Australian Dairy Farms Group
ASX Code: AHF
2017 ANNUAL REPORT
Australian Dairy Farm Group consisting of:
Australian Dairy Farms Limited ABN: 36 057 046 607 and
Australian Dairy Farms Trust ARSN: 600 601 689
CONTENTS
CHIEF EXECUTIVE OFFICER’S LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CORPORATE GOVERNANCE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
AUDITOR’S INDEPENDENCE DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME . 17
CONSOLIDATED STATEMENT OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CONSOLIDATED STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NOTES TO THE FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DIRECTORS’ DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
CORPORATE DIRECTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
2
Australian Dairy Farms Group Annual Report 2017 CEO’s REPORT
Despite greatly improved weather conditions on the Group’s high quality farming
assets, the financial year ended June 2017 continued the prior year’s status of
being historically challenging for the Australian Dairy Industry . Many dairy farmers
experienced ongoing financial stress and the largest dairy company in Australia,
which pays one of the lowest prices for milk, is under serious commercial pressure,
as are many of the almost 50% of Victorian dairy farmers who supply its raw milk .
Approximately 75% of the Group’s funds are employed in the farming of raw milk .
However, the Group, as with other farmers, have no ability to influence either the
global dairy market, which drives raw milk prices in Victoria, or the environmental
conditions . Notwithstanding these circumstances, the Group’s farm management
team led by its experienced Operations Manager, are doing an excellent job at
controlling what is possible to manage and the Group’s vertical integration plan to
drive more of the milk produced on Group farms into value added CDC “Own Brands”
is progressing well .
As previously reported, management is pleased that the minimum farmgate milk price for the Group farms during the 2017-2018
financial year will be $5.78 per kg of solids. This is one of the highest standard milk prices currently available in the Victorian farm
milk market . As CEO, I am also pleased to see the increased percentage volumes of milk solids, reduced feed costs and the
significantly increased tonnages of on-farm fodder. In addition, there are the many other positives from the improved performances
coming from continued excellent work from our farm personnel .
The non-premium, bottled white milk market has become more highly competitive with numerous examples of competitor’s sales
at prices which reflect extremely low, sometimes negative margins, being evident in the market. These prices are, unfortunately,
at lower prices than those of several years ago . Obviously, this challenges the Group’s capacity to hold prices for “commodity”
milk produced . Nevertheless, CDC has been able to achieve a 9% increase in sales over the previous year and has also seen
encouraging sales of CDC’s Own Brand products .
Management and securityholders need to be realistic about how much can be achieved in short time frames, given the current
state of the Australian Dairy Industry, its current level of competition and the challenges in introduction of CDC’s Own Brand
products. CDC must compete by its product differentiation and high quality, and management is pleased to report that good
progress is being made in this area .
The Group now has a platform which extends from on-farm production to processing and delivery of high quality Own Brand dairy
products into key markets across three key dairy categories (fresh milk, butter and yoghurt) . This vertical integration provides
opportunity for genuine differentiation of products and services. Value and differentiation are at the core of CDC’s strategy as is the
production, marketing and sales of high quality natural dairy products .
The Board’s corporate focus is on being a market driven company which continually monitors and reviews and hunts for
opportunities . New Own Brand products due for launch this year will be consistent with the brand charter and extend our reach to
consumer desires . Consumers are now more interested than ever in where their food originates and in natural, wholesome foods
without unnecessary additives .
The Board and management continue to work on several new exciting opportunities, some of which are commercially sensitive,
and looks forward to sharing these opportunities with securityholders and other stakeholders at the appropriate time . There is no
doubt that CDC needs increased scale and scope and the current position is a base from which to work and grow rather than a
destination arrived at .
I would like to thank all of our employees and the people involved in the Group for their support and hard work during the year .
I would also like to thank the securityholders for their support during the year and assure them that they are top of mind in all
respects . For those of you who are able to make it to the AGM, please introduce yourself and I look forward to meeting you then .
.
Peter Skene
CHIEF EXECUTIVE OFFICER/ DIRECTOR
3
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT
Director’s Report
The Board of directors of Australian Dairy Farms Limited (the Company) submits to members the Annual Report of the company
and its controlled entities (the Group) for the financial year ended 30 June 2017.
PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN THE NATURE OF THOSE ACTIVITIES
The principal activities of the Group during the year were:
• Ownership and operation of dairy farms and dairy livestock in Australian Dairy Farms Trust (ADFT) and SW Dairies Pty Ltd
(SWD) for the production of fresh raw milk for conversion to milk and milk products; and
•
Processing of dairy products in Camperdown Dairy Company Pty Ltd (CDC) for sale in the domestic market .
In September 2016, CDC ceased exporting fresh milk to China as a precaution amid changes in administration of shelf life policies
by Chinese regulators . CDC has not pursued re-exporting at this point as the board formed the view that it is not in the best
interests of securityholders to recommence . These processes remain under consideration by the board .
On 1 January 2017, the Group moved its fresh raw milk supply arrangements in SWD from Fonterra to have management and
control of the Group’s produced milk for its own processing opportunities in CDC .
During the second half of the financial year, CDC commenced the production, processing, packaging and marketing of specialised
Jersey Milk and in August 2017, commenced Free Range Milk from segregated milk produced on the Group’s farms.
OUR BUSINESS MODEL AND OBJECTIVES
The Group published its Strategy Overview for the next five years (ASX Release Date 11 July 2017), which sets out the Group’s
plans for the immediate term and the aspirations for the medium term . The board believe that the goals set out in the Strategy
Overview are realistic and achievable, however it is also recognised that the Dairy industry is going through significant structure
change and cyclical stress that the board will continue to monitor for opportunities and threats .
Additionally the Group has disclosed that confidential negotiations are advanced and proceeding with experienced and financial
prospective partners in developing joint venture style partnerships in the construction or acquisition of new plant to fulfil the Group’s
objective of widening the diversity of its product range and customer base in the domestic and export markets . These initiatives are
key planks in the Group’s business model for the future .
In the immediate term, the Group is focused on rapidly expanding its production range and distribution of its ‘Own Branded’ existing
milk, cream, yoghurt and soon to be launched flavoured milk drinks in CDC with direct transparency to the Group’s farm-produced
milk and moving away from commodity production and styles .
This will take time to work through existing contracts and establish new ones and is expected to include the acquisition of
established distribution networks. Trials of several new Own Brand products such as the Jersey and Free Range Camperdown
Dairy milks in selected Victorian Woolworths stores and independent retailers are showing strong consumer take-up in a good
proportion of retail outlets .
Putting in place direct to market distribution channels is also a key focus as CDC, was only a short time ago, was almost solely
a contract packer of others’ brands in which bulk orders were made and delivered to customer’s distribution warehouses . The
customers would then range, promote and distribute the products . The conversion from contract packer to Own Brand production
and marketing along with the development and roll out of new product is a significant project that will take time to fully develop.
Additionally, while continuing to efficiently produce high quality farm milk, the directors are continuing to investigate opportunities to
restructure the ownership of its dairy farm assets to reduce the level of the Group’s direct investment capital in farm assets . Capital
released would be applied to potentially more profitable investments such as joint venture projects, by introduction of additional
synergistic investors in a manner that ensures the Group retains material ownership and offtake arrangements and traceability of
milk source .
As part of planning the future, the directors are in active and positive negotiations with several mutually compatible potential
partners to establish and fund joint venture developments in extended shelf life products and specialty powders .
These activities aim to provide the basis for the Group to achieve its medium term goals to become a successful and profitable
producer and diversified distributer of premium Own Brand and co-branded milk and derivative products in the Australian domestic
markets and for multi country export markets with established export country partners . Exports will be only in products which
can satisfy the Group’s internal low risk framework for achieving the highest standards of product and consumer safety and the
regulatory requirements of export countries .
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Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
OPERATING RESULTS
The consolidated net loss attributed to members of the Group, after providing for income tax was $2,179,348 (2016: $3,703,625).
This result is comprised of a net profit from the dairy processing segment of $26,920, net profit from the dairy farm segment of
$224,570 and corporate costs and bank facility finance charges of $2,430,838. Included in corporate costs are non-cash equity-
settled share-based payments to KMP in the year of $1,017,661 (2016: $Nil). Included in the share-based payments amount is
$294,301 (2016: $Nil) relating to forfeited performance options and $569,808 in non-recurring payments as consideration for the
renewal and extension of employment agreements .
Total income for the year ended 30 June 2017 is $24,972,709, up 135% against the 2016 comparative period of
$10,620,150. This is a result of a $13,061,863 increase in revenue from the dairy processing segment, an increase of $1,302,208
from the dairy farm segment and an $11,512 decrease from all other segments.
Total expenses for the year ended 30 June 2017 were $27,152,057, up 90% against the 2016 comparative period of
$14,323,775, following the acquisition of CDC in April 2016. This is a result of a $13,071,541 increase in expenses from the dairy
processing segment, a decrease of $1,634,372 from the dairy farm segment and an increase of $1,391,113 from corporate costs
and bank facility finance charges.
REVIEW OF OPERATIONS
Dairy Processing - Camperdown Dairy Company Pty Ltd (CDC)
CDC reported a net profit of $26,920 and EBITDA of $615,234 for the year ended 30 June 2017, and most importantly the progress
on the repositioning the company from a contact packer of others brand, to a brand owner of high quality well respected products
of choice in the market . This required considerable investment in time energy and other resources, while continuing the day to day
operations .
This reflects the first full year of operations of the Group with CDC as a subsidiary company, since completion of the acquisition of
CDC on 16 April 2016 . During that period CDC has focused on maintaining existing sales and customers at the time of completion
of the acquisition, while working diligently to expand the customer base and widen the range of products produced and sold .
During the period, substantial progress has been achieved in developing new customer relationships, while also recognising that
the Group must focus on production and sales for profit rather than profit and sales for volume. This has caused management to
seek out the higher margins that come from Own Branded products rather than commoditised products . As part of this process,
long term relationships have had to be reviewed as contracts come up for renewal .
The relatively brief consumer enthusiasm for supporting farmers by avoiding $1.00 per litre supermarket milk seen Australia wide in
mid-2016 rapidly waned as consumers realised that their efforts in paying more did not result in direct advantage to the farmers.
The first year of operation for CDC as a subsidiary has seen several challenges, as is usual for a company in its first year after
acquisition, and new owners challenge past management decisions and retiring vendors change direction after selling .
What has been consistent at CDC has been the commitment of its senior management and their support in moving from a milk
processor which was established and run primarily to supply its previous parent company, to a processor, which is broadening its
scope of operations by the introduction of CDC’s Own Branded products plus the marketing, sales and distribution for the new
products .
Dairy Farms - Australian Dairy Farms Trust and SW Dairies Pty Ltd
The Group’s dairy farms reported a net profit of $224,570 and EBITDA of $695,401 for the year ended 30 June 2017, with projected
FY2018 EBITDA of approximately $2M advised to ASX on 25 August 2017.
The farms are physically in the best condition since they were acquired between 2012 and 2014, with capital expenditure on
drainage and water conservation as well as paddock, laneway and expansion of storage upgrades all combining to deliver
proceeds to the bottom line on a long term basis .
Clearly, in the agricultural industry, as with many industries, nature can change the fundamental inputs at any time, although each
input and output has been realistically estimated based on current and forecast conditions with reasonable fall back protections in
key cost areas .
The Group is fortunate to have a strong farm management team with committed individual farm managers and on-farm teams .
There has been nominal staff turnover, with each farm manager benefiting from strong leadership and training under the lead of
the experienced Operation Manager. The strength of the farm operations in specialist milk production with high quality Jersey and
Holstein herds and continued improvements will continue to flow on to CDC in the production of high quality, segregated milk which
can be sold in the premium milk market . CDC is already becoming well established in processing and marketing the premium
priced Jersey and Free Range milks with direct transparency to the production farms.
Continued lower industry-wide milk production levels in Australia and overseas, are expected to maintain milk prices at reasonable
levels through the coming season .
5
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
FINANCIAL POSITION
The net assets of the Group at 30 June 2017 total $28,664,198, an increase of $1,218,017 from the 2016 comparative.
The key assets and liabilities in the statement of financial position at 30 June 2017 are:
•
•
•
•
•
cash and cash equivalents of $1,577,264 (2016: $2,472,232);
property, plant and equipment of $25,973,270 (2016: $26,271,715);
intangible assets of $6,649,168 (2016: $6,810,080);
biological assets (livestock) of $5,426,719 (2016: $4,516,400); and
total borrowings of $10,602,361 (2016: $13,113,786)
The reduction in borrowings is predominantly a result of the conversion of 235 convertible notes to fully paid stapled securities as
announced to ASX 9 November 2016 and the repayment of Fonterra loans .
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
On 1 January 2017, the Group moved its fresh raw milk supply arrangements from Fonterra to have management and control of the
Group’s produced milk for its own processing opportunities in CDC .
The Group also issued 16,627,779 stapled securities in the year from convertible notes and KMP securities and 19,380,000
performance options .
In the opinion of the directors, other than the above, there were no other significant changes in the state of affairs of the Group that
occurred during the year under review that are not disclosed elsewhere in this report or in the accompanying financial statements.
EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any significant events post 30 June 2017.
ENVIRONMENTAL ISSUES
The Group is regulated by environmental obligations contained in the Environment Protection Act 1970 and is subject to water
licensing restrictions under the Water Act 1989 .
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
As set out in the Strategy Overview and other market releases, the directors have provided information about the future strategies
and plans for the Group which are summarised below:
•
•
•
To operate existing high quality dairy farms with value growth capability in prime locations and look to add further fresh milk
supply via alliances with farmer / owners particularly in specialty milk and related production . Included in this strategy is the
potential to undertake a restructure of the ownership of the farm assets by introducing new partners or investors in a way
that ensures the Group retains material influence over the operations and long term access to the milk produced;
To grow revenues and securityholder value by differentiating farm supplied milk, value adding via Own Brands, and
extending our participation in the grocery, route and other dairy product markets;
To invest in high value categories and foster cooperative relationships with initial producers and end sellers including in
organic milk production, manufacture and sales; and
•
To continue to build the value and diversity of the Own Brand portfolio, targeting strategic markets .
These developments, together with the current strategy of continuous improvement and adherence to quality control are expected
to assist in the achievement of the Group’s long-term goals and development . The key risks of these strategies relate to weather
factors, the changing business environment within the dairy industry, which is also presenting potentially significant opportunities,
and business risks generally .
6
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
INFORMATION ON DIRECTORS
The following persons held office as directors of the Company during or since the end of the year. The names and details of the
directors are:
Name
Position
Appointed/Retired
Michael Hackett
Adrian Rowley
Peter Skene
Keith Jackson
Chairman
Director
Director / Group CEO Appointed 1 July 2016
Director
Retired 25 November 2016
Michael Hackett
Chairman (Non-Executive)
Qualifications
Bachelor of Commerce - University of Queensland
Fellow - Institute of Chartered Accountants in Australia
ACA Financial Planning Specialist
Directorships held in other listed
entities in the past 3 years
Trustees Australia Limited – director since 1986
Interest in Group securities &
options
A relevant interest in 21,364,952 stapled securities at the date of this report .
