ANNUAL REPORT 2023
AUS TR ALI A N DAIRY NUTRITIONALS GROUP
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E WAY N A T U R
CORPORATE DIRECTORY
BOARD OF DIRECTORS
Martin Bryant
Non-Executive Chairman
Jason Dong
Non-Executive Director
Bernard Kavanagh
Non-Executive Director
Scott Lai
Non-Executive Director
COMPANY SECRETARY
Kate Palethorpe
Company Secretary
CORPORATE OFFICE
160 Depot Road
Camperdown VIC 3260
Telephone: (03) 8692 7284
Email: shareholders@adnl.com.au
AUDITOR
Nexia Brisbane Audit Pty Ltd
Level 28, 10 Eagle Street
Brisbane QLD 4000
Telephone: (07) 3229 2022
Facsimile: (07) 3229 3277
Email: audit@nexiabrisbane.com.au
Web: www.nexia.com.au
REGISTERED OFFICE
160 Depot Road
Camperdown VIC 3260
Telephone: (03) 8692 7284
Email: shareholders@adnl.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”.
SHARE REGISTER
Link Market Services Limited
WEBSITE
adnl.com.au
Level 21, 10 Eagle Street
Brisbane QLD 4000
Telephone: 1300 554 474
Facsimile: (02) 9287 0303
Email: registrars@linkmarketservices.com.au
Web: www.linkmarketservices.com.au
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
CONTENTS
CORPORATE DIRECTORY
CHAIRMAN’S ADDRESS
CEO REPORT
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
03
02
04
05
07
26
AUDITOR’S INDEPENDENCE DECLARATION 27
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
29
30
31
32
34
75
76
80
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
04
CHAIRMAN’S ADDRESS
Despite the collective
efforts of the Australian
in compliance and insurance costs and simplify the
Group’s corporate structure;
Dairy Nutritionals’
team in completing its
5-year transformation
strategy, this financial
year has been one
of mixed fortunes.
The Group is now a
fully vertically integrated
manufacturer of premium
organic infant formula and dairy powder products. After
a long and costly period of establishing organic A2 dairy
herds and organic certified farms plus construction of the
purpose built manufacturing facility, the Group is now
focused on selling our premium products.
Our Ocean Road Dairies Organic A2 infant formula has
been sold in the domestic market since November 2022
and while there has been a strong interest in the range
from distributors and consumers, we had hoped sales
volumes for the financial year would be higher than what
was achieved. Pleasingly we are starting to see sales of
this range grow and hope that a further 12 months in the
market and increased brand awareness will drive domestic
sales performance.
Sales of the Future Gradulac Gentle range have been
disappointing, so we are focussing this brand on international
markets where consumer understanding and acceptance of
reduced lactose formulations is already established.
In the second half of the financial year we put in place
distribution arrangements for Vietnam, Canada and
China and discussions are continuing with several other
potential distributors. The team are working very hard
to satisfy the product registration requirements for these
markets to expedite sales in these markets.
As dairy farm revenues alone are not sufficient to support
the cost base of the Group, we have restructured the
business during the financial year to reduce costs and
improve operational efficiencies including:
•
•
•
discontinuing Camperdown Dairy’s fresh milk
processing and selling the residual assets;
sale of our direct to consumer home delivery business,
Victoria Farmers Direct;
restructuring of the dairy farm portfolio to unstaple
the shares in Australian Dairy Nutritionals Limited from
the units in Australian Dairy Farms Trust and winding
up the Trust. The restructure was completed effective
30 June 2023 and will deliver a substantial reduction
•
•
sale and leaseback of the Brucknell North farm; and
capital raisings from new and existing shareholders.
The Group’s total revenue from continuing operations in
FY23 was $5.86m, which is broadly the same outcome as
the result in FY22. The resultant net loss from continuing
operations was $6.9m in FY23, compared to $1.8m in
FY22. The loss is largely attributable to commencement
of production of nutritional powders from the new
manufacturing facility plus the attendant marketing costs
without material product sales. The net assets of the Group
at 30 June 2023 total $33.5m, a decrease of $6.4m from
June 2022. The decrease in net assets is predominantly
driven by operating losses, offset by fair value increases and
capital raising. The Group remains debt free.
The Group’s small team continues to perform at a high
standard enabling the Group to confidently promote
and sell a premium product that has been manufactured
in our factory from the organic A2 milk produced from
our farms. There is no doubt that the achievements of
the team in producing a world class product have been
let down by slower sales results than we anticipated.
However, we are seeing significant interest in our products
in overseas markets where we can achieve prices
commensurate with the quality of our nutritional powders
and remain confident of success in the next year.
The Board acknowledges that the disappointing operating
performance and lack of material infant formula sales has
put significant pressure on the working capital position
of the Group. Now that the new manufacturing facility
has obtained its export licence the Board is confident that
our search for global distribution partners will result in the
Groups ability to scale up its manufacture and product
sales. Until such time as the product sales build sufficient
momentum to return positive cash flows the Group has a
number of initiatives it can utilise to ensure working capital
is adequate.
To all our shareholders, thank you for your continued
support.
Martin Bryant
Chairman
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
05
CEO REPORT
FY23 was a very busy
year with the final
milestones of our
5 year vertical
integration strategy
being achieved with
commencement of
commercial production
at our new infant formula
facility and launch of our
Ocean Road Organic A2 protein
infant formula range in Chemist warehouse nationally in
November 2022.
The transition from factory commissioning to commercial
production was executed with remarkable efficiency,
significantly outpacing industry standard. This is a
commendable achievement that reflects the unwavering
commitment of our talented operations team.
In February 2023 we were pleased to obtain our export
licence for our manufacturing facility, allowing all powders
and formulas produced in our manufacturing facility to be
exported to international markets.
With the export licence in place, export production
followed and the first shipping container of Ocean Road
Dairies infant formula was shipped to China and launched
on the JD.co.hk platform. This will be followed by Tmall
and other e-commerce distribution opportunities in that
market.
Domestic sales volumes of both the Future Gradulac
Gentle and Ocean Road Dairies infant formula range
have been slower to ramp up than anticipated. We put
this down to the highly competitive nature of the infant
formula category and the need for customers to develop
both awareness and trust of our brands. In addition,
COVID-19 materially changed the Australian infant
formula category, resulting in a significant reduction in
the volumes of sales through the major pharmacy and
supermarket retailers (previously supercharged by daigou
personal shoppers).
In response, we commenced the search for global
distribution partners with participation in key trade shows
across strategic locations including Singapore, the United
States, Vietnam, and Thailand. The trade shows bring in
distributors and retailers from many other countries as
well as domestic attendance. The feedback has been
excellent, and we have appointed distributors for both
brands in Vietnam and Canada and are in advanced
discussions with several other potential distributors in
international markets.
Unfortunately, the timeline to enter international markets
is longer than the domestic market as we need to ensure
we meet the relevant country’s product registration
requirements which can take between 2 and 12 months.
The increased timeframe to produce material revenues
from infant formula product sales has put pressure on
the Gorup’s cash flow as farm revenues are not sufficient
to support the cost structure of the Group. However,
we have adopted several measures during the financial
year to raise cash including two private placements, a
share purchase plan and the sale of discontinued fresh
processing assets.
We will continue to closely manage cash flows to
ensure the business remains viable while distribution
arrangements are established, and market entry
requirements satisfied.
I would like to thank all of our staff, shareholders, suppliers
and customers for their support over the last 12 months.
Peter Skene
Chief Executive Officer
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
06
Amidst a challenging economic environment
FY23 brought mixed fortunes for the Group. Major
milestones were achieved with commercial production
at the new infant formula facility and export certification,
however domestic sales have been slower to build,
accelerating our pivot to international market entries.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
07
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 2023.
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 (ADFT) and Regen Properties Pty Ltd (Regen
Properties);
operation of dairy farms and ownership of livestock
through SW Dairy Farms Pty Ltd (SWD);
manufacture of Ocean Road Dairies Organic A2
infant formula base powders at 160 Depot Road,
Camperdown, Victoria; and
distribution of the Group’s infant formula ranges
through Organic Nutritionals Pty Ltd (Organic
Nutritionals).
The Group’s infant formula manufacturing facility
achieved commercial production in October 2022 and
the Ocean Road Dairies Organic A2 infant formula range
was launched in Chemist Warehouse stores nationally in
November 2022.
Organic Nutritionals successfully obtained export
certification from the Department of Agriculture, Fisheries
and Forestry (DAFF) for its infant formula manufacturing
facility in February 2023. The export certification means
infant formula and other dried milk and milk powder
products manufactured at the Depot Road manufacturing
facility can be exported from Australia to international
markets, subject to local requirements for importation of
these products into each market. The certification was
a critical step in expanding the international distribution
footprint for the Ocean Road Dairies infant formula range.
Discontinued Operations – Fresh Processing
and Consumer Direct
During the year the Group discontinued its fresh dairy
processing operations and sold its home delivery business.
These segments are reported as discontinued operations
for the year ended 30 June 2023.
Camperdown Dairy’s fresh milk processing ceased at the
end of August 2022 allowing the Group to focus on its
infant formula strategy and transition skilled processing
staff to the Depot Road manufacturing facility. On 3 June
2023, the Group announced that it had entered into an
agreement to sell Camperdown Dairy’s residual fresh
dairy processing assets for $1.05 million and transfer the
Manifold Street lease to a third party. The sale and transfer
completed on 29 June 2023, delivering operational cost
savings of $30k per month.
Victorian Farmers Direct Pty Ltd, the Group’s consumer
direct home delivery business, was sold on 28 April 2023.
Corporate restructure and unstapling
In 2022 the Group commenced the process of
restructuring its dairy farm portfolio to enable it to
unstaple the shares in Australian Dairy Nutritionals Limited
(ADNL) from the units in the Australian Dairy Farms Trust
(ADFT).
As part of this process, ownership of the Group’s dairy
farms was transferred from ADFT to Regen Properties,
with the Brucknell North and South farms transferred in
May 2022 and the Yaringa farm in September 2022.
On 15 July 2022 the Group sold the Brucknell North
farm to a third party for $6.425 million. The farm was
immediately leased back by SWD for a period of 3 years
plus a further 1-year option to renew. This allows the
Group to continue to produce organic A2 protein milk at
the farm to support the manufacture of the Ocean Road
Dairies infant formula range. SWD is able to terminate
the lease of the Brucknell North farm without liability
by providing 90 days written notice, giving it significant
flexibility in managing its raw milk requirements.
At the Group’s annual general meeting held 24 November
2022, shareholders voted in favour of unstapling the
shares in ADNL from the units in ADFT. The unstapling
date is 1 December 2022 and following the unstapling,
shares in ADNL have continued to trade on the ASX, with
no further trading in the units of ADFT.
On 6 March 2023, unitholders were advised that ADFT had
transferred all remaining and future arising assets to ADNL
and that, in the absence of any objection from unitholders,
the units would be cancelled and ADFT wound up. No
objections were received from unitholders within the time
required so the units were cancelled and the trust wound
up effective 30 June 2023.
As part of the restructure, no changes were made to dairy
farm operations which remain in SWD.
Following the completion of the FY23 audit, the Group
will apply to cancel the Australian Financial Services
Licence held by the responsible entity of ADFT, Dairy
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
08
DIRECTORS’ REPORT, CONTINUED.
Fund Management Ltd and wind up this entity. The
restructure and unstapling process simplifies the Group’s
corporate structure and delivers a substantial reduction in
compliance and insurance costs.
Capital Raising
During the year, the Group has undertaken the following
capital raising to support its cash flows as it works to
establish distribution networks for its products:
•
•
•
On 26 April 2023, a private placement of 33,333,333
new shares to Mr Xin Yang to raise $1 million at a
price of $0.03 per share. The subscription agreement
included a ‘top-up’ mechanism requiring ADNL to issue
additional shares if it raised additional capital within 6
months of the placement at a price less than $0.03 per
share. As ADNL conducted a share purchase plan within
6 months of the placement at $0.022 per share, Mr Yang
was issued an additional 12,121,212 shares in ADNL on 11
July 2023 to ‘top up’ his shareholding to be equivalent
to a subscription price of $0.022 per share;
On 29 June 2023, a share purchase plan to existing
shareholders to raise $505k through the issue of
22,957,300 shares at a price of $0.022 per share; and
On 11 July 2023, a private placement to specific
sophisticated investors to raise $710k at a price of
$0.022 per share. This placement completed after
the reporting period and the proceeds are not
incorporated in the financial results at 30 June 2023.
BUSINESS MODEL AND OBJECTIVES
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.
October 2022 saw the successful completion of the final
step in the vertical integration strategy with commercial
production of all three stages of the Ocean Road Dairies
Organic A2 infant formula range at the Group’s infant
formula manufacturing facility. The Ocean Road Dairies
range was launched in Chemist Warehouse stores
nationally in November 2022.
In the second half of FY23 the Group’s focus shifted to
establishing the distribution network for its infant formula
products and refining operations at the manufacturing
facility. At a broader level there was also a renewed focus
on refining the Group’s corporate operations to reduce
complexity and costs.
The infant formula category in Australia was significantly
impacted by COVID-19. Prior to COVID-19 lockdowns
and international border closures, large volumes of infant
formula were purchased from the major pharmacy and
supermarket retailers by personal shoppers (known as
daigous) and sent overseas, predominantly to China.
When international borders were closed, sales through
this channel reduced significantly, materially impacting the
performance of the infant formula category in the major
pharmacy and supermarket retailers.
As a result, domestic sales of the Group’s infant formula
products in Chemist Warehouse have been slower to gain
traction than anticipated and this is compounded by the
fact that both brands are new in the market. The Group is
continuing to invest in targeted marketing to promote and
increase brand awareness in the Australian market and we
continue to engage with the major supermarkets, however
at this stage they are unlikely to add new brands to the
category until the brand and products are sufficiently
established in the market.
With challenging conditions domestically, the Group
also focussed on establishing international distribution
opportunities. A critical step in accessing international
markets for the Ocean Road Dairies infant formula range
was obtaining export certification of the Depot Road
manufacturing facility. This was successfully obtained
in February 2023, meaning infant formula and other
powdered milk products manufactured at the facility can
be exported to international markets (subject to local
import requirements).
