ANNUAL REPORT
2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 1
CORPORATE DIRECTORY
BOARD OF DIRECTORS
Martin Bryant
Non-Executive Chairman
Adrian Rowley
Non-Executive Director
Jason Dong
Non-Executive Director
Bernard Kavanagh
Non-Executive Director
COMPANY SECRETARY
Kate Palethorpe
Company Secretary
REGISTERED OFFICE
325 Manifold Street
Camperdown VIC 3260
CORPORATE OFFICE
325 Manifold Street
Camperdown VIC 3260
Telephone:
Email:
(03) 8692 7284
shareholders@adnl.com.au
Telephone:
Email:
(03) 8692 7284
shareholders@adnl.com.au
SHARE REGISTER
AUDITOR
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Level 21
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Brisbane QLD 4000
Telephone:
Facsimile:
1300 554 474
(02) 9287 0303
Nexia Brisbane Audit Pty Ltd
Level 28
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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”.
WEBSITE
adnl.com.au
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 2
CONTENTS
CORPORATE DIRECTORY
CHAIRMAN’S ADDRESS
CEO REPORT
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
SHAREHOLDER INFORMATION
02
04
05
07
23
24
26
27
28
29
30
71
72
77
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 3
The Group’s total income was $18m, a decrease of 23%
from $23.5m in FY21, primarily due to the sale of the Ecklin
South farm in September 2021 and lower fresh processing
revenues. The Group’s EBITDA result for the year was a
$3m loss, an improvement of 43% on the $5.3m loss in
FY21. While disappointing, the EBITDA improvement on
FY21 reflects the efforts of the Board and management to
better align the operations of the Group away from fresh
dairy manufacturing to focus on infant formula and dairy
nutritionals. Whilst Australia and most of the rest of the
world are starting to live with COVID-19, the FY22 results
also reflect the ongoing impact of the pandemic in all
areas of our operations.
Despite the challenges our management team and their
staff have performed to the highest standard and have
enabled the Group to look confidently toward a strong
future. The Group is excited about the coming financial
year as the hard work of the last 5 years culminates in the
production and sale of our own organic A2 branded infant
formula, manufactured by our own infant formula plant
using milk sourced from our farms.
To all our securityholders, thank you, for your continued
support.
Martin Bryant
Chairman
CHAIRMAN’S ADDRESS
This financial year has
been a strategically
important year for
Australian Dairy
Nutritionals Group as it
nears the completion of
its 5-year transformation
strategy to become a
vertically integrated
manufacturer of
premium organic dairy
nutritional products.
It is widely understood
that during the last year
the dairy industry had been significantly impacted by the
changing macroeconomic environment and COVID-19
challenges. We used this period of volatility to focus on
the completion of our investment in our infant formula
plant and re-position our operations to focus on infant
formula and dairy nutritionals, moving away from fresh
dairy manufacturing. Substantial progress has been
made giving myself and the Board confidence that our
operations will be in the best position to support the
business as it looks to leverage this investment through
the launch of our organic A2 infant formula range and
expand distribution of our future infant formula range.
This financial year marked the Group’s first step into the
infant formula and nutritionals market with the launch of
our new future Gradulac Gentle infant formula range. The
range has been available in Chemist Warehouse stores
nationally since April 2022. Infant formula purchasers tend
to be highly brand loyal, so we are supporting this launch
with an omnichannel marketing campaign designed to
build trust and brand recognition with consumers.
The Group’s other notable successes for the year include:
•
•
•
•
•
the establishment of the Ocean Dairy joint venture
with Wellnex Life to launch the Ocean Road
Dairies organic A2 infant formula range in Chemist
Warehouse;
the successful manufacture of Australia’s first organic
A2 whole milk powder at our new infant formula plant;
conversion of all farms to organic certification with all
herds now converted to A2 milk production;
full repayment of our finance facility to CBA clearing
all bank debt; and
a successful private placement to IJ Funds
Management to raise $2.75 million.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 4
During the financial year, COVID-19 restrictions
continued to impact demand for ‘on the go’ yoghurt
products such as pouches and single serves driving
the Board’s decision to exit yoghurt manufacturing
announced in October 2021. With significant
progress made with the infant formula project the
Board also made the difficult decision to cease
fresh milk processing at the Manifold Street site
in Camperdown to allow us to transition skilled
staff to the new plant and focus their efforts in
the infant formula and dairy nutritionals space.
I would like to thank the Board, Management
Team and all staff on their hard work over
the last 12 months to not just meet the many
challenges, but also make great progress in the
delivery of our vertical integration strategy.
Peter Skene
Chief Executive Officer
CEO REPORT
Against the backdrop
of an incredibly
challenging operating
environment over the
past 12 months, great
advances have been
made by the Group
in several areas.
We were very
pleased to see our
new future Gradulac
Gentle infant formula
range launched
following several
years of product development. The range is available
in Chemist Warehouse stores nationally and via a
guaranteed subscription arrangement through the
future formula website. We will focus on expanding our
distribution footprint both domestically and in selected
international markets in the coming 12 months.
Big advances were made with the progress of our
cornerstone infant formula project with construction
of the purpose-built building complete, as well as
installation and commissioning of the infant formula
liquid mixing plant, evaporator and dryer. Just prior to
the end of the financial year we were very pleased to
produce Australia’s first organic A2 whole milk powder
at the plant and are now producing infant formula.
In addition to our key building and equipment
projects, product development activities have
focused on our Ocean Road Dairies Organic A2
infant formula range; a 3-stage range combining
market leading packaging and certified organic
ingredients to complement the high quality
certified organic A2 protein milk from our farms.
Thanks to the efforts of our farm managers and
their teams our farms graze A2 only herds allowing
us to transition to fully certified organic A2 protein
milk production in October 2022. This transition
has been critical to ensuring we have security
of supply of organic A2 protein milk, which is in
scarce supply, for the Ocean Road Dairies range.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 5
“ FY22 was a strategically important year for
Australian Dairy Nutritionals Group as we near
the completion of our 5-year transformation to
a vertically integrated manufacturer of premium
organic dairy nutritional products.”
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 6
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 2022.
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 and a newly created subsidiary of the
Company, Regen Properties Pty Ltd;
Operation of dairy farms and livestock through SW
Dairy Farms Pty Ltd;
Installation and testing of the Group’s infant formula
plant in the newly constructed building located at
Depot and Old Geelong Road, Camperdown, Victoria.
Processing of raw milk and manufacture of dairy
products including a variety of milks, cream, and
yoghurt by Camperdown Dairy Company Pty Ltd at its
existing leased facility located at 325 Manifold Street,
Camperdown, Victoria.
Distribution of infant formula, fresh 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;
- Cross border e-commerce (CBEC) via distribution
partners; and
- Home delivery.
On 30 September 2021, the Group completed the sale of
the Ecklin South farm for a total purchase price of $5.625
million. All of the proceeds of this farm sale were used to
pay out the remainder of the Group’s debt facility with
Commonwealth Bank of Australia, which expired in early
October 2021, delivering a debt free balance sheet for the
Group.
In January 2022, the Group conducted an internal
restructure of its farm assets transferring both the
Brucknell North and Brucknell South farm to a new
subsidiary, Regen Properties Pty Ltd (RGP). The Yaringa
farm will also be transferred to RGP pending assessment
by the Victorian State Revenue Office, expected
September 2022.
On 28 June 2022, the Group announced the sale of a
further farm, Brucknell North, for a purchase price of
$6.425 million. The sale completed on 15 July 2022 and
the proceeds will be used to invest in inventory for its
Ocean Road Dairies infant formula range and to support
working capital. The Group has leased back the Brucknell
North farm for a period of 3 years plus a further 1-year
option to renew. This allows the Group to maintain its
organic A2 protein milk production at this farm to support
the manufacture of the Ocean Road Dairies infant formula
range at the Group’s infant formula plant. The Group is
able to terminate this lease with 90 days written notice
without liability, giving it significant flexibility in managing
its raw milk requirements.
During the financial year, the Group took a number of
steps to rationalise its fresh dairy operations as it shifts
its focus to the infant formula and nutritionals space.
In October 2021, Camperdown Dairy Company (CDC)
terminated its yoghurt manufacturing agreement with The
Collective, with manufacturing ceasing in April 2022.
Subsequent to the year end, on 9 August 2022 the Group
announced that, after a further strategic review of its
remaining fresh dairy operations, CDC would cease
manufacturing fresh milk at the Manifold Street site in
Camperdown by the end of August 2022. The decision
to cease production was driven by a combination of
significant increases in production costs, resourcing
challenges associated with the tight labour market and
ongoing competition from fully automated, low-cost
competitors.
On 10 March 2022, the Group announced a private
placement to IJ Funds Management Pty Ltd (IJ Funds
Management) to raise up to $4.5 million at a price of
$0.065 per security. A total of $2.75 million was received
and IJ Funds Management were issued a total of
42,503,864 fully paid ordinary securities, taking IJ Funds
Management’s holding in the Group to 7.75% of the total
issued capital in the Group at 30 June 2022.
During FY22 the Board also underwent a further renewal
process to ensure its size and the knowledge, skills and
experience of its members are appropriate to deliver the
Group’s current and future strategy. With the Group’s
transition to focus on nutritional products, Peter Skene
resigned from the Board to allow him to focus on the
CEO role and Mr Bernard Kavanagh was appointed on
21 June 2022 to replace him. Mr Kavanagh brings a
wealth of knowledge and experience in the dairy and
wider agricultural industry, built over 20 years working in
executive and director roles at Warrnambool Cheese and
Butter, Saputo Inc. and Keytone Dairy Limited.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 7
DIRECTORS’ REPORT (cont’d)
BUSINESS MODEL AND OBJECTIVES
Entering The Infant Formula And Dairy Nutritionals
Segment
In March 2018 the Group announced its 5-year strategy
to transition to become a fully vertically integrated
manufacturer of premium organic infant formula and
dairy nutritional products. FY22 was the penultimate year
of this strategy and one in which the Group made strong
progress in delivering the final elements of this strategy.
The most significant progress was made in the delivery
of the infant formula project, with the Group successfully
completing the installation and commissioning of
the plant in early 2022. As the plant was purchased
second hand, this was an extremely complex process
and one which was carried out by the Group’s internal
project team (typically this would be done by the plant
manufacturer where a new plant is purchased).
Trial and testing of the new infant formula plant
commenced early in 2022 and the Group were very pleased
to announce in June 2022 that the plant successfully
produced organic A2 whole milk powder using organic A2
protein milk from our farms. We believe this to be Australia’s
first production of organic A2 whole milk powder using
Australian milk. Trial and testing of the plant has continued
in the first quarter of FY23, with trials of all three stages of
the Ocean Road Dairies Organic A2 infant formula range
completed. The Board remains confident that the first
commercial production of the Ocean Road Dairies infant
formula range will occur by the end of Q1FY23.
Another significant milestone in the infant formula and
nutritionals segment was the establishment of the Ocean
Dairy Pty Ltd (Ocean Dairy) joint venture with Wellnex
Life Ltd (ASX: WLL) to distribute the Ocean Road Dairies
Organic A2 infant formula range within Australia. Ocean
Dairy is jointly owned by the Company and WLL, and
draws on the strengths of both partners. The Group is
responsible for the manufacture of the Ocean Road
Dairies infant formula range at its infant formula plant
using organic A2 protein milk from its farms. WLL will be
responsible for the sale of the new range in the Australian
retail and pharmacy channel, including in Chemist
Warehouse stores nationally. At the time of writing, the
Ocean Road Dairies range is expected to be available in
Chemist Warehouse stores nationally in October 2022.
The Group will have the exclusive right to distribute the
organic A2 infant formula range internationally, including
through cross border e-commerce channels in China. The
Group will pay Ocean Dairy a royalty on sales through the
overseas cross boarder e-commerce channel and also
has the option to purchase WLL’s shares (based on an
independent valuation) in Ocean Dairy at any time within
2 to 5 years after it commences supply of the Ocean Road
Dairies range.
FY22 also saw the launch of the Group’s Future Gradulac
Gentle infant formula range. This is an innovative, 3
step range with increasing levels of lactose designed
to be gentle on baby’s tummies. The Future Gradulac
Gentle range has been available in Chemist Warehouse
stores nationally since April 2022 and is available via a
guaranteed subscription model through the Group’s
website www.futureformula.com.au. Tier 1 cross border
e-commerce customer GMH is also selling the Future
range in China through its digital platforms.
The Group has supported the launch of the Future Gradulac
Gentle range with an omnichannel marketing and brand
awareness strategy which is critical in gaining the trust and
adoption of new products in this category, where consumers
tend to be extremely brand loyal. The Group has also
applied for accelerated approval from the US Food and Drug
Administration (FDA) for the sale of the Future Gradulac
Gentle range in the United States in response to severe infant
formula shortages in that market caused by a food quality
incident with a major domestic manufacturer. At the time of
writing the application is still under active review.
Our Farms: Supporting Our Vertical Integration Strategy
To support our vertical integration strategy, all of the
Group’s farm properties have achieved organic pasture
certification and have transitioned to A2 herds. The A2
herds on Yaringa and Brucknell South farms are certified
organic, and the Brucknell North herd will achieve organic
certification in October 2022. The three farms produce
approximately 6.5 million litres per year, which is well in
excess of the volume required by the infant formula plant,
even when operating at full capacity during the second
half of the year, when production is seasonally lower.