A relevant interest in 900,000 performance options at the date of this report .
Michael Hackett was appointed to the board on 8 May 2009 . Michael is a Chartered Accountant who is the Managing Director
of Trustees Australia Limited (ASX CODE: TAU) . He has a Bachelor of Commerce degree from the University of Queensland .
Michael has had considerable experience in managing and operating a wide range of businesses and property developments .
Adrian Rowley
Qualifications
Director (Non-Executive, Independent)
Certified Financial Planner
Directorships held in other listed
entities in the past 3 years
No other current or former directorships in listed entities .
Interest in Group securities &
options
A relevant interest in 1,286,000 stapled securities at the date of this report .
A relevant interest in 900,000 performance options at the date of this report .
Adrian Rowley was appointed to the board on 20 July 2011. Adrian has had a career in financial services spanning 20 years
and is currently Head of Equity Strategy at Watershed Funds Management .
Peter Skene
Qualifications
Director (Group CEO)
Bachelor of Applied Science - Melbourne University
Bachelor of Commerce - Deakin University
Associate Diploma in Dairy Technology - VCAH
Directorships held in other listed
entities in the past 3 years
No other current or former directorships in listed entities .
Interest in Group securities &
options
A relevant interest in 1,010,000 stapled securities at the date of this report .
A relevant interest in 6,560,000 performance options at the date of this report .
Peter Skene was appointed to the board on 1 July 2016. Peter’s past experience reflects a vertical experience path starting
on the factory floor and moving through positions from factory hand to Managing Director in dairy, food and other fast
moving consumer goods (FMCG) industries . He has over 25 years experience in the areas of sales, global supply chain,
manufacturing, quality management, research and development and general management . Peter has also taken on the role of
Group CEO with effective operational responsibility for all aspects of the Group’s business.
7
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
INFORMATION ON DIRECTORS (cont’d)
Keith Jackson
Qualifications
Director (Non-Executive, Independent)
Bachelor of Commerce - Otago University (NZ)
Directorships held in other listed
entities in the past 3 years
Cooks Global Food Limited (NZ) - director since August 2008
TRS Investments Limited (NZ) - director since August 2001
Interest in Group securities &
options
No relevant interest in stapled securities or options at the date of retirement .
Keith Jackson was appointed to the board on 23 October 2014 and retired on 25 November 2016. Keith has an extensive
background in management and governance with particular emphasis on the food and dairy industries . He is a director of the
vendor company from which the Group acquired the dairy farm at 463 Moreys Road Brucknell and has held director roles in
several New Zealand listed and unlisted companies .
COMPANY SECRETARY
The following persons held office as a company secretary of the Company during the financial year:
Jerome Jones
Company Secretary
Interest in Group securities &
options
No relevant interest in stapled securities or options at the date of this report .
Jerome Jones was appointed company secretary on 28 August 2013. Jerome is an experienced financial and management
accounting analyst with experience in Australia and the UK. He is CPA qualified with specialist skills and experience in detailed
management accounting and procedure implementation in several private and ASX listed businesses .
MEETINGS OF DIRECTORS
The board generally meets on a monthly basis either in person or by telephone conference . Directors meet bi-annually with the
Group’s auditor to discuss relevant issues . On matters of corporate governance, the board retains its direct interest rather than
through a separate committee structure which is at this stage is inappropriate for a Company of this size and structure .
Aside from formally constituted directors’ meetings, the directors and chairman are in regular contact regarding the operation of
the Company and particular issues of importance . Written reports on trading activities and operating strategies are prepared by or
provided to the directors on a regular basis or as required by changing circumstances .
The number of directors’ meetings and number of meetings attended by each of the company directors during the financial year are
set out in the table below:
Directors
Michael Hackett
Adrian Rowley
Peter Skene
Keith Jackson
Meetings eligible
to attend
Meetings attended
12
12
12
3
12
12
12
1
DIVIDENDS PAID OR RECOMMENDED
The directors have not recommended or paid a dividend for the year ended 30 June 2017 (2016: $nil) at the date of this report.
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Australian Dairy Farms Group Annual Report 2017
DIRECTORS’ REPORT (cont’d)
INDEMNIFYING OFFICERS OR AUDITOR
During the financial year, the Company paid an insurance premium in respect of an insurance policy insuring the directors, the
company secretary and all executive officers of the Group against a liability incurred as a consequence of holding that office in
the group to the extent permitted by the Corporations Act 2001. The amount of the premium was $28,828 (2016: $20,784) for all
directors and officers for the year.
The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or
auditor of the Company against a liability incurred as such by an officer or auditor.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of a court to bring proceedings against or on behalf of the Group or to intervene in any significant
proceedings to which any such entity is a party for the purpose of taking responsibility for all or any part of those proceedings . No
proceeding has had or is likely to have a material impact on the financial position of the Group.
NON-AUDIT SERVICES
The board is satisfied that the provision of non-audit services during the year is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001 and is satisfied that the services disclosed below did not
compromise the external auditor’s independence for the following reasons:
i) all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely
affect the integrity and objectivity of the auditor; and,
ii) the nature of the services provided do not compromise the general principles relating to auditor independence in accordance
with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional Ethical Standards board .
During the year ended 30 June 2017 there was no payment to external auditors for non-audit services, (2016: $nil).
OPTIONS
At the date of this report, the unissued ordinary stapled securities of Australian Dairy Farms Limited under option are as follows:
Grant Date
1 July 2016
29 July 2016
Last Date of Expiry
Exercise Price
Number under Option
31 December 2018
31 December 2018
25 cents - 27 cents
27 cents - 29 cents
9,840,000
2,700,000
Option holders do not have any rights, by virtue of holding options, to participate in any issues of securities or other interests of the
Company or any other entity .
There have been no other options granted over unissued securities or interests of any controlled entity within the Group during or
since the end of the reporting period .
For details of options issued to directors and executives as remuneration, refer to the Remuneration Report .
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration for the year ended 30 June 2017 has been received and a copy can be found at page 16 .
9
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT
Remuneration Policy
The remuneration policy of Australian Dairy Farms Limited has been designed to align key management personnel (KMP)
objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term
incentives based on key performance areas affecting the Group’s financial results. The Board believes the remuneration policy to
be appropriate and effective in its ability to attract and retain high-quality KMP to run and manage the Group, as well as create goal
congruence between directors, executives and shareholders .
The Board’s policy for determining the nature and amount of remuneration for KMP of the Group is as follows:
– The remuneration policy is developed and approved by the Board, who form the remuneration committee due to the
current size and nature of the Group’s activities . Professional advice is sought from independent external consultants when
required .
– All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation and
performance incentives .
– Performance incentives are only paid once predetermined key performance indicators (KPIs) have been met .
– Incentives paid in the form of options or rights are intended to align the interests of the KMP and Group with those of the
securityholders . In this regard, KMP are prohibited from limiting risk attached to those instruments by use of derivatives or
other means .
– The remuneration committee reviews KMP packages annually by reference to the Group’s performance, executive
performance and comparable information from industry sectors .
The performance of KMP is measured against criteria agreed annually with each executive and is based predominantly on the
forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined
performance criteria . The policy is designed to attract a high calibre of executives and reward them for performance results leading
to long-term growth in shareholder wealth .
KMP receive, at a minimum, a superannuation guarantee contribution required by the government, which is currently 9 .5% of the
individual’s average weekly ordinary time earnings (AWOTE). Some individuals, however, may choose from time to time to sacrifice
part of their salary to increase payments towards superannuation .
There are currently no defined benefit superannuation entitlements to executive KMP and upon retirement KMP are paid employee
benefit entitlements accrued to the date of retirement. Any options not exercised before or on the date of termination will lapse.
All remuneration paid to KMP is valued at the cost to the company and expensed .
The Board’s policy is to remunerate directors at market rates for time, commitment and responsibilities . The remuneration
committee determines payments to the directors and reviews their remuneration annually, based on market practice, duties and
accountability . Independent external advice is sought when required . The maximum aggregate amount of fees that can be paid to
directors is subject to approval by shareholders at the annual general meeting .
KMP are also entitled and encouraged to participate in the Long Term Incentive Plan (LTIP) to align their interests with
shareholders’ interests .
Options granted under the LTIP do not carry dividend or voting rights . Each option is entitled to be converted into one ordinary
security once the interim or final financial report has been disclosed to the public and is measured using a binomial methodology.
KMP or closely related parties of KMP are prohibited from entering into hedge arrangements that would have the effect of limiting
the risk exposure relating to their remuneration .
In addition, the Board’s remuneration policy prohibits directors and KMP from using Australian Dairy Farms Limited securities as
collateral in any financial transaction, including margin loan arrangements.
10
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Engagement of Remuneration Consultants
During the financial year, no consultants were engaged by the remuneration committee to review the elements of KMP
remuneration and provide recommendations . As the size and nature of the Group’s activities increase, this may become necessary .
Performance-based Remuneration
KPIs are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each
individual is involved in and has a level of control over . The KPIs target areas the Board believes hold greater potential for Group
expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based
on budgeted figures for the Group and respective industry standards.
Performance in relation to the KPIs is assessed bi-annually, with bonuses being awarded depending on the number and deemed
difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the
desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before the
KPIs are set for the following year .
In determining whether or not a KPI has been achieved, the Group bases the assessment on audited figures; however, where the
KPI involves comparison of the Group, or a division within the Group, to the market, independent reports may be obtained from
other organisations .
Relationship between Remuneration Policy and Group Performance
The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives . The
establishment of the LTIP is to encourage the alignment of personal and shareholder interests . The Group believes this policy
should be effective in increasing shareholder wealth in future years.
Performance Conditions Linked to Remuneration
The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the incorporation of
incentive payments based on the achievement of Total Securityholder Returns and continued employment with the Group .
During this financial year, the Group issued Performance Rights to current KMP. The performance-related proportions of
remuneration based on the achievement of Total Securityholder Returns are included in the following table The objective of the
Performance Rights is to both reinforce the short and long-term goals of the Group and provide a common interest between
management and shareholders .
The satisfaction of the performance conditions is based on a review of the audited financial statements of the Group and publicly
available market indices, as such figures reduce any risk of contention relating to payment eligibility. The Board does not believe
that performance conditions should include a comparison with any other measures or factors external to the Group at this time .
Employment Details of Members of Key Management Personnel
The following table provides employment details of persons who were, during the financial year, members of KMP of the
consolidated Group . The table also illustrates the proportion of remuneration that was performance and non-performance based
and the proportion of remuneration received in the form of options .
Name
Position Held
Contract Details
M Hackett
Chairman
A Rowley
Director
K Jackson
Director
N/A
N/A
N/A
P Skene
Group CEO / Director
3 year term (3 months notice)
Proportions of Elements
of Remuneration Related
to Performance (Other
than Options Issued)
Proportions of Elements
of Remuneration Not
Related to Performance
Non-salary
Cash-based
Incentives
%
-
-
-
-
Securities
%
-
-
-
-
Fixed
Salary
/ Fees
%
100
100
100
100
11
Australian Dairy Farms Group Annual Report 2017
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Changes in Directors and KMP Subsequent to Year-end
There has been no change to directors or KMP subsequent to year-end .
Remuneration Expense Details for the Year Ended 30 June 2017
The following table of benefits and payments represents the components of the current year and comparative year remuneration
expenses for each member of KMP of the Group . Such amounts have been calculated in accordance with Australian Accounting
Standards .
Key Management
Personnel (KMP)
M Hackett - 2017
M Hackett - 2016
A Rowley - 2017 1
A Rowley - 2016
K Jackson - 2017 2
K Jackson - 2016
Short Term Benefit
Post
Employment
Salary /
Director’s
Fees
Securities
Super
Contributions
$
$
$
Long-
term
Benefit
Long
Service
Leave
$
Termination
Equity-settled
Share-based
Payments
Total
Termination
Benefits
Options4
$
$
$
75,000
40,000
50,000
30,000
12,055
30,000
-
-
-
-
-
-
7,125
3,800
4,750
2,850
1,145
2,850
19,616
32,636
9,500
-
-
-
-
-
-
9,687
9,687
-
-
-
-
-
-
-
-
-
-
100,284
182,409
-
43,800
100,284
155,034
-
-
-
32,850
13,200
32,850
237,885
777,572
438,453
1,128,215
-
109,500
Peter Skene - 20173
330,384
180,000
Total - 2017
Total - 2016
467,439
180,000
100,000
-
1 . This amount is paid in accordance with a contract arrangement with Watershed Funds Management Pty Ltd, an entity associated
with Adrian Rowley .
2 . Keith Jackson retired as a director on 25 November 2016.
3 . Peter Skene was appointed as a director on 01 July 2016.
4 . In accordance with AASB 2, the total amortised value of options issued is included in the above table, however $80,577 for Mr
Hackett and Mr Rowley and $35,047 for Mr Skene are attributable to forfeited options during the year.
Securities Received that Are Not Performance-related
Peter Skene was issued 1,000,000 stapled securities as consideration for the renewal and extension of his employment agreement
for an additional 3 years commencing 1 July 2016. The fair value of securities granted was determined by reference to market price
of $0.18, totalling $180,000.
12
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Options and Rights Granted as Share-based Payments
The terms and conditions relating to performance options granted as remuneration during the year to KMP are as follows
Name
Remuneration
Type
Grant Date Grant
Value
Reason for
Grant
Percentage
Vested /
Paid during
Year
Percentage
Forfeited
during Year
Percentage
Remaining
as
Unvested
Expiry
Date for
Vesting or
Payment
$
Note
%
M Hackett
Options
29/07/16
55,165
Options
Options
Options
29/07/16
25,412
29/07/16
21,600
29/07/16
14,913
A Rowley
Options
29/07/16
55,615
P Skene
Options
Options
Options
Options
Options
Options
Options
Options
29/07/16
25,412
29/07/16
21,600
29/07/16
14,913
01/07/16
139,879
01/07/16
35,047
01/07/16
38,005
01/07/16
40,922
01/07/16
42,840
(i)
(i)
(i)
(i)
(i)
(i)
(i)
(i)
(ii)
(i)
(i)
(i)
(i)
-
-
-
-
-
-
-
-
100
-
-
-
-
%
100
100
-
-
100
100
-
-
-
100
-
-
-
%
-
-
100
100
-
-
100
100
-
-
100
100
100
Range of
Possible
Values
Relating
to Future
Payments
31/12/16
30/06/17
31/12/17
31/12/18
31/12/16
30/06/17
31/12/17
31/12/18
01/07/16
30/06/17
31/12/17
30/06/18
31/12/18
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(i) Options were issued as part of the Group’s LTIP with vesting milestones based on Total Securityholder Returns .
(ii) Options were issued as consideration for the renewal and extension of Peter Skene’s employment agreement for an
additional 3 years commencing 1 July 2016.
Options and Rights Granted as Remuneration
Grant Details
Exercised
Forfeited
Balance at
01/07/2016
Issue Date
No.
