2020
Annual
Report
CONTENTS
CHAIRMAN’S ADDRESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CORPORATE GOVERNANCE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AUDITOR’S INDEPENDENCE DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME . 20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CONSOLIDATED STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
NOTES TO THE FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DIRECTORS’ DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
CORPORATE DIRECTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
2
Australian Dairy Nutritionals Group Annual Report 2020 CHAIRMAN’S ADDRESS
On behalf of the Board of Directors (Board) of Australian Dairy Nutritionals Group, I am pleased to
present to members the Annual Report of the company and its controlled entities (Group) for the
financial year ended 30 June 2020 (FY20).
FY20 has been a significant challenge for our industry and, of course, the second half year’s
challenges caused by the COVID-19 pandemic have required the Group to continually adapt to an
ever-changing environment and market . The underlying net loss (excluding interest, depreciation,
amortisation and impairment costs) for FY20 was $1 .5M and, while it is an improvement on the FY19
loss of $1.9M, it is disappointing and reflects somewhat the impact of a volatile dairy industry and the
pandemic .
Despite the challenges of FY20, the Group has maintained its strategy of focusing on the production
of premium and specialty dairy products with healthy profit margins, including development of the
Group’s own brands . During FY20 the Group began construction on the new plant to house the
recently purchased infant formula and nutritionals mixing plant . In addition, the Group purchased the right to manufacture, distribute
and sell The Collective products allowing the Group to improve and realise efficiencies in the current supply chain and give greater
control over margins .
The Collective product sales did not reach the volume levels that we expected to produce through the Camperdown factory in
FY20. We expect an improvement in FY21, buoyed by the recent notification from Woolworths that they have broadened the range
and volume of The Collective products to be sold at their stores from October 2020 . Also, our new Ecklin South brand A2 yoghurt
will be distributed through Coles nationally and we are optimistic about the potential for this new brand .
As stated previously, we are seeking a partnership with a distributor into the Asian market that will assist the Group in selling its
future output of organic infant formula. During FY20, we were in advanced negotiations with a business that is a significant supplier
of infant formula into Asia, however these have been suspended due to current market conditions including the impact of the
COVID-19 pandemic . We will continue to pursue strategic partners to access international markets for our organic dairy products .
While the COVID-19 pandemic has been difficult to manage, it has provided an opportunity to expand our home delivery business.
We have invested in additional resources, expanded the regional distribution footprint and improved the product range to meet the
growing demand for this service .
The conversion of the Group’s dairy farms to an organic certification continues, with the first farm certification occurring in FY20
with the expectation of the remaining farms being converted by the end of the 2021 calendar year . Despite the challenges and
expense of developing the organic farms, without the certification to sell the milk at organic price levels, the farms contributed a net
profit of $23K in FY20 compared with a loss of $1.9M in FY2019. The farms remain integral to the vertical integration strategy being
employed by the Group .
The results include a non-cash impairment of the goodwill incurred on the purchase, in April 2016 of the Camperdown Dairy
Company (CDC) . The Board adopted a conservative approach to the Australian Accounting Standards in adopting the impairment
of $4 .26M, taking into account the current uncertain conditions impacting both the Australian and global economies . The writedown
of the goodwill to $2 .35M has no impact on the cash position of CDC’s business or its future operations . The Board is of the opinion
that there is significant value in the CDC plant operations and the portfolio of brand names not recognised in the statement of
financial position.
FY20 has seen a consolidation of the Group’s management structure, processes and systems that will ensure the Group
successfully executes its strategy to achieve profitable growth. While adherence to our strategy has been at the forefront of our
operations, there has also been a focus on governance and improving the management team capability . The recent addition of a
new Chief Financial Officer and General Manager of Sales & Marketing, both very experienced and skilled managers, has ensured
that the Group’s operations are managed by a highly skilled, experienced and energetic executive team .
I would like to acknowledge the efforts of all our employees during FY20, especially their attention to the health and safety rules
protecting the business and their health in the pandemic . I am happy to say that, to date, we have had no employee who has
contracted the COVID-19 virus . Our executive management team have worked incredibly hard during this last year to not only
manage the business but to also ensure the safety and wellbeing of all employees, and the Board is proud of their efforts.
To all our shareholders, thank you, for your continued support and I hope during these challenging times you stay safe and healthy .
Martin Bryant - Chairman
3
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT
The Board of directors of Australian Dairy Nutritionals 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 2020.
PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN THE NATURE OF THOSE ACTIVITIES
The principal activities of the Group during the year were:
• Ownership of dairy farms via the Australian Dairy Farms Trust;
• Operation of dairy farms and livestock through SW Dairy Farms Pty Ltd;
•
Processing of raw milk and manufacture of dairy products including a variety of milks, cream, butter and yoghurt by
Camperdown Dairy Company Pty Ltd at its existing facility located at 325 Manifold Street, Camperdown, Victoria; and
• Distribution of dairy products and other food staples under Group owned brands or customer brands through the following
distribution channels:
- Retail (major supermarkets)
- Foodservice and niche retailers
- Home delivery
In August 2019 the Group acquired an introductory infant formula and nutritionals mixing plant, a significant step in its infant
formula strategy . The plant was transported from overseas to Camperdown in September 2019 . After an extensive planning and
development process, construction of the purpose built building to house the infant formula plant commenced in June 2020 and is
expected to be completed in early 2021 after which installation and commissioning works will commence . The quoted construction
cost of the building is $2 .7M subject to agreed variations under the contract .
In October 2019, the Group entered into a joint venture with the founders of the Jonesy’s Dairy Fresh milk distribution business.
The joint venture known as Jonesy’s Distribution provides a platform for distribution of the Group’s products beyond the major
supermarkets and into the foodservice segment (cafes and restaurants) and small niche retailers .
In November 2019 the first of the Group’s dairy farms, Yaringa, located in Nirrandha South achieved full organic certification.
In April 2020 the Group expanded its manufacturing arrangement with New Zealand based dairy brand, The Collective to include
the exclusive right to manufacture, distribute and sell The Collective’s products in Australia . To facilitate this change with minimal
disruption to customers and suppliers, the Group acquired The Collective’s Australian operating subsidiary, Epicurean Dairy Pty Ltd .
BUSINESS MODEL AND OBJECTIVES
FY20 represented a further step in the Group’s progression toward becoming a vertically integrated dairy farmer and manufacturer
of differentiated dairy products under its own brands and other premium brands.
At the farm level, the first of the Group’s dairy farms, Yaringa, achieved full organic certification in late November 2019. All other
farms remain on track to achieve organic certification in calendar year 2021. In addition, in the third quarter of FY20, the Group
converted one of its farms to cows producing only A2 beta casein protein in readiness for introduction of its new Ecklin South
yoghurt product .
The manufacturing segment had a difficult year, although there were positive signs in the final quarter of FY20. The white milk and
yoghurt categories remain highly competitive, with bi-annual supermarket range reviews . Acquiring the right to distribute and sell
The Collective products (in addition to the manufacturing rights), is expected to realise efficiencies in the current supply chain and
give greater control over margins. In addition, in May 2020, the Group obtained confirmation of ranging of it’s own brand, Ecklin
South A2 Greek Style yoghurt in Coles supermarkets nationally .
In October 2019, the Group entered into a joint venture arrangement in relation to milk distribution business, Jonesy’s Dairy Fresh.
Establishment of the joint venture provides a platform for distribution of Camperdown Dairy’s range of milks to the hospitality and
niche retailer distribution channels in the foodservice segment .
The other key pillar of the Group’s strategy is the establishment of the nutritional powder and infant formula plant on the
Camperdown Dairy Park site . The introductory infant formula plant was acquired from overseas in August 2019 and transported
to Camperdown in September 2019 . After a comprehensive development and planning process, construction of the building
commenced in June 2020. Construction of the plant is expected to be completed in early 2021, followed by an installation and
commissioning period. The Group is also well progressed in the development of differentiated nutritional and infant formula
formulations and is progressing ranging and strategic distribution discussions .
FY20 set the initial foundations for this project and the Group will be strongly focussed on the execution and successful delivery of
the building and plant in FY21 .
4
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
OPERATING RESULTS
The consolidated net loss attributed to members of the Group, after providing for income tax was $7,496,088 (2019: $4,026,025) .
This result is comprised of a net loss from the dairy processing segment of $7,520,018 (2019: $2,077,510) and net profit from the
dairy farm segment of $23,930 (2019: $1,948,515 loss) .
Total income for FY20 is $24,089,076 up 10% against the FY19 comparative period of $21,940,223 . This is a result of a $678,789
increase in revenue from the dairy processing segment and a $1,470,064 increase from the dairy farm segment .
Total expenses for FY20 were $31,585,164 up 22% against the FY19 comparative period of $25,966,248 . This comprised a
$6,121,297 increase in expenses from the dairy processing segment and a decrease of $502,381 from the dairy farm segment .
Included in total expenses is a non-cash impairment of $4,262,652 for FY20 relating to the carrying value of goodwill in the dairy
processing segment . The Group has taken a conservative approach to the underlying calculations for goodwill, including the
discount rate, and has taken into account the uncertain conditions impacting the Australian economy as a result of the COVID-19
pandemic .
The writedown has no impact on the cash position of the business or its future operations and the Group believe there is significant
value in the Camperdown plant operations and brand portfolio . The Group remains optimistic about the prospects of the dairy
processing segment, including positive changes to the range of The Collective yoghurts sold in Woolworths stores from October
2020, introduction of the new Ecklin South yoghurt in Coles stores nationally and growth in its home delivery distribution channel .
FINANCIAL POSITION
The net assets of the Group at 30 June 2020 total $33,376,879, an increase of $362,218 from the June 2019 comparative.
The key assets and liabilities in the statement of financial position at 30 June 2020 are:
•
•
•
•
•
cash and cash equivalents of $6,361,821 (June 2019: $3,748,550);
property, plant and equipment of $29,757,034 (June 2019: $29,190,439);
intangible assets of $2,753,218 (June 2019: $6,974,236);
biological assets (livestock) of $5,368,015 (June 2019: $4,928,422); and
total borrowings of $12,081,526 (June 2019: $12,695,402).
CURRENT RATIO
The Group’s bank borrowing is a facility with the Commonwealth Bank of Australia Limited (CBA), which was established in April
2016, and is due for renewal on 4 October 2021 (refer Note 16(c)) . Not withstanding that the CBA facility matures on 4 October
2021, under the terms of the facility, the Group may not have an unconditional right to defer settlement beyond 12 months from the
current balance date .
As a result, in accordance with the provisions of the Australian Accounting Standards (AASB 101: Presentation of Financial
Statements) and prudent disclosure practices, the Group has re-classified the existing CBA facility from a non-current liability at 30
June 2019, to a current liability at 30 June 2020. Consequently, this presents as a net current asset deficiency at 30 June 2020.
All obligations under the loan agreement have been met in accordance with the terms of the facility and at the balance date the
Group has cash and cash equivalents of $6,361,821. The directors are confident of restructuring or refinancing the facility prior to
maturity date. Accordingly, on this basis the financial statements of the Group have been prepared on a going concern basis and
the financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that may be
necessary if the Group could not continue as a going concern .
REVIEW OF OPERATIONS
Farms - Australian Dairy Farms Trust (land owner) and SW Dairies Pty Ltd (farm operator)
High farmgate milk prices and favourable weather conditions for dairy farming in South Western Victoria saw improved performance
in the Group’s farming operations in FY20 versus FY19 .
The season commenced with good rainfall in May 2019 which continued through the winter months . Pasture growth was favourable
and good silage levels were harvested in late 2019 for use during the drier periods in the final quarter of FY20, resulting in lower
external feed requirements . Total milk production was 12 .7M litres, a decrease of 3 .1M litres on the prior year . The decrease in
production was attributable to the conversion of all farms to organic .
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Australian Dairy Nutritionals Group Annual Report 2020
DIRECTORS’ REPORT (cont’d)
REVIEW OF OPERATIONS (cont’d)
Farm revenues were $10,019,117, up $1,470,064 on FY19 . This increase was underpinned by a 9 cent per litre increase to the milk
price in FY20 and gains on the change in value of livestock, with sustained strong cattle prices throughout the year .
Total farm milk sales for FY20 of $7,118,208 were 4% down on the FY19 comparative period . This was due to an increase of $1 .14
per kilogram in the net milk solids price from $6.04 to $7.22 during the year, offset by a 20% decrease in milk solids production
arising from the conversion to organic .
Gain on change in fair value of livestock during the year was $1,574,300 (2019: $538,552) . Livestock carrying values increased
throughout FY20 with strong cattle prices in the open market .
Total expenses for FY20 were $9,995,187, down $502,381 on FY19. This was largely driven by a decrease of $723K in feed costs,
offset by increases to pasture renovation and employment costs.
Registered valuers Preston Rowe Paterson completed an independent valuation of all farms for the year ended 30 June 2020. The
basis of the valuation was ‘As Is and In Use’ with vacant possession and the combined fair value of all properties was $23,550,000,
giving rise to a reversal of prior period impairment charges of $614,664 . The Drumborg and Yarringa farms fair values exceed
historical written down value by $271,824 and $363,645, however these are unbooked gains under the cost method adopted by the
Group under AASB 116 .
Manufacturing - Camperdown Dairy Company Pty Ltd
Camperdown Dairy Company (CDC) produced a range milks, cream, butter and yoghurt during FY20 for distribution in the major
supermarkets and niche retailers, hospitality businesses and home delivery .
Dairy processing revenue for FY20 was $14,069,959, up $678,789 on FY19 . This increase was largely driven by increased revenue
from yoghurt sales to The Collective .
Total expenses for FY20 were $21,589,977, up $6,121,297 on FY19 . This was largely driven by an increase in raw material costs
from higher farmgate milk prices, additional costs from the acquisition of Jonesy’s Distribution and Epicurean Dairy and a non-cash
impairment of the acquisition goodwill for CDC of $4,262,652 (refer to Note 12) .
The Group has taken a conservative approach to the underlying calculations for goodwill, including the discount rate, and has taken
into account the uncertain conditions impacting the Australian economy as a result of the COVID-19 pandemic .