This was the key driver of the Board’s decision to free up
capital by selling two of the farm properties in FY22. The
Ecklin South farm was sold on 29 September 2021 for
$5.625 million and all of the proceeds of the sale were
used to pay out the final amount of the Group’s finance
facility with the CBA, delivering a debt free balance sheet.
The Brucknell North farm was sold just after the end of
the financial year on 15 July 2022 for a purchase price of
$6.425 million. The proceeds from the sale will be used
to fund raw material and packaging purchases, additional
infant formula production runs as well as general working
capital requirements.
Immediately after the sale settled, Group subsidiary, SW
Dairy Farms Pty Ltd (SWD) leased the Brucknell North farm
back for a period of 3 years with an option to extend for a
further 12 months. The rental cost is based on an agreed
percentage return on the purchase price of the Brucknell
North property. SWD will continue to operate the farm
and maintain its organic certification to produce organic
A2 protein milk for its fresh milk and infant formula
products. SWD also has the right to terminate the lease
at any time during the term (and any extended term) on
90 days written notice, giving significant flexibility to the
Group in determining the optimal strategy for sourcing its
raw milk requirements.
Both farms were sold at a time of record high property
prices allowing the Group to crystallise good capital
growth on both properties through the sales. The Group
is also investigating ways to further simplify its corporate
structure to reduce complexity and costs, including
destapling the Trust.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 8
DIRECTORS’ REPORT (cont’d)
BUSINESS MODEL AND OBJECTIVES (cont’d)
Strategic Alignment Of Our Operations: Exiting Fresh
Dairy Manufacturing
In September 2021, the Board commenced a strategic
review of the Group’s fresh dairy manufacturing segment
after a disappointing FY21 financial performance. As a
result of this review, the Board announced the decision to
cease yoghurt manufacturing at the Manifold Street site
and terminate the Group’s manufacturing agreement with
The Collective.
Yoghurt manufacturing ceased in April 2022 at which time
The Collective also purchased the Group’s high speed
pouch machine for $365k. As part of the termination and
transition arrangements, The Collective paid a termination
payment to the Group of $66k and purchased residual
packaging and raw materials from the Group when
manufacturing ceased, allowing the Group to minimise
inventory write downs associated with the termination.
Early in 2022, with yoghurt manufacturing to cease at the
Manifold Street site and strong progress being made with
the Group’s infant formula project and vertical integration
strategy, the Board recognised a further review of the
remaining fresh processing operations was required to
ensure the Group’s resources and operations align with
the final stage of its vertical integration strategy to drive
sales of its nutritional products.
This review identified several issues with the Group’s fresh
dairy operations which will continue to adversely impact
the Group’s financial performance including resourcing
and logistics disruptions from COVID-19, increasing
production costs and ongoing competition from fully
automated, low-cost competitors. As a result of this,
the Board advised the market on 9 August 2022 that the
Group will cease fresh milk processing at the Manifold
Street site by the end of August 2022.
Whilst disappointing for Camperdown Dairy staff and
customers, the decision was made in the best interests
of the Group.
The closure of the fresh processing plant will allow the
Group to transition most permanent staff at the Manifold
Street site to the new infant formula site and minimise job
losses. The closure will also:
•
reduce operational complexity by allowing the Group
to run a single operational, quality and compliance
system for nutritionals rather than a dual site system
covering both fresh milk and nutritionals;
•
avoid upcoming significant maintenance and capital
costs necessary to improve the condition of the aging
Manifold Street building; and
•
deliver significant savings for the Group’s insurance
portfolio.
The decision to cease fresh milk processing in no way
diminishes the efforts of our dedicated staff who have
worked tirelessly to deliver award winning, premium
quality dairy products to consumers in Victoria and
nationwide. The Camperdown Dairy brand has a good
reputation in the market as a regional Victorian brand and
will be retained by the Group.
When fresh milk operations cease, the Group will continue
to lease the site on a short-term basis for storage until
the infant formula site obtains its export licence. Select
processing equipment will be transitioned to the infant
formula site, but the majority will remain at the Manifold
Site to allow it to be sold, with or without the site lease.
Closure of the fresh milk operations will also allow the
Group’s management team to completely focus on
delivering the final elements of the vertical integration
strategy and ensure the Group is best positioned to
capitalise on the opportunities this presents.
OPERATING RESULTS
The consolidated net loss attributed to members of the
Group, after providing for income tax was $4,148,521
(2021: $6,910,837 loss). This result is comprised of a net
loss from the dairy processing segment of $3,926,947
(2021: $6,610,487 loss) and net loss from the dairy farm
segment of $221,574 (2021: $300,350 loss). Net operating
cash flow for the year was ($3,795,011) (2021: ($2,031,487))
with operating EBITDA of ($3,020,918), an improvement
of $2,321,601 on 2021. Included in the results for 2022 is a
gain on the disposal of the Ecklin South farm in September
2021 of $1,555,342.
Total revenue for FY22 is down $6,651,248 against the
FY21 comparative period of $21,714,193. This is a result of
a decrease in revenue from the dairy processing segment
of $4,429,688 and a $2,221,560 decrease from the dairy
farm segment. This was due largely to the wind down of
yoghurt manufacturing operations at the fresh dairy plant
and for the farm segment, the sale of the Ecklin South
farm in September 2021.
Total expenses for FY22 were $22,109,019, down 27%
against the FY21 comparative period of $30,427,975. This
comprised a $7,105,091 decrease in expenses from the
dairy processing segment and a $1,213,865 decrease
from the dairy farm segment. Corporate expenses for the
year were $2,586,598 (2021: $2,403,253). For segment
reporting, the corporate expenses were allocated on a
50/50 basis between dairy processing and farming.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 9
DIRECTORS’ REPORT (cont’d)
FINANCIAL POSITION
The net assets of the Group at 30 June 2022 total
$39,948,487, an increase of $5,961,522 from the June
2021 comparative.
The key assets and liabilities in the statement of financial
position at 30 June 2022 are:
•
•
•
•
•
cash and cash equivalents of $2,431,696
(2021: $6,192,119);
property, plant and equipment of $27,003,288
(2021: $28,227,815);
inventories of $1,398,681 (2021: $1,038,700);
non-current assets held for sale of $6,425,000
(2021: $nil);
biological assets (livestock) of $4,416,205
(2021: $4,795,079); and
• borrowings of $502,770 (2021 $5,980,506).
As noted above, the Group utilised the proceeds of the
sale of the Ecklin South farm to repay in full it’s bank
facility with the Commonwealth Bank of Australia Limited
(CBA) on 30 September 2021 (refer Note 16(b)).
The Group’s borrowing at the end of FY22 comprised
a short term, unsecured loan of $500,000 from M & J
Bryant, the Group’s Chairman. The loan was repaid in full
on 29 July 2022 (refer Note 16(a)).
During the year, the Group changed its accounting policy
on the measurement of the carrying amount of land and
buildings from cost to fair value to better represent the
value of its farm assets. This change was made as farm
values in Southwest Victoria have risen strongly in the past
few years, meaning the carrying value of the farms was
significantly out of step with the actual valuation of the
farms. This resulted in a $7,160,545 increase in the value of
the farm portfolio of the Group (see further commentary
in the review of operations).
REVIEW OF OPERATIONS
Farms - Australian Dairy Farms Trust (Land Owner) And
Sw Dairies Pty Ltd (Farm Operator)
Registered valuers Preston Rowe Paterson completed
an independent valuation of all farms on 3 February
2022. The carrying amounts at 30 June 2022 for the
Brucknell South and Yaringa farms are the independent
valuations plus capitalised costs from the valuation date,
less depreciation. The Brucknell North farm is held as
an asset for sale based on the agreed purchase price
of $6.425 million. The combined value of the Group’s
farm portfolio (including the non-current asset held
for sale) is $20,491,617, up 59% on FY21 for the same 3
farms. A fair value gain of $7,160,545 is reflected in other
comprehensive income.
The farm segment results include a gain on change in
fair value of livestock during the year of $1,342,672 (2021:
$1,614,189) as livestock carrying values again showed gains
in FY22 due to strong cattle prices in the open market.
The Group also undertook an internal restructure of its
farm properties in FY22. Both the Brucknell North and
Brucknell South farm properties were transferred from
ADFT to a newly incorporated Group subsidiary, Regen
Properties Pty Ltd (RGP). The Yaringa farm is also in the
process of being transferred to RGP and this is anticipated
to occur in September 2022. The Group successfully
applied for and obtained the corporate reconstruction
concession to reduce the stamp duty payable on the
transfer of the two Brucknell farms and expects to rely on
the concession for the transfer of the Yaringa farm.
As noted above, the Group sold the Ecklin South farm
on September 2021 and used the proceeds of the sale to
repay the Group’s finance facility with the CBA. Prior to
the end of FY22 the Group also announced the sale of
the Brucknell North farm for a purchase price of $6.425
million. The sale settled on 15 July 2022, with the farm
immediately leased back by the Group for a period of 3
years plus an option to renew for a further 12 months.
With the sale of the Ecklin South and Brucknell North
farms, the Group’s farm milk production is now better
aligned with the manufacturing requirements of the infant
formula plant whilst also maintaining sufficient flexibility
for the Group’s raw milk procurement requirements.
Processing - Organic Nutritionals Pty Ltd (Nutritionals)
(I) Future Gradulac Gentle Infant Formula
The Group launched its first infant formula range, Future
Gradulac Gentle in FY22. The launch has been supported
by an omni-channel marketing program to gain consumer
awareness and trust with the brand. The range has been
available in Chemist Warehouse stores nationally since
April 2022. In December 2021 the Group also announced
the appointment of a tier 1 distributor operating in the
Chinese cross border e-commerce channel (CBEC) and
some preliminary sales and marketing has commenced in
this channel.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 10
DIRECTORS’ REPORT (cont’d)
REVIEW OF OPERATIONS (cont’d)
The Future Gradulac Gentle range is manufactured by
an external contractor with good capacity to support
ongoing sales of this range, leaving the Group’s new infant
formula plant available to produce its organic A2 milk
powder and infant formula range. The Group has also
applied to the United States Food and Drug Administration
(FDA) for accelerated approval to sell the Future infant
formula range in the United States to assist with infant
formula shortages in this market due to a food safety
issue. This application is currently under active review by
the FDA.
(Ii) Infant Formula Plant (Depot Road) And Ocean Road
Dairies Organic A2 Infant Formula
Spence Construction commenced construction of
the infant formula plant building on the Depot Road,
Camperdown site in June 2020. Despite the ongoing
impact of COVID-19 restrictions, construction of the
building progressed well and was completed in early 2021.
Configuration, installation and commissioning works were
completed by the Group’s internal project team (with
assistance from specialist contractors) and trial and testing
works commenced in early 2022.
On 1 July 2022 the Group announced that the infant
formula plant had successfully produced organic A2
whole milk powder with milk sourced from its own farms.
Testing of the organic A2 whole milk powder produced
excellent results and the powder has been used in further
test batches. In August 2022 the Group produced all
3 stages of the Ocean Dairies Organic A2 infant formula
range in trial productions. At the date of this report, the
Board remains confident that commercial production
of the Ocean Road Dairies Organic A2 range remains
on track to be complete by the end of Q1FY23 ready for
national ranging in Chemist Warehouse in October 2022.
As noted above, sale and distribution of the Ocean Road
Dairies Organic A2 infant formula range in Australia will be
managed by Ocean Dairy Pty Ltd, a 50/50 joint venture
between Australian Dairy Nutritionals Limited (ADNL) and
Wellnex Life Ltd (ASX: WLL). The Ocean Road Dairies
infant formula products will first be ranged nationally in
Chemist Warehouse stores before being expanded into
other pharmacy and specialist retail stores. ADNL will be
responsible for distribution of the Ocean Road Dairies
range to overseas markets and will pay Ocean Dairy a
royalty on selected sales of the products in these markets.
Processing – Camperdown Dairy Company Pty Ltd
(Fresh Dairy)
In FY22, CDC manufactured a range of milks, cream
and yoghurt for distribution in the major supermarkets
and niche retailers, hospitality businesses and home
delivery. As noted above, in October 2021 the Group
announced, following a strategic review of its fresh
dairy manufacturing operations, that it had given notice
to terminate its manufacturing agreement with The
Collective and cease manufacturing yoghurt at the
Manifold Street site in Camperdown. After a transition
period to run down outstanding raw materials and
packaging, yoghurt manufacturing ceased in April 2022.
As part of the transition process The Collective purchased
the Group’s high speed pouch machine for $365k and
paid a termination payment of $64k.
With yoghurt manufacturing to cease at the Manifold
Street site, in early 2022 the Board undertook a further
strategic review of its remaining fresh dairy manufacturing.
As a result of this review, the Group announced that
it would also cease manufacturing fresh milk at the
Manifold Street site by the end of August 2022 due to
rising production costs, resourcing issues and strong
competition from fully automated, low-cost competitors.
Dairy processing revenue for FY21 was $13,820,660,
down $249,299 on FY20. This was largely driven by lower
sales of The Collective’s yoghurts as well as the impact of
yoghurt manufacturing ceasing in April 2022. The decision
to cease fresh milk processing doesn’t impact the FY22
results but, will reduce revenue by $4 million in FY23.