Value
($)
No.
Value
($)
No.
Balance at
30/06/2017
M Hackett
A Rowley
P Skene
TOTAL
-
-
-
-
29/07/16
2,400,000
117,090
29/07/16
2,400,000
117,090
01/07/16
8,120,000
296,693
12,920,000
530,873
-
-
-
-
-
-
-
-
1,500,000
900,000
1,500,000
900,000
1,560,000
6,560,000
4,560,000
8,360,000
Balance at
30/06/2017
Vested
Unvested
No.
No.
M Hackett
900,000
A Rowley
900,000
-
-
900,000
900,000
P Skene
6,560,000
1,880,000
4,680,000
8,360,000
1,880,000
6,480,000
The fair value of options granted as remuneration as shown in the above table has been determined in accordance with Australian
Accounting Standards and will be recognised as an expense over the relevant vesting period .
The forfeited options were all granted in this financial year.
13
Australian Dairy Farms Group Annual Report 2017
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Description of Options/Rights Issued as Remuneration
Details of the options granted as remuneration to those KMP listed in the previous table are as follows:
Grant Date
Issuer
Entitlement
on Exercise
Dates
Exercisable
Exercise
Price
Value per Option
at Grant Date
Amount Paid/
Payable by Recipient
29/07/16
01/07/16
01/07/16
Australian Dairy
Farms Limited
Australian Dairy
Farms Limited
Australian Dairy
Farms Limited
1:1
1:1
1:1
$
$
29/07/21
$0.23 - $0.29
$0.04 - $0.06
01/07/18
$0.25
$0.07
26/05/19
$0.27
$0.02 - $0.03
$
nil
nil
nil
Option values at grant date were determined using a binomial method .
Details relating to performance criteria required for vesting have been provided in the Options and Rights Granted as Share-based
Payments table .
KMP Securityholdings
The number of ordinary securities held by each KMP of the Group during the financial year is as follows:
30 June 2017
Michael Hackett1
Adrian Rowley
Keith Jackson
Peter Skene
Balance at
01/07/2016
Granted as
Remuneration
6,675,871
786,000
-
-
7,461,871
-
-
-
1,000,000
1,000,000
Issued on
Conversion
of Notes2
14,439,081
-
-
-
14,439,081
Other
Changes
Balance at
30/06/2017
250,000
500,000
-
10,000
760,000
21,364,952
1,286,000
-
1,010,000
23,660,952
1 . The balance includes relevant interests held by Mr Hackett, including Trustees Australia Limited .
2 . On 9 November 2016, relevant interests of Michael Hackett holding 232 unlisted convertible notes converted to fully paid
stapled securities .
Other Equity-related KMP Transactions
There have been no other transactions involving equity instruments apart from those described in the tables above relating to
options, rights and securityholdings .
Loans to KMP
At the date of this report, there have been no loans made to or from any member of KMP .
Other Transactions with KMP and/or their Related Parties
As set out in note 23(b) of the financial statements, the Group was billed $275,000 of costs, charged on a reimbursement cost basis
for the provision of administrative services, accounting, secretarial, farm director costs and related activities, plus $58,211 interest
on convertible notes by Trustees Australia Limited during the year . Trustees Australia Limited does not charge, nor is it reimbursed
for Responsible Entity services other than ASIC lodgement fees for Australian Dairy Farms Trust .
There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above
relating to equity and compensation, that were conducted other than in accordance with normal employee, customer or supplier
relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons .
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors .
_______________
Michael Leslie Hackett
Chairman
Brisbane
31 August 2017
14
Australian Dairy Farms Group Annual Report 2017 CORPORATE GOVERNANCE STATEMENT
The board is responsible for the overall Corporate Governance of the Group .
The board monitors the operational and financial position and performance of the Group and oversees the business strategy,
including approving the strategic goals of the Group and considering and approving its business plan and the associated farm and
corporate budgets .
The board is committed to maximising performance and growth and generating appropriate levels of security holder value and
returns . In conducting the Group’s business, the board strives to ensure the Group is properly managed to protect and enhance
securityholder interests and that the Group operates in an appropriate environment of Corporate Governance . In accordance with
this, the board has developed and adopted a framework of Corporate Governance policies, risk management practices and internal
controls that it believes are appropriate for the Group .
Unless disclosed, as per ASX Listing rule 4 .10 .3 all the recommendations of the ASX Corporate Governance Council have been
applied for the entire financial year ended 30 June 2017. The Group has generally adopted the Corporate Governance Statement
to comply with the ASX’s revised Corporate Governance Principles and Recommendations third edition which became effective on
or after 1 July 2014. The Corporate Governance Statement which was lodged with this Annual Report, discloses the extent to which
the Company will follow the recommendations taking into account that the relatively small size of the company requires that the
cost and benefits of adoption need to be taken into account in determining the extent of practical implementation.
The principal governance related policies and practices are as follows:
• Corporate Governance Statement
•
•
Board Charter
Securityholder Communication Policy
• Risk Management Policy
• Continuous Disclosure Policy
• Code of Conduct
Details of the Group’s key policies, charters for the board and code of conduct are available on the Group’s website under the
Governance tab at www.adfl.com.au.
15
Australian Dairy Farms Group Annual Report 2017 AUDITOR’S
CORPORATIONS ACT 2001
INDEPENDENCE DECLARATION UNDER S 307C OF THE
TO THE DIRECTORS OF AUSTRALIAN DAIRY FARMS LIMITED AND CONTROLLED
ENTITIES
As lead auditor for the audit of Australian Dairy Farms Limited I declare that, to the best of
my knowledge and belief, during the year ended 30 June 20176 there have been no
contraventions of:
i.
the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit; and
ii.
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Australian Dairy Farms Limited and the entities it controlled
during the year.
Nexia Brisbane Audit Pty Ltd
N D Bamford
Director
Date: 31 August 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Revenue
Other income
Administration and non-dairy related costs
Employment expenses
Finance costs
Dairy related costs
Dairy processing related costs
Depreciation and amortisation expense
Deemed cost of livestock disposed
Impairment of property, plant and equipment
Loss before income tax
Tax expense
Net loss for the year
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
when specific conditions are met:
Items that will not be reclassified to profit or loss
Other comprehensive income for the year
Notes
3(a)
3(b)
3(c)(v)
3(c)(iv)
3(c)(i)
3(c)(ii)
2017
$
23,605,437
1,367,272
(706,425)
2016
$
9,844,465
775,685
(814,519)
(5,568,530)
(1,840,396)
(503,436)
(5,742,304)
3(c)(iii)
(12,714,691)
3(c)(vi)
3(c)(vi)
4
(975,271)
(941,400)
-
(2,179,348)
-
(343,322)
(4,935,072)
(2,477,168)
(753,449)
(1,350,450)
(1,809,399)
(3,703,625)
-
(2,179,348)
(3,703,625)
-
-
-
-
-
-
Total comprehensive loss for the year
(2,179,348)
(3,703,625)
Loss is attributable to:
Company shareholders
Trust unitholders
Company shareholders
Trust unitholders
Earnings per stapled security:
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
The accompanying notes form part of these financial statements.
(1,318,569)
(860,779)
(2,179,348)
(1,003,181)
(2,700,444)
(3,703,625)
(1,318,569)
(860,779)
(2,179,348)
(1,003,181)
(2,700,444)
(3,703,625)
29
29
(1 .14)
(1 .14)
(2 .25)
(2 .25)
17
Australian Dairy Farms Group Annual Report 2017 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Biological assets
Intangible assets
Property, plant & equipment
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Provisions
Borrowings
Total Current Liabilities
Non-Current Liabilities
Provisions
Borrowings
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued capital
Reserves
Accumulated losses
Equity attributable to shareholders
Non-controlling interests
Issued units
Convertible notes
Accumulated losses
Equity attributed to non-controlling interests
Total Equity
The accompanying notes form part of these financial statements.
Notes
2017
$
2016
$
5
6
7
8
9
10
11
12
13
14
13
14
1,577,264
2,428,048
785,199
213,738
2,472,232
3,607,626
559,324
457,346
5,004,249
7,096,528
5,426,719
6,649,168
25,973,270
38,049,157
4,516,400
6,810,080
26,271,715
37,598,195
43,053,406
44,694,723
3,442,405
237,710
184,083
3,864,198
3,896,351
165,780
2,733,413
6,795,544
106,732
10,418,278
10,525,010
72,625
10,380,373
10,452,998
14,389,208
17,248,542
28,664,198
27,446,181
15
16
17,379,491
16,347,345
363,360
-
(10,423,799)
(9,399,531)
7,319,052
6,947,814
26,995,425
24,978,986
-
(5,650,279)
21,345,146
28,664,198
308,881
(4,789,500)
20,498,367
27,446,181
18
Australian Dairy Farms Group Annual Report 2017 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
Net operating cash flows
Cash Flows from Investing Activities
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of non-current assets held for sale
Payment for biological assets
Payment for Camperdown Dairy Company Pty Ltd
Net investing cash flows
Cash Flows from Financing Activities
Proceeds from issue of stapled securities net of transaction costs
Net proceeds from / (repayment of) loans - unsecured
Proceeds from CBA facility
Repayment of loan - Fonterra
Net proceeds from bank hire purchase loans
Net financing cash flows
Net increase / (decrease) in cash held
Cash at the beginning of the period
Cash at the end of the financial period
The accompanying notes form part of these financial statements.
Notes
2017
$
2016
$
5(b)
11
9
15
14(c)
14(b)
26,046,862
(25,304,245)
8,970
(445,225)
306,362
9,187,802
(9,612,566)
74,710
(171,288)
(521,342)
(585,003)
(10,533,867)
58,051
-
95,122
22,256
(484,447)
(2,755,800)
-
(10,921,449)
(1,011,399)
(24,093,738)
-
(74,416)
-
(200,000)
84,485
(189,931)
(894,968)
2,472,232
1,577,264
6,031,529
87,620
6,000,000
(60,000)
157,103
12,216,252
(12,398,828)
14,871,060
2,472,232
19
Australian Dairy Farms Group Annual Report 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Issued
Capital
Ordinary
Option
Reserve
Accumulated
Losses
Non-
controlling
Interest
(Trust)
Total
Note
$
$
$
$
$
Balance at 1 July 2016
16,347,345
Comprehensive income for the year
Loss attributable to company shareholders /
trust unitholders
Total comprehensive loss for the year
Transactions with equityholders in their
capacity as equity holders:
Contributions of equity, net of transaction
costs
Conversion of convertible notes
Option reserve - KMP options
Transfer to retained earnings
-
-
15
15
25
1,032,146
-
-
-
-
-
-
-
-
657,661
(294,301)
(9,399,531)
20,498,367
27,446,181
(1,318,569)
(860,779)
(2,179,348)
(1,318,569)
(860,779)
(2,179,348)
-
-
-
294,301
2,016,439
3,048,585
(308,881)
(308,881)
-
-
657,661
-
Total transactions with equity holders
1,032,146
363,360
294,301
1,707,558
3,397,365
Balance at 30 June 2017
17,379,491
363,360
(10,423,799)
21,345,146
28,664,198
Issued
Capital
Ordinary
Financial
Asset
Revaluation
Reserve
Accumulated
Losses
Non-
controlling
Interest
(Trust)
Total
Balance at 1 July 2015
14,830,305
5,056
(8,396,350)
18,647,667
25,086,678
Note
$
$
$
$
$
Comprehensive income for the year
Loss attributable to company shareholders /
trust unitholders
Total comprehensive loss for the year
Transactions with equityholders in their
capacity as equity holders:
Contributions of equity, net of transaction
costs
-
-
15
1,517,040
Total transactions with equity holders
1,517,040
-
-
-
-
(1,003,181)
(2,700,444)
(3,703,625)
(1,003,181)
(2,700,444)
(3,703,625)
-
-
-
-
4,551,144
6,068,184
4,551,144
6,068,184
-
-
(5,056)
(5,056)
Other
De-recognition of revaluation increment on
disposal of OHPL shares
Total other
Balance at 30 June 2016
-
-
(5,056)
(5,056)
16,347,345
-
(9,399,531)
20,498,367
27,446,181
The accompanying notes form part of these financial statements.
20
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Australian Dairy Farms Group (“the Group”) was formed by the stapling of Australian Dairy Farms Limited (“the Company”) and
its controlled entities, and Australian Dairy Farms Trust (“the Trust”) . The Financial Reports of the Group and the Trust have been
presented jointly in accordance with ASIC Class Order 13/1050 relating to combining accounts under stapling and for the purpose
of fulfilling the requirements of the Australian Securities Exchange.
The Trust is a registered managed investment scheme under the Corporations Act 2001 . Trustees Australia Limited is the
Responsible Entity of the Trust and is incorporated and domiciled in Australia . The Responsible Entity is governed by the terms and
conditions specified in the constitution.
The Group was established for the purpose of facilitating a joint quotation of the Company and the Trust on the Australian Securities
Exchange . The constitutions of the Trust and the Company ensure that, for so long as the two entities remain jointly quoted, the
number of units in the Trust and the number of shares in the Company shall be equal and the unitholders and shareholders are
identical . Both the Responsible Entity of the Trust and the Company must at all times act in the best interests of the Group .
To account for the stapling, Australian Accounting Standards require an acquirer (the Company) to be identified and an acquisition
to be recognised. The net assets and net profit of the acquire (the Trust) are recognised as non-controlling interest as they are not
owned by the acquirer in the stapling arrangement .
The stapling arrangement will cease upon the earliest of either the winding up of the Company or the Trust or by agreement
between the parties .
The principal accounting polices adopted in the preparation of the financial report are set out below.
(a) Basis of Preparation
These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian
Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting
Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting
purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial
statements are presented below and have been consistently applied unless stated otherwise .
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical
costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial
liabilities .
(b) Principles of Consolidation
Stapling
The stapling of the Company and the Trust was approved at separate meetings of the respective shareholders and unitholders on
1 September 2014 . On 22 October 2014, shares in the Company and units in the Trust were stapled to one another and are now
quoted as a single security on the Australian Securities Exchange .
Australian Accounting Standards require an acquirer to be identified and an in-substance acquisition to be recognised. In relation
to the stapling of the Company and the Trust, the Company is identified as having acquired control over the assets of the Trust. To
recognise the in-substance acquisition, the following accounting principles have been applied:
(1) no goodwill is recognised on acquisition of the Trust because no direct ownership interest was acquired by the Company in
the Trust;
(2) the equity issued by the Company to unitholders to give effect to the transaction is recognised at the dollar value of the
consideration payable by the unitholders . This is because the issue of shares by the Company was administrative in nature
rather than for the purposes of the Company acquiring an ownership interest in the Trust; and
(3) the issued units of the Trust are not owned by the Company and are presented as non-controlling interests in the Group
notwithstanding that the unitholders are also the shareholders by virtue of the stapling arrangement . Accordingly, the equity
in the net assets of the Trust and the profit / (loss) arising from these net assets have been separately identified in the
statement of comprehensive income and statement of financial position.