The writedown has no impact on the cash position of the business or its future operations and the Group believe there is significant
value in the Camperdown plant operations and brand portfolio . The Group remains optimistic about the prospects of the dairy
processing segment, including positive changes to the range of The Collective yoghurts sold in Woolworths stores from October
2020, introduction of the new Ecklin South yoghurt in Coles stores nationally and growth in its home delivery distribution channel .
In May 2020, former joint venture partner Organic Dairy Farmers of Australia Limited (ODFA) appointed voluntary administrators .
The Group has an outstanding receivable of $193,774 with ODFA for deferred settlement on the joint venture split, that is due for
payment in instalments to July 2022. Given the uncertainty around the future of ODFA and recoverability of the outstanding amount,
a bad debt provision has been made for the full amount .
CDC had a challenging FY20 due to the impact of high farmgate milk prices and lower than anticipated sales of The Collective
yoghurts, particularly in the second half of FY20 as the impact of changes at the Woolworths October 2019 range review were felt .
However, effective 1 May 2020, the Group’s licence with The Collective was expanded to include distribution and sales of its
products in addition to the right to manufacture. It is anticipated that this change will allow the Group to realise efficiencies in the
current supply chain and give greater control over margins . The Group also expanded its sales and marketing expertise through
the transition of experienced sales staff as part of The Collective acquisition.
On 7 October 2019, the Group entered into a joint venture arrangement in relation to milk distribution business, Jonesy’s
Dairy Fresh. The joint venture, Jonesy’s Distribution Pty Ltd (Jonesy’s Distribution) acquired the brand, customer base and
ordering system of Jonesy’s Dairy Fresh and is 75% owned by ADNL and 25% owned by the founders of Jonesy’s Dairy Fresh.
Camperdown Dairy Company has a fully secured loan over all of the assets of Jonesy’s Distribution giving it the ability to potentially
recover previous trade debtors owed to the Group by Jonesy’s Dairy Fresh.
Establishment of the joint venture provided a platform for distribution of the Camperdown Dairy range of milks to the foodservice
and niche retailer distribution channels. Camperdown Dairy manufactures milk, cream, butter and yoghurt products for Jonesy’s
Distribution. In addition to the Jonesy’s Dairy Fresh milk range Jonesy’s Distribution now ranges the full suite of the Camperdown
Dairy milk and cream products and alternate milks (soy, almond and rice) .
In January 2020 CDC successfully commissioned its new high speed pouch machine at its existing facility and the machine is
currently being utilised in the production of yoghurt pouch products for The Collective .
In April 2020 the Group also obtained confirmation that its Ecklin South A2 Greek Style yoghurt product would be ranged in Coles
stores nationally and sales commenced in late July 2020.
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Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
REVIEW OF OPERATIONS (cont’d)
Distribution
(i)
Major supermarkets
Camperdown Dairy’s 2L whole milk and skim milk products were ranged in over 300 Woolworths stores in Victoria in FY20 . Whole
milk sales volumes recorded an increase of 34% compared to FY19, a very strong result . As noted above, sales of The Collective
yoghurts in Woolworths were impacted by the October 2019 range review changes, however management have worked closely
with Woolworths to implement range changes in October 2020 to increase volumes and improve sales . A range of The Collective
yoghurt products also commenced ranging in select IGA stores through the Metcash network in late April 2020 .
(ii)
Foodservice and niche retailers
The Group participates in the foodservice and niche retailer segment through the Jonesy’s Distribution business. Since its
acquisition in October 2019, significant work has been undertaken in improving the operations of this business, reducing costs
and improving customer service . As much of the customer base is made up of cafes and other hospitality businesses, sales were
initially impacted by the restrictions implemented by the Government in response to the COVID-19 pandemic . Despite this, sales
in this segment have not been impacted as much as expected and, in the period through March to the end of the financial year
Jonesy’s Distribution sales showed a steady month on month increase.
(iii)
Home delivery
In the second half FY20, the Group reviewed the performance of its home delivery channel and invested in additional resources to
grow its customer base . This, along with the increase in demand for home delivery services as a result of the COVID-19 restrictions
saw good improvements in the financial performance of this channel in the second half of FY20.
Infant Formula Plant
The Group completed the acquisition of the introductory infant formula and nutritionals mixing plant in August 2019 . The plant
was transported from overseas to Camperdown in September 2019 . After a comprehensive planning and development process,
construction of the purpose built building to house the infant formula plant commenced in June 2020. The building is expected to
be completed in early 2021 (weather and COVID-19 restrictions permitting), after which plant installation and commissioning works
will commence . Under the terms of the Construction Agreement, the quoted construction cost is $2 .7 million, subject to agreed
variations under the contract .
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
Significant changes in the state of affairs of the Group in the year included the acquisition of the infant formula and nutritionals
mixing plant and commencement of construction of a building to house the plant on the Group’s Camperdown Dairy Park site .
In addition, the Group completed the second tranche of the capital raising announced in June 2019, established the Jonesy’s
Distribution joint venture and acquired Epicurean Dairy Pty Ltd through the change to its licensing arrangement with The Collective .
With the escalation of the COVID-19 pandemic in March 2020 and associated Government mandated restrictions, the Group acted
decisively, with the first priority being to protect the health and safety of our staff. For the corporate office, there was a seamless
transition to remote working that had a minimal impact on the business . At the farms and the Camperdown manufacturing facility,
measures were implemented in line with recommended practises to limit unnecessary contact and promote social distancing .
Jonesy’s Distribution and Victorian Farmers Direct delivery drivers implemented contactless delivery processes, again with minimal
impact to customers .
The health and safety of our staff remains our first priority in the management of our response to the pandemic. The Group is
continually monitoring the different areas of its business to ensure that it is adopting recommended practises relevant to each area
to assist in reducing the spread of the virus and adapting its practises to ensure its business can continue to operate in a manner
which ensures the safety of its customers and staff.
All entities in the Group are eligible for the cash flow boost incentive implemented by the Government in response to the pandemic.
The Group has recognised a total of $100,000 in government assistance from the cash flow boost in the consolidated statement
of comprehensive income for the year ended 30 June 2020. Refer Note 4(a)(ii). None of the Group entities have qualified for the
JobKeeper allowance.
On 20 August 2019, the Group finalised the second tranche of the placement to sophisticated investors announced to the ASX
in June 2019. Following shareholder approval at the extraordinary general meeting held on 13 August 2019, the Group issued a
further 67,342,149 stapled securities to raise $8 .1 million . The Lead Manager for the placement, Blue Ocean Equities was also
issued 2,500,000 options .
In the opinion of the directors, there are no other significant changes in the state of affairs of the Group that occurred during the
year that are not disclosed elsewhere in this report or in the accompanying financial statements.
7
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
EVENTS AFTER THE REPORTING PERIOD
The impact of the COVID-19 pandemic is ongoing and while it has not materially impacted the Group on the signing of this report, it
is not practical to estimate the potential impact, positive or negative, after the reporting date . As is evident from the implementation
of Stage 4 restrictions in Victoria from 13 August 2020, the situation continues to develop rapidly and is dependent on measures
imposed by the Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions
and economic stimulus . The Group will continue to assess any impact of COVID-19 on the business and ways to mitigate risks to
the Group in relation to it .
In the opinion of the directors there are no material matters that have arisen since 30 June 2020 that have significantly affected or
may significantly affect the Group, that are not disclosed elsewhere in this report or in the accompanying financial statements.
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 . The Group considers itself to be in compliance with its environmental obligations .
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The Group is transforming from a dairy farming and contract packing operation to a fully vertically integrated manufacturer of
differentiated, value-added dairy products with an emphasis on developing the Group’s own brands and partnering with like-minded
premium brands . This transition shifts the Groups operations to products which return higher margins and are less exposed to
competition from other market participants .
As part of this strategy, the Group is transitioning its dairy farms to fully certified organic operations. The first farm, Yaringa,
achieved organic certification in November 2019 and the remaining farms are on track to achieve organic certification in calendar
year 2021 . In addition, in April 2020, the Group converted one of its farms to A2 beta casein only producing cows .
The Group continues to progress a number of innovation and product development opportunities as well as contract manufacturing
arrangements with other premium brands . The Group also continues to invest in its hospitality and home delivery distribution
businesses to extend distribution of its own brands and licensed brands beyond the major Australian supermarkets .
FY21 will see significant focus on the construction and commissioning of the Group’s infant formula plant at the Camperdown Dairy
Park site . Due to current uncertainty around COVID-19 restrictions, construction and commissioning of the plant is expected to take
most of calendar year 2021, with the operational and financial benefits to be realised in the second half of FY22.
The Group will continue to identify and progress potential distribution partners both domestically and internationally and review and
advance its infant formula strategy including the stage 2 expansion at the appropriate time .
BUSINESS RISK
The Group consists of complementary businesses in dairy farming and manufacture and distribution of dairy products . The Group
is exposed to a range of strategic, financial, operational, environmental and related risks that are inherent when operating in
agricultural and fast-moving consumer goods markets . The Group has an enterprise risk management framework which, together
with corporate governance, provides a framework for managing the material risks .
Below is a summary of some of the key risks impacting the Group but is not intended to be an exhaustive list:
Milk Prices
Milk prices are set by the Australian and global markets depending on the product type, seasonal demand and tariffs. In recent
years, competitive forces within Australia have influenced fresh milk pricing whereas the export market for milk product is
determined by international supply and demand and global seasonal conditions . Changes in domestic and global milk pricing will
affect the revenue earned by the Group.
Operating Risks
The operation of processing factories, farms and other agricultural and manufacturing activities involve risks to employees,
contractors, livestock and plant and equipment . This may include through accident, malfunction, acts of God and other events
which are not foreseeable, unable to be insured against or which the Group and management have little or no control or
knowledge . Some events may cause considerable or even catastrophic damage to the Group and its assets . There can be no
assurance that the Group can avoid or insure against such events .
Environmental Risks
Agricultural businesses are exposed to various environmental risks such as fire, flood, drought, unseasonal rain, wind, storms and
similar events of nature which can have adverse or positive impacts on the operation of the business . This could include increased
operational costs, impact on the health and well-being of livestock . These risks are part of the operation of agricultural businesses
and there may be limited avenues to mitigate such risks .
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Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
BUSINESS RISK (cont’d)
Development Projects
The Group proposes to undertake development projects to build new facilities and expand existing facilities, specifically the
construction of the new building to house the acquired infant formula plant, and its future expansion by installing a further dryer .
There are risks associated with development projects, including construction delays, cost overruns and delays in anticipated
revenues flowing from the developments all of which could have an adverse effect on the Group’s revenues and costs. Similar
risks arise in the installation of significant equipment, such as the acquired infant formula plant, which may be delayed in its
installation or may not perform to its designed capacity initially or at all .
Consumption Trends
Vegan or plant based products are becoming more mainstream and as a result there is potential for future movement away from
traditional dairy milk based products, which could adversely impact the Group’s revenues in the future .
Customer / supplier contract security
The supply of the Group’s products to major retailers in Australia are governed by limited supply agreements which include six-
monthly reviews at which time products may be removed from sale in those retailers . Such reviews could reduce the number of the
Group’s products sold by this channel, adversely impacting the Group’s revenues in the future .
Food safety / quality
While the Group maintains and follows good industry quality and assurance practices there remains a risk of product contamination
in supply, production and storage of the Group’s products . A product contamination or threat of contamination may cause
reputational damage to the Group and its brands from perspective suppliers, customers, the general public and regulators . This
may also result in significant product recall costs, compensation payments and penalties all of which have an adverse effect on the
Group’s revenue and profitability.
Regulatory / compliance risk
Changes in relevant taxes, legal and administration regimes, accounting practice and government licensing and operations
policies may adversely affect the financial performance of the Group. In order to perform its activities the Group must comply with
the environmental legislation of Federal, State and Local governments, which may include changes to the conditions of or further
obligations under its environmental and water use licences and other regulated entitlements .
Current and future impact of COVID-19 and Export risks
An outbreak of the COVID-19 virus at the Group’s production plant would cause the temporary shutdown of that plant and standing
down of staff. This could have an adverse effect on the Group by reducing production while cleaning activities are undertaken and
staff self-isolate, with a consequential effect on revenues. The Group is also exposed to the global dairy market and the availability
of export opportunities of milk from Victoria . If country borders remain closed and exports limited, then there is a risk that there will
be excess local supply, attracting a lower price, and reducing the prices which the Group is able to obtain for its products .
Stage 2 Infant Formula Plant funding
In order to implement the Group’s stage 2 strategy regarding milk drying facilities, further capital will need to be raised . There is no
guarantee that those funds will be able to be raised, or if they are raised, raised at a cost which is acceptable to the Group . Further,
any equity capital raising may dilute existing securityholders in the Group .
Global climate conditions risk
Changes in global and regional weather and climate conditions are not easily or reliably predicted and, can have a positive of
negative effect on farm and manufacturing production which in turn affects revenues and costs. Domestic and international
legislation, regulation and similar programs introduced to mitigate such climate change may have positive or adverse effects on
Group financial performance and asset values over time.
9
Australian Dairy Nutritionals Group Annual Report 2020 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
Martin Bryant
Chairman (appointed director 11 November 2019 and chairman 23 December 2019)
Michael Hackett
Director (retired as chairman 23 December 2019)
Adrian Rowley
Director
Peter Skene
Paul Morrell
Director / Group CEO
Director
Martin Bryant
Qualifications
Non-Executive Chairman
Bachelor of Business - University of Western Australia
Member of Australian Institute of Company Directors
Directorships held in other listed
entities in the past 3 years
BCI Minerals Limited – retired November 2018
Sime Darby Industrial Holdings Sun Bhd (Malaysian listed) - retired December 2017
Interest in Group securities &
options
A relevant interest in 1,000,000 stapled securities at 30 June 2020.
Martin Bryant was appointed to the Board on 11 November 2019 and was appointed Chairman of the Group on 23 December
2019 . Martin is a highly skilled senior executive and director with extensive international experience at senior levels and a
particular focus on Asia including China, Vietnam and The Philippines . Martin brings a wealth of strategic and operational
experience to the Group and his insight and leadership of the Board will be invaluable as it executes its two-stage infant
formula strategy .
