annual report
2016
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
CORPORATE DIRECTORY
BESTON GLOBAL FOOD COMPANY LIMITED
ACN 603 023 383
Annual Report for the period ended 30 June 2016
INCORPORATION
Incorporated in Australia on 24 November 2014
Chairman
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
DIRECTORS
Roger Sexton
Stephen Gerlach
Catherine Cooper
Petrina Coventry
Jim Kouts
Ian McPhee
CEO
Sean Ebert
COMPANY SECRETARY
Richard Willson
REGISTERED OFFICE
72 Sturt St Adelaide, South Australia 5000
+61 (0)8 8231 2777
PRINCIPAL PLACE OF BUSINESS
Level 9, 420 King William St, Adelaide, South Australia 5000
+61 (0)8 8470 6500
SHARE REGISTER
Link Market Services
Tower 4, Collins Square, 727 Collins St, Melbourne, Victoria 3008
+61 (0)3 9200 4555
Beston Global Food Company Limited shares are listed on the Australian Stock Exchange (ASX)
LEGAL ADVISORS
Minter Ellison
AUDITORS
Ernst & Young Australia
2 0 1 6 A N N U A L R E P O R T
CONTENTS
OUR BRANDS
CHAIRMAN’S STATEMENT
CEO’S COMMENTARY
REVIEW OF OPERATIONS
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
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4
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O U R B R A N D S
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CHAIRMAN’S STATEMENT
The agri-business
sector has been
widely recognised
as one of the key
drivers of the
Australian economy
in coming decades.
Indeed, agri-business
is seen as the industry sector amongst all
sectors in Australia, which best capitalises on
the competitive advantages of the Australian
economy as well as producing what the world
increasingly wants.
Beston Global Food Company (BFC or Company)
has positioned itself as a branded food company
which, through its portfolio of investments in
the dairy, seafood, meat and health foods
industries in Australia can provide high quality,
nutritious and safe food and beverage products
to consumers across the globe. Overlaying this
portfolio is the exclusive “technology eco-system”
which we have developed in Beston Technologies
to provide consumers with ingredient
track-and-trace capabilities on our products
and assure them of the authenticity of the
products with our anti-counterfeiting technology.
The core operating structure of BFC is based
around the three legs of our “closed loop”
(vertically integrated) business model, namely:
1. Security of supply (and raw materials) via
farm ownership, leased quota and company
owned quota.
2. Investment in production facilities and
productivity enhancements via increased
throughput, capacity utilisation and
technology adoption and innovation.
3. Marketing and distribution arrangements
in target markets via our own on-the-ground
staff, complemented by strategic joint
venture arrangements.
Around this structure, we have added selected
business assets in four strategic areas:
1. Dairy
2. Seafood
3. Meat
4. Health and Nutrition
and then linked it all together with our internationally
patented Beston Technologies capabilities.
Our sales focus is to “capture”, in key target markets
in Australia and overseas, customers who are
looking for safe, reliable, healthy, nutritious food
and beverage products.
We are aiming to produce products which span
a range of age groups, with taste and flavour
variations tailored to the nuances of specific
geographic regions, in the hope that once
“captured”, these customers will stay with
our Beston Brands for the whole of their lives.
The strategy is focused on growing our Beston
Global Food Company over the long term both
organically and through acquisitions, within these
four industry segments.
I am pleased to report that BFC has achieved
significant progress in implementing this business
strategy, during the 2015-16 financial year.
BFC has demonstrated the strength of its closed
loop supply model to provide provenance and
security of supply to high growth export markets,
particularly to China and the ASEAN region.
Our platform for growth has now been established
with the various initiatives which we have put
in place in relation to raw materials and production
and the sales and distribution relationships which
have been formed in China, Hong Kong, Thailand,
Singapore and other parts of Asia.
BFC will continue to refine its strategies, as we
go forward, to build on the opportunities already
created for the Company.
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RESULTS ACHIEVED
The 2015-16 financial year was our first year as a listed
public company on the Australian Securities Exchange,
having listed on 28 August 2015. It was also a year
of consolidation for the Company as we implemented
the business strategy set out in the IPO Prospectus,
namely: to build out the dairy division of the
Company, build out the seafood division, establish
the meat division and further develop the marketing
and distribution capabilities of the Company.
The financial results for the year end were a statutory
net loss of $1.716 million and an underlying net profit
after tax (UNPAT), after adjusting for the costs of the
IPO and other non-recurring costs, of $2.449 million.
These results were below the management budgets
for the period, primarily due to a number of key
assumptions on sales (particularly in China) and
income not being realised as expected - and as
contracted - in the second half:
China Sales
BFC started the year with contracted sales to
Dashang Group Co. Limited (a major supermarket
chain in China and significant BFC shareholder)
of RMB 200 million (approx. AUD 42.0 million).
These sales were not confirmed by purchase order
by the close of the 2015-16 financial year. Sales
from these contracted commitments had been
incorporated into the Company’s budget earnings
and dividend expectations.
Pedra Branca
BFC terminated the lease over the Pedra Branca
dairy farm following a default by the lessee and
brought the operations of the farm under internal
company management. The short-term impact
of this decision was a reduction in revenues of
approx. $1.6 million in the second half of 2015-16.
Regulatory Constraints
In addition, significant regulatory hurdles were
experienced (primarily in China) during the second
half of 2015-16 which affected the timing of
deliveries and sales recognition in this period.
Management has responded by taking a number
of actions to address each of these issues, such as:
• Creating multiple new sales channels to market
in China, separate from the arrangements with
Dashang Group Co. Limited. A number of new
agreements have been entered into by the Company
for the supply, marketing and distribution of BFC
food and beverage products to supermarkets,
gourmet food outlets and food service businesses
as well as through associated e-commerce
platforms in China and Korea. As at September 2016,
the Company now has its own offices and personnel
located in four strategic locations in China: Dalian,
Beijing, Shanghai and Fuzhou.
• Taking operational control of the Pedra Branca
farm and re-building the farm back to “best practice”
standards. While the decision to terminate the Pedra
Branca lease contributed to a shortfall in revenue
in 2015-16, the benefits of bringing Pedra Branca
“in house” has been a significant uplift in productivity
which is expected to be reflected in the operating
results of the farm in 2016-17.
• Addressing each of the regulatory hurdles as they
have arisen through proactive decisions using the
long-established networks of contacts in the regions
in which the Company operated. For example,
BFC established a Manufacturing and Distribution
Agreement with the Hondo Agricultural Company
in China (as announced on 1 April 2016) when the
export of allergen free ready-to-eat “Yarra Valley”
meals to China was prevented by Chinese import
and quarantine regulations.
• Underpinning the earnings of the Beston Pure Foods
factories with local Australian supply contracts
while continuing to build into higher margin
export markets.
• Adjusting the convertible note investments and
equity interests with investee companies to align
with their underlying earnings.
All of these actions, of course, take time to put
in place and time to yield bottom line results.
That said, the Board and management of BFC
believe that the Company will be better and
stronger as a consequence of the decisions
taken to deal with the various “head winds”
that emerged during the year.
As is well understood by companies that trade
with China, doing business in China can often
be unpredictable and uncertain. The key to being
successful, is to have the right “guanxi” or network
of connections and relationships in place to enable
alternative actions to be implemented when
difficulties arise… and to persevere.
The benefits in persevering and staying the course
in China can only be measured in the long term.
China has a growing population of 1.4 billion people
which needs to be fed. As the population becomes
more affluent, Chinese consumers are acquiring
a taste for more varied, more healthy (nutritional)
and more value-added foods.
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The reduction in tariff over 4 years to 2020 via
the Chinese-Australia Free Trade Agreement
(ChAFTA) is a transformational dynamic for
Australian agri-business - one which BFC has moved
quickly to take advantage of - but experience over
the past 50 years (since the end of the Cultural
Revolution) has shown that doing business in
China can be like running a marathon where
parties that stay the course and have tenacity,
endurance and flexibility are the ones that reap
the rewards.
Notwithstanding the long history of many of the
Directors in transacting business in China and
with other countries in Asia, both the Board and
the management team of BFC have increased
our knowledge during the year of the markets
we have entered with our food and beverage
products as well as of the systems and support
required to leverage the investments made by
the Company to date.
FOOD SAFETY
Food safety is becoming a major issue across the
world, and particularly in China where there have
been a string of unethical behaviours and
counterfeiting of food products and food brands.
Food fraud (including counterfeiting, dilution and
the mislabeling of food products) has been estimated
to cost up to US$40 billion a year. Beyond the
economic cost, food contamination and/or dilution
can pose a major health concern such as occurred
in 2008 in China when melamine was added to milk
and infant formula. (The result, in that case, was the
hospitalisation of over 50,000 infants and six deaths).
The reputational impact upon a company of a food
security incident can be very severe as was shown
recently in the “berry case” in Australia which
involved a string of Hepatitis A cases in NSW and
Victoria which were traced to contamination in
frozen berries imported into Australia.
Straight out counterfeiting of particular high-value
food and beverage items is also a growing problem.
For example, there exists a thriving ”industry” in
China counterfeiting Australian wine. Indeed, there
are various estimates that suggest that up to 80%
of wine sold in China is not as labeled.
For Australian producers of food products this is a very
significant issue and risk, since the value (both of their
products and of the company itself) is often centred
on quality products that are promoted as being
“clean and green” (such as honey, for example).
The opacity of the global food chain has created
the opportunity for food fraud and food crime and
increased the risk of food contamination and related
problems (such as the expansion of “superbugs”).
BFC is transforming the business model of food
production by building its supply chain around
an internet-driven food safety system, known
as OZIRISTM which has been developed exclusively
by the Company and now has five international
patents pending. The technology combines ingredient
identification and traceability capabilities with
BRANDLOK authentication capabilities to ensure the
safety and quality of the products which BFC supplies.
Data collected at farm level is used to track raw
materials as they are transformed at the factory
level and then shipped to consumers. We believe
that our OZIRISTM food safety technologies, as they
become more widely utilised, will empower
consumers who are increasingly wanting to
know what is going into their bodies.
Our technologies also provides genuine producers
with a means of building trust with consumers.
BFC has made the technology available to other
producers in the Australian food industry (or other
industries) who are able to access and use the
technology by payment of a small royalty on sales.
FOOD INNOVATION
After years of consuming large amounts of salt
and fat in the food stuffs manufactured by the big
global food companies, consumers across the world
are starting to look for products which enable them
to “eat better”. The food system has made it too
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2 0 1 6 A N N U A L R E P O R T
easy to eat poorly, with the results that westernised
countries are experiencing an increasing incidence
of diseases such as diabetes and obesity.
Indeed, diabetes has become one of the world’s
most critical unmet prevention and treatment
challenges. Notwithstanding the introduction
of many new medications, the combined prevalence
of impaired glucose intolerance (IGT) and diabetes
has surpassed 13% worldwide and continues to
grow, according to information compiled by the
International Diabetes Foundation. Coupled with
these issues has been the increasing use of artificial
flavours and colourings, preservatives and antibiotics
in food production by the big food companies.
BFC has been leading the way, in a number of
respects, in developing food and beverage products
which are healthier (with less sugar and salt),
yet are still affordable and taste good. Most of
this product development has been undertaken
in conjunction with our investee company,
Neptune Bio-Innovations Pty Ltd (NBI).
In August this year, we announced the formation
of a joint venture with Singapore based company
MindChamps Holdings Pty Ltd (MindChamps)
to provide fresh and nutritious food to all pre-school
children who attend the early childcare centres
operated by MindChamps in Singapore and Manila.
A “Kids Nutrition” program has been developed
by our in-house Dietician and the food technicians
at NBI and our other operating businesses to
provide healthy and nutritious meals for the more
than 2,000 children who attend the MindChamps
childcare centres each school day. Since the
formation of this joint venture, we have also
been working with MindChamps to develop
a range of healthy food products specifically
for children which will be branded by the joint
venture and sold in supermarkets across Asia
initially, and over time, in other countries.
This “Kids Nutrition” program is consistent with
the long-term focus for BFC to build strategic
value into our business by taking a whole-of-life
perspective in relation to the healthy eating
needs of populations. That is, we aim to design,
develop and provide food and beverage products
which are healthy and nutritious (i.e. contain
“no nasties”) and which are able to be consumed
right through from the early years of a person’s
life to the senior years.
LOOKING BACK…TO LOOK FORWARD
BFC has come a long way since the business was
founded in 2012. When the Company listed on
28 August 2015, our market capitalisation at the
commencement of our first day of trading was
around $130 million. As at 30 June 2016, our market
capitalisation was close to $150 million and BFC is now
firmly established as one of the leading agri-business
companies in Australia.
BFC is a very different company today than it was
at the time of our IPO. This is partly as a result of
implementing the business strategies detailed in our
Prospectus, but is also partly a result of the need to
address the changed circumstances in our operating
environment, as explained above.
Our vertically integrated supply model (i.e. in-house
sourcing, production, distribution and marketing)
provides BFC with significant cost advantages over our
competitors in each of our product categories, resulting
in higher margins. Customers are increasingly recognising
the value of the BFC supply model in being able to
offer products which are authentic, great tasting and
healthy and nutritious with “clean” ingredient labels.
BFC’s well-developed brands, extensive product
portfolio, leading edge technologies and well invested
and resourced product portfolio is a valuable asset that
is highly scalable in order to achieve our long-term
growth objectives. The Company has ample capital
and manufacturing capacity to support its current
growth initiatives and is well-positioned to take
advantage of opportunities as they arise from the
attractive dynamics of the food industry, both in
Australia and overseas.
On behalf of the Board, I would like to thank our
relatively small, but highly experienced management
team and all our dedicated employees for their efforts
and achievements during the year. Every one of our
management and staff have contributed enormously,
with long hours and personal dedication and have
demonstrated by their actions that they are focused
on maximising the value of the Company’s assets.
I would also like to thank our shareholders for your
support over the past year, in our first year as a listed
company, and look forward to your continuing
support as we continue to grow and enhance the
value of your Company.
To do this, we will continue to create new foods, as
well as adapting existing foods, to make them more
nutritious and more healthy and kinder on our bodies.
Dr Roger Sexton AM
Chairman
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CEO’S COMMENTARY
In our maiden year
as a public company,
we are pleased to have
successfully completed
a range of investments
across the key assets
provided in the IPO
Prospectus, having
developed and secured a range of strategic sales,
manufacturing and distribution partners in our
primary growth regions of China, ASEAN and Australia.
In addition to this we launched what we believe are
the world’s first range of proprietary anti-counterfeit
and food traceability technologies that look to solve
the growing need to provide consumer confidence
and provenance of foods.
It is extremely pleasing to see that in such a short period
as a result of the marketing and distribution arrangements
put in place over the past year, our objective in taking
premium high quality Australian foods into some of
the fastest growing economies is now well on track.
KEY HIGHLIGHTS
Key highlights from this financial year include:
• Restarting of the Murray Bridge and Jervois Dairy
facilities and achieving silver and gold medals
for a range of our cheeses.
• Signing strategic sales partnerships with JM WOWO
Limited and Hondo Agricultural in China, Sunwah in
Hong Kong and MindChamps Holdings in Singapore.
• Establishment of BFC Sales and Marketing teams
in China, Thailand, Vietnam and Australia with
solid sales across all product divisions.
• Launch of our integrated technology platform
combining B2C e-commerce, consumer traceability,
and product anti-counterfeit technology into the
Australian marketplace.
• Acquisition of a 51% equity stake in AQUAessence,
providing strategic security of supply and a new
premium brand to meet the rapidly growing demand
for naturally high alkaline water in China and Asia.
These highlights demonstrate the breadth of work
undertaken and the key areas where management has
focused its efforts to build on the foundations established
for the business in order to grow and develop further.
The acquisitions undertaken have all been value
accretive for the Company and are enabling each
of the operating divisions to achieve the critical
mass and operating efficiencies required to
compete in global markets.
ESTABLISHING THE GROWTH PLATFORM
Dairy
Following the restart of the acquired UDP facilities in
September 2015, we brought back a range of premium
cheeses based on previous consumer demand and for
which the facility was well recognised.
As part of developing our new brand, we recognised
the importance of creating a brand that reflected
the long standing heritage of the Murray Bridge
region as being a high quality dairy region, so we
developed and launched the “Edwards Crossing” brand.
This was officially launched into selected retail
stores in late May 2016 in South Australia, with the
progressive roll out plan into the Eastern States of
Australia, followed by Singapore, Thailand, Vietnam
and China in progress. Our Edwards Crossing cheese
range subsequently received 2 gold and 3 silver
medals including the overall title of Champion
Cheddar at the recent prestigious Royal Adelaide
Show Dairy Awards in August which was a true
testament to the experience of our cheese makers
in producing such high quality cheeses within
less than 12 months of re-opening operations.
Following our focus on being innovative in dairy,
our ASEAN marketing team engaged in a range
of consumer group studies which resulted in the
development and launch of “Kyubu”, a range
of Japanese branded flavoured cheeses which follows
the leading dairy consumer trends in Asia. This range
of cheese products meet consumers growing need
to increase their consumption of cheese in order
to increase their daily calcium intake, while packaged
for convenience and suited to Asian flavour profiles.
We first launched our “Kyubu” branded range of
cheeses into retail stores across Singapore and
Thailand in early June 2016, with ongoing rollout
plans scheduled for Australia and China later
in the second half of the financial year.
We are pleased that since restarting the Murray Bridge
and Jervois facilities, we have established two strong
brands, a range of award winning cheeses, and have
over 50 SKU’s for retail and food service together
with a clear growing distribution in our core regions.
Seafood
In seafood, we entered the China market by creating
branded premium Australian seafood gift boxes
for Chinese New Year. This paved the way for the
introduction of some of our most prized Australian
seafood such as Southern Rock Lobster, Southern Blue
Fin Tuna, Coffin Bay Oysters and a range of other
products being introduced direct to Chinese
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2 0 1 6 A N N U A L R E P O R T
consumers in a new way. The gift box is now an
ongoing offering to the Chinese market on certain
holidays, and the collection has been included
in the Beston Marketplace online store in Australia.
We announced in the 3rd quarter the joint venture
with SunWah based in Hong Kong. SunWah are
one of the largest and most well established seafood
importers in Hong Kong and the implementation
and roll out of this Joint Venture forms one of the
key distribution platforms in Hong Kong for our
seafood direct to hotels, restaurants and retail.
As part of leading the development of Australian
seafood, BFC achieved the largest single shipment
of Hirashima Kingfish ever made to China, on behalf
of Clean Seas Limited.
BFC increased scale of production in Southern Rock
Lobster from 128T to 380T, and gained access to
Southern Blue Fin Tuna processing through the
acquisition of 5 Star Seafoods and Mori Seafood
in the 1st quarter of 2015-16. The combined business
with Ferguson Australia provides a significantly
improved capacity to supply and to capitalise on
growing demand for Australian seafood whilst the
Chinese-Australia Free Trade Agreement reduce
tariffs over the 4 years to 2020.