Financial performance in the processing segment was
impacted by high farm gate milk prices in FY22, leading
to increased raw material costs. The average per litre for
conventional milk at the farm gate was 10 cents higher
in FY22. However, lower sales volumes and reduced
production through the plant as part of the yoghurt
wind down process meant total costs decreased from
$20,431,147 in FY21 to $13,326,056 in FY22.
Distribution
(i) Major supermarkets
In FY22 Camperdown Dairy’s 2L whole milk and skim milk
products were ranged in over 160 Woolworths stores in
Victoria. In March 2022 Woolworths also commenced
a trial of the Camperdown Dairy organic A2 whole milk.
Camperdown Dairy 2L Whole Milk and 2L Jersey milk was
also ranged in select Coles supermarkets in Victoria in FY22.
(ii) Foodservice and niche retailers
In May 2021, Sealane Group commenced as the exclusive
distributor of the Jonesy’s Dairy Fresh Brand in Victoria.
Whilst Camperdown Dairy continued to manufacture the
Jonesy’s Dairy Fresh milks the transition to a distributor
model for this brand allowed the Group to shut down the
Jonesy’s Distribution business, reducing both costs and
complexity.
Camperdown Dairy continued to supply select other
distributors in the Victoria market during FY22 however
these arrangements will cease when fresh milk
manufacturing ceases at the Manifold Street site at the
end of August 2022.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 11
DIRECTORS’ REPORT (cont’d)
REVIEW OF OPERATIONS (cont’d)
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
(iii) Home delivery
The Group’s home delivery business underwent some
operational changes in FY22 to ensure its model was
able to scale to accommodate a wider distribution
footprint. COVID-19 restrictions made preferred customer
acquisition programs difficult to execute however the
business has now developed a multi-channel customer
acquisition plan which it will formally roll out in FY23.
Capital Raising – Private Placement To IJ Funds
Management
On 10 March 2022, the Group announced a private
placement to IJ Funds Management (IJ Funds
Management) to raise up to $4.5 million at a price of
$0.0647 per security (Placement). A total of $2.75 million
was received from IJ Funds Management and the Group
issued a total of 42,503,864 fully paid ordinary securities,
taking IJ Funds Management’s holding in the Group to
7.75% of the total issued capital of the Group as at 30 June
2022.
The proceeds of the Placement will be used to fund:
•
•
expansion of the Group’s distribution network in Asia
as well as marketing and promotional activities in this
region;
support the Group’s investment in inventory to
support ranging of both the Future and organic A2
infant formula ranges in Chemist Warehouse; and
• general working capital and transaction costs.
In conjunction with the Placement, the Group also
engaged IJ Funds Management to provide consultancy
services to the Group in relation to the expansion of
the Group’s business in Asia as well as marketing and
networking activities in the region. The consultancy
services fee is $45,833 per month, for a period of 6
months commencing 1 July 2022.
At the conclusion of the consultancy services the Board
expects that IJ Funds Management will have assisted
the Group with introduction to and establishment of
additional distribution arrangements in Asia, advised on
logistics and fulfillment and worked with The Group’s
marketing team to advise on and implement multi-
channel marketing and promotional campaigns for the
Group’s products in China.
Significant changes in the state of affairs of the Group
in FY22 included the sale of the two farm properties
(Ecklin South and Brucknell North) as well as the private
placement to IJ Funds Management. At the operational
level there were several significant changes including:
•
•
•
•
launch of the Group’s Future Gradulac Gentle infant
formula range and ranging in Chemist Warehouse
stores nationally;
completion of the commissioning of the Group’s
new infant formula plant at the Depot Road site in
Camperdown and significant progress in the trial and
testing of the plant including successful production
of Australia’s first organic A2 whole milk powder using
milk from the Group’s farms;
establishment of the Ocean Dairy joint venture
between ADNL and Wellnex Life Ltd to manage sale
and distribution of the Ocean Road Dairies Organic
A2 infant formula range within Australia, including
national ranging in Chemist Warehouse stores
targeted for October 2022; and
strategic review of the fresh dairy manufacturing
operations to ensure the Group’s operations align
with its strategic objectives moving forward. As a
result of this review fresh dairy manufacturing at the
Group’s Manifold Street site will cease at the end of
August 2022 to allow the Group to fully focus on the
nutritionals segment.
The Board of Directors also underwent a renewal in FY22
to better align the skills of the Board with the ongoing
strategic direction of the Group. Chief Executive Officer,
Peter Skene resigned from the Board in June 2022 to
allow him to focus on the CEO role and Mr Bernard
Kavanagh was appointed to the Board to replace him.
Mr Kavanagh brings a wealth of knowledge, skills and
experience in the dairy and wider agricultural industry.
He also has significant experience built over 20 years in
both executive and director positions at Warnambool
Cheese & Butter Limited, Saputo Inc, Keytone Dairy
Limited and Viplus Dairy Pty Ltd.
Despite the country learning to ‘live with COVID-19’ in
FY22, the Group continued to juggle the impact of the
pandemic including staff absences, lack of skilled and
unskilled labour and logistics challenges. The health
and safety of our staff remains our first priority in the
management of our response to the pandemic. All areas
of the business continue to monitor and implement
COVID-19 related procedures to ensure we keep our staff,
customers and suppliers safe.
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 12
DIRECTORS’ REPORT (cont’d)
EVENTS AFTER THE REPORTING PERIOD
•
•
•
On 15 July 2022, the Group announced the
completion of the sale and leaseback for the Brucknell
North farm located at 417 Moreys Road, Victoria for
$6.425M.
On 22 August 2022, CDC ceased manufacturing
fresh milk at the Manifold Street site in
Camperdown.
On 22 August 2022 and 25 August 2022, the Group
announced various issues of securities and the
cancellation of options and performance rights to
directors, management and the lead manager for a
private placement in June 2019.
In the opinion of the directors there are no material
matters that have arisen since 30 June 2022 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
(Cth) and is subject to water licensing restrictions under
the Water Act 1989 (Vic). The Group is also subject to
the Environment Protection Act 2017 (Cth) and Water
(Regulations) 2021 (Vic) which regulates effluent disposal
from its manufacturing sites.
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 dairy products with an
emphasis on infant formula and dairy nutritional products.
This transition shifts the Group’s operations to products
with return higher margins that are less exposed to
competition from other market participants.
As part of this strategy, the Group has transitioned all of
its dairy farms to fully certified organic operations. All
of the Group farms have A2 only herds of which the
Yaringa and Brucknell South farms are certified organic.
The Brucknell North farm herd will achieve organic
certification in October 2022. At this time, all three farms
will be producing certified organic A2 protein milk for use
in production of the Ocean Road Dairies Organic A2 infant
formula, which will be manufactured at the Group’s infant
formula plant.
After a significant period of investment in transitioning
the farms to organic A2 protein milk production and
construction, commissioning and testing of the infant
formula plant, the Group will increase its focus on the
sale and distribution of its infant formula ranges; Future
Gradulac Gentle and Ocean Road Dairies. Both infant
formula ranges are expected to be ranged in Chemist
Warehouse stores nationally by the end of October 2022.
The Group will focus on establishing and expanding
its distribution footprint in selected overseas markets
including Asia and the United States.
The Group also continues to maintain its home delivery
distribution business has started to implement a customer
acquisition program designed to expand the distribution
footprint of this business segment in Victoria.
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, infectious disease, 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 and financial performance.
This could include increased operational costs, disruption
to operations or 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 13
DIRECTORS’ REPORT (cont’d)
BUSINESS RISK (cont’d)
Development Projects
The Group is currently undertaking the infant formula
project which involves the final stages of trialing and
testing the infant formula plant and commencement of
commercial production. In the future the Group may
also undertake new projects to build new facilities and
expand existing facilities, which may include installation
of an additional dryer or installation of the high-speed
canning line. There are risks associated with development
projects, including trial and testing delays, cost overruns
or may not perform to its designed capacity initially or
at all. This may result in delays in anticipated revenues
flowing from the developments all of which could have an
adverse effect on the Group’s revenues and costs.
Access To Specialised Raw Materials
As the Group moves to manufacture of more complex
nutritional products and organic products, it will need
to source raw materials from a variety of domestic and
international suppliers. Some of these raw materials
have limited supply, long lead times and require forward
commitments to secure supply. If the Group does not
manage its inventory requirements of these raw materials
it may experience delays in production of its products and
product outages. This may in turn, cause issues with the
Group’s customers if customer supply arrangements are
impacted.
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 the perspective of
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.
Current And Future Impact Of Covid-19 Or Other
Infectious Diseases 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.
Furthermore, the discovery of infectious diseases affecting
livestock in Australia may require isolation or even
destruction of livestock or, restrictions on movement
of livestock both domestically and internationally. This
would have significant impact of the Group’s farming
operations and its raw milk production volumes.
The Group is also exposed to the global dairy market
and the availability of export opportunities of milk from
Victoria. If country borders are closed or imports or
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.
Funding And Access To Capital
In order to support large increases in demand for the
Group’s products and increase inventory or, to expand the
Group’s infant formula plant capacity or install the high-
speed blending and canning line, further capital may 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 or 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.
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.
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 14
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
Adrian Rowley
Jason Dong
Director
Director
Bernard Kavanagh
Director (appointed 21 June 2022)
Peter Skene
Director (retired 21 June 2022) and CEO
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
No other current or former directorships in listed entities.
Interest in Group securities & options
A relevant interest in 1,500,000 stapled securities at 30 June 2022.
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
Directorships held in other listed
entities in the past 3 years
Interest in Group securities & options
Executive Director (retired 21 June 2022) and CEO
Bachelor of Applied Science - Melbourne University
Bachelor of Commerce - Deakin University
Associate Diploma in Dairy Technology - VCAH
No other current or former directorships in listed entities.
A relevant interest in 7,415,385 stapled securities at 30 June 2022.
A relevant interest in 7,000,000 loan securities.
A relevant interest in 500,000 performance rights at 30 June 2022.
Peter Skene was appointed to the Board on 1 July 2016 and retired from the Board on 21 June 2022. 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 year’s
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 15
DIRECTORS’ REPORT (cont’d)
INFORMATION ON DIRECTORS (cont’d)
Adrian Rowley
Qualifications
Non-Executive Director
Certified Financial Planner
Directorships held in other listed
entities in the past 3 years
No other current or former directorships in listed entities.
Interest in Group securities & options
A relevant interest in 1,411,000 stapled securities at 30 June 2022.
A relevant interest in 500,000 performance rights at 30 June 2022.
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 Portfolio Manager and Equity Strategist within the Watershed Funds Management Investment Team.
Adrian is a specialist in the delivery of Managed Account Solutions with over 15 years’ experience managing funds across
multiple platforms, structures and asset classes. Adrian is the Portfolio Manager for the Watershed Australian Share SMA
and Income SMA and a member of the Asset Allocation, International Share and Emerging Leaders Investment teams.
Jason Dong
Qualifications
Non-Executive Director
Master of Commerce (University of Melbourne)
Bachelor of Economics, Shanxi University of Finance and Economics, China
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
No relevant interest in stapled securities at 30 June 2022.
A relevant interest in 500,000 performance rights at 30 June 2022.
Jason Dong was appointed to the Board on 15 April 2021. Jason is a highly skilled executive with extensive experience
working with Australian and Chinese enterprises to promote trade and industry relationships. His previous roles include
Industry Adviser and Research Fellow for the Centre of International Agricultural Research of the Chinese Academy of
Agricultural Sciences and a member of the Industry Advisory Board for the Centre for Asian Business and Economics at
the University of Melbourne.
Bernard Kavanagh
Non-Executive Director
Qualifications
Bachelor of Commerce - Deakin University
Fellow of Institute of Company Secretaries and Administrators
Fellow of Australian Institute of Company Directors
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
No relevant interest in stapled securities at 30 June 2022
Bernard Kavanagh was appointed to the Board on 21 June 2022. Bernard is a highly skilled director who brings a wealth
of dairy and agriculture industry skills and experience. Until 2016 he was a senior executive with Saputo Inc., a top 10
global dairy company holding the positions of Vice-President – Dairy Divisions International and General Manager
– Corporate Development. Prior to this he held several senior executive positions over 30 years at Warrnambool
Cheese and Butter Co Ltd including Chief Financial Officer, Company Secretary, General Manager – Strategy & Growth
and Executive Director. He has significant listed company Executive and Board experience including mergers and
acquisitions, capital raising, strategic global supply arrangements as well as strategy development and oversight. More
recently he lead the oversubscribed IPO of Ketone airy Corporation (ASX: KTD) on the ASX as Chairman.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 16
DIRECTORS’ REPORT (cont’d)
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
A relevant interest in 1,000,000 stapled securities at 30 June 2022.
A relevant interest in 1,000,000 options at 30 June 2022.
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.
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 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
Adrian Rowley
Jason Dong
Peter Skene
Bernard Kavanagh
Meetings eligible
to attend
Meetings attended
15
15
15
14
1
14
10
12
14
1
DIVIDENDS PAID OR RECOMMENDED
The directors have not recommended or paid a dividend for the year ended 30 June 2022 (2021: $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 $33,519 (2021:
$30,750) 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:
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 17
DIRECTORS’ REPORT (cont’d)
NON-AUDIT SERVICES (cont’d)
i)
ii)
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,
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 2022 there was no payment to external auditors for non-audit services (2021: $nil).
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
12 February 2023
18 November 2019
18 November 2022
17 Februry 2021
17 February 2024
12.4 cents
11.5 cents
9 cents
7,000,0001.
