets of $3,417,396 has been recognised at 30 June 2020.
The losses can be carried forward indefinitely and have no expiry date.
36 / ATLAS PEARLS LTD • ANNUAL REPORT
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
2020
$
718,302
718,302
2019
$
1,017,220
1,017,220
The Group’s exposure to interest rate risk is disclosed in note 18. The maximum exposure to credit risk at the reporting date is the carrying
amount of each class of cash and cash equivalents mentioned above.
CASH NOT AVAILABLE FOR USE
The Group has cash held as a guarantee as part of their obligations under their lease agreement totalling $100,000 (30 June 2019: $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
As at the date of this report the Company has not entered into any non-cash financing or investing activities.
2020
$
2019
$
(8,076,828)
(3,582,461)
626,012
(98,390)
37,948
613,260
297,255
(45,600)
134,080
277,954
1,101,760
2,407,607
20,404
6,704,155
1,726,452
(13,940)
589,783
149,767
(2,289,496)
1,338,228
(210,457)
241,314
420,902
408,707
(1,689,199)
(1,618,427)
(1,293,065)
763,855
ANNUAL REPORT • ATLAS PEARLS LTD / 37
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
8.1.3. CREDIT FACILITIES
As at 30 June 2020, the Company had in place a bank overdraft loan facility with the National Australia Bank with a limit of $1.5M (30 June 2019: $1.5M).
8.1.4. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
NON-CASH CHANGES
CLOSING
BALANCE
2019
$
CASH FLOWS
$
PROCEEDS
$
FOREIGN
VALUE
CHANGES
$
FAIR VALUE
CHANGES
$
Long term borrowings
Short-term borrowings
Lease liabilities
Assets held to hedge
750,000
-
-
-
2,870,140
(2,678,023)
3,273,124
53,748
-
-
(503,081)
-
-
-
-
-
Total liabilities from financing activities
3,620,140
(3,181,104)
3,273,124
53,748
RE-CLASS-
IFICATION
IN BALANCE
SHEET
$
(750,000)
750,000
-
-
-
-
-
-
-
-
CLOSING
BALANCE
2020
$
-
4,268,989
(503,081)
-
3,765,908
PART E WORKING CAPITAL
9.
Inventories
Pearls
Jewellery
TOTAL INVENTORY
2020
$
2019
$
1,281,225
1,046,377
436,985
1,181,421
1,718,210
2,227,798
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 2020, a write off of pearl stocks of
$2,423,906 has been recorded (30 June 2019: $2,331,340) 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
2020
$
2019
$
126,030
288,798
-
126,030
232,331
358,361
-
288,798
502,999
791,797
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 consider-
ation 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 28.
38 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
11. Trade and Other Payables
CURRENT
Provisions
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
2020
$
2019
$
2,260,371
2,074,104
573,734
353,660
822,720
277,998
3,187,764
3,174,823
108,747
108,747
131,299
131,299
3,296,511
3,306,122
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
2020
$
2019
$
1,121,537
1,087,569
(1,089,264)
(946,771)
32,273
140,798
898,999
1,058,057
(775,325)
(745,476)
123,674
155,947
312,581
453,379
2,718,632
2,615,703
(674,293)
(567,581)
2,044,339
2,048,122
9,634,999
8,831,433
(6,547,038)
(5,815,021)
3,087,961
5,132,300
5,288,247
3,016,412
5,064,534
5,517,913
Included in pearling project land (leasehold and freehold) and buildings is $571,941 (30 June 2019: $669,709) which represents construction of
buildings in progress at cost.
ANNUAL REPORT • ATLAS PEARLS LTD / 39
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
Amortisation of right-of-use Asset
DEPRECIATION CHARGE (NOTE 5)
40 / ATLAS PEARLS LTD • ANNUAL REPORT
2020
$
2019
$
140,798
40,090
(2,341)
244,588
11,997
(911)
(142,068)
(115,394)
(4,205)
32,274
518
140,798
312,581
377,895
-
(118,650)
(70,363)
106
123,674
-
-
(76,305)
10,991
312,581
2020
$
2019
$
2,048,120
1,774,358
772,921
878,604
(671,667)
(665,318)
(106,349)
1,314
(79,469)
139,947
2,044,339
2,048,122
3,016,413
2,638,193
133,316
664,594
254,274
642,000
(735,366)
(711,663)
9,004
193,607
3,087,961
3,016,411
5,288,247
5,517,912
2020
$
2019
$
(1,054,146)
(982,831)
759,548
685,576
(294,598)
(297,255)
(294,598)
(233,070)
(102,803)
(64,185)
(228,611)
-
(626,012)
(297,255)
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).