Meat
Early in the financial year, we identified the growing
demand from Chinese and Asian consumers for high
quality healthy pre-prepared meals, and in particular
meals which contain premium quality Australian
sourced beef and lamb. In response, we developed
the Yarra Valley range of ‘ready-to-eat’ meals which
were launched in late June 2016 into the Spinneys
retail stores in Dubai in the UAE Middle East. In April
2016, we announced our manufacturing partnership
with Hondo Agricultural which will enable BFC
to be one of the first to introduce Australian
ready-to-eat meals using premium quality
Australian beef and lamb which is allergen free
and also carries the OZIRISTM anti-counterfeit and
product traceability assurance to Chinese customers.
Looking ahead, we will continue to roll out new
ready-to-eat meal products with healthier and
better nutritional alternatives as part of expanding
our position in this growing market segment.
Health
BFC has taken a leadership role in the development of
food and beverage products that are healthier, while still
providing the same taste and flavour profile people enjoy.
As part of that development, we developed the first
50% reduced sodium salt cheese through combining
the innovations of Neptune Bio-Innovations using their
LoSalTM reduced Sodium Salt, and the cheese production
expertise at the Beston Pure Foods facility.
We saw the opportunity to lead the development of
healthy eating and nutrition in children from the ages of
1 to 6 years of age. As a result we announced in August
the formation of a joint venture with MindChamps
Holdings to provide a range of foods to over 2,000
children that attend the MindChamps child care centres
in Singapore. The program has been specifically
designed by our in-house Dietician to ensure the
optimal nutritional intake is provided to the children
and meets both the Singapore and Australian guidelines.
In early October 2015, we identified the growing
consumer demand for clean, high quality, naturally
sourced water. Following an extensive search, this
lead to our acquisition of 51% equity in AQUAessence
in May 2016. Following the acquisition, BFC created
a new brand which reflected the ancient age of the
water being 2,820 years old, and highlights the health
benefits of being a naturally high alkaline water high
in electrolytes. The product is now being rolled out
in stores across China, Singapore, and Australia with
plans for countries in Asia scheduled for the second
half of the financial year.
CONCLUSION
We have made significant progress during the 2015-16
year in building out of our business across all of the
operating divisions. The Company has been positioned
to be a long term growth business which builds
sustainable value for shareholders while creating whole
of life loyalty with customers via authentic, healthy
and nutritious food choices with its house of brands.
We will do this by further integrating technology into
our whole supply chain; taking a holistic approach to
whole-of-life healthy foods across a persons life span;
capitalising on synergies between our investee
companies; developing strategic alliances with other
companies to further enhance our manufacturing and
distribution capabilities; investing in manufacturing
capability; improving productivity on our farms;
and building our own brands.
The actions which we have taken in these areas
over the 2015-16 financial year in terms of our
existing operations, along with our planned expansion
projects in 2016-17, has established a momentum
for the underlying organic growth of our business
over the next two to three years.
We believe that BFC will provide a rewarding , long
term investment for shareholders through the position
it is building as a preferred supplier of high quality,
safe, clean Australian food into the Asia Pacific region.
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REVIEW OF OPERATIONS
During the financial year ended 30 June 2016
Beston Global Food Company completed a successful
IPO raising $100 million, and listed on the Australian
Securities Exchange on 28 August 2015.
Following the Company’s IPO, BFC has undertaken
a number of significant steps towards becoming
a premium provider of dairy, seafood, meat and
health and nutrition products to both domestic
and emerging markets, particularly Asia.
To achieve this objective, BFC has carefully selected
a portfolio of food and beverage businesses and
assets in Australia and globally, enabling it to be
one of the few food companies in the world to
have a closed loop supply chain.
BFC provides a wide range of premium, healthy,
and functional food & beverage products sourced
substantially from its own farms, produced
substantially in its own factories, and sold through
its own people on the ground in the markets it serves.
In the ten months following the IPO, BFC has
completed the acquisition of the following assets:
• Kurleah Dairy Farm
• Pedra Branca Dairy Farm
• United Dairy Power (UDP) assets
(now re-branded as Beston Pure Foods)
• Australian Dairy Proteins
• Mori Seafood
• Five Star Seafoods
• Additional Lobster Pot Quotas
• 40% interest in Scorpio Foods Pty Ltd
• 40% interest in Australia Provincial Cheese
• 20% interest in Neptune Bio-Innovations Pty Ltd
• 51% interest in AQUAessence BMTG Pty Ltd
These assets are either held directly by BFC, or by one of
the operating companies in which BFC holds an interest.
With the completion of the acquisitions set out above,
BFC has been able to move away from commodity
style, mass produced products to producing high
quality and premium food products allowing it to
differentiate itself from most other food providers.
BFC has created a “house of brands” which it will
continue to grow through new product development
and acquisitions (currently BFC has some 30 brands
within its portfolio).
BFC has established sales teams in China, Thailand,
Vietnam and Australia, and progressed with the
operation and improvement of its dairy farms, and
cheese and whey factories at Murray Bridge and
Jervois in South Australia.
In addition, BFC has established a number of
significant and strategic relationships during
the period with large international food Companies
who will purchase BFC and third party products
through BFC, for distribution through their
numerous outlets.
The development of the Company’s food traceability
and authentication capability has been another focus
for the Company during the period with the launch
of BFC’s OZIRISTM food traceability system and
BRANDLOK authentication technology, ensuring the
safety and quality of the food that BFC supplies.
Consumers are empowered by having farm-to-fork
information on the products they are buying.
OZIRISTM has in turn been linked to the
Beston Marketplace, an e-commerce platform
featuring premium food products of both BFC
and non-BFC brands. All products sold on the
Beston Marketplace are able to be traced and
authenticated through OZIRISTM.
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Key achievements in the
2016 financial year include:
DAIRY
- Substantial investment to improve plant and
infrastructure on farms to enhance productivity
- Increased herd count to 2,675 cows with
the aim of achieving an equal ratio of spring
and autumn calving to ensure consistent milk
production throughout the year
- Processing of 36 million litres of milk
- Production of 3,561 tonnes of cheese
- Production of 1,094 tonnes of whey powder
- Commenced shipment and export of Romano
and Pepato cheese to Malta
- Production of the first batch of low sodium
‘heart healthy’ cheese for health conscious
consumers ready for distribution to our
Middle East customers.
- Commenced manufacturing of the formerly
iconic “Centenary” black waxed vintage Cheddar,
and released into retail stores as a 2,500 unit
limited edition product.
- Commenced manufacturing of a range
of Murray Bridge cheeses (Gouda, Colby,
Aussie Jack, Edam)
- China Certification and Accreditation Administration
of the People’s Republic of China (CNCA) product
certification received for BFC dairy products.
- Development and launch of “Kyubu”,
a Japanese style flavoured cheese snack,
in Thailand and Singapore
- Award of $2.5 million Government Regional
Development Grant to develop a new ‘state of
the art cheese’ processing facility. The grant will be
received and recognised in the 2017 financial year
SEAFOOD
- Joint venture agreement signed with Sunwah
to supply seafood products into Hong Kong,
Macau and other parts of southern China
- Lobster production increased from 128 tonnes
per annum to 380 tonnes per annum
- Processing of Southern Blue Fin Tuna increased
from 650 tonnes to 735 tonnes per annum
- The largest ever single shipment of Hiramasa Kingfish
into China markets through contract with Clean Seas.
BFC entered into an agreement for the distribution
of fresh and frozen Kingfish in China incorporating
Hong Kong SAR and the Republic of Korea
MEAT
- Increase in meat processing capacity from
2,000 to 2,500 tonnes per annum
- Manufacturing and distribution agreement
established with Hondo Agricultural for the
manufacturing of Yarra Valley processed meat
under license into China
- Launch of the healthy, ready-to-eat meals under
the Yarra Valley range of products into Australian
and export markets
HEALTH
- Launch of SweetinTM, LoSalTM, Condensed Milk
Powder and Instant Mayo products into major
retail store ‘Lulu’ in the Middle East
- Launch of SweetinTM and LoSalTM into 400 retail
stores across the Brunei region in June 2016
- Developed new innovative products and put
in place distribution arrangements for these
and other products for ASEAN markets, including
Life X10, a natural health drink derived from
grapes and full of powerful health enhancing
anti-ageing oxidants.
12
2 0 1 6 A N N U A L R E P O R T
DISTRIBUTION
- Entered into a joint venture with the Sunwah Group
in Hong Kong for the marketing and distribution
of BFC food and beverage products in Hong Kong,
Macau, and certain parts of southern China
- Entered into a strategic partnership with
JM WOWO Limited, China’s leading catering and
food service industry B2B e-commerce platform
Profit/(loss) attributable to
Owners of the Company
UNPAT adjustments
30 June 2016
$’000
($1,716)
- IPO & corporate establishment costs
$3,449
- Formed a strategic alliance with leading Australian
- Sales & distribution establishment costs
$754
cheese distributor Washed Rind Group (WRG)
under which WRG will distribute cheddar and
other cheeses currently produced at
Beston Pure Foods Factory at Murray Bridge
TECHNOLOGIES
- Launch of OZIRISTM allowing users to scan
and view product information and trace it back
to its producers. OZIRISTM runs in both English
and Chinese languages.
- Awarded a Provisional Patent for Food Safety
Technologies that embodies the proprietary
OZIRISTM food traceability App and builds on
verification and anti-counterfeiting applications
developed by DataDot Technology Limited and
Brandlok Brand Protection Solutions Pty Ltd.
- Launch of the e-commerce platform
Beston Marketplace allowing customers
to purchase BFC and third party products for
delivery direct to the customer
FINANCIAL REVIEW
The consolidated net loss attributable to owners
of the Company, after providing for income tax
and research and development tax concessions,
is $1.716 million (2015: $1.103 million loss).
Due to 2015/16 being the first year of normal
operations, comparisons to prior year are largely
not meaningful.
The result was based on revenue and other income
of $20.568 million primarily from the sale of dairy,
seafood, meat, and health products into China
and dairy products into the domestic market.
The following table provides a reconciliation
between the reported results of the Company
and the underlying net profit after tax (UNPAT).
This measure is relevant as it reverses the impact
of start-up, establishment and non-recurring gains
and expenses to enable a better understanding
of the Company’s operating performance.
Details of UNPAT adjustments are provided below.
- Dairy manufacturing plant start-up costs
$478
- Farms purchase & start-up costs
- Abnormal bad debts
$1,071
$301
- Gain on business acquisitions
($2,018)
- Acquisition transaction costs
- Non-recurring professional fees
UNPAT
$37
$93
$2,449
The results for the financial year are a composite of:
- Significant one-off listing costs and expenses
in completing a successful IPO;
- Significant costs and expenses associated
with establishing China and ASEAN sales
and distribution operations;
- Significant costs and expenses in re-starting
the former UDP factory at Murray Bridge and
the former ADP Lactoferrin plant at Jervois;
- Significant costs and expenses in improving and
rebuilding the Kurleah and Pedra Branca dairy
farms, including associated transaction costs; and
- Operational revenue and expenditure from the
activities of dairy farming, manufacturing of cheese
and associated dairy products, and sales and
distribution of BFC, investee company, and third
party products which have become the core
business of the Company.
As a result of the closed loop supply chain, milk
revenues from farms have largely been eliminated
as intercompany transactions. The ability to supply
milk from BFC owned farms to the BFC cheese
factory has enabled the Company to partially
insulate itself from the current dairy industry
crisis, particularly the record low prices being
paid for milk by key industry players.
15
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
As previously announced, revenues were below
expectation with shortfalls primarily due to
three factors:
- Termination of the Pedra Branca dairy farm lease
following a default by the lessee. This brought the
farm under internal management control which
has seen a significant uplift in productivity, however
this impact won’t be seen in the results until the
2016-17 financial year. As a result, the short term
negative impact of this decision is a reduction in
profitability of the farm of approximately $1.6 million
- The decision not to proceed with the acquisition
of the Weneeda Dairy Farm after comprehensive
due diligence, resulting in lower than expected
milk revenue
- Purchase commitments, signed under company seal
by Dashang Limited and included in the Company’s
internal budget, were not received by the close of
the financial year on 30 June 2016. The Company
is continuing to engage with Dashang on these
outstanding commitments with a view of working
with Dashang to become one of the Company’s
key distribution channels in its supply of food
and beverage products to the China market
- The delays in the first half of the year in regaining
the export licences for the former UDP factories
at Jervois and Murray Bridge, as well as other
regulatory hurdles experienced in the second half,
negatively affected the timing and ability to deliver
food and beverage products during 2015-16
Expenses for the year were $25.108 million largely
comprised of cost of goods sold in the ordinary course
of business and one off establishment costs.
Operating costs include the day to day operation
of farms, factories, overseas subsidiaries and local
management costs. These were higher than planned
largely due to taking on the operation of the Pedra
Branca dairy farm from a lease back arrangement
and investing into the farm to restore it to
a sustainable operating level.
The key assets in the Consolidated Balance Sheet
at 30 June 2016 are:
- Property, plant and equipment of $38.267 million.
Independent valuations obtained as at 30 June 2016
for these assets exceed the carrying value of the
assets in the financial statements;
- Trade and other receivables of $26.610 million.
The most significant items comprising this value
are trade debtors of $12.299 million reflecting the
growth in the Company’s sales towards the end
of the second half, and convertible notes
receivable of $8.584 million;
- Cash and cash equivalents of $19.372 million;
- Investments in associates of $16.935 million.
This is comprised of Neptune Bio-Innovations
($11.938 million) and Ferguson Australia Group
($4,997 million);
- Intangible assets of $10.041 million, largely
comprised of owned lobster quota ($4.949 million)
and water licences ($3.959 million). Independent
valuations support or exceed the carrying value
of these assets in the financial statements;
- Inventories of $7.965 million, largely due to
above budget stocks of cheese as a results of the
Company’s decision to produce and release
“aged” hard cheese products to the market in due
course (which can earn significantly higher margins).
This was also in part due to the Company making
a decision to take in additional milk as part of its
Cheese Bank initiative in order to assist the dairy
industry in coping with the “milk crisis” which
emerged in the second half of the year; and
- Biological assets (livestock) of $4.241 million
comprising the dairy herd at the Kurleah and
Pedra Branca dairy farms
The key liabilities for the Company are Trade
and Other Payables of $8.705 million incurred
in the ordinary course of business.
The Company had no debt as at 30 June 2016.
16
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
SHAREHOLDER RETURNS
The BFC dividend of 0.6 cents per share which the BFC
Directors have resolved to pay is calculated to provide
investors with a benefit that reflects the underlying
performance of the Company having regard to BFC’s
financial requirements, future profitability and capital
outlooks, and other factors that the Board deems relevant.
The Board has previously determined that a payout
ratio range of 60% to 85% of UNPAT for the 2015-16
financial year is intended but not mandatory.
Thereafter, future dividends will be dependent
on the free cash flow of the business.
Total Shareholder Return (TSR) measures the
change in share value over a specified period
together with the return by way of dividends received.
BFC’s TSR since its listing on the ASX on 28 August
2015 to 30 June 2016 was 18.9%
Loss attributable to owners
of the Company ($’000)
30 June 30 June
2015
2016
($1,716) ($1,103)
Basic EPS (cents per share)
(0.54)
(5.38)
Diluted EPS (cents per share)
(0.54)
(5.38)
UNPAT ($’000)
$2,449 ($1,103)
UNPAT Basic EPS (cents per share)
0.77
(5.38)
Dividends declared ($’000)
$2,179
-
Dividends per share (cents per share)
0.60
Opening share price
(at listing 28 August 2015)
$0.35
Closing share price at 30 June 2016
$0.41
-
-
-
BFC has made significant progress during the
2015-16 financial year building out its business across
all of BFC’s operating divisions. The Company’s existing
operations and planned expansion projects will have
underlying growth in the next 2 to 3 years. This long
term growth is expected to be achieved via, inter alia:
- Further integrating technology into our
whole supply chain
CORPORATE GOVERNANCE
- Taking a holistic approach to whole-of-life
healthy foods across a person’s whole life span
- Exploiting synergies between investee companies
- Creating new, value-added products
- Developing strategic alliances with other
companies to enhance our manufacturing and
distribution capabilities
- Investing in manufacturing capability
- Improving productivity on our farms
- Further building our own brands
POST 2015-16 YEAR END
Since the end of the 2015-16 financial year, the
following key achievements have been made;
- BFC topped its class at the South Australian Dairy
Industry Awards. All the Beston Pure Foods Edwards
Crossing-branded cheeses that were nominated in
the prestigious Royal Adelaide Show Dairy Awards
won medals in their categories, with BFC landing
a total of two Gold and three Silver including the
overall title of Champion Cheddar
- Entered into a Joint Venture with the Singapore
based MindChamps Holdings Pte Limited to
provide fresh and nutritious foods to all pre-school
children who attend the 35 early childcare centres
operated by MindChamps in Singapore and the
Philippines. MindChamps currently supplies
some 6000 meals each school day to the
children in its childcare centres
- Placement of 64,051,111 shares at $0.45
(5.9% premium to BFC’s 5 day VWAP) to
Singapore company Kunteng Pte Ltd, a wholly
owned subsidiary of the China based private
company, Dalian Hairunlai Group
The Company has been positioned to be a long-term
growth business which builds sustainable economic
value for shareholders while creating whole-of-life
loyalty with customers via authentic, healthy,
and nutritious food and beverage choices with
its house of brands.
Beston Global Food Company Limited and the Board are committed to achieving and demonstrating the highest
standards of corporate governance. Beston Global Food Company Limited has reviewed its corporate governance
practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the
ASX Corporate Governance Council.
The 2016 corporate governance statement is dated as at 30 June 2016 and reflects the corporate governance
practices in place throughout the 2016 financial year. The 2016 corporate governance statement was approved
by the Board on 11 June 2015. A description of the Group’s current corporate governance practices is set out
in the Group’s corporate governance statement which can be viewed at www.bestonglobalfoods.com.au .
18
2 0 1 6 A N N U A L R E P O R T
financial report
2016
21
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
FINANCIAL REPORT CONTENTS
REVIEW OF OPERATIONS AND ACTIVITIES
DIRECTORS’ REPORT
AUDITORS’ INDEPENDENCE DECLARATION
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
ASX ADDITIONAL INFORMATION
23
28
40
41
47
92
93
95
22
2 0 1 6 A N N U A L R E P O R T
REVIEW OF OPERATIONS AND ACTIVITIES
Review of operations and activities
During the financial year ended 30 June 2016, Beston Global Food Company (“BFC” or “the Company”) completed a
successful IPO raising $100 million, and listed on the Australian Securities Exchange on 28 August 2015. Following the
Company’s IPO, BFC has undertaken a number of significant steps towards becoming a premium provider of dairy,
seafood, meat and health and nutrition products to both domestic and emerging markets, particularly Asia.
To achieve this objective, BFC has carefully selected a portfolio of food and beverage businesses and assets in Australia
and globally, enabling it be one of the few food companies in the world to have a closed loop supply chain. BFC provides
a wide range of premium, healthy, functional food and beverage products sourced substantially from its own farms,
produced substantially in its own factories, and sold through its own people on the ground in the markets it serves.