2,500,0001.
3,000,000
1. 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.
A summary of movements in options and other performance securities is set out in Note 26.
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 2022 has been received and a copy
can be found at page 24.
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 incentives based on
achievement of key operational and strategic objectives
affecting the Group’s performance. 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. The Group does not have a remuneration
committee due to the current size and nature of the
Group’s activities. Professional advice is sought by the
Board from independent external consultants when
required;
All KMP receive a base salary (which is based on
factors such as length of service, nature of role and
experience) plus superannuation and performance
incentives;
Performance incentives are based on the achievement
of strategic and operational objectives for the KMP,
which are agreed in advance, typically at or shortly
after the Group’s budget and strategy for the relevant
financial year is approved;
Performance incentives are only paid if the Board
determines the KMP has met some or all of the
predetermined key performance indicators (KPIs);
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 18
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Engagement Of Remuneration Consultants
Incentives paid in the form of equity are intended to
align the interests of the KMP and the 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; and
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.
•
•
The Board reviews KMP packages annually by
reference to the Group’s performance, executive
performance and comparable information from
industry sectors.
The performance of KMP is reviewed on an ongoing basis
with a formal review conducted annually after issue of the
Group’s audited results for the relevant financial year. This
includes review of the KMP’s performance against agreed
objectives and award of incentives (if relevant). 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 in line with legislation, which is currently
10.5%. 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 or rights not exercised
before or on the date of termination will lapse (unless
otherwise agreed by the Board).
All remuneration paid to KMP is valued at the cost to the
Group and expensed.
The Board’s policy is to remunerate non-executive
directors at market rates for their time, commitment and
responsibilities. The Chairman 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 entitled to participate in the Long Term
Incentive Plan (LTIP) to align their interests with
shareholders’ interests.
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.
Performance-Based Remuneration
Performance incentives are set annually, in consultation
with KMP and based on the Group’s strategic and
operational objectives, both short term and long term.
A portion of the measures typically focus on the overall
performance of the Group (measured by specific
performance metrics) and a portion are specifically
tailored to the area each individual is involved in and
accountable for. 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,
based on an assessment of the KMP’s performance
against the agreed KPIs. 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.
Following the assessment, the KPIs are reviewed by
the Board in light of the desired and actual outcomes,
and their efficacy is assessed in relation to the Group’s
goals and shareholder wealth, before KPIs are set for the
following year.
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 personnel and shareholder interests. The
Group believes this policy should be effective in increasing
shareholder wealth in future years.
Performance Conditions Linked To Remuneration
During this financial year, the Group issued Performance
Incentives to current KMP.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 19
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
KMP Securityholdings
The number of ordinary securities held directly, indirectly, or beneficially by each KMP (or their related parties) of the Group
during the financial year is as follows:
30 June 2022
Martin Bryant
Adrian Rowley
Peter Skene
Jason Dong
Bernard Kavanagh
Balance at
01/07/2021
Granted as
Remuneration
Other
Changes
Balance at
30/06/2022
1,500,000
1,411,000
13,415,385
-
-
16,326,385
-
-
-
-
-
-
-
-
1,000,000
-
-
1,000,000
1,500,000
1,411,000
14,415,385
-
-
17,326,385
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.
Loan From KMP
As set out in Note 24(c) of the financial statements, the Group had the following loan from KMP:
On 1 June 2022 the Group established an unsecured 6-month loan facility of $500,000 with M & J Bryant. The loan was
at a variable interest rate: RBA official cash rate + 6%. The loan including accrued interest of $5,674 was repaid in full on 29
July 2022.
Changes In Directors And Kmp Subsequent To Year-End
There has been no change to directors or KMP subsequent to year-end.
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.
Name
Position Held
Contract Details
M Bryant
Chairman
A Rowley
Director
J Dong
Director
B Kavanagh
Director
N/A
N/A
N/A
N/A
P Skene
Group CEO / Director
3 months’ notice
Proportions of Elements of
Remuneration Related to
Performance (Other than
Options/Rights Issued)
Proportions of Elements of
Remuneration Not Related
to Performance
Non-salary
Cash-based
Incentives
%
-
-
-
-
-
Securities
%
-
-
-
-
-
Fixed
Salary
/ Fees
%
100
100
100
100
100
In the current year, no KMP received any performance-based remuneration.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 20
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Remuneration Expense Details For The Year Ended 30 June 2022
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)
Short Term Benefit
Post
Employment
Long-term
Benefit
Termination
Equity-settled
Share-based
Payments
Total
Salary /
Director’s
Fees
Annual
Leave
Super
Contributions
$
$
$
LSL
$
Termination
Benefits
Performance
Rights
$
$
$
M Bryant - 2022 6
M Bryant - 2021
A Rowley - 2022 1
A Rowley - 2021
J Dong - 2022
J Dong - 2021 2
75,000
75,000
60,000
60,000
60,000
12,667
B Kavanagh - 2022 3
-
-
-
-
-
-
-
-
7,500
7,125
5,700
5,700
6,000
1,203
-
-
-
-
-
-
-
-
P Skene - 2022
383,744
14,061
P Skene - 2021
383,714
7,796
25,000
25,000
6,699
16,820
Former KMP
M Hackett - 2022
-
M Hackett - 2021 4
45,000
P Morrell- 2022
-
P Morrell- 2021 5
50,000
-
-
-
-
-
4,275
-
4,750
-
-
-
-
Total - 2022
Total - 2021
578,744
14,061
44,200
6,699
626,381
7,796
48,053
16,820
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,000
91,500
-
82,125
9,000
74,700
-
65,700
9,000
75,000
-
-
13,870
-
9,000
438,504
110,999
544,329
-
-
-
-
-
49,275
-
54,750
36,000
679,704
110,999
810,049
1. This amount is paid in accordance with a contract arrangement with Watershed Funds Management Pty Ltd, an entity associated with Adrian Rowley.
2. Jason Dong was appointed as a director on 15 April 2021.
3. Bernard Kavanagh was appointed as a director on 22 June 2022.
4. Michael Hackett retired as a director on 23 March 2021.
5. Paul Morrell retired as a director on 16 April 2021.
6. On 25 August 2022, Martin Bryant elected not to receive the securities to which he was entitled.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 21
DIRECTORS’ REPORT (cont’d)
REMUNERATION REPORT (cont’d)
Options And Rights Granted As Share-Based Payments
During the year ended 30 June 2022 are as follows:
Grant Details
Exercised
Forfeited
Balance at
01/07/2021
Issue Date
No.
Value
($)
No.
Value
($)
No.
Value
($)
Balance at
30/06/2022
P Skene
8,000,000 20/01/2022
3,000,000
156,500 (1,000,000)
(87,999)
(2,500,000)
(147,500)
7,500,000
M Bryant
A Rowley
J Dong
- 20/01/2022
1,000,000
38,500
- 20/01/2022
1,000,000
38,500
- 20/01/2022
1,000,000
38,500
-
-
-
-
-
-
(500,000)
(29,500)
500,000
(500,000)
(29,500)
500,000
(500,000)
(29,500)
500,000
Total
8,000,000
6,000,000
272,000 (1,000,000)
(87,999)
(4,000,000)
(236,000)
9,000,000
Balance at
30/06/2022
Vested
Unvested
No.
No.
P Skene
7,500,000
7,500,000
M Bryant
500,000
500,000
A Rowley
500,000
500,000
J Dong
500,000
500,000
-
-
-
-
The fair value of options granted as remuneration as shown in the above table has been determined in accordance with
Australian Accounting Standards and was recognised as an expense over the relevant vesting period.
During the year ended 30 June 2021 are as follows:
Grant Details
Exercised
Forfeited
Balance at
01/07/2020
Issue Date
No.
Value
($)
P Skene
7,000,000 17/02/2021
3,000,000
242,998
Total
7,000,000
3,000,000
242,998
No.
-
-
Value
($)
No.
Value
($)
Balance at
30/06/2021
-
-
(2,000,000)
(154,999)
8,000,000
(2,000,000)
(154,999)
8,000,000
Balance at
30/06/2021
Vested
Unvested
No.
No.
P Skene
8,000,000
8,000,000
-
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) 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
2022, Watershed Funds Management Pty Ltd was paid
$65,700 (2021: $60,225) for the provision of services
performed by Adrian Rowley as director. There was $6,023
(2021: $6,023) due at 30 June 2022.
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 favorable 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 2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 22
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
• Board Skills Matrix
Details of the Group’s key policies, charters for the Board and code of conduct are available on the Group’s website under
the Investor Centre at www.adnl.com.au.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 23
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 2022 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
Gavin Ruddell
Director
Date: 31 August 2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 24
FINANCIAL STATEMENTS
2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 25
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
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
Notes
3(a)
3(b)
3(c)(v)
3(c)(iv)
3(c)(i)
3(c)(iii)
3(c)(ii)
3(c)(vi)
3(c)(vi)
4
2022
$
15,062,945
2,897,553
(652,709)
(4,563,584)
(132,478)
(9,573,445)
(4,080,492)
(995,125)
(2,111,186)
-
(4,148,521)
-
2021
$
21,714,193
1,802,945
(754,044)
(6,047,672)
(454,849)
(12,830,175)
(4,579,477)
(1,113,469)
(2,294,548)
(2,353,741)
(6,910,837)
-
(4,148,521)
(6,910,837)
Items that will be reclassified subsequently to profit or loss
-
Items that will not be reclassified to profit or loss
Fair value movement on land and buildings at fair value through other
Comprehensive income
13(i)
7,160,545
Other comprehensive income for the year
7,160,545
-
-
-
Total comprehensive income / (loss) for the year
3,012,024
(6,910,837)
Loss is attributable to:
Company shareholders
Trust unitholders
Non-controlling interest
Total comprehensive income / (loss) is attributable to:
Company shareholders
Trust unitholders
Non-controlling interest
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.
(5,389,438)
(6,403,982)
1,241,756
(506,855)
(839)
-
(4,148,521)
(6,910,837)
(5,389,438)
8,402,301
(839)
(6,403,982)
(506,855)
-
3,012,024
(6,910,837)
30
30
(0.81)
(0.81)
(1.62)
(1.62)
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 26
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 30 JUNE 2022
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets held for sale
Other 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
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
2022
$
2021
$
5
6
7
8
9
10
11
12
13
14
15
16
15
17(a)
18
17(a)
2,431,696
974,232
1,398,681
6,425,000
836,365
12,065,974
4,416,205
569,654
547,481
27,003,288
32,536,628
6,192,119
1,321,409
1,038,700
-
151,020
8,703,248
4,795,079
956,287
429,173
28,227,815
34,408,354
44,602,602
43,111,602
2,837,666
242,634
630,342
502,770
4,213,412
345,504
95,199
440,703
1,969,469
200,079
566,887
5,980,506
8,716,941
309,468
98,228
407,696
4,654,115
9,124,637
39,948,487
33,986,965
43,563,897
8,026,909
(35,541,736)
16,049,070
30,744,991
(6,845,574)
23,899,417
39,948,487
40,562,399
918,363
(30,152,297)
11,328,465
30,744,991
(8,086,491)
22,658,500
33,986,965
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 27
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
Net operating cash flows
Cash Flows from Investing Activities
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for biological assets
Payment for intangible assets
Deposit on sale of property, plant and equipment
Net investing cash flows
Cash Flows from Financing Activities
Proceeds from issue of stapled securities net of transaction costs
Repayment of CBA facility
Proceeds from borrowings - unsecured
Repayment of borrowings - unsecured
Proceeds from related party loan
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
2022
$
2021
$
15,242,346
22,494,337
(18,911,399)
(24,086,291)
6,520
(132,478)
(3,795,011)
15,316
(454,849)
(2,031,487)
(2,576,084)
5,886,339
(389,640)
(142,072)
321,250
3,099,793
2,733,999
(5,980,506)
652,838
(652,838)
500,000
(179,394)
(139,304)
(3,065,205)
(3,760,423)
6,192,119
2,431,696
(4,896,237)
6,148,064
(107,423)
(79,107)
-
1,065,297
7,220,203
(6,073,494)
376,734
(404,260)
-
(195,636)
(127,059)
796,488
(169,702)
6,361,821
6,192,119
5(b)
10
12(a)
5
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 28
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Issued Capital
Ordinary
Asset
Revaluation
Reserve
Option
Reserve
Accumulated
Losses
Non-
controlling
Interests
Total
Notes
$
$
$
$
$
$
918,363
(30,152,297)
22,658,500
33,986,965
Balance at 1 July 2021
Comprehensive
income for the year
Profit / (loss) attributable to
company shareholders / trust
unitholders for the period
Non-controlling interests
Other comprehensive
income for the period
Total comprehensive
income / (loss) for the year
Transactions with equity
holders in their capacity
as equity holders and
other transfers:
Contribution of equity,
net of transaction costs
Share-based payments
- securities
Share-based payments
- performance rights
Shares issued on
exercise of rights
Share-based payment
- supplier
Total transactions
with equity holders
40,562,399
-
-
-
-
-
-
-
7,160,545
7,160,545
17(iv)
2,733,999
17(i)
92,500
26(b)(i)
-
17(ii)
17(iii)
87,999
87,000
-
-
-
-
-
-
-
-
-
-
-
36,000
(87,999)
-
(5,389,438)
1,241,756
(4,147,682)
-
-
(839)
(839)
-
7,160,545
(5,389,438)
1,240,917
3,012,024
-
-
-
-
-
-
-
-
-
-
-
-
2,733,999
92,500
36,000
-
87,000
2,949,499
3,001,498
-
(51,999)
Balance at 30 June 2022
43,563,897
7,160,545
866,364
(35,541,736)
23,899,417
39,948,487
Issued Capital
Ordinary
Option
Reserve
Accumulated
Losses
Non-
controlling
Interest
Notes
$
$
$
$
Total
$
Balance at 1 July 2020
33,191,050
720,408
(23,771,315)
23,165,355
33,305,498
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
Supplier securities issued
Employee and consultant
performance securities issued
Transfer to retained earnings (options)
Total transactions with equity holders
-
-
17(vii),(viii)
7,145,590
-
-
-
17(vi)
17(v),(ix)
-
220,955
131,759
94,000
-
7,371,349
-
(23,000)
197,955
(6,403,982)
(506,855)
(6,910,837)
(6,403,982)
(506,855)
(6,910,837)
-
-
-
23,000
23,000
-
-
-
-
-
7,145,590
220,955
131,759
94,000
-
7,592,304
Balance at 30 June 2021
40,562,399
918,363
(30,152,297)
22,658,500
33,986,965
The accompanying notes form part of these financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 29
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 30
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 31
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 32
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 33
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 34
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 35
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(h) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any
accumulated depreciation and impairment losses.