During the second half of FY23, the Group has made
progress in establishing its international distribution network,
attending four international trade shows, and appointing
a distributor in Canada, Vietnam and for the JD.co.hk
e-commerce platform in China. The Ocean Road Dairies
signature store on JD.co.hk launched in July 2023 and
management are working with the appointed distributors
in Vietnam and Canada to satisfy the local requirements for
import of both ranges in the respective markets.
Going Concern
The financial statements have been prepared using the going
concern basis of preparation. During the year the Group
incurred a loss of $9.24 million (2022: $4.15 million loss),
has total accumulated losses of $48.74 million and had a
net cash outflow from operations of $7.05 million (2022:
$3.80 million outflow). The Groups cash and cash equivalent
balance as at 30 June 2023 was $2.01 million. The Board
is satisfied the going concern basis of preparation remains
appropriate, reaching such a conclusion after having regard
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
09
DIRECTORS’ REPORT, CONTINUED.
to the circumstances which they consider reasonably likely
to affect the Group during the period of at least one year
from the date of this report.
The Board has been very closely monitoring cash flows
throughout the year as the Group has incurred costs in
producing inventory and invested in sales and marketing
activity to promote both infant formula brands however this
has not yet translated to material infant formula sales.
To support cash flows the Group has reduced non-
core operational costs through the closure and sale of
Camperdown Dairy’s fresh processing operations and the
consumer direct home delivery business, Victorian Farmers
Direct. The unstapling of the shares in ADNL from the
units in the ADFT and winding up the ADFT will also deliver
significant compliance and insurance cost savings in FY24.
While infant formula product sales build and the Group
works to gain access to international markets such as
Vietnam and Canada, the Board is confident in the Groups
ability to continue as a going concern for the 12 month
period assessed above due to the Group’s ability to produce
the requisite working capital from various initiatives including
but not limited to:
•
•
•
•
the Group is seeking to raise short-term borrowings in
order to fund ongoing operational needs until such time
as sales of its infant formula build sufficient momentum
to return positive cash flows from operations to the
Group;
the Group can further curtail operating costs to better
align with the output of the manufacture and sale of
infant formula;
the Group presently has at its disposal surplus assets that
can be readily sold without impacting core operations,
realising significant cash and cash equivalents; and
the Group will seek approval from shareholders at
the 2023 annual general meeting to refresh its 15%
placement capacity and additional 10% placement
capacity under ASX listing Rule 7.1. The Board is
confident that it will obtain approval for at least one
of the available placement facilities allowing it to raise
working capital through equity placements to new or
existing shareholders.
are reasonable grounds to believe that the Group will be
able to continue to meet its debts as and when they fall due
and that it is appropriate for the financial statements to be
prepared on a going concern basis.
The financial report does not include any adjustments to the
amounts or classifications of recorded assets or liabilities
that might be necessary should the Group not continue as a
going concern. Should the Group be unable to continue as
a going concern it may be required to realise its assets and
extinguish its liabilities other than in the ordinary course of
business and at amounts that differ from those stated in the
financial statements.
OPERATING RESULTS
Continuing Operations
The consolidated net loss from continuing operations
attributed to members of the Group, after providing for
income tax was $6,938,549 (2022: $1,788,268). This result
is comprised of a net loss from the nutritional powders
segment of $3,709,830 (2022: $276,592) and net loss from
the dairy farm segment of $724,160 (2022: $1,074,922
profit). Corporate costs of $2,504,559 (2022: $2,586,598)
are not included in the segment results.
Total revenue from continuing operations for FY23
is $5,855,677 which is broadly in line with the FY22
comparative period of $5,856,390. This is comprised of
$5,442,236 (2022: $5,671,973) in revenue from the dairy
farms segment and $413,441 (2022: $192,544) from the
nutritional powders segment.
The decrease in dairy farms segment revenue of $230,315
in FY23 is largely attributable to a decrease in livestock
sales and 3 months of revenue in the FY22 comparative
from the Ecklin South farm which was sold in September
2021. This is offset by a positive increase in milk price per
litre for FY23.
The Nutritional powders segment revenue in FY23
increased by $220,897 compared to FY22, reflecting the
launch of the Ocean Road Dairies infant formula range
in November 2022. Although this is an increase, this is a
disappointing result and demonstrates that domestic sales
of both brands, particularly the Future brand, have been
slower to build domestically than anticipated.
Should the Group be unsuccessful in securing additional
funds or monetising assets, there exists a material
uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern. The Board
are satisfied at the date of signing the financial report there
Total expenses from continuing operations for FY23
were $12,794,227, up 21% against the FY22 comparative
period of $10,542,211. This increase is primarily driven by
expenditure on manufacturing and marketing of the infant
formula brands. Expenses for the nutritional powders
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
10
DIRECTORS’ REPORT, CONTINUED.
segment are $4,123,271 (2022: $469,146) and $6,166,396
(2022: $7,486,467) for the dairy farms segment. Corporate
expenses for FY23 are $2,504,559 (2022: $2,586,598).
Discontinuing Operations
Discontinued operations include Camperdown Dairy
Company Pty Ltd’s fresh dairy processing operations
which were discontinued in August 2022 and the
consumer direct home delivery business Victorian Farmers
Direct sold in May 2023.
The consolidated net loss from discontinuing operations
attributed to members of the Group, after providing for
income tax was $2,305,637 (2022: $2,360,253). Refer Note
4 for further details.
FINANCIAL POSITION
The net assets of the Group at 30 June 2023 total
$33,523,354, a $6,425,133 decrease from the June 2022
comparative of $39,948,487. The decrease is primarily
driven by operating losses, offset by fair value increases
and equity capital raising.
The key assets and liabilities in the statement of financial
position at 30 June 2023 are:
•
•
•
•
•
cash and cash equivalents of $2,007,429
(2022: $2,431,696);
inventories of $1,732,674 (2022: $1,398,681);
property, plant and equipment of $26,381,586
(2022: $33,428,288);
intangible assets of $635,732 (2022: $547,481);
biological assets (livestock) of $3,535,686
(2022: $4,416,205); and
•
total borrowings of $nil (2022: $502,770).
REVIEW OF OPERATIONS
CONTINUING OPERATIONS
DAIRY FARM SEGMENT
Regen Properties Pty Ltd (land owner) and SW Dairy
Farms Pty Ltd (farm operator)
wholly owned subsidiary of ADNL, Regen Properties Pty
Ltd (Regen Properties). The Brucknell South and North
farms were transferred to Regen Properties in May 2022
and the Yaringa farm was transferred in September 2022.
No changes were made to dairy farm operations which
remain in SWD.
On 15 July 2022, the Group sold the Brucknell North farm
to a third party for $6.425 million. The sale did not include
the A2 cow herd on that property and the farm was
immediately leased back by SWD for a term of 3 years plus
an option for a further 12 months. At any time during the
term of the Brucknell North lease, the Group may elect
to terminate by providing the landlord 3 months’ written
notice.
During the financial year SWD also leased part of an
organic certified farm located in Darlington, Victoria.
The property will be used to produce a portion of SWD’s
organic grain and silage requirements. Subject to the
yield achieved, vertical integration of SWD’s organic grain
requirements will assist in securing organic grain supply
and deliver an estimated 30% reduction in grain costs,
compared to sourcing on market.
(ii) Dairy farm segment performance
For the third consecutive year, seasonal conditions in
Southwest Victoria have been favourable for dairy farming.
The dairy farms segment net loss for the financial year
was $724,160 (2022: $1,074,922 profit). The FY22 result
includes the gain on disposal of the Ecklin South farm
of $1,555,342 and gains from changes to fair value of
livestock of $1,342,672 (2023: $238,913 loss).
After removing the impact of the Ecklin South farm sale
and sales, deemed cost of sales and fair value movements
of livestock in both financial years, the dairy farm
operating segment’s financial performance has seen a
significant improvement in FY23 with an operational net
loss of $215,821 (2022: $1,240,044). This is off the back of
a stronger milk price, reduced costs, and good seasonal
conditions. With strong milk prices, good seasonal
conditions and vertical integration of organic grain,
FY24 should see a move back to achieving a profitable
operating result in the dairy farms segment.
(i) Dairy farm ownership structure
(iii) Livestock values
In 2022 the Group commenced the process of
restructuring its dairy farm portfolio to enable it to
unstaple the shares in Australian Dairy Nutritionals Limited
(ADNL) from the units in the Australian Dairy Farms Trust
(ADFT). As part of this process, ownership of the Group’s
dairy farm properties were transferred from ADFT to a new
Livestock values remained strong during the first half of
the financial year, however prices softened in the second
half of FY23 resulting in a loss from changes in fair value of
livestock of $238,913 (2022: $1,342,672 gain).
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
11
DIRECTORS’ REPORT, CONTINUED.
(iv) Farm values
Rural property prices in Southwest Victoria continued
to perform well despite rising interest rates. Registered
valuers Preston Rowe Paterson completed an independent
valuation of both farm properties for 30 June 2023. The
basis of the valuation is ‘As Is and In Use’ with vacant
possession and the combined fair value of both farm
properties is $15,400,000. The combined value of the
Group’s farm portfolio is up 9% on 30 June 2022 carrying
values and a fair value gain of $1,434,305 is reflected in
other comprehensive income.
(v) FY23 Farmgate milk price
After a period of record prices in FY23, farmgate
conventional milk prices softened in the second half of the
financial year driven by reduction in international demand
as well as the impact of rising cost of living domestically.
Despite this, demand for organic farmgate milk remained
steady and SWD was able to contract all the excess
organic milk produced by its farms in FY24 and FY25 at a
similar price to FY23.
NUTRITIONAL POWDERS SEGMENT
(i) Depot Road Manufacturing Facility
The Group’s infant formula manufacturing facility achieved
commercial production of all three stages of the Ocean
Road Dairies infant formula range in October 2022, a
major milestone for the Group. The range launched in
November 2022 and is available in Chemist Warehouse
stores nationally.
The Group successfully obtained export certification from
the Department of Agriculture, Fisheries and Forestry
(DAFF) for the Depot Road manufacturing facility in
February 2023. The export certification means infant
formula and other dried milk and milk powder products
manufactured at the facility can be exported from Australia
to international markets, subject to local requirements for
importation of these products into each market.
All Ocean Road Dairies infant formula products and
other milk powder products produced at the facility
following the export certification are eligible for export to
international markets which is a key step in expanding the
Group’s international distribution network.
Registered valuers IPN Valuers - Greater Geelong
completed an independent valuation of the Depot & Old
Geelong Road land and infant formula building for 30
June 2023. The basis of valuation is a cost approach using
the summation of land and improvements, supported by
comparable sales evidence and capitalisation of income.
The combined fair value was assessed at $5,100,000
and a fair value loss of $149,769 is reflected in other
comprehensive income.
(ii) Infant formula and nutritionals
As noted above, the Ocean Road Dairies infant formula
range has been available in Chemist Warehouse stores
nationally since November 2022. There has been
significant focus on establishing this new brand in the
market and developing consumer trust and confidence.
Our targeted marketing investment has focussed on
driving brand and product recognition with consumers
including social media campaigns and attendance at
Pregnancy and Baby Shows. Whilst the infant formula
category is highly competitive and consumers tend to
be very brand loyal, Chemist Warehouse sales of the
Ocean Road Dairies range are starting to increase steadily,
notwithstanding the challenging retail environment and
cost of living pressures.
In addition to the Ocean Road Dairies infant formula
range, the Group also manufactures (via a third party)
and sells the Future Gradulac Gentle infant formula
range (Future). This range has been available in Chemist
Warehouse stores nationally since May 2022. Sales of
the Future range have been slower to gain traction than
anticipated most likely due to consumers finding the
gradual lactose formulation difficult to understand. As a
result, the segment includes a write-down of $916,519 in
relation to short-dated stock of the future range. Moving
forward, opportunities for the Future range will primarily
relate to international markets.
For both infant formula ranges, the Group continues
to work on obtaining ranging in both of the major
supermarkets, however changes to the infant formula
category because of COVID-19 lock downs and travel
bans significantly reduced the volume of infant formula
sold through this channel making them reluctant to take
on new brands at this stage.
On the international front, the Group exported its first
shipment of Ocean Road Dairies products to China in
June 2023 in anticipation of the launch of the Ocean
Road Dairies signature store on the JD.co.hk and Tmall
e-commerce platforms. Based on our experience
domestically, sales are likely to be slow to build as
the brand has to gain recognition in this market and
consumers develop trust in the products.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
12
DIRECTORS’ REPORT, CONTINUED.
The Group has also appointed a distributor for both
ranges in Vietnam and Canada and is progressing
product registration requirements in these markets.
Registration of the Future range in Malaysia has been
delayed, however the Group still considers this an
attractive territory and is continuing to progress
distribution opportunities for both brands.
On 17 May 2023 the Group announced the execution of
a Cooperation Agreement with Beijing Yiqing Food Group
Co. Ltd (Yiqing). Yiqing is a comprehensive food group
headquartered in Beijing, China with a wide range of
businesses including beverages, bread, beer, cooked food,
snacks, pastries and other categories as well as its own
distribution businesses including food stores, Jingqing
convenience stores and e-commerce. Management are
working with Yiqing to understand their requirements and
identify opportunities for the two businesses to partner for
mutual benefit.
DISCONTINUED OPERATIONS
FRESH DAIRY PROCESSING SEGMENT
Camperdown Dairy Company Pty Ltd
As per previous announcements to the ASX during the
year, the Group made the decision to close its fresh milk
processing at the Manifold Street site in Camperdown. The
closure allowed the Group to transfer several experienced
dairy processing staff to its new manufacturing facility and
focus on its infant formula brands. The fresh processing
operations ceased at the end of August 2022 and the
remaining plant and equipment and the Manifold Street
site lease were transferred to a third party on 29 June
2023 for $1,050,000 resulting in a loss on disposal of
$1,025,217.
CONSUMER DIRECT SEGEMENT
Victorian Farmers Direct Pty Ltd
The consumer direct segment comprised the Group’s
Victorian Farmers Direct business, an online platform
which delivered fresh milk, dairy, meat, and other groceries
directly to consumers’ doorsteps. The business operated
in Victoria only and generated revenue of $1,466,334 in
FY23 (2022: $2,249,471) and a net loss of $132,861 (2022:
$98,307). With the closure of Camperdown Dairy’s fresh
milk processing, the Group restructure and the business
in a loss position, the business was sold to a third party in
April 2023.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
Significant changes in the state of affairs of the Group
in FY23 included the sale of the Brucknell North farm
for $6.425 million which completed on 15 July 2022.