In the ten months following the IPO, BFC has completed the acquisition of the following assets:
Kurleah Dairy Farm
Pedra Branca Dairy Farm
United Dairy Power (UDP) assets (now re-branded as Beston Pure Foods)
Australian Dairy Proteins
•
•
•
•
• Mori Seafood
•
•
•
•
•
•
Five Star Seafoods
Additional Lobster Pot Quotas
40% interest in Scorpio Foods Pty Ltd
40% interest in Australia Provincial Cheese
20% interest in Neptune Bio-Innovations Pty Ltd
51% interest in AQUAessence BMTG Pty Ltd
These assets are either held directly by BFC, or by one of the operating companies in which BFC holds an interest.
With the completion of the acquisitions set out above, BFC has been able to move away from commodity style, mass
produced products to producing high quality and premium food products allowing it to differentiate itself from most other
food providers.
BFC has created a “house of brands” which it will continue to grow with new product development and acquisitions (and
currently has some 30 brands within its portfolio).
BFC has established sales teams in China and Thailand, and progressed with the operation and improvement of the
dairy farms, and cheese and whey factories at Murray Bridge and Jervois in South Australia.
In addition, BFC has established a number of significant and strategic relationships during the period with large
international food companies who will purchase BFC and third party products through BFC, for distribution through their
various outlets.
The development of the Company’s food traceability and authentication capability has been another focus for the
Company during the period with the launch of BFC’s Oziris food traceability system and BrandLok authentication
technology, providing confidence in the safety and quality of the food that BFC supplies. Consumers are empowered by
having farm-to-fork information on the products they are buying.
Oziris has in turn been linked to the Beston Marketplace, an e-commerce platform featuring premium food products of
both BFC and non-BFC brands. All products sold on the Beston Marketplace are able to be traced and authenticated.
Beston Global Food Company Limited
30 June 2016
23
23
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Review of operations and activities
Key achievements in the FY16 financial year include:
Dairy
•
•
•
•
•
•
•
•
•
•
•
Substantial investment to improve plant and infrastructure on farms to enhance productivity
Increased herd count to 2,675 cows with the aim of achieving an equal ratio of spring and autumn calving to ensure
milk production throughout the year
Processing of 36m litres of milk
Production of 3,561 tonnes of cheese
Production of 1,094 tonnes of whey powder
Commenced shipment and export of Romano and Pepato cheese to Malta
Production of the first batch of low sodium “heart healthy” cheese for health conscious consumers
Commenced manufacturing of the former iconic “Centenary” black waxed vintage Cheddar
Commenced manufacturing of the former range of Murray Bridge cheeses (Gouda, Colby, Aussie Jack, Edam)
China product certification received for BFC dairy products
Development and launch of “Kyubu”, a Japanese style cheese snack, in Thailand and Singapore
Seafood
Joint venture agreement signed with Sunwah to supply seafood products into Hong Kong, Macau and other parts of
southern China
Lobster production increased from 128 tonnes per annum to 380 tonnes per annum
Processing of Southern Blue Fin Tuna increased from 650 tonnes to 735 tonnes per annum
Largest ever shipment of Hiramasa Kingfish into China markets through contract with Clean Seas
•
•
•
•
Meat
Increase in meat processing capacity from 2,000 to 2,500 tonnes per annum
•
• Manufacturing and distribution agreement established with Hondo Agricultural for the manufacturing of Yarra Valley
•
processed meat under license into China to commence in October 2016
Launch of the healthy, ready-to-eat meals under the Yarra Valley range of products into Australian and export
markets
Health
•
•
•
Launch of Sweetin, LoSal, Condensed Milk Powder and Instant Mayo products into major retail store Lulu in Middle
East
Launch of Sweetin and LoSal into 400 retail stores across Brunei region in June 2016
Developed new innovative products and put in place distribution arrangements for these and other products for
ASEAN markets, including Life X10, a natural health drink derived from grapes and full of powerful health
enhancing anti-ageing oxidants
Distribution
•
•
•
Entered into a joint venture with the Sunwah Group in Hong Kong for the marketing and distribution of BFC food
and beverage products in Hong Kong, Macau, and certain parts of southern China.
Entered into a strategic partnership with JM WOWO Limited, China’s leading catering and food service industry
B2B e-commerce platform
Formed a strategic alliance with leading Australian cheese distributor Washed Rind Group (WRG) under which
WRG will distribute cheddar and other cheeses currently produced at Beston Pure Foods Factory at Murray Bridge
Beston Global Food Company Limited
30 June 2016
24
24
2 0 1 6 A N N U A L R E P O R T
Review of operations and activities
Financial review
The consolidated statutory net loss attributable to owners of the Company, after providing for income tax and research
and development tax concessions, is $1.716 million (2015: $1.103 million loss). The increase in the statutory net loss
from the unaudited result included in the Appendix 4E of $1.362 million relates to the Company’s share of the de-
recognition of revenue for work performed by Neptune Bio-Innovations Pty Ltd (NBI) in Brunei. Whilst this revenue is
underpinned by a contractual agreement with the Brunei Government, which has been acknowledged by the Brunei
Government as being completed to their satisfaction, as at the date of lodging these accounts payment for the work has
not been received by NBI. As such the auditors of Neptune Bio-Innovations Pty Ltd consider the revenue recognition
requirements as not yet being met and have de-recognised this revenue for the year ended 30 June 2016. This revenue
is expected to be recognised in the following financial year.
The result was based on revenue and other income of $20.568 million primarily from the sale of dairy, seafood, meat,
and health products into China and dairy products into the domestic market.
The following table, which has not been audited, provides a reconciliation between the reported results of the Company
and the underlying net profit after tax (UNPAT). This measure is relevant as it reverses the impact of start-up,
establishment and non-recurring gains and expenses to enable a better understanding of the Company’s operating
performance. Details of UNPAT adjustments are provided below.
Loss attributable to owners of the Company
UNPAT adjustments:
-
-
-
-
-
-
-
-
UNPAT
IPO and corporate establishment costs
Sales and distribution establishment costs
Dairy manufacturing plant start-up costs
Farms purchase and start-up costs
Abnormal bad debts
Gain on business acquisitions
Acquisition transaction costs
Non-recurring professional fees
30 June
2016
$‘000
(1,716)
3,449
754
478
1,071
301
(2,018)
37
93
2,449
The results for the financial year are a composite of:
•
•
•
•
Significant one-off listing costs and expenses in completing a successful IPO;
Significant costs and expenses associated with establishing China and ASEAN sales and distribution operations;
Significant costs and expenses in re-starting the former UDP factory at Murray Bridge and the former ADP
Lactoferrin plant at Jervois;
Significant costs and expenses in improving and rebuilding the Kurleah and Pedra Branca dairy farms, including
associated transaction costs; and
• Operational revenue and expenditure from the activities of dairy farming, manufacturing of cheese and associated
dairy products, and sales and distribution of BFC, investee company, and third party products which have become
the core business of the Company.
As a result of the closed loop supply chain, milk revenues from farms have largely been eliminated as intercompany
transactions. The ability to supply milk from owned farms has enabled the Company to partially insulate itself from the
current dairy industry crisis, particularly the record low prices being paid for milk by key industry players.
Beston Global Food Company Limited
30 June 2016
25
25
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Review of operations and activities
As previously announced, revenues were below expectation with shortfalls primarily due to three factors:
•
•
•
Termination of the Pedra Branca Dairy Farm lease following a default by the lessee. This brought the farm under
internal management control which as result has seen a significant uplift in productivity, however these results won’t
be seen until the FY17 financial year. As a result, the short term negative impact of this decision is a reduction in
profitability of approximately $1.6m.
Purchase commitments, signed under company seal by Dashang Limited and included in the Company’s internal
budget, were not received by the close of the financial year on 30 June 2016. The Company is continuing to
engage with Dashang on these outstanding commitments with a view of working with Dashang to become one of
the Company’s key distribution channels in its supply of food and beverage products to the China market.
The delays in the first half of the year in regaining the export licences for the former UDP factories at Jervois and
Murray Bridge, as well as other regulatory hurdles experienced in the second half, negatively affected the timing
and ability to deliver food and beverage products during FY16.
Expenses for the year were $25.108 million largely comprised of cost of goods sold in the ordinary course of business
and one-off establishment costs. Operating costs include the day to day operation of farms, factories, overseas
subsidiaries and local management costs. These were higher than planned largely due to taking back the operation of
the Pedra Branca Dairy Farm from a lease back arrangement and investing into the farm to restore it to a sustainable
operating level.
The key assets in the consolidated balance sheet as at 30 June 2016 are:
•
•
•
•
•
•
•
Property, plant and equipment of $38.267 million. Independent valuations obtained as at 30 June 2016 for these
assets exceed the carrying value of the assets in the financial statements;
Trade and other receivables of $26.610 million. The most significant items comprising this value are trade debtors
of $12.299 million reflecting the growth in the Company’s sales towards the end of the second half, and convertible
notes receivable of $8.584 million;
Cash and cash equivalents of $19.372 million;
Investments in associates of $16.935 million. This is comprised of Neptune Bio Innovations ($11.938 million) and
Ferguson Australia Group ($4.997 million);
Intangible assets of $10.041 million, largely comprised of owned lobster quota ($4.949 million) and water licences
($3.959 million). Independent valuations support or exceed the carrying value of these assets in the financial
statements;
Inventories of $7.965 million, largely due to above budget stocks of cheese as a results of the Company’s decision
to produce and release “aged” hard cheese products to the market in due course (which can earn significantly
higher margins). This was also in part due to the Company making a decision to take in additional milk as part of its
Cheese Bank initiative in order to assist the dairy industry in coping with the “milk crisis” which emerged in the
second half of the year; and
Biological assets (livestock) of $4.241 million comprising the dairy herd at the Kurleah and Pedra Branca dairy
farms.
-
The key liabilities for the Company are Trade and Other Payables of $8.705 million incurred in the ordinary course of
business.
The Company had no debt as at 30 June 2016.
Beston Global Food Company Limited
30 June 2016
26
26
2 0 1 6 A N N U A L R E P O R T
Review of operations and activities
Shareholder returns
The BFC dividend of 0.60 cents per share which the BFC directors have resolved to pay is calculated to provide
investors with a benefit that reflects the underlying performance of the Company having regard to BFC’s financial
requirements, future profitability and capital outlooks, and other factors that the Board deems relevant.
The Board has previously determined that a payout ratio range of 60% to 85% of UNPAT for the 2015-16 financial year
is intended but not mandatory. Thereafter, future dividends will be dependent on the free cash flow of the business.
Total Shareholder Return (TSR) measures the change in share value over a specified period together with the return by
way of dividends received. BFC’s TSR since its listing on the ASX on 28 August 2015 to 30 June 2016 was 18.9%.
Loss attributable to owners of the Company (‘000)
Basic EPS (cents per share)
Diluted EPS (cents per share)
UNPAT (‘000)
UNPAT basic EPS (cents per share)
Dividends declared (‘000)
Dividends per share (cents per share)
Opening share price (at listing 28 August 2015)
Closing share price at 30 June 2016
Strategy
30 June
2016
($1,716)
(0.54)
(0.54)
$2,449
0.77
$2,179
0.60
$0.35
$0.41
30 June
2015
($1,103)
(5.38)
(5.38)
($1,103)
(5.38)
-
-
-
-
BFC has made significant progress during the 2015-16 financial year building out its business across all of BFC’s
operating divisions. The Company’s existing operations and planned expansion projects will have underlying growth in
the next 2 to 3 years. This long term growth is expected to be achieved via, inter alia:
•
•
•
•
•
•
•
•
Further integrating technology into our whole supply chain
Taking a holistic approach to whole-of-life healthy foods across a person’s whole life span
Exploiting synergies between investee companies
Creating new, value-added products
Developing strategic alliances with other companies to enhance our manufacturing and distribution capabilities
Investing in manufacturing capability
Improving productivity on our farms
Further building our own brands
The Company has been positioned to be a long-term growth business which builds sustainable economic value for
shareholders while creating whole-of-life loyalty with customers via authentic, healthy, and nutritious food and beverage
choices with its house of brands.
Beston Global Food Company Limited
30 June 2016
27
27
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
DIRECTORS’ REPORT
Directors' report
The directors present their report on the consolidated entity consisting of Beston Global Food Company Limited and the
entities it controlled at the end of, or during, the year ended 30 June 2016. Throughout the report, the consolidated entity
is referred to as the Group.
Directors
The following persons were directors of Beston Global Food Company Limited during the whole of the financial year and
up to the date of this report unless otherwise stated:
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor (resigned on 7 April 2016)
I McPhee (appointed on 7 April 2016)
C Cooper (appointed on 7 September 2016)
Principal activities
During the year the principal continuing activities of the Group consisted of:
(a) Marketing and distribution of dairy, seafood, meat, wine, water, health and nutrition products into local and
international markets.
(b) Production of milk, cheese and other dairy related products.
(c) Production and processing of meat products.
(d) Development and production of health and well-being focused food, beverage and pharmaceutical products.
(e) Processing of high pH natural spring water.
(f) Development and commercialisation of end-to-end food traceability and anti-counterfeit technology.
(g) Development and commercialisation of a premium food e-commerce platform.
Dividends - Beston Global Food Company Limited
Since the end of the financial year the directors have recommended the payment of a final ordinary dividend of
$2,179,446 (0.60 cents per fully paid share) to be paid on 31 October 2016 out of retained earnings at 30 June 2016.
Review of operations
Information on the operations and financial position of the Group and its business strategies and prospects is set out in
the review of operations and activities on pages 23 to 27.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the year, not otherwise
disclosed in this annual report.
Events since the end of the financial year
On 11 August 2016, the Group entered into a convertible note with Scorpio Foods Pty Ltd for an amount of $300,000.
This note was issued at a 9.5% interest rate and converts to that number of ordinary shares which equate to 5% of the
investee. The Group may convert the note at its discretion.
On 18 August 2016, the Group entered into a contract to purchase the “Westdama” dairy farm at Glencoe, approximately
30 kilometres north-west of Mount Gambier, for $2,600,000 subject to due diligence and the satisfaction of certain
undertakings and conditions. The property has 80 hectares of irrigated pasture and currently supports approximately 400
cows. The Group intends to commence the process of conversion of Westdama to an organic dairy farm once the
transaction is finalised.
On 31 August 2016, Beston Global Food Company Limited announced the placement of 64,051,111 shares to a
Singapore company, Kunteng Pte Ltd, which is a wholly owned subsidiary of the China based private company, Dalian
Hairunlai Group.
Beston Global Food Company Limited
30 June 2016
28
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2 0 1 6 A N N U A L R E P O R T
Directors' report
Events since the end of the financial year (continued)
The placement has been made at a price of 45 cents per share and will provide net proceeds to Beston Global Food
Company Limited of $28,289,775. The funds will be used to further the Group's dairy, health, and seafood businesses.
On 31 August 2016, the directors resolved to pay a final dividend of 0.60 cents per fully paid ordinary share (2015 - nil).
This is to be paid on 31 October 2016.
On 15 September 2016, Beston Pure Dairies Pty Ltd acquired the assets of Australian Provincial Cheese Pty Ltd ("APC")
for an amount of $2,200,000. The acquired assets include plant and equipment, trademarks and intellectual property.
BFC previously held a convertible note issued by APC in the amount of $1,100,000, which has been repaid as part of
this transaction.
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected the Group's operations,
results or state of affairs, or may do so in future years.
Likely developments and expected results of operations
Refer to the operating and financial review on pages 23 to 27 for information on likely developments and future prospects
of the Group.
Environmental regulation
Beston Pure Dairies Pty Ltd ("BPD") and Beston Farms Pty Ltd ("Beston Farms") operate under separate SA EPA
Environmental licences. These licences impose conditions to regulate activities that have the potential to harm the
environment.
BPD and Beston Farms operate their wastewater discharge to the local sewer system under Trade Waste licences
regulated by SA Water pursuant to section 56 of the Water Industry Act 2012 and Section 28(3) of the EPA’s Code of
Practice for Milking Shed Effluent 2003.
The Trade Waste licence authorises them to discharge trade waste into SA Water’s sewer system in accordance with the
specific terms and conditions set out in the licences.
BPD is also a mandatory reporter under the National Pollutant Inventory legislation, which requires it to measure and
report specific emission to ensure that the community has access to information about the emission and transfer of toxic
substances which may affect them locally.
BPD has appointed a Quality and Environment Manager responsible for the development and implementation of
strategies to meet all of the conditions of the licences. The Work Health & Safety Coordinator and Maintenance Manager
assist in ensuring compliance activities are completed and maintained.
Group compliance activities include:
Environmental management and emergency response planning
Stormwater retention and release to aquifer procedures at Murray Bridge
•
•
• Weekly reporting of Murray Bridge trade waste discharge data to SA Water
•
•
•
Periodic sampling and independent testing of trade wastewater discharges from Murray Bridge
Periodic testing of river, bore and wastewater at the Jervois site
Periodic soil testing of the treated wastewater discharge sites around Jervois
Beston Farms, with expanding herds, has initiated a significant capital upgrade program to ensure current back-up
systems (which are compliant) are replaced by upgraded permanent operational requirements, particularly as it applies
to the handling of the volume of waste water generated from the milking shed and associated yards at all times of the
year.
There have been no significant known breaches of the Group's licence conditions or any environmental regulations to
which it is subject.
Beston Global Food Company Limited
30 June 2016
29
29
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Directors' report
Information on directors
Roger Sexton, AM B.Ec. (Hons), M.Ec., PhD (Econ), FAICD, FAIM, S.F.Fin, C.Univ. Chair - non-executive
Experience and expertise Dr Roger Sexton is an investment banker and a company director. He has extensive
experience in the agricultural sector, having worked for the Bureau of Agricultural
Economics. Roger also has had extensive experience overseas and particularly in China
and the Asia Pacific, as a result of leading trade and investment missions to the region for
more than 30 years and from working on investment banking transactions in the region.
Roger is actively engaged in a number of community organisations, including as Chairman
and Principal Patron of the Freemasons Foundation Men's Health Centre at the University
of Adelaide.
Other current directorships • Chairman of the Investment Manager, Beston Pacific Asset Management Pty Ltd
• Chairman, IOOF Holdings Limited
• Chairman, KeyInvest Limited
• Director, IBISWorld Pty Ltd
Former directorships in
last 3 years
Roger has served on the Australian Accounting Standards Board and was an Executive
Director of the Industries Assistance Commission, specialising in rural industries.
Special responsibilities
• Founder of Beston Global Food Company Limited
• Chair of the Board
• Member of audit and risk committee
Interests in shares and
options
Ordinary shares
Founders' Rights options
Stephen Gerlach, AM LL.B, FAICD Non-executive director
4,648,274
12,404,931
Experience and expertise Stephen Gerlach is a corporate adviser and company director. He was formerly a Partner
and the Managing Partner of Finlaysons Lawyers for 23 years. Stephen is also the
Chancellor of Flinders University of South Australia.