Property
Freehold land and buildings are carried at their fair value (being the amount for which an asset could be exchanged
between knowledgeable, willing parties in an arm’s length transaction), based on periodic, but at least triennial,
valuations by external independent valuers, less accumulated impairment losses and accumulated depreciation for
buildings.
Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation surplus in
equity. Decreases that offset previous increases of the same asset are recognised against revaluation surplus directly
in equity; all other decreases are recognised in profit or loss.
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset
and the net amount is restated to the revalued amount of the asset.
Plant and equipment
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and
any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated
recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and
impairment losses are recognised in profit or loss. A formal assessment of recoverable amount is made when
impairment indicators are present (refer to Note 1(l) for details of impairment).
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have
been discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the Consolidated Group includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during
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
Depreciation Rate (years)
Land
Buildings
Fixed Improvements
Plant and equipment - owned
Plant and equipment - leased
Motor Vehicles
Not depreciated
40 years
30 years
3-10 years
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 earnings.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 36
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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;
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 37
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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.
(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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 38
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(s) Revenue and Other Income (cont’d)
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.
(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(a);
- Carrying value determination of property, plant and equipment, refer Note 13(b);
- Carrying value determination of intangibles, refer Note 12;
- Carrying value determination of right of use assets, refer Note 11(a);
- Fair value determination of livestock, refer Note 10;
- Share-based payments, refer Note 26; and
- Income tax and other taxes, refer Note 4;
Actual results may differ from these estimates under different assumptions and conditions and may materially affect
financial results or the financial position reported in future periods. Further details of the nature of these assumptions
and conditions may be found in the relevant notes to the financial statements.
Capital Management
The Board is continually monitoring the cash position of the Group and has a number of short, medium and long
term strategies for management of the Group’s cash position to ensure operations are well funded as the Group
nears the completion of its 5-year transformation strategy to become a fully vertically integrated manufacturer of
premium organic dairy nutritional products.
The Group has cash and cash equivalents of $6.1m at the date of this report and just under $1 million inventory of the
future Gradulac Gentle infant formula range to support ongoing development of its distribution network. Fresh milk
processing at the Camperdown Dairy Manifold Street ceased on the 22 August 2022 and is expected to deliver an
estimated $1m EBITDA improvement to the Group based on the position at closure.
In addition to the above, as a listed entity, the Group also has capital raising opportunities available to it from existing
shareholders as well as sophisticated investors with strong alignment to the Group’s strategy and future objectives.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 39
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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
The Group has considered the implications of new or amended Accounting Standards which have become applicable
for the current financial reporting period but determined that their application to the financial statements is either not
relevant or not material.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 40
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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
Non-controlling interest
Retained earnings
Total Equity
Statement of Profit or Loss and Other Comprehensive Income
Total loss
Total comprehensive loss
Contingent liabilities and guarantees
2022
$
2021
$
17,842,525
12,751,769
30,594,294
15,341,454
12,562,305
27,903,759
7,226,740
125,816
7,352,556
5,084,304
920
5,085,224
43,563,896
40,562,398
857,364
(839)
918,363
-
(21,178,683)
(18,662,226)
23,241,738
22,818,535
(2,525,458)
(2,525,458)
(2,923,679)
(2,923,679)
The Company does not have any contingent liabilities or guarantees for the year ended 30 June 2022.
In the 2021 comparative, the Company had a contingent liability for payment of royalties in respect of Epicurean
Dairy Products commencing April 2022, however this agreement ended prior to the commencement of the royalties
and guarantees in respect of CBA borrowings that have subsequently been repaid (refer Note 16(b)).
Contractual commitments
At 30 June 2022, the parent company had not entered into any contractual commitments.
.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 41
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 3: REVENUE AND EXPENSES
(a) Revenue
Revenue from contracts with customers
Other sources of revenue
Total revenue
Notes
(i)
(ii)
2022
$
2021
$
14,852,359
21,301,894
210,586
412,299
15,062,945
21,714,193
(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
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 disposal of property, plant and equipment
(c) Expenses
(i) Finance costs
CBA facility
Loans - unsecured
Loan - related party
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
9,244,276
5,608,083
13,609,650
7,692,244
14,852,359
21,301,894
14,852,359
21,301,894
6,520
30,071
-
173,995
210,586
15,316
37,897
323,393
35,693
412,299
1,342,672
1,554,881
2,897,553
1,614,189
188,756
1,802,945
60,905
28,052
2,770
19,801
20,950
132,478
1,632,353
406,538
38,923
44,381
111,010
102,368
167,456
1,577,463
4,080,492
389,196
23,838
-
20,937
20,878
454,849
1,741,843
450,610
69,641
64,844
222,373
110,881
234,203
1,685,082
4,579,477
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 42
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 3: 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
Property costs
(vi) Other significant items
Deemed cost of livestock sold (refer Note 10)
Impairment of goodwill1
2022
$
6,970,612
932,750
250,773
(26,429)
1,445,739
2021
$
9,282,333
1,669,919
229,289
72,816
1,575,818
9,573,445
12,830,175
4,435,084
128,500
4,563,584
382,793
244,940
24,976
652,709
5,807,332
180,340
5,987,672
432,131
381,913
-
814,044
2,111,186
-
2,294,548
2,353,741
1 Goodwill relates to the dairy processing segment cash-generating-unit. In the 2021 comparative year, the Board fully impaired
the goodwill, resulting in a $2,353,741 impairment expense.
NOTE 4: INCOME TAX EXPENSE
(a) The prima facie tax on profit before income tax is reconciled to the income tax as follows
Prima facie tax payable / (benefit) on loss from ordinary activities before
income tax at 25% (2021: 26%):
(1,037,130)
(1,796,818)
Add /(less)
Tax effect of:
- trust (profit) / 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.
(314,106)
1,466,737
(896,830)
781,329
-
132,089
1,860,605
991,656
(1,187,532)
-
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 43
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 4: INCOME TAX EXPENSE (cont’d)
(b) 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
Capital losses
Net unbooked deferred tax assets
2022
$
2021
$
323,116
156,823
11,267,610
10,276,345
-
243,233
11,590,726
10,676,401
The Group has significant carry forward tax losses and will only be able to utilise these losses subject to it satisfying
certain carry forward rules and other taxation legislation such as the Same Business Test and/or the Continuity
of Ownership Test. Due to the changes that have occurred within the Group since these losses commenced
accumulating, there is uncertainty as to the likelihood of the Group being able to utilise these losses. The Group
has previously endeavoured to obtain a private ruling as to the status of its carry forward losses from the Australian
Taxation Office (ATO) only to be advised that the ATO will not rule on the applicability of carry forward tax losses until
such time as the Group endeavours to utilise those losses.
NOTE 5: CASH AND CASH EQUIVALENTS
Current
Cash at bank and in hand
Total cash and cash equivalents
Note
28
2022
$
2021
$
2,431,696
2,431,696
6,192,119
6,192,119
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 2022:
Cash at bank and in hand
2022
$
2,431,696
2,431,696
2021
$
6,192,119
6,192,119
A floating charge over cash and cash equivalents was provided to the CBA as part of security arrangements for
facilities in the 2021 comparative period. For further details refer to Note 16(b).
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 44
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 5: 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
Gain on disposal of property, plant and equipment
Bad debts and impairment provision
Finance costs - loan from related party
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:
2022
$
2021
$
(4,148,521)
(6,910,837)
995,125
2,111,186
(1,342,672)
-
(1,554,881)
(26,429)
2,770
215,500
185,921
(685,345)
(359,981)
751,890
60,426
1,113,469
2,294,548
(1,614,189)
2,353,741
(188,756)
72,815
-
240,340
553,995
13,929
219,207
(164,865)
(14,884)
(3,795,011)
(2,031,487)
1 July 2021
Cash flows
Non-cash
Movements
30 June
2022
$
$
$
CBA Facility
5,980,506
(5,980,506)
-
-
Loan - related party
Lease liabilities
-
500,000
2,770
502,770
509,548
(318,697)
397,287
588,138
Total
6,490,054
(5,799,203)
400,057
1,090,908
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 45
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 6: TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables
Provision for impairment
Note
2022
$
775,211
199,021
-
2021
$
1,169,649
170,763
(19,003)
Total current trade and other receivables
28
974,232
1,321,409
(a) Lifetime Expected Credit Loss Credit Impaired
Opening
balance
Net
measurement
of loss
allowance
Amounts
written off
$
$
$
Trade receivables
19,003
(14,818)
(4,185)
Total
$
-
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 2022 is determined as follows; the expected credit
losses also incorporate forward-looking information.
2022
Expected loss rate
Current
>30 days past
due
>60 days past
due
>90 days past
due
$
0%
$
0%
$
0%
5,143
-
Total
$
$
0%
8,754
974,232
-
-
Gross carrying amount
896,446
63,889
Loss allowance provision
-
-
2021
Expected loss rate
Current
>30 days past
due
>60 days past
due
>90 days past
due
$
0%
$
0%
$
0%
$
14%
Total
$
Gross carrying amount
1,134,119
45,729
29,246
131,318
1,340,412
Loss allowance provision
-
-
-
19,003
19,003
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 46
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 6: TRADE AND OTHER RECEIVABLES (cont’d)
Credit risk
The Group has a significant concentration of credit risk with two key customers totaling $381,822 (2021: $449,288)
or 39% (2021: 34%) of receivables at balance date. There is no impairment on these customers and outstanding
amounts are within terms at year end.
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
2022
$
2021
$
974,232
974,232
1,321,409
1,321,409
A floating charge over some trade receivables has been provided for certain debt. For further details refer to Note 16:
Borrowings.
NOTE 7: INVENTORIES
Current
Packaging
Raw materials, finished goods and chemicals
Feedstock, hay and silage
Total inventories (at cost)
2022
$
202,627
997,008
199,046
2021
$
383,920
178,771
476,009
1,398,681
1,038,700
NOTE 8: NON-CURRENT ASSETS HELD FOR SALE
On 9 June 2022 the Group announced to the ASX that it had entered into an unconditional contract of sale and
leaseback for the Brucknell North farm located at 417 Moreys Road, Victoria for $6.425M. The sale was completed
after balance date on 15 July 2022.
In accordance with AASB 5: Non-current Assets Held for Sale, the Group has reclassified the assets of the Brucknell
North farm in the proposed sale as held for sale.
Following is a detailed breakdown of the assets held for sale on 30 June 2022:
Non-current assets
Property, plant & equipment
2022
$
2021
$
6,425,000
-
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 47
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 9: OTHER ASSETS
Current
Prepayments
Bonds and deposits
Total other assets
NOTE 10: BIOLOGICAL ASSETS
Non-current
Dairy livestock
Total biological assets
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
2022
$
778,567
57,798
836,365
2021
$
114,995
36,025
151,020
Notes
(a)
2022
$
2021
$
4,416,205
4,416,205
4,795,079
4,795,079
2022
$
4,795,079
389,640
(2,111,186)
1,342,672
4,416,205
2022
No.
2,900
164
725
(1,562)
2,227
2021
$
5,368,015
107,423
(2,294,548)
1,614,189
4,795,079
2021
No.
3,662
58
1,177
(1,997)
2,900
(a) Biological assets represent the dairy livestock owned by the Group. At 30 June 2022, 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 $1,342,672 (2021: $1,614,189) has been recognised in profit and
loss at 30 June 2022, 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 2022, the Group produced 6.8 million litres (2021: 10.6 million litres) of raw
milk. The average number of cows milked during the year was 1,154 (2021: 1,655).
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 48
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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 lease on 368 acres of land on Cooramook Road, Grassmere, Victoria, with an expiry date of
24 December 2024.
The land lease was an initial 3 year and 2 month lease with a 3-year option, which provided the Group
opportunities to manage the lease in order to align with business strategies. The 3-year extension option was
exercised by the Group on 25 December 2021 and as such the option has now been capitalised and included
in the calculation of the lease liability.