Immediately after settlement of the sale SWD leased back
the property for a period of 3 years with an option to
renew for a further 12 months.
FY23 also saw the closure of Camperdown Dairy’s fresh
processing operations and sale of the residual processing
equipment and transfer of the Manifold Street lease on 29
June 2023.
At the operational level, the Depot Road infant formula
manufacturing facility achieved first commercial
production of the Ocean Road Dairies Organic A2 infant
formula range in October 2022 and the range was
launched in Chemist Warehouse stores nationally from
November 2022. The Depot Road manufacturing facility
also achieved export certification through the Department
of Agriculture, Fisheries and Forestry (DAFF) in February
2023 allowing dried milk and milk powder products
manufactured at the facility to be exported to international
markets (subject to local import requirements).
From a corporate perspective, the Group sought the
approval of shareholders at the annual general meeting
held on 24 November 2022 to unstaple the shares in
ADNL from the units in ADFT. The unstapling resolution
was approved by shareholder and the unstapling
completed effective 1 December 2022. Since that date,
the shares in ADNL have continued to trade as normal on
the ASX and the units in the trust were cancelled and ADFT
was wound up effective 30 June 2023.
The Board also conducted two capital raisings in
the financial year to support the Group’s cash flows.
33,333,333 shares were issued to Mr Xin Yang on 26 April
2023 raising $1,000,000 and 22,957,300 shares were
issued to existing shareholders through a share purchase
plan on 29 June 2023 raising $505,061.
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 2023
13
DIRECTORS’ REPORT, CONTINUED.
EVENTS AFTER THE REPORTING PERIOD
•
•
•
•
On 11 July 2023 the Group completed a placement to
sophisticated investors to raise $710,000 through the
issue of 32,272,727 shares at $0.022 per share.
The Group issued a further 12,121,212 shares to
Mr Xin Yang as the subscription agreement for the
placement completed on 26 April 2023 provided for
his shareholding to be ‘topped up’ in the event the
Group raised further equity capital within 6 months of
completion of the placement at a price less than $0.03
per share. The issue of the additional shares gave him
an effective subscription price of $0.022, the same as
the share purchase plan and later placement.
Mr Adrian Rowley resigned from the Board on 27 July
2023 to focus on his own business.
Mr Scott Lai was appointed to the Board on 7 August
2023. Mr Lai is a director of IJ Funds Management
Pty Ltd, one of the Group’s substantial shareholders
and brings a strong background of establishing
and managing start-up businesses. He also has
significant experience and networks in capital raising
and investment management. Mr Lai will seek re-
appointment as a director at the Group’s next annual
general meeting.
In the opinion of the directors there are no other material
matters that have arisen since 30 June 2023 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 a Trade Waste
Agreement with Wannon Water which regulates effluent
disposal from the Depot Road manufacturing facility.
The Group considers itself to be in compliance with its
environmental obligations.
FUTURE DEVELOPMENTS, PROSPECTS
AND BUSINESS STRATEGIES
After a significant period of investment in transitioning
its dairy farms to organic A2 protein milk production and
construction of the Group’s infant formula manufacturing
facility, ADNL’s vertical integration strategy is now
complete. In FY24 and beyond the Group will focus on
the following core areas:
•
•
sale and distribution of its infant formula ranges and
complementary products;
increasing the capacity and efficiency of its
manufacturing operations;
•
refining its farming operations; and
• effective management of non-operational costs.
BUSINESS RISK
The Group consists of complementary businesses in
dairy farming and manufacture and distribution of infant
formula 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 uncertainties impacting the Group.
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
14
DIRECTORS’ REPORT, CONTINUED.
Environmental Risks
Food Safety / Quality
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.
Development Projects
The Group may 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, the development 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 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.
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, profitability
and reputation.
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.
Marketing Investment and Competitive landscape
The infant formula and infant nutrition segment is highly
competitive and many large, long established businesses
participate in the segment. These brands have very
large marketing budgets to promote their products
making it difficult for new brands to gain exposure in the
market. There is no guarantee that the level of marketing
investment available to the Group will be sufficient to
increase brand or product awareness in the market or, that
consumers will develop the required level of trust in the
Group’s brands/products to consider trying or switching
to them. Furthermore, there is no guarantee that other
participants in the segment won’t introduce similar
products to the Group’s products potentially eroding the
Group’s competitive advantage.
Inventory Management
Predicting market and consumer demand for new
products is very difficult. Furthermore, manufacturing
facilities often require minimum production volumes to
manufacture products or components of a product. There
is a risk of large inventory write offs and/or brand damage
if inventory of finished products (particularly products
with shelf life restrictions) or components of products
materially exceed demand.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
15
DIRECTORS’ REPORT, CONTINUED.
Infectious Diseases and Export Risks
Regulatory / Compliance Risk
An outbreak of COVID-19 or another infectious disease at
the Group’s production plant could cause the temporary
shutdown of that plant and standing down of staff, with
a consequential effect on production and 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 it’s 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.
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.
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. The sale of infant formula
products is highly regulated both domestically and in
international markets. Failure to comply with these
regulations may damage the reputation of the Group
and its brands and impact the financial performance of
the Group including access to international markets. In
addition, 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 2023
16
DIRECTORS’ REPORT, CONTINUED.
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
Martin Bryant
Position
Chairman
Adrian Rowley
Director (resigned 27 July 2023)
Jason Dong
Director
Bernard Kavanagh
Director
Scott Lai
Director (appointed 8 August 2023)
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 2,500,000 shares at 30 June 2023.
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 as well as insight and leadership of the Board.
Adrian Rowley
Qualifications
Non-Executive Director (resigned 27 July 2023)
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 1,911,000 shares at 30 June 2023.
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.
Mr Rowley resigned as a director of the Company on 27 July 2023.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
17
DIRECTORS’ REPORT, CONTINUED.
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
A relevant interest in 500,000 shares at 30 June 2023.
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 shares at 30 June 2023.
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 Ex-
ecutive 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 led
the oversubscribed IPO of Ketone Dairy Corporation (ASX: KTD) on the ASX as Chairman.
Scott Lai
Qualifications
Non-Executive Director
Bachelor of Commerce - Banking, Finance and Risk Management
(Griffith University)
Master of Commerce - Professional Accounting (Griffith University)
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 42,503,864 shares at 30 June 2023.
Scott Lai was appointed to the Board on 7 August 2023. Scott brings strong financial market knowledge and an
extensive network of more than 1,000 corporate and high net worth investors to the Group. He also has a strong
track record of establishing and growing innovative businesses in highly regulated sectors including financial services
and energy markets with demonstrated skills managing teams of more than 100 employees. In 2017 Mr Lai founded
IJ Financial Services Pty Ltd and has grown this business to be a preeminent leader in the fund investment and
mortgage loan industry in Queensland with a specific focus on the Chinese market. Mr Lai is also a director of IJ Funds
Management Pty Ltd which has been a major shareholder in the Group since 2022.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
18
DIRECTORS’ REPORT, CONTINUED.
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 1,500,000 stapled securities at 30 June 2023.
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 arising in relation to the half year review and annual audit. On matters of
corporate governance, the Board retains a direct interest rather than through a separate committee structure which at this
stage is appropriate for a Board of this size and structure. At each Board meeting written reports in relation to operating
strategies and activities are provided as well as risk and compliance matters with a particular focus on occupational health
and safety, food safety and quality and key strategic and emerging risks.
Aside from formally constituted directors’ meetings, the directors and chairman are in regular contact regarding the opera-
tion of the Group and particular issues of importance.
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
Bernard Kavanagh
Meetings eligible to attend
Meetings attended
17
17
17
17
16
13
14
17
DIVIDENDS PAID OR RECOMMENDED
The directors have not recommended or paid a dividend for the year ended 30 June 2023 (2022: $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 $41,740 (2022:
$33,519) 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
19
DIRECTORS’ REPORT, CONTINUED.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of a court to bring proceedings against or on behalf of the Group or to intervene in any
significant proceedings to which any such entity is a party for the purpose of taking responsibility for all or any part of those
proceedings. No proceeding has had or is likely to have a material impact on the financial position of the Group.
NON-AUDIT SERVICES
The Board is satisfied that the provision of non-audit services during the year is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001 and is satisfied that the services disclosed below did not
compromise the external auditor’s independence for the following reasons:
i)
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 2023 there was no payment to external auditors for non-audit services (2022: $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
12 February 2018
Last Date of Expiry
12 February 2023
18 November 2019
18 November 2022
17 February 2021
17 February 2024
Exercise Price
Number under Option
12.4 cents
11.5 cents
9 cents
7,000,0001
2,500,0001
3,000,000
1 Loan Securities issued under the Company’s Long Term Incentive Plan which have expired and are in the process of being
bought back and cancelled.
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 27.
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 2023 has been received and a copy can be found
at page 27.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
20
DIRECTORS’ REPORT, CONTINUED.
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. Whilst the Board acknowledges
that the Group received a first strike in relation to
the remuneration report for financial year ending 30
June 2022, the Board has acted on the message from
shareholders to ensure the remuneration policy is
appropriate and effective in its ability to attract and retain
high-quality KMP to manage the Group, as well as create
goal congruence between directors, executives and
shareholders based on the performance of the Group.
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 role and experience, market comparison with
equivalent roles, performance and length of service)
plus superannuation;
Performance incentives are based on the achievement
of strategic and operational objectives by the KMP,
which are agreed in advance, typically 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 the predetermined key
performance indicators (KPIs);
•
•
Incentives paid in the form of equity are intended to
align the interests of the KMP with the Group and the
shareholders. In this regard, KMP are prohibited from
limiting risk attached to those instruments by use of
derivatives or other means; and
The Board reviews KMP packages annually by reference
to the Group’s performance, executive performance,
and comparable information from industry sectors.
Performance of KMP is reviewed on an ongoing basis
with a formal review conducted annually, typically
after issue of the Group’s audited result for the relevant
financial year. This includes review of the relevant KMP’s
performance against agreed objectives and award of
incentives (if applicable). The remuneration policy is
designed to attract a high caliber of executives and
reward them for performance leading to long-term
growth in shareholder value.
KMP receive, at a minimum, a superannuation guarantee
contribution in line with legislation, which is currently
11%. 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 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 performance, 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 and executives are entitled to participate in
the Company’s Long Term Incentive Plan (LTIP) to align
their interests with shareholders’ interests. Given the
strike against the 2022 Remuneration Report, the Board
have elected not to seek approval for any performance
incentives in respect of financial year 2024.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
21
DIRECTORS’ REPORT, CONTINUED.
KMP or closely related parties of KMP are prohibited from
entering 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 shares as collateral in any financial transaction,
including margin loan arrangements.
Engagement Of Remuneration Consultants
During the financial year, no consultants were engaged by
the remuneration committee to review the elements of
KMP remuneration and provide recommendations. As the
size and nature of the Group’s activities increase, this may
become necessary.
Performance-Based Remuneration
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.
For executives, a portion of the measures typically focus
on the overall performance of the Group (measured by
specific performance metrics) and a portion are tailored
to the operational area each individual is accountable for.
The KPIs target areas the Board believes hold greatest
potential for Group expansion and profit, covering
financial and non-financial as well as short and long-term
goals.
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 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
the Board determines whether the relative attached KPI is
approved..
Relationship Between Remuneration Policy
And Group Performance
As noted above, the remuneration policy provides for
a fixed and variable component of remuneration for
KMP’s of the Group. The fixed component of a KMP’s
remuneration is a contractual obligation and cannot be
amended without the agreement of the relevant KMP or,
termination of the KMP. The remuneration policy provides
for a variable component of the KMP’s remuneration
which is at-risk and only granted to the KMP if pre-agreed
performance conditions are achieved. The variable
component of the KMP’s remuneration is designed to
reward the KMP only for performance which contributes
to the performance of the Group thereby aligning
the experience of the KMP with the experience of the
shareholder. The issue of performance-based incentives
to KMP pursuant to the Group’s Long Term Incentive
Plan is to align KMP and shareholder interests. The Group
believes this policy to be effective in driving KMP’s and
other Group personnel to increase shareholder wealth in
future years.
Performance Conditions Linked To Remuneration
During this financial year, the Group issued shares to
KMP (Adrian Rowley, Jason Dong and Peter Skene). The
grant of these performance incentives was approved by
shareholders at the 2021 annual general meeting held on
20 January 2022. Peter Skene, Adrian Rowley and Jason
Dong were each issued 500,000 shares on 24 August
2022 as the Total Shareholder Return (TSR) performance
hurdle attached to those performance incentives was
achieved during the financial year ended 30 June 2022.
At the 2022 annual general meeting held on 24 November
2022, shareholders approved the issue of 1,000,000
performance rights to each of Bernard Kavanagh and
Jason Dong. The performance rights entitled each
individual to be issued 1 share in the Company if
performance conditions attached to those performance
rights were achieved. None of the performance conditions
were achieved and therefore the 1,000,000 performance
rights were forfeited.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
22
DIRECTORS’ REPORT, CONTINUED.
Key Management Personnel (KMP) Shareholdings
The number of ordinary shares held directly, indirectly, or beneficially by each KMP (or their related parties) of the Group
during the financial year is as follows:
30 June 2023
Martin Bryant
Adrian Rowley1
Peter Skene2
Jason Dong
Bernard Kavanagh
Balance at
01/07/2022
1,500,000
1,411,000
14,415,385
-
-
Granted as
Remuneration
-
500,000
500,000
500,000
-
Purchased
on Market
1,000,000
-
158,566
-
-
Balance at
30/06/2023
2,500,000
1,911,000
15,073,951
500,000
-
17,326,385
1,500,000
1,158,566
19,984,951
1. Resigned as a director 27 July 2023.
2. Includes 7,000,000 loan securities issued under the Company’s Long Term Incentive Plan which have expired and are in the process of being bought back
and cancelled.
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 shareholdings.