Other current directorships • Director of the Investment Manager, Beston Pacific Asset Management Pty Ltd
• Chairman, Ebony Energy Limited
• Chairman, Adelaide Capital Partners Pty Ltd
• Chairman, S Gerlach Pty Ltd
• Director, Gerlach Asset Development Pty Ltd
Former directorships in
last 3 years
-
Special responsibilities
• Member of remuneration and nomination committee
Interests in shares and
options
Ordinary shares
Founders' Rights options
660,060
2,816,385
Beston Global Food Company Limited
30 June 2016
30
30
2 0 1 6 A N N U A L R E P O R T
Directors' report
Information on directors (continued)
Petrina Coventry, B.Ed., M. Phil. (Ethics), MBA, EMBA, FAHRI Non-executive director
Experience and expertise Petrina has spent over twenty years working in Asia, the United States and Europe in global
leadership and director roles with The General Electric Company, The Coca Cola Company
and Procter and Gamble. Her experience covers multiple industries including energy,
technology, education, fast moving consumer goods and financial services. Her work in
organisational transformation, company performance and governance has led to increased
involvement with governments, industry associations and consulting groups across the
Asian region. Petrina is an ethicist by background and is completing her PHD with
Melbourne University.
Other current directorships • Director, Australian Human Resources Institute
• Director, Australasian Association of Philosophy
Former directorships in
last 3 years
-
Special responsibilities
• Chair of remuneration and nomination committee
Interests in shares
Ordinary shares
57,142
Jim Kouts, BA (Journalism), FAICD Non-executive director
Experience and expertise Jim has served as a senior executive and director in major companies in the energy,
financial service and business tourism industries and has also held various senior positions
in the public sector. Through his various roles, Jim has gained strong commercial and
contract negotiation skills and has a sound grasp of governance, strategy and strategy
implementation. These skills, together with his extensive insight of air freight logistics into
Asia, will be valuable on the Board.
Other current directorships • Chairman, HomeStart Finance
• Director, Adelaide Venue Management Board
• Director, Adelaide Convention Bureau
• Strategic Advisor, Adelaide Airport Limited
Former directorships in
last 3 years
-
Special responsibilities
• Member of audit and risk committee
• Member of remuneration and nomination committee
Interests in shares
Ordinary shares
142,857
Beston Global Food Company Limited
30 June 2016
31
31
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Directors' report
Information on directors (continued)
Ian McPhee, AO PSM, B.Bus., B.A, FCPA, FCA, GAICD Non-executive director
Experience and expertise Ian served as the Auditor General of Australia until June 2015. He holds a Bachelor of
Business (Accountancy) degree and a Bachelor of Arts (Computing Studies) degree. Ian is
a Fellow of CPA Australia and a Fellow of Chartered Accountants Australia and New
Zealand. He is currently a Member of the International Ethics Standards Board for
Accountants and an Adjunct Professor at the College of Business and Economics,
Australian National University. He is the former Deputy Chair of the Australian Accounting
Standards Board.
Other current directorships -
Former directorships in
last 3 years
-
Special responsibilities
• Chair of the audit and risk committee
Interests in shares
Ordinary shares
Nil
Catherine Cooper, LL.B, GDLP, FAICD Non-executive director
Experience and expertise Catherine has a legal and business background with significant expertise in areas such as
strategic planning, leadership, innovation and effective governance across a broad industry
base including agribusiness, food security, finance and audit, banking and insurance,
energy, health and education, and research and development.
She has previously chaired the SA Fisheries Council, the SA Dairy Regulator, and held
directorships at SA Water, National Agrifoods Skills Council and the National Quarantine
Export Advisory Council.
She is a Commissioner of the Australian Fisheries Management Authority. Catherine
currently chairs the Fleurieu Regional Waste Management Authority and is a director of the
Australian Egg Corporation Limited.
She has previously held management positions at Fosters Brewing Group, Elders Limited,
and Futuris Corporation.
Catherine was a finalist in both the 1997 and 1998 Telstra Business Women's Awards.
Other current directorships -
Former directorships in
last 3 years
Special responsibilities
-
-
Interests in shares
Ordinary shares
Nil
Beston Global Food Company Limited
30 June 2016
32
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2 0 1 6 A N N U A L R E P O R T
Information on directors (continued)
Don Taylor, CA, GradCertRuralSc, FAICD Non-executive director
Experience and expertise Don is a Chartered Accountant and gained a broad knowledge of industry having worked
Directors' report
with Arthur Andersen & Co in their Sydney, Brisbane and Singapore offices in both the
assurance and tax practices. He has experience in capital raisings, takeovers and major
business reorganisations and business integrations. In 2014, Don served as the Executive
Chairman and interim CEO of GrainCorp until the appointment of a new CEO. Some of
Don's previous roles have included Chairman of Carrington Cotton Limited. In addition, he
has served on a number of government industry enquiries and consultative committees. He
has also presented at a number of forums including the international Grains Council in
London. His executive experiences with the grains industry covers logistics, processing,
marketing and distribution both in Australia and internationally with a particular focus in
Southeast Asia, Middle East and Northern Africa.
Other current directorships • Chairman, GrainCorp Limited
Former directorships in
last 3 years
-
Special responsibilities
• Chair of audit and risk committee (up to date of resignation on 7 April 2016)
Interests in shares
Ordinary shares
Nil
Company secretary
Richard Willson, B.Acc, FCPA, FAICD
Richard is an accountant with more than 20 years’ experience in public practice and in various senior financial
management, company secretarial and non-executive director roles, predominantly within the resources and agricultural
sectors for both publicly listed and private companies.
In addition to his role as company secretary of Beston Global Food Company Limited, Richard is company secretary of
ASX Listed Aurelia Metals Limited, non-executive director of ASX listed company Aus Tin Mining Limited, non-executive
director and company secretary of Wilgena Resources Limited, and a non-executive director and company secretary of
the not-for-profit Unity Housing Company.
Meetings of directors
The numbers of meetings of the Company's Board of directors and of each Board committee held during the year ended
30 June 2016, and the numbers of meetings attended by each director were:
Full meetings
of directors
A
13
8
11
12
8
3
-
B
13
13
13
13
10
3
-
Meetings of committees
Audit
A
3
**
**
3
2
1
-
Remuneration and
nomination*
B
A
-
-
-
-
-
-
-
-
-
-
-
-
-
-
B
3
**
**
3
2
1
-
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor
I McPhee
C Cooper
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
* = As this was the first year as a listed company, the directors resolved that it was more appropriate that remuneration
and nomination committee related matters be considered at full meetings of directors.
** = Not a member of the relevant committee
Beston Global Food Company Limited
30 June 2016
33
33
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Remuneration report
The directors present the Beston Global Food Company Limited 2016 remuneration report, outlining key aspects of our
remuneration policy and framework, and remuneration awarded this year. The remuneration report has been audited.
Directors' report
The report is structured as follows:
(a)
(b)
(c)
(d)
(e)
(f)
Key management personnel (KMP) covered in this report
Remuneration policy and link to performance
Executive contracts
Remuneration expenses for non-executive KMP
Directors arrangements
Additional statutory information
(a) Key management personnel covered in this report
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor (resigned on 7 April 2016)
I McPhee (appointed on 7 April 2016)
Other key management personnel
Name
S Ebert
S Hartwig
R Willson
Non-executive Chairman
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Position
Chief Executive Officer
Chief Financial Officer
Chief Financial Officer (until 15 April 2016)
(b) Remuneration policy and link to performance
The Group outsources all of its investment management, valuation, accounting and other administrative functions to
Beston Pacific Asset Management Pty Ltd ("BPAM" or "the Investment Manager"). As such, the Group does not
remunerate any key management personnel employees directly.
The remuneration and nomination committee comprises three non-executive directors. The committee recommends the
director nominees for each annual general meeting and ensures that the audit, compensation and nominating and
corporate governance committees of the Board have the benefit of qualified and experienced independent directors. The
committee makes recommendations to the Board on remuneration packages and policies applicable to directors and the
management team. As this was the first year as a listed company, the directors resolved that it was more appropriate
that remuneration and nomination related matters be considered at full meetings of directors.
(c) Executive contracts
(i) Management fee
The Group has a formal Investment Management Agreement with BPAM as the Investment Manager to outsource key
management activities for a fee of 1.20% (exclusive of GST) per annum of the Group's portfolio value. This fee is
calculated half yearly and paid monthly with an initial term of 5 years. During the year ended 30 June 2016, BPAM was
paid $1,595,980 under this arrangement (2015: $76,428).
(ii) Performance fee
Under the terms of the Investment Management Agreement, BPAM is also entitled to a performance fee based upon the
market capitalisation of BFC and the performance of the BFC’s share price relative to the ASX All Ordinaries
Accumulation Index. In February 2016, the directors and BPAM agreed that the commencement date of the performance
period would begin from 1 January 2016, with an initial net asset value of $0.3468 per share. In accordance with this
agreement and the performance of BFC, the Investment Manager would have been entitled to receive a performance fee
of $4,351,016 for the year ended 30 June 2016.
Beston Global Food Company Limited
30 June 2016
34
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2 0 1 6 A N N U A L R E P O R T
Directors' report
Remuneration report (continued)
(c) Executive contracts (continued)
(ii) Performance fee (continued)
The key metrics of the fee are summarised below:
Key metrics
Beston Global Food Company Limited
ASX All Ordinaries Accumulation Index
1 January 2016
$0.3468
47,788.21
30 June 2016
$0.4100
48,530.36
Performance
TSR 18.22%
1.53%
The performance fee is calculated as follows:
A. Market capitalisation
B. Outperformance factor (BFC TSR% - ASX:XAOAI TSR%)
C. Agreed performance fee %
Total performance fee for the 6 months to 30 June 2016:
A x B x C
$148,928,831
16.69%
17.50%
$4,351,016
The directors, in agreement with BPAM, have agreed to waive the performance fee for the period to 30 June 2016 and
as a result, no expense has been recognised for the year ended 30 June 2016.
(d) Remuneration expenses for non-executive directors
The following table shows details of the remuneration expense recognised for the Group's non-executive directors for the
current and previous financial year measured in accordance with the requirements of the accounting standards.
Short-term benefits
Post-employment
Long-term
benefits
Share-based
payments
Name
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor
I McPhee
Total NED
remuneration
Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Cash
salary*
$
60,000
-
40,000
-
39,999
10,000
40,000
10,000
30,778
10,000
9,333
-
220,110
30,000
Non-
monetary
benefits*
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Super-
annuation
benefits**
$
5,700
-
3,800
-
3,800
925
3,800
925
2,924
925
743
-
20,767
2,775
Other post
employ-
ment
benefits**
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual
and long
service
leave***
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cash
bonus*
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Shares
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share
options
$
4,341,726
-
985,735
-
-
-
-
-
-
-
-
-
5,327,461
-
Total
$
4,407,426
-
1,029,535
-
43,799
10,925
43,800
10,925
33,702
10,925
10,076
-
5,568,338
32,775
* Short-term benefits as per Corporations Regulation 2M.3.03(1) Item 6
** Post-employment benefits as per Corporations Regulation 2M.3.03(1) Item 7
*** Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8
During the year, S Ebert received a share-based payment in the form of Founders' Rights options totalling $140,418
(2015 - nil) from Beston Global Food Company Limited. Refer to part (f)(i) of this remuneration report for further details.
Beston Global Food Company Limited
30 June 2016
35
35
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Remuneration report (continued)
(e) Director arrangements
The Board has resolved to provide for non-executive director's fees (per annum) of up to a maximum of $350,000 in total
with effect from Listing.
In addition to earning a director's fee, a director may also be paid fees or other amounts as the directors determine if a
director performs special duties or otherwise performs services outside the scope of the ordinary duties of a director. A
director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any other special
duties.
Directors' report
Dr Roger Sexton AM
Mr Stephen Gerlach AM
Ms Petrina Coventry
Mr Jim Kouts
Mr Don Taylor
Mr Ian McPhee AO PSM
Annual
maximum fee
$60,000
$40,000
$40,000
$40,000
$40,000
$40,000
In addition, directors will be entitled to statutory superannuation.
Dr Sexton and Mr Gerlach did not receive a directors fee from Beston Global Food Company Limited in 2014-15.
Thereafter, Dr Sexton and Mr Gerlach received Board fees on the same basis as has been independently determined
appropriate for a listed company of the size of the Group, initially, $40,000 to each non-executive director and $60,000 to
the Chairman.
Dr Sexton and Mr Gerlach are shareholders and directors of the Investment Manager and as such, may receive
remuneration from the Investment Manager for services provided to the Investment Manager. As directors, shareholders
and employees of the Investment Manager, in their respective capacities, they may benefit from the entry by the
Investment Manager into the Management Agreement with the Company, through the payment of fees under the
Management Agreement.
The Company believes that the Management Agreement has been entered into on arm's length terms and that the
remuneration payable to the Investment Manager is reasonable.
(f) Additional statutory information
(i) Reconciliation of options, deferred shares and ordinary shares held by KMP
Share holdings
2016
Name
Ordinary shares
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor
Total
Balance at the
start of the year
Acquired
during the year
Disposed
during the year
Balance at the
end of the year
4,207,074
1,320,120
-
-
-
5,527,194
441,200
-
57,142
142,857
285,715
926,914
-
(660,060)
-
-
(285,715)
(945,775)
4,648,274
660,060
57,142
142,857
-
5,508,333
Founders' Rights
The Founders' Rights options scheme incentivises specific directors to maintain ongoing involvement with the Group.
These Founders' Rights are convertible into shares 15 months after being granted at zero cost to the recipients. The
scheme allocates 5% of the share capital to the participants. The fair value of the rights granted during the year ended
30 June 2016 was estimated on the date the rights were issued, being the value of the shares at the time of the IPO,
$0.35.
Beston Global Food Company Limited
30 June 2016
36
36
2 0 1 6 A N N U A L R E P O R T
Remuneration report (continued)
(f) Additional statutory information (continued)
(i) Reconciliation of options, deferred shares and ordinary shares held by KMP (continued)
Directors' report
2016
Name
Founders' Rights
R Sexton
S Gerlach
P Coventry
J Kouts
D Taylor
I McPhee
S Ebert
Total
Balance at start
of the year
Granted as
compensation
Balance at end
of the year
-
-
-
-
-
-
-
-
12,404,931
2,816,385
-
-
-
-
401,194
15,622,510
12,404,931
2,816,385
-
-
-
-
401,194
15,622,510
Fair value at
grant date
$
4,341,726
985,735
-
-
-
-
140,418
5,467,879
(ii) Loans to key management personnel
No loans were made to KMP or their related parties during the year.
(iii) Other transactions with key management personnel
Grape Ensembles Co Pty Ltd is beneficially controlled by Dr Sexton. Grape Ensembles Co Pty Ltd holds an 80% interest
in a company that owns the BRANDLOK intellectual property associated with brand protection seals which has been
developed as an anti-counterfeiting device. The Company has an option to purchase Grape Ensembles Co Pty Ltd's
80% shareholding in Brandlock Protection Solutions Pty Ltd ("BBPS"). The purchase price for BBPS has been agreed at
the greater of 10 times the net profit after tax of BBPS; the then market value of the 80% holding of BBPS; and
$2,000,000. These rights are exercisable by the independent directors of Beston Global Food Company Limited and
include tag along and drag along rights to enable the Company to acquire 100% of BBPS.
Main & Cherry is controlled by a family member of Dr Sexton who has no pecuniary interest in Main & Cherry. During the
year, the Group purchased wine stock from Main & Cherry for export into Asia. The purchases were made based on
normal commercial terms and conditions.
Aggregate amounts for the above transactions with KMP of Beston Global Food Company Limited:
Amounts recognised as expense
Cost of goods sold
Amounts recognised as assets
Inventory
Amounts recognised as liabilities
Trade payables to Main & Cherry
There were no other transactions with KMP or their related parties during the year.
This is the end of the audited remuneration report.
30 June
2016
$
30 June
2015
$
1,533,329
16,435
586,131
-
-
-
Beston Global Food Company Limited
30 June 2016
37
37
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Shares under option
Shares under option
(a) Unissued ordinary shares
(a) Unissued ordinary shares
As at the date of this report, there were 16,047,776 unissued ordinary shares under option. Refer to the Founders' Rights
As at the date of this report, there were 16,047,776 unissued ordinary shares under option. Refer to the Founders' Rights
in part (f)(i) of the remuneration report for more detail on the scheme.
in part (f)(i) of the remuneration report for more detail on the scheme.
No options were granted to the directors or any of the key management personnel of the Company since the end of the
No options were granted to the directors or any of the key management personnel of the Company since the end of the
financial year.
financial year.
Directors' report
Directors' report
(b) Shares issued on the exercise of options
(b) Shares issued on the exercise of options
During the financial year, no options have been exercised.
During the financial year, no options have been exercised.
Insurance of officers and indemnities
Insurance of officers and indemnities
(a)
(a)
Insurance of officers
Insurance of officers
During the financial year, Beston Global Food Company Limited paid a premium of $12,330 to insure the directors and
During the financial year, Beston Global Food Company Limited paid a premium of $12,330 to insure the directors and
secretaries of the Company and its Australian-based controlled entities, and the general managers of each of the
secretaries of the Company and its Australian-based controlled entities, and the general managers of each of the
divisions of the Group.
divisions of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to
gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the
gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
(b)
(b)
Indemnity of auditors
Indemnity of auditors
Beston Global Food Company Limited has agreed to indemnify their auditors, Ernst & Young Australia, to the extent
Beston Global Food Company Limited has agreed to indemnify their auditors, Ernst & Young Australia, to the extent
permitted by law, against any claim by a third party arising from Beston Global Food Company Limited's breach of their
permitted by law, against any claim by a third party arising from Beston Global Food Company Limited's breach of their
agreement. The indemnity stipulates that Beston Global Food Company Limited will meet the full amount of any such
agreement. The indemnity stipulates that Beston Global Food Company Limited will meet the full amount of any such
liabilities including a reasonable amount of legal costs.
liabilities including a reasonable amount of legal costs.
Proceedings on behalf of the company
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
of the Corporations Act 2001.
Auditor's independence declaration
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 40.
on page 40.
Rounding of amounts
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in
2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in
the directors' report. Amounts in the directors' report have been rounded off in accordance with that Instrument to the
the directors' report. Amounts in the directors' report have been rounded off in accordance with that Instrument to the
nearest thousand dollars, or in certain cases, to the nearest dollar.
nearest thousand dollars, or in certain cases, to the nearest dollar.
Beston Global Food Company Limited
Beston Global Food Company Limited
30 June 2016
30 June 2016
38
38
38
2 0 1 6 A N N U A L R E P O R T
Shares under option
This report is made in accordance with a resolution of directors.
(a) Unissued ordinary shares
As at the date of this report, there were 16,047,776 unissued ordinary shares under option. Refer to the Founders' Rights
in part (f)(i) of the remuneration report for more detail on the scheme.
No options were granted to the directors or any of the key management personnel of the Company since the end of the
financial year.
R Sexton
(b) Shares issued on the exercise of options
Chairman
Directors' report
Directors' report
During the financial year, no options have been exercised.