13.
Leases
This note provides information for leases where the group is a lease. Lease amounts are presented in the statement of financial position as follows:
(a) Right-of-use Assets
Land and buildings - right-of-use
Less: Accumulated depreciation
TOTAL RIGHT-OF-USE ASSETS
(b) Lease Liabilities
Lease Liabilities (current)
Lease Liabilities (non-current)
TOTAL LEASE LIABILITIES
2020
$
2019
$
2,728,657
(2,159,054)
569,603
2020
$
269,203
-
269,203
-
-
-
-
-
-
2019
$
ANNUAL REPORT • ATLAS PEARLS LTD / 41
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(c) Impact of Adoption
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates the classification of
operating and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities
are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge
for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs).
On transition to AASB 16 the Group has chosen to measure right of use assets as if AASB 16 had been applied since the commencement of the
lease, except that the discount rate used is the incremental borrowing rate on the date of initial application and certain practical expedients are
available (see below for the practical expedients used by the Group). The Group has used this method for all of its leases.
AASB16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. In applying the modified
retrospective approach, the Group has taken advantage of the following practical expedients:
A single discount rate has been applied to portfolios of leases with reasonably similar characteristics.
Leases with a remaining term of 12 months or less from the date of application have been accounted for as short-term leases (i.e. not recognised
on balance sheet) even though the initial term of the leases from lease commencement date may have been more than 12 months.
For the purposes of measuring the right-of-use asset hindsight has been used. Therefore, it has been measured based on prevailing estimates at
the date of initial application and not retrospectively by making estimates and judgements (such as the term of leases) based on circumstances
on or after the lease commencement date.
The weighed average incremental borrowing rate applied to lease liabilities on 1 July 2019 was 6.12%.
The impact of adoption on opening retained earnings as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rate of 6.12% (AASB 16)
Accumulated depreciation as at 1 July 2019 (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities (AASB 16)
Tax effect on the above adjustments
Reduction in opening retained earnings as at 1 July 2019
SIGNIFICANT JUDGEMENT
Leases
1 JUL 2019
$
715,622
(671,733)
(1,876,114)
2,424,512
(671,733)
11,782
(161,680)
In determining the leases terms, management considers all facts and circumstances that create an economic incentive to exercise and
extension options, or not exercise termination options. Extension options (or periods after termination options) are only included in the
lease term if the lease is reasonably certain to be extended (or not terminated).
Extension options on leased offices in Claremont, West Australia and Sanur, Indonesia have not been included in the lease liability because
the Group could replace the assets without significant cost or business disruption.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise)
it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects
this assessment, and that is within the control of the lessee.
Refer to note 28 for accounting policy.
42 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART G FUNDING, CAPITAL MANAGEMENT & EQUITY
14. Borrowings
CURRENT
Other loans
TOTAL CURRENT BORROWINGS
NON CURRENT
Bank Loan
Other loans
TOTAL NON-CURRENT BORROWINGS
TOTAL BORROWINGS
2020
$
2019
$
4,268,989
4,268,989
2,870,140
2,870,140
250,000
63,631
313,631
-
750,000
750,000
4,582,620
3,620,140
Refer to Note 18.4 for disclosures on financing arrangements currently in place.
SIGNIFICANT ACCOUNTING POLICY
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds and the redemption amount is recognised in the statement of profit or loss and other
comprehensive income over the period of the borrowings using the effective interest rate method.
Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw down of the facility, are
recognised in the statement of profit or loss and other comprehensive income.
Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, 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.