Changes In Directors And KMP Subsequent To Year-End
On 27 July 2023 Adrian Rowley resigned as a director of the Company. On 7 August 2023 Scott Lai was appointed as a
director of the Company.
Employment Details Of Members Of Key Management Personnel
The following table provides employment details of persons who were, during the financial year, members of KMP
of the consolidated Group. The table also illustrates the proportion of remuneration that was performance and non-
performance based.
Proportions of Elements of
Remuneration Related to
Performance (Other than
Options/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
Name
Position Held
Contract Details
M Bryant
Chairman
A Rowley
J Dong
Director
Director
B Kavanagh Director
N/A
N/A
N/A
N/A
P Skene
Group CEO / Director
3 months’ notice
In the current year, no KMP received any performance-based remuneration.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
23
DIRECTORS’ REPORT, CONTINUED.
Remuneration Expense Details For The Year Ended 30 June 2023
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.
Short Term Benefit
Post
Employment
Long-term
Benefit
Termination
Benefits
Equity-settled
Share-based
Payments
Total
Salary /
Director’s
Fees
Annual
Leave
Super
Contributions
$
$
$
LSL
$
Termination
Benefits
Performance
Rights
$
$
$
Key Management
Personnel (KMP)
M Bryant - 2023
M Bryant - 2022
A Rowley - 20231
A Rowley - 2022
J Dong - 20232
J Dong - 2022
B Kavanagh - 20233
B Kavanagh - 2022
75,000
75,000
63,450
60,000
202,497
60,000
78,000
-
-
-
-
-
-
-
-
-
7,875
7,500
3,150
5,700
6,300
6,000
8,190
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
82,875
9,000
91,500
-
66,600
9,000
74,700
2,500
211,297
9,000
75,000
2,500
88,690
-
-
-
432,812
9,000
438,504
5,000
882,274
36,000
679,704
P Skene - 2023
382,404
16,197
25,000
9,211
P Skene - 2022
383,744
14,061
25,000
6,699
Total - 2023
Total - 2022
801,351
16,197
50,515
9,211
578,744
14,061
44,200
6,699
1. This includes directors’ fees and an amount paid in accordance with a contract arrangement with
Watershed Funds Management Pty Ltd, an entity associated with Adrian Rowley.
2. This amount includes director’s fees and an amount paid in accordance with a contract arrangement
with Ozvic Victoria Pty Ltd, an entity associated with Jason Dong.
3. Bernard Kavanagh was appointed as a director on 22 June 2022.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
24
DIRECTORS’ REPORT, CONTINUED.
Options And Rights Granted As Share-Based Payments
During the year ended 30 June 2023 are as follows:
Grant Details
Exercised
Forfeited
Balance at
01/07/2022
Issue Date
No.
Value
($)
No.
Value
($)
No.
Value
($)
Balance at
30/06/2023
P Skene
7,500,000
M Bryant1
500,000
A Rowley
500,000
-
-
-
-
-
-
(500,000)
(9,000)
-
-
7,000,000
-
-
(500,000)
(9,000)
(500,000)
(9,000)
-
-
J Dong
500,000
24/11/2022
1,000,000
29,000
(500,000)
(9,000) (1,000,000)
(29,000)
B Kavanagh
- 24/11/2022
1,000,000
29,000
-
- (1,000,000)
(29,000)
-
-
-
-
Total
9,000,000
2,000,000
58,000
(1,500,000)
(27,000)
(2,500,000)
(67,000)
7,000,000
1. Martin Bryant was entitled to 500,000 director performance rights (TSR hurdle) at 30 June 2022. As announced to the ASX on 25 August 2022, he elected not
to receive the securities to which he is entitled and these have been cancelled.
Balance at
30/06/2023
Vested
Unvested
No.
No.
P Skene1
7,000,000
7,000,000 -
7,000,000
7,000,000 -
1Loan Securities issued under the Company’s Long Term Incentive Plan which have expired and are in the process of being
bought back and cancelled.
The fair value of options granted as remuneration as shown in the above table has been determined in accordance with
Australian Accounting Standards and was recognised as an expense over the relevant vesting period.
During the year ended 30 June 2022 are as follows:
Grant Details
Exercised
Forfeited
Balance at
01/07/2021
Issue Date
No.
Value
($)
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
Total
- 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
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
-
-
-
-
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
25
DIRECTORS’ REPORT, CONTINUED.
Other Transactions With KMP And/Or Their Related Parties
(a) the Group will not seek approval for the issue of
As set out in Note 25(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
2023, Watershed Funds Management Pty Ltd was paid
$33,450 (2022: $65,700) for the provision of services by
Adrian Rowley as director. There was no (2022: $6,023)
amounts due at 30 June 2023.
(ii) OzVic Pty Ltd - director related entity
OZVIC Group Pty Ltd is a related entity of Jason Dong.
During the year ended 30 June 2023, OZVIC Group Pty
Ltd was paid $142,497 (2022: $nil) for the provision of
consultancy services by Jason Dong and there was no
(2022: $nil) outstanding amounts due at 30 June 2023.
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.
First Strike - 2022 AGM
At the 2022 AGM, 50.29% of the votes cast by
shareholders were against the adoption of the
Remuneration Report in the annual report for the financial
year ending 30 June 2022 (2022 Remuneration Report),
which meant the Company incurred a first strike.
The first strike against the adoption of the 2022
Remuneration Report was a serious message for the Board
from shareholders. The Board has taken the first strike
seriously and taken the following measures to deliver
greater transparency to shareholders in relation to Board
and Executive remuneration and to ensure there is greater
alignment between executive and shareholder experience
whilst also honoring its contractual obligations to its
personnel:
any variable performance-based incentives for the
Directors (e.g. performance rights) in relation to
financial year 2024;
(b) the CEO and other Executives only received the
fixed component of their remuneration for financial
year 2023 and, neither the CEO or other Executives
received variable performance-based remuneration in
relation to financial year 2023;
(c) any variable performance-based remuneration
component for the CEO and other Executives in
relation to financial year 2024 will be tied to the
financial performance of the Group.
At the 2023 annual general meeting of the Company,
shareholders will be asked to vote on the adoption of the
remuneration report for financial year 2023 contained
in this annual report (2023 Remuneration Report). If
25% or more of the shareholders vote against the 2023
Remuneration Report then the Company will incur a
second strike and shareholders will be asked to vote on
whether an extraordinary general meeting of the Company,
referred to as a ‘Spill Meeting’ is to be convened.
If the Spill Meeting resolution is passed as an ordinary
resolution, that is 50% of the votes are cast ‘for’ the
resolution, a Spill Meeting will need to be convened within
90 days of the 2023 annual general meeting. If the Spill
Meeting is to be held, all the non-executive Directors will
cease to hold office immediately before the end of the Spill
Meeting unless they are re-elected at the Spill Meeting.
This Directors’ Report, incorporating the Remuneration
Report, is signed in accordance with a resolution of the
Board of Directors.
Martin Bryant
Chairman
31 August 2023
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
26
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 shareholder 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 open and transparent corporate governance environment.
In accordance with this, the Board has developed and adopted a framework of Corporate Governance systems, processes,
policies and 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
• Share Trading 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 2023
27
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 Group I declare that, to the best of
my knowledge and belief, during the year ended 30 June 2023 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 2023
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
28
FINANCIAL STATEMENTS 2023
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
29
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
Continuing Operations
Revenue
Other income
Administration and non-dairy related costs
Employment expenses
Finance costs
Dairy farm related costs
Infant formula product related costs
Depreciation and amortisation
Deemed cost of livestock sold
Loss from changes in fair value of livestock
Loss before income tax
Income tax expense
Loss from continuing operations
Discontinued operations
Loss from discontinued operations after tax
Loss for the year
Other comprehensive income
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
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
Profit/(loss) attributable to:
Company shareholders
Trust unitholders
Non-controlling interest
Total comprehensive income/(loss) attributable to:
Company shareholders
Trust unitholders
Non-controlling interest
Note
3(a)
3(b)
3(c)(v)
3(c)(iv)
3(c)(i)
3(c)(ii)
3(c)(iii)
11
11
5
4
2023
$
2022
$
5,855,677
-
(916,179)
(3,352,074)
(56,748)
(3,659,058)
(3,176,790)
(752,858)
(641,606)
(238,913)
5,856,390
2,897,553
(652,709)
(2,722,795)
(113,844)
(4,080,492)
(472,143)
(389,042)
(2,111,186)
-
(6,938,549)
(1,788,268)
-
-
(6,938,549)
(1,788,268)
(2,305,637)
(9,244,186)
(2,360,253)
(4,148,521)
-
-
1,058,922
7,160,545
1,058,922
(8,185,264)
7,160,545
3,012,024
(9,157,667)
(21,730)
(64,789)
(5,389,438)
1,241,756
(839)
(9,244,186)
(4,148,521)
(8,098,745)
(21,730)
(64,789)
(5,389,438)
8,402,301
(839)
(8,185,264)
3,012,024
Earnings per share from continuing and discontinued operations:
Basic earning per share (cents)
Diluted earnings per share (cents)
30
30
(1.65)
(1.65)
(0.81)
(0.81)
The accompanying notes form part of these financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
30
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets held for sale
Other current assets
Total Current Assets
Non-Current Assets
Biological assets
Right of use assets
Intangible assets
Property, plant & equipment
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Lease liabilities
Provisions
Borrowings
Total Current Liabilities
Non-Current Liabilities
Lease liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Non-controlling interests
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.
Note
6
7
8
9
10
11
12
13
14
15
12
16
17
12
16
18
19
18
2023
$
2,007,429
660,390
1,732,674
-
276,267
4,676,760
3,535,686
1,009,996
635,732
26,381,586
31,563,000
2022
$
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
36,239,760
44,602,602
945,138
555,605
699,559
-
2,837,666
242,634
630,342
502,770
2,200,302
4,213,412
484,920
31,184
516,104
345,504
95,199
440,703
2,716,406
4,654,115
33,523,354
39,948,487
76,091,020
6,176,512
-
(48,678,550)
33,588,982
-
(65,628)
(65,628)
33,523,354
43,563,897
8,026,909
(35,541,736)
16,049,070
30,744,991
(6,845,574)
23,899,417
39,948,487
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
31
FOR THE YEAR ENDED 30 JUNE 2023
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 & equipment
Proceeds from sale of property, plant & equipment
Deposit on sale of property, plant and equipment
Payment for non-current assets held for sale
Payment for biological assets
Payment for intangible assets
Cash on disposal of VFD
Net investing cash flows
Cash Flows from Financing Activities
Net proceeds from issue of shares
Repayment of CBA facility
Proceeds from borrowings - unsecured
Repayment of borrowings - unsecured
Repayment of 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
Note
2023
$
2022
$
8,836,952
(15,814,031)
4,046
(78,153)
15,242,346
(18,911,399)
6,520
(132,478)
(7,051,186)
(3,795,011)
14
11
13
(825,881)
7,146,669
-
(30,900)
-
(110,011)
(2,937)
(2,576,084)
5,886,339
321,250
-
(389,640)
(142,072)
-
6,176,940
3,099,793
18
1,434,032
2,733,999
-
(5,980,506)
17
12(c)
630,555
(630,555)
(500,000)
-
(484,053)
449,979
(424,267)
2,431,696
2,007,429
652,838
(652,838)
500,000
(179,394)
(139,304)
(3,065,205)
(3,760,423)
6,192,119
2,431,696
The accompanying notes form part of these financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
32
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
-
-
-
-
-
5,000
-
-
Note
Issued Capital
Ordinary
Asset
Revaluation
Reserve
Option
Reserve
Non-
controlling
Interests
Accumulated
Losses
$
$
$
$
$
Total
$
43,563,897
7,160,545
866,364
23,899,417
(35,541,736)
39,948,487
-
-
-
-
-
-
1,058,922
1,058,922
(21,730)
(9,157,667)
(9,179,397)
(64,789)
-
-
-
(64,789)
1,058,922
(86,519)
(9,157,667)
(8,185,264)
Balance at 1 July 2022
Comprehensive income
for the year
Loss attributable to company
shareholders for the period
Non-controlling interests
Other comprehensive
income for the period
Total comprehensive
loss for the year
Transactions with equity holders
in their capacity as equity
holders and other transfers:
Contribution of equity, net
of transaction costs
18(vi),(vii)
1,434,032
Director performance rights
25(b)(i)
-
Share-based payments - shares
18(i),(v)
231,100
Share-based payment - supplier
18(iv)
90,000
-
-
-
-
-
-
-
-
-
-
-
-
-
1,434,032
5,000
231,100
90,000
-
-
-
Transfer to retained earnings
-
(2,117,570)
(769,749)
2,887,319
Transfer from NCI on de-stapling
18(iii)
30,744,991
-
(23,878,525)
(6,866,466)
Shares issued on
exercise of rights
Total transactions with
owners and other transfers
27,000
-
(27,000)
-
-
32,527,123
(2,117,570)
(791,749)
(23,878,525)
(3,979,147)
1,760,132
Balance at 30 June 2023
76,091,020
6,101,897
74,615
(65,628)
(48,678,550)
33,523,354
The accompanying notes form part of these financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
33
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2022
Issued Capital
Ordinary
Asset
Revaluation
Reserve
Option
Reserve
Non-
controlling
Interests
Accumulated
Losses
Note
$
$
$
$
$
Total
$
Balance at 1 July 2021
Comprehensive income
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
40,562,399
-
-
-
-
-
-
-
7,160,545
7,160,545
Transactions with equity holders
in their capacity as equity
holders and other transfers:
Contribution of equity, net
of transaction costs
18(xi)
2,733,999
Share-based payments - securities
18(viii)
92,500
Share-based payments -
performance rights
Shares issued on exercise of rights
18(ix)
Share-based payment - supplier
18(x)
Total transactions with
equity holders
Balance at 30 June 2022
-
87,999
87,000
3,001,498
918,363
22,658,500
(30,152,297)
39,949,326
-
-
-
-
-
-
36,000
(87,999)
-
(51,999)
1,241,756
(5,389,438)
(4,147,682)
(839)
-
-
-
(839)
7,160,545
1,240,917
(5,389,438)
3,012,024
-
-
-
-
-
-
-
-
-
-
-
-
2,733,999
92,500
36,000
-
87,000
2,949,499
-
-
-
-
-
-
43,563,897
7,160,545
866,364
23,899,417
(35,541,736)
39,948,487
The accompanying notes form part of these financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
34
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
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.