The Trust’s contributed equity and accumulated losses are shown as a non-controlling interest in this Financial Report . Even though
the interests of the equity holders of the identified acquiree (the Trust) are treated as non-controlling interests the equity holders of
the acquiree are also equity holders in the acquirer (the Company) by virtue of the stapling arrangement .
21
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Principles of consolidation (cont’d)
Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries from the date on which control
is obtained by the Company .
Subsidiaries are entities controlled by the Company . Control exists when the Company 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases .
The acquisition method of accounting is used to account for the business combinations by the Company . Inter-entity transactions,
balances and unrealised gains on transactions between Company entities 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 Company .
Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income
and statement of financial position respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company. A list of subsidiaries
appears in note 21 to the consolidated financial statements.
Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses .
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or
businesses under common control . The business combination will be accounted for from the date that control is obtained, whereby
the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to
certain limited exemptions) .
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability
is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in
value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial
instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase .
Goodwill
Goodwill is carried at cost less any accumulated impairment losses . Goodwill is calculated as the excess of the sum of:
(i) the consideration transferred;
(ii) any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
(iii) the acquisition date fair value of any previously held equity interest;
over the acquisition date fair value of net identifiable assets acquired.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any
previously held equity interest shall form the cost of the investment in the separate financial statements.
Fair value remeasurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they arise.
Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such
amounts are recycled to profit or loss.
22
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Principles of consolidation (cont’d)
Goodwill (cont’d)
The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than 100% interest will depend
on the method adopted in measuring the non-controlling interest . The Group can elect in most circumstances to measure the non-
controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s proportionate share
of the subsidiary’s identifiable net assets (proportionate interest method). In such circumstances, the Group determines which
method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business
combination .
Under the full goodwill method, the fair value of the non-controlling interest is determined using valuation techniques which make
the maximum use of market information where available . Under this method, goodwill attributable to the non-controlling interest is
recognised in the consolidated financial statements.
Goodwill on acquisition of subsidiaries is included in intangible assets . Goodwill on acquisition of associates is included in
investments in associates .
Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash-generating units,
representing the lowest level at which goodwill is monitored and not larger than an operating segment . Gains and losses on the
disposal of an entity include the carrying amount of goodwill related to the entity disposed of .
Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions
and do not affect the carrying amounts of goodwill.
(c) Income tax
Under current income tax legislation the Trust is not liable to pay tax provided its taxable income and realised capital gains are
distributed to unitholders . The liability for capital gains tax that may arise if the land and buildings were sold is not accounted for in
this report .
The Company’s income tax expense for the period is the tax payable on the current period’s taxable income adjusted by changes
in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted . The relevant tax rates are
applied to cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An
exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset
or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination,
that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if is probable that future
taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not
recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the
parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future .
Current and deferred tax balances attributable to amounts recognised in other comprehensive income or directly in equity are also
recognised in other comprehensive income or directly in equity .
Tax consolidation
The Company and its wholly-owned entities (this excludes the Trust) have formed a tax-consolidated group with effect from 1 July
2014 and are, therefore, taxed as a single entity from that date . The head entity within the tax consolidated group is Australian
Dairy Farms Limited .
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of
the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group, using
the ‘separate taxpayer within the group’ approach by reference to carrying amounts of assets and liabilities in the separate financial
statements of each entity and the tax values applying under tax consolidation .
23
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Income tax (cont’d)
Any current tax liabilities or assets and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the
head entity in the tax consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax
consolidated group in conjunction with any tax funding arrangement amounts referred to in the following section. Any difference
between these amounts is recognised by the Company as an equity contribution or distribution .
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it
is probable that future taxable profits to the tax consolidated group will be available against which the asset can be utilised. Any
subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised assessments of the
probability of recoverability, is recognised by the head entity only .
Tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax consolidate group, has entered into a tax funding arrangement, which
sets out the funding obligations of members of the tax consolidated group in respect of tax amounts . The tax funding arrangements
require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss
deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable (payable) equal in
amount to the tax liability (asset) assumed . The inter-entity receivable (payable) is at call .
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head
entity’s obligation to make payments for tax liabilities to the relevant tax authorities .
The head entity, in conjunction with other members of the tax consolidated group, has also entered into a tax sharing agreement .
The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the
head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this
agreement, as payment of any amounts under the tax sharing agreement is considered remote .
(d) Fair value of assets and liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the
requirements of the applicable Accounting Standard .
Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced)
transaction between independent, knowledgeable and willing market participants at the measurement date .
As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair
value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair
values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques .
These valuation techniques maximise, to the extent possible, the use of observable market data .
To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with
the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous
market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset
or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs) .
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its
highest and best use or to sell it to another market participant that would use the asset in its highest and best use .
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements)
may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to
observable market information where such instruments are held as assets . Where this information is not available, other valuation
techniques are adopted and, where significant, are detailed in the respective note to the financial statements.
(e) Inventories
Inventories and consumables held for use in operations are valued at the lower of cost and net realisable value . Cost is determined
on the average cost basis and comprises the cost of purchase including transport costs .
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale .
24
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(f ) Biological Assets
Biological assets are comprised of livestock (dairy cattle) . Biological assets are measured at fair value less costs to sell, with any
change recognised in profit or loss. Costs to sell include all costs that would be necessary to sell the assets, including freight and
direct selling costs .
The Group, at each reporting date, appoints an external, independent valuer who having recent experience in the location and
nature of cattle held by the Group performs a valuation for the reporting date . Fair value is determined by reference to market
values for cattle of similar age, weight, breed and genetic make-up . The fair value represents the estimated amount for which
cattle could be sold on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after proper
marketing wherein the parties had each acted knowledgably, prudently and without compulsion .
In the event an independent valuer has not been appointed the Group determines whether an active or other effective market exists
for a biological asset in its present location and condition, the quoted price in that market is the appropriate basis for determining
the fair value of that asset . If an active market does not exist then the directors use one of the following valuation methods, when
available, in determining fair value:
•
the most recent market transaction price, provided that there has not been a significant change in economic circumstances
between the date of that transaction and the end of the reporting period; or
• market prices, in markets accessible to the entity, for similar assets with adjustments to reflect differences.
(g) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the
instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or sale of the
asset (i .e . trade date accounting is adopted) .
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair
value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Finance instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less
principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that
initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent
to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or
discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to
the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an
adjustment to the carrying value with a consequential recognition of an income or expense item in profit or loss.
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements
of Accounting Standards specifically applicable to financial instruments.
i. Financial assets at fair value through profit or loss
Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-term profit
taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to
enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis
in accordance with a documented risk management or investment strategy . Such assets are subsequently measured at fair value
with changes in carrying value being included in profit or loss.
ii. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation
process and when the financial asset is derecognised.
25
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(g) Financial instruments (cont’d)
iii. Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses
are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.
Impairment
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the
financial asset(s).
In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is
considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline
in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.
In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors
are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will
enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the
carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management
establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the
allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously
recognised in the allowance account .
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the group
recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been
renegotiated so that the loss events that have occurred are duly considered .
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another
party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset.
Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the
carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including
the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
(h) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost or as indicated, less, where applicable, accumulated depreciation and
impairment losses .
Basis of measurement of carrying amount
Land, buildings and improvements, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses .
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount . The recoverable value of property is based on periodic, but at least triennial, valuations by external
independent valuers, less subsequent depreciation for buildings and an assessment of the properties value in use .
In the event the carrying amount of property, plant and equipment is greater than its estimated recoverable amount, the carrying
amount is written down immediately to its estimated recoverable amount and impairment losses are recognised in profit or loss.
A formal assessment of recoverable amount is made when impairment indicators are present (refer to note 1(l) for details of
impairment) .
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are recognised as expenses in profit or loss in the financial period in which they are
incurred .
26
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(h) Property, Plant and Equipment (cont’d)
Depreciation
The depreciable amount of all fixed assets, including buildings but excluding freehold land, is depreciated on a straight-line basis
over the asset’s useful life to the Group commencing from the time the asset is available for use . Leasehold improvements are
depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements .
The useful-life rates used for each class of depreciable assets are:
Class of Fixed Assets
Land
Land improvements
Buildings
Fixed Improvements
Depreciation Rate
(years)
Not depreciated
3 years
40 years
30 years
Plant and equipment - owned
3-10 years
Plant and equipment - leased
Motor Vehicles
2-5 years
5 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period .
Gains and losses on disposals are determined by comparing proceeds with the carrying amount . These gains or losses are
included in the statement of profit or loss and other comprehensive income.
(i) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal
ownership that is transferred to entities in the group, are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased
property or the present value of the minimum lease payments, including any guaranteed residual values . Lease payments are
allocated between the reduction of the lease liability and the lease interest expense for the period .
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term .
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the periods in which they are incurred .
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease
term .
(j) Employee Benefits
Short-term employee benefits
Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other
than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period
in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are
measured at the (undiscounted) amounts expected to be paid when the obligation is settled .
The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of
current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and
long service leave entitlements are recognised as provisions in the statement of financial position.
27
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(j) Employee Benefits (cont’d)
Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12
months after the end of the annual reporting period in which the employees render the related service . Other long-term employee
benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments
incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates
determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that
approximate the terms of the obligations . Any remeasurements for changes in assumptions of obligations for other long-term
employee benefits are recognised in profit or loss in the periods in which the changes occur.
The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial
position, except where the group does not have an unconditional right to defer settlement for at least 12 months after the end of the
reporting period, in which case the obligations are presented as current provisions .
Equity-settled compensation
The Group operates an employee share ownership plan . Share-based payments to employees are measured at the fair value of
the instruments issued and amortised over the vesting periods . Share-based payments to non-employees are measured at the fair
value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods
or services cannot be reliably measured, and are recorded at the date the goods or services are received . The corresponding
amount is recorded to the option reserve . The fair value of options is determined using a binomial pricing model . The number of
shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised
for services received as consideration for the equity instruments granted is based on the number of equity instruments that
eventually vest .
(k) Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that
an outflow of economic benefits will result and that outflow can be reliably measured.
(l) Impairment of Assets
At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any
indication that those assets have been impaired . If such an indication exists, the recoverable amount of the asset, being the higher of
the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value . Any excess of the asset’s carrying
value over its recoverable amount is recognised immediately in profit or loss.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs .
(m) Intangibles other than Goodwill
Contractual agreements
Contractual agreements are recognised at fair value. They have a finite life and are carried at fair value less any accumulated
amortisation and any impairment losses . Contractual agreements are amortised over their useful lives .
(n) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts . Bank overdrafts are reported within short-term
borrowings in current liabilities in the statement of financial position.
28
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(o) Trade and other receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of
business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets.
All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment . Refer to Note 1(g) for further discussion on the determination of impairment
losses .
(p) Trade and other payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by
the Group during the reporting period which remains unpaid . The balance is recognised as a current liability with the amount being
normally paid within 30 days of recognition of the liability .
(q) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial
period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale .
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(r) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable . The net amount of GST recoverable
from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or
payments to suppliers .
(s) Revenue and Other Income
Revenue from the sale of milk, after taking into account dairy levies and volume charges, is recognised at the point of delivery as
this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in
those goods .
Dairy cattle fair value adjustments are determined at the end of each reporting date (refer note 9) . The amount of the net increment
or decrement in the fair value is recorded as either revenue or expense and is determined as:
•
The difference between the total net fair value of dairy cattle recognised at the beginning of the financial year and the total
fair value of dairy cattle recognised as at the reporting date; less
• Costs expected to be incurred in realising the fair value (including freight and selling costs) .
Dairy cattle sales are recognised when:
•
•
•
•
there has been a transfer of risks and rewards to the customer (through the execution of a sales agreement at the time of
delivery of the cattle to the customer);
no further work or processing is required;
the quantity and quality of the cattle has been determined; and
the price is fixed and generally title has passed.
Revenue from the sale of dairy processing products is recognised at the point of delivery as this corresponds to the transfer of
significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent
in the instrument .
29
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(t) Critical Accounting Estimates and Judgments
The preparation of the financial statements requires directors to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. The director’s continually evaluate their judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses. Judgements and estimates are based on historical experience and
on other various factors they believe are reasonable under the circumstances, the result of which form the basis of the carrying
values of assets and liabilities that are not readily apparent from other sources .
The following accounting policies for which significant judgements, estimates and assumptions have been made:
- Carrying value determination of land and buildings, refer note 11;
- Carrying value determination of goodwill, refer note 10;
- Fair value determination of livestock, refer note 9; and
- Income tax and other taxes, refer note 4 .
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. Further details of the nature of these assumptions and conditions may be found
in the relevant notes to the financial statements.
(u) Compound Financial Instruments
Compound financial instruments issued by the Group comprise convertible notes that can be converted to ordinary shares at the
option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.
The liability component of compound financial instruments is initially recognised at fair value of a similar liability that does not have
an equity conversion option. The equity component is initially recognised as the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated
to the liability and equity components in proportion to their initial carrying amounts .
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound financial instrument is not remeasured.
Interest related to the financial liability is recognised in profit or loss. On conversion, the financial liability is reclassified to equity and
no gain or loss is recognised .
(v) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
Where the Group has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial
statements or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the
earliest comparative period will be disclosed .
(w) New Accounting Standards for Applicable in Future Periods
Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the
potential impact of such pronouncements on the company when adopted in future periods, are discussed below:
•
AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting periods beginning on or
after 1 July 2018).
The Standard will be applicable retrospectively and includes revised requirements for the classification and measurement of
financial instruments, revised recognition and derecognition requirements for financial instruments.
Although, the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, it is
impracticable at this stage to provide a reasonable estimate of such impact .
30
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(w) New Accounting Standards for Applicable in Future Periods (cont’d)
•
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after 1 July 2018,
as deferred by AASB 2015-8: Amendments to Australian Accounting Standards – Effective Date of AASB 15).
When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles based
model. The core principle of this Standard is to recognise revenue that reflects consideration to which the Group expects to be
entitled .
This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue .
The directors are assessing the adoption of AASB 15 and at this stage it is impracticle to judge the impact on the Group’s financial
statements .
•
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 July 2019).
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and
related Interpretations . AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be
classified as operating or finance leases.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB
108: Accounting Policies, Changes in Accounting Estimates and Errors or recognise the cumulative effect of retrospective applica-
tion as an adjustment to opening equity on the date of initial application .
The directors are satisified the adoption of AASB 16 will not have a material impact on the Group’s financial statements.
NOTE 2: PARENT INFORMATION
The following information has been extracted from the books and records of the parent and has been prepared in accordance with
Accounting Standards .
Statement of Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Statement of Profit or Loss and Other Comprehensive Income
Total loss
Total comprehensive loss
Contingent liabilities and guarantees
2017
$
2016
$
383,477
10,935,360
11,318,837
2,509,697
10,936,592
13,446,289
4,256,565
4,256,565
5,982,578
5,982,578
17,379,491
15,347,345
363,360
-
(10,680,579)
(8,883,634)
7,062,272
7,463,711
(2,091,246)
(2,091,246)
(809,498)
(809,498)
The company does not have any contingent liabilities or guarantees in place for the year ended 30 June 2017, other than in respect
of CBA borrowings, refer note 14 .