In the 2021 comparative, the Group also had leases for plant and equipment that have been repaid in 2022 and
transferred to property, plant and equipment.
(a) AASB 16 related amounts recognised in the statement of financial position
Right of use assets
Leased land and buildings
Accumulated depreciation
Leased plant and equipment
Accumulated depreciation
Notes
(i)
(i)
2022
$
1,153,344
(583,690)
569,654
-
-
-
2021
$
918,924
(611,580)
307,344
996,959
(348,016)
648,943
Total right of use assets
569,654
956,287
(i) Movement in carrying amounts:
Leased land and building:
Opening balance
Additions
Depreciation expense
Net carrying amount 1
2022
$
307,344
402,869
(140,559)
569,654
2021
$
434,221
-
(126,877)
307,344
1. The net carrying amount on factory premises at 325 Manifold Street, Camperdown is $206,381. Subsequent to
ceasing fresh milk processing at the factory on 22 August 2022, the Group continues to use the site for storage and
is also in negotiations for a third party to assume the lease in conjunction with a sale of CDC plant and equipment as
outlined in Note 13(b). On this basis the Board is satisfied there is no impairment required to the right of use asset.
Leased plant and equipment:
Opening balance
Disposals
Transfer to owned plant and equipment
Depreciation expense
Net carrying amount
648,943
-
(648,943)
-
-
934,414
(182,412)
-
(103,059)
648,943
(b) 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)
98,987
40,751
229,936
41,815
(c) AASB 16 related amounts recognised in the statement of cash flows
Total cash outflows for leases
318,698
322,695
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 49
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Total intangible assets
(a)
(a) The movement in carrying amounts of intangibles comprises:
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 12: INTANGIBLE ASSETS
Recipes, formulations and patents
- at cost
Product development
- at cost
Less accumulated amortisation
Opening balance
Additions in year
Impairment expense
Amortisation
Closing balance
NOTE 13: PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements
- at cost1
- at fair value1
Less accumulated depreciation
Notes
2022
$
2021
$
346,846
346,846
163,898
(81,571)
82,327
429,173
2021
$
2,753,218
79,107
346,846
346,846
305,970
(105,335)
200,635
547,481
2022
$
429,173
142,072
-
(2,353,741)
(23,764)
547,481
(49,411)
429,173
Notes
2022
$
2021
$
-
22,433,563
19,767,915
(408,617)
(a)
19,359,298
-
(1,290,995)
21,142,568
1. Fully depreciated pasture improvements at cost and the associated accumulated depreciation of $849,997 has been removed from the balances.
Plant and equipment - owned
- at cost
Less accumulated depreciation
11,532,228
(3,888,238)
(b)
7,643,990
10,482,036
(3,396,790)
7,085,246
Total property, plant and equipment
27,003,288
28,227,815
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 50
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 13: PROPERTY, PLANT AND EQUIPMENT (cont’d)
(a) Below is a table showing the carrying value of land and buildings and improvements by property:
Property name
Note
Acquisition date
2022
2021
Brucknell No 2
Yarringa - Nirranda South
Brucknell No 3 (ii)
Missens Road (ii)
Brucknell No 1
Depot & Old Geelong Road
(Camperdown) - Land
Infant Formula Plant Project
(i)
(i)
(ii)
(ii)
(iii)
(iv)
(iv)
22 October 2014
6,423,625
4,124,416
4 October 2018
7,642,992
4,727,862
6 March 2015
9 July 2015
22 October 2014
-
-
-
2,288,819
1,481,499
4,056,706
17 November 2017
272,974
272,974
in progress
5,019,707
4,190,292
Total
19,359,298
21,142,568
(i) Registered valuers Preston Rowe Paterson completed an independent valuation of all farms on 3 February
2022. The basis of the valuation was ‘As Is and In Use’ with vacant possession and the combined fair value
of all farm properties (excluding the Infant Formula Plant Project and Depot & Old Geelong Road Land) was
$20,475,000. The carrying amounts at 30 June 2022 for the Brucknell South and Yaringa farms are the independent
valuations from February 2022 plus capitalised costs from the valuation date, less depreciation. The Brucknell North
farm is held as an asset for sale based on the agreed purchase price of $6.425 million (refer note (iii) below). The
combined value of the Group’s farm portfolio (including the non-current asset held for sale) is $20,491,617, up 59%
on FY21 for the same 3 farms. A fair value gain of $7,160,545 is reflected in other comprehensive income.
(ii) On 30 September 2021, the Group announced to the ASX that it had sold its farm property located at 300-
350 Missens Road (Brucknell No 3 and Missens Road) for $5,625,000. A gain on disposal of $1,555,342 has
been recorded in other income.
(iii) On 9 June 2022 the Group announced to the ASX that it had entered into an unconditional contract of
sale and leaseback for the Brucknell North farm located at 417 Moreys Road, Victoria for $6.425M (refer Note
8).
(iii) At 30 June 2022, the Infant Formula Plant Project was in the final stage of completion. On full completion
and at an appropriate time, the directors will engage an independent valuer to assess the fair value of the
infant formula plant and associated land. The directors have assessed the fair value of the infant formula plant
and associated land at 30 June 2022 and the carrying amount is representative of its current replacement
cost.
(b) On 9 August 2022, the Group announced to the ASX that it would cease fresh milk processing at its
Camperdown Dairy Manifold Street site and on the 22 August 2022, processing formally ceased.
Select processing equipment will be transitioned to the Infant Formula site, with the majority remaining at the
Manifold Street site to allow it to be sold, with or without the site lease. The Group is currently in discussions
with third parties interested in purchasing the processing equipment and/or taking over the site and these
opportunities are progressing.
The written down value of the property, plant and equipment at 30 June 2022 is $2,479,386. The Board is of
the view this is indicative of the fair value less costs of disposal. Based on current negotiations, which remain
commercial in confidence, the Board is satisfied there is no impairment required.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 51
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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:
2022
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
$
$
Total
$
Balance beginning of the financial year
21,142,568
7,085,247
28,227,815
Additions
Disposals
Transfer between classes
Fair value adjustments
Transfer to non-current assets held for sale
Transfer from right of use assets
Depreciation expense
Balance at end of financial year
2021
Balance beginning of the financial year
Additions
Disposals
Depreciation expense
Balance at end of financial year
NOTE 14: TRADE AND OTHER PAYABLES
Current
Trade creditors
Sundry creditors and accrued expenses
Total trade and other payables
924,425
1,651,659
2,576,084
(3,741,848)
410,695
7,160,545
(6,425,000)
-
(112,087)
(612,449)
(410,695)
-
-
648,943
(718,715)
(4,354,297)
-
7,160,545
(6,425,000)
648,943
(830,802)
19,359,298
7,643,990
27,003,288
Land,
Buildings &
Improvements
Plant &
Equipment -
Owned
$
22,968,478
3,551,969
(5,298,433)
(79,446)
$
6,788,556
1,529,363
(519,257)
(713,415)
Total
$
29,757,034
5,081,332
(5,817,690)
(792,861)
21,142,568
7,085,247
28,227,815
Notes
2022
$
2021
$
1,757,126
1,080,540
2,837,666
1,267,623
701,846
1,969,469
Financial liabilities at amortised cost classified as trade
and other payables
Total trade and other payables
Financial liabilities as trade and other payables
28
2,837,666
2,837,666
1,969,469
1,969,469
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 52
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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
2022
$
2021
$
630,342
630,342
566,887
566,887
95,199
95,199
725,541
665,115
250,955
(190,529)
725,541
98,228
98,228
665,115
679,999
269,429
(284,313)
665,115
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
Loan - related party
CBA facility - secured
Total current borrowings
Notes
(a)
(b)
2022
$
502,770
-
502,770
2021
$
-
5,980,506
5,980,506
(a) On 1 June 2022 the Group established an unsecured 6-month loan facility of $500,000 with M & J Bryant. The
loan was at a variable interest rate: RBA official cash rate + 6%. The loan including accrued interest of $5,674
was repaid in full on 29 July 2022. Securityholder approval for the related party loan was not required under
the Corporations Act 2001 (Cth) as the terms of the loan from M & J Bryant were more favourable to the
Group than the terms the Group would have obtained from a third party financier acting at arms’ length.
(b) The Group established borrowing facilities with the Commonwealth Bank of Australia Limited (CBA) in April
2016, as a 3-year re-drawable loan facility of $10,000,000. Since that time, the term and principal amount has
varied and at 30 June 2021 the principle amount was $5,980,506 with a facility maturity date of 4 October
2021. The facility was repaid in full on 30 September 2021.
2021 Comparative - Collateral Provided
In the 2021 comparative, the CBA facility was 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 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 were secured by the underlying leased assets.
The carrying amounts of assets pledged as security were:
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
2022
$
-
-
-
-
-
2021
$
21,142,568
7,525,760
204,704
14,238,569
43,111,601
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 53
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 17: ISSUED CAPITAL
Contributed equity of the Group
(a) Movement in stapled securities:
Date
Details
2022
$
2021
$
74,308,888
71,307,390
Number
of Stapled
Securities
Issue Price
$
Shareholders
$
Unitholders
$
Stapled
Entity
$
01 Jul 2021
Opening balance
501,698,361
40,562,399
30,744,991
71,307,390
08 Sep 2021
Employee performance
securities (i)
08 Sep 2021
Performance rights
exercised (ii)
1,850,000
0.050
92,500
1,000,000
0.088
87,999
10 Nov 2021
Supplier securities (iii)
1,500,000
0.058
87,000
30 Mar 2022
Placement - tranche 1 (iv)
15,455,951
0.065
1,000,000
02 May 2022
Placement - tranche 2 (iv)
7,727,975
0.065
500,000
03 Jun 2022
Placement - tranche 3 (iv)
19,319,938
0.065
1,250,000
Transaction costs
(16,001)
-
-
-
-
-
-
-
92,500
87,999
87,000
1,000,000
500,000
1,250,000
(16,001)
30 June 2022
548,552,225
43,563,897
30,744,991
74,308,888
Date
Details
01 Jul 2020
07 Jul 2020
21 Dec 2020
21 Dec 2020
17 Feb 2021
25 Feb 2021
9 Mar 2021
9 Mar 2021
9 Mar 2021
Opening balance
Employee performance
securities (v)
Supplier securities (vi)
Placement - tranche 1 (vii)
SPP - external (viii)
Placement - tranche 2 (vii)
Supplier securities (vi)
SPP - directors (viii)
Consulting services (ix)
Transaction costs
Number
of Stapled
Securities
Issue Price
$
Shareholders
$
Unitholders
$
Stapled
Entity
$
370,986,440
33,191,050
30,744,991
63,936,041
500,000
450,068
55,272,898
16,706,011
53,060,436
1,472,509
2,249,999
1,000,000
0.068
0.063
0.06
0.06
0.06
0.07
0.06
0.06
34,000
28,354
3,316,374
1,002,362
3,183,626
103,405
135,000
60,000
(491,772)
-
-
-
-
-
-
-
-
-
34,000
28,354
3,316,374
1,002,362
3,183,626
103,405
135,000
60,000
(491,772)
30 June 2021
501,698,361
40,562,399
30,744,991
71,307,390
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 8 September 2021, there were 1,850,000 stapled securities issued as a share-based payment under the AHF
Long Term Incentive Plan at a price of $0.050 per security. The fair value of securities issued, determined by
reference to the market price, was $92,500.
(ii) On 8 September 2021, there were 1,000,000 stapled securities issued at a price of $0.088 per security upon
vesting of employee performance rights.
(iii) On 10 November 2021, there were 1,500,000 stapled securities issued as a share-based payment for
consulting services under the AHF Long Term Incentive Plan at a price of $0.058 per security. The fair value of
securities issued, determined by reference to the market price, was $87,000.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 54
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 17: ISSUED CAPITAL (cont’d)
(iv) Between 30 March 2022 and 03 June 2022 there were 42,503,684 stapled securities issued to IJ Funds
Management for a placement conducted in three tranches. The fair value of securities issued in the 3 tranches,
determined by reference to the placement price of $0.065 per security, was $2,750,000, with transaction costs
of $16,001.
(v) On 7 July 2020, there were 500,000 stapled securities issued as a share-based payment under the AHF
Long Term Incentive Plan at a price of $0.068 per security. The fair value of securities issued, determined by
reference to the market price, was $34,000.
(vi) On 21 December 2020, there were 450,068 stapled securities issued to F.A Maker Pty Ltd for a 10% deposit on
a high-speed blending and canning line for infant formula tins and nutritional powder bags. The fair value of
securities issued, determined by reference to market price, was $28,354. A further 1,472,509 stapled securities
were issued as a progress payment on 9 March 2021 with a fair value determined by reference to the market
price of $103,405.
(vii) On 21 December 2020, there were 55,272,898 stapled securities issued on completion of a placement being
conducted in two tranches. The fair value of securities issued in tranche 1, determined by reference to the
placement price of $0.06 per security, was $3,316,374, with transaction costs of $221,366. The second tranche
of 53,060,436 were issued on 25 February 2021 raising an additional $3,183,626.
(viii) On 17 February 2021, there were 16,706,011 stapled securities issued on completion of a Security Purchase
Plan (SPP). The fair value of securities issued, determined by reference to the placement price of $0.06 per
security, was $1,002,362. The director component of 2,249,999 stapled securities were issued following
securityholder approval on 9 March 2021, raising an additional $135,000.