15. Contributed equity
Issued and fully paid-up capital
ORDINARY SHARES
Balance at beginning of year
Shares issued
Share transaction costs
Balance at end of year
TREASURY SHARES
Balance at beginning of year
Shares released
Balance at end of year
2020
NO. OF
SHARES
2019
NO. OF
SHARES
2020
$
2019
$
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 2020 to employees
as part of the Atlas employee share salary sacrifice plan (30 June 2019: nil).
ANNUAL REPORT • ATLAS PEARLS LTD / 43
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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 17,596,165 unlisted options on issue at 30 June 2020. Information relating to the Atlas Limited Employee Option Plan, including details of
options issued, exercised and lapsed during the financial year and the options outstanding at the end of the reporting period, is set out in note 26.
(III)
CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide
returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt. The Group has a net gearing ratio of 20% at 30 June 2020 (30 June 2019 : 20%)
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.
16. 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 year
Movement in Employee Share Reserve
Balance at end of year
Revaluation Reserve3
Balance at beginning of year
Movement in Revaluation Reserve
Balance at end of year
2020
$
2019
$
(8,878,364)
(8,810,933)
911,215
179,179
873,267
179,179
(7,787,970)
(7,758,487)
(8,810,933)
(10,269,725)
(67,431)
1,458,792
(8,878,364)
(8,810,933)
873,267
37,948
911,215
739,187
134,080
873,267
179,179
179,179
-
-
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.
44 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
17. Dividends
Dividend Franking Account
2020
$
2019
$
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 2020 financial year or the period ended 30 June 2019.
ANNUAL REPORT • ATLAS PEARLS LTD / 45
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART H FINANCIAL RISK MANAGEMENT
18. Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and
liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts
to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or speculative instruments. The Group
uses different methods to measure different types of risk to which it is exposed. The Group uses sensitivity analysis in the case of interest rate
and foreign exchange risks and aging analysis for credit risk. Risk management is carried out by the Board of Directors and senior management.
The Group holds the following financial instruments:
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
TOTAL FINANCIAL ASSETS
FINANCIAL LIABILITIES
Trade and other payables
Lease Liabilities
Borrowings
TOTAL FINANCIAL LIABILITIES
18.1. MARKET RISK
(I)
FOREIGN EXCHANGE RISK
2020
$
2019
$
718,302
1,017,220
126,030
310,502
-
20,405
844,332
1,348,127
675,829
824,821
378,404
4,582,620
3,620,140
5,636,854
4,444,961
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.
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 2020
30 JUNE 2019
-10%
10%
-10%
10%
2020
2019
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
FINANCIAL ASSETS
Cash
718,302
1,017,220
1,711
Trade and other receivables
126,030
310,502
Derivatives
FINANCIAL LIABILITIES
-
20,405
-
-
Trade and other payables
675,829
824,821
(2,152)
Borrowings
Derivatives
4,582,620
3,620,140
(194,894)
-
-
-
Total Increase/(Decrease)
(195,336)
-
-
-
-
-
-
-
(1,400)
-
-
1,761
159,459
-
159,820
-
-
-
-
-
-
-
63,182
27,143
2,267
(37,374)
-
-
55,218
-
-
-
-
-
-
-
(51,694)
(22,208)
(1,855)
30,579
-
-
(45,178)
-
-
-
-
-
-
-
46 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
Trade debtors relates to sales made in JPY. Current borrowings are all held in AUD and JPY. Not shown in the table above is the exposure to
exchange movements on the inter-company 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 2020 was $3,810,433 (30 June 2019: AUD$2,736,848). The inter-company 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, which are repayable by 30 October 2020 at fixed interest rates. As such the Group
considers that any fair value interest rate risk or cash flow risk will be immaterial.
(iii)
Price risk
The Group is exposed to fluctuations in pearl prices. This product is not traded as a commodity on an open market and as such the price risk
cannot be hedged.
18.2. CREDIT RISK
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, as well as credit
exposures to wholesale and retail customers, including outstanding receivables. The Group considers the credit quality of the customer, taking
into account its financial position, past experience and other factors. Sales to retail customers are required to be settled in cash or using major
credit cards, thus mitigating credit risk.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised 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.
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit
loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions
include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and forward-looking information
that is available. The allowance for expected credit losses, is calculated based on the information available at the time of preparation. The actual
credit losses in future years may be higher or lower.