Peter Skene
Qualifications
Executive Director and 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 12,515,385 stapled securities at 30 June 2020.
A relevant interest in 7,000,000 loan securities at 30 June 2020.
Peter Skene was appointed to the Board on 1 July 2016. Peter has significant dairy industry experience 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 . As Group CEO, Peter has responsibility for all aspects of
the Group’s operations .
10
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
INFORMATION ON DIRECTORS (cont’d)
Michael Hackett
Non-Executive Director
Qualifications
Bachelor of Commerce - University of Queensland
Directorships held in other listed
entities in the past 3 years
Cashwerkz Limited – director since June 1986
Australian Adventure Tourism Group Limited - retired August 2018
Interest in Group securities &
options
A relevant interest in 23,298,887 stapled securities at 30 June 2020.
Michael Hackett was appointed to the Board on 8 May 2009 and served as chairman until 23 December 2019 . Michael is a
qualified Chartered Accountant who is a director of Cashwerkz Limited (ASX CODE: CWZ) and a former director of Australian
Adventure Tourism Group Limited (NSX CODE: AAT). Michael has considerable experience in managing and operating a wide
range of businesses and property developments .
Adrian Rowley
Qualifications
Non-Executive Director
Certified Financial Planner
Directorships held in other listed
entities in the past 3 years
Interest in Group securities &
options
No other current or former directorships in listed entities .
A relevant interest in 911,000 stapled securities at 30 June 2020.
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 .
Paul Morrell
Qualifications
Non-Executive Director
Trade Qualified - Diesel Mechanic
Certificate IV - Business and Management
Directorships held in other listed
entities in the past 3 years
Interest in Group securities &
options
No other current or former directorships in listed entities .
No relevant interest in stapled securities or options at 30 June 2020.
Paul Morrell was appointed to the Board on 1 March 2018 . Paul’s background has a strong emphasis in lead management
in complex construction and people management for large scale enterprises and is combined with a sound knowledge of
the manufacturing and on time delivery of services and products including exposure to aspects of food manufacturing and
speciality powders .
COMPANY SECRETARY
The following persons held office as a company secretary of the Company during the financial year:
Kate Palethorpe
Company Secretary and General Counsel
Interest in Group securities &
options
No relevant interest in stapled securities or options at 30 June 2020.
Kate Palethorpe was appointed to this role in September 2018. Kate is an experienced legal and governance professional
with both domestic and international businesses . She holds a Bachelor of Science and Law and is admitted to the Victorian
Supreme Court and High Court of Australia . She also has a strong background in food manufacturing and FMCG, including
direct experience in product development, procurement and logistics .
11
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
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 Group of this size and structure .
Aside from formally constituted directors’ meetings, the directors and chairman are in regular contact regarding the operation of the
Group 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
Martin Bryant
Michael Hackett
Adrian Rowley
Peter Skene
Paul Morrell
Meetings eligible
to attend
Meetings attended
14
21
21
21
21
13
19
18
21
18
DIVIDENDS PAID OR RECOMMENDED
The directors have not recommended or paid a dividend for the year ended 30 June 2020 (2019: $nil) at the date of this report.
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 $45,833 (2019: $40,943) 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 2020 there was no payment to external auditors for non-audit services (2019: $nil).
12
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
OPTIONS / PERFORMANCE SECURITIES
At the date of this report, the unissued ordinary stapled securities of Australian Dairy Nutritionals Limited under option are as
follows:
Grant Date
Last Date of Expiry
Exercise Price
Number under Option
12 February 2018
19 August 2019
12 February 2023
19 August 2022
18 November 2019
18 November 2022
12 .4 cents
18 cents
11 .5 cents
7,000,000*
2,500,000
2,500,000*
* Loan Securities
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 .
In the current year, no stapled securities have been issued in respect of options and 1,000,000 stapled securities were issued as
remuneration to employees . A summary of movements in options and other performance securities is set out in Note 26 . In the
comparative period, on 3 July 2018, 3,000,000 securities were issued on the exercise of employee options granted on 12 February
2018 with a nil exercise price .
For details of options and performance securities 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 2020 has been received and a copy can be found at page 19 .
REMUNERATION REPORT
Remuneration Policy
The remuneration policy of Australian Dairy Nutritionals 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 equity 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 caliber 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%. 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.
13
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
The Board’s policy is to remunerate non-executive 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 .
Directors 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 Nutritionals Limited securities
as collateral in any financial transaction, including margin loan arrangements.
No KMP receive securities that are not performance based as part of their remuneration.
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 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 did not issue Performance Incentives to current KMP. The performance-related proportions
of remuneration based on the achievement of Total Securityholder Returns are included in the Employment Details of KMP table
below . The objective of the Performance Incentives 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 .
14
Australian Dairy Nutritionals Group Annual Report 2020
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
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 .
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
100
-
-
-
-
-
Name
Position Held
Contract Details
M Bryant
Chairman
M Hackett
Director
A Rowley
Director
P Morrell
Director
N/A
N/A
N/A
N/A
P Skene
Group CEO / Director
3 months notice
In the current year, no KMP received any performance based remuneration.
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 2020
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 - 2020
M Hackett - 2019
A Rowley - 2020 1
A Rowley - 2019
P Skene - 2020
P Skene - 2019
P Morrell - 2020
P Morrell - 2019
M Bryant - 2020 2
Total - 2020
Total - 2019
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
Options
$
$
$
68,750
75,000
55,000
50,000
376,942
329,469
60,000
60,000
45,833
606,525
514,469
-
-
-
-
-
-
-
-
-
-
-
6,531
7,125
5,225
4,750
-
-
-
-
23,441
25,059
20,531
14,435
5,700
5,700
4,354
-
-
-
45,251
25,059
38,106
14,435
-
-
-
-
-
-
-
-
-
-
-
-
5,265
-
5,265
-
-
-
-
-
-
75,281
87,390
60,225
60,015
425,442
364,435
65,700
65,700
50,187
676,835
10,530
577,540
1 . This amount is paid in accordance with a contract arrangement with Watershed Funds Management Pty Ltd, an entity associated
with Adrian Rowley .
2 . Martin Bryant was appointed as a director on 11 November 2019 .
15
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Options and Rights Granted as Share-based Payments
There were no options or rights granted as share-based payments to KMP during the year (2019: nil).
Options and Rights Granted as Remuneration (prior years)
Grant Details
Exercised
Balance at
01/07/2019
Issue Date
No.
Value
($)
No.
Value
($)
M Hackett
2,400,000 12/02/2018
2,400,000
A Rowley
2,400,000 12/02/2018
2,400,000
34,203
34,203
P Skene
7,000,000 12/02/2018
7,000,000
442,217
TOTAL
11,800,000
11,800,000
510,623
-
-
-
-
Forfeit/
Cancel
No.
(2,400,000)
(2,400,000)
Balance at
30/06/2020
-
-
-
7,000,000
(4,800,000)
7,000,000
-
-
-
-
Balance at
30/06/2020
Vested
Unvested
No.
No.
P Skene1 .
7,000,000
7,000,000
7,000,000
7,000,000
-
-
1 . Peter Skene holds 7,000,000 loan securities .
The fair value of options granted as remuneration as shown in the above table has been determined in accordance with Australian
Accounting Standards and was recognised as an expense over the relevant vesting period .
Description of Options/Rights Issued as Remuneration
There were no options or rights issued as remuneration during the year (2019: nil) . On 29 November 2019, securityholders
approved the issue of 6,000,000 performance rights to directors, subject to achievement of specific performance hurdles. At the
date of this report, the performance rights have not been issued .
KMP Securityholdings
The number of ordinary securities held directly, indirectly or benefically by each KMP (or their related parties) of the Group during
the financial year is as follows:
30 June 2020
Martin Bryant
Michael Hackett1
Adrian Rowley
Peter Skene
Paul Morrell
Balance at
01/07/2019
Granted as
Remuneration
Other
Changes
Balance at
30/06/2020
-
22,632,221
1,286,000
12,515,385
37,152,422
73,586,028
-
-
-
-
-
-
1,000,000
666,666
(375,000)
-
(37,152,422)
(35,860,756)
1,000,000
23,298,887
911,000
12,515,385
-
37,725,272
1 The balance includes relevant interests held indirectly .
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 security holdings .
Loans to KMP
At the date of this report, there have been no loans made to or from any member of KMP.
16
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Other Transactions with KMP and/or their Related Parties
As set out in Note 24(b) of the financial statements, the Group had the following transactions with KMP:
(i) Australian Adventure Tourism Group Limited (AATG) - director related entity
Michael Hackett is a former director of AATG. During the year ended 30 June 2020, AATG was paid $33,472 (2019: $93,372) on
a reimbursement basis, for the provision of administrative services, accounting and related activities . There was $2,970 (2019:
$9,391) due at 30 June 2020.
(ii) Watershed Funds Management Pty Ltd - director related entity
Adrian Rowley is a director of Watershed Funds Management Pty Ltd. During the year ended 30 June 2020, Watershed Funds
Management Pty Ltd was paid $60,225 (2019: $54,750) for the provision of Adrian Rowley as director . There was $6,023 (2019:
$5,019) due at 30 June 2020.
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 .
_____________
Martin Bryant
Chairman
31 August 2020
17
Australian Dairy Nutritionals Group Annual Report 2020 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,
processing 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 .
The ASX Listing Rules require the Group to report on the extent to which it has followed the Corporate Governance
Recommendations contained in the ASX Corporate Governance Council’s Principles and Recommendations. The Corporate
Governance Statement, which was lodged with this Annual Report, discloses the extent to which the Group will follow the
recommendations taking into account the relatively small size of the Group 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.
18
Australian Dairy Nutritionals Group Annual Report 2020 AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
Under S307C of the Corporations Act 2001
To the Directors of Australian Dairy Nutritionals Limited
As the lead auditor for the audit of Australian Dairy Nutritionals Limited I declare that, to the best of
my knowledge and belief, during the year ended 30 June 2020 there have been no contraventions
of:
i.
ii.
the auditor independence requirements as set out in the Corporations Act 2001 in relation to
the audit; and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Australian Dairy Nutritionals Limited and the entities it controlled
during the year.
Nexia Brisbane Audit Pty Ltd
N D Bamford
Director
Date: 31 August 2020
19
Australian Dairy Nutritionals Group Annual Report 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue
Other income
Administration costs
Employment expenses
Finance costs
Dairy product related costs
Dairy farm related costs
Depreciation and amortisation expense
Deemed cost of livestock disposed
Impairment expenses
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
4(a)
4(b)
4(c)(v)
4(c)(iv)
4(c)(i)
4(c)(iii)
4(c)(ii)
4(c)(vi)
4(c)(vi)
5
2020
$
2019
$
22,467,336
21,373,358
1,621,740
(805,349)
566,865
(830,733)
(6,262,998)
(5,788,552)
(527,359)
(638,223)
(11,863,680)
(10,232,587)
(5,552,223)
(1,781,871)
(1,143,695)
(3,647,988)
(7,496,088)
-
(6,138,396)
(1,468,232)
(869,525)
-
(4,026,025)
-
(7,496,088)
(4,026,025)
-
-
-
-
-
-
Total comprehensive loss for the year
(7,496,088)
(4,026,025)
Loss is attributable to:
Company shareholders
Trust unitholders
Total comprehensive loss is attributable to:
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.
(7,448,762)
(3,254,207)
(47,326)
(771,818)
(7,496,088)
(4,026,025)
(7,448,762)
(3,254,207)
(47,326)
(771,818)
(7,496,088)
(4,026,025)
30
30
(2 .08)
(2 .08)
(1 .55)
(1 .55)
20
Australian Dairy Nutritionals Group Annual Report 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Biological assets
Right of use assets
Intangible assets
Property, plant & equipment
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Lease liabilities
Provisions
Borrowings
Total Current Liabilities
Non-Current Liabilities
Lease 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
Accumulated losses
Equity attributed to non-controlling interests
Total Equity
The accompanying notes form part of these financial statements.