Contractual commitments
As announced to ASX on 19 December 2016, the company has conditionally contracted to purchase industrial zoned land for
$260,000 (2016: $nil) through its subsidiary Camperdown Dairy Park Trust.
31
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 3: REVENUE AND EXPENSES
(a) Revenue
Revenue
Dairy farm milk sales
Dairy processing sales
Livestock sales
Other revenue
Other revenue
Interest received - other persons
Total Revenue
(b) Other Income
Gain on disposal of other financial assets
Gain on change in fair value of livestock (refer note 9)
Gain on disposal of property, plant and equipment
(c) Expenses
(i) Finance costs
CBA facility
Loans - unsecured
Loans - Fonterra
Other
Finance charges payable under finance leases
Interest on convertible notes (related parties)
(ii) Dairy related costs
Feed costs
Repairs, maintenance and vehicle costs
Animal health costs
Land holding and lease costs
Breeding and herd testing expenses
Dairy shed expenses
Electricity
Other dairy related costs
(iii) Dairy processing related costs
Cost of goods sold
Freight costs
Property and lease costs
Other dairy processing related costs
(iv) Employment benefits expense
Wages and salaries costs
Director fees
Equity settled share based payment costs
Superannuation
Employee benefits provisions
2017
$
6,601,516
16,137,298
706,678
150,975
23,596,467
2016
$
5,571,670
3,162,751
801,542
233,792
9,769,755
8,970
74,710
23,605,437
9,844,465
-
1,367,272
-
1,367,272
414,860
7,236
-
432
22,697
58,211
503,436
11,512
741,550
22,623
775,685
155,520
4,712
334
5
10,717
172,034
343,322
3,086,093
3,439,257
328,521
156,286
111,081
196,578
116,290
165,442
1,582,013
5,742,304
270,867
214,307
78,312
156,483
91,181
129,083
555,582
4,935,072
10,100,158
1,999,998
1,160,288
304,662
1,149,583
223,181
131,294
122,695
12,714,691
2,477,168
3,955,127
150,075
1,017,661
339,630
106,037
5,568,530
1,545,599
109,500
-
132,725
52,572
1,840,396
32
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 3: REVENUE AND EXPENSES (con’t)
(v) Administration and non-dariy related costs
Administration costs
Professional costs
CDC acquisition costs
(vi) Other significant itens
Deemed cost of livestock sold (refer note 9)
Impairment of land and buildings (refer note 11)
NOTE 4: INCOME TAX EXPENSE
(a) The components of tax expense / (benefit) comprise
Current tax
Deferred tax
2017
$
241,434
464,991
-
706,425
941,400
-
2016
$
238,709
468,668
107,142
814,519
1,350,450
1,809,399
2017
$
2016
$
-
-
-
-
-
-
(b) The prima facie tax on profit before income tax is reconciled to the income tax as follows
Prima facie tax payable / (benefit) on profit / (loss) from ordinary activities before
income tax at 30% (2016: 30%):
(653,804)
(1,111,088)
Add /(less)
Tax effect of:
- trust loss not recognised
- current period tax losses not recognised
- net amount of expenses not currently deductible
- other income not included in assessable income
Income tax expense / (benefit) attributable to entity
Applicable weighted average effective tax rates are as follows:
(c) Deferred tax assets not recognised
375,542
153,079
535,365
619,251
108,589
609,166
(410,182)
(225,918)
-
N/A
-
N/A
Deferred tax assets and liabilities not brought to account, the net benefit of which will only be realised if the conditions for
deductibility set out in Note 1 occur . The amount of losses ultimately available is also dependant on compliance with conditions of
deductibility imposed by law .
Temporary differences
Tax losses
Net unbooked deferred tax assets
30,230
3,581,235
3,611,465
212,023
3,052,614
3,264,637
These amounts are measured at a 30% tax rate, if legislated changes in tax rates to 27 .5% apply to the Group then the total re-
stated deferred tax asset approximates $3.3M.
The Group has revenue losses of $11,937,451 (2016: $10,175,380). These losses comprise $6,157,144 of Group losses and
$5,780,307 of transferred in losses “pre-stapling”. The transferred in losses can be carried forward and may be utilised against
taxable income in future years provided the Same Business Test is satisfied. The Group is of the view that it satisfies the necessary
criteria for these losses to be made available against future taxable profit, however the ATO will not rule on the availability to carry
forward the losses at a point in time, they will only rule on the ability to utilise the losses at the date of utilisation .
33
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 5: CASH AND CASH EQUIVALENTS
Current
Cash at bank and in hand
Total cash and cash equivalents
2017
$
2016
$
1,577,264
1,577,264
2,472,232
2,472,232
Cash at bank earns interest at floating rates based on daily bank deposit rates.
The fair value of cash, cash equivalents and overdrafts is $1,577,264 (2016: $2,472,232).
(a) Reconciliation of Cash
For the purpose of the Cash Flow Statement, cash includes cash and cash equivalents comprising the following at 30 June 2017:
Cash at bank and in hand
2017
$
1,577,264
1,577,264
2016
$
2,472,232
2,472,232
A floating charge over cash and cash equivalents has been provided to the CBA as part of security arrangements for current
facilities . For further details refer to Note 14: Borrowings .
(b) Reconciliation of Profit after Income Tax to Cash Flows from Operations
Net loss after income tax
Adjustment of non cash items
Amortisation and depreciation
Deemed cost of livestock disposed
Fair value adjustment of biological assets
Impairment of property, plant and equipment
Loss / (gain) on disposal of property, plant and equipment
Interest accrual on convertible notes - related party
Gain on disposal of financial assets
Equity settled share based payments
Changes in assets and liabilities, net of the effects of movements in subsidiaries
(Increase) / decrease in trade and other receivables
(Increase) / decrease in other assets
(Increase) / decrease in inventories
Increase / (decrease) in trade and other payables
Increase / (decrease) in provisions
Net operating cash flows
Significant non-cash financing activities in the period are:
2017
$
2016
$
(2,179,348)
(3,703,625)
975,271
(1,367,272)
941,400
-
11,038
58,211
-
1,017,661
1,179,578
243,608
(225,875)
(453,947)
106,037
306,362
753,449
1,350,450
(741,550)
1,809,399
(22,623)
172,034
(11,512)
-
(1,053,563)
(226,005)
1,864
1,076,768
52,572
521,342
- Convertible note conversion of $2,688,586 (refer note 14(a)) and share based payments $360,000 (refer note 15(b)).
34
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 6: TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Other receivables
Total current trade and other receivables
(a) Provision For Impairment of Receivables
2017
$
2016
$
2,417,126
10,922
2,428,048
3,114,806
492,820
3,607,626
Current trade and other receivables are non-interest bearing and generally on 14-60 day terms . A provision for impairment is
recognised when there is objective evidence that an individual trade or term receivable is impaired . There are no balances within
trade and other receivables that contain assets that are impaired .
CREDIT RISK — TRADE AND OTHER RECEIVABLES
The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties other
than those receivables specifically provided for and mentioned within Note 6. The class of assets described as “trade and other
receivables” is considered to be the main source of credit risk related to the Group .
On a geographical basis, the Group has all credit risk exposures in Australia .
The following table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other credit
enhancements) with ageing analysis and impairment provided for thereon . Amounts are considered as ‘past due’ when the
debt has not been settled, with the terms and conditions agreed between the Group and the customer or counter party to the
transaction . Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided
for where there are specific circumstances indicating that the debt may not be fully repaid to the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of good credit
quality .
Gross
amount
Past
due and
impaired
Past due but not impaired
(days overdue)
1-30
31-60
61-90
2017
$
$
$
$
$
Within
initial
trade terms
$
>90
$
Trade and term receivables
2,417,126
Other receivables
Total
10,922
2,428,048
-
-
67,552
39,748
4,204
12,688
2,292,934
-
-
-
-
10,922
67,552
39,748
4,204
12,688
2,303,856
The Group does not hold any financial assets with terms that have been renegotiated, but which would otherwise be past due or
impaired. Trade receivables include $2,185,553 due from the Group’s 3 main customers.
Gross
amount
Past
due and
impaired
Past due but not impaired
(days overdue)
31-60
31-60
61-90
2016
$
$
$
$
$
Within
initial
trade terms
$
>90
$
Trade and term receivables
3,114,806
Other receivables
Total
492,820
3,607,626
-
-
-
234,935
33,001
37,980
142,171
2,666,719
-
-
-
-
492,820
234,935
33,001
37,980
142,171
3,159,539
35
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 6: TRADE AND OTHER RECEIVABLES (cont’d)
(b) Financial assets classified as loans and receivables
Trade and other receivables
Total current
Financial assets
(c) Collateral pledged
Notes
27
2017
$
2016
$
2,428,048
2,428,048
3,607,626
3,607,626
A floating charge over some trade receivables has been provided for certain debt. For futher details refer to Note 14: Borrowings.
NOTE 7: INVENTORIES
Current
Packaging
Raw materials, finished goods and chemicals
Feedstock, hay and silage
Total inventories (at cost)
NOTE 8: OTHER ASSETS
Current
Prepayments
GST receivables
Bonds and deposits
Total other assets
NOTE 9: BIOLOGICAL ASSETS
Non-current
Dairy livestock
Total biological assets
Movements during the year:
Opening carrying amount
Purchases of livestock
Deemed cost of livestock disposed
Fair value adjustment of biological assets
Closing carrying amount
2017
$
336,300
131,371
317,528
785,199
2017
$
81,383
53,667
78,688
213,738
2016
$
353,473
110,811
95,040
559,324
2016
$
138,173
265,481
53,692
457,346
Notes
(a)
2017
$
2016
$
5,426,719
5,426,719
4,516,400
4,516,400
4,516,400
484,447
(941,400)
1,367,272
5,426,719
2,369,500
2,755,800
(1,350,450)
741,550
4,516,400
36
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 9: BIOLOGICAL ASSETS (cont’d)
Movements during the year (herd numbers):
Opening balance
Purchases
Natural increase and attrition
Sales
Closing balance
2017
No.
3,302
353
1,446
(1,597)
3,504
2016
No.
1,625
1,765
1,672
(1,760)
3,302
(a) Biological assets represent the dairy livestock owned by the Group. At 30 June 2017 the livestock has been valued at fair
value, by independent stock agents, based on the prices in the open cattle market in the locality of the dairy operations .
NOTE 10: INTANGIBLE ASSETS
Goodwill
- at cost
Contractual agreements
- at fair value
Less accumulated amortisation
Total intangible assets
Notes
2017
$
2016
$
(a)
21(b)
6,616,393
6,616,393
225,000
(192,225)
32,775
6,649,168
6,616,393
6,616,393
225,000
(31,313)
193,687
6,810,080
(a) On 15 April 2016 the Group acquired Camperdown Dairy Company Pty Ltd (CDC) . In accordance with AASB 3 Business
Combinations, the purchase price was allocated to the fair value of the net identifiable assets of CDC and the remaining amount is
allocated to goodwill . Refer note 21(b) for further details .
As part of the annual review of holding values of all intangibles the directors have reviewed the carrying value of goodwill and
contractual agreements and have adopted the current carrying values at 30 June 2017.
Impairment Disclosures
Goodwill is allocated to cash-generating units (CGU) which are based on the Group’s internal reporting segments . Goodwill relates
to the acquisition of CDC and the recoverable amount of this goodwill has been assessed using “value in use” calculations for the
dairy processing segment .
Key Assumptions Used For ‘Value-In-Use’ Calculations
Value-in-Use
The impairment test for the dairy processing segment is based on ‘value-in-use’ calculations, applying 5-year discounted cash flow
projections that have been approved by the board .
Key assumptions
The key assumptions are based on historical results combined with expectations of future market activity and opportunities, and
include revenue growth, gross margins, discount rates and terminal growth rate .
Sensitivity to change in assumptions
Revenue growth – Revenue projections are based on the 2018 budget and forward-looking plans using current sales levels and
pipeline growth. Growth rates of 3.1% have been used, reflecting a conservative approach in a changing marketplace.
Gross margins – Gross margins are based on the most recent actual results, the 2018 budget and conservative estimates for
future year’s raw material and direct overhead costs .
37
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 10: INTANGIBLE ASSETS (cont’d)
Sensitivity to change in assumptions (con’t)
Discount rates – Discount rates used reflect pre-tax rates and are adjusted to incorporate risk premiums associated with the
industry sector and specific business risk assessments. A pre-tax discount rate of 7.77% has been used in calculations.
Terminal growth rate - A terminal growth rate of 2.2% has been used for future cash flow growth beyond the 5-year forecast period.
This is a conservative rate when compared with annual growth rates during the forecast period .
Impairment
At 30 June 2017, the recoverable amount of the CGU exceeded the carrying value and no impairment has been recorded for
intangible assets in the dairy processing segment .
Impact of possible changes in key assumptions
Sensitivity analysis indicated that given current industry conditions no reasonably possible changes in any of the key assumptions
would cause the recoverable amount of the CGU to be less than its carrying value .
NOTE 11: PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements
- at cost
Less accumulated depreciation
Less accumulated impairment
Plant and equipment - owned
- at cost
Less accumulated depreciation
Plant and equipment - leased
- at cost
Less accumulated depreciation
Notes
2017
$
2016
$
22,461,351
(556,693)
(2,447,564)
19,457,094
22,428,442
(472,186)
(2,447,564)
19,508,692
(b)
(a)
6,808,552
(976,143)
5,832,409
783,803
(100,036)
683,767
6,541,085
(314,938)
6,226,147
578,207
(41,331)
536,876
Total property, plant and equipment
25,973,270
26,271,715
(a) Below is a table showing the carrying value of land, buildings and improvements by farm:
Farm name
Brucknell No 1
Brucknell No 2
Ignatios
Brucknell No 3
Missens Road
Drumborg
Total
Acquisition date
Carrying value
22 October 2014
22 October 2014
14 January 2015
6 March 2015
9 July 2015
16 September 2015
4,126,837
4,379,991
2,220,304
2,283,370
1,551,872
4,894,720
19,457,094
Land, buildings and improvements represents the total holding costs of each farm including purchase price, acquisition
costs, capitalised development and land improvement costs since acquisition .
38
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 11: PROPERTY, PLANT AND EQUIPMENT (cont’d)
Land, buildings and improvements represents the total holding costs of each farm including purchase price, acquisition
costs, capitalised development and land improvement costs since acquisition .
(b) With effective date at 30 June 2016 registered valuer Mr Roger Cussen provided an independent valuation of all farms in
light of recent sales evidence, assessing the fair value of the combined properties at $19,508,692. Adjusting the carrying
cost on the basis of the independent valuation resulted in an impairment of $1,809,399 for the year ended 30 June 2016.
The directors have adopted the same valuation for the year ended 30 June 2017, less depreciation.