Major purchases are invoiced as cash on delivery (COD). Smaller accounts are provided 30 day credit terms and are usually paid by their due date.
On that basis, the loss allowance as at 30 June 2020 and 30 June 2019 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
18.3.
LIQUIDITY RISK
2020
$
2019
$
9,486
-
288,798
20,405
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 un-drawn 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.
ANNUAL REPORT • ATLAS PEARLS LTD / 47
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
18.4. FINANCING ARRANGEMENTS
The Group had access to the following borrowing facilities at the reporting date.
Foreign currency trade loans
Overdraft facility (NAB)
NAB COVID-19 Loan
2020
$
2019
$
1,754,048
-
1,500,000
1,500,000
250,000
-
3,504,048
1,500,000
•
•
•
•
•
•
•
•
•
•
•
During the year ended 30 June 2020, 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 2020
no amount had has been drawn down on this facility, (30 June 2019: $1,120,140).
During the year ended 30 June 2020, no repayments were made to the debt financing package from the Martin Family (a related party).
On 27 August, the Group entered into a new loan agreement with Boneyard Investments Pty Ltd (Boneyard) which replaces its Existing
Loan Agreement and pursuant to which agreement, Boneyard has agreed to make a revolving loan facility available to Atlas;
The aggregate of all loans provided by Boneyard under the Facility will be an amount equal to $4.5M, being the $2.5M loan outstanding
under the Existing Loan Agreement as well as an additional loan in the amount of $2M. Refer note 18.4 for full details;
Repayment of any loans outstanding under the Facility as at 31 March 2021 are scheduled equally over four tranches commencing on 31
March 2021, with the last tranche due for repayment on 30 September 2022;
Any amounts repaid by Atlas prior to 31 March 2021 may be re-borrowed under the Facility up to a limit of $4.5M;
Loans provided under the Facility will bear interest at the rate of 7.5% per annum (which is identical to the interest provisions under the
Existing Loan Agreement);
Subject to shareholder approval, all outstanding loans and interest under the New Loan Agreement will be convertible into shares in Atlas
in the event Atlas defaults on its repayment terms, with conversion being at Boneyard’s option In that event, the conversion price per share
will be at a 15% discount to the most recent 30 day VWAP.
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. On 8 June 2020 the Company agreed to extend
the short-term loan. A repayment of ¥70,000,000 was made on 23 June 2020. The remaining loan balance is payable by grant of four equal
first purchase rights of ¥32,500,000 exercisable each quarter.
On 11 June 2020, the Company received a $250,000 loan from NAB. The loan is repayable over a three year period at a variable interest rate.
Payments are deferred for six months.
18.5. MATURITIES OF FINANCIAL LIABILITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
The table below analyses the Group’s financial liabilities, net and gross settled derivative financial instruments into relevant maturity groupings
based on their remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
un-discounted cash flows.
Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
30 JUNE 2020
30 JUNE 2019
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
675,829
-
-
-
675,829
675,829
824,821
-
-
3,377,024
960,357
83,333
83,333
4,504,048
4,504,048
181,572
124,416
20,209
52,207
378,404
378,404
-
-
1,750,000
750,000
-
-
-
-
-
824,821
824,821
2,500,000
2,500,000
-
-
Borrowings
Lease Liabilities
TOTAL NON-
DERIVATIVES
DERIVATIVES
Net settled
(Non deliverable forwards)
Gross settled
-(inflow)
-outflow
TOTAL DERIVATIVES
4,234,426 1,084,774
103,542
135,540 5,558,281 5,558,281
824,821 1,750,000
750,000
- 3,324,821 3,324,821
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,405
2,334,223
(2,313,818)
20,405
-
-
-
-
-
-
-
-
-
-
-
-
20,405
20,405
2,334,223
2,334,223
(2,313,818)
(2,313,818)
20,405
20,405
48 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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 2020 and 30
June 2019 on a recurring basis:
30 JUNE 2020
ASSETS
Forward foreign exchange contracts
Biological Assets
TOTAL ASSETS
30 JUNE 2019
ASSETS
Forward foreign exchange contracts
Biological Assets
TOTAL ASSETS
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$
$
$
$
LEVEL 1
$
-
-
-
-
-
-
-
-
-
-
-
12,783,728
12,783,728
12,783,728
12,783,728
LEVEL 2
LEVEL 3
TOTAL
$
$
$
20,405
-
20,405
-
17,030,664
17,030,664
20,405
17,030,664
17,051,069
(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.