Notes
2020
$
2019
$
6
7
8
9
10
11
12
13
14
15
16
15
16
6,361,821
2,152,392
1,257,907
164,949
9,937,069
5,368,015
1,368,635
2,753,218
29,757,034
39,246,902
3,748,550
2,477,116
995,718
216,416
7,437,800
4,928,422
-
6,974,236
29,190,439
41,093,097
49,183,971
48,530,897
2,213,785
2,370,950
307,650
565,064
12,081,526
15,168,025
-
314,797
264,363
2,950,110
524,132
114,935
-
639,067
-
135,087
12,431,039
12,566,126
15,807,092
15,516,236
33,376,879
33,014,661
17(a)
18
33,191,050
25,474,856
720,408
591,634
(23,699,934)
(16,264,510)
10,211,524
9,801,980
17(a)
30,744,991
30,744,991
(7,579,636)
(7,532,310)
23,165,355
33,376,879
23,212,681
33,014,661
21
Australian Dairy Nutritionals Group Annual Report 2020 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash Flows from Operating Activities
Receipts from customers
R&D tax incentive
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
Payment for biological assets
Payment for intangible assets
Payment for acquisition of Organic Nutritionals Pty Ltd
Payment for Flahey’s Nutritionals Pty Ltd
Cash on acquisition of Epicurean Dairy
Net investing cash flows
Cash Flows from Financing Activities
Proceeds from issue of stapled securities net of transaction costs
Net proceeds from CBA facility
Proceeds from borrowings - unsecured
Repayment of borrowings - unsecured
Repayment of hire purchase loans
Repayment of lease principal
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
2020
$
2019
$
25,334,445
22,012,465
299,516
-
(27,430,492)
(23,867,690)
77,679
(527,359)
5,486
(638,223)
6(b)
(2,246,211)
(2,487,962)
13
10
12(c)
3(i)
3(iii)
3(iv)
17(a)
16
6
(1,260,456)
(6,579,734)
-
(8,988)
(56,485)
(1,235,013)
2,743,343
(53,621)
(20,598)
-
-
(270,260)
106,947
-
(2,453,995)
(4,180,870)
7,677,005
-
355,818
(328,292)
(266,372)
(124,682)
7,313,477
2,613,271
3,748,550
6,361,821
6,354,208
2,054,000
-
-
(322,526)
-
8,085,682
1,416,850
2,331,700
3,748,550
22
Australian Dairy Nutritionals Group Annual Report 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Balance at 1 July 2019
AASB16 adjustment
Balance at 1 July 2019
Comprehensive income for the year
Loss attributable to company shareholders /
trust unitholders
Total comprehensive loss for the year
Transactions with equity holders in their
capacity as equity holders and other
transfers:
Contributions of equity, net of transaction
costs
Option expense
Employee performance securities issued
Issued
Capital
Ordinary
Option
Reserve
Accumulated
Losses
Non-
controlling
Interest
(Trust)
Total
Note
$
$
$
$
$
25,474,856
591,634
(16,264,510)
23,212,681
33,014,661
-
-
(20,865)
-
(20,865)
25,474,856
591,634
(16,285,375)
23,212,681
32,993,796
-
-
17(a)
7,596,194
-
-
-
26(d)
17(ii)
-
162,977
120,000
-
(7,448,762)
(47,326)
(7,496,088)
(7,448,762)
(47,326)
(7,496,088)
-
-
-
34,203
34,203
-
-
-
-
-
7,596,194
162,977
120,000
-
7,879,171
Transfer to retained earnings (options)
26(c)(ii)
-
(34,203)
Total transactions with equity holders
7,716,194
128,774
Balance at 30 June 2020
33,191,050
720,408
(23,699,934)
23,165,355
33,376,879
Issued
Capital
Ordinary
Option
Reserve
Accumulated
Losses
Non-
controlling
Interest
(Trust)
Total
Note
$
$
$
$
$
Balance at 1 July 2018
18,760,113
761,279
(13,031,720)
23,984,499
30,474,171
Comprehensive income for the year
Loss attributable to company shareholders /
trust unitholders
Total comprehensive loss for the year
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of transaction
costs
Option expense
Transfer of retained earnings (options)
Transfer to issued capital (options)
Total transactions with equity holders
-
-
17(a)
6,414,023
-
-
-
26
-
-
152,492
(21,417)
300,720
(300,720)
6,714,743
(169,645)
(3,254,207)
(771,818)
(4,026,025)
(3,254,207)
(771,818)
(4,026,025)
-
-
21,417
-
21,417
-
-
-
-
-
6,414,023
152,492
-
-
6,566,515
Balance at 30 June 2019
25,474,856
591,634
(16,264,510)
23,212,681
33,014,661
The accompanying notes form part of these financial statements.
23
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Australian Dairy Nutritionals Group (“the Group”) was formed by the stapling of Australian Dairy Nutritionals 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 . The Responsible Entity, Dairy Fund
Management Limited, is governed by the terms and conditions specified in the constitution and is domiciled in Australia.
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 acquiree (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 .
(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 in compliance with 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.
The financial statements were authorised for issue by the Board of Directors as at the date of signing the directors’ declaration.
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 .
24
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 the Company and 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 .
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 23 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.
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 .
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.
25
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Principles of consolidation (cont’d)
Goodwill (cont’d)
Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or Group’s 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 .
(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 it 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 Nutritionals 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 .
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 .
26
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Income tax (cont’d)
Tax funding arrangements and tax sharing arrangements (cont’d)
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 .
(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 knowledgeably, 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.
27
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(g) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the
instrument. For financial assets, this is 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 (except for trade receivables) 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 . Where available, quoted prices in an active market are used to determine fair value . In other circumstances, valuation
techniques are adopted .
Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing
component or if the practical expedient was applied as specified in AASB 15.63.
Classification and subsequent measurement
Financial liabilities
All of the Group’s financial liabilities are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense
in profit or loss over the relevant period.
The effective interest rate is the internal rate of return of the financial asset or liability; that is, it is the rate that exactly discounts the
estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition.
The Group does not have any financial liabilities classified as held for trading, designated as fair value through profit or loss or any
financial guarantee contracts.
A financial liability cannot be reclassified.
Financial assets
Financial assets are subsequently measured at:
•
•
amortised cost; or
fair value through other comprehensive income, or through profit and loss.
Measurement is on the basis of the two primary criteria:
•
•
the contractual cash flow characteristics of the financial asset; and
the business model for managing the financial assets.
A financial asset is subsequently measured at amortised cost if it meets the following conditions:
•
•
the financial asset is managed solely to collect contractual cash flows; and
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on
the principal amount outstanding on specified dates.
A financial asset is subsequently measured at fair value through other comprehensive income if it meets the following conditions:
•
•
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on
the principal amount outstanding on specified dates; and
the business model for managing the financial asset comprises both contractual cash flows collection and the selling of the
financial asset.
By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other
comprehensive income are subsequently measured at fair value through profit or loss.
28
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(g) Financial instruments (cont’d)
Derecognition
Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial
position .
Derecognition of financial liabilities
A liability is derecognised when it is extinguished (i .e . when the obligation in the contract is discharged, cancelled or expires) . An
exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms
of a financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including
any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Derecognition of financial assets
A financial asset is derecognised when the holder’s contractual rights to its cash flows expires, or the asset is transferred in such a
way that all the risks and rewards of ownership are substantially transferred .
All of the following criteria need to be satisfied for derecognition of financial assets:
•
•
•
the right to receive cash flows from the asset has expired or been transferred;
all risk and rewards of ownership of the asset have been substantially transferred; and
the Group no longer controls the asset (i .e . the Group has no practical ability to make a unilateral decision to sell the asset
to a third party) .
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum
of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in equity which was elected to be classified as at fair value through other comprehensive
income, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or
loss, but is transferred to retained earnings .
Impairment
The Group recognises a loss allowance for expected credit losses on:
•
financial assets that are measured at amortised cost;
Loss allowance is not recognised for:
•
financial assets measured at fair value.
Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit
loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at
the original effective interest rate of the financial instrument.
The Group uses the simplified approach to impairment, as applicable under AASB 9: Financial Instruments.
Simplified approach
The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the
recognition of lifetime expected credit loss at all times .
In measuring the expected credit loss, a provision matrix for trade receivables was used taking into consideration various data to
get to an expected credit loss (i .e . diversity of customer base, appropriate groupings of historical loss experience, etc .) .
Recognition of expected credit losses in financial statements
At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of
profit or loss and other comprehensive income.
The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset.
29
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(h) Property, Plant and Equipment
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 farm 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. Any
reversal of an impairment loss is recognised in profit and loss, to the extent that the increased carrying amount does not exceed
‘historical carrying amount’ had no impairment loss been recognised previously . A formal assessment of recoverable amount is
made when impairment indicators are present (refer to Note 1(l) for details of impairment) .
Subsequent costs for an asset 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 .
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 .
An assets carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated redeemable amount .
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 in the period which they arise. When revalued assets
are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earning .
(i) Leases (the Group as lessee)
At inception of a contract, the Group assesses if the contract contains or is a lease . If there is a lease present, a right-of-use asset
and a corresponding lease liability is recognised by the Group where the Group is a lessee. However all contracts that are classified
as short-term leases (lease with remaining lease term of 12 months or less) and leases of low value assets are recognised as an
operating expense on a straight-line basis over the term of the lease .
Initially the lease liability is measured at the present value of the lease payments still to be paid at commencement date . The lease
payments are discounted at the interest rate implicit in the lease . If this rate cannot be readily determined, the Group uses the
incremental borrowing rate .
Lease payments included in the measurement of the lease liability are as follows:
•
•
fixed lease payments less any lease incentives;
variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement
date;
30
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(i) Leases (the Group as lessee) (cont’d)
•
•
•
•
the amount expected to be payable by the lessee under residual value guarantees
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
lease payments under extension options if lessee is reasonably certain to exercise the options; and
payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the corresponding lease liability as mentioned above, any lease
payments made at or before the commencement date as well as any initial direct costs . The subsequent measurement of the right-
of-use assets is at cost less accumulated depreciation and impairment losses .
Right-of-use assets are depreciated over the lease term or useful life of the underlying asset whichever is the shortest .
Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates
exercising a purchase option, the specific asset is depreciated over the useful life of the underlying asset.
(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.
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 payments
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 equity . 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.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period .
(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 .
31
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(m) Intangibles other than Goodwill
Other intangibles have a finite life and are carried at cost or fair value less any accumulated amortisation and any impairment
losses, and 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 .
(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 recognition policies are as follows:
The sale of dairy farm and dairy processing segment products are measured at the fair value of consideration received net of any
trade discounts and volume rebates allowed .
The sale of dairy products represents a single performance obligation and accordingly, revenue will be recognised in respect of the
sale of these goods at the point in time when control over the corresponding goods and services is transferred to the customer (i .e .
at a point in time for sale of goods when the goods are delivered to the customer or transfer to the freight forwarder) .
Dairy cattle fair value adjustments are determined at the end of each reporting date (refer Note 10) . 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 control to the customer (through the execution of a sales agreement at the time of delivery of
the cattle to the customer);
the quantity and quality of the cattle has been determined; and
the price is fixed and generally title has passed.
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent
in the instrument .
Government funding / grant assistance is recognised at fair value where there is reasonable assurance the grant will be received
and all conditions will be met .
32
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 .
Accounting measurements for which significant judgements, estimates and assumptions have been made are:
- Carrying value determination of land and buildings, refer Note 13;
- Carrying value determination of goodwill and intangibles, refer Note 12;
- Fair value determination of livestock, refer Note 10;
- Classification of debt, refer Note 16;
- Share based payments, refer Note 26; and
- Income tax and other taxes, refer Note 5 .
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) 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 .
(v) New and Amended Accounting Policies Adopted by the Group
Initial Application of AASB 16: Leases
The Group has adopted AASB 16: Leases retrospectively with the cumulative effect of initially applying AASB 16 recognised at 1
July 2019. In accordance with AASB 16 the comparatives for the 2018 reporting period have not been restated as permitted under
specific transition provisions in the standard.
The Group has recognised a lease liability and right-of-use asset for all leases (with the exception of short-term and low-value
leases) recognised as operating leases under AASB 117: Leases where the Group is the lessee .
Lease liabilities are measured at the present value of the remaining lease payments . The Group’s weighted average incremental
borrowing rate of 4.25% as at 1 July 2019 was used to discount the lease payments.
The right-of-use assets for the lease have been measured and recognised in the statement of financial position as at 1 July 2019
by taking into consideration the lease liability and the prepaid and accrued lease payments previously recognised as at 1 July 2019
(that are related to the lease) .
The following practical expedients have been used by the Group in applying AASB 16 for the first time:
- Leases that have a remaining lease term of less than 12 months as at 1 July 2019 have been accounted for in the same way as
short term leases;
- The use of hindsight to determine lease terms on contracts that have options to extend or terminate;
- Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
- Relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review . The
Group did not have any onerous contracts as at 1 July 2019.
The difference between the undiscounted amount of operating lease commitments at 30 June 2019 and the discounted operating
lease commitments as at 1 July 2019 was $139,616. This difference is attributable to discounting the operating lease commitments
at the Group’s incremental borrowing rate by $119,033 and $20,583 for the remaining lease commitments on the Docklands
premises treated as a short-term lease in accordance with the practical expedient available .
33
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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
Australian Accounting Standards .
Statement of Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-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
2020
$
2019
$
10,136,695
12,889,053
23,025,748
4,885,559
277
4,885,836
5,622,851
11,657,658
17,280,509
5,189,441
54,897
5,244,338
33,191,051
25,474,856
720,408
591,634
(15,761,547)
(14,030,319)
18,149,912
12,036,171
(1,765,431)
(1,765,431)
(1,709,702)
(1,709,702)
The Company does not have any contingent liabilities or guarantees in place for the year ended 30 June 2020, other than in
respect of CBA borrowings, refer Note 16 .
Contractual commitments
At 30 June 2020, the parent company had not entered into any contractual commitments.
.
34
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 3: BUSINESS COMBINATIONS
(i) Organic Nutritionals Pty Ltd
On 26 August 2019, Australian Dairy Nutritionals Limited acquired 100% of the issued capital and control of Organic Nutritionals
Pty Ltd (Organic Nutritionals) for a total purchase consideration of $1,235,013 . This acquisition forms part of the Group’s overall
strategy to expand its dairy processing business and is a key step in its organic infant formula project .
The identifiable assets acquired and liabilities assumed on acquisition of Organic Nutritionals were as follows:
Purchase consideration:
Cash
Total purchase consideration
Fair value of assets acquired and liabilities assumed:
Trade and other receiveables
Property, plant and equipment
Net identifiable assets acquired and liabilities assumed
$
1,235,013
1,235,013
14,879
1,220,134
1,235,013
There have been no operational transactions in Organic Nutritionals from acquisition date to 30 June 2020.
(ii) Jonesy’s Distribution Pty Ltd
On 7 October 2019, Australian Dairy Nutritionals Limited (the Group) acquired the business assets of Jonesy’s Dairy Fresh as part
of a joint venture with Somerville Property Holdings Pty Ltd (Sommerville Property) . There was no consideration paid and the joint
venture company, Jonesy’s Distribution Pty Ltd (Jonesy’s Distribution) is 75% owned by the Group and 25% owned by Somerville
Property .
The business assets of Jonesy’s Dairy Fresh include premium quality brands and products, long established relationships supplying
cafes, restaurants and retailers and the associated delivery systems and infrastructure. The Group supplies Jonesy’s Dairy Fresh
with milk and dairy products, providing another distribution channel for its products .
The identifiable assets acquired and liabilities assumed on acquisition of the Jonesy’s Dairy Fresh business assets were as follows:
Purchase consideration
Fair value of assets acquired and liabilities assumed:
Property, plant and equipment
Net identifiable assets acquired and liabilities assumed1.