(ix) On 9 March 2021, there were 1,000,000 stapled securities issued as a share-based payment for consulting
services under the AHF Long Term Incentive Plan at a price of $0.06 per security. The fair value of securities
issued, determined by reference to the market price, was $60,000.
(b) Options and Rights
There are 11,500,000 (2021: 10,500,000) options or rights on issue at 30 June 2022 (refer Note 26(c)).
(c) Loan Securities
There are 9,500,000 (2021: 9,500,000) loan securities on issue at 30 June 2022 (refer Note 26(b)).
(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.
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 2022 and 30 June 2021 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing Ratio
Notes
16
6
2022
$
502,771
(2,431,696)
(1,928,925)
40,085,257
38,156,332
N/A
2021
$
5,980,506
(6,192,119)
(211,613)
33,986,965
33,775,352
N/A
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 55
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 18: RESERVES
Nature and purpose of reserves
Option reserve
The option reserve records amounts recognised on issue of share-based payments (options and securities).
Asset revaluation reserve
The asset revaluation reserve records revaluation of land and buildings.
NOTE 19: COMMITMENTS
In conjunction with the placement to IJ Funds Management (refer Note 17(iv)), the Group has engaged IJ Funds
Management to provide consultancy services in relation to the expansion of the Group’s business in Asia, as well as
marketing and networking activities in the region. The consultancy services fee is $45,833 per month, for a period of
6 months commencing 1 July 2022.
There are no capital expenditure commitments contracted for the year ended 30 June 2022.
NOTE 20: CONTINGENT LIABILITIES
As set out in Note 2, in the 2021 comparative, the Group had a contingent liability for payment of royalties in respect
of Epicurean Dairy Products commencing April 2022, however this agreement ended prior to the commencement of
the royalties.
The Group does not have any other contingent liabilities for the year ended 30 June 2022 (2021: nil).
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 2022.
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
2022
$
592,805
44,200
6,699
36,000
679,704
2021
$
634,177
48,053
16,820
110,999
810,049
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
2022
$
74,946
2021
$
78,970
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 56
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 23: CONTROLLED ENTITIES
Particulars in relation to controlled entities
Note
Class of Equity
Parent Entity:
Australian Dairy Nutritionals Limited
(a)
2022
2021
Percentage
Owned
Percentage
Owned
%
%
Wholly Owned Controlled Entities
SW Dairy Farms Pty Ltd
Dairy Fund Management Limited
Camperdown Dairy Company Pty Ltd
Victorian Farmers Direct Pty Ltd
Organic Nutritionals Pty Ltd
Jonesy’s Distribution Pty Ltd
Camperdown Brand Manufacturing Pty Ltd
Regen Properties Pty Ltd
Regen Farms Pty Ltd
Regen Operations Pty Ltd
Camperdown Dairy Park Trust
Other Controlled Entities
Ocean Dairy Pty Ltd
Australian Dairy Farms Trust
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
units
(b)
(b)
(b)
(c)
(d)(e)
ordinary
units
100
100
100
100
100
100
100
100
100
100
100
50
-
100
100
100
100
100
100
100
-
-
-
100
-
-
All controlled entities have the same financial year end 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. 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) Wholly Owned Controlled Entities - Additions
The Group undertook an internal restructure of its farm properties in FY22 and established three new subsidiaries.
The Brucknell North and Bucknell South farm properties were transferred from Australian Dairy Farms Trust to
subsidiary, Regen Properties Pty Ltd (RGP). The Yaringa farm is also in the process of being transferred to RGP and this
is anticipated to occur in September 2022.
(c) Other Controlled Entities - Ocean Dairy Pty Ltd (Ocean Dairy)
The Ocean Dairy joint venture with Wellnex Life Ltd (ASX: WLL) was established to distribute the Ocean Road Dairies
Organic A2 infant formula range within Australia. Ocean Dairy is jointly owned by the Company and WLL and draws
on the strengths of both partners. The Group is responsible for the manufacture of the Ocean Road Dairies infant
formula range at its infant formula plant using organic A2 protein milk from its farms. WLL will be responsible for
the sale of the new range in the Australian retail and pharmacy channel, including in Chemist Warehouse stores
nationally. At the time of writing, the Ocean Road Dairies range is expected to be available in Chemist Warehouse
stores nationally in October 2022.
The Group will have the exclusive right to distribute the organic A2 infant formula range internationally, including
through cross border e-commerce channels in China. The Group will pay Ocean Dairy a royalty on sales through
the overseas cross boarder e-commerce channel and also has the option to purchase WLL’s shares (based on an
independent valuation) in Ocean Dairy at any time within 2 to 5 years after it commences supply of the Ocean Road
Dairies range.
There were immaterial transactions in Ocean Dairies for the year ended 30 June 2022, resulting in a loss of $1,678 in
the joint venture.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 57
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 23: CONTROLLED ENTITIES (cont’d)
(d) Transactions with Non-controlling interests in ADFT
As set out in Note 1, ADFT is a controlled entity. Transactions with non-controlling interests in ADFT in the year
comprised equity as set out in Note 17.
(e) Summarised Financial Information of Subsidiaries with Material Non-controlling Interests
Set out below is the summarised financial information for ADFT, before any intra-group elimination:
Summarised Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
Carrying amount of non-controlling interests
Summarised Financial Performance
Revenue
Profit / (loss) after tax
Other comprehensive income after tax
Total comprehensive income / (loss)
Profit / (loss) attributable to non-controlling interests
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:
2022
$
2021
$
19,155,734
7,642,991
11,403,165
17,265,164
(9,229)
(6,009,829)
-
-
26,789,496
22,658,500
26,789,496
22,658,500
1,600,483
1,241,755
2,889,241
4,130,996
4,130,996
217,580
(506,855)
-
(506,855)
(506,855)
(207,096)
5,463,178
(539,742)
5,865,647
(5,332,923)
(5,284,235)
(76,841)
41,670
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 favorable than those
available to other parties unless otherwise stated.
The following transactions occurred with related parties:
(i) Watershed Funds Management Pty Ltd - director related entity
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 58
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 24: RELATED PARTY TRANSACTIONS (cont’d)
Adrian Rowley is a director of Watershed Funds Management Pty Ltd. During the year ended 30 June 2022,
Watershed Funds Management Pty Ltd was paid $65,700 (2021: $65,700) for the provision of services by Adrian
Rowley as director. There was $6,023 (2021: $6,023) due at 30 June 2022.
(ii) Funding amongst Group entities is on an unsecured, interest free, no fixed term basis.
(c) Loan from related party:
On 1 June 2022 the Group established an unsecured 6-month loan facility of $500,000 with M & J Bryant. The loan
was at a variable interest rate: RBA official cash rate + 6%. The loan including accrued interest of $5,674 was repaid in
full on 29 July 2022.
NOTE 25: SEGMENT REPORTING
SEGMENT INFORMATION
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 and nutritional products to domestic and
international 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. Segment liabilities include trade and
other payables.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 59
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 25: SEGMENT REPORTING (cont’d)
(i) Segment Performance
30 June 2022
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Dairy Farm
$
5,668,713
2,889,416
3,260
8,561,389
Dairy
Processing
$
9,387,712
8,137
3,260
9,399,109
Total
$
15,056,425
2,897,553
6,520
17,960,498
17,960,498
Segment net loss before tax
(221,574)
(3,926,947)
(4,148,521)
(i) Segment Performance
30 June 2021
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Dairy Farm
$
7,890,834
1,802,945
2,699
9,696,478
Dairy
Processing
$
13,808,043
-
12,617
13,820,660
Total
$
21,698,877
1,802,945
15,316
23,517,138
23,517,138
Segment net loss before tax
(300,350)
(6,610,487)
(6,910,837)
(ii) Segment Assets
As at 30 June 2022
Segment assets
Segment assets include:
Additions to non-current assets
(ii) Segment Assets
As at 30 June 2021
Segment assets
Segment assets include:
Additions to non-current assets
Dairy Farms
Dairy
Processing
$
$
Total
$
28,151,504
16,451,098
44,602,602
1,350,267
1,757,529
3,107,796
Dairy Farms
Dairy
Processing
$
$
Total
$
28,220,235
14,891,367
43,111,602
134,985
4,953,454
5,088,439
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 60
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 25: SEGMENT REPORTING (cont’d)
(iii) Segment Liabilities
As at 30 June 2022
Segment liabilities
(iii) Segment Liabilities
As at 30 June 2021
Segment liabilities
Dairy Farms
$
Dairy
Processing
$
Total
$
1,755,576
2,898,539
4,654,115
Dairy Farms
$
Dairy
Processing
$
Total
$
1,105,560
8,019,077
9,124,637
(iv) Revenue by geographic region
Revenue attributable to external customers is disclosed below, based on the location of the external customer
Australia
Other countries
Total revenue
(v) Assets by geographic region
2021
$
17,960,498
-
17,960,498
2021
$
23,517,138
-
23,517,138
The location of segment assets is disclosed below by geographical location of the assets
Australia
Other countries
Total assets
2022
$
44,739,372
-
44,739,372
2021
$
43,111,602
-
43,111,602
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 61
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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 2022 are as follows:
Grant Date
Number
8 September 2021
1,850,000
The fair value of securities granted, determined by reference to market price, was $92,500.
These securities were issued as compensation to management personnel of the Group.
During the year ended 30 June 2021 are as follows:
Grant Date
7 July 2020
Number
500,000
The fair value of securities granted, determined by reference to market price, was $34,000.
These securities were issued as compensation to management personnel of the Group.
(b) Performance rights granted to employees under the Group Incentive Plan as share-based payments
A summary of movements in performance rights is as follows:
Opening balance
Granted (i)
Forfeited (ii)
Exercised (iii)
Closing balance
2022
1,000,000
2021
-
6,000,000
3,000,000
(4,000,000)
(2,000,000)
(1,000,000)
-
2,000,000
1,000,000
(i) Granted performance rights
During the year ended 30 June 2022, the following performance rights were granted:
• On 20 January 2022 the Group issued 2,000,000 performance rights to Directors (TSR hurdle).
The issue price of the rights was 1.8 cents calculated using the Monte Carlo method, the expiry date was 30
June 2022 and the rights vested when total shareholder return was >25 in a defined period during 1 July 2021
to 30 June 2022. Other Key inputs include volatility of 53.65% and a risk-free rate of 0.84%.
The fair value of the rights issued was $36,000.
The performance hurdle was met and 2,000,000 performance rights vested on 30 June 2022.
• On 20 January 2022 the Group issued 2,000,000 performance rights to Directors (EBITDA hurdle).
The issue price of the rights was 5.9 cents calculated using the Black-Scholes method, the expiry date was
30 June 2022 and the rights vested if the Group’s audited operating EBITDA for the second half of the
financial year ending 30 June 2022 was break even or above. Other Key inputs include volatility of 53.65%
and a risk-free rate of 0.84%.
The fair value of the rights issued was $118,000.
The performance hurdle was not met and the 2,000,000 performance rights were forfeited.
• On 20 January 2022 the Group issued 1,000,000 performance rights to Peter Skene.
The issue price of the rights was 5.9 cents calculated using the Black-Scholes method, the expiry date was 30
June 2022 and the rights vested if successful commercial manufacture and tinning of the Group’s organic A2
protein infant formula range (Stages 1-3) was completed by 30 June 2022. Other Key inputs include volatility
of 53.65% and a risk-free rate of 0.84%.
The fair value of the rights issued was $59,000.
The performance hurdle was not met and the 1,000,000 performance rights were forfeited.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 62
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 26: SHARE-BASED PAYMENTS (cont’d)
• On 20 January 2022 the Group issued 1,000,000 performance rights to Peter Skene.
The issue price of the rights was 5.9 cents calculated using the Black-Scholes method, the expiry date was
30 June 2022. The rights vested if there was completion or significant progression toward completion during
financial year ending 30 June 2022 of an opportunity or transaction that contributes significantly to the
achievement of the strategic objectives of the Group or materially improves the financial performance of the
Group. Other Key inputs include volatility of 53.65% and a risk-free rate of 0.84%.
The fair value of the rights issued was $59,000.
The performance hurdle was not met and the 1,000,000 performance rights were forfeited.
In the June 2021 comparative, the following performance rights were granted:
• On 10 December 2020 the Group issued 3,000,000 performance rights to Peter Skene.
The issue price of the rights was 8.1 cents calculated using the Black-Scholes method, the expiry date was
30 June 2021 and the rights vested when various performance hurdles were met. Other Key inputs include
volatility of 56.50% and a risk-free rate of 0.09%.
The fair value of the rights issued was $242,998. 1,000,000 of the performance rights vested on 30 June 2021.
(ii) Cancelled and forfeited performance rights
Performance rights are forfeited if performance hurdles are not satisfied or after the holder ceases to be employed by
the Group, unless the Board determines otherwise.
During the year ended 30 June 2022, 2,000,000 performance rights issued to Directors (EBITDA hurdle) and
2,000,000 performance rights issued to Peter Skene were forfeited as performance hurdles were not met.
Martin Bryant was entitled to 500,000 director performance rights (TSR hurdle) at 30 June 2022. As announced to
the ASX on 25 August 2022, he has subsequently elected not to receive the securities to which he is entitled and
these have been cancelled.
In the June 2021 comparative, 2,000,000 performance rights issued to Peter Skene were forfeited as performance
hurdles were not met.