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 2020 or 30 June 2019.
(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 2020:
OPENING BALANCE 30 JUNE 2019
Additions
Gains recognised through ‘change in fair value’
Losses recognised through ‘change in fair value’
CLOSING BALANCE AT 30 JUNE 2020
BIOLOGICAL
ASSETS
$
TOTAL
$
17,030,664
17,030,664
54,587
54,587
1,827,417
1,827,417
(6,128,940)
(8,782,052)
12,783,728
10,130,615
ANNUAL REPORT • ATLAS PEARLS LTD / 49
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
INPUT
Average selling price
Yen exchange rate
Average pearl size
Proportion of marketable grade
Discount rate
Mortality
2020
2019
COMMENTARY
¥9,413 - ¥12,383
per momme
¥13,200 per
momme
Obtained by analysing sales prices achieved and the trend analysis of the past
12 months of average sales prices.
¥76.60: AUD 1
¥75.73: AUD 1
Based on forward Yen price per a financial institution.
0.39
35%
20%
0.37
36%
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
$2.04
$0.76
$2.46
$0.77
Based on historical independant valuation.
Based on historical averages of costs to complete and sell pearls per momme.
(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 2020:
Bank Loan
Debt Financing
TOTAL NON-CURRENT BORROWING
2020
2020
2019
2019
CARRYING
AMOUNT
FAIR VALUE
CARRYING
AMOUNT
FAIR VALUE
250,000
250,000
4,252,048
4,252,048
4,502,048
4,502,048
-
750,000
750,000
-
750,000
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
19. Events occurring after the reporting period
At report date, the impact of the Coronavirus (COVID-19) pandemic is ongoing and casts uncertainty over the Company’s ability to realise
future sales. It is not practical to reliably measure any future impact, as the situation continues to rapidly develop and is dependant on measures
imposed by each Countries Government. Travel restrictions, quarantine rules, social distancing regulations and commercial flight availability
all influence the Company’s ability to move pearls and people. Management continue to observe the developing situation and are responding
proactively, ensuring minimum business disruption where possible.
On 27 August, the Group entered into a new loan agreement with Boneyard Investments Pty Ltd (Boneyard) which replaces its Existing Loan
Agreement and pursuant to which agreement, Boneyard has agreed to make a revolving loan facility available to Atlas. The aggregate of all
loans provided by Boneyard under the Facility will be an amount equal to $4.5M, being the $2.5M loan outstanding under the Existing Loan
Agreement as well as an additional loan in the amount of $2M. Refer note 18.4 for full details.
20. Commitments
Atlas Pearls had a bank guarantee with the National Bank of Australia for AUD$100,000 at 30 June 2020 (30 June 2019: $100,000).
This guarantee has been taken out to secure the rental of the Atlas Pearls corporate offices in Claremont, Western Australia.
21. Contingencies
The Company’s historical tax affairs are regularly subject to audit by the Indonesian Tax Office and this process remains ongoing. There is a
possibility that this review programme may result in future tax liabilities in relation to prior year tax returns. All assessments received to date have
been brought to account. Currently there are no periods under review.
50 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
PART J OTHER
22. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in note 28.2.
NAME OF ENTITY
CLASS OF SHARES
PERCENTAGE OWNED
PERCENTAGE OWNED
30 JUNE 2020
30 JUNE 2019
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%
100%
100%
100%
Australia
Australia
Indonesia
Indonesia
Indonesia
Malaysia
The ultimate parent entity, Atlas Pearls Ltd, is incorporated in Australia.
23. Related party transactions
(A)
SUBSIDIARIES
Interests in subsidiaries are set out in note 22.
(B)
JOINT VENTURES
World Senses Pty Ltd was formed on 29 November 2012 as a joint venture between Nomad Two Worlds Global Trading Pte Ltd and Atlas Pearls Ltd.