Movements in the Carrying Amounts
Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the
current financial year:
2017
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
Plant &
Equipment -
Leased
$
$
$
Total
$
Balance beginning of the financial year
19,508,692
6,226,147
536,876
26,271,715
Additions
Disposals
32,908
-
346,499
(69,089)
205,596
-
585,003
(69,089)
Depreciation expense
(84,506)
(671,148)
(58,705)
(814,359)
Balance at end of financial year
19,457,094
5,832,409
683,767
25,973,270
2016
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
Plant &
Equipment -
Leased
$
$
$
Total
$
Balance beginning of the financial year
13,312,349
835,691
358,923
14,506,963
Additions
Disposals
Depreciation expense
Impairment expense
8,412,283
5,748,720
209,146
14,370,149
-
(73,862)
-
(73,862)
(406,541)
(284,402)
(31,193)
(722,136)
(1,809,399)
-
-
(1,809,399)
Balance at end of financial year
19,508,692
6,226,147
536,876
26,271,715
NOTE 12: TRADE AND OTHER PAYABLES
Current
Trade creditors
Sundry creditors and accrued expenses
Total trade and other payables
Notes
2017
$
2016
$
2,329,731
1,112,674
3,442,405
2,273,087
1,623,264
3,896,351
Financial liabilities at amortised cost classified as trade and other payables
Total trade and other payables
Financial liabilities as trade and other payables
27
3,442,405
3,442,405
3,896,351
3,896,351
39
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: PROVISIONS
Current
Employee benefits
Total current provisions
Non-current
Employee benefits
Total non-current provisions
Total provisions
Movement in provisions:
Opening balance
Provisions assumed on acquisition of CDC
Additional provision
Amounts used
Closing balance
Provision for employee benefits
2017
$
2016
$
237,710
237,710
106,732
106,732
344,442
238,045
-
265,088
(158,691)
344,442
165,780
165,780
72,625
72,625
238,405
12,102
173,731
94,036
(41,464)
238,405
A provision has been recognised for employee entitlements relating to annual leave and long service leave . In calculating the
present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on
historical data. The measurement and recognition criteria relating to employee benefits have been included in Note 1 to this report.
NOTE 14: BORROWINGS
Current
Loans - unsecured
Bank hire purchase loans - secured
Convertible notes
Loan - Fonterra
Total current borrowings
Non-current
Bank hire purchase loans - secured
CBA facility
Total non-current borrowings
Total borrowings
Notes
(a)
(b)
(c)
2017
$
21,846
162,237
-
-
184,083
2016
$
96,263
115,656
2,321,494
200,000
2,733,413
418,278
10,000,000
10,418,278
10,602,361
380,373
10,000,000
10,380,373
13,113,786
(a) On 9 November 2016, the holders of the 235 unlisted convertible notes converted to fully paid stapled securities . The value
of the convertible notes plus accrued interest at the date of conversion was $2,688,586, which included accrued interest of
$58,211 for the year and $308,881 classified as the equity component of the convertible notes on initial recognition. 14,627,779
stapled securities were issued in consideration .
(b) The Group repaid $200,000 in interest free advances from Fonterra Milk Australia Pty Ltd on 31 October 2016.
40
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 14: BORROWINGS (cont’d)
(c) At 30 June 2017 the Group has banking facilities with the Commonwealth Bank of Australia Limited (CBA) secured by
registered mortgages and charges over all farms. The facility is a three year redrawable loan facility of $10,000,000 which has
a maturity date of 15 April 2019 . The facility is subject to compliance with predetermined covenants and an annual review . The
directors have classified the facility as a non-current liability in its entirety based on the facility not maturing until 15 April 2019,
the Group’s intentions to retain the facility prior to maturity date and meeting all covenants during the period and subsequent to
balance date. The facility is drawn to $10,000,000 at 30 June 2017 (2016:$10,000,000).
Collateral Provided:
The CBA facility is secured by a first registered mortgage over all the Group farms and a general security interest over all assets
of Australian Dairy Farms Trust (ADFT) . In addition the Company has provided a negative pledge to not grant a security interest
over its sharholding in Camperdown Dairy Company, and an unlimited guarantee secured over all its present and after acquired
property .
Lease liabilities are secured by the underlying leased assets .
The carrying amounts of assets pledged as security are:
2017
$
2016
$
19,457,093
11,973,647
683,767
10,938,899
43,053,406
19,508,692
13,837,243
536,876
-
33,882,811
2017
$
2016
$
44,374,916
41,635,212
First mortgage over land and buildings at market value
General security interest over all assets of ADFT
First registered charge over leased equipment
Negative pledge and guarantee over all other Group assets
Total assets pledged as security
NOTE 15: ISSUED CAPITAL
Contributed equity of the Group
a) Movement in stapled securities:
Date
Details
01 July 2016
19 Sept 2016
09 Nov 2016
30 June 2017
01 Jul 2015
31 Mar 2016
08 Apr 2016
30 June 2016
Opening Balance
KPI performance rights (i)
Convertible note
conversion (ii)
Opening balance
Loyalty options exercised
Loyalty options exercised
Transaction costs
Number
of Stapled
Securities
181,005,330
2,000,000
Issue Price
$
Shareholders
$
Unitholders
$
Stapled Entity
$
0 .18
16,347,345
360,000
25,287,867
-
41,635,212
360,000
14,627,779
0 .1838
672,146
1,707,558
2,379,704
197,633,109
156,126,217
19,279,259
5,599,854
-
181,005,330
17,379,491
26,995,425
44,374,916
0 .25
0 .25
-
14,830,305
1,204,953
349,991
(37,904)
16,347,345
20,736,722
3,614,862
1,049,972
(113,689)
25,287,867
35,567,027
4,819,815
1,399,963
(151,593)
41,635,212
The basis of allocation of the issue price of stapled securities issued post stapling is determined by arrangement between the
Company and Trust as set out in the Stapling Deed .
(i) See note 15(b) .
(ii) See note 15(d) .
41
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 15: ISSUED CAPITAL (cont’d)
(b) Stapled Securities
The fully paid ordinary shares in the Company are stapled with the fully paid units in the Trust to produce Stapled Securities . These
entitle the holder to participate in dividends and distributions as declared from time to time and the proceeds on winding up . Subject
to the Corporations Act 2001, every holder of stapled securities present at a meeting in person, or by proxy, is entitled to one vote
for each stapled security held .
On 1 July 2016 there was 2,000,000 stapled securities granted to management personnel as share-based payments . The fair value
of securities granted, determined by reference to market price, was $360,000, refer note 25.
(c) Options
During the 2016 comparative financial year loyalty option holders exercised 19,279,259 options and the balance of 5,599,854 was
fully underwritten by Bell Potter Securities and exercised in accordance with the underwriting agreement .
(d) Convertible Notes
On 9 November 2016, the holders of the 235 unlisted convertible notes converted to fully paid stapled securities . The value of
the convertible notes plus accrued interest at the date of conversion was $2,688,586, which included accrued interest of $58,211
for the year and $308,881 classified as the equity component of the convertible notes on initial recognition. 14,627,779 stapled
securities were issued in consideration .
(e) Capital management
Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term
shareholder value and ensure that the Group can fund its operations and continue as a going concern .
The Group’s debt and capital include ordinary share capital, convertible notes and financial liabilities, supported by financial assets.
The Group is not subject to any externally imposed capital requirements .
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure
in response to changes in these risks and in the market . These responses include the management of debt levels, distributions to
shareholders and share issues .
This strategy, consistent with the prior year, is to ensure that the Group’s gearing ratio remains below 35% . The gearing ratios for
the years ended 30 June 2017 and 30 June 2016 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
NOTE 16: RESERVES
Nature and purpose of reserves
Notes
14
5
2017
$
10,602,361
(1,577,264)
9,025,097
28,664,198
37,689,295
24%
2016
$
13,113,786
(2,472,232)
10,641,554
27,446,181
38,087,735
28%
The option reserve records items recognised as expenses on valuation of employee share options .
42
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: CAPITAL AND LEASING COMMITMENTS
(a) Finance lease commitments:
Payable - minimum lease payments
Not later than 12 months
Between 12 months and 5 years
Greater than 5 years
Minimum lease payments
Less future finance charges
Present value of minimum lease payments
2017
$
184,969
466,471
-
651,440
(70,924)
580,516
(b) Non-cancellable operating leases contracted for but not capitalised in the financial statements:
Payable - minimum lease payments
Not later than 12 months
Between 12 months and 5 years
Greater than 5 years
2017
$
194,359
172,353
-
2016
$
132,372
429,127
-
561,499
(65,470)
496,029
2016
$
187,800
366,712
-
Present value of minimum lease payments
366,712
554,512
(c) Capital Expenditure Commitments
As announced to ASX on 19 December 2016, the company has conditionally contracted to purchase industrial zoned land for
$260,000 (2016: $nil) through its subsidiary Camperdown Dairy Park Trust.
NOTE 18: CONTINGENT LIABILITIES
The Group does not have any contingent liabilities for the year ended 30 June 2017.
NOTE 19: KEY MANAGEMENT PERSONNEL COMPENSATION
Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each member of
the Group’s key management personnel (KMP) for the year ended 30 June 2017.
The totals of remuneration paid to KMP of the company and the Group during the year are as follows:
Short term
Post employment
Other long-term
Termination benefits
Share-based payments
2017
$
647,439
32,636
9,687
-
438,453
1,128,215
2016
$
100,000
9,500
-
-
-
109,500
43
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: KEY MANAGEMENT PERSONNEL COMPENSATION (cont’d)
Short-term employee benefits
These amounts include fees and benefits paid to the non-executive Chair and non-executive directors as well as all salary, leave
benefits, fringe benefits and cash bonuses awarded to executive directors and other KMP.
Post-employment benefits
These amounts are the current-year’s estimated cost of providing for the Group’s superannuation contributions made during the
year .
Other long-term benefits
These amounts represent long service leave benefits accruing during the year.
Share-based payments
During the year, stapled securities and performance options were issued to employees and key management personnel under the
ADFG employee Long Term Incentive Plan (LTIP) .
These amounts represent the expense related to the participation of KMP in the ADFG employee Long Term Incentive Plan (LTIP),
as measured by the fair value of the options, rights and shares granted on grant date .
Further information in relation to KMP remuneration can be found in the directors’ report .
NOTE 20: AUDITORS’ REMUNERATION
Remuneration of the auditor for:
Audit and review of the financial statements
NOTE 21: CONTROLLED ENTITIES
Particulars in relation to controlled entities
Parent Entity:
Australian Dairy Farms Limited
Wholly Owned Controlled Entities
SW Dairy Farms Pty Ltd
Dairy Fund Management Limited
DFI Operations Pty Ltd (dormant)
Camperdown Dairy Company Pty Ltd
Camperdown Dairy Park Trust
Other Controlled Entities
Australian Dairy Farms Trust
2017
$
62,325
2016
$
62,976
Note
Class of
Equity
Percentage
Owned
Percentage
Owned
2017
2016
%
%
(a)
(b)
(c)
ordinary
ordinary
ordinary
ordinary
units
(d)(e)
units
100
100
100
100
100
%
-
100
100
100
100
-
%
-
The financial year of all controlled entities is the same as that of the holding company and all controlled entities are incorporated in
Australia . All entities principal place of business and country of incorporation is Australia . All ownership interests are directly held
and have equal voting rights. Other than for borrowings as detailed in note 14, there are no significant restrictions over the Group’s
ability to access or use assets, and settle liabilities, of the Group .
(a)
Ultimate Controlling Entity
The ultimate controlling entity of the Group is Australian Dairy Farms Limited .
44
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 21: CONTROLLED ENTITIES (cont’d)
(b) Acquisition of subsidiary
On 15 April 2016 Australian Dairy Farms Limited acquired 100% of the issued capital and control of Camperdown Dairy Company
Pty Ltd (CDC) for a net cash purchase consideration of $10,927,665. This acquisition formed part of the Group’s overall strategy to
become the ASX’s first vertically integrated dairy entity as a milk farmer, processor, manufacturer and exporter of dairy products.
The identifiable assets acquired and liabilities assumed on acquisition of CDC were as follows:
Purchase consideration:
- Cash
Less:
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Property, plant and equipment1
Intangible assets2
Trade and other payables
Provisions
Identifiable assets acquired and liabilities assumed
Goodwill3
$
10,927,665
6,216
1,801,985
515,285
124,102
3,834,921
225,000
(2,022,506)
(173,731)
4,311,272
6,616,393
1 . Property, plant and equipment was independently valued by Henley Valuers on a fair value (going concern) basis .
2 .
In accordance with AASB 3: Business Combinations the acquirer is required to recognise separately from Goodwill the
identifiable intangible assets of CDC on acquisition. Under the accounting standard, an intangible asset is considered
identifiable if it meets the Contractual Legal Criterion. Customer supply agreements meet the Contractual Legal Creiterion
and in accordance with this requirement the Group has attributed $225,000 to material supply agreements that are required
to be amortised over the life of the agreements .
3 . Goodwill is attributable to the significant time and costs to setup and establish the factory and business at Campberdown,
including the establishment of the current workforce, management team and brand .
Total income of CDC included in the consolidated revenue of the Group since the acquisition date on 15 April 2016 amounted to
$3,191,166 and net profit of $36,598 was included in consolidated profit of the Group since the acquisition date.
c) Gain of control over other entities
On 15 December 2016 the Group established the Camperdown Dairy Park Trust with Dairy Fund Management Limited as trustee .
(d) Transactions with Non-controlling interests in ADFT
As set out in note 1, ADFT is a controlled entity . Transactions with non-controlling interests in ADFT in the year comprised equity as
set out in note 15 .
45
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 21: CONTROLLED ENTITIES (cont’d)
(e) Summarised Financial Information of Subsidiaries with Material Non-controlling Interests
Set out below is the summarised financial information for ADFT, before any intra-group elimination:
Summarised Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
2017
$
2016
$
10,831,615
20,599,127
85,596
10,000,000
21,345,146
12,660,367
20,685,568
2,847,568
10,000,000
20,498,367
Carrying amount of non-controlling interests
21,345,146
20,498,367
Summarised Financial Performance
Revenue
Loss after tax
Other comprehensive income after tax
Total comprehensive loss
35,715
205,378
(860,779)
(2,700,444)
-
-
(860,779)
(2,700,444)
Loss attributable to non-controlling interests
(860,779)
(2,700,444)
Summarised Cash Flow Information
Net cash from / (used in) operating activities
Net cash from / (used in) investing activities
Net cash from / (used in) financing activities
Net cash increase / (decrease) in cash and cash equivalents
NOTE 22: ASSOCIATES AND JOINT ARRANGEMENTS
Information on Joint Ventures
(642,111)
7,174
704,287
(10,574,474)
-
10,551,145
62,176
(16,155)
Set out below are the details of the joint venture the Group acquired an ownership interest in as part of the acquisition of
Camperdown Dairy Company Pty Ltd . The share capital of Camperdown Cheese & Butter Factory Pty Ltd consists solely of
ordinary shares and the proportion of ordinary shares held by the Group equals the voting rights held by the Group .