On 5 December 2022, the shares in the Company were destapled from the units in the Trust. The consolidated financial statements for the
year ended 30 June 2023 are presented as a continuation of the existing Group with the Company as the accounting parent entity. The
destapling constitutes a transaction amongst owners, where previously they held their interest through the Company and Trust (the non-
controlling interest), and after the destapling they hold all of their interest directly through the Company. The impact of the destapling has
been recognised in equity whereby the issued units of the Trust have been transferred to issued capital in the Company and the retained
earnings in the Trust have been transferred to retained earnings in the Company.
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.
Going concern
The financial statements have been prepared using the going concern basis of preparation. During the year the Group incurred a loss of
$9.24 million (2022: $4.15 million loss), has total accumulated losses of $48.74 million and had a net cash outflow from operations of $7.05
million (2022: $3.80 million outflow). The Groups cash and cash equivalent balance as at 30 June 2023 was $2.01 million. The Board is
satisfied the going concern basis of preparation remains appropriate, reaching such a conclusion after having regard to the circumstances
which they consider reasonably likely to affect the Group during the period of at least one year from the date of this report.
The Board has been very closely monitoring cash flows throughout the year as the Group has incurred costs in producing inventory and
invested in sales and marketing activity to promote both infant formula brands however this has not yet translated to material infant formula
sales.
To support cash flows the Group has reduced non-core operational costs through the closure and sale of Camperdown Dairy’s fresh
processing operations and the consumer direct home delivery business, Victorian Farmers Direct. The unstapling of the shares in ADNL
from the units in the ADFT and winding up the ADFT will also deliver significant compliance and insurance cost savings in FY24.
While infant formula product sales build and the Group works to gain access to international markets such as Vietnam and Canada, the
Board is confident in the Groups ability to continue as a going concern for the 12 month period assessed above due to the Group’s ability to
produce the requisite working capital from various initiatives including but not limited to:
•
•
•
•
the Group is seeking to raise short-term borrowings in order to fund ongoing operational needs until such time as sales of its infant
formula build sufficient momentum to return positive cash flows from operations to the Group;
the Group can further curtail operating costs to better align with the output of the manufacture and sale of infant formula;
the Group presently has at its disposal surplus assets that can be readily sold without impacting core operations, realising significant
cash and cash equivalents; and
the Group will seek approval from shareholders at the 2023 annual general meeting to refresh its 15% placement capacity and
additional 10% placement capacity under ASX listing Rule 7.1. The Board is confident that it will obtain approval for at least one of the
available placement facilities allowing it to raise working capital through equity placements to new or existing shareholders.
Should the Group be unsuccessful in securing additional funds or monetising assets, there exists a material uncertainty that may cast
significant doubt about the Group’s ability to continue as a going concern. The Board are satisfied at the date of signing the financial report
there are reasonable grounds to believe that the Group will be able to continue to meet its debts as and when they fall due and that it is
appropriate for the financial statements to be prepared on a going concern basis.
The financial report does not include any adjustments to the amounts or classifications of recorded assets or liabilities that might be
necessary should the Group not continue as a going concern. Should the Group be unable to continue as a going concern it may be
required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts that differ from those
stated in the financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
35
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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.
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 24 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 un-
der 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 sub-
sequent 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 acquisi-
tion 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
36
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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 de-
ferred 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 cumula-
tive 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 tempo-
rary 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 rec-
ognised 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 2023
37
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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. 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.
The method used to determine costs for inventory categories are:
Feedstocks, hay and silage: Purchase price of inventory and other direct costs for farm produced inventory.
Packaging: Purchase price of packaging including transport costs.
Raw materials: Purchase price of raw materials including transport costs.
Finished goods: Purchase price of raw materials, direct labour, other direct production costs and overheads.
(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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
38
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(f) Biological Assets (cont’d)
In the event an independent valuer has not been appointed the Group determines whether an active or other effective market exists for a
biological asset in its present location and condition, the quoted price in that market is the appropriate basis for determining the fair value of
that asset. If an active market does not exist then the directors use one of the following valuation methods, when available, in determining
fair value:
•
the most recent market transaction price, provided that there has not been a significant change in economic circumstances
between the date of that transaction and the end of the reporting period; or
• market prices, in markets accessible to the entity, for similar assets with adjustments to reflect differences.
(g) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the 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 2023
39
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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 2023
40
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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
Land
Buildings
Fixed Improvements
Plant and equipment - owned
Plant and equipment - leased
Motor Vehicles
Depreciation Rate (years)
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 2023
41
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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 2023
42
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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 indica-
tion 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 recov-
erable amount is recognised immediately in profit or loss.
Impairment testing is performed annually for 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) Intangible Assets other than Goodwill
Recipes, formulations, trademarks and patents
Recipes, formulations, trademarks and patents are recognised at cost of acquisition. They have an indefinite life and are tested annually for
impairment and carried at cost less any accumulated impairment losses.
Product development
Product development is recorded at cost, has a finite life and is carried at cost less accumulated amortisation and any impairment losses.
Product development has an estimated useful life of between one and three years. It is assessed annually for impairment.
(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 receiv-
ables 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 recov-
erable 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 2023
43
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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.
(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 14(a);
- Carrying value determination of right of use assets, refer Note 12(a);
- Fair value determination of livestock, refer Note 11;
- Share-based payments, refer Note 27; and
- Income tax and other taxes, refer Note 5;
Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the
financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant
notes to the financial statements.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
44
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
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) Non-current Assets Held for Sale and Discontinued Operations
Non-current assets and disposal groups are classified as held for sale and generally measured at the lower of carrying amount and fair value
less costs to sell, where the carrying amount will be recovered principally through sale as opposed to continued use. No depreciation or
amortisation is charged against assets classified as held for sale.
Classification as “held for sale” occurs when: management has committed to a plan for immediate sale; the sale is expected to occur within
one year from the date of classification; and active marketing of the asset has commenced. Such assets are classified as current assets.
A discontinued operation is a component of an entity, being a cash-generating unit (or a group of cash-generating units), that either has
been disposed of, or is classified as held for sale, and: represents a separate major line of business or geographical area of operations; is part
of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired
exclusively with the view to resale.
Impairment losses are recognised for any initial or subsequent write-down of an asset (or disposal group) classified as held for sale to fair
value less costs to sell. Any reversal of impairment recognised on classification as held for sale or prior to such classification is recognised as
a gain in profit or loss in the period in which it occurs.
(w) Interests in Joint Arrangements
Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about
relevant activities are required.
Separate joint venture entities providing joint venturers with an interest to net assets are classified as a joint venture and accounted for using
the equity method. Joint operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure
to each liability of the arrangement. The Group’s interests in the assets, liabilities, revenue and expenses of joint operations are included in
the respective line items of the consolidated financial statements.
Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the Group makes
purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those
goods/assets to a third party.
(x) New and Amended Accounting Standards and Interpretations Adopted by the Group
The Australian Accounting Standards Board (AASB) has issued a number of standards and amendments to standards that are mandatory for
the first time in the reporting period commenced 1 July 2022. The Group has assessed and determined that there are no new or amended
standards applicable for the first time for the financial report for the year ended 30 June 2023, that materially affect the Group’s accounting
policies or any of the amounts recognised in the financial statements.
(y) New and Amended Accounting Standards and Interpretations in issue but not yet effective
The AASB has issued a number of new or amended accounting standards and interpretations that are not mandatory for the first time in
the reporting period ended 30 June 2023. The Group has assessed these standards and interpretations and determined that there are no
standards or amendments to standards that are not yet effective that are expected to have a material impact on the Group in the future
reporting period.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
45
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 2: PARENT ENTITY
The following information has been extracted from the books and records of the parent and has been prepared
in accordance with Accounting Standards.
Statement of Financial Position
Assets
Current Assets
Non-current Assets
Total Assets
Liabilities
Current Liabilities
Non-current Liabilities
Total Liabilities
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Statement of Comprehensive Income
Total loss
Total comprehensive loss
Contingent liabilities and guarantees
The Company does not have any contingent liabilities or guarantees for the year ended 30 June 2023.
Contractual commitments
At 30 June 2023, the parent company had not entered into any contractual commitments.
2023
$
2022
$
18,145,754
12,695,232
17,842,525
12,751,769
30,840,986
30,594,294
757,466
64,614
822,080
7,226,740
125,816
7,352,556
76,091,020
43,563,896
74,615
(46,146,729)
30,018,906
857,364
(21,179,522)
23,241,738
(25,728,692)
(25,728,692)
(2,525,458)
(2,525,458)
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
46
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 3: REVENUE AND EXPENSES
(a) Revenue
Continued operations
Revenue from contracts with customers
Other sources of revenue
Discontinued operations
Revenue from contracts with customers
Other sources of revenue
Note
(i)
(ii)
(i)
(ii)
(i) Revenue disaggregation
The revenue is disaggregated by service line and timing of revenue recognition.
Service lines
- Nutritional powders
- Dairy Farms
- Dairy Processing
- Consumer Direct
Timining of revenue recognition
Services transferred to customers:
- at a point in time
(ii) Other sources of revenue
Interest - unrelated
Farm costs recoveries
Fuel rebate and other revenue
(b) Other income
Gain from changes to fair value of livestock
Gain on disposal of property, plant & equipment
(c) Expenses
(i) Finance costs
CBA facility
Loans - unsecured
Loan - related party
Right of use assets
Finance charges payable under finance leases
2023
$
2022
$
5,804,396
51,281
5,855,677
2,131,077
12,556
2,143,633
5,795,182
61,208
5,856,390
9,057,177
149,378
9,206,555
7,999,310
15,062,945
407,300
5,397,096
664,743
1,466,334
7,935,473
187,099
5,608,083
6,807,707
2,249,470
14,852,359
7,935,473
14,852,359
4,046
31,200
28,591
63,837
-
-
-
-
25,906
2,904
27,938
-
56,748
6,520
30,071
173,995
210,586
1,342,672
1,554,881
2,897,553
60,905
28,052
2,770
1,167
20,950
113,844
.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
47
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 3: REVENUE AND EXPENSES, (cont’d)
(c) Expenses continued.
(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 farm related costs
(iii) Infant formula related costs:
Cost of goods sold
Inventory impairment
Manufacturing related costs
Advertising and marketing costs
Property related costs
Other infant formula costs
(iv) Employee benefits expense
Employee and director remuneration costs
Equity settled share-based payment costs
(v) Administration and non-dairy related costs
Administraion costs
Equity settled share-based payment - professional costs
Professional costs
Property costs
.
2023
$
2022
$
1,722,050
363,926
31,495
30,969
59,032
104,183
125,688
1,221,715
3,659,058
294,461
916,519
909,352
660,970
28,368
367,120
3,176,790
1,632,353
406,538
38,923
44,381
111,010
102,368
167,456
1,577,463
4,080,492
143,924
-
33,377
80,839
10,799
203,204
472,143
3,120,974
231,100
3,352,074
2,594,295
128,500
2,722,795
504,929
90,000
277,543
43,707
916,179
382,793
87,000
157,940
24,976
652,709
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
48
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 4: DISCONTINUED OPERATIONS
(a) On 22 August 2022, the Group ceased fresh milk processing at its Camperdown Dairy Manifold Street site and on 29 June 2023 the
Group announced the sale of the Camperdown dairy equipment and transfer of the Manifold Street lease to complete the closure of the
discontinued fresh dairy processing activites.
Cash consideration of $1,050,000 has been received and a $1,025,217 loss on disposal of property, plant and equipment has been re-
corded in discontinued operations.
(b) With the closure of the Group’s fresh milk processing at Camperdown and with the consumer direct business achieving losses, The
Group sold Victorian Farmers Direct Pty Ltd On 28 April 2023 for $19,600.
A gain of $12,557 from disposal of subsidiaries has been recorded in discontinued operations.
(c) Statement of Profit or Loss and Other Comprehensive Income for the period
from discontinued operations:
Revenue
Other Income
Employment expenses
Finance costs
Dairy product related costs
Depreciation and amortisation expense
Loss on disposal of property, plant and equipment
Loss before income tax
Income tax expense
Net loss from discontinued operations
(d) The net cash flows of the discontinued operation, which have been
incorporated into the statement of cash flows, are as follows:
Net cash outflow from operating activities
Net cash outflow from investing activities
Net cash outflow from from financing activities
Net cash outflow by discontinued operations
.
2023
$
2,131,076
12,557
(477,152)
(18,634)
(2,805,531)
(122,736)
(1,025,217)
2022
$
9,206,555
-
(1,840,789)
(18,634)
(9,101,302)
(606,083)
-
(2,305,637)
(2,360,253)
-
-
(2,305,637)
(2,360,253)
2023
$
(1,222,900)
1,048,774
(79,395)
(253,521)
2022
$
(1,622,727)
288,910
(68,473)
(1,402,290)
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
49
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 5: INCOME TAX EXPENSE
(a) The prima facie tax on profit before income tax is reconciled
to the income tax as follows:
2023
$
2022
$
Prima facie tax payable / (benefit) on profit / (loss) from ordinary activities before
income tax at 25% (2022: 25%):
(2,311,047)
(1,037,130)
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.
(1,421,738)
2,104,347
910,500
717,938
-
(314,106)
1,536,251
185,410
(370,425)
-
(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
Net unbooked deferred tax assets
2023
$
1,760,067
11,785,855
13,545,922
2022
$
253,602
11,103,246
11,356,848
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.
The 2022 comparative year amounts have been re-stated to agree to tax returns as lodged.
.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
50
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 6: CASH AND CASH EQUIVALENTS
Current
Cash at bank and in hand
Total cash and cash equivalents
Note
2023
$
2022
$
28
2,007,429
2,007,429
2,431,696
2,431,696
Cash at bank earns interest at floating rates based on daily bank deposit rates.