At 30 June 2020, there is a net loan balance of $698,212 owing from World Senses Pty Ltd to Atlas (30 June 2019: $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 (EOT) 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. On 30 June 2020, the Company announced the sale of the joint venture (refer to note 24).
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
(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
2020
$
2019
$
771,173
(72,961)
771,173
(72,961)
(698,212)
(698,212)
-
-
-
2,180,879
(816,028)
1,364,581
2020
$
2019
$
795,921
814,130
37,448
18,262
39,284
91,250
851,631
944,666
ANNUAL REPORT • ATLAS PEARLS LTD / 51
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
(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
Expatriate Medical Insurance
(E)
LOANS FROM RELATED PARTIES
2020
$
2019
$
3,333
6,978
10,667
-
Refer to Note 18.4 for detailed disclosures on financing arrangements. Loans detailed below are accounted for under current and
non-current liabilities (see note 14).
Beginning of the year
Loans advanced from
Principal repayments
Interest charged
Interest paid
END OF YEAR
24.
Interests in Joint Ventures
(A)
JOINT VENTURE
2020
$
2019
$
2,500,000
3,250,000
-
-
-
(750,000)
188,014
229,829
(141,267)
(229,829)
2,546,747
2,500,000
The parent entity has a 50% interest in World Senses Pty Ltd, which is a resident in Australia and the principal activity of which was the
commercialisation of Atlas and Essential Oils of Tasmania Pty Ltd’s research and development, products and export markets.
The interest in World Senses Pty Ltd is accounted for in the financial statements using the equity method of accounting (refer to note 23). The
joint venture is unlisted hence no quoted fair value is disclosed. Information regarding to the joint ventures are set out below.
WORLD SENSES PTY LTD
JOINT VENTURES’ ASSETS AND LIABILITIES
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
NET ASSETS
JOINT VENTURE’S REVENUES, EXPENSES AND RESULTS
Revenues
Expenses
Profit/(loss) for the period
RECONCILIATION TO CARRYING VALUE
Opening net asset 1 July
Profit/(loss) for the period
CLOSING NET ASSETS (LIABILITIES)
GROUP’S SHARE IN PERCENTAGE
Group share in profit/(loss)
Carrying value
52 / ATLAS PEARLS LTD • ANNUAL REPORT
2020
$
2019
$
302,568
441,333
743,901
41,341
304,246
441,333
745,579
41,491
1,760,292
1,760,292
1,801,633
1,801,783
(1,057,731)
(1,056,204)
360
(1,888)
(1,528)
-
(718)
(718)
(1,056,204)
(1,055,486)
(1,528)
(718)
(1,057,731)
(1,056,204)
50%
(764)
-
50%
(359)
-
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
2020
$
2019
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,262,277
1,181,730
5,444,007
473,693
4,706,483
5,180,176
263,831
3,832,172
(3,504,422)
327,750
(63,919)
327,750
263,831
50%
163,875
-
On 30 June 2020, the Company sold its 50% interest in Essential Oils of Tasmania (EOT) for consideration of $1,500,000, resulting in a profit on sale
before income tax of $98,390. Atlas has been reviewing the strategic options surrounding EOT and the growing need for additional funding in
EOT to produce the required commercial return culminated Atlas’ decision to sell its holding.
Total Sale Consideration
Reversal of previous impairment
Carrying amount of net assets disposed
GAIN ON SALE OF JOINT VENTURE
2020
1,500,000
816,029
(2,217,639)
98,390
(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.
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.
ANNUAL REPORT • ATLAS PEARLS LTD / 53
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
25. Parent entity financial information
(A)
SUMMARY FINANCIAL INFORMATION
The individual financial statements for the parent entity show the following aggregate amounts:
STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Issued capital
RESERVES
Share-based payment reserve
Accumulated losses
LOSS FOR THE PERIOD
TOTAL COMPREHENSIVE LOSS
(B)
CONTINGENT LIABILITIES
2020
$
2019
$
3,827,896
1,638,652
17,070,600
22,229,455
7,752,617
5,994,931
6,596,130
5,361,007
36,857,417
36,857,417
911,218
823,270
(20,862,237)
(18,377,313)
16,906,398
19,353,373
(5,830,729)
(2,484,924)
(5,830,729)
(2,484,924)
The parent entity did not have any contingent liabilities as at 30 June 2020 (30 June 2019: Nil). The parent entity did not provide financial
guarantees during the period (30 June 2019: 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.