(iii) Exercised performance rights
During the year ended 30 June 2022, 1,000,000 stapled securities were issued to Peter Skene on exercise of
performance rights (refer Note 17(ii)).
In the June 2021 comparative there were no performance rights exercised.
(c) Options
A summary of movements in options is as follows:
Opening balance
Granted (i)
Closing balance
(i) Granted options
2022
2021
9,500,000
2,500,000
-
7,000,000
9,500,000
9,500,000
During the year ended 30 June 2022 there were no options granted.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 63
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 26: SHARE-BASED PAYMENTS (cont’d)
In the June 2021 comparative, the following options were granted:
• On 16 February 2021 the Group issued 4,000,000 performance options to management personnel.
The issue price of the options was 0.009 cents calculated using the Black-Scholes method, the expiry date
is 15 August 2022, the options vest on issue and have an exercise price of 9 cents. Other Key inputs include
volatility of 56.32% and a risk-free rate of 0.09%.
The fair value of the options issued was $35,341.
• On 17 February 2021 the Group issued 3,000,000 lead manager options for fees associated with the capital
raise.
The issue price of the options was 2.5 cents calculated using the Black-Scholes method, the expiry date is 17
February 2024 and the options will vest when the stapled security price is 9 cents or more for a period of 5
consecutive trading days.
The fair value of the options issued was $74,615.
(ii) There were no options cancelled, forfeited or exercised during the year ended 30 June 2022 (June 2021: nil).
(d) Loan securities
A summary of movements in the number of loan securities is as follows:
Opening balance
9,500,000
9,500,000
Closing balance (exercisable)
9,500,000
9,500,000
2022
2021
There were no loan securities issued, cancelled, forfeited or exercised during the year ended 30 June 2022 (2021: nil).
(e) Other share-based payments
During the year ended 30 June 2022, there were 1,500,000 stapled securities issued as a share-based payment
for consulting services under the AHF Long Term Incentive Plan at a price of $0.058 per security. The fair value of
securities issued, determined by reference to the market price, was $87,000.
In the June 2021 comparative, there were 1,000,000 stapled securities issued as a share-based payment for
consulting services under the AHF Long Term Incentive Plan at a price of $0.06 per security. The fair value of
securities issued, determined by reference to the market price, was $60,000.
(f) Total expenses arising from share-based transactions recognised during the year
Equity settled share-based payments - employment benefit costs
Equity settled share-based payment - professional costs
Note
3(iv)
2022
$
128,500
87,000
2021
$
180,340
60,000
NOTE 27: EVENTS AFTER THE BALANCE DATE
• On 15 July 2022, the Group announced the completion of the sale and leaseback for the Brucknell North
farm located at 417 Moreys Road, Victoria for $6.425M.
• On 22 August 2022, CDC ceased manufacturing fresh milk at the Manifold Street site in Camperdown.
• On 22 August 2022 and 25 August 2022, the Group announced various issues of securities and the
cancellation of options and performance rights to directors, management and the lead manager for a private
placement in June 2019.
In the opinion of the directors there are no material matters that have arisen since 30 June 2022 that have
significantly affected or may significantly affect the Group, that are not disclosed elsewhere in this report or in the
accompanying financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 64
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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 Risk Management Policies
Financial liabilities
Financial liabilities at amortised cost:
Lease liabilities
Trade and other payables
Borrowings
Total financial liabilities
Notes
2022
$
2021
$
5
6
9
14
16
2,431,696
974,232
57,798
3,463,726
6,192,119
1,321,409
36,025
7,549,553
588,138
2,837,666
502,770
3,928,574
509,548
1,969,469
5,980,506
8,459,523
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 6).
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;
obtaining funding from a variety of sources;
•
• monitoring undrawn credit facilities;
•
• 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 65
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 28: FINANCIAL RISK MANAGEMENT (cont’d)
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.
Financial liability and financial asset maturity analysis:
Within 1 year
1 to 5 years
Over 5 years
Total
2022
2021
2022
2021
2022
2021
2022
2021
$
$
$
$
$
$
$
$
Financial liabilities due
for payment
Borrowings
Lease liabilities
(502,770) (5,980,506)
-
-
(242,634)
(200,079)
(345,504)
(309,468)
Trade & other payables
(2,837,666) (1,969,469)
-
-
Total expected outflows
(3,583,070) (8,150,054)
(345,504)
(309,468)
Financial assets -
cash flows realisable
Cash
2,431,696 6,192,119
Trade and other receivables
974,232 1,321,409
-
-
-
-
Bonds and deposits
-
-
57,798
36,025
Total anticipated inflows
3,405,928 7,513,528
57,798
36,025
Net (outflows) / inflows on
financial instruments
(177,142)
(636,526)
(287,706)
273,443
-
-
-
-
-
-
-
-
-
-
(502,770) (5,980,506)
- (588,138)
(509,547)
- (2,837,666) (1,969,469)
- (3,928,574) (8,459,522)
- 2,431,696 6,192,119
-
974,232 1,321,409
-
57,798
36,025
- 3,463,726 7,549,553
- (464,848)
(909,969)
•
The Groups financial assets were pledged as security for debt in the 2021 comparative (refer Note 16).
(c) Market risk
Interest rate risk
The Group at the date of this report has debt exposure through $502,770 in a variable rate facility, and $2,431,696 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 2022, 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%
2022
$
19,289
(19,289)
19,289
(19,289)
2021
$
2,116
(2,116)
2,116
(2,116)
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 66
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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
2022
$
2021
$
2022
$
2021
$
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)
2,431,696
974,232
57,798
6,192,119
1,321,409
36,025
2,431,696
974,232
57,798
6,192,119
1,321,409
36,025
3,463,726
7,549,553
3,463,726
7,549,553
2,837,666
588,138
502,770
3,928,574
1,969,469
509,547
5,980,506
8,459,522
2,837,666
588,138
502,770
3,928,574
1,969,469
509,547
5,980,506
8,459,522
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
Land and buildings
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 67
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
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 2022
Non-financial assets
Biological assets
Land and buildings
Total non-financial assets
recognised at fair value on a
recurring basis
30 June 2021
Biological assets
Total non-financial assets
recognised at fair value on a
recurring basis
Note
Level 1
Level 2
Level 3
$
$
$
10
13
10
-
-
-
-
-
4,416,205
19,359,298
23,775,503
4,795,079
4,795,079
-
-
-
-
-
Total
$
4,416,205
19,359,298
23,775,503
4,795,079
4,795,079
(b) Techniques and Inputs Used to Measure Level 2 Fair Values
In the absence of an active market for an identical asset, the Group selects and uses one or more valuation
techniques to measure the fair value of the asset. The Group selects a valuation technique that is appropriate in the
circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant
data primarily depends on the specific characteristics of the asset being measured. The valuation techniques selected
by the Group are consistent with one or more of the following valuation approaches:
• Market approach uses prices and other relevant information generated by market transactions for identical or
similar assets.
•
Income approach converts estimated future cash flows or income and expenses into a single discounted
present value.
• Cost approach reflects the current replacement cost of an asset at its current service capacity.
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing
the asset, including assumptions about risks. When selecting a valuation technique, the Group gives priority to
those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs
that are developed using market data (such as publicly available information on actual transactions) and reflect the
assumptions that buyers and sellers would generally use when pricing the asset 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 68
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
FOR THE YEAR ENDED 30 JUNE 2022
NOTE 29: FAIR VALUE MEASUREMENT (cont’d)
Description
Non-financial assets
Fair Value at 30
June 2022
$
Valuation Technique(s)
Input Used
Land and buildings
19,359,298
Biological assets
4,416,204
23,775,503
(c) Disclosed Fair Value Measurements
Market approach using
recent observable
comparable sales evidence
Price per hectare,
improvements value,
current replacement cost
Market approach using
recent observable industry
market data for dairy cattle
Breed, weight, condition
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; and
Borrowings.
NOTE 30: EARNINGS PER STAPLED SECURITY CALCULATION
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
2022
cents
(0.81)
(0.81)
2021
cents
(1.62)
(1.62)
(4,148,521)
(6,910,837)
Number of
Shares
Number
of Shares
511,529,282
426,356,807
-
-
511,529,282
426,356,807
All options on issue are considered to be dilutive potential ordinary securities, however they are presently anti-dilutive
at 30 June 2022 as the Group is in losses.
NOTE 31: DIVIDENDS
The directors have not recommended or paid a dividend for the year ended 30 June 2022 (2021: $nil) at the date of
this report.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 69
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 70
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 70
DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION
For the year ended 30 June 2022
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 2022 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 2022.
This declaration is made in accordance with a resolution of the Board of directors.
Martin Bryant
Chairman
31 August 2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 71
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 2022, 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 2022 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 72
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited
Key audit matter
Assessment of carrying value of
property, plant and equipment
Refer Note 13 of the financial report.
At 30 June 2022 key assets of the Group
included land buildings and improvements of
$19,359,298 and plant and equipment of
$7,643,990. During the year the Group
continued to record operating losses and
cash outflows from operating activities of
$3.80m (2020: outflow $2.03m).
Accounting standards require an entity to
assess at the end of each reporting period
whether there is any indication that an asset
may be impaired. The Group has identified
impairment
required
management to perform an impairment
assessment.
indicators which
Impairment testing of property plant and
equipment was a key audit matter due to the
significance of the value of the recorded
assets in the statement of financial position
and the degree of estimation required by the
Group in assessing assets not yet in service.
How our audit addressed the key audit
matter
Our procedures included, but were not limited to:
• We completed site visits at locations of material
property, plant and equipment and inspected
the general state of the assets to assess
whether assets continue to be employed in the
business and are in sound working order;
• We performed procedures to determine that
recorded assets existed and were reported
completely and accurately in the financial
records of the Group;
• We
assessed
and
qualifications of the independent property
valuation expert used by the Group;
competence
the
• We assessed the valuation reports obtained by
the Group, with reference to the methodology
used, prior independent expert valuations, and
our knowledge of the Group assets;
• We considered the carrying value of the Groups
farms with reference to evidence of similar
market transactions; and
• We evaluated the adequacy of the disclosures
made in the financial report regarding the
assessment of the carrying value of the Groups
property, plant and equipment.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 73
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited (continued)
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 2022, 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.
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:
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 74
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited (continued)
•
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.
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 75
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS (cont’d)
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited (continued)
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the remuneration report included in pages 18 to 22 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the Remuneration Report of Australian Dairy Nutritionals Limited for the year ended
30 June 2022 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
Gavin Ruddell
Director
Level 28, 10 Eagle Street
Brisbane, QLD, 4000
Date: 31 August 2022
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 76
SHAREHOLDER INFORMATION
The following information was extracted from Australian Dairy Nutritional Group’s Register of Securityholders
on 25 August 2022:
TWENTY LARGEST SECURITYHOLDERS - ORDINARY SECURITIES
1 WE SAY GO PTY LIMITED
2
IJ FUNDS MANAGEMENT PTY LTD
3 MR JIMMY THOMAS & MS IVY RUTH PONNIAH
4 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
5 CORPORATE SOLUTIONS PTY LTD
6
7
8
BARADNIL PTY LIMITED
COSTINE PTY LTD
PETER JOHN SKENE & LYNNE NICOLE SKENE
9 MRS QIUMEI DING
10 CITICORP NOMINEES PTY LIMITED
11
SHAREHOLDERS MUTUAL ALLIANCE PTY LTD
12 RATHVALE PTY LIMITED
13 FIDUCIARY NOMINEES PTY LTD
14 MR PETER JOHN SKENE & MRS LYNNE NICOLE SKENE
15 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
16 MOWSAN PTY LTD
17 MRS LINDA YE & MR DAVID XIAO DONG YE
18 MR PATRICK JOHN BRADY
19 MR JUNLONG LIANG
20 MR ZHONGDE ZHAO
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
55,440,764
10.02
42,503,864
23,483,671
18,821,401
15,309,892
12,500,000
7,696,324
7,000,000
6,939,845
6,555,369
6,000,000
5,853,885
5,205,540
4,875,385
4,335,311
4,122,872
4,004,000
4,000,000
3,855,000
3,412,796
7.68
4.24
3.40
2.77
2.26
1.39
1.27
1.25
1.18
1.08
1.06
0.94
0.88
0.78
0.75
0.72
0.72
0.70
0.62
241,915,919
553,282,225
43.72
100.00
Number of
Securityholders
210
586
555
1,413
595
3,359
Securities
47,837
1,784,479
4,713,146
55,306,120
491,430,643
553,282,225
%
0.01
0.32
0.85
10.00
88.82
100.00
On 25 August 2022, using the last traded security price of $0.068 per security, there were 987 holdings totalling
2,759,887 securities, 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 77
SHAREHOLDER INFORMATION (cont’d)
SUBSTANTIAL SECURITYHOLDERS
The names of the substantial securityholders listed in the Group’s register on 25 August 2022 are:
We Say Go Pty Limited
IJ Funds Management Pty Ltd
Securities Held
55,440,764
42,503,864
% of Voting
Power
10.02
7.68
UNLISTED OPTIONS/RIGHTS OVER ORDINARY 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
17 February 2021
17 February 2024
$0.09
3,000,000
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP ANNUAL REPORT 2022. PAGE 78
325 Manifold Street
Camperdown VIC 3260
Telephone: (03) 8692 7284
Email: shareholders@adnl.com.au
adnl.com.au