$
-
4,500
4,500
1 . The Group has assessed the fair value of the Jonesy’s Dairy Fresh brand and customer list and whilst there is an underlying
value in both, it has adopted a conservative approach in not bringing these to account at 30 June 2020 due to current and prior
period trading losses in the business .
The Group is providing working capital funding to Jonesy’s Distribution through a loan facility with its wholly owned subsidiary,
Camperdown Dairy Company Pty Ltd (CDC). The facility is fully secured against the existing and future assets of Jonesy’s
Distribution and includes all trade payables owed to CDC by Jonesy’s Dairy Fresh on establishment of the joint venture. The trade
payables and subsequent assumed liabilities transferred to Jonesy’s Distribution on 7 October 2019 were $1,008,095 and the
balance of the facility, including accrued interest at 30 June 2020 is $1,119,758.
As disclosed above, Jonesy’s Distribution has assumed liabilities of $1,008,095 through a loan facility with CDC. As the debtor in
CDC has been fully provided for this financial year and prior periods up to completion, there is no impact for the assumed liability on
consolidation. The loan in CDC will continue to be impaired until Jonesy’s Distribution is in a positive trading position and has the
cash flow to commence repayments.
Results contributed by the acquired entity since acquisition date:
Revenue
Loss before income tax
$
897,570
(222,717)
35
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 3: BUSINESS COMBINATIONS (cont’d)
(iii) Flahey’s Nutritionals Pty Ltd (31 December 2018 acquisition)
On 24 December 2018, Australian Dairy Nutritionals Limited acquired 100% of the issued capital and control of Flahey’s Nutritionals
Pty Ltd (Flahey’s) for a total purchase consideration of $1,095,260 . This acquisition formed part of the Group’s overall strategy to
expand its dairy processing business and was a key step in entering the infant / toddler formula market . Additionally, Christopher
Flahey, the founder of Flahey’s Nutritionals and an experienced sales executive in the infant formula sector, joined the Group as its
Sales and Marketing executive .
Purchase consideration:
Cash
Completion price adjustment
Stapled securities1 .
Performance consideration2 .
Total purchase consideration
$
400,000
(129,740)
75,000
750,000
1,095,260
1 . On 24 December 2018, 625,000 stapled securities were issued at the market price of 12 cents .
2 . On 24 December 2018, 6,250,000 consideration securities were issued and valued using both the binomial option pricing model
and Black-Scholes model . The consideration securities are subject to various performance milestones and Christopher Flahey
remaining employed with the company on a conversion date . The consideration securities are forfeited if performance hurdles are
not satisfied and the conversion dates are as follows:
•
•
•
31 August 2019 - 1,875,000 consideration securities will be available to be converted to 1,875,000 stapled securities;
30 August 2020 - 1,875,000 consideration securities will be available to be converted to 1,875,000 stapled securities; and
31 August 2021 - 2,500,000 consideration securities will be available to be converted to 2,500,000 stapled securities .
The independent valuation resulted in a price of 12 cents per consideration security under both models .
For financial accounting purposes (Under AASB 3 Business Combinations) the performance consideration was accounted for as
follows:
Recognised as cost of acquisition (i)
Amortised as performance consideration through profit and loss (ii)
(i) Fair value of assets acquired and liabilities assumed:
Other current assets
Intangible assets3 .
Property, plant and equipment
Net identifiable assets acquired and liabilities assumed
$
345,260
750,000
1,095,260
20,260
322,140
2,860
1,095,260
3 . In accordance with AASB 3: Business Combinations the acquirer is required to recognise separately from Goodwill the identifiable
intangible assets of Flahey’s on acquisition. Under the accounting standard, an intangible asset is considered identifiable if it
meets the Contractual Legal Criterion . Flahey’s uses a range of recipes, formulations and patents which meet the Contractual
Legal Criterion and in accordance with this requirement the Group has attributed $322,140 to the fair value of identifiable intangible
assets acquired .
(ii) Performance consideration is amortised over 3 years, with a charge to profit and loss to reflect the actual number of securities
which issue. In the year ended 30 June 2020, Christopher Flahey resigned from the Group and $126,273 has been written back
into profit for previously accrued share based payments on the basis that no securities will be issued and remaining consideration
securities have been cancelled .
36
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 3: BUSINESS COMBINATIONS (cont’d)
(iv) Epicurean Dairy Pty Ltd
On 30 April 2020 the Group acquired 100% of the issued capital and control of Epicurean Dairy Pty Ltd (Epicurean Dairy) . The
acquisition expanded the Group’s manufacturing arrangement for The Collective range of yoghurt products to include the exclusive
right to manufacture, distribute and sell The Collective products in Australia .
The acquisition agreement for Epicurean Dairy also provides for the Group to pay royalties in the range of 1% - 4% of revenue on
certain products commencing April 2022 .
The identifiable assets acquired and liabilities assumed on acquisition of Epicurean Dairy were as follows:
Purchase consideration
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables1 .
Inventories
Other assets
Property plant and equipment
Trade and other payables
Provisions
Net identifiable assets acquired and liabilities assumed2.
$
-
106,947
979,320
132,692
36,939
41,399
(1,202,593)
(51,764)
42,940
1 . Included in trade and other receivables is a $606,636 receivable from the vendor for the working capital adjustment on
acquisition. This is a preliminary amount as the Group and the vendor are still in the process of agreeing the final calculation. On
finalisation, the acquisition receivable will be reassessed under AASB 3: Business Combinations .
2 . The Group has assessed the fair value of the customer list and contracts of Epicurean Dairy and whilst there is an underlying
value in both, the Group has adopted a conservative approach in not bringing these to account at 30 June 2020 due to current
and prior period trading losses in the business . Under AASB 3: Business Combinations, the acquisition identifiable assets can be
reassessed for a 12 month period following acquisition . The Group will monitor the trading position and reassess the fair value of
the customer list and contracts in accordance with results .
Results contributed by the acquired entity since acquisition date:
Revenue
Loss before income tax
$
817,752
(274,987)
37
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 4: REVENUE AND EXPENSES
(a) Revenue
Revenue from contracts with customers
Other sources of revenue
Total revenue
(i) Revenue disaggregation
The revenue is disaggregated by service line and timing of revenue recognition .
Service lines:
- Dairy processing
- Dairy farms
Timing of revenue recognition
Services transferred to customers:
- at a point in time
(ii) Other sources of revenue
Interest
Farm costs recoveries
R&D tax incentive
Government grants - Cashflow Boost subsidy
Fuel rebate and other revenue
(b) Other Income
Gain on change in fair value of livestock (refer Note 10)
Gain on acquisition of property, plant and equipment (refer Note 3(ii),(iv))
Gain on disposal of property, plant and equipment
(c) Expenses
(i) Finance costs
CBA facility
Loans - unsecured
Finance costs - right of use assets
Finance charges payable under finance leases
(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
Note
2020
$
2019
$
(i)
(ii)
21,892,308
21,285,117
575,028
88,241
22,467,336
21,373,358
13,893,084
7,999,224
21,892,308
13,391,171
7,893,946
21,285,117
21,892,308
21,285,117
77,679
55,669
299,516
100,000
42,164
575,028
1,574,300
47,440
-
1,621,740
467,433
6,533
23,388
30,005
527,359
5,486
52,389
-
-
30,366
88,241
538,552
-
28,313
566,865
604,592
3,276
-
30,355
638,223
2,532,373
3,255,608
459,880
63,683
(59,514)
168,642
131,850
279,556
1,975,753
5,552,223
406,141
94,140
152,947
211,969
143,129
175,562
1,698,900
6,138,396
38
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 4: REVENUE AND EXPENSES (cont’d)
(iii) Dairy processing related costs
Cost of goods sold
Freight costs
Property and lease costs
Loss allowance on receivables
Other dairy processing related costs
(iv) Employment benefits expense
Employee and director remuneration costs
Equity settled remuneration costs
(v) Administration and non-dairy related costs
Administration costs
Professional costs
(vi) Other significant items
Deemed cost of livestock sold (refer Note 10)
Impairment of goodwill (refer Note 12)
Impairment reversal - land and buildings (refer Note 13)
NOTE 5: INCOME TAX EXPENSE
(a) The components of tax expense / (benefit) comprise
Current tax
Deferred tax
2020
$
2019
$
9,188,136
7,473,221
910,654
248,124
371,856
423,830
411,691
873,765
1,144,910
1,050,080
11,863,680
10,232,587
6,100,021
162,977
6,262,998
474,550
330,799
805,349
1,143,695
4,262,652
(614,664)
5,636,060
152,492
5,788,552
335,780
494,953
830,733
869,525
-
-
-
-
2020
$
2019
$
-
-
-
(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 27 .5% (2019: 27 .5%):
(2,061,424)
(1,107,157)
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 nil due to losses.
188,337
1,520,065
799,001
(445,979)
-
212,250
1,069,733
(26,724)
(148,102)
-
39
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 5: INCOME TAX EXPENSE (cont’d)
(c) Deferred tax assets not recognised
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 dependent on compliance with conditions of
deductibility imposed by law .
Temporary differences
Tax losses
Net unbooked deferred tax assets
2020
$
400,817
8,845,716
9,246,533
2019
$
1,189,890
7,137,314
8,327,204
The Group has revenue losses of $32,166,239 (2019: $25,953,868) . These losses comprise $26,385,932 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 .
NOTE 6: CASH AND CASH EQUIVALENTS
Current
Cash at bank and in hand
Total cash and cash equivalents
2020
$
2019
$
6,361,821
6,361,821
3,748,550
3,748,550
Cash at bank earns interest at floating rates based on daily bank deposit rates.
(a) Reconciliation of Cash
For the purpose of the Cash Flow Statement, cash includes cash and cash equivalents comprising the following at 30 June 2020:
Cash at bank and in hand
2020
$
6,361,821
6,361,821
2019
$
3,748,550
3,748,550
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 16: Borrowings .
40
Australian Dairy Nutritionals Group Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 6: CASH AND CASH EQUIVALENTS (cont’d)
(b) Reconciliation of Result 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 expenses
Loss / (gain) on disposal of property, plant and equipment
Bad debts and impairment provision
Distribution from termination of Camperdown Cheese and Butter Factory joint venture
Gain on acquisition of property, plant and equipment
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
(c) Changes in liabilities arising from Financing Activities:
2020
$
2019
$
(7,496,088)
(4,026,025)
1,781,871
1,143,695
(1,574,300)
3,647,988
-
371,856
-
(47,440)
162,977
947,070
88,406
(129,499)
(1,321,099)
178,352
1,468,232
869,525
(538,552)
-
(28,313)
873,765
(681,543)
-
152,492
(671,816)
5,189
(370,209)
379,589
79,704
(2,246,211)
(2,487,962)
1 July 2019
Cash flows
Acquisition
Non-cash
Initial
application
of AASB 16
Non-cash
Accrual
30 June
2020
CBA Facility
Loans - unsecured
Lease liabilities
Total
$
$
$
$
12,054,000
-
-
-
(328,292)
355,818
641,402
(391,054)
-
12,695,402
(719,346)
355,818
-
-
581,964
581,964
$
12,054,000
27,526
831,782
12,913,308
-
-
(530)
(530)
(d) Non-cash financing and investing - comparative year
A total of 625,000 stapled securities were issued with a value of $75,000 as consideration for the acquisition of Flahey’s
Nutritionals .
A total of 150,031 stapled securities were issued with a value of $24,005 as consideration for equipment acquisition advisory
services .
A total of 3,000,000 stapled securities were issued with a value of $300,720 on exercise of performance rights issued in the prior
year .
During the prior year the Group acquired plant and equipment with an aggregate value of $485,507 by means of finance leases
and $402,863 in a distribution from the CDC joint venture. These acquisitions are not reflected in the statement of cashflows.
41
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 7: TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for impairment
Other receivables
Provision for impairment
Total current trade and other receivables
Note
(a)
2020
$
2019
$
1,345,544
2,839,564
-
1,000,622
(193,774)
2,152,392
(864,438)
501,990
-
2,477,116
(a) Lifetime Expected Credit Loss Credit Impaired
Opening
balance
Net
measurement
of loss
allowance
Amounts
written off
Total
Trade receivables
Other receivables
$
$
$
864,438
178,082
(1,042,520)
-
193,774
-
Current trade receivables
864,438
371,856
(1,042,520)
$
-
193,774
193,774
The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of
the lifetime expected loss provision for all trade receivables . To measure the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the days past due . The loss allowance provision for all receivables as at
30 June 2020 is determined as follows; the expected credit losses also incorporate forward-looking information.
2020
Current
>30 days past
due
>60 days past
due
>90 days past
due
$
$
$
$
Total
$
Expected loss rate
9%
0%
0%
0%
Gross carrying amount
2,185,749
73,124
67,966
19,327
2,346,166
Loss allowing provision (i)
193,774
-
-
-
193,774
(i) In May 2020, former joint venture partner Organic Dairy Farmers of Australia Limited (ODFA) appointed voluntary administrators .
The Group has an outstanding receivable of $193,774 with ODFA for deferred settlement on the joint venture due in instalments to
July 2022. Given the uncertainty around the future of ODFA and recoverability of the outstanding amount, a bad debt provision has
been made for the full amount .
2019
Current
>30 days past
due
>60 days past
due
>90 days past
due
$
$
$
$
Total
$
Expected loss rate
3%
55%
Gross carrying amount
2,473,946
121,823
Loss allowing provision
70,826
66,498
0%
869
-
98%
744,916
3,341,554
727,114
864,438
42
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 7: TRADE AND OTHER RECEIVABLES (cont’d)
Credit risk
The Group has a significant concentration of credit risk with four key customers totalling $1,741,060 (2019: $2,189,865) or 74%
(2019: 65%) of receivables at balance date . Of this amount, $193,774 is impaired . The class of assets described as “trade and
other receivables” is considered to be the main source of credit risk to the Group .
On a geographical basis, the Group has all credit risk exposures in Australia .
The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit loss . The
expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of
the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor, general
economic conditions of the industry in which the debtor operates and an assessment of both the current and the forecast direction
of conditions at the reporting date .
There has been no change in the estimation techniques used or significant assumptions made during the current reporting period.