26. Share Based Payments and Options
26.1. 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.
54 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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.
II.
The expiry of the option period;
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
If an eligible Person’s employment or engagement with the Company ceases because of a controllable event, the last day
iii.
of any period specified in clause 25(b), subject to clause 25(a).
26.2. 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 2019
Granted during the period
Exercised during the period
Expired during the period
Forfeited during the period1
AS AT 30 JUNE 2020
1. Forfited on resignation
ISSUE DATE
20 November 2018
TOTAL
EXERCISE PRICE
PER SHARE OPTION
NUMBER OF OPTIONS
0.027
20,306,013
-
-
0.027
0.027
-
-
2,709,847
17,596,165
EXPIRY DATE
EXERCISE PRICE
SHARE OPTIONS
30 JUNE 2020
SHARE OPTIONS
30 JUNE 2019
30 June 2021
0.0270
17,596,165
17,596,165
20,306,013
20,306,013
Weighted average remaining contractual life of options outstanding at the end of the period
1.0 years
2.0 years
26.3.
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 independantly 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.
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
and three-year trading periods.
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.
ANNUAL REPORT • ATLAS PEARLS LTD / 55
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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
2020
$
2019
$
37,948
134,080
-
-
37,948
134,080
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.
27. Remuneration of Auditors
During the period, the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
2020
$
2019
$
87,100
101,148
43,955
46,786
131,055
147,934
3,725
3,725
2,328
2,328
134,780
150,262
2020
$
2019
$
19,500
24,000
8,589
4,665
28,089
28,665
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
TAX SERVICES
RSM AUSTRALIA FIRM:
Tax compliance services and advice
RSM INDONESIA FIRM:
Tax compliance services and advice
TOTAL REMUNERATION FOR TAXATION SERVICES
56 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
28. Accounting policies
28.1. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards
Board (“AASB”) that are mandatory for the reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 16 – Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates the classification of
operating and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities
are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge
for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs).
In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under
AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now
replaced by interest expense and depreciation in profit or loss.
For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease
payments are separately disclosed in financing activities.
The impact on the financial performance from the adoption of this Accounting Standard is detailed in Note 13.
AASB 2018-6 Amendments to the Australia Accounting Standards – Definition of a business
This standard amends AASB 3 Business Combinations’ (“AASB 3”) definition of a business. To be considered a business, an acquisition would have
to include an input and a substantive process that together significantly contributes to the ability to create outputs. The new guidance provides
a framework to evaluate when an input and a substantive process are present. The revisions to AASB 3 also introduced an optional concentration
test. If the concentration test is met, the set of activities and assets acquired is determined not to be a business combination and asset acquisition
accounting is applied. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets. The Group’s assessment of the impact of this new amendment is that it is not expected
to have a material impact on the Group in the current or future reporting periods.
28.2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Atlas Pearls as at 30 June 2020 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 de-
consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of business combinations by the Group. Intercompany transactions,
balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive
income, statement of changes in equity and statement of financial position respectively.
The interest in a joint venture entity is accounted for using the equity method after initially being recognised at cost in the consolidated
statement of financial position. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter
to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements
in other comprehensive income of the investee in other comprehensive income. When the Group’s share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest
in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by
the Group. The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners
of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling
interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests
and any consideration paid or received is recognised in a separate reserve within equity attributable to the owners.
ANNUAL REPORT • ATLAS PEARLS LTD / 57
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
28.3.
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.
28.4.
COMPARATIVE FIGURES
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current
financial period.
28.5.
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.
28.6.
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 26.
58 / ATLAS PEARLS LTD • ANNUAL REPORT
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
28.7.
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.
28.8. 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.
28.9.
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’).
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 2020 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.
28.10.
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
ANNUAL REPORT • ATLAS PEARLS LTD / 59
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENT
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.