(a) Reconciliation of Cash
For the purpose of the Consolidated Cash Flow Statement, cash includes cash
and cash equivalents comprising the following at 30 June 2023:
Cash at bank and in hand
(b) Reconciliation of Profit after Income Tax to Cash Flows from Operations
Net loss after income tax
Adjustment of non cash items
Amortisation & depreciation
Deemed cost of livestock disposed
Fair value adjustment of biological assets
Net loss / (gain) on disposal of property, plant and equipment
Loss on disposal of property, plant and equipment - discontinued operations
Inventory impairments
Bad debts and impairment provision
Gain on disposal of subsidiary
Finance costs - loan from related party
Equity settled share-based payments
Changes in assets and liabilities, net of the effects of purchase of 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 finance activities
2023
$
2,007,429
2,007,429
2022
$
2,431,696
2,431,696
2023
$
2022
$
(9,244,186)
(4,148,521)
875,593
641,606
238,913
41,276
1,025,217
916,519
7,193
(12,557)
(2,770)
258,600
301,979
50,618
(639,711)
(1,514,678)
5,202
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
(7,051,186)
(3,795,011)
Loan - related party
Lease liabilities
1 July 2022
Cash flows
Non-cash Movements
30 June 2023
$
$
$
$
502,770
588,138
1,090,908
(505,674)
(484,053)
(989,727)
2,904
936,440
939,344
-
1,040,525
1,040,525
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
51
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 7: TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Other receivables
Total current trade and other receivables
Note
28
2023
$
621,253
39,137
660,390
2022
$
775,211
199,021
974,232
The Group applies the simplified approach to providing for expected credit loss 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 Group has not recorded an impairment for expected credit losses in the current or prior year as all trade and other receivables are
considered credit worthy with no material balances past due. The effect of any expected credit loss is considered immaterial.
(a) Lifetime Expected Credit Loss Credit Impaired
2023
Current
> 30 days past due
> 60 days past due
>90 days past due
$
$
$
$
Expected loss rate
Gross carrying amount
Loss allowance provision
0%
621,453
-
0%
38,718
-
0%
219
-
0%
-
-
2022
Current
> 30 days past due
> 60 days past due
>90 days past due
Expected loss rate
Gross carrying amount
Loss allowance provision
Credit Risk
$
$
$
$
0%
896,446
-
0%
63,889
-
0%
5,143
-
0%
8,754
-
Total
$
660,390
-
Total
$
974,232
-
The Group has a significant concentration of credit risk with one (2022: two) key customer totaling $527,291 (2022: $381,822) or 80% (2022:
39%) of receivables at balance date. There is no impairment on this customer and outstanding amounts, the customer has always paid with-
in terms and 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 analy-
sis 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 asstes measured at amortised cost
Note
28
2023
$
660,390
660,390
2022
$
974,232
974,232
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
52
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 8: INVENTORIES
Current
Feedstocks, hay and silage
Packaging
Raw materials, finished goods and chemicals
Total inventories
NOTE 9: NON-CURRENT ASSETS HELD FOR SALE
2023
$
451,422
18,161
1,263,091
1,732,674
2022
$
199,046
202,627
997,008
1,398,681
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 15 July 2022.
In accordance with AASB 5: Non-current Assets Held for Sale, the Group 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 in the 30 June 2022 comparative:
Non-current
Property, plant and equipment
NOTE 10: OTHER ASSETS
Current
Prepayments
Bonds and deposits
Total other assets
NOTE 11: BIOLOGICAL ASSETS
Non-current
Dairy livestock
Total biological assets
Opening carrying amount
Purchases of Livestock
Deemed cost of livestock disposed
Gain / (loss) from changes to fair value
Closing carrying amount
Movement during the year (herd numbers):
Opening balance
Purchases
Natural increase and attrition
Sales
Closing balance
Note
28
Note
(i)
2023
$
-
-
2023
$
227,017
49,250
276,267
2023
$
3,535,686
3,535,686
4,416,205
-
(641,606)
(238,913)
3,535,686
2023
No.
2,227
-
860
(782)
2,305
2022
$
6,425,000
6,425,000
2022
$
778,567
57,798
836,365
2022
$
4,416,205
4,416,205
4,795,079
389,640
(2,111,186)
1,342,672
4,416,205
2022
No.
2,900
164
725
(1,562)
2,227
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
53
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 11: BIOLOGICAL ASSETS, (cont’d)
(i) Biological assets represent the dairy livestock owned by the Group. At 30 June 2023, the livestock has been valued at fair value, by inde-
pendent stock agents, based on the prices in the open cattle market in the locality of the dairy operations. A fair value loss of $238,913
(2022: $1,342,672) has been recognised in profit and loss at 30 June 2023, and represents price movements, natural increase and the
movement in ages of young stock.
Financial risks associated with the Group’s dairy herd relates to selling prices of milk, and is managed by way of contracted revenue prices.
During the year ended 30 June 2023, the Group produced 6.2 million litres (2022: 6.8 million litres) of raw milk. The average number of
cows milked during the year was 1,051 (2022: 1,154).
NOTE 12: RIGHT OF USE ASSETS
(a) AASB 16 related amounts recognised in the statement of financial position
Right of use assets
Leased land and buildings
Accumulated depreciation
Total right of use assets
Movement in carrying amounts:
Opening balance
Additions
Disposals
Depreciation expense
Net carrying amount
2023
$
1,483,968
(473,972)
1,009,996
2023
$
569,654
1,081,100
(168,858)
(471,900)
1,009,996
2022
$
1,153,344
(583,690)
569,654
2022
$
307,344
402,869
-
(140,559)
569,654
Note
(i)
(ii)
(iii)
(i) The Group has the following carried forward land and building leases recognised under AASB16.
•
•
a 3-year lease on 368 acres of land on Cooramook Road, Grassmere, Victoria, with an expiry date of 24 December 2024.
a 3-year lease on a warehouse at 3/216 Blackshaws Road, Altona North, Victoria, with an expiry date of 31 May 2025.
(ii) The Group entered into the following leases recognised under AASB 16 during the period.
•
a 3-year lease on 410 acres of land at 463 Moreys Road, Brucknell, Victoria with an expiry date of 14 July 2025.
The land lease is an initial 3 years with a 1-year option, which provides the Group opportunities to manage the lease in order to align
with business strategies. The option is only exercisable by the Group; however, management has no reasonable certainty at this point in
time that the option will be exercised and as such the option is not included in the calculation of the lease liability.
•
a 3-year lease on 229 acres of land at 463 Moreys Road, Brucknell, Victoria with an expiry date of 14 July 2025.
The land lease is an initial 3 years with a 1-year option, which provides the Group opportunities to manage the lease in order to align
with business strategies. The option is only exercisable by the Group; however, management has no reasonable certainty at this point in
time that the option will be exercised and as such the option is not included in the calculation of the lease liability.
•
a 3-year and 3 months lease on 651 acres of land at Claidheamh, Darlington, Victoria with an expiry date of 22 March 2026.
The land lease is an initial 3 years and 3 months with an option for a further term, which provides the Group opportunities to manage
the lease in order to align with business strategies. The option is only exercisable by the Group; however, management has no
reasonable certainty at this point in time that the option will be exercised and as such the option is not included in the calculation of
the lease liability.
(iii) The following carried forward lease recognised under AASB 16 was disposed during the period.
•
a 5-year and 3-month lease on factory premises at 325 Manifold Street, Camperdown, with an expiry date of 31 March 2025;
On 29 June 2023, the lease was transferred as part of the sale of the Camperdown dairy fresh processing equipment (refer Note 14(b)).
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
54
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 12: RIGHT OF USE ASSETS, (cont’d)
(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)
2023
$
414,266
23,334
2022
$
98,987
40,751
(c) AASB 16 related amounts recognised in the statement of cash flows
Total cash outflows for leases
484,053
318,698
(d) Lease liabilities
Current
Lease liabilities
Total current lease liabilities
Non-current
Lease liabilities
Total non-current lease liabilities
555,605
555,605
484,920
484,920
242,634
242,634
345,504
345,504
Total lease liabilities
1,040,525
588,138
NOTE 13: INTANGIBLE ASSETS
Recipes, formulations, trademarks and patents
-at cost
Product development
-at cost
Less accumulated amortisation
Total intangible assets
(a) The movement in carrying amounts of intangibles comprises:
Opening balance
Additions in year
Amortisation
Closing balance
Note
(a)
2023
$
613,972
613,972
43,520
(21,760)
21,760
635,732
547,481
110,011
(21,760)
635,732
2022
$
503,961
503,961
148,855
(105,335)
43,520
547,481
429,173
142,072
(23,764)
547,481
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
55
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 14: PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements
- at fair value
less accumulated depreciation
Plant and equipment
- at cost
less accumulated depreciation
Note
2023
$
2022
$
20,500,000
-
19,767,915
(408,617)
(a)
20,500,000
19,359,298
6,901,800
(1,020,214)
5,881,586
11,532,228
(3,888,238)
7,643,990
(b)
Total property, plant and equipment
26,381,586
27,003,288
(a) Below is a table showing the carrying value of land and buildings and improvements by property:
Property name
Brucknell No 2
Yaringa - Nirranda South
Infant Formula Facility
Total
Note
(i)
(i)
(ii)
Acquisition /
commission date
22 October 2014
4 October 2018
1 July 2022
2023
2022
7,000,000
8,400,000
5,100,000
6,423,625
7,642,992
5,019,707
20,500,000
19,359,298
(i) Registered valuers Preston Rowe Paterson completed an independent valuation of both farms properties for 30 June 2023. The basis
of the valuation is ‘As Is and In Use’ with vacant possession and the combined fair value of both farm properties (excluding the Infant
Formula Plant Project and Depot & Old Geelong Road Land) is $15,400,000. The combined value of the Group’s farm portfolio is up 9%
on 30 June 2022 carrying values and a fair value gain of $1,434,305 is reflected in other comprehensive income.
(ii) Registered valuers IPN Valuers - Greater Geelong completed an independent valuation of the Depot & Old Geelong Road land and infant
formula building for 30 June 2023. The basis of valuation is a cost approach using the summation of land and improvements, supported
by comparable sales evidence and capitalisation of income. The combined fair value was assessed at $5,100,000 and a fair value loss of
$149,769 is reflected in other comprehensive income.
(b) On 22 August 2022, the Group ceased fresh milk processing at its Camperdown Dairy Manifold Street site and on 29 June 2023 the
Group announced the sale of the Camperdown dairy equipment and transfer of the Manifold Street lease to complete the closure of the
discontinued fresh dairy processing activites.
Cash consideration of $1,050,000 has been received and a loss on disposal of property, plant and equipment of $1,025,217 has been
recorded in discontinued operations (refer Note 4(c)).
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
56
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 14: PROPERTY, PLANT AND EQUIPMENT, (cont’d)
(c) 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:
2023
Balance beginning of the financial year
Additions
Disposals
Fair value adjustments
Depreciation expense
Balance at end of financial year
2022
Balance beginning of the financial year
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
NOTE 15: TRADE AND OTHER PAYABLES
Current
Trade creditors
Sundry creditors and accrued expenses
Total trade and other payables
Land, Buildings &
Improvements
$
19,359,298
134,095
(118,059)
1,284,536
(159,870)
20,500,000
Land, Buildings &
Improvements
$
21,142,568
924,425
(3,741,848)
410,695
7,160,545
(6,425,000)
-
(112,087)
19,359,298
Note
Financial liabilities at amortised cost classified as trade and other payables
Total Trade and other payables
Financial liabilities as trade and other payables
28
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
Plant &
Equipment
$
7,643,990
691,786
(2,177,612)
-
(276,578)
5,881,586
Plant &
Equipment
$
7,085,247
1,651,659
(612,449)
(410,695)
-
-
648,943
(718,715)
Total
$
27,003,288
825,881
(2,295,671)
1,284,536
(436,448)
26,381,586
Total
$
28,227,815
2,576,084
(4,354,297)
-
7,160,545
(6,425,000)
648,943
(830,802)
7,643,990
27,003,288
2023
$
485,711
459,427
945,138
945,138
945,138
2022
$
1,757,126
1,080,540
2,837,666
2,837,666
2,837,666
57
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 16: PROVISIONS
Current
Employee benefits
Total current provisions
Non-Current
Employee benefits
Total non-current provisions
Opening Balance
Additional provisions
Amounts used
Closing Balance
Provision for employee benefits
2023
$
699,559
699,559
31,184
31,184
730,743
725,541
276,434
(271,232)
730,743
2022
$
630,342
630,342
95,199
95,199
725,541
665,115
250,955
(190,529)
725,541
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 17: BORROWINGS
Current
Loan - related party
Total current borrowing
Note
(i)
2023
$
-
-
2022
$
502,770
502,770
(i) 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 rate:
RBA official cash rate + 6%. The loan including accrued interest of $5,674 was repaid in full on 29 July 2022.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
58
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 18: ISSUED CAPITAL
Contributed equity of the Group
(a) Movement in ordinary shares at 30 June 2023:
2023
$
2022
$
76,091,020
74,308,888
Details
Date
Number
of Stapled
Securities
Shareholders
Unitholders
Stapled Entity
Issue Price
$
$
$
$
Opening balance
1 Jul 2022
548,552,225
43,563,897
30,744,991
74,308,888
Employee performance securities (i)
24 Aug 2022
3,230,000
Performance rights exercised (ii)
24 Aug 2022
1,500,000
226,100
27,000
-
-
Transfer from NCI on de-stapling (iii)
5 Dec 2022
-
30,744,991
(30,744,991)
Supplier securities (iv)
16 Dec 2022
1,800,000
Employee performance securities (v)
16 Dec 2022
100,000
90,000
5,000
Placement shares (vi)
26 Apr 2023
33,333,333
1,000,000
Share purchase plan (vii)
29 Jun 2023
22,957,300
505,061
(71,029)
-
611,472,858
76,091,020
Transaction costs
30 June 2023
226,100
27,000
-
90,000
5,000
1,000,000
505,061
(71,029)
76,091,020
0.070
0.018
-
0.050
0.050
0.030
0.022
-
-
-
-
-
-
Until 5 December 2022, the stapled securities of the Group were comprised of one share in the Company and one unit in the Trust. As
noted in Note 1, the stapled securities were destapled effective from 5 December 2022.
(i) On 24 August 2022, there were 3,230,000 stapled securities issued as a share-based payment under the AHF Long Term Incentive Plan
at a price of $0.070 per security. The fair value of securities issued, determined by reference to the market price, was $226,100.