The Group writes off a receivable when there is information indicating that the debtor is in severe financial difficulty and there is no
realistic prospect of recovery .
(b) Financial assets Measured at Amortised Cost
Trade and other receivables
Total current
Total financial assets measured at amortised cost
(c) Collateral pledged
Note
28
2020
$
2019
$
2,152,392
2,152,392
2,477,116
2,477,116
A floating charge over some trade receivables has been provided for certain debt. For futher details refer to Note 16: Borrowings.
NOTE 8: INVENTORIES
Current
Packaging
Raw materials, finished goods and chemicals
Feedstock, hay and silage
Total inventories (at cost)
NOTE 9: OTHER ASSETS
Current
Prepayments
Bonds and deposits
Total other assets
NOTE 10: BIOLOGICAL ASSETS
Non-current
Dairy livestock
Total biological assets
2020
$
357,973
555,992
343,943
1,257,907
2020
$
125,060
39,889
164,949
2020
$
2019
$
341,876
268,690
385,152
995,718
2019
$
165,474
50,942
216,416
2019
$
5,368,015
5,368,015
4,928,422
4,928,422
43
Notes
(a)
Australian Dairy Nutritionals Group Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 10: BIOLOGICAL ASSETS (cont’d)
Movements during the year:
Opening carrying amount
Purchases of livestock
Deemed cost of livestock disposed
Gain from changes to fair value
Closing carrying amount
Movements during the year (herd numbers):
Opening balance
Purchases
Natural increase and attrition
Sales
Closing balance
2020
$
2019
$
4,928,422
5,205,774
8,988
(1,143,695)
1,574,300
5,368,015
53,621
(869,525)
538,552
4,928,422
2020
No.
3,939
5
1,530
(1,812)
3,662
2019
No.
3,812
65
1,610
(1,548)
3,939
(a) Biological assets represent the dairy livestock owned by the Group. At 30 June 2020, 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 . A
fair value gain of $1,574,300 (2019: $538,522) has been recognised in profit and loss at 30 June 2020, and represents price
movements, natural increase and the movement in ages of young stock .
(b) Financial risks associated with the Group’s dairy herd relates to selling prices of milk, and is managed by way of contracted
revenue prices .
(c) During the year ended 30 June 2020, the Group produced 12.7 million litres (2019: 15.8 million litres) of raw milk. The
average number of cows milked during the year was 1,908 (2019: 2,111) .
NOTE 11: RIGHT OF USE ASSETS
The Group has the following land and building leases recognised under AASB16 .
•
•
a 5-year and 3-month lease on factory premises at 325 Manifold Street, Camperdown, with an expiry date of 31 March
2025; and
a 3-year and 2-month lease on 368 acres of land on Cooramook Road, Grassmere, Victoria .
The land lease has a 3-year option, which provides the Group opportunities to manage the lease in order to align with
business strategies . The extension or termination option is only exercisable by the Group; however, management has
no reasonable certainty at this point in time that the option will be exercised and as such the option is not included in the
calculation of the lease liability .
The Group also has leases for plant and equipment .
(i) AASB 16 related amounts recognised in the statement of financial position
Right of use assets
Leased land and building
Accumulated depreciation
Leased plant and equipment
Accumulated depreciation
Total right of use assets
2020
$
918,924
(484,703)
434,221
1,295,290
(360,876)
934,414
1,368,635
44
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 11: RIGHT OF USE ASSETS (cont’d)
Movement in carrying amounts:
Leased land and building:
Recognised on initial application of AASB 16 (previously classified as operating
leases under AASB 117)
Depreciation expense
Net carrying amount
Leased plant and equipment:
Opening balance transferred from property plant and equipment on initial application
of AASB 16
Transfer to owned plant and equipment
Depreciation expense
Net carrying amount
(ii) AASB 16 related amounts recognised in the statement of profit or loss
Depreciation charge related to right of use assets
Interest expense on lease liabilities (included in finance costs)
(iii) AASB 16 related amounts recognised in the statement of cash flows
Total cash outflows for leases
NOTE 12: INTANGIBLE ASSETS
Goodwill
- at cost
Less impairment expense
Recipes, formulations and patents
- at cost
Product development
- at cost
Less accumulated amortisation
2020
$
561,100
(126,879)
434,221
1,103,560
(54,009)
(115,137)
934,414
242,016
53,393
391,055
Notes
2020
$
2019
$
6,616,393
(4,262,652)
2,353,741
6,616,393
-
6,616,393
346,846
346,846
87,021
(34,390)
52,631
336,220
336,220
41,163
(19,540)
21,623
(a)
(b)
(c)
Total intangible assets
2,753,218
6,974,236
45
Australian Dairy Nutritionals Group Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 12: INTANGIBLE ASSETS (cont’d)
(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
was allocated to goodwill .
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 discounted cash flow
projections that have been approved by the Board, covering a 5 year period and a terminal growth rate .
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 and costs, discount rates and terminal growth rate .
Sensitivity to change in assumptions
Revenue growth – Revenue projections are based on the 2021 budget and forward-looking plans using current and contracted
sales levels and pipeline growth. Growth rates applied range between 0% and 5% across the product mix, reflecting a conservative
approach in a changing marketplace . The projections assume changes in product mix and customer mix based on the existing
dairy product range and existing production capability . Overall revenue growth in the 5 year forecast period averages 4 .73% .
Gross margins – Gross margins are based on the 2021 budget and reflect current actuals and estimates of contracted sales
margins, or Group estimates of future production costs (primarily milk, labour and manufacturing costs) . Average margin growth in
the 5 year forecast period averages 4 .42% .
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 8.01% has been used in calculations, reflecting
the Group’s estimated WACC which takes into account debt and equity .
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
On the basis of the Group review of the carrying value of goodwill in CDC, it has recorded an impairment of $4,262,652 at 30 June
2020, reducing the goodwill to $2,353,741 .
The Group has taken a conservative approach to the underlying calculations, including revenue growth, and has taken into account
the uncertain conditions impacting the Australian economy as a result of the COVID-19 pandemic .
Impact of possible changes in key assumptions
•
•
A movement in average revenue growth percentage of 10% (up / down) would impact the recoverable value of goodwill by
$339,643; and
A movement in average margin growth percentage of 10% (up / down) due to changes in cost assumptions would impact
the recoverable value of goodwill by $266,147 .
These sensitivities are currently the key material inputs to the value-in-use calculations assessed by the Group .
(b) Recipes, formulations and patents relate to the acquisition of Flahey’s Nutritionals Pty Ltd on 24 December 2018 (refer Note 3) .
(c) The movement in carrying amount of intangibles comprises:
Opening balance
Additions in year
Acquisition of Flahey’s Nutritionals (refer Note 3 (iii))
Impairment expense
Amortisation
Closing balance
2020
$
6,974,236
56,485
-
(4,262,652)
(14,851)
2,753,218
2019
$
6,643,045
20,598
322,140
(11,547)
6,974,236
46
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 13: 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
2020
$
2019
$
27,238,326
(2,060,038)
(2,209,810)
22,968,478
26,560,020
(1,240,622)
(2,824,473)
22,494,925
(b)
(a)
9,683,794
7,767,241
(2,895,238)
(2,175,287)
6,788,556
5,591,954
-
-
-
1,366,521
(262,961)
1,103,560
Total property, plant and equipment
29,757,034
29,190,439
(a) Below is a table showing the carrying value of land, buildings and improvements by property:
Property name
Acquisition date
Carrying value 2020
Carrying value 2019
Brucknell No 1
22 October 2014
4,069,408
4,172,733
Brucknell No 2
22 October 2014
4,148,805
4,133,816
Brucknell No 3
6 March 2015
2,298,239
2,290,333
Missens Road
9 July 2015
1,488,798
1,520,110
Drumborg
16 September 2015
5,298,432
5,200,361
Yarring - Nirranda South
4 October 2018
4,744,426
4,904,598
Depot & Old Geelong Road
(Camperdown) - Land
17 November 2017
272,974
272,974
Infant Formula Plant Project
in progress
647,396
-
Total
22,968,478
22,494,925
Land, buildings and improvements represents the total holding costs of each property including purchase price, acquisition
costs, capitalised development and land improvement costs since acquisition .
(b) Registered valuers Preston Rowe Paterson completed an independent valuation of all farms for the year ended 30
June 2020. The basis of the valuation was ‘As Is and In Use’ with vacant possession and the combined fair value of all
properties was $23,550,000, giving rise to a reversal of prior period impairment charges of $614,664 . The Drumborg and
Yarringa farms fair values exceed historical written down value by $271,824 and $363,645, however these are unbooked
gains under the cost method adopted by the Group under AASB 116 .
47
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 13: PROPERTY, PLANT AND EQUIPMENT (cont’d)
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:
2020
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
Plant &
Equipment -
Leased
$
$
$
Total
$
Balance beginning of the financial year
22,494,925
5,591,954
1,103,560
29,190,439
-
(1,103,560)
(1,103,560)
Opening balance transferred to right of use assets on
initial application of AASB 16
Transfer from right of use assets
Impairment reversals
Additions
Additions - acquisition of Jonesy’s Distribution
Additions - acquisition of Organic Nutritionals
Additions - acquisition of Epicurean Dairy
-
-
614,664
678,306
-
-
-
54,009
-
582,150
4,500
1,220,134
41,399
Depreciation expense
(819,417)
(705,590)
Balance at end of financial year
22,968,478
6,788,556
-
-
-
-
-
-
-
-
54,009
614,664
1,260,456
4,500
1,220,134
41,399
(1,525,007)
29,757,034
2019
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
Plant &
Equipment -
Leased
$
$
$
Total
$
Balance beginning of the financial year
19,658,311
5,443,810
732,642
25,834,763
Additions
Disposals
5,906,230
1,076,367
(2,374,841)
(256,182)
485,507
(24,719)
7,468,104
(2,655,742)
Depreciation expense
(694,775)
(672,041)
(89,870)
(1,456,686)
Balance at end of financial year
22,494,925
5,591,954
1,103,560
29,190,439
NOTE 14: TRADE AND OTHER PAYABLES
Current
Trade creditors
Sundry creditors and accrued expenses
Total trade and other payables
Notes
2020
$
2019
$
1,532,857
680,928
2,213,785
1,579,109
791,841
2,370,950
Financial liabilities at amortised cost classified as trade and other payables
Total trade and other payables
Financial liabilities as trade and other payables
28
2,213,785
2,213,785
2,370,950
2,370,950
48
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 15: PROVISIONS
Current
Employee benefits
Total current provisions
Non-current
Employee benefits
Total non-current provisions
Total provisions
Movement in provisions:
Opening balance
Additional provision
Amounts used
Closing balance
2020
$
565,064
565,064
114,935
114,935
679,999
2019
$
314,797
314,797
135,087
135,087
449,884
449,884
405,907
(175,792)
679,999
370,180
263,352
(183,648)
449,884
Provision for employee benefits
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(j) to this
report .
NOTE 16: BORROWINGS
Current
Bank hire purchase loans - secured
Loans - unsecured
CBA facility - secured
Total current borrowings
Non-current
Bank hire purchase loans - secured
CBA facility - secured
Total non-current borrowings
Total borrowings
Notes
2020
$
(a)
(b)
(c)
(a)
(c)
-
27,526
12,054,000
12,081,526
-
-
-
12,081,526
2019
$
264,363
-
-
264,363
377,039
12,054,000
12,431,039
12,695,402
(a) Bank hire purchase loans have been transferred to lease liabilities on initial application of AASB 16 .
(b) The Group has unsecured short-term loans for payment of the Group’s insurance policies .
(c) The Group established borrowing facilities with the Commonwealth Bank of Australia Limited (CBA) in April 2016, as a three
year re-drawable loan facility of $10,000,000 to assist with the acquisition of Camperdown Dairy Company . Since that time,
the term and principal amount has been varied and at 30 June 2020 the principle amount is $12,054,000 with a facility
maturity date of 4 October 2021 . The facility is subject to compliance with predetermined covenants and at least annual
reviews .
Despite the CBA facility maturity date of 4 October 2021 and meeting all obligations in accordance with the terms of the
facility, under the terms of the facility, the Group may not have an unconditional right to defer settlement beyond 12 months
from the current balance date . As a result, in accordance with the provisions of the Australian Accounting Standards (AASB
101: Presentation of Financial Statements) and prudent disclosure practices, the Group has re-classified the existing CBA
facility from a non-current liability at 30 June 2019, to a current liability at 30 June 2020. The directors are confident of
restructuring or refinancing the facility prior to maturity date.
49
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 16: BORROWINGS (cont’d)
(d) In the comparative year, On 13 May 2019, the CBA approved a short-term overdraft facility of $1,000,000 for the Group . The
facility remained undrawn and was subsequently closed on 15 July 2019.
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 shareholding 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:
First mortgage over land and buildings
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 17: ISSUED CAPITAL
2020
$
22,968,478
12,284,453
421,908
13,509,132
49,183,971
2019
$
22,494,924
12,877,664
1,103,560
12,054,748
48,530,896
2020
$
2019
$
63,936,041
56,219,847
Contributed equity of the Group
(a) Movement in stapled securities:
Date
Details
01 Jul 2019
19 Aug 2019
18 Nov 2019
18 Nov 2019
30 June 2020
Opening balance
Placement - Tranche 2 (i)
Employee performance
securities (ii)
Loan securities (iii)
Transaction costs
Date
Details
Number
of Stapled
Securities
300,144,291
67,342,149
1,000,000
2,500,000
370,986,440
Number
of Stapled
Securities
Issue Price
$
Shareholders
$
Unitholders
$
Stapled Entity
$
0 .12
0 .12
25,474,856
8,081,058
30,744,991
-
56,219,847
8,081,058
120,000
-
120,000
-
(484,864)
33,191,050
-
-
30,744,991
-
(484,864)
63,936,041
Issue Price
$
Shareholders
$
Unitholders
$
Stapled Entity
$
01 Jul 2018
Opening balance
242,792,046
-
18,760,113
30,744,991
49,505,104
02 Jul 2018
30 Oct 2018
24 Dec 2018
28 Jun 2019
28 June 2019
KPI performance rights
(iv)
Stapled Security
Purchase Plan(v)
Purchase of Flahey's
Nutritionals Pty Ltd (vi)
Placement - Tranche 1
(vii)
Ultima Capital
Consultancy (viii)
Transaction costs
3,000,000
0 .10
300,720
20,919,363
0 .13
2,719,500
625,000
0 .12
75,000
32,657,851
0 .12
3,918,942
150,031
0 .16
24,005
-
-
(323,424)
-
-
-
-
-
-
300,720
2,719,500
75,000
3,918,942
24,005
(323,424)
30 June 2019
300,144,291
25,474,856
30,744,991
56,219,847
50
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 17: ISSUED CAPITAL (cont’d)
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) On 19 July 2019, there were 67,342,149 stapled securities issued on completion of a placement being conducted in two
tranches (refer (vii)) . The fair value of securities issued in tranche 2, determined by reference to the placement price of
$0 .12 per security, was $8,081,058 .