Insurance of officers and indemnities
Adelaide
(a)
30 September 2016
Insurance of officers
During the financial year, Beston Global Food Company Limited paid a premium of $12,330 to insure the directors and
secretaries of the Company and its Australian-based controlled entities, and the general managers of each of the
divisions of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to
gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
(b)
Indemnity of auditors
Beston Global Food Company Limited has agreed to indemnify their auditors, Ernst & Young Australia, to the extent
permitted by law, against any claim by a third party arising from Beston Global Food Company Limited's breach of their
agreement. The indemnity stipulates that Beston Global Food Company Limited will meet the full amount of any such
liabilities including a reasonable amount of legal costs.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 40.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in
the directors' report. Amounts in the directors' report have been rounded off in accordance with that Instrument to the
nearest thousand dollars, or in certain cases, to the nearest dollar.
Beston Global Food Company Limited
Beston Global Food Company Limited
30 June 2016
30 June 2016
38
39
39
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Auditor’s Independence Declaration to the Directors of Beston Global
Food Company Limited
As lead auditor for the audit of Beston Global Food Company for the financial year ended 30 June 2016,
I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Beston Global Food Company Limited and the entities it controlled during
the financial year.
Ernst & Young
Mark Phelps
Partner
Adelaide
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
40
2 0 1 6 A N N U A L R E P O R T
FINANCIAL STATEMENTS
Beston Global Food Company Limited ABN 28 603 023 383
Financial report - 30 June 2016
Contents
Financial statements
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
42
44
45
46
47
92
93
These financial statements are the consolidated financial statements of the consolidated entity consisting of Beston
Global Food Company Limited and its subsidiaries. A list of subsidiaries is included in note 12. The financial statements
are presented in the Australian currency.
Beston Global Food Company Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office is:
Beston Global Food Company Limited
72 Sturt Street
Adelaide South Australia 5000
Its principal place of business is:
Beston Global Food Company Limited
Level 9, 420 King William Street
Adelaide South Australia 5000
A description of the nature of the consolidated entity's operations and its principal activities is included in the review of
operations and activities on page 23 and in the directors' report on page 28, both of which are not part of these financial
statements.
The financial statements were authorised for issue by the directors on 30 September 2016. The directors have the power
to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases,
financial reports and other information are available at our Investors' Centre on our website:
www.bestonglobalfoods.com.au
Beston Global Food Company Limited
30 June 2016
41
41
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Revenue from continuing operations
Sale of goods
Other revenue from ordinary activities
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Cents
Cents
Notes
2
2
30 June
2016
$'000
15,999
2,963
18,962
30 June
2015
Loss per share from continuing operations attributable to the ordinary
$'000
equity holders of the Company:
Basic earnings per share
Diluted earnings per share
-
36
36
Loss per share attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
19
19
19
19
(0.54)
(0.54)
(0.54)
(0.54)
(5.38)
(5.38)
(5.38)
(5.38)
Other income
3(a)
3,022
Expenses
Cost of sales of goods
Other expenses from ordinary activities
Selling and distribution
Administration
Other
Establishment costs
Loss from operations
Finance income
Finance expenses
Net finance income
Share of profit/(loss) from associates
Loss before income tax
Income tax benefit
Loss for the year from continuing operations
Other comprehensive income
Exchange differences on translation of foreign operations
Other comprehensive loss for the year, net of tax
(8,538)
(677)
(8,945)
(794)
(6,154)
(3,124)
1,465
(114)
1,351
(156)
(1,929)
209
(1,720)
(48)
(48)
3(b)
3(b)
4
7(b)
-
-
(162)
(862)
(806)
-
(1,794)
232
-
232
-
(1,562)
458
(1,104)
-
-
Total comprehensive loss for the year from continuing operations
(1,768)
(1,104)
Loss is attributable to:
Owners of Beston Global Food Company Limited
Non-controlling interests
Total comprehensive loss for the year is attributable to:
Owners of Beston Global Food Company Limited
Non-controlling interests
(1,716)
(4)
(1,720)
(1,764)
(4)
(1,768)
(1,103)
(1)
(1,104)
(1,103)
(1)
(1,104)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
Beston Global Food Company Limited
30 June 2016
42
42
Beston Global Food Company Limited
43
30 June 2016
2 0 1 6 A N N U A L R E P O R T
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Cents
Cents
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Loss per share from continuing operations attributable to the ordinary
equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Loss per share attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
19
19
19
19
(0.54)
(0.54)
(0.54)
(0.54)
Loss per share from continuing operations attributable to the ordinary
equity holders of the Company:
Basic earnings per share
Diluted earnings per share
(5.38)
(5.38)
Loss per share attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
(5.38)
(5.38)
19
19
19
19
Cents
Cents
(0.54)
(0.54)
(0.54)
(0.54)
(5.38)
(5.38)
(5.38)
(5.38)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
Beston Global Food Company Limited
30 June 2016
43
43
Beston Global Food Company Limited
43
30 June 2016
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Consolidated balance sheet
As at 30 June 2016
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Biological assets
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Employee benefit obligations
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Notes
5(a)
5(b)
6(a)
6(b)
5(b)
12(c)
6(c)
6(d)
6(e)
6(f)
5(c)
4(a)
6(g)
6(e)
6(g)
30 June
2016
$'000
30 June
2015
$'000
19,372
26,610
7,965
-
53,947
-
16,935
38,267
4,241
4,096
10,041
73,580
7,547
5,333
-
1,132
14,012
5,054
-
2,152
-
871
25
8,102
127,527
22,114
8,705
875
50
9,630
725
7
732
1,747
-
-
1,747
-
-
-
10,362
1,747
117,165
20,367
EQUITY
Contributed equity
Other reserves
Accumulated losses
Capital and reserves attributable to owners of Beston Global Food Company
Limited
Non-controlling interests
Total equity
7(a)
7(b)
7(c)
113,472
5,569
(2,819)
21,471
-
(1,103)
116,222
20,368
12(b)
943
(1)
117,165
20,367
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Beston Global Food Company Limited
30 June 2016
44
44
2 0 1 6 A N N U A L R E P O R T
Consolidated statement of changes in equity
For the year ended 30 June 2016
Attributable to owners of
Beston Global Food Company Limited
Contributed
equity
$'000
Other
reserves
$'000
Notes
Accum-
ulated
losses
$'000
Non-
controlling
interests
$'000
Total
$'000
Balance at 1 July 2014
Loss for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
and tax
Balance at 30 June 2015
7(a)
Balance at 1 July 2015
Loss for the year
Other comprehensive loss
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
and tax
Non-controlling interests on acquisition of
subsidiary
Founders' Rights share reserve
7(a)
11
7(b)
-
-
(1,103)
(1,103)
(1,103)
(1,103)
-
(1)
(1)
Total
equity
$'000
-
(1,104)
(1,104)
-
(1,103)
21,471
20,368
-
(1)
21,471
20,367
(1,103)
20,368
(1)
20,367
-
-
-
21,471
21,471
21,471
-
-
-
-
-
-
-
-
-
-
(48)
(48)
(1,716)
-
(1,716)
(1,716)
(48)
(1,764)
(4)
-
(4)
(1,720)
(48)
(1,768)
92,001
-
-
92,001
-
-
5,617
5,617
-
-
-
-
92,001
-
5,617
97,618
-
92,001
948
-
948
948
5,617
98,566
Balance at 30 June 2016
113,472
5,569
(2,819)
116,222
943
117,165
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Beston Global Food Company Limited
30 June 2016
45
45
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Consolidated statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
xxx
Interest received
Deposits to secure export shipments
Net cash (outflow) from operating activities
Cash flows from investing activities
Payments for acquisition of businesses, net of cash acquired
Payments for property, plant and equipment
Payments for intangible assets
Advances of convertible notes
Purchase of livestock
Purchase of equity investments
Refund of deposits
Payment of deposits
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Transaction costs on issue of shares
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
30 June
2016
$'000
6,478
(23,427)
1,233
(990)
(16,706)
(27,098)
(14,314)
(5,314)
(3,400)
(2,028)
(12,000)
180
-
(63,974)
100,000
(7,499)
92,501
11,821
7,547
4
19,372
Notes
8(a)
11
6(c)
6(f)
6(d)
7(a)
7(a)
5(a)
30 June
2015
$'000
-
(662)
40
-
(622)
-
(2,102)
(25)
(10,100)
-
-
-
(930)
(13,157)
22,627
(1,301)
21,326
7,547
-
-
7,547
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Beston Global Food Company Limited
30 June 2016
46
46
2 0 1 6 A N N U A L R E P O R T
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Segment information
(a) Description of segments
The Group's executive management committee, consisting of the Chief Executive Officer and the Chief Financial Officer,
examines the Group's performance both from a product and geographic perspective and has identified five reportable
segments of its business:
•
•
•
•
•
The Dairy section which owns farms and production plants and uses milk to produce cheese and other dairy
products.
The Seafood division is focused on sourcing and supplying high quality seafood to the markets.
The Health division targets innovative products for health conscious markets.
The Meat division brings high quality and innovative meat products to expanding markets.
The Distribution division creates relationships and digital platforms with both local and offshore parties to
distribute products.
No operating segments have been aggregated to form the above reportable operating segments.
The executive management committee monitors the operating results of its business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is evaluated based on
operating profit or loss and is measured consistently with profit or loss in the consolidated financial statements.
Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third
parties.
(b) Segment results
The segment information provided to the executive management committee for the reportable segments for the year
ended 30 June 2016 is as follows:
2016
Dairy
$'000
Seafood
$'000
Health
$'000
Meat Distribution
$'000
$'000
Total
segments
$'000
Adjustments
and
eliminations
$'000
Revenue
External customers
Other revenue
Share of loss from associates
Total revenue
Expenses
Cost of sales
Selling and distribution
Administration
Other expenses
Establishment costs
Finance costs
Total expenses
11,869
620
-
12,489
(7,338)
(435)
(8,046)
(618)
-
(19)
(16,456)
4,664
44
(52)
4,656
(3,163)
(24)
(339)
(6)
-
-
(3,532)
4,968
25
(104)
4,889
(1,875)
(29)
(408)
(2)
-
-
(2,314)
391
240
-
631
(293)
(2)
(31)
(1)
-
-
(327)
1,197
-
-
1,197
23,089
929
(156)
23,862
(1,173)
(10)
(56)
(29)
-
-
(1,268)
(13,842)
(500)
(8,880)
(656)
-
(19)
(23,897)
(5,267)
677
-
(4,590)
5,304
(177)
(65)
(138)
(6,154)
(95)
(1,325)
Total
$'000
17,822
1,606
(156)
19,272
(8,538)
(677)
(8,945)
(794)
(6,154)
(114)
(25,222)
Operating profit/(loss)
(3,967)
1,124
2,575
304
(71)
(35)
(5,915)
(5,950)
Gain on bargain purchase
Management fee from associate
2,876
-
-
-
5
1,140
-
-
-
-
2,881
1,140
-
-
2,881
1,140
Segment profit/(loss)
(1,091)
1,124
3,720
304
(71)
3,986
(5,915)
(1,929)
Total segment assets
124,225
18,595
21,291
3,585
9,526
177,222
(49,695)
127,527
Total segment liabilities
(60,228)
(10,667)
(2,549)
(1,063)
(1,767)
(76,274)
65,912
(10,362)
Beston Global Food Company Limited
30 June 2016
47
47
-
-
-
-
-
-
-
-
-
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(b) Segment results
The segment information provided to the executive management committee for the reportable segments for the year
ended 30 June 2015 is as follows:
Segment information
Dairy
$'000
Seafood
$'000
Health
$'000
Meat Distribution
$'000
$'000
Total
segments
$'000
Adjustments
and
eliminations
$'000
2015
Revenue
Other revenue
Interest revenue
Total revenue
Expenses
Selling and distribution
Administration
Other expenses
Total expenses
36
19
55
-
-
(125)
(125)
-
144
144
-
-
-
-
-
-
-
-
-
-
-
-
1
1
-
-
-
-
Total
$'000
36
232
268
-
68
68
(162)
(862)
(681)
(1,705)
(162)
(862)
(806)
(1,830)
36
164
200
-
-
(125)
(125)
Segment profit/(loss)
(70)
144
-
1
xxx
Total segment assets
8,233
5,122
Total segment liabilities
(3,268)
-
38
-
128
-
-
75
(1,637)
(1,562)
13,521
8,593
22,114
(3,268)
1,521
(1,747)
There was no impairment charge or other significant non-cash item recognised in 2015.
Beston Global Food Company Limited
30 June 2016
48
48
2 0 1 6 A N N U A L R E P O R T
2 Revenue
The Group derives the following types of revenue:
Sales revenue
Other revenue
Leasing income
Management fees
Total revenue
30 June
2016
$'000
15,999
1,823
1,140
2,963
18,962
30 June
2015
$'000
-
36
-
36
36
(a) Recognising revenue from major business activities
Revenue is recognised for the major business activities using the methods outlined below.
(i) Sale of goods
Revenue from the sale of goods in the course of the ordinary activities is measured at the fair value of the consideration
received or receivable, net of returns, trade discounts and volume rebates. Revenue for sale of goods is recognised
when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is
probable, the associated costs and possible return of the goods can be estimated reliably, there is no continuing
involvement with goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be
granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the
sales are recognised.
Transfer of risks and rewards varies depending on the individual terms of the contract of sale. For exports of finished
goods these criteria are met at the time the product is shipped and delivered to the customer and title and risk have
passed to the customer (depending on the delivery conditions) and acceptance of the product has been obtained.
Examples of delivery conditions are ‘Free on Board point of delivery’, ‘Costs and Freight point of delivery’, ‘Costs, Freight
and Insurance point of delivery’, where the point of delivery may be the shipping warehouse or any other point as agreed
in the contract with the customer and where title and risk for the goods pass to the customer.
For products for which a right of return exists during a defined period, revenue recognition is determined based on the
historical pattern of actual returns and internal quality reviews. Return policies are typically based on customary return
arrangements in local markets.
In case of loss under a sales agreement, the loss is recognised immediately.
(ii) Revenue from services
Revenue from services is recognised when the Group can reliably measure the amount of revenue and the associated
cost related to the stage of completion of a contract or transaction, and the recovery of the consideration is considered
probable.
(iii) Other revenue
See note 21(e) for the recognition and measurement of other revenue.
Beston Global Food Company Limited
30 June 2016
49
49
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
3 Other income and expense items
(a) Other income
Other items
Gain on bargain purchase
(b) Breakdown of expenses by nature
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits expenses
Depreciation
Management fees
Loss on disposal of fixed assets
Fair value loss on revaluation of livestock
Finance income
Interest income
xxx
Finance costs
Finance charges paid for financial liabilities
Exchange losses on foreign currency borrowings
xxx
Net finance income
Notes
11
30 June
2016
$'000
141
2,881
3,022
30 June
2015
$'000
-
-
-
30 June
2016
$'000
30 June
2015
$'000
Notes
98
6,119
3,829
830
1,596
5
3
6(c)
6(d)
-
-
42
-
76
-
-
30 June
2016
$'000
30 June
2015
$'000
1,465
232
(19)
(95)
(114)
1,351
-
-
-
232
Beston Global Food Company Limited
30 June 2016
50
50
2 0 1 6 A N N U A L R E P O R T
4 Income tax benefit
(a)
Income tax benefit
Current tax
Current tax
Total current tax expense
Deferred income tax
(Increase) decrease in deferred tax assets (note 6(e))
Increase (decrease) in deferred tax liabilities (note 6(e))
Total deferred tax expense/(benefit)
Income tax benefit
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax
Tax at the Australian tax rate of 30.0% (2015 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Capital raising costs
Research and development adjustments (net)
Share of profit/loss from associates
Tax rate differentials
Non-recognition of DTA on foreign revenue losses
Other non-deductible items
Income tax benefit
(c) Amounts recognised directly in equity
30 June
2016
$'000
30 June
2015
$'000
875
875
(1,804)
720
(1,084)
(209)
30 June
2016
$'000
(1,929)
(579)
360
(153)
47
(186)
281
21
(209)
-
-
(458)
-
(458)
(458)
30 June
2015
$'000
(1,562)
(469)
-
-
-
-
-
11
(458)
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Deferred tax: share issue costs
7(a)(ii)
(1,421)
(413)
30 June
2016
$'000
30 June
2015
$'000
Notes
Beston Global Food Company Limited
30 June 2016
51
51
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30.0%
Income tax benefit
30 June
2016
$'000
935
281
30 June
2015
$'000
-
-
The unused tax losses were incurred by a foreign subsidiary that is not part of the Australian tax consolidated group. The
directors have conservatively agreed not to recognise a deferred tax asset in relation to the tax losses on the basis that
the entity is still in its establishment phase. See note 6(e) for information about recognised tax losses and significant
judgements made in relation to them.
5 Financial assets and financial liabilities
(a) Cash and cash equivalents
Cash at bank and in hand
30 June
2016
$'000
30 June
2015
$'000
19,372
7,547
(i) Classification as cash equivalents
Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of
acquisition and are repayable with 24 hours notice with no loss of interest. See note 21(k) for the Group’s other
accounting policies on cash and cash equivalents.
(b) Trade and other receivables
Trade receivables
Receivables from related parties
Other receivables
Prepayments
Goods and services tax (GST) receivable
Convertible notes receivable (ii)
30 June
2016
Non-
current
$'000
30 June
2015
Non-
current
$'000
Total
$'000
Current
$'000
-
-
-
-
-
-
-
12,299
1,282
1,696
111
2,638
8,584
26,610
40
-
14
9
94
5,176
5,333
-
-
-
-
-
5,054
5,054
Current
$'000
12,299
1,282
1,696
111
2,638
8,584
26,610
Total
$'000
40
-
14
9
94
10,230
10,387
(i) Classification as trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. If collection of the amounts is expected in one year or less they are classified as current
assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 90
days and therefore are all classified as current. The Group’s impairment and other accounting policies for trade and other
receivables are outlined in notes 9(b) and 21(l) respectively.
(ii) Convertible notes receivable
During the prior year, the Group entered into a convertible note agreement with the potential to acquire between 32%
and 36% interest in Ferguson Australia Group for an amount of $5,000,000 subject to the satisfaction of certain financing
conditions. This note was issued on 10 March 2015 at a 9.5% interest rate, and on 10 March 2016 the note was
converted into 4,706 ordinary shares resulting in an ownership of 32% of the investee.
Beston Global Food Company Limited
30 June 2016
52
52
2 0 1 6 A N N U A L R E P O R T
Financial assets and financial liabilities
(b) Trade and other receivables
During the prior year, the Group entered into a convertible note with potential to acquire a 26.5% interest in B.-d. Farm
Paris Creek Pty Ltd for an amount of $5,000,000. This note was issued at a 9.5% interest rate on 10 March 2015 and
converts to that number of ordinary shares which equate to 26.5% of the investee. The Group may convert the note at
the discretion of the Group, after satisfaction of certain objectives and financing conditions.