(ii) On 24 August 2022, there were 1,500,000 stapled securities issued at a price of $0.018 per security upon vesting of employee
performance rights.
(iii) On 5 December 2022, the Company and the Trust were destapled. (Refer Note 1(a)).
(iv) On 16 December 2022, there were 1,800,000 shares issued as a share-based payment for consulting services under the AHF Long
Term Incentive Plan at a price of $0.05 per security. The fair value of securities issued, determined by reference to the market price, was
$90,000.
(v) On 16 December 2022, there were 100,000 shares 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 $5,000.
(vi) On 26 April 2023, there were 33,333,333 shares issued to Mr Xin Yang in a private placement. The fair value of shares issued, determined
by reference to the placement price of $0.03, was $1,000,000, with transaction costs of $50,000. Subsequent to the year end on 11 July
2023, Mr Yang was issued a further 12,121,212 top up shares to ensure consistency with the price of the completed share purchase plan
on 29 June 2023.
(vii) On 29 June 2023, there were 22,957,300 shares issued on completion of a Share Purchase Plan (SPP). The fair value of shares issued,
determined by reference to the SPP price of $0.022 per share, was $505,061.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
59
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 18: ISSUED CAPITAL, (cont’d)
(b) Movement in stapled securities at 30 June 2022:
Details
Date
Number
of Stapled
Securities
Shareholders
Unitholders
Stapled Entity
Issue Price
$
$
$
$
Opening balance
01 Jul 2021
501,698,361
40,562,399
30,744,991
71,307,390
Employee performance securities (i)
08 Sep 2021
1,850,000
Performance rights exercised (ii)
08 Sep 2021
1,000,000
Supplier securities (iii)
10 Nov 2021
1,500,000
92,500
87,999
87,000
Placement - tranche 1 (iv)
30 Mar 2022
15,455,951
1,000,000
Placement - tranche 2 (iv)
02 May 2022
7,727,975
500,000
Placement - tranche 3 (iv)
03 Jun 2022
19,319,938
1,250,000
-
-
-
-
-
-
-
92,500
87,999
87,000
1,000,000
500,000
1,250,000
(16,001)
0.050
0.088
0.058
0.065
0.065
0.065
Transaction costs
30 June 2022
-
(16,001)
548,552,225
43,563,897
30,744,991
74,308,888
(i)
(ii)
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.
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. The fair value of securities issued, determined by refernce to market price, was $87,999.
(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.
(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.
NOTE 19: 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 20: COMMITMENTS
There are no capital expenditure commitments contracted for the year ended 30 June 2023.
In the 2022 comparative, the Group 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 of $45,833 per month
commenced 1 July 2022 and ended 31 December 2022.
NOTE 21: CONTINGENT LIABILITIES
The Group does not have any contingent liabilities for the year ended 30 June 2023 (2022: nil).
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
60
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 22: KEY MANEGEMENT 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 2023.
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 paymens
Short-term employee benefits
2023
$
801,351
50,515
25,408
5,000
882,274
2022
$
592,805
44,200
6,699
36,000
679,704
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 23: AUDITORS’ REMUNERATION
Remuneration of the auditor for:
Audit and review of the financial statements
2023
$
2022
$
80,342
74,946
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
61
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 24: CONTROLLED ENTITIES
Particulars in relation to controlled entities
Parent Entity:
Australian Dairy Nutritionals Limited
Wholly Owned Controlled Entities
SW Dairy Farms Pty Ltd
Dairy Fund Management Limited
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
Note
(a)
(b)
(b)
(c)(d)
Class of
Equity
2023
Percentage
Owned
2022
Percentage
Owned
%
%
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
units
ordinary
units
100
100
100
-
100
-
-
100
100
100
100
50
-
100
100
100
100
100
100
100
100
100
100
100
50
-
All controlled entities have the same financial year end as that of the holding company and all controlled entities are incorporated in Austra-
lia. 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) Deregistered entities
The following dormant companies were deregistered during the period:
Jonesy’s Distribution Pty Ltd - 13 November 2022
Camperdown Brand Manufacturing Pty Ltd - 13 November 2022
(c) Transactions with Non-controlling interests in ADFT
As set out in Note 1, ADFT was a controlled entity. On 5 December 2022, the shares in the Company were destapled from the units in the
Trust. The consolidated financial statements for the year ended 30 June 2023 are presented as a continuation of the existing Group with the
Company as the accounting parent entity. The destapling constitutes a transaction amongst owners, where previously they held their inter-
est through the Company and Trust (the non-controlling interest), and after the destapling they hold all of their interest directly through the
Company. The impact of the destapling has been recognised in equity whereby the issued units of the Trust have been transferred to issued
capital in the Company and the retained earnings in the Trust have been transferred to retained earnings in the Company.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
62
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 24: CONTROLLED ENTITIES, (cont’d)
(d) Summarised Financial Information of Subsidiaries with Material Non-controlling Interests
Set out below is the summarised financial information for ADFT, before any intra-group elimination:
Summarised Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
Carrying amount of non-controlling interests
Summarised Financial Performance
Other income
Profit after tax
Other comprehensive income after tax
Total comprehensive income
Profit 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
2023
$
2022
$
-
-
-
-
-
-
6,866,466
6,844,735
-
6,844,735
6,844,735
-
-
-
-
19,155,734
7,642,991
(9,229)
-
26,789,496
26,789,496
1,600,483
1,241,755
2,889,241
4,130,996
4,130,996
(207,096)
5,463,178
(5,332,923)
(76,841)
Following the destapling of ADFT and the Company, the Board elected to forgive all intercompany loans with ADFT. This has resulted in a
revenue from forgiveness of the loans of $6,866,466 (2022: $nil).
NOTE 25: RELATED PARTY TRANSACTIONS
(a) The Group’s main related parties are as follows
(i) Entities exercising control over the Group:
The ultimate parent entity that exercises control over the Group is Australian Dairy 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 22.
(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 par-
ties unless otherwise stated.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
63
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 25: RELATED PARTY TRANSACTIONS, (cont’d)
The following transactions occurred with related parties:
(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 2023, Watershed Funds Management
Pty Ltd was paid $33,450 (2022: $65,700) for the provision of services by Adrian Rowley as director. There was no (2022: $6,023) amounts
due at 30 June 2023.
OZVIC Group Pty Ltd is a related entity of Jason Dong. During the year ended 30 June 2023,OZVIC Group Pty Ltd was paid $142,497 (2022:
$nil) for the provision of consultancy services by Jason Dong and there was no (2022: $nil) outstanding amounts due at 30 June 2023.
(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 inter-
est rate: RBA official cash rate + 6%. The loan including accrued interest of $5,674 was repaid in full on 29 July 2022.
NOTE 26: SEGMENT REPORTING
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.
The Group has historically disclosed two reportable segments, dairy farms and dairy processing. With the closure of the fresh milk process-
ing at Camperdown in August 2022 and the sale of the Victorian Farmers Direct business in April 2023, both are reported as discontinued
operations for the year ended 30 June 2023. The Group has revised its dairy processing segment to more appropriately reflect the current
operations of the Group.
For the year ended 30 June 2023, the dairy processing segment has been split as follows:
Dairy Processing (Discontinued Operations) - this segment includes the residual assets and liabilities from the fresh milk processing factory
at Camperdown.
Nutritional Powders - this segment includes the processing and sale of dairy and nutritional products to domestic and international markets.
Home Delivery (Discontinued Operations) - the comparative segment includes the online platform which delivers fresh milk, dairy, meat and
other groceries directly to consumers’ doorsteps.
The 30 June 2022 comparatives have been restated to reflect the current year changes.
There has been no change to the dairy farms segment which 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.
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 ac-
counting policies that are consistent to those adopted in the annual financial statements of the Group.
Corporate costs and KMP remuneration have not been allocated to segments but are reviewed by the Board and 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 2023
64
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 26: SEGMENT REPORTING, (cont’d)
(i) Segment Performance
30 June 2023
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total group revenue
Nutritional
Powders
Dairy Farms
Total
$
$
$
413,441
5,438,190
5,851,631
-
-
-
4,046
-
4,046
413,441
5,442,236
5,855,677
5,855,677
Segment net profit / (loss) before tax
(3,709,830)
(724,160)
(4,433,990)
Reconciliation of segment result to group net profit/loss before
tax from continuing operations:
Amounts not included in segment result but reviewed by the Board:
- Corporate charges
(626,140)
(1,252,280)
(1,878,420)
- Corporate charges allocated to discontinued operations
Net loss from continuing operations before tax
(626,139)
(6,938,549)
(ii) Segment Performance
30 June 2022
Revenue
External sales
Other income
Interest revenue
Total segment revenue
Total Group revenue
Nutritional
Powders
$
Dairy Farms
Total
$
$
187,099
5,455
-
5,668,713
2,889,416
3,260
5,855,812
2,894,871
3,260
192,554
8,561,389
8,753,943
8,753,943
Segment net profit / (loss) before tax
(276,592)
1,074,922
798,330
Reconciliation of segment result to group net profit/loss
before tax from continuing operations:
Amounts not included in segment result but reviewed by the Board:
- Corporate charges
(646,650)
(1,293,299)
(1,939,949)
- Corporate charges allocated to discontinued operations
Net loss from continuing operations before tax
(646,649)
(1,788,268)
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
65
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 26: SEGMENT REPORTING, (cont’d)
(iii) Segment Assets
As at 30 June 2023
Segment assets
Segment assets include:
Additions to non-current assets
(iv) Segment Assets
As at 30 June 2022
Nutritional
Powders
Dairy Farms
Total
$
$
$
13,286,970
22,952,790
36,239,760
786,292
1,261,599
2,047,891
Nutritional
Powders
$
Dairy Farms
$
Dairy
Processing
$
Home
Delivery
$
Total
$
Segment assets
11,544,379
28,151,504
4,790,926
115,793
44,602,602
Segment assets include:
Additions to non-current assets
1,662,650
1,350,267
88,032
6,847
3,107,796
(v) Segment Liabilities
As at 30 June 2023
Nutritional
Powders
$
Dairy Farms
$
Total
$
Segment liabilities
1,066,963
1,649,443
2,716,406
(vi) Segment Liabilities
As at 30 June 2022
Nutritional
Powders
$
Dairy Farms
$
Dairy
Processing
$
Home
Delivery
$
Total
$
Segment liabilities
611,524
1,755,576
2,168,254
118,761
4,654,115
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
66
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 26: SEGMENT REPORTING, (cont’d)
(iv) Revenue by geographic region
Revenue attributable to external customers is disclosed below, based on the location of the external customer
Australia
Other foreign countries
Total revenue
(v) Assets by geographic region
The location of segment assets is disclosed below by geographical location of the assets
Australia
Other foreign countries
Total revenue
NOTE 27: SHARE BASED PAYMENTS
2023
$
5,855,677
-
5,855,677
2022
$
8,753,943
-
8,753,943
2023
$
2023
$
36,239,760
44,602,602
-
-
36,239,760
44,602,602
(a) Stapled securities granted to employees under the Group Incentive Plan as share-based payments
During the year ended 30 June 2023 are as follows:
Grant Date
24 August 2022
16 December 2022
Note
(i)
(ii)
Number
3,230,000
100,000
(i) On 24 August 2022, there were 3,230,000 stapled securities issued to management personnel of the Group at a price of $0.070 per
security. The fair value of securities issued, determined by reference to the market price, was $226,100.
(i) On 16 December 2022, there were 100,000 stapled securities issued to an employee as part of a performance review at a price of $0.050
per security. The fair value of securities issued, determined by reference to the market price, was $5,000.
During the year ended 30 June 2022 are as follows:
Grant Date
8 September 2021
Note
(i)
Number
1,850,000
(i) On 8 September 2021, there were 1,850,000 stapled securities issued to management personnel of the Group at a price of $0.05 per
security. The fair value of securities issued, determined by reference to the market price, was $92,500.
(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)
Cancelled (iv)
Closing balance
2023
2,000,000
2,000,000
(2,000,000)
(1,500,000)
(500,000)
2022
1,000,000
6,000,000
(4,000,000)
(1,000,000)
-
-
2,000,000
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
67
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 27: SHARE BASED PAYMENTS, (cont’d)
(i) Granted performance rights
During the year ended 30 June 2023, the following performance rights were granted:
• On 24 November 2022 the Group issued 500,000 performance rights each to directors Bernard Kavangh and Jason Dong (TSR hurdle).
The issue price of the rights is 0.5 cents calculated using the Monte Carlo method, the expiry date is 30 June 2023 and the rights vest
when total shareholder return is >30 in the period during 1 July 2022 to 30 June 2023. Other Key inputs include volatility of 63.08% and
a risk-free rate of 3.24%.
The fair value of the rights issued was $5,000.
• On 24 November 2022 the Group issued 500,000 performance rights each to Directors Bernard Kavangh and Jason Dong (EBITDA hurdle).
The issue price of the rights is 5.3 cents calculated using the Monte Carlo method, the expiry date is 30 June 2023 and the rights vest
if the Group’s audited operating EBITDA for the financial year ending 30 June 2023 is break even or above. Other Key inputs include
volatility of 63.08% and a risk-free rate of 3.24%.
The fair value of the rights issued is $53,000.
(ii) 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 2023, 2,000,000 performance rights issued to Directors (TSR and EBITDA hurdles) were forfeited as
performance hurdles were not met.
(iii) Exercised performance rights
During the year ended 30 June 2023, 1,500,000 stapled securities were issued to directors on exercise of performance rights (refer Note 18(ii)).
(iv) Cancelled performance rights
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 elected not to receive the securities to which he was entitled and these have been cancelled.
(c) Options
A summary of movements in options is as follows:
Opening balance
Expired (i)
Closing balance
(i) Expired options
2023
9,500,000
(6,500,000)
3,000,000
2022
9,500,000
-
9,500,000
During the year ended 30 June 2023, 6,500,000 lead manager and management options expired.
There were no options granted, cancelled or exercised during the year ended 30 June 2023.
(d) Loan securities
A summary of movements in the number of loan securities is as follows:
Opening balance
Expired (i)
2023
9,500,000
(9,500,000)
2022
9,500,000
-
Closing balance (exerciable)
-
9,500,000
(i) During the year ended 30 June 2023, 9,500,000 loan securities expired. The expired loan securities will be bought back for nil
consideration in accordance with the buy-back procedure set out in the Corporations Act 2001 (Cth).