(ii) On 18 November 2019, there was 1,000,000 stapled securities granted to Chris Melville as a share-based payment . The fair
value of securities issued, determined by reference to market price, was $120,000 .
(iii) On 18 November 2019, there was 2,500,000 loan securities granted to Chris Melville as a share-based payment .
(iv) On 2 July 2018, there was 3,000,000 stapled securities granted to Peter Skene as a share-based payment. The fair value of
securities issued, determined by independent valuation, was $300,720 (being the amount of the options granted) .
(v) On 30 October 2018, there was 20,919,363 stapled securities issued to eligible securityholders under the Group’s Stapled
Security Purchase Plan at a price of $0 .13 per security . The fair value of securities issued, determined by reference to the
offer issue price, was $2,719,500.
(vi) On 24 December 2018, 625,000 stapled securities were issued as part of the acquisition of Flahey’s Nutritionals . The fair
value of securities issued, determined by reference to market price, was $75,000 (refer Note 3) .
(vii) On 28 June 2019, there were 32,657,851 stapled securities issued on completion of a placement being conducted in two
tranches (refer (i)) . The fair value of securities issued in tranche 1, determined by reference to the placement price of $0 .12
per security, was $3,918,942 .
(viii) On 28 June 2019, there was 150,031 stapled securities issued to Ultima Capital Partners for consultancy services in
relation to the Group’s infant formula project . The fair value of securities issued, determined by reference to market price,
was $24,005 .
(b) Performance Options
There are 2,500,000 (2019: 16,250,000) performance options on issue at 30 June 2020 (refer Note 26).
(c) Loan Securities
There are 9,500,000 (2019: 7,000,000) loan securities on issue at 30 June 2020 (refer Note 26).
(d) 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 .
(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 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 .
51
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 17: ISSUED CAPITAL (cont’d)
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 2020 and 30 June 2019 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing Ratio
NOTE 18: RESERVES
Nature and purpose of reserves
Notes
16
6
2020
$
12,081,527
(6,361,821)
5,719,706
33,376,878
39,096,584
15%
2019
$
12,695,402
(3,748,550)
8,946,852
33,014,661
41,961,513
21%
The option reserve records amounts recognised on issue of share based payments (options and securities) .
NOTE 19: 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
2020
$
(b) Non-cancellable operating leases contracted for but not capitalised in the financial statements:
2020
$
Payable - minimum lease payments
Not later than 12 months
Between 12 months and 5 years
Greater than 5 years
Present value of minimum lease payments
2019
$
293,867
424,369
-
718,236
(76,834)
641,402
2019
$
135,430
82,800
-
218,230
-
-
-
-
-
-
-
-
-
-
Non-cancellable operating lease commitments have been accounted for in accordance with AASB 16 Leases from 1 July 2019.
(c) Capital Expenditure Commitments
In June 2020, after a comprehensive planning and development process, the Group entered into a construction agreement to
construct the infant formula plant on the Group’s Camperdown Dairy park site. The agreement commenced on 19 June 2020 and
the construction cost is quoted as $2 .7M subject to agreed variations under the contract . The build is expected to be completed in
early 2021, after which a period of installation and commissioning will take place (under a separate agreement which has not been
finalised).
NOTE 20: CONTINGENT LIABILITIES
As set out in Note 3(iv), the Group has a contingent liability for payment of royalties in respect of Epicurean Dairy Products
commencing April 2022. The Group does not have any other contingent liabilities for the year ended 30 June 2020 (2019: nil).
52
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 21: 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 2020.
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
Share-based payments
Short-term employee benefits
2020
$
606,525
45,251
25,059
-
676,835
2019
$
514,469
38,106
14,435
10,530
577,540
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 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
These amounts represent the expense related to the participation of KMP in equity settled remuneration, 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 22: AUDITORS’ REMUNERATION
Remuneration of the auditor for:
Audit and review of the financial statements
2020
$
71,852
2019
$
64,566
53
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 23: CONTROLLED ENTITIES
Particulars in relation to controlled entities
Parent Entity:
Australian Dairy Nutritionals Limited
Wholly Owned Controlled Entities
SW Dairy Farms Pty Ltd
Dairy Fund Management Limited
DFI Operations Pty Ltd (dormant)
Camperdown Dairy Company Pty Ltd
Victorian Farmers Direct Pty Ltd
Organic Nutritionals Pty Ltd
Jonesy’s Distribution Pty Ltd
Epicurean Dairy Pty Ltd
Camperdown Dairy Park Trust
Other Controlled Entities
Australian Dairy Farms Trust
2020
2019
Class of
Equity
Percentage
Owned
Percentage
Owned
%
%
Note
(a)
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
units
(b)(c)
units
100
100
100
100
100
100
75
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 16, 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 Nutritionals Limited .
(b) 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 17 .
(c) 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
Carrying amount of non-controlling interests
Summarised Financial Performance
Revenue
Loss after tax
Other comprehensive income after tax
Total comprehensive loss
Loss attributable to non-controlling interests
2020
$
2019
$
12,338,399
22,914,532
(12,087,576)
12,938,737
22,433,852
(105,908)
-
(12,054,000)
23,165,355
23,212,681
23,165,355
23,212,681
55,669
(47,326)
-
(47,326)
(47,326)
220,232
(771,818)
-
(771,818)
(771,818)
54
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 23: CONTROLLED ENTITIES (cont’d)
(d) 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 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 24: RELATED PARTY TRANSACTIONS
(a) The Group’s main related parties are as follows:
(i)
Entities exercising control over the Group:
2020
$
2019
$
(555,795)
(32,316)
556,645
(31,465)
(570,388)
(2,572,079)
1,491,091
1,651,376
The ultimate parent entity that exercises control over the Group is Australian Dairy Nutritionals 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 21 .
(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) Australian Adventure Tourism Group Limited (AATG) - director related entity
Michael Hackett is a former director of AATG. During the year ended 30 June 2020, AATG was paid $33,472 (2019: $93,372) on
a reimbursement basis, for the provision of administrative services, accounting and related activities . There was $2,970 (2019:
$9,391) due at 30 June 2020.
(ii) Watershed Funds Management Pty Ltd - director related entity
Adrian Rowley is a director of Watershed Funds Management Pty Ltd. During the year ended 30 June 2020, Watershed Funds
Management Pty Ltd was paid $60,225 (2019: $54,750) for the provision of Adrian Rowley as director . There was $6,023 (2019:
$5,019) due at 30 June 2020.
(iii) Funding amongst Group entities is on an unsecured, interest free, no fixed term basis.
55
Australian Dairy Nutritionals Group Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 25: SEGMENT REPORTING
SEgmEnt InFORmA tIOn
Identification of reportable segments
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 markets .
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.
In accordance with AASB 8, corporate costs and KMP remuneration have been allocated to the dairy farm and dairy processing
segments on a 50/50 basis, representative of the consumption of this expenditure . Finance costs - banking facility, have been
allocated in accordance with historical use of funds .
There are no intersegment sales .
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 .
56
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 25: SEGMENT REPORTING (cont’d)
(i) Segment Performance
30 June 2020
Revenue
External sales
Other income
Interest revenue
Dairy Farm
$
8,405,978
1,574,300
38,839
Dairy
Processing
$
Total
$
13,983,679
22,389,657
47,440
38,840
1,621,740
77,679
Total segment revenue
10,019,117
14,069,959
24,089,076
Total group revenue
24,089,076
Segment net profit / (loss) before tax
23,930
(7,520,018)
(7,496,088)
(i) Segment Performance
30 June 2019
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Dairy Farm
Dairy
Processing
$
$
Total
$
7,976,702
13,391,170
21,367,872
566,865
5,486
-
-
566,865
5,486
8,549,053
13,391,170
21,940,223
21,940,223
Segment net loss before tax
(1,948,515)
(2,077,510)
(4,026,025)
(ii) Segment Assets
As at 30 June 2020
Segment assets
Segment assets include:
Additions to non-current assets
(ii) Segment Assets
As at 30 June 2019
Segment assets
Segment assets include:
Additions to non-current assets
Dairy Farms
Dairy
Processing
$
$
Total
$
34,847,737
14,336,234
49,183,971
50,205
2,541,757
2,591,962
Dairy Farms
Dairy
Processing
$
$
Total
$
33,425,001
15,105,896
48,530,897
6,680,822
1,183,643
7,864,465
57
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 25: SEGMENT REPORTING (cont’d)
(iii) Segment Liabilities
As at 30 June 2020
Segment liabilities
As at 30 June 2019
Segment liabilities
(iv) Revenue by geographic region
Dairy Farms
$
Dairy
Processing
$
Total
$
4,477,396
11,329,696
15,807,092
Dairy Farms
$
Dairy
Processing
$
Total
$
6,139,679
9,376,557
15,516,236
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
2020
$
24,089,076
-
24,089,076
2019
$
21,940,223
-
21,940,223
2020
$
49,183,971
-
49,183,971
2019
$
48,530,897
-
48,530,897
58
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 26: SHARE BASED PAYMENTS
(a) Stapled securities granted to employees under the Group Incentive Plan as share-based payments during the year ended 30
June 2020 are as follows:
Grant Date
Number
18 November 2019
1,000,000
The fair value of securities granted, determined by reference to market price, was $120,000 .
These securities were issued as compensation to key management personnel of the Group .
(b) Loan securities granted to employees as share-based payments during the year ended 30 June 2020 are as follows:
Grant Date
Number
Exercise Price Vesting Date
Exercisable on or before
18 November 2019
2,500,000
$0 .115
18 November 2019
18 November 2022
A summary of key terms and conditions of the loan securities are:
•
•
•
•
•
Loan securities are securities in the stapled entity, each carrying the same dividend rights and otherwise ranking pari passu
in all respects with ordinary issued securities in the Group;
Financial assistance is provided to participants by way of a limited recourse interest free loan to acquire the securities;
The loan is repayable at any time or is repayable immediately if the participant ceases to be an employee;
The Group retains security over the loan securities whilst ever there is an amount outstanding under the loan; and
Loan securities that have not vested and / or are subject to loan repayment will be restricted from trading .
Under the applicable Accounting Standards, the loan securities and related limited recourse loan are accounted for as options,
which gives rise to a share based payment expense . The value of the loan and the issue price of the shares are not recorded as
loans receivable or share capital of the Group until repayment or part repayment of the loan occurs .
The fair value of loan securities granted during the year was $158,191 This value was calculated using a binomial option pricing
model applying the following inputs:
Exercise price:
Life of the option:
Expected share price volatility:
$0 .115
3 years
79 .977%
Weighted average risk-free interest rate:
0 .75%
A summary of movements in the number of all loan securities during the year is as follows:
2020
2019
Opening balance
7,000,000
7,000,000
Granted
2,500,000
-
Closing balance (exercisable)
9,500,000
7,000,000
(c) A summary of movements in the number of all options during the year is as follows
Opening balance
16,250,000
13,780,000
2020
2019
Granted (i)
Forfeited (ii)
Exercised (iii)
2,500,000
6,250,000
(16,250,000)
(780,000)
-
(3,000,000)
Closing balance
2,500,000
16,250,000
(i) Granted options
On 19 August 2019 the Group issued 2,500,000 lead manager options to L39 Pty Ltd, representing 1% of the total proceeds of the
placement completed on that date ($12 million, total of tranche 1 and tranche 2) .
The issue price of the options was 4 .8 cents calculated using the Black-Scholes method, the expiry date is 19 August 2022 and the
options will vest when the stapled security price is $0 .18 or more for a period of 5 consecutive trading days .
The fair value of the options issued is $120,000 based on the total proceeds of the placement .
59
Australian Dairy Nutritionals Group Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 26: SHARE BASED PAYMENTS (cont’d)
(ii) Cancelled and forfeited performance options
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 . On 31 December 2019, 10,000,000 performance options were forfeited as the performance hurdle
was not satisfied and $34,203 has been transferred from the equity reserve to retained earnings.
On 24 December 2018, 6,250,000 consideration securities were issued to Christopher Flahey as part of the acquisition of Flahey’s
Nutritionals Pty Ltd (refer Note 3(iii)) . The consideration securities were subject to various performance milestones and Christopher
Flahey remaining employed with the Group on a conversion date . The consideration securities are forfeited if performance hurdles
are not satisfied. In the year ended 30 June 2020, Christopher Flahey resigned from the company and $126,273 has been written
back into profit for previously accrued share based payments and the consideration securities have been cancelled.
(iii) Exercised performance options
During the year ended 30 June 2020 there were no performance options exercised.
(iv) Performance options approved but not issued
On 29 November 2019, securityholders approved the issue of 6,000,000 performance rights to directors, subject to achievement of
specific performance hurdles. At the date of this report, the performance rights have not been issued.
(d) Included under employee benefits expense in the statement of profit or loss is $162,977 (2019: $152,492), which relates to
equity-settled share-based payment transactions - securities and options .
NOTE 27: EVENTS AFTER THE BALANCE DATE
The impact of the COVID-19 pandemic is ongoing and while it has not materially impacted the Group on the signing of this report, it
is not practical to estimate the potential impact, positive or negative, after the reporting date . As is evident from the implementation
of Stage 4 restrictions in Victoria from 13 August 2020, the situation continues to develop rapidly and is dependent on measures
imposed by the Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions
and economic stimulus . The Group will continue to assess any impact of COVID-19 on the business and ways to mitigate risks to
the Group in relation to it .