The Group has designated the joint venture in accordance with AASB 11: Joint Arrangement and accounted for the joint venture
using the “equity” method of accounting. The joint venture is operated on a break-even basis with issued capital of $200 and as
such the Group will carry the investment as nil in accordance with AASB 128 Investments in Associates and Joint Ventures .
Name
Unlisted:
Principal
Activities
Country
of
Incorp.
Type
Ownership Interest
2017
%
2016
%
Carrying amount of
investment
2016
$
2015
$
Camperdown Cheese & Butter
Factory Pty Ltd (CCB)
Manufacture
of butter &
cream
Aust
Shares
50 .00
50 .00
-
-
CCB is a private entity that manufactures butter for the shareholders of the joint venture . The Group’s interest in the company
represents a strategic investment with the joint venture operated on a break-even basis and is not material to the Group .
46
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 23: RELATED PARTY TRANSACTIONS
(a) The Group’s main related parties are as follows:
(i)
Entities exercising control over the Group:
The ultimate parent entity that exercises control over the Group is Australian Dairy Farms Limited, which is incorporated in
Australia .
(ii)
Key management personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise) of that entity, are considered key management personnel .
For details of disclosures relating to key management personnel, refer to Note 19 and the remuneration report .
(iii)
Other related parties:
Other related parties include entities controlled by the ultimate parent entity and entities over which key management personnel
have joint control .
(b) Transactions with related parties:
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated .
The following transactions occurred with related parties:
(i) Michael Hackett and associated entities, including Trustees Australia Limited (TAU) of which Mr Hackett is a director .
During the year ended 30 June 2017, Michael Hackett associated entities had the following transactions with the Group:
• Recovery costs charged on a reimbursement basis for the provision of administrative services, accounting, secretarial, farm
director costs and related activities of $275,000 (2016: $338,900). There was $444,450 (2016: $338,900) due to TAU at 30
June 2017. Trustees Australia Limited does not charge nor is it reimbursed for Responsible Entity services other than ASIC
lodgement fees for Australian Dairy Farms Trust .
• On 9 November 2016, 235 unlisted convertible notes converted to fully paid stapled securities . The value of the convertible
notes plus accrued interest at the date of conversion was $2,688,586, which included accrued interest of $58,211 (2016:
$172,034) for the year and $308,881 classified as the equity component of the convertible notes on initial recognition.
14,627,779 stapled securities were issued in consideration . (refer note 15(d)) .
(ii) Watershed Funds Management Pty Ltd
Adrian Rowley is a director of Watershed Funds Management Pty Ltd. During the year ended 30 June 2017 Watershed Funds
Management Pty Ltd was paid $54,750 (2016: $32,850) for the provision of Adrian Rowley as director.
(iii) Jackson and Associates Ltd
Keith Jackson is a director of Jackson and Associates Ltd. During the year ended 30 June 2017 Jackson and Associates Ltd was
paid $13,200 (2016: $32,850) for the provision of Keith Jackson as director.
(iv) Funding amongst Group entities is on an unsecured, interest free, no fixed term basis.
47
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: SEGMENT REPORTING
SEGMENT INFORMATION
Identification of reportable segments
Until the acquisition of Camperdown Dairy Company Pty Ltd (CDC) on 15 April 2016 management determined the Group operated
in one reportable segment. Following the acquisition of CDC another segment was established and the financial results have been
allocated and reported on this basis .
The Group has identified its operating segments based on the internal reports that are reviewed by the board in assessing
performance and determining the allocation of resources .
The Group is managed primarily on the basis of product category since the diversification of the Group’s operations inherently have
notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same
basis .
Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar
economic characteristics and are also similar with respect to the following:
•
•
•
the products sold and/or services provided by the segment;
the type or class of customer for the products or service; and
external regulatory requirements .
Types of products and services by segment
Dairy Farms
The dairy farms segment includes the ownership and operation of dairy farms and dairy livestock for the production and sale of
fresh raw milk for conversion to milk and milk products .
Dairy Processing
The dairy processing segment includes the processing and sale of dairy products to domestic and export markets from 15 April
2016 .
All other segments
Other income from the gain on disposal of non-current assets held for sale has been disclosed in this segment .
Basis of accounting for purposes of reporting by operating segments
Accounting policies adopted
Unless otherwise stated, all amounts reported to the board with respect to operating segments are determined in accordance with
accounting policies that are consistent to those adopted in the annual financial statements of the Group.
Segment assets
If an asset is used across multiple segments, if possible it is allocated to the segment that receives the majority of economic value
from it, otherwise it is split between segments. Segment assets are generally identifiable on the basis of their nature and physical
location .
Segment liabilities
Liabilities are, if possible, allocated to segments where there is a direct nexus between the incurrence of the liability and the
operations of the segment, otherwise they are split between segments . Bank facility borrowings are considered to relate to the
Group as a whole and are not allocated . Segment liabilities include trade and other payables .
Amounts not included in segment result but reviewed by the Board
The following items of revenue and expenses are not allocated to operating segments as they are not considered part of the core
operations of any segment:
•
•
corporate charges
finance costs - bank facility
There are no intersegment sales .
48
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: SEGMENT REPORTING (cont’d)
(i) Segment Performance
30 June 2017
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Dairy Farm
Dairy
Processing
Total
$
7,343,908
1,367,272
8,500
8,719,680
$
16,252,559
-
470
16,253,029
$
23,596,467
1,367,272
8,970
24,972,709
24,972,709
Segment net profit / (loss) before tax
224,570
26,920
251,490
Reconciliation of segment result to group net profit/(loss) before tax
(i) Amounts not included in segment result but reviewed by the Board
Corporate charges
Finance costs - bank facility
Net profit before tax
(2,015,978)
(414,860)
(2,179,348)
30 June 2016
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Dairy Farm
Dairy
Processing
All Other
Segments
Total
$
6,578,589
764,173
74,710
7,417,472
$
3,191,166
-
-
3,191,166
-
11,512
-
11,512
$
9,769,755
775,685
74,710
10,620,150
10,620,150
Segment net profit / (loss) before tax
(2,712,010)
36,598
11,512
(2,663,900)
Reconciliation of segment result to group net profit/(loss) before tax
(i) Amounts not included in segment result but reviewed by the Board
Corporate charges
Finance costs - bank facility
Net profit before tax
(884,205)
(155,520)
(3,703,625)
49
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: SEGMENT REPORTING (cont’d)
(ii) Segment Assets
As at 30 June 2017
Segment assets
Segment assets include:
Additions to non-current assets
Total group assets
As at 30 June 2016
Segment assets
Segment assets include:
Additions to non-current assets
Total group assets
(iii) Segment Liabilities
As at 30 June 2017
Segment liabilities
Reconciliation of segment liabilities to group liabilities
Unallocated liabilities
CBA facility (refer note 14)
Total group liabilities
As at 30 June 2016
Segment liabilities
Reconciliation of segment liabilities to group liabilities
Unallocated liabilities
CBA facility (refer note 14)
Total group liabilities
Dairy Farms
Dairy
Processing
$
$
Total
$
29,725,105
13,328,301
43,053,406
892,066
177,384
1,069,450
Dairy Farms
Dairy
Processing
$
$
43,053,406
Total
$
23,376,929
15,317,794
44,694,723
13,279,538
10,925,047
24,204,585
44,694,723
2,052,699
2,336,239
4,389,208
10,000,000
14,389,208
4,246,694
3,001,848
7,248,542
10,000,000
17,248,542
50
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: SEGMENT REPORTING (cont’d)
(iv) Revenue by geographic region
Revenue attributable to external customers is disclosed below, based on the location of the external customer
Australia
Other countries
Total revenue
(v) Assets by geographic region
The location of segment assets is disclosed below by geographical location of the assets
Australia
Other countries
Total assets
NOTE 25: SHARE BASED PAYMENTS
2017
$
24,972,709
-
24,972,709
2016
$
10,620,150
-
10,620,150
2017
$
43,053,406
-
43,053,406
2016
$
44,694,723
-
44,694,723
During the year ended 30 June 2017, stapled securities and performance options were issued to employees and key management
personnel under the ADFG employee Long Term Incentive Plan (LTIP) .
(i) The following performance options were granted to employees and key management personnel to take up ordinary securities:
Grant Date
1 July 2016
1 July 2016
1 July 2016
1 July 2016
1 July 2016
29 July 2016
29 July 2016
29 July 2016
29 July 2016
Number
Exercise Price Vesting Date
Exercisable on or before
2,820,000
2,340,000
2,340,000
2,340,000
2,340,000
3,000,000
1,500,000
1,500,000
1,200,000
19,380,000
$0.25
$0.27
$0.27
$0.27
$0.27
$0.23
$0.25
$0.27
$0.29
1 July 2016
1 July 2018
30 June 2017
26 May 2019
31 December 2017
26 May 2019
30 June 2018
26 May 2019
31 December 2018
26 May 2019
31 December 2016
29 July 2021
30 June 2017
29 July 2021
31 December 2017
29 July 2021
31 December 2018
29 July 2021
The weighted average exercise price of performance options is $0.26 each and the options hold no voting or dividend rights and
are not transferable .
The options vest over a two and a half year period with a percentage of options vesting on grant date . Vesting subsequent to grant
date is also subject to key management personnel meeting specified performance criteria. No other options have been issued as
at the end of the reporting period or to the date of this report .
(ii) The Group established the LTIP to motivate executives to strive to improve group performance and shareholder return . The
options are issued for no consideration and carry no entitlements to voting rights or dividends of the Group . The number available
to be granted is determined by the Board and is based on various performance measures .
Options are forfeited if performance hurdles are not satisfied or after the holder ceases to be employed by the Group, unless
the Board determines otherwise. During the year ended 30 June 2017, 6,840,000 performance options were forfeited as the
performance hurdle was not satisfied and $294,301 has been transferred from the equity reserve to retained earnings.
No other options have lapsed or been cancelled during or since the end of the period .
(iii) The weighted average remaining contractual life of 12,540,000 options outstanding at period-end was 1 .4 years . The weighted
average exercise price of outstanding shares at the end of the reporting period was $0.27. The fair value of the options granted to
employees is considered to represent the value of the employee services received over the vesting period .
51
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 25: SHARE BASED PAYMENTS (cont’d)
The fair value of options granted during the period was $657,661 (30 June 2016: $Nil). These values were calculated using a
binomial option pricing model applying the following inputs:
Weighted average exercise price:
$0.26
Weighted average life of the option:
1 .7 years
Expected share price volatility:
95 .5%
Weighted average risk-free interest rate:
1 .62%
Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future
movements . The life of the options is based on the historical exercise patterns, which may not eventuate in the future .
Options exercisable at period end total 2,820,000 .
(iv) Stapled securities granted to employees and key management personnel as share-based payments are as follows:
Grant Date
1 July 2016
1 July 2016
Number
1,000,000
1,000,000
2,000,000
The fair value of securities granted, determined by reference to market price, was $360,000, refer note 15.
These securities were issued as compensation to employees and key management personnel of the Group .
(v) Included under employee benefits expense in the statement of profit or loss is $1,017,661 (2016: $Nil), which relates to equity-
settled share-based payment transactions - securities and options .
NOTE 26: EVENTS AFTER THE BALANCE DATE
The directors are not aware of any significant events post 30 June 2017.
NOTE 27: FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments consist mainly of deposits with banks, accounts receivable, accounts payable, bank
loans and leases .
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies
to these financial statements, are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Bonds, deposits and GST receivable
Total financial assets
Notes
5
6
8
2017
$
1,577,264
2,428,048
132,355
4,137,667
2016
$
2,472,232
3,607,626
319,173
6,399,031
52
Australian Dairy Farms Group Annual Report 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 27: FINANCIAL RISK MANAGEMENT (cont’d)
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables
Borrowings
Total financial liabilities
Financial Risk Management Policies
Notes
12
14
2017
$
2016
$
3,442,405
10,602,361
14,044,766
3,896,351
13,113,786
17,010,137
The main purpose of the financial instruments listed is to raise finance for the Group’s operations when the board considers it
appropriate. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise
directly from its operations. Risks arising from the Group’s financial instruments include interest rate risk, liquidity risk and credit
risk . The board reviews and agrees policies for managing each of these risks and they are summarised below .
Treasury Risk Management
The board considers financial risk exposure to evaluate treasury management strategies in the context of the most recent economic
conditions and forecasts. The overall risk management strategy seeks to assist the Group in meeting its financial targets, while
minimising potential adverse effects on financial performance. Risk management policies are reviewed by the board when
necessary. These include the use of credit risk policies and future cash flow requirements.
Financial Risk Exposures and Management
(a) Credit risk
The Group trades only with parties that it believes to be creditworthy . The maximum exposure to credit risk is equivalent to the
financial assets’ carrying value. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit
verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant. (see also note 6).
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, financial
assets and bonds and deposits, the Group’s exposure to credit risk arises from default of the counter party, with a maximum
exposure equal to the carrying amount of those instruments . The Group generally does not require third party collateral .
(b) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities. The Group manages this risk through the following mechanisms:
•
preparing forward looking cash flow analysis in relation to its operational, investing and financing activities;
• monitoring undrawn credit facilities;
•
obtaining funding from a variety of sources;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
•
•
investing surplus cash with appropriately regulated financial institutions; and
comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
53
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 27: FINANCIAL RISK MANAGEMENT (cont’d)
The table below presents maturity of the Group’s financial instruments. Cash flows realised from financial assets reflect
management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash
flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates taking into consideration
management expectations that Group banking facilities will be extended .
Financial liability and financial asset maturity analysis
Within 1 year
1 to 5 years
Over 5 years
Total
2017
2016
2017
2016
2017
2016
2017
2016
$
$
$
$
$
$
$
$
Financial liabilities due
for payment
Borrowings*
(184,083)
(3,042,294) (10,418,278) (10,380,373)
Trade & other payables
(3,442,405)
(3,896,351)
-
-
Total contractual outflows
(3,626,488)
(6,938,645) (10,418,278) (10,380,373)
Total expected outflows
(3,626,488)
(6,938,645) (10,418,278) (10,380,373)
Financial assets -
cash flows realisable
Cash
1,577,264
2,472,232
Trade and other receivables
2,428,048
3,607,626
-
-
-
-
Bond, deposits and GST
receivable
53,667
265,481
78,688
53,692
Total anticipated inflows
4,058,979
6,345,339
78,688
53,692
Net (outflows) / inflows on
financial instruments
432,491
(593,306) (10,339,590) (10,326,681)
-
-
-
-
-
-
-
-
,-
-
-
-
-
-
-
-
-
-
(10,602,361) (13,422,667)
(3,442,405)
(3,896,351)
(14,044,766) (17,319,018)
(14,044,766) (17,319,018)
1,577,264
2,472,232
2,428,048
3,607,626
132,355
319,173
4,137,667
6,399,031
(9,907,099) (10,919,987)
* Included above in the within 1 year borrowings in the 2016 comparative is $308,881 that was classified as equity on the issue of
the convertible notes . Refer note 14(a) .