There were no loan securities issued, cancelled, or exercised during the year ended 30 June 2023.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
68
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 27: SHARE BASED PAYMENTS, (cont’d)
(e) Other share-based payments
During the year ended 30 June 2023, there were 1,800,000 stapled securities issued as a share-based payment for consulting services
under the AHF Long Term Incentive Plan at a price of $0.05 per security. The fair value of securities issued, determined by reference to the
market price, was $90,000.
(f) Total expenses arising from share-based transactions recognised during the year
Equity settled share-based payments - employment benefit costs
Equity settled share-based payments - professional costs
NOTE 28: FINANCIAL RISK MANAGEMENT
Note
3(iv)
3(v)
2023
$
231,100
90,000
2022
$
128,500
87,000
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
Loans and 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
Note
2023
$
2022
$
6
7
9
12
15
17
2,007,429
660,390
49,250
2,717,069
2,431,696
974,232
57,798
3,463,726
1,040,525
945,138
-
1,985,663
588,138
2,837,666
502,770
3,928,574
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 opera-
tions. 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
69
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 28: FINANCIAL RISK MANAGEMENT, (cont’d)
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 as-
sets’ carrying value. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis, however the Group will always have exposure to potential bad debts
(see also Note 7).
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, bonds and de-
posits, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount
of those instruments. The Group generally does not require third party collateral.
(b) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations
related to financial liabilities. The Group manages this risk through the following mechanisms:
• preparing forward looking cash flow analysis in relation to its operational, investing and financing activities;
• monitoring undrawn credit facilities;
• obtaining funding from a variety of sources;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
• investing surplus cash with appropriately regulated financial institutions; and
• comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
The table following presents contractual maturity of the Group’s financial instruments. Cash flows realised from financial assets reflect
management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows
presented in the table to settle financial liabilities reflects the earliest contractual settlement dates taking into consideration management
expectations that Group banking facilities will be extended.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
70
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 28: FINANCIAL RISK MANAGEMENT, (cont’d)
(b) Liquidity risk, continued.
Financial Liability and Financial Asset Maturity Analysis:
Within 1 year
1 to 5 years
Over 5 years
Total
2023
2022
2023
2022
2023
2022
2023
2022
$
$
$
$
$
$
$
$
Financial liabilities due
for payment
Borrowings
Lease liabilities
-
(502,770)
-
-
(555,605)
(242,634)
(484,920)
(345,504)
Trade & other payables
(945,138)
(2,837,666)
-
-
Total expected outflows
(1,500,743)
(3,583,070)
(484,920)
(345,504)
Financial assets -
cash flows realisable
Cash
2,007,429
2,431,696
Trade and other receivables
660,390
974,232
-
-
-
-
Bonds and deposits
30,000
-
19,250
57,798
Total anticipated inflows
2,697,819
3,405,928
19,250
57,798
Net (outflows) / inflows on
financial instruments
1,197,076
(177,142)
(465,670)
(287,706)
(c) Market risk
Interest Rate Risks
The Group at the date of this report has $2,007,429 in variable rate cash balances.
Sensitivity Analysis
-
-
-
-
-
-
-
-
-
-
-
(502,770)
- (1,040,525)
(588,138)
-
(945,138)
(2,837,666)
-
(1,985,663)
(3,928,574)
-
2,007,429
2,431,696
-
660,390
974,232
-
49,250
57,798
-
2,717,069
3,463,726
-
731,406
(464,848)
The Group has performed sensitivity analysis relating to its exposure to variable interest rate at balance date. This sensitivity analysis demon-
strates 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 2023, 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%
2023
$
20,074
(20,074)
(20,074)
20,074
2022
$
19,289
(19,289)
19,289
(19,289)
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
71
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 28: FINANCIAL RISK MANAGEMENT, (cont’d)
(c) Market risk, continued.
Carrying Amount
Fair Value
Footnote
2023
$
2022
$
2023
$
2022
$
Financial assets at amortised cost:
Cash and cash equivalents
Trade and other receivables
Bonds and deposits
Total financial assets
Financial liabilities
Trade and other payables
Lease liabilities
Borrowings
(i)
(i)
(i)
(i)
(ii)
(ii)
2,007,429
2,431,696
2,007,429
2,431,696
660,390
49,250
974,232
57,798
660,390
49,250
974,232
57,798
2,717,069
3,463,726
2,717,069
3,463,726
945,138
2,837,666
945,138
2,837,666
1,040,525
-
588,138
502,770
1,040,525
-
588,138
502,770
Total financial liabilities
1,985,663
3,928,574
1,985,663
3,928,574
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
Measurements based on quoted
prices (unadjusted) in active markets
for identical assets or liabilities
that the entity can access at the
measurement date.
Level 2
Measurements based on inputs
other than quoted prices included
in Level 1 that are observable for
the asset or liability, either directly
or indirectly.
Level 3
Measurements based on unobservable
inputs for the asset or liability.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
72
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 29: FAIR VALUE MEASUREMENT, (cont’d)
(a) Fair Value Hierarchy, continued.
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 is included in Level 2
The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair
value. The availability of sufficient and relevant data primarily depends on the specific haracteristics 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 liabil-
ity 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 2023
Note
Level 1
Non-financial assets
Biological Assets
Land and buldings
Total non-financial assets
recognised at fair value on
a recurring basis
30 June 2022
Non-financial assets
Biological Assets
Land and buldings
Total non-financial assets
recognised at fair value on
a recurring basis
11
14
$
-
-
-
Note
Level 1
11
14
$
-
-
-
Level 2
$
3,535,686
20,500,000
24,035,686
Level 2
$
4,416,205
19,359,298
23,775,503
Level 3
Level 4
$
-
-
-
$
-
-
-
Level 3
Level 4
$
-
-
-
$
-
-
-
Total
$
3,535,686
20,500,000
24,035,686
Total
$
4,416,205
19,359,298
23,775,503
(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 avail-
able 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.
• ncome 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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
73
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 29: FAIR VALUE MEASUREMENT, (cont’d)
(a) Fair Value Hierarchy, continued.
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset, includ-
ing 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 con-
sidered 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.
Description
Fair Value at 30 June 2023
Valuation Technique(s)
Input Used
Non-financial assets
$
Biological assets
3,535,686
Land and buildings
20,500,000
24,035,686
(c) Disclosed Fair Value Measurements
Market approach using
recent observable industry
market data for dairy cattle
Market approach using recent
observable comparable
sales evidence
Breed, weight, condition
Price per hectare, improvements
value, current replacement cost
The following assets and liabilities are not measured at fair value in the statement of financial position, but their fair values are disclosed in
the notes:
• Cash;
• Trade and other receivables;
• Bonds and deposits;
• Trade and other payables;
• Borrowings; and
• Lease liabilities.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
74
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED.
FOR THE YEAR ENDED 30 JUNE 2023
NOTE 30: EARNINGS PER SHARE CALCULATIONS
From continuing and discontinued operations :
Basic loss per share
Diluted loss per share
From continuing operations :
Basic loss per share
Diluted loss per share
From discontinued operations :
Basic loss per share
Diluted loss per share
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
2023
cents
(1.65)
(1.65)
(1.24)
(1.24)
(0.41)
(0.41)
2022
cents
(0.81)
(0.81)
(0.35)
(0.35)
(0.46)
(0.46)
2023
$
2022
$
(9,244,186)
(4,148,521)
Number
of Shares
Number
of Shares
559,588,729
511,529,282
-
-
559,588,729
511,529,282
All options on issue are considered to be dilutive potential ordinary shares, however they are presently anti-dilutive at 30 June 2023 as the
average market price of shares during the period is less than the exercise price of all options.
NOTE 31: DIVIDENDS
The directors have not recommended or paid a dividend for the year ended 30 June 2023 (2022: $nil) at the date of this report.
NOTE 32: EVENTS AFTER THE BALANCE DATE
On 11 July 2023 the Group completed a placement to
sophisticated investors to raise $710,000 through the issue of
32,272,727 shares at $0.022 per share.
•
•
•
The Group issued a further 12,121,212 shares to Mr Xin Yang
as the subscription agreement for the placement completed
on 27 April 2023 provided for his shareholding to be ‘topped
up’ in the event the Group raised further equity capital within
6 months of completion of the placement at a price less than
$0.03 per share. The issue of the additional shares gave him
an effective subscription price of $0.022, the same as the
share purchase plan and later placement.
•
Mr Adrian Rowley resigned from the Board on 27 July 2023 to
focus on his own business.
Mr Scott Lai was appointed to the Board on 8 August
2023. Mr Lai is a director of IJ Funds Management Pty Ltd,
one of the Group’s substantial shareholders and brings a
strong background of establishing and managing start-up
businesses. He also has significant experience and networks
in capital raising and investment management. Mr Lai will
seek re-appointment as a director at the Group’s next annual
general meeting.
In the opinion of the directors there are no other material matters
that have arisen since 30 June 2023 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 2023
75
DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION
For the year ended 30 June 2023
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)
give a true and fair view of the Company’s and Group’s financial position as at
30 June 2023 and of their performance for the year ended on that date; and
(ii) 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 2023.
This declaration is made in accordance with a resolution of the Board of directors.
Martin Bryant
Chairman
31 August 2023
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
76
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 2023, 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 2023 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.
Material uncertainty related to going concern
We draw attention to Note 1(a) in the financial report which indicates that during the year the Group
incurred a loss of $9.24 million (2022: $4.15 million loss) has total accumulated losses of $48.74
million and had a net cash outflow from operations of $7.05 million (2022: $3.80 million outflow). As
stated in Note 1(a), these events or conditions, along with other matters as set forth in the note,
indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to
continue as a going concern.
Our opinion is not modified in respect of this matter.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
77
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS, CONTINUED.
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited
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.
Key audit matter
Assessment of carrying value of
property, plant and equipment
Refer Note 14 of the financial report.
At 30 June 2023 key assets of the Group
included property, plant and equipment of
$26,381,586. During the year the Group
continued to record operating losses and
cash outflows from operating activities.
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.
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; 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.
Other information
The directors are responsible for the other information. The other information comprises the
information in Australian Dairy Nutritionals Limited’s annual report, for the year ended 30 June 2023,
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.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
78
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS, CONTINUED.
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited (continued)
If, based on the work we have performed, we conclude that there is a material misstatement of the
other information we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibility for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at The
Australian Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the remuneration report included in pages 20 to 25 of the directors’ report for the
year ended 30 June 2023.
In our opinion, the Remuneration Report of Australian Dairy Nutritionals Limited for the year ended
30 June 2023 complies with section 300A of the Corporations Act 2001.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
79
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS, CONTINUED.
Independent Auditor’s Report to the Members of Australian Dairy
Nutritionals Limited (continued)
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 2023
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
80
SHAREHOLDER INFORMATION
The following information was extracted from Australian Dairy Nutritional Group’s Register of Shareholders on 7 August 2023:
TWENTY LARGEST SHAREHOLDERS - ORDINARY SECURITIES
1
2
XIN YANG
IJ FUNDS MANAGEMENT PTY LTD
3 MRS QIUMEI DING
4 WE SAY GO PTY LIMITED
5 MR JIMMY THOMAS & MS IVY RUTH PONNIAH
6
7
8
CORPORATE SOLUTIONS PTY LTD
ILWELLA PTY LTD
BARADNIL PTY LIMITED
9 COSTINE PTY LTD
10 OZSCIENTIFIC PTY LTD
11 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12 CITICORP NOMINEES PTY LIMITED
13 MR JIMMY THOMAS & MS IVY RUTH PONNIAH
14 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
15 PJB BRADCO PTY LTD
16 FIDUCIARY NOMINEES PTY LTD
17 MR PETER JOHN SKENE & MRS LYNNE NICOLE SKENE
18 SHAREHOLDERS MUTUAL ALLIANCE PTY LTD
18 BLAMNCO TRADING PTY LTD
19 MOWSAN PTY LTD
20 BNP PARIBAS NOMINEES PTY LTD
Total Securities on issue
DISTRIBUTION OF SHAREHOLDINGS
Size of Holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
MARKETABLE PARCELS
Securities Held
% of Issued
Capital
45,454,545
7.03
42,503,864
30,100,000
29,849,229
22,203,671
15,309,892
13,301,025
12,500,000
7,696,324
7,350,000
6,601,402
6,254,387
6,237,771
5,984,373
5,685,000
5,205,540
5,033,951
5,000,000
5,000,000
4,834,937
4,804,758
6.58
4.66
4.62
3.44
2.37
2.06
1.93
1.19
1.14
1.02
0.97
0.97
0.93
0.88
0.81
0.78
0.77
0.77
0.75
0.74
286,910,669
646,366,797
44.39
100.00
Number of
Securityholders
Shares
%
632
1,295
493
553
212
3,185
590,240,964
50,206,306
4,198,061
1,672,449
49,017
91.32
7.77
0.65
0.26
0.01
646,366,797
100.00
On 7 August 2023, using the last traded share price of $0.024 per share, there were 1,716 holdings totalling 13,290,671 shares, 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 represen-
tative, shall have one vote for every share of which he is the holder.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
81
SHAREHOLDER INFORMATION, CONTINUED.
SUBSTANTIAL SECURITYHOLDERS
The names of the substantial shareholders listed in the Group’s register on 7 August 2023 are:
XIN YANG
IJ FUNDS MANAGEMENT PTY LTD
Securities Held
45,454,545
42,503,864
% of Voting
Power
7.03
6.58
UNLISTED OPTIONS/RIGHTS OVER ORDINARY SECURITIES
At the date of this report, the unissued ordinary shares of Australian Dairy Nutritionals Limited under option are as follows:
Grant Date
17 February 2021
Last Date of Expiry
Exercise Price
Number under Option
17 February 2024
$0.09
3,000,000
Option holders do not have any rights to participate in any issues of shares 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. The loan securities have expired and are in the process
of being bought back and cancelled.
AUSTRALIAN DAIRY NUTRITIONALS GROUP / ANNUAL REPORT 2023
16 0 D epot R oa d
C amp erd own VIC 326 0
Tel e phone : (03) 8692 7284
E mai l: sharehold er s@a dnl.com. au
adn l. com.au