In the opinion of the directors there are no material matters that have arisen since 30 June 2020 that have significantly affected or
may significantly affect the Group, that are not disclosed elsewhere in this report or in the accompanying financial statements.
NOTE 28: 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 9 as detailed in the accounting policies to
these financial statements, are as follows:
Financial assets
Financial assets at amortised cost:
Cash and cash equivalents
Trade and other receivables
Bonds and deposits
Total financial assets
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables
Borrowings
Total financial liabilities
Notes
2020
$
2019
$
6
7
9
14
16
6,361,821
2,152,392
39,889
8,554,102
3,748,550
2,477,116
50,942
6,276,608
2,213,785
12,081,526
14,295,311
2,370,950
12,695,402
15,066,352
60
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d)
Financial Risk Management Policies
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, however the Group will always have
exposure to potential bad debts (see also Note 7) .
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, 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.
The table following presents contractual 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 .
61
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d)
Financial liability and financial asset maturity analysis:
Within 1 year
1 to 5 years
Over 5 years
Total
2020
2019
2020
2019
2020
2019
2020
2019
$
$
$
$
$
$
$
$
Financial liabilities due
for payment
Borrowings
(27,526)
(264,363) (12,054,000) (12,431,039)
Lease liabilities
(307,650)
-
(524,132)
Trade & other payables
(2,213,785)
(2,370,950)
-
-
-
Total expected outflows
(2,548,961)
(2,635,313) (12,578,132) (12,431,039)
Financial assets -
cash flows realisable
Cash
6,361,821
3,748,550
Trade and other receivables
2,152,392
2,477,116
-
-
-
-
Bonds and deposits
-
-
39,889
50,942
Total anticipated inflows
8,514,213
6,225,666
39,889
50,942
Net (outflows) / inflows on
financial instruments
5,965,252
3,590,353 (12,538,243) (12,380,097)
•
The Groups financial assets are pledged as security for debt (refer Note 16).
(c) Market risk
Interest rate risk
-
-
-
-
-
-
-
-
-
- (12,081,526) (12,695,402)
-
(831,782)
-
- (2,213,785)
(2,370,950)
- (15,127,093) (15,066,352)
-
-
-
-
-
6,361,821
3,748,550
2,152,392
2,477,116
39,889
50,942
8,554,102
6,276,608
(6,572,991)
(8,789,744)
The Group at the date of this report has debt exposure through $449,435 in fixed rate facilities, $12,054,000 in variable rate
facilities, and $6,361,821 in variable rate cash balances .
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 2020, 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:
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%
2020
$
(56,922)
56,922
(56,922)
56,922
2019
$
(83,054)
83,054
(83,054)
83,054
62
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d)
Fair Values
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
2020
$
2019
$
2020
$
2019
$
Financial assets
Financial assets at amortised
cost:
Cash and cash equivalents
Trade and other receivables
Bonds and deposits
Total financial assets
Financial liabilities
Financial liabilities at amortised
cost:
Trade creditors
Lease liabilities
Borrowings
Total financial liabilities
(i)
(i)
(i)
(i)
(ii)
(ii)
6,361,821
2,152,392
39,889
8,554,102
3,748,550
2,477,116
50,942
6,276,608
6,361,821
2,152,392
39,889
8,554,102
3,748,550
2,477,116
50,942
6,276,608
2,213,785
831,782
12,081,526
15,127,093
2,370,950
-
12,695,402
15,066,352
2,213,785
831,782
12,081,526
15,127,093
2,370,950
12,695,402
15,066,352
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 and deposits and trade and other payables are short-term
instruments in nature whose carrying value is equivalent to fair value .
(ii) Fair values on borrowings and lease liabilities are determined using a discounted cash flow model incorporating current
commercial borrowing rates .
NOTE 29: FAIR VALUE MEASUREMENT
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition:
•
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 and liabilities 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 liability or is included in Level 2 .
63
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 29: FAIR VALUE MEASUREMENT (cont’d)
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 or
liability 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 or
liability 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 2020
Non-financial assets
Biological assets
Total non-financial assets recognised at
fair value on a recurring basis
30 June 2019
Note
Level 1
Level 2
Level 3
$
$
$
Total
$
10
-
-
5,368,015
5,368,015
-
-
5,368,015
5,368,015
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
10
-
-
4,928,422
4,928,422
-
-
4,928,422
4,928,422
(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 2020
$
5,368,015
5,368,015
Valuation Technique(s)
Input Used
Market approach using
recent observable market
data for dairy cattle
Breed, weight, condition
There were no changes during the period in the valuation techniques used by the Group to determine Level 2 fair values .
64
Australian Dairy Nutritionals Group Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 29: FAIR VALUE MEASUREMENT (cont’d)
(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 are
disclosed in the notes:
• Cash;
•
•
•
•
•
Trade and other receivables;
Bonds and deposits;
Trade and other payables;
Borrowings; and
Farm properties .
NOTE 30: 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
2020
cents
(2 .08)
(2 .08)
2019
cents
(1 .55)
(1 .55)
(7,496,088)
(4,026,025)
Number of
Shares
Number of
Shares
360,603,521
260,204,432
-
-
360,603,521
260,204,432
All options on issue are considered to be dilutive potential ordinary securities, however they are presently anti-dilutive at 30 June
2020 as the Group is in losses .
NOTE 31: DIVIDENDS
The directors have not recommended or paid a dividend for the year ended 30 June 2020 (2019: $nil) at the date of this report.
65
Australian Dairy Nutritionals Group Annual Report 2020 DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION
For the year ended 30 June 2020
In the opinion of the directors of Australian Dairy Nutritionals 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
2020 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 2020.
This declaration is made in accordance with a resolution of the Board of directors .
_________________
Martin Bryant
Chairman
Brisbane
31 August 2020
66
Australian Dairy Nutritionals Group Annual Report 2020 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUSTRALIAN DAIRY NUTRITIONALS LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Australian Dairy Nutritionals Limited ((“the Company”) and
its subsidiaries (“the Group”)), which comprises the consolidated statement of financial position as at
30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
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. 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 (including Independence Standards) (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.
67
Australian Dairy Nutritionals Group Annual Report 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report To The Members Of Australian Dairy Nutritionals Limited
(continued)
Key audit matter
How our audit addressed the key audit
matter
Assessment of impairment of goodwill
Refer Note 12 of the financial report.
At 30 June 2020 the Group recorded goodwill
at cost of $6,616,393 relating to its Dairy
Processing segment (the cash generating unit,
or CGU). The industry in which the CGU
operates has undergone structural change,
and the CGU has responded through changes
in its strategic direction including customer
mix and product mix. The CGU incurred losses
in recent years. Given these circumstances,
the Group considered whether there was any
impairment of the CGU at balance date.
Furthermore, as the CGU contains goodwill,
the Group was required by AASB 136
Impairment of Assets to perform an
recoverable
assessment of
amount.
that CGU’s
The Group assessed the recoverable amount
of the Dairy Processing CGU by determining its
value-in-use using a discounted cash flow
model. An impairment charge of $4,4262,652
was
recognised and allocated against
goodwill. The remaining carrying value of
goodwill at year end is $2,353,741.
We focused on this matter because of the
significant judgement involved in estimating
the recoverable amount of the CGU, the
amount of impairment recognised, and the
materiality of the CGU on the financial report.
Assessment of impairment of dairy farm
assets
Refer Notes 10 and 13 of the financial report.
At 30 June 2020 key assets of the Group
included dairy farm properties $22,968,478
and the dairy herd $5,368,015. The dairy
industry has undergone structural change,
and as a consequence the dairy farms have
responded
in strategic
through changes
direction for product mix.
Our procedures included, amongst others:
• we assessed the identification of the CGU,
including the allocation of goodwill and other
assets, and the associated identification and
allocation of cash flows to the CGU;
• we checked the mathematical accuracy of
the Group’s value in use model, 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 by
comparing it to our view of an acceptable
range based on market data and comparable
companies;
• we performed sensitivity analyses on the key
assumptions used in the cash flow model;
and
• we evaluated
the adequacy of
the
disclosures made in the financial report
regarding
the
impairment.
key assumptions and
Our procedures included, but were not limited
to:
• we completed farm site visits and attended
herd stocktakes at certain farm properties;
68
Australian Dairy Nutritionals Group Annual Report 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report To The Members Of Australian Dairy Nutritionals Limited
(continued)
• we
the
assessed
competence
and
qualifications of the independent property
expert, and
independent stock agent
experts, used by the Group;
• we assessed the valuation reports obtained
by the Group, with reference to methodology
used, prior independent expert valuations,
and our knowledge of the dairy farm assets;
and
• we evaluated
the adequacy of
the
disclosures made in the financial report
regarding the assessment of recoverable
value of the farm assets.
The dairy farms earned a small profit in the
current year after losses in recent years. Given
these circumstances, the Group considered
whether there was any impairment of these
assets at balance date.
The Group assessed the recoverable amounts
of its farm properties by obtaining market
valuations from an independent property
expert. The valuations resulted in a reversal
through profit & loss of a prior impairment
charge by $614,664.
The Group assessed the value of the herd by
obtaining market valuations from independent
stock agent experts. The valuations resulted
in a fair value gain through profit & loss of
$1,574,300.
We focused on this matter because of the
significant judgement involved in estimating
the recoverable amounts of the dairy farm
assets, the amounts of the recoverable value
adjustments recognised, and their materiality
to the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report, for the year ended 30 June 2020, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the
other information we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
69
Australian Dairy Nutritionals Group Annual Report 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report To The Members Of Australian Dairy Nutritionals Limited
(continued)
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 scepticism 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.
• 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.
70
Australian Dairy Nutritionals Group Annual Report 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report To The Members Of Australian Dairy Nutritionals Limited
(continued)
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, actions
taken to eliminate threats or safeguards applied.
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 13 to 17 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Australian Dairy Nutritionals Limited for the year ended
30 June 2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Nexia Brisbane Audit Pty Ltd
N D Bamford
Director
Level 28, 10 Eagle Street
Brisbane, QLD, 4000
Date: 31 August 2020
71
Australian Dairy Nutritionals Group Annual Report 2020
SHAREHOLDER INFORMATION
The following information was extracted from Australian Dairy Nutritional Group’s Register of Securityholders on 21 August 2020:
twEnty LARgESt SECURItyhOLDERS - ORDInARy SECURItIES
1
2
3
4
5
6
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CORPORATE SOLUTIONS PTY LTD
PETER AND LYNNE SKENE
SIR RONALD ALFRED BRIERLEY
CITICORP NOMINEES PTY LIMITED
FIDUCIARY NOMINEES PTY LTD
7 MR JUNLONG LIANG
8
RATHVALE PTY LIMITED
9 WAVET FUND NO2 PTY LTD
10 COSTINE PTY LTD
11 ONMELL PTY LTD
12 MYALL RESOURCES PTY LTD
13 MRS NARELLE MELVILLE
14 VITAMIN WAREHOUSE AUSTRALIA PTY LTD
15 MR SHAN RANG
16 CAROLINE HOUSE SUPERANNUATION FUND PTY LTD
17 MR ZHONGDE ZHAO
18 MR CHONG CHE WONG
19 AM GLORY PTY LTD
20 BATISTA FAMILY SUPER FUND PTY LTD
Total Securities on issue
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
Fully Paid Stapled Securities
Securities Held
% of Issued
Capital
66,702,106
18 .15
15,309,892
12,515,385
12,500,000
5,657,208
4,872,207
3,855,000
3,728,885
3,666,512
2,741,788
2,600,000
2,600,000
2,500,000
2,360,000
2,089,800
2,000,000
2,000,000
2,000,000
1,900,069
1,849,108
4 .17
3 .41
3 .40
1 .54
1 .33
1 .05
1 .01
1 .00
0 .75
0 .71
0 .71
0 .68
0 .64
0 .57
0 .54
0 .54
0 .54
0 .52
0 .50
153,447,960
367,486,440
41.76
100.00
Number of
Securityholders
194
733
569
1,385
467
3,348
Securities
44,046
2,281,573
4,789,314
53,013,989
311,357,518
367,486,440
%
0 .01
0 .61
1 .29
14 .27
83 .82
100.00
On 21 August 2020, using the last traded security price of $0 .068 per security, there were 1,105 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 .
72
Australian Dairy Nutritionals Group Annual Report 2020 SHAREHOLDER INFORMATION (cont’d)
SUBStAntIAL SECURItyhOLDERS
The names of the substantial securityholders listed in the Group’s register on 21 August 2020 are:
Ironbark-Vest Pty Ltd
Michael Hackett and associated entities
Securities Held
55,440,764
23,298,887
% of Voting
Power Advised
14 .94
6 .28
UnLIStED OPtIOnS OVER ORDInAR y SECURItIES
At the date of this report, the unissued ordinary securities of Australian Dairy Nutritionals Limited under option are as follows:
Grant Date
Last Date of Expiry
Exercise Price
Number under Option
19 August 2019
19 August 2022
$0 .18
2,500,000
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 9,500,000 restricted loan securities on issue at the date of this report .
73
Australian Dairy Nutritionals Group Annual Report 2020 CORPORATE DIRECTORY
Board of Directors
Martin Bryant
Chairman
Michael Hackett
Director
Adrian Rowley
Director
Paul Morrell
Director
Peter Skene
Director / Group CEO
Registered Office
Level 1, 200 Creek 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 21
10 Eagle Street
Brisbane QLD 4000
Telephone:
Facsimile:
1300 554 474
(02) 9287 0309
Company Secretary
Kate Palethorpe
Company Secretary
Corporate Office
Level 1, 200 Creek 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 Nutritionals Group is listed on the official List of the Australian Securities Exchange Limited (ASX).
The ASX Code is “AHF”.
74
Australian Dairy Nutritionals Group Annual Report 2020
75
Australian Dairy Nutritionals Group Annual Report 2020