During the year ended 30 June 2016, the Group entered into a convertible note with potential to acquire a 40% interest in
Scorpio Foods Pty Ltd and Australian Provincial Cheese Pty Ltd for an amount of $3,500,000. This note was issued at a
9.5% interest rate on 25 August 2015 and converts to that number of ordinary shares which equate to 40% of the
investee company entities. On 20 June 2016, the convertible note term was extended for a period of 12 months or until
the investee companies meet their forecasts. The Group may convert the note at the discretion of the Group, after
satisfaction of certain objectives and financing conditions.
The directors consider the embedded derivative component of the convertible notes are not material and has not been
separately brought to account on inception. At balance date, the directors also consider the movement in the fair value of
the embedded derivative not to be material.
(iii) Fair value of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair
value. For the majority of the non-current receivables, the fair values are also not significantly different to their carrying
amounts.
(iv) Impairment and risk exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit
risk, foreign currency risk and interest rate risk can be found in note 9(a).
(c) Trade and other payables
Current liabilities
Trade payables
Amounts due to associates
Goods and services tax (GST) payable
Accrued expenses
Payroll liabilities
Other payables
30 June
2016
$'000
30 June
2015
$'000
7,343
147
22
770
369
54
8,705
808
-
-
939
-
-
1,747
Trade payables are unsecured and are usually paid within 30 days of recognition.
(i) Fair value of trade and other payables
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their
short-term nature.
Beston Global Food Company Limited
30 June 2016
53
53
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
6 Non-financial assets and liabilities
(a)
Inventories
Current assets
Raw materials and stores
Finished goods
30 June
2016
$'000
30 June
2015
$'000
445
7,520
7,965
-
-
-
(i) Assigning costs to inventories
The costs of individual items of inventory are determined using weighted average costs. See note 21(m) for the Group’s
other accounting policies for inventories.
(ii) Amounts recognised in profit or loss
Inventories recognised as expense during the year ended 30 June 2016 amounted to $8,538,344 (2015 - nil).
There were no write-downs of inventories during the year (2015 - nil).
(b) Other current assets
Deposits paid for acquisitions
Capitalised acquisition costs
30 June
2016
$'000
-
-
-
30 June
2015
$'000
1,058
74
1,132
Beston Global Food Company Limited
30 June 2016
54
54
2 0 1 6 A N N U A L R E P O R T
(c) Property, plant and equipment
Non-financial assets and liabilities
Land
$'000
Buildings
$'000
Plant and
equipment
$'000
Furniture,
fittings and
equipment
$'000
Motor
vehicles
$'000
-
-
1,824
1,824
1,824
-
1,824
1,824
17,959
3,753
-
-
23,536
23,536
-
23,536
264
264
264
-
264
264
2,902
225
-
(83)
3,308
3,391
(83)
3,308
-
64
64
64
-
64
64
1,778
10,051
-
(733)
11,160
11,893
(733)
11,160
-
-
-
-
-
-
-
-
150
-
(7)
143
150
(7)
143
-
-
-
-
-
-
-
-
135
(8)
(7)
120
127
(7)
120
Total
$'000
-
2,152
2,152
2,152
-
2,152
2,152
22,639
14,314
(8)
(830)
38,267
39,097
(830)
38,267
At 1 July 2014
Net book amount
Year ended 30 June 2015
Additions
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Acquisitions of businesses
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
(i) Depreciation methods and useful lives
Property, plant and equipment is stated at historical cost less depreciation. Land is carried at cost.
Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual
values, over their estimated useful lives:
-
-
-
Buildings
Plant and equipment
Furniture, fittings and equipment
- Motor vehicles
20 - 50 years
5 - 40 years
3 - 10 years
7 - 15 years
See note 21(o) for the other accounting policies relevant to property, plant and equipment.
Beston Global Food Company Limited
30 June 2016
55
55
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(d) Biological assets
Livestock
Non-financial assets and liabilities
30 June
2016
$'000
30 June
2015
$'000
4,241
-
Livestock relates to cattle herds at the Pedra Branca and Kurleah dairy farms. Cattle are held primarily for dairy farming
purposes.
As at 30 June 2016, the Group held a total of 2,675 cattle (2015 - nil).
Movements:
Opening balance
Increases due to purchases
Increases due to acquisitions of businesses
Decreases due to livestock sold
Change in fair value
Balance 30 June 2016
30 June
2016
$'000
30 June
2015
$'000
-
2,028
2,349
(133)
(3)
4,241
-
-
-
-
-
-
(i) Accounting for biological assets
Biological assets are measured at fair value less cost to sell. Costs to sell include the incremental selling costs, including
auctioneers’ fees, commission paid to brokers and dealers and estimated costs of transport to the market but excludes
finance costs and income taxes.
Livestock are classified as current assets if they are to be sold within one year.
(ii) Measuring biological assets at fair value
The fair value of cattle is based on the market price of livestock of a similar age, weight, breed and genetic make-up. As
these prices are observable, they are deemed to be Level 2 in the fair value hierarchy.
The value of these cattle, comprising principally females and breeding bulls, is determined by independent valuation with
reference to prices received from representative sales of breeding cattle similar to the Group's herd. Prices for these
cattle are reflective of current market conditions.
Independent valuations were undertaken by Elders Limited. In performing the valuation, consideration is given to the
breed, class, age, quality and location of the herd. Direct comparisons are made to recent sales evidence in relevant
cattle markets.
(e) Deferred tax balances
(i) Deferred tax assets
The balance comprises temporary differences attributable to:
Tax losses and offsets
Employee benefits
Accruals
Tax only assets
Total deferred tax assets
30 June
2016
$'000
30 June
2015
$'000
2,031
17
21
2,027
4,096
309
-
36
526
871
Beston Global Food Company Limited
30 June 2016
56
56
2 0 1 6 A N N U A L R E P O R T
(e) Deferred tax balances
Significant estimates
The deferred tax assets include an amount of $1,419,779 which relates to carried forward tax losses of the Australian tax
consolidated group. The Group has concluded that the deferred assets will be recoverable using the estimated future
taxable income based on the approved business plans and budgets. The losses can be carried forward indefinitely and
have no expiry date.
Non-financial assets and liabilities
(ii) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Intangible assets
30 June
2016
$'000
30 June
2015
$'000
720
5
725
-
-
-
(iii) Tax consolidation
Members of the tax consolidated group and tax sharing agreement
Beston Global Food Company Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated
group with effect from 11 February 2015. Beston Global Food Company Limited is the head entity of the tax consolidated
group. Members of the tax consolidated group have entered into a tax sharing agreement that provides for 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 on the basis that the possibility of default
is remote.
Tax effect accounting by members of the tax consolidated group
Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting
The head entity and the controlled entities in the tax consolidated group continue to account for their own current and
deferred tax amounts. The Group has applied the stand-alone taxpayer approach in determining the appropriate amount
of current taxes and deferred taxes to allocate to members of the tax consolidated group. These tax amounts are
measured as if each entity in the tax consolidated group continues to be a separate taxable entity in its own right. The
nature of the tax funding agreement is discussed further below.
In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the tax consolidated group.
Nature of the tax funding agreement
Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement, the
wholly-owned entities fully compensate Beston Global Food Company Limited for any current tax payable assumed and
are compensated for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax
credits transferred to Beston Global Food Company Limited under the tax consolidation legislation. The funding amounts
are determined by reference to the amounts recognised in the wholly-owned entities' financial statements.
The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable
(payable) which is at call. To the extent that there is a difference between the amount charged under the tax funding
agreement and the allocation under AASB Interpretation 1052, the head entity accounts for these as equity transactions
with the subsidiaries.
The amount receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the
head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require
payment of interim funding amounts to assist with its obligation to pay tax instalments.
Beston Global Food Company Limited
30 June 2016
57
57
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(f)
Intangible assets
At 1 July 2014
Net book amount
Year ended 30 June 2015
Additions - acquisition
Closing net book amount
At 30 June 2015
Cost
Accumulation amortisation
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions - acquisition
Additions - internal development
Acquisitions of businesses
Closing net book amount
At 30 June 2016
Cost
Accumulated amortisation
Net book amount
Non-financial assets and liabilities
Goodwill
$'000
Software
$'000
Customer
contracts
$'000
Lobster
quotas
$'000
Water
licences
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
227
227
227
-
227
-
-
-
-
-
-
-
210
153
-
363
363
-
363
-
-
-
-
-
-
-
-
-
543
543
543
-
543
-
-
-
-
-
-
-
4,949
-
-
4,949
4,949
-
4,949
-
25
25
25
-
25
25
2
-
3,932
3,959
3,959
-
3,959
-
25
25
25
-
25
25
5,161
153
4,702
10,041
10,041
-
10,041
* Software includes capitalised development costs being an internally generated intangible asset.
(i) Amortisation methods and useful lives
For the year ended 30 June 2016, there was no amortisation expensed in relation to software as it was not in use by the
Group. Lobster quotas and water licences have an indefinite useful life and are not amortised:
•
Lobster quotas: The Group has the right to the annual lobster quotas over an indefinite period and therefore the
lobster quotas have an indefinite useful life.
• Water licences: The Group has the right to use water over an indefinite period and therefore the water licences are
considered to have an indefinite useful life.
The Group amortises IT development and software from the date of first use using the straight-line method over 3 - 5
years.
Customer contracts were acquired as part of the AQUAessence BMTG Pty Ltd business combination. They are
recognised at their fair value at the date of acquisition and are amortised on a straight-line based on the timing of the
projected cash flows of the contracts over their estimated useful lives.
Impairment tests for goodwill
(ii)
Goodwill has been tested for impairment. Based on valuations undertaken of the Beston Farm Pty Ltd's assets to which
the goodwill relates, goodwill is not impaired.
(iii) Assessment of recoverable amount of water licences - fair value less cost to sell
Water licences were acquired within the past 12 months with fair value assessed at the date of acquisition. Accordingly,
the carrying value of water licences approximates fair value at 30 June 2016.
Beston Global Food Company Limited
30 June 2016
58
58
2 0 1 6 A N N U A L R E P O R T
Non-financial assets and liabilities
(f)
Intangible assets
(iv) Assessment of recoverable amount of lobster quotas - fair value less cost to sell
The fair value of the lobster quotas was determined using a market comparable method. This means that valuations
performed by the valuer are based on active market prices, significantly adjusted for differences in the nature, location
and condition of the lobster quota. The fair value of the lobster quotas was derived using an external valuation from an
established broker. As these prices are observable, they are deemed to be Level 2 in the fair value hierarchy.
Key assumptions were that the quotas were unencumbered and licence terms and conditions were being complied with.
The approach in determining fair value was to use data from recent completed sales, current licences and quota
available for sale or lease, recent market demand, and historical industry data.
There were no changes to the valuation technique given this is the first valuation since acquisition earlier in the year.
(g) Employee benefit obligations
30 June
2016
Non-
current
$'000
Current
$'000
30 June
2015
Non-
current
$'000
Total
$'000
Total
$'000
Current
$'000
Leave obligations (i)
50
7
57
-
-
-
(i) Leave obligations
The leave obligations cover the Group’s liability for long service leave and annual leave.
The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service
leave where employees have completed the required period of service and also those where employees are entitled to
pro-rata payments in certain circumstances. The entire amount of the provision of $49,604 (2015 - nil) is presented as
current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However,
based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require
payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid
within the next 12 months.
30 June
2016
$'000
30 June
2015
$'000
Current leave obligations expected to be settled after 12 months
15
-
Beston Global Food Company Limited
30 June 2016
59
59
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
7 Equity
(a) Contributed equity
(i) Share capital
Ordinary shares - fully paid
363,241,052
77,526,766
113,472
21,471
30 June
2016
Shares
30 June
2015
Shares
30 June
2016
$'000
30 June
2015
$'000
(ii) Movements in ordinary share capital
Opening balance 1 July 2014
Establishment
Issuance of founders shares - 6 - 9 February 2015
Share issue via placement - 23 February 2015
Share issue via placement - 29 June 2015
Less: Equity raising costs
Deferred tax credit recognised directly in equity
Balance 30 June 2015
Share issue via Initial Public Offering - 28 August 2015
Less: Equity raising costs
Deferred tax credit recognised directly in equity
Balance 30 June 2016
Number of shares
$'000
-
100
2,916,666
55,000,000
19,610,000
77,526,766
-
-
77,526,766
285,714,286
363,241,052
-
-
363,241,052
-
-
29
16,500
5,883
22,412
(1,354)
413
21,471
100,000
121,471
(9,420)
1,421
113,472
(iii) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Beston Global Food Company Limited
30 June 2016
60
60
2 0 1 6 A N N U A L R E P O R T
(b) Other reserves
The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these
reserves during the year. A description of the nature and purpose of each reserve is provided below the table.
Equity
Share-based payments
Foreign currency translation
Movements:
Share-based payments
Opening balance
Issue of shares held by entity to employees
Balance 30 June
Foreign currency translation
Opening balance
Currency translation differences arising during the year
Balance 30 June
30 June
2016
$'000
5,617
(48)
5,569
30 June
2016
$'000
-
5,617
5,617
-
(48)
(48)
30 June
2015
$'000
-
-
-
30 June
2015
$'000
-
-
-
-
-
-
(i) Nature and purpose of other reserves
Share-based payments
The share-based payments reserve is used to recognise Founders' Rights issued to non-executive directors. This
represents the fair value at grant date.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income as described in note 21(d) and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss when the net investment is disposed of.
(c) Accumulated losses
Movements in accumulated losses were as follows:
Opening balance
Net loss for the period attributable to equity holders of the parent
Balance 30 June
30 June
2016
$'000
(1,103)
(1,716)
(2,819)
30 June
2015
$'000
-
(1,103)
(1,103)
Beston Global Food Company Limited
30 June 2016
61
61
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
8 Cash flow information
(a) Reconciliation of loss after income tax to net cash outflow from operating activities
Loss for the year
Depreciation and amortisation
Bad debts written off
Non-cash employee benefits expense - share-based payments
Transaction costs expensed on issue of shares
Net loss on disposal of fixed assets
Fair value adjustment to biological assets
Interest income
Interest expense
Foreign exchange loss
Share of loss from associates
Gain on bargain purchase
Change in operating assets and liabilities:
(Increase) in trade and other receivables
(Increase) in inventories
(Increase) in deferred tax assets
Increase in trade and other payables
Increase in provision for income taxes payable
Increase in deferred tax liabilities
Increase in other provisions
Net cash inflow (outflow) from operating activities
9 Financial risk management
30 June
2016
$'000
30 June
2015
$'000
(1,720)
830
430
1,199
1,356
5
3
1,465
(19)
(95)
156
(2,881)
(16,366)
(7,577)
(1,804)
6,660
875
720
57
(16,706)
(1,104)
-
-
-
-
-
-
-
-
-
-
-
(447)
-
(871)
1,800
-
-
-
(622)
This note explains the Group's exposure to financial risks and how these risks could affect the Group’s future financial
performance. Current year profit and loss information has been included where relevant to add further context. Senior
management oversees the management of these risks. The Board of directors reviews and agrees policies for managing
each of these risks.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes
in foreign exchange rates. The Group's exposure to risk of changes in foreign exchange rates relates primarily to the
Group's operating activities (when revenue or expense is denominated in a foreign currency) and the Group's net
investments in foreign subsidiaries.
The Group manages its foreign exchange risk by hedging transactions that are expected to occur within the next 12
months, mainly focused on forecasted sales and purchases.
Exposure
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar, was as
follows:
Trade receivables
Trade payables
There was no material foreign currency risk exposure as at 30 June 2015.
30 June 2016
USD
$'000
-
(1,647)
THB
$'000
987
(28)
Beston Global Food Company Limited
30 June 2016
62
62
2 0 1 6 A N N U A L R E P O R T
(a) Market risk
Amounts recognised in profit or loss and other comprehensive income
During the year, the following foreign exchange related amounts were recognised in profit or loss:
Financial risk management
Amounts recognised in profit or loss
Net foreign exchange gain/(loss) included in other income/other expenses
Total net foreign exchange gains/(losses) recognised in profit before income tax for the
period
A
A
30 June
2016
$'000
30 June
2015
$'000
(95)
(95)
-
-
Sensitivity
The sensitivity of profit or loss to changes in the exchange rates is summarised below. Given the foreign currency
balances included in the consolidated balance sheet at balance date, if the Australian dollar at that date strengthened by
10% with all other variables held constant, then the impact on post tax profit/(loss) arising on the balance sheet exposure
would be as follows:
Index
THB/AUD exchange rate - increase 10%
THB/AUD exchange rate - decrease 10%
USD/AUD exchange rate - increase 10%
USD/AUD exchange rate - decrease 10%
Impact on post-tax profit
2016
$'000
(99)
81
183
(150)
2015
$'000
-
-
-
-
(ii) Cash flow and fair value interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to
the Group's cash at bank held at variable rates.
Cash and cash equivalents
30 June
2016
$'000
30 June
2015
$'000
19,372
7,547
Sensitivity
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance date. At 30 June
2016, if interest rates had moved as illustrated in the table below, with all other variables held constant, post-tax profit
would have been impacted as follows:
Interest rates - increase by 100 basis points
Interest rates - decrease by 100 basis points
Impact on post-tax profit
2016
$'000
193
(193)
2015
$'000
75
(75)
(iii) Price risk
Exposure
The Group is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase
of milk and manufacture of cheddar and other cheese products, in addition to seafood and therefore require a continuous
supply of milk and seafood. The Group manages commodity risk by where possible entering into longer term
relationships with key suppliers that create more certainty around key commodity prices.
Beston Global Food Company Limited
30 June 2016
63
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B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Financial risk management
(b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables)
and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions
and other financial instruments. The maximum exposure to credit risk before any credit enhancements at the end of each
reporting period is the carrying amount of the financial assets (refer note 5(b)). None of these assets are impaired.
(i) Risk management
Customer credit risk is managed by each business unit subject to the Group's established policy, procedures and control
relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating
scorecard and individual credit limits are defined in accordance with this assessment.
Management have regular reporting and assessment of key customers credit risk in order to manage this.
Impaired trade receivables
(ii)
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. The
other receivables are assessed collectively to determine whether there is objective evidence that an impairment has
been incurred but not yet been identified. For these receivables the estimated impairment losses are recognised in a
separate provision for impairment. The Group considers that there is evidence of impairment if any of the following
indicators are present:
•
•
significant financial difficulties of the debtor; and
probability that the debtor will enter bankruptcy or financial reorganisation.
Receivables for which an impairment provision was recognised are written off against the provision when there is no
expectation of recovering additional cash.
Impairment losses are recognised in profit or loss within other expenses. Subsequent recoveries of amounts previously
written off are credited against other expenses. See note 14 for information about how impairment losses are calculated.
Movements in the provision for impairment of trade receivables that are assessed for impairment collectively are as
follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectible
At 30 June
30 June
2016
$'000
30 June
2015
$'000
-
430
(430)
-
-
-
-
-
(iii) Past due but not impaired
As at 30 June 2016, trade receivables of $1,228,643 (2015 - nil) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of default.