(c) Market risk
Interest rate risk
The Group at the date of this report has debt exposure through $602,361 in fixed rate facilities and $10,000,000 in variable rate
facilities .
Sensitivity Analysis
The Group has performed sensitivity analysis relating to its exposure to variable interest rate at balance date . This sensitivity
analysis demonstrates the effect on the current year results and equity which could result from a change in this risk.
Interest rate sensitivity analysis
At 30 June 2017, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining
constant would be as follows:
54
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 27: FINANCIAL RISK MANAGEMENT (cont’d)
Change in profit
- Increase in interest rate by 1%
- Decrease in interest rate by 1%
Change in equity
- Increase in interest rate by 1%
- Decrease in interest rate by 1%
Fair Values
2017
$
(84,227)
84,227
(84,227)
84,227
2016
$
(101,581)
101,581
(101,581)
101,581
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments recognised
in the financial statements.
Carrying Amount
Fair Value
Footnote
2017
$
2016
$
2017
$
2016
$
Financial assets
Cash and cash equivalents
Trade and other receivables
Bonds, deposits and GST
receivable
Total financial assets
Financial liabilities
Trade creditors
Borrowings
Total financial liabilities
(i)
(i)
(i)
(i)
(ii)
1,577,264
2,428,048
2,472,232
3,607,626
1,577,264
2,428,048
2,472,232
3,607,626
132,355
319,173
132,355
319,173
4,137,667
6,399,031
4,137,667
6,399,031
3,442,405
10,602,361
14,044,766
3,896,351
13,113,786
17,010,137
3,442,405
10,602,361
14,044,766
3,896,351
13,113,786
17,010,137
The fair values disclosed in the above table have been determined based on the following methodologies:
(i) Cash and cash equivalents, trade and other receivables, bonds, deposits and GST receivable and trade and other payables
are short-term instruments in nature whose carrying value is equivalent to fair value .
(ii) Fair values on borrowings are determined using a discounted cash flow model incorporating current commercial borrowing
rates .
55
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 28: FAIR VALUE MEASUREMENT
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition:
•
•
financial assets; and
biological assets
The Group may measure some items of property at fair value on a non-recurring basis . The Group does not subsequently measure
any other assets or liabilities at fair value on a non-recurring basis .
(a) Fair Value Hierarchy
AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which
categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to
the measurement can be categorised into as follows:
Level 1
Level 2
Level 3
Measurements based on quoted prices
(unadjusted) in active markets for
identical assets or liabilities that the
entity can access at the measurement
date .
Measurements based on inputs
other than quoted prices included in
Level 1 that are observable for the
asset or liability, either directly or
indirectly .
Measurements
based on
unobservable inputs
for the asset or
liability .
The fair values of assets that are not traded in an active market are determined using one valuation technique . This valuation
technique maximises, to the extent possible, the use of observable market data. All significant inputs required to measure fair value
are observable, therefore the asset or is included in Level 2 .
The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to
measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset
being measured . The valuation techniques selected by the Group are consistent with the following valuation approach:
• Market approach: valuation techniques that use prices and other relevant information generated by market transactions for
identical or similar assets or liabilities .
This valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset
including assumptions about risks . When selecting a valuation technique, the group gives priority to those techniques that maximise
the use of observable inputs and minimise the use of unobservable inputs . Inputs that are developed using market data (such as
publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when
pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are
developed using the best information available about such assumptions are considered unobservable .
The following tables provide the fair values of the Group’s assets measured and recognised on a recurring basis after initial
recognition and their categorisation within the fair value hierarchy:
30 June 2017
Non-financial assets
Biological assets
Total non-financial assets recognised at
fair value on a recurring basis
30 June 2016
Note
Level 1
Level 2
Level 3
$
$
$
Total
$
9
-
-
5,426,719
5,426,719
-
-
5,426,719
5,426,719
Note
Level 1
Level 2
Level 3
$
$
$
Total
$
Non-financial assets
Biological assets
Total non-financial assets recognised at
fair value on a recurring basis
9
-
-
4,516,400
4,516,400
-
-
4,516,400
4,516,400
56
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 28: FAIR VALUE MEASUREMENT (cont’d)
(b) Techniques and Inputs Used to Measure Level 2 Fair Values
The following tables provide the fair values of the group’s assets and liabilities measured and recognised on a recurring basis after
initial recognition and their categorisation within the fair value hierarchy:
Description
Non-financial assets
Biological assets
Fair Value at
30 June 2017
$
Valuation Technique(s)
Input Used
Market approach using
recent observable market
data for dairy cattle
Breed, weight, condition
5,426,719
5,426,719
There were no changes during the period in the valuation techniques used by the group to determine Level 2 fair values .
Farm properties were measured on a non-recurring basis at fair value at 30 June 2016, as set out in note 11(b).
(c) Disclosed Fair Value Measurements
The following assets and liabilities are not measured at fair value in the statement of financial position, but their fair values equate
to their carrying values:
Trade and other receivables;
Inventories;
Other current assets;
Plant and equipment;
Trade and other payables;
Provisions; and
Borrowings .
NOTE 29: EARNINGS PER STAPLED SECURITY CALCULATIONS
Earnings per stapled security:
Basic loss per stapled security
Diluted loss per stapled security
Reconciliation of earnings to profit or loss:
Loss attributable to shareholders and unitholders
Weighted average number of stapled securities outstanding during the year
used in calculating basic EPS
Weighted average number of options outstanding
Weighted average number of stapled securities outstanding during the year
used in calculating dilutive EPS
2017
cents
(1 .14)
(1 .14)
2016
cents
(2 .25)
(2 .25)
(2,179,348)
(3,703,625)
Number of
Shares
Number of
Shares
191,899,227
164,474,789
-
-
191,899,227
164,474,789
57
Australian Dairy Farms Group Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: EARNINGS PER STAPLED SECURITY CALCULATIONS (cont’d)
Employee and KMP options are considered to be dilutive potential ordinary securities however they are presently anti-dilutive as
the Group is in losses .
In the 2016 Comparative, convertible notes were considered to be dilutive potential ordinary securities however they were anti-
dilutive as the Group was in losses and the ASX market price for AHF stapled securities was below the 18 .38 cent conversion price
of the convertible notes .
NOTE 30: DIVIDENDS
The directors have not recommended or paid a dividend for the year ended 30 June 2017 (2016: $nil) at the date of this report.
58
Australian Dairy Farms Group Annual Report 2017 DIRECTORS’ DECLARATION
Australian Dairy Farms
DIRECTORS’ DECLARATION
For the year ended 30 June 2017
In the opinion of the directors of Australian Dairy Farms Group:
(a)
the financial statements and notes of the company and of the Group are in accordance with
the Corporations Act 2001, and:
(i)
(ii)
give a true and fair view of the company’s and Group’s financial position as at 30 June
2017 and of their performance for the year ended on that date; and
comply with Australian Accounting Standards, which, as stated in accounting policy
Note 1 to the financial statements, constitutes compliance with International Financial
Reporting Standards (IFRS); and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable; and
This declaration has been made after receiving the declarations required to be made to the
directors in accordance with Section 295A of the Corporations Act 2001 for the financial year
ending 30 June 2017.
This declaration is made in accordance with a resolution of the board of directors .
___________________
Michael Leslie Hackett
Chairman
Brisbane
31 August 2017
59
Australian Dairy Farms Group Annual Report 2017 INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUSTRALIAN DAIRY FARMS LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Australian Dairy Farms Limited (“the Company”) and its controlled
entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2017,
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 statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Australian Dairy Farms Limited 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 2017 and of its performance
for the year then ended; 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. Those standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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.
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.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUSTRALIAN DAIRY FARMS LIMITED (continued)
Key audit matter
How our audit addressed the key audit
matter
Assessment of
current assets
impairment
for non-
Refer to notes 10 and 11 of the financial report.
At 30 June 2017 the Group held $25.9 million of
property, plant and equipment and $6.6 million
of intangible assets. The Group considered
whether
indicators of
impairment for each of its two cash generating
units (CGUs).
there were any
Our procedures included but were not limited to:
we assessed the identification of CGUs,
including the allocation of goodwill and
property, plant and equipment and the
associated identification and allocation of
cash flows to those CGUs;
exceeded
As the carrying amount of the net assets of the
Group
the Group’s market
capitalisation at 30 June 2017, the Group
considered that there was an impairment
impairment
indicator and performed an
assessment. Furthermore, as
the Dairy
Processing CGU contains goodwill, the Group
was required by AASB 136 Impairment of Assets
to perform an assessment of that CGU’s
recoverable amount.
The Group assessed the recoverable amounts of
its Dairy Farms and Dairy Processing CGUs by
determining their value-in-use.
We focused on this matter because of the
significant judgement involved in estimating the
recoverable amount of the CGUs and the
potentially material impact on the financial
report.
we checked the mathematical accuracy of
the cash flow models, agreed forecast cash
flows to the latest Board approved forecasts
and tested the key assumptions used in the
Group’s forecasts;
we assessed the discount rate used for each
CGU by comparing it to our view of an
acceptable range based on market data and
comparable companies;
we performed sensitivity analyses around
the key drivers of growth rates used in the
cash flow forecasts and the discount rate
used; and
to a change
we assessed management’s consideration of
in key
the sensitivity
assumptions
individually or
collectively would be required for assets to
be impaired and considered the likelihood of
such a movement in those key assumptions
arising.
that either
Other information
The directors are responsible for the other information. The other information comprises the information in
the Company’s annual report for the year ended 30 June 2017, 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.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUSTRALIAN DAIRY FARMS LIMITED (continued)
If, based on the work we have performed, we conclude that there is a material misstatement of the other
information we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibility 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUSTRALIAN DAIRY FARMS LIMITED (continued)
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the remuneration report included in pages 10 to 14 of the directors’ report for the year ended
30 June 2017.
In our opinion, the Remuneration Report of Australian Dairy Farms Limited for the year ended 30 June 2017
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.
Nexia Brisbane Audit Pty Ltd
N D Bamford
Director
Level 28, 10 Eagle Street
Brisbane, QLD, 4000
Date: 31 August 2017
SHAREHOLDER INFORMATION
The following information was extracted from Australian Dairy Farms Group’s Register of Securityholders on 22 August 2017:
TWENTY LARGEST SECURITYHOLDERS - ORDINARY SECURITIES
1
2
3
4
5
6
7
8
Jimmy Crow Limited
Jimmy Thomas and Ivy Ponniah
HSBC Custody Nomiees
Fiduciary Nominees Pty Ltd
Citicorp Nominees Pty Limited
Xuelin Xie
Zhongde Zhao
Vitamin Warehouse Australia Pty Ltd
9 Maree Makrillos
10 Fang Yin Super Pty Ltd
11 Wenqing Fan
12 Xinguang Wang and Jun Yin
13 Michael Janssen and Scott Janssen
14 Costine Pty Ltd
15 Songs Investment (Aust) Pty Ltd
16 Irene Makrillos
17 Citicorp Nominees Pty Ltd
18 Muhlbauer Investments Pty Ltd
19 Bay Optical Company Pty Ltd
20 Peter Mulally
Fully Paid Stapled Securities
Securities Held
% of Issued
Capital
15,194,507
7 .69
9,200,866
5,937,300
4,590,156
3,601,263
2,898,018
2,750,000
2,537,125
2,377,542
1,918,182
1,778,391
1,625,230
1,610,000
1,580,289
1,500,000
1,493,103
1,228,348
1,190,141
1,400,000
1,120,000
4 .66
3 .00
2 .32
1 .82
1 .47
1 .39
1 .28
1 .20
0 .97
0 .90
0 .82
0 .81
0 .80
0 .76
0 .76
0 .62
0 .60
0 .58
0 .57
Total of Top Twenty Securityholdings
Total Securities on issue
65,270,461
197,633,109
33.03
100.00
DISTRIBUTION OF SECURITYHOLDINGS
Size of Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 or greater
MARKETABLE PARCELS
Number of
Securityholders
194
898
630
1,478
289
3,489
Securities
53,335
2,669,260
5,345,541
53,088,174
136,476,799
197,633,109
%
0 .03
1 .35
2 .70
26 .86
69 .06
100.00
On 22 August 2017, using the last traded security price of $0.125 per security, there were 825 holdings, which were of less than a
marketable parcel ($500).
VOTING RIGHTS
On a show of hands, every member present in person or by proxy or attorney or being a corporation by its authorised
representative shall have one vote . On a poll, every member who is present in person or by proxy or attorney, or being a
corporation, by its authorised representative, shall have one vote for every stapled security of which he is the holder .
64
Australian Dairy Farms Group Annual Report 2017 SHAREHOLDER INFORMATION (cont’d)
SUBSTANTIAL SECURITYHOLDERS
The names of the substantial securityholders listed in the Group’s register on 22 August 2017 are:
Michael Hackett and associated entities
Securities Held
% of Voting
Power Advised
21,364,952
10 .81
UNLISTED OPTIONS OVER ORDINARY SECURITIES
At the date of this report, the unissued ordinary securities of Australian Dairy Farms Limited under option are as follows:
Grant Date
1 July 2016
29 July 2016
Last Date of Expiry
Exercise Price
Number under Option
31 December 2018
25 cents - 27 cents
31 December 2018
27 cents - 29 cents
9,840,000
2,700,000
Option holders do not have any rights to participate in any issues of securities or other interests of the Company or any other entity .
RESTRICTED SECURITIES
There are no restricted securities on issue at the date of this report .
65
Australian Dairy Farms Group Annual Report 2017 CORPORATE DIRECTORY
Board of Directors
Michael Hackett
Chairman
Adrian Rowley
Director
Peter Skene
Director / Group CEO
Registered Office
Level 3, 140 Ann Street
Brisbane QLD 4000
Telephone:
Facsimile:
Email:
Web:
(07) 3020 3020
(07) 3020 3080
info@adfl.com.au
www.adfl.com.au
Share Register
Link Market Services Limited
Level 15
324 Queens Street
Brisbane QLD 4000
Telephone:
Facsimile:
1300 554 474
(02) 9287 0309
Company Secretary
Jerome Jones
Company Secretary
Corporate Office
Level 3, 140 Ann Street
Brisbane QLD 4000
GPO Box 6
Brisbane QLD 4001
Telephone:
Facsimile:
Email:
Web:
(07) 3020 3020
(07) 3020 3080
info@adfl.com.au
www.adfl.com.au
Auditor
Nexia Brisbane Audit Pty Ltd
Level 28
10 Eagle Street
Brisbane QLD 4000
Telephone:
Facsimile:
(07) 3229 2022
(07) 3229 3277
Email:
Web:
registrars@linkmarketservices .com .au
www .linkmarketservices .com .au
Email:
Web:
audit@nexiabrisbane .com .au
www .nexia .com .au
Stock Exchange
Australian Dairy Farms Group is listed on the official List of the Australian Securities Exchange Limited (ASX).
The ASX Code is “AHF” .
66
Australian Dairy Farms Group Annual Report 2017