28.11
LEASES LIABILITIES
The Group leases offices in Claremont, West Australia and Sanur, Indonesia. As the leases are of real estate, the Group has elected not to separate
the lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other that the security
interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease
payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise
price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable
lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change
in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase
option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit
or loss if the carrying amount of the right-of-use asset is fully written down.
Until the period ending 30 June 2019, leases of property, plant and equipment were classified as either finance leases or operating leases. From 1 July
2019, leases are recognised as a right-of-use asset and a corresponding liability as the date at which the leases asset is available for use by the Group.
28.12 RIGHT OF USE ASSETS
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial
amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease
incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be
incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the
depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months
or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Low value assets comprise IT
equipment and vehicles.
Leases relating to the farms in Indonesia have been recognised as right of use assets and are amortised over the life of the lease. There is no lease
liability as the leases have all been prepaid on inception of the agreements.
60 / ATLAS PEARLS LTD • ANNUAL REPORT
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 2020 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 2020 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
31 August 2020
ANNUAL REPORT • ATLAS PEARLS LTD / 61
ATLAS PEARLS 2020
ADDITIONAL ASX INFORMATION
The following additional information is required by the Australian Securities Exchange. The information is current as at 20 August 2020.
(A)
DISTRIBUTION SCHEDULE AND NUMBER OF HOLDERS OF EQUITY SECURITIES AS AT 20 AUGUST 2020
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
TOTAL
Fully Paid Ordinary Shares (ATP)
134
390
281
800
Unlisted Options - 2.7c 30/06/2021
-
-
-
-
342
15
1,947
15
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 20 August 2020 is 1,213.
(B)
20 LARGEST HOLDERS OF QUOTED EQUITY SECURITIES AS AT 20 AUGUST 2020
The names of the twenty largest holders of fully paid ordinary shares (ASX code: ATP) as at 20 August 2020 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
MR WESLEY RUTHERFORD + MRS SIAN RUTHERFORD
MISS KRISTIE BIRKBECK
QUEENSRIDGE INVESTMENTS PTY LTD
MR TIMOTHY JAMES MARTIN
MS JENNIFER MICHELLE ROUGHAN
MR GERALD FRANCIS PAULEY + MR MICHAEL JAMES PAULEY
TOTAL
53,048,882
32,400,000
26,371,481
20,718,834
20,529,202
17,880,240
17,833,333
8,000,000
6,712,185
5,851,053
5,620,000
5,567,208
5,000,000
4,744,717
4,000,000
3,818,536
3,549,072
3,540,883
3,360,000
3,312,706
12.40
7.57
6.16
4.84
4.80
4.18
4.17
1.87
1.58
1.37
1.31
1.30
1.17
1.11
0.93
0.89
0.83
0.83
0.79
0.77
251,858,332
58.86
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 20 August 2020 are detailed in part (D).
62 / ATLAS PEARLS LTD • ANNUAL REPORT
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 2020;
SECURITY
Unlisted options exercisable at 2.7 cents on or before 30 June 2021
NUMBER ON ISSUE
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 20 August 2020.
(F)
RESTRICTED SECURITIES AS AT 20 AUGUST 2020
There were no restricted securities on issue as at 20 August 2020.
(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/pages/corporate-governance.
ANNUAL REPORT • ATLAS PEARLS LTD / 63
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 2020, 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 2020 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.
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 the financial report, was a key audit matter
as the 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.
Our audit procedures included, but were not
limited to:
•
•
•
•
•
•
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
reporting date 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, incorporating any potential
impact of the COVID-19 pandemic, exchange
rates, pearl size, sellable percentage of
pearls, mortality, costs to complete and
discount rate;
performing a sensitivity analysis of the key
inputs including the discount rate, foreign
exchange rate, selling price, pearl size and
sellable percentage of pearls and impact of
COVID-19 as these are the key assumptions
against which the model is most sensitive to;
and
evaluating the adequacy of the related
disclosure in Note 4 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 2020, 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.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 12 to 17 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Atlas Pearls Limited, for the year ended 30 June 2020,
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
Dean Just
Director
Perth, 31 August 2020
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
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