Up to 3 months
3 to 6 months
6 to 9 months
30 June
2016
$'000
574
192
463
1,229
30 June
2015
$'000
-
-
-
-
Beston Global Food Company Limited
30 June 2016
64
64
2 0 1 6 A N N U A L R E P O R T
(c) Liquidity risk
The Group monitors its risk to a shortage of funds using a liquidity planning tool. The Group's objective is to maintain a
sufficient cash surplus in order to pay its debts as and when they fall due.
All financial liabilities of the Group are non-derivatives and have contractual maturities of up to 6 months.
Financial risk management
10 Capital management
(a) Risk management
The Group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they
can continue to provide returns for shareholders and benefits for other stakeholders.
In order to maintain the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders or issue new shares.
(b) Dividends
(i) Ordinary shares
There were no dividends paid or provided for during the year ended 30 June 2016.
(ii) Dividends not recognised at the end of the reporting period
Since year end, the directors have recommended the payment of a final dividend of 0.60 cents per fully paid ordinary
share (2015 - nil).
Beston Global Food Company Limited
30 June 2016
65
65
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
11 Business combination
(a) Summary of acquisition
On 3 September 2015, the Company acquired the Kurleah Dairy Farm ("Kurleah") business. The acquisition has been
accounted for using the acquisition method. The financial statements include the results for Kurleah for the year from
acquisition date.
Kurleah was established in 1966 and is a 314 hectare dairy farm. It is located at Allendale, 30 kilometres from Mt
Gambier in the South East of South Australia. It has carried 700 cows year round with replacements and is located in a
reliable high rainfall area. The property has 184 hectares of irrigated pasture (using 3 centre pivots) and carries 2.3 cows
per usable hectare.
Details of the purchase consideration, the nets assets acquired and goodwill are as follows:
xxx
Purchase consideration:
Cash paid
The assets and liabilities recognised as a result of the acquisition are as follows:
xxx
Livestock
Property
Plant and equipment
Intangibles: water licences
Net identifiable assets acquired
xxx
Add: Goodwill
Net assets acquired
$'000
xxx
6,952
Fair value
$'000
xxx
706
3,269
1,726
1,024
6,725
xxx
227
6,952
The goodwill is attributable to the expected synergies and other benefits from combining the assets of Kurleah with those
of the Group. It will not be deductible for tax purposes.
(i) Revenue and profit contribution
As the Kurleah business is integrated within the Beston Farms business unit, it is impractical to segregate and isolate the
revenue and profit impact on the consolidated statement of comprehensive income for the year and the period from the
date of acquisition.
(ii) Acquisition-related costs
Acquisition-related costs of $380,509 are included in administration expenses in the consolidated statement of
comprehensive income and in operating cash flows in the consolidated statement of cash flows.
Beston Global Food Company Limited
30 June 2016
66
66
2 0 1 6 A N N U A L R E P O R T
Business combination
(b) Summary of acquisition
On 3 September 2015, the Company acquired the Pedra Branca Dairy Farm ("Pedra Branca") business. The acquisition
has been accounted for using the acquisition method. The financial statements include the results for Pedra Branca for
the year from acquisition date.
Pedra Branca is an established 1299 hectare dairy farm located approximately 20 kilometres south west of Mount
Gambier, in the south east of South Australia. It is the consolidation of three dairy farms which were operated separately
in the past. As an integrated property it currently carries approximately 1,200 dairy cows year round with herd
replacements, but has previously carried approximately 2,300 - 2,400 cows and 1,835 as recently as 2012. In a very
reliable 750mm pa rainfall area, production is supported by 542 hectares of irrigation.
Details of the purchase consideration, the nets assets acquired and the gain on bargain purchase are as follows:
xxx
Purchase consideration
Cash paid
The assets and liabilities recognised as a result of the acquisition are as follows:
xxx
Livestock
Property
Plant and equipment
Intangibles: water licences
GST payable
Net identifiable assets acquired
xxx
Less: Gain on business acquisition
Net assets acquired
$'000
xxx
17,810
Fair value
$'000
xxx
1,643
15,920
530
2,700
(107)
20,686
xxx
(2,876)
17,810
(i) Revenue and profit contribution
As the Pedra Branca business is integrated within the Beston Farms business unit, it is impractical to segregate and
isolate revenue and profit from the impact of the Pedra Branca business on the consolidated statement of
comprehensive income for the year and the period from the date of acquisition.
(ii) Acquisition-related costs
Acquisition-related costs of $940,407 are included in administration expenses in the consolidated statement of
comprehensive income and in operating cash flows in the consolidated statement of cash flows.
Beston Global Food Company Limited
30 June 2016
67
67
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Business combination
(c) Summary of acquisition
On 10 June 2016, the Group acquired a 51% controlling interest in AQUAessence BMTG Pty Ltd ("AQUAessence"). The
acquisition has been accounted for using the acquisition method. The financial statements include the results for
AQUAessence for the year from acquisition date.
AQUAessence is a producer of premium quality bottled water and has been supplying the domestic Australian market
since 1998. It is natural spring water that has been naturally filtered for thousands of years through the limestone caves
that connect the pristine underground aquifer systems surrounding the Blue Lake in Mount Gambier with access to an
abundance of water resources.
Details of the purchase consideration, the nets assets acquired and the gain on bargain purchase are as follows:
Purchase consideration:
Cash paid
The assets and liabilities recognised as a result of the acquisition are as follows:
Trade receivables
Inventories
Property
Plant and equipment
Intangible asset: water licences
Intangible asset: customer contracts
Trade payables
Related party payables
Deferred tax liability
Net identifiable assets acquired
Less: Non-controlling interests
Less: Gain on bargain purchase
Net assets acquired
$'000
981
Fair value
$'000
72
388
574
608
205
543
(151)
(300)
(5)
1,934
(948)
(5)
981
(i) Accounting policy choice for non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition
basis. For the non-controlling interests in AQUAessence, the Group elected to recognise the non-controlling interests in
at its proportionate share of the acquired net identifiable assets. See note 21(i) for the Group's accounting policies for
business combinations.
(ii) Revenue and profit contribution
The acquired business contributed revenues of $11,115 and net loss of $19,742 to the Group for the period from 10 June
2016 to 30 June 2016.
(iii) Acquisition-related costs
Acquisition-related costs of $49,069 are included in administration expenses in the consolidated statement of
comprehensive income and in operating cash flows in the consolidated statement of cash flows.
Beston Global Food Company Limited
30 June 2016
68
68
2 0 1 6 A N N U A L R E P O R T
12 Interests in other entities
(a) Material subsidiaries
The Group’s principal subsidiaries at 30 June 2016 are set out below. Unless otherwise stated, they have share capital
consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held
equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of
business.
Name of entity
Country of
incorporation
and operation
Ownership interest
held by the Group
Ownership interest
held by NCI
2016
%
2015
%
2016
%
2015
%
Principal activities
Beston Farms Pty Ltd
Beston Dairies Pty Ltd
Beston Pure Foods (Australia)
Pty Ltd
Beston Global Food (Thailand)
Company Limited
Beston Global Food Company
(Hong Kong) Limited
Beston Global Food Company
(Dalian) Limited
Beston Technologies Pty Ltd
AQUAessence BMTG Pty Ltd
Australia
Australia
Australia
Thailand
Hong Kong
China
Australia
Australia
100.0
100.0
100.0
98.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
98.0
-
-
-
-
-
-
-
2.0
-
-
-
49.0
- Dairy farming
- Dairy production
- Sales and distribution
2.0 Sales and distribution
- Sales and distribution
- Sales and distribution
- Technology developer
- Water products
Beston Global Food Company Limited
30 June 2016
69
69
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(b) Non-controlling interests (NCI)
Interest in:
Share capital
Retained earnings
Interests in other entities
30 June
2016
$'000
30 June
2015
$'000
948
(5)
943
-
(1)
(1)
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material
to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI
Summarised statement of comprehensive income
Revenue
Profit for the period
Total comprehensive income
Profit/(loss) allocated to NCI
< blank header row >
Summarised cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increases/(decrease) in cash and cash equivalents
AQUAessence BMTG Pty
Ltd
30 June
2016
$'000
30 June
2015
$'000
491
483
8
1,961
5
1,956
1,964
963
-
-
-
-
-
-
-
-
AQUAessence BMTG Pty
Ltd
30 June
2016
$'000
30 June
2015
$'000
61
30
30
15
-
-
-
-
AQUAessence BMTG Pty
Ltd
30 June
2016
$'000
49
(2,256)
2,224
17
30 June
2015
$'000
-
-
-
-
Beston Global Food Company Limited
30 June 2016
70
70
2 0 1 6 A N N U A L R E P O R T
Interests in other entities
(c)
Interests in associates
Name of entity
Country of
incorporation
and operation
% of
ownership
interest
Nature of
relationship
Measurement
method
Ferguson Australia Pty Ltd
Neptune Bio-Innovations Pty Ltd
Total equity accounted
investments
Australia
Australia
2016
%
2015
%
32
20
52
-
-
-
Associate
Associate
Equity method
Equity method
Carrying amount
2016
$'000
2015
$'000
4,997
11,938
16,935
-
-
-
(1) Ferguson Australia Pty Ltd is a processor and exporter of premium seafood products. It is a strategic investment for the Group
to complement its distribution of seafood products into Asia. The Group holds additional lobster quotas to increase the supply
of Ferguson Australia Pty Ltd's core product, the Southern Rock Lobster.
(2) Neptune Bio-Innovations Pty Ltd is an industry recognised and accredited Research & Development food contract
manufacturer, operating in the Food & Beverage, Nutritional, Personal Care and Nutraceutical product industries. It is a
strategic investment for the Group offering a range of health and well-being enhancing functional foods, either used as
stand-alone products or in conjunction with the Dairy, Meat and Health divisions.
The above entities are private companies with no quoted price available.
(i) Summarised financial information for associates
Summarised balance sheet
Current assets
Cash and other cash equivalents
Other current assets
Total current assets
Blank header
Non-current assets
< blank header row >
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
< blank header row >
Non-current liabilities
Financial liabilities (excluding trade payables)
Other non-current liabilities
Total non-current liabilities
< blank header row >
Net assets
< blank header row >
Ferguson
Australia Pty
Ltd
Neptune
Bio-Innovations
Pty Ltd
30 June
2016
$'000
30 June
2016
$'000
2
3,426
3,428
6,427
2,784
2,148
4,932
1,388
-
1,388
3,535
5,938
891
6,829
4,137
441
1,676
2,117
79
185
264
8,585
Beston Global Food Company Limited
30 June 2016
71
71
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
(c)
Interests in associates
Summarised statement of comprehensive income
Revenue
Interest income
Depreciation and amortisation
Interest expense
Income tax expense
< blank header row >
(Loss)/profit for the period from continuing operations
Other comprehensive income
Total comprehensive income
< blank header row >
Reconciliation to carrying amounts
Opening net assets
(Loss)/profit for the period
Distributions
Closing net assets
Group share in %
Group's share in $
Goodwill
Carrying amount
Interests in other entities
Ferguson
Australia Pty
Ltd
Neptune
Bio-Innovations
Pty Ltd
30 June
2016
$'000
54,288
5
(331)
(329)
(58)
(764)
-
(764)
30 June
2016
$'000
4,434
160
(418)
(66)
-
(523)
-
(523)
Ferguson
Australia Pty
Ltd
Neptune
Bio-Innovations
Pty Ltd
30 June
2016
$'000
4,974
(764)
(675)
3,535
32.0%
1,131
3,866
4,997
30 June
2016
$'000
9,108
(523)
-
8,585
20.0%
1,717
10,221
11,938
Beston Global Food Company Limited
30 June 2016
72
72
2 0 1 6 A N N U A L R E P O R T
13 Contingent liabilities and contingent assets
The Group had no contingent assets or liabilities at 30 June 2016 (2015 - nil).
14 Commitments
(a) Non-cancellable operating leases - Group as lessor
The Group has entered into operating leases on its dairy farming property portfolio consisting of certain farms (including
plant and equipment, land and cattle herds), lobster quotas and dairy processing plant and equipment. These leases
have initial terms of between 1 and 15 years. All leases include a clause to enable upward revision of the rental charge
on an annual basis according to prevailing market conditions.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:
Within one year
Later than one year but not later than five years
Later than five years
30 June
2016
$'000
418
760
1,678
2,856
30 June
2015
$'000
190
736
874
1,800
(b) Non-cancellable operating leases - Group as lessee
The Group leases its offices under non-cancellable operating leases expiring within 3 years. Commitments for minimum
lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
30 June
2016
$'000
30 June
2015
$'000
79
51
130
-
-
-
Beston Global Food Company Limited
30 June 2016
73
73
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
15 Events occurring after the reporting period
On 11 August 2016, the Group entered into a convertible note with Scorpio Foods Pty Ltd for an amount of $300,000.
This note was issued at a 9.5% interest rate and converts to that number of ordinary shares which equate to 5% of the
investee. The Group may convert the note at its discretion.
On 18 August 2016, the Group entered into a contract to purchase the “Westdama” dairy farm at Glencoe, approximately
30 kilometres north-west of Mount Gambier, for $2,600,000 subject to due diligence and the satisfaction of certain
undertakings and conditions. The property has 80 hectares of irrigated pasture and currently supports approximately 400
cows. The Group intends to commence the process of conversion of Westdama to an organic dairy farm once the
transaction is finalised.
On 31 August 2016, Beston Global Food Company Limited announced the placement of 64,051,111 shares to a
Singapore company, Kunteng Pte Ltd, which is a wholly owned subsidiary of the China based private company, Dalian
Hairunlai Group.
The placement has been made at a price of 45 cents per share and will provide net proceeds to Beston Global Food
Company Limited of $28,289,775. The funds will be used to further the Group's dairy, health, and seafood businesses.
On 31 August 2016, the directors resolved to pay a final dividend of 0.60 cents per fully paid ordinary share (2015 - nil).
This is to be paid on 31 October 2016.
On 15 September 2016, Beston Pure Dairies Pty Ltd acquired the assets of Australian Provincial Cheese Pty Ltd ("APC")
for an amount of $2,200,000. The acquired assets include plant and equipment, trademarks and intellectual property.
BFC previously held a convertible note issued by APC in the amount of $1,100,000, which has been repaid as part of
this transaction.
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected the Group's operations,
results or state of affairs, or may do so in future years.
16 Related party transactions
(a) Subsidiaries
Interests in subsidiaries are set out in note 12(a).
(b) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
30 June
2016
$
220,110
20,767
-
-
5,467,879
5,708,756
30 June
2015
$
30,000
2,775
-
-
-
32,775
Detailed remuneration disclosures are provided in the remuneration report on pages 34 to 37.
Beston Global Food Company Limited
30 June 2016
74
74
2 0 1 6 A N N U A L R E P O R T
(c) Transactions with other related parties
The following transactions occurred with related parties:
Sales of goods and services
Management fees from investee companies
Remuneration received for directors services
Interest income from investee companies
Purchases of goods and services
Purchases of various good and services from related parties
Management fees to the Investment Manager
Reimbursement of costs associated with business formation (ex GST)
(i) Transactions with other related parties
The Group entered into the following transactions with related parties:
Related party transactions
30 June
2016
$
30 June
2015
$
1,140,000
136,562
778,662
-
-
-
(4,260,089)
(1,595,980)
(640,000)
-
(265,628)
-
•
•
•
•
•
•
•
Provision of management services to Neptune Bio-Innovations Pty Ltd to assist in commercialisation processes
Provision of additional directors services to all associates and investee entities
Provision of funding via convertible notes and charging of interest on balances owing to all associates
Purchases of products from associates and investee entities for export and on-sale to third parties
Purchases of products from associates and investees entities for sale via the Beston Marketplace e-commerce
platform
Procurement of management services from the Investment Manager
Payment to BPAM for costs incurred pre-IPO in forming the Group
(d) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Outstanding balances receivable/(payable)
Current receivables
Current payables
(e) Loans to/from related parties
Loans to other related parties
Beginning of the year
Loans received
Loans advanced
End of year
30 June
2016
$
30 June
2015
$
1,705,312
(1,054,389)
-
-
30 June
2016
$
30 June
2015
$
18,003
-
14,500
32,503
-
18,003
-
18,003
There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has
been recognised in respect of impaired receivables due from related parties.
Beston Global Food Company Limited
30 June 2016
75
75
B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Related party transactions
(f) Terms and conditions
(i) Transactions with the Investment Manager
The Company outsources various investment management and administrative functions to an Investment Manager,
including key management personnel services. Dr Sexton controls and Mr Gerlach is a director of the Investment
Manager, Beston Pacific Asset Management Pty Ltd ("BPAM"). The Investment Manager receives a fee for its
management of the Group. This fee is equal to 1.20% per annum (exclusive of GST) of the gross portfolio value of the
assets of the Group.
The Investment Manager will also be entitled to receive a performance fee for outperformance by BFC. Outperformance
is calculated as the total shareholder return against a benchmark index, namely the ASX All Ordinaries Accumulation
Index. As agreed between BFC and BPAM, the commencement date of the performance period was amended to 1
January 2016, with an initial net asset value agreed between the parties of $0.3468 per share.
The key metrics of the fee are summarised below:
Key metrics
Beston Global Food Company Limited
ASX All Ordinaries Accumulation Index
1 January 2016
$0.3468
47,788.21
30 June 2016
$0.4100
48,530.36
Performance
TSR 18.22%
1.53%
The performance fee is calculated as follows:
A. Market capitalisation
B. Outperformance factor (BFC TSR% - ASX:XAOAI TSR%)
C. Agreed performance fee %
Total performance fee for the 6 months to 30 June 2016:
A x B x C
$148,928,831
16.69%
17.50%
$4,351,016
The directors, in agreement with BPAM, have agreed to waive the performance fee for the period to 30 June 2016 and
as a result, no expense has been recognised for the year ended 30 June 2016.
(ii) Transactions with other related parties
Grape Ensembles Co Pty Ltd is beneficially controlled by Dr Sexton. Grape Ensembles Co Pty Ltd holds an 80% interest
in a company that owns the BRANDLOK intellectual property associated with brand protection seals which has been
developed as an anti-counterfeiting device. The Company has an option to purchase Grape Ensembles Co Pty Ltd's
80% shareholding in Brandlock Protection Solutions Pty Ltd ("BBPS"). The purchase price for BBPS has been agreed at
the greater of 10 times the net profit after tax of BBPS; the then market value of the 80% holding of BBPS; and
$2,000,000. These rights are exercisable by the independent directors of Beston Global Food Company Limited and
include tag along and drag along rights to enable the Company to acquire 100% of BBPS.
Main & Cherry is controlled by a family member of Dr Sexton, who has no pecuniary interest in Main & Cherry. During
the year, the Group purchased wine stock from Main & Cherry for export into Asia. The purchases were made based on
normal commercial terms and conditions.
Sales of goods to other associates and related parties during the year were based on the price lists in force and terms
that would be available to third parties. Purchases of goods from associates and other related parties during the year
were also based on the price lists in force and terms that would be available to third parties.
All amounts owing to and from associates and related parties are settled on normal commercial terms and time frames.
No interest was charged on balances owing to or from associates and related parties.
Management fees from investee companies are invoiced at appropriate milestones as agreed with them beforehand, and
on normal commercial terms.
Remuneration received for directors services is charged every six months in arrears.
Interest income from investee companies is invoiced monthly in arrears, in line with their respective convertible note
agreements.
No guarantees were provided for any related parties.
Beston Global Food Company Limited
30 June 2016
76
76
2 0 1 6 A N N U A L R E P O R T
17 Share-based payments
(a) Employee Option Plan
In July 2015, 16,047,776 Founders' Rights were granted to senior executives under a Founders' Performance Rights
Plan. The Plan gives founders the right to acquire the number of shares necessary for their overall shareholding to
equate to 5% of the total shares on issue post IPO. The fair value of the rights granted during the year ended 30 June
2016 was estimated on the date the rights were issued being the value of shares at the time of the IPO, $0.35.
For the year ended 30 June 2016, the Group has recognised a share-based payment reserve of $5,616,721 in relation to
the rights. The share-based payments expense in the consolidated statement of comprehensive income is $1,198,780
representing the portion of the share-based payment that relates to the pre IPO shares on issue. The remaining
share-based payment has been recognised in contributed equity as an equity raising cost.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as follows:
Founders' Rights
18 Remuneration of auditors
30 June
2016
$'000
30 June
2015
$'000
1,199
-
During the year the following fees were paid or payable for services provided by the auditor of the entity and its related
practices:
Ernst & Young Australia
Audit and other assurance services
Audit and review of financial statements
Taxation services
Tax compliance services
Other services
ASX IPO support
Total remuneration of Ernst & Young Australia
2016
$
2015
$
94,738
40,000
65,896
50,000
-
353,000
160,634
443,000
Beston Global Food Company Limited
30 June 2016
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B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
19 Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operations
Total basic earnings per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operations
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
30 June
2016
Cents
(0.54)
-
(0.54)
30 June
2016
Cents
(0.54)
-
(0.54)
30 June
2015
Cents
(5.38)
-
(5.38)
30 June
2015
Cents
(5.38)
-
(5.38)
The Founders' Rights per note 17(a) have not been included in the diluted earnings per share calculation as they are
anti-dilutive for the period presented. The shares issued outlined in note 15 have not been included in the earnings per
share calculation as they were issued post balance date.
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the Company used in calculating basic
earnings per share:
From continuing operations
From discontinued operations
Diluted earnings per share
Loss from continuing operations attributable to the ordinary equity holders of the
Company
Used in calculating basic earnings per share
Used in calculating diluted earnings per share
(d) Weighted average number of shares used as the denominator
30 June
2016
$'000
30 June
2015
$'000
(1,716)
-
(1,716)
(1,103)
-
(1,103)
(1,716)
(1,716)
(1,103)
(1,103)
2016
Number
2015
Number
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
317,839,878
20,503,220
Beston Global Food Company Limited
30 June 2016
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20 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Share-based payments
Accumulated losses
Total equity
Profit or loss for the year
Total comprehensive income
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015.
30 June
2016
$'000
30 June
2015
$'000
29,745
88,337
118,082
2,380
1
2,381
16,635
5,598
22,233
1,758
-
1,758
115,701
20,475
113,472
21,471
5,617
(3,388)
-
(996)
115,701
20,475
(2,392)
(2,392)
(996)
(996)
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30 June 2016
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21 Summary of significant accounting policies
This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial
statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The
financial statements are for the Group consisting of Beston Global Food Company Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Beston Global
Food Company Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Beston Global Food Company Limited Group also comply with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost basis.
(iii) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for first time in their annual reporting period
commencing 1 July 2015:
•
•
Amendments made to Australian Accounting Standards - Conceptual Framework, Materiality and Financial
Instruments
Amendments to Australian Accounting Standards arising from the withdrawal of AASB 1031 Materiality
There has been no material impact to the Group's results or disclosures as a result of these new standards.
(iv) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
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2 0 1 6 A N N U A L R E P O R T
(a) Basis of preparation
Summary of significant accounting policies
Title of
standard
AASB 9
Financial
Instruments
AASB 15
Revenue
from
Contracts
with
Customers
AASB 16
Leases
Nature of change
AASB 9 addresses the
classification,
measurement and
derecognition of financial
assets and financial
liabilities and introduces
new rules for hedge
accounting. In December
2014, the AASB made
further changes to the
classification and
measurement rules and
also introduced a new
impairment model. These
latest amendments now
complete the new
financial instruments
standard.
The AASB has issued a
new standard for the
recognition of revenue.
This will replace AASB
118 which covers
contracts for goods and
services and AASB 111
which covers
construction contracts.
The new standard is
based on the principle
that revenue is
recognised when control
of a good or service
transfers to a customer -
so the notion of control
replaces the existing
notion of risks and
rewards.
AASB 16 was issued in
February 2016. It will
result in almost all leases
being recognised on the
balance sheet, as the
distinction between
operating and finance
leases is removed. Under
the new standard, an
asset (the right to use the
leased item) and a
financial liability to pay
rentals are recognised.
The only exceptions are
short-term and low-value
leases. The accounting
for lessors will not
significantly change.
Mandatory application
date/ Date of adoption
by Group
Must be applied for
financial years
commencing on or after 1
January 2018.
Expected date of
adoption by the Group: 1
July 2018.
Impact
While the Group has yet to undertake a
detailed assessment of the impact of AASB 9,
the Group does not expect there to be a
material impact for the Group's financial assets
and liabilities.
• Classification and measurement of the
Group’s financial assets and liabilities is
expected to remain the same under the new
standard.
• At present there are no hedge relationships
in place.
• The new impairment model is an expected
credit loss model which may result in the
earlier recognition of credit losses.
At this stage, the Group is not able to estimate
the impact of the new rules on the Group’s
financial statements. The Group will make
more detailed assessments of the impact over
the next twelve months.
Mandatory for financial
years commencing on or
after 1 January 2018.
At this stage, the Group
does not intend to adopt
the standard before its
effective date.
Mandatory for financial
years commencing on or
after 1 January 2019. At
this stage, the Group
does not intend to adopt
the standard before its
effective date.
The standard will affect primarily the
accounting for the Group’s operating leases.
As at the reporting date, the Group has
operating lease commitments of $130,000.
However, the Group has not yet determined to
what extent these commitments will result in
the recognition of an asset and a liability for
future payments and how this will affect the
Group’s profit and classification of cash flows.
Some of the commitments may be covered by
the exception for short-term and low-value
leases and some commitments may relate to
arrangements that will not qualify as leases
under AASB 16.
Beston Global Food Company Limited
30 June 2016
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Summary of significant accounting policies
(a) Basis of preparation
There are no other standards that are not yet effective and that would be expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
(e) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies.
(b) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Beston Global Food
Company Limited ("Company" or "parent entity") as at 30 June 2016 and the results of all subsidiaries for the year then
ended. Beston Global Food Company Limited and its subsidiaries together are referred to in this financial report as the
Group or the consolidated entity.
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 21(i)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally
the case where the Group holds of between 20% and 50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting (see below (iii)), after initially being recognised at cost.
(iii) Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to
recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's
share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received
or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of
the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in
note 21(j).
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker.
The Board of Beston Global Food Company Limited has appointed an executive management committee which
assesses the financial performance and position of the Group, and makes strategic decisions. The executive
management committee, which has been identified as being the chief operating decision maker, consists of the Chief
Executive Officer and the Chief Financial Officer.
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30 June 2016
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Summary of significant accounting policies
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are
presented in Australian dollars, which is Beston Global Food Company Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign exchange gains and losses are presented in the consolidated income statement on a net basis within other
income or other expenses.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the date of initial transactions.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities
such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or
loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets
are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet
income and expenses for each consolidated income statement and consolidated statement of comprehensive
income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates
of the transactions), and
all resulting exchange differences are recognised in other comprehensive income.
When a foreign operation is sold, the associated exchange differences are reclassified to profit or loss, as part of the
gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities
of the foreign operation and translated at the closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described
below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
The specific accounting policies for the Group’s main types of revenue are explained in note 2. Revenue for interest
income is recognised on the following basis:
Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the
carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective
interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired
loans is recognised using the original effective interest rate.
Beston Global Food Company Limited
30 June 2016
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Summary of significant accounting policies
(f) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match
them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as
deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets.
(g) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
The deferred tax liabilities in relation to investment property that is measured at fair value is determined assuming the
property will be recovered entirely through sale.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the company 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Beston Global Food Company Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and
liabilities of these entities are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(h) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the
leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net
of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between
the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and
equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the
lease term.
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30 June 2016
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2 0 1 6 A N N U A L R E P O R T
Summary of significant accounting policies
(h) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases (note 14). Payments made under operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over
the lease term. The respective leased assets are included in the consolidated balance sheet based on their nature.
(i) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the
following:
•
•
•
•
•
fair values of the assets transferred
liabilities incurred to the former owners of the acquired business
equity interests issued by the Group
fair value of any asset or liability resulting from a contingent consideration arrangement, and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling
interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the
•
•
•
consideration transferred,
amount of any non-controlling interest in the acquired entity, and
acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair
value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a
bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the
rate at which a similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
(j)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating
units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
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B E S T O N G L O B A L F O O D C O M P A N Y L I M I T E D
Summary of significant accounting policies
(k) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the
consolidated balance sheet.
(l) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. See note 5(b) for further information about the Group’s accounting for
trade receivables and note 9(b) for a description of the Group's impairment policies.
(m) Inventories
Raw materials and stores, work in progress and finished goods
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value.
Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity.
Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory
are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
(n) Investments and other financial assets
(i) Classification
The Group classifies its financial assets in the following categories:
•
•
•
•
financial assets at fair value through profit or loss,
loans and receivables,
held-to-maturity investments, and
available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates
this designation at the end of each reporting period.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in
this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for
trading unless they are designated as hedges. Assets in this category are classified as current assets if they are
expected to be settled within 12 months; otherwise they are classified as non-current.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after the
reporting period which are classified as non-current assets. Loans and receivables are included in trade and other
receivables and receivables in the balance sheet.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the Group's management has the positive intention and ability to hold to maturity. If the Group were to sell other than
an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as
available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities
less than 12 months from the end of the reporting period, which are classified as current assets.
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2 0 1 6 A N N U A L R E P O R T
Summary of significant accounting policies
(n) Investments and other financial assets
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets
unless the investment matures or management intends to dispose of the investment within 12 months of the end of the
reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or
determinable payments and management intends to hold them for the medium to long-term.
(ii) Reclassification
The Group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the
financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and
receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a
single event that is unusual and highly unlikely to recur in the near term. In addition, the Group may choose to reclassify
financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale
categories if the Group has the intention and ability to hold these financial assets for the foreseeable future or until
maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised
cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently
made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories
are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates
prospectively.
(iii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the Group
commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the Group has transferred substantially all the risks and
rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit or loss as gains and losses from investment securities.
(iv) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective
interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value are recognised as follows:
•
•
•
for ‘financial assets at fair value through profit or loss’ - in profit or loss within other income or other expenses
for available for sale financial assets that are monetary securities denominated in a foreign currency - translation
differences related to changes in the amortised cost of the security are recognised in profit or loss and other changes
in the carrying amount are recognised in other comprehensive income
for other monetary and non-monetary securities classified as available for sale - in other comprehensive income.
Dividends on financial assets at fair value through profit or loss and available-for-sale equity instruments are recognised
in profit or loss as part of revenue from continuing operations when the Group’s right to receive payments is established
Interest income from financial assets at fair value through profit or loss is included in the net gains/(losses). Interest on
available-for-sale securities calculated using the effective interest method is recognised in the income statement as part
of revenue from continuing operations.
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Summary of significant accounting policies
(n) Investments and other financial assets
Impairment
(v)
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments
classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is
considered an indicator that the assets are impaired.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the
amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the
reversal of the previously recognised impairment loss is recognised in profit or loss.
Impairment testing of trade receivables is described in note 9(b).
Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in profit or loss - is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a
subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase
can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment
loss is reversed through profit or loss.
(o) Property, plant and equipment
The Group's accounting policy for land and buildings is explained in note 6(c). All other property, plant and equipment is
stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow
hedges of foreign currency purchases of property, plant and equipment.
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. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
The depreciation methods and periods used by the Group are disclosed in note 6(c).
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount (note 21(j)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit
or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of
those assets to retained earnings.
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Summary of significant accounting policies
(p) Intangible assets
(i) Goodwill
Goodwill is measured as described in note 21(i). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in
which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for
internal management purposes, being the operating segments (note 1).
(ii) Trademarks and licences
Separately acquired trademarks and licences are shown at historical cost. Trademarks, licences and customer contracts
acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and
are subsequently carried at cost less accumulated amortisation and impairment losses.
(iii) Software (e-commerce platform and other applications)
Costs associated with maintaining software programs are recognised as an expense as incurred. Development costs
that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group
are recognised as intangible assets when the following criteria are met:
it is technically feasible to complete the software so that it will be available for use
•
• management intends to complete the software and use or sell it
•
•
•
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use or sell the software are
available, and
the expenditure attributable to the software during its development can be reliably measured.
•
Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion
of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is
ready for use.
(iv) Amortisation methods and periods
Refer to note 6(f) for details about amortisation methods and periods used by the Group for intangible assets.
(q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are
recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
(r) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations
in the balance sheet.
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Summary of significant accounting policies
(r) Employee benefits
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. They are therefore measured as the present value
of expected future payments to be made in respect of services provided by employees up to the end of the reporting
period using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market
yields at the end of the reporting period of corporate bonds with terms and currencies that match, as closely as possible,
the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual
settlement is expected to occur.
(iii) Share-based payments
Employees and directors of the Group may receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model. The cost is recognised, together with a corresponding increase in other capital reserves in
equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense.
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that
will ultimately vest. The consolidated statement of comprehensive income expense or credit for a period represents the
movement in cumulative expense recognised as at the beginning of the period and is recognised in employee benefits
expense. No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for
which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether
or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are
satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had that terms
not been modified, if the original terms of the award are not met. An additional expense is recognised for any
modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification. The dilutive effect of outstanding options is reflected as additional
share dilution in the computation of diluted earnings per share.
(s) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
(t) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(u) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
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Summary of significant accounting policies
(v) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
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 taxation authority is included with other receivables or payables in the consolidated
balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(w) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in
the financial statements. Amounts in the financial statements have been rounded off in accordance with that instrument
to the nearest thousand dollars, or in certain cases, the nearest dollar.
(x) Parent entity financial information
The financial information for the parent entity, Beston Global Food Company Limited, disclosed in note 20 has been
prepared on the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
(i)
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Beston Global Food Company Limited. Dividends received from associates are recognised in the parent entity's profit or
loss when its right to receive the dividend is established.
(ii) Tax consolidation legislation
Beston Global Food Company Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation.
Refer to note 5(e)(iii) for further details.
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DIRECTORS’ DECLARATION
Directors' declaration
Directors' declaration
In the directors' opinion:
In the directors' opinion:
(a)
(a)
the financial statements and notes set out on pages 41 to 91 are in accordance with the Corporations Act 2001,
including:
the financial statements and notes set out on pages 41 to 91 are in accordance with the Corporations Act 2001,
including:
(i)
(i)
(ii)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its
performance for the year ended on that date, and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its
performance for the year ended on that date, and
(b)
(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.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
Note 21(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Note 21(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
The directors have been given the declarations by the Investment Manager, Chief Executive Officer and Chief Financial
Officer required by section 295A of the Corporations Act 2001.
The directors have been given the declarations by the Investment Manager, Chief Executive Officer and Chief Financial
Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of directors.
This declaration is made in accordance with a resolution of directors.
R Sexton
R Sexton
Director
Director
Adelaide
Adelaide
30 September 2016
30 September 2016
Beston Global Food Company Limited
30 June 2016
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Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Independent auditor's report to the members of Beston Global Food
Company Limited
Report on the financial report
We have audited the accompanying financial report of Beston Global Food Company Limited, which
comprises the consolidated balance sheet as at 30 June 2016, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
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 controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 21, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report. We confirm that the Auditor’s Independence Declaration
would be in the same terms if given to the directors as at the time of this auditor’s report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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2
Opinion
In our opinion:
a.
the financial report of Beston Global Food Company Limited is in accordance with the
Corporations Act 2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 21.
Report on the remuneration report
We have audited the Remuneration Report included in pages 34 to 37 of the directors' report for the year
ended 30 June 2016. 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.
Opinion
In our opinion, the Remuneration Report of Beston Global Food Company for the year ended 30 June
2016, complies with section 300A of the Corporations Act 2001.
Ernst & Young
Mark Phelps
Partner
Adelaide
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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ASX ADDITIONAL INFORMATION
ASX additional information
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 14 September 2016.
A. Ordinary share capital
427,292,163 fully paid ordinary shares are held by 5,341 individual shareholders.
All issued ordinary shares carry one vote per share.
There are no restricted securities or securities subject to voluntary escrow.
There are no current on-market buy-backs.
B. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Investors
Shares
Percentage of
issued shares
155
1,237
1,141
2,568
240
5,341
58,828
3,908,161
9,524,373
86,183,321
327,617,480
427,292,163
.01%
.92%
2.23%
20.17%
76.67%
100.00%
The number of shareholders holding less than a marketable parcel of 1,250 shares ($0.400) is 233 and they hold
147,563 shares.
C. Substantial holders
Substantial holders in the company are set out below:
Name
Australia Aulong Auniu Wang Food Holdings Pty Ltd
Kunteng Pte Ltd
I.G. Investment Management Ltd
Allianz SE
Ordinary shares
Number held
Percentage of
issued shares
66,894,345
64,051,111
46,749,513
21,955,164
199,650,133
15.66%
14.99%
10.94%
5.14%
46.73%
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D. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
ASX additional information
Name
Kunteng Pte Ltd
Australia Aulong Auniu Wang Food Holdings Pty Ltd
BNP Paribas Noms Pty Ltd
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
First Boom Investments Limited
First Boom Investments Limited
BNP Paribas Noms Pty Ltd
Blue Ridge Holdings Pty Ltd
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Hishenk Pty Ltd
Mr Hui Song
Pershing Australia Nominees Pty Ltd
HWR Nominees Pty Ltd
Mr Ian Gregory Griffiths & Mrs Susan Jane Griffiths
Aboriginal Contracting WA Pty Ltd
Beacon Light (SA) Pty Ltd
Marich Nominees Pty Ltd
E. Business objectives and use of cash
Number
held
64,051,111
54,449,834
36,839,158
35,184,199
31,023,707
14,147,807
11,428,572
8,333,334
6,561,740
4,206,974
3,481,462
2,959,569
2,200,000
1,181,194
1,080,400
1,000,000
838,430
754,914
714,286
704,000
Percentage
14.99%
12.74%
8.62%
8.23%
7.26%
3.31%
2.67%
1.95%
1.54%
.98%
.81%
.69%
.51%
.28%
.25%
.23%
.20%
.18%
.17%
.16%
Beston Global Food Company Limited has used cash and cash equivalents held at the timing of listing in a way
consistent with its stated business objectives.
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