2017
ANNUAL REPORT
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT CORP ORAT E D IR ECTORY
BESTON GLOBAL FOOD COMPANY LIMITED
ACN 603 023 383
Annual Report for the period ended 30 June 2017
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
Level 9, 420 King William St, Adelaide, South Australia 5000
+61 (0)8 8470 6500
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
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CON T ENT S
Chairman’s Review
Chief Executive’s Review
Executive Summary
Review of Operations
Divisional Operations
Milk Supply
Outlook
Corporate Governance
Financial Report
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30
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33
ASX Additional Information
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CH AI RMAN’S REVI EW
RESULTS ACHIEVED
The statutory NPAT loss result
(of $7.7 million) reported at
30 June 2017, whilst disappointing,
masks the very real achievements
which have been made in the
Company over this past financial
year. It has been a year earmarked
by a 49% overall growth in
revenues (reflecting positive
sales growth both in Australia
and the ASEAN region), the further
build-out of our dairy division,
the commercialisation of our
OZIRIS and anti-counterfeiting
and traceability technology
platform and investment in
our infrastructure and people.
The first half of the 2016-17
financial year was negatively
impacted by two key events:
a lower than expected level
of milk production on our
own farms (as well as on our
contracted dairy farms) because
of the exceptionally wet winter
and lower than expected sales
in China.
Given the loss incurred in the
first half of the financial year,
the Board of Directors was
faced with a choice: either to
pull back on all capital
expenditures, infrastructure
development, brand and market
building and other growth
initiatives in order to achieve
a short-term profit and pay
a dividend or continue to stay
the course to build out the
company and increase
long-term shareholder value.
The Board and Management
resolved to stay the course in
order to achieve the “build-out”
objectives of the Company as
quickly as possible and be in
a position to take advantage
of the opportunities emerging
from the transformation of the
dairy industry supply chain in
Australia sooner rather than later.
The Board formed the view that
this decision, even at the risk
of incurring an overall loss for
the year, and therefore not being
in a position to pay a dividend
to shareholders (which was in
fact the end result) would better
serve the interest of shareholders
in the long term.
The Board, and management,
considered that the work which
had been done to achieve sales
growth would better position the
Company to deliver both the
short-term objectives of profits
and dividends and the longer-term
objectives of value creation.
And, until late in the financial
year, it seemed apparent that
both objectives would be
achieved, that is:
In September this year, Beston
Global Food Company Limited
(BFC) celebrated its second year
since listing on the Australian
Securities Exchange. The prime
objective of BFC is to be a
leading manufacturer, exporter
and distributor of premium
safe and healthy Australian
food and beverage products
for supply to the world’s
growing consumer market.
Since listing, the Company has
evolved from an Australian based
agri-business with a portfolio of
investments in the dairy, seafood,
meat and health and nutrition
industries to a globally focussed
food business offering a diversity
of healthy, nutritious and safe food
and beverage products to markets
in Asia and China in particular, as
well as to other parts of the world.
Substantial progress has been
made over the past two years
across a broad range of areas
in the Company to position the
Company with the momentum
for sustainable earnings growth,
going forward.
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• Group Sales revenues increased
by 49%
• Sales revenues in Asia increased
by over 200%
Notwithstanding the enhanced
performance in the second half,
some delays in the closing of
several major strategic supply
contracts (which remain in
negotiation) and losses incurred in
our investee companies impacted
on our revenue momentum to the
point that the growth in sales and
margins was not sufficient to
offset the expenditures incurred
in association with our various
growth initiatives, including the
purchase of additional milk (via
the signing of contracts with
independent dairy farmers),
investment in brands, market
development activities and
other non-capitalised factory
refurbishment expenditures
associated with the installation
of the new mozzarella
production facility.
When this became apparent,
the Board issued a “Company
Update” to the ASX on 19 June
2017 in order to keep
shareholders fully informed.
The decision to “stay the course”
has produced a number of
important outcomes which
can be expected to translate
into increased earnings and
enhanced shareholder wealth
as we progress forward.
Our commitment, for example,
to producing only the best
possible quality cheese from our
farms and factories has produced
24 prestigious awards, including
the Christian Hansen Cup for the
“Best Cheddar in Australia” and
opened the doors to immediate
new sales opportunities, such as
being accepted into the product
portfolio for Metcash stores across
Australia. Our commitment to
building our milk supply to
90 million litres as at 30 June 2017,
as another example, has incurred
a short-term cash cost in this
financial year which will flow
through to revenues and margins
in FY2017-18 (milk purchased from
contract dairy farmers is paid for
on 30 days, processed into cheese
and matured, and the cost of the
milk outlays typically recouped
from market sales after 9 months,
consistent with industry norms).
The inventories of cheese at our
dairy factories resulting from the
increase milk purchases amounted
to around $7 million as at 30 June
2017, all of which has been
financed from operational cash
flows without accessing debt.
TRANSFORMATION
OF SUPPLY CHAIN
The dairy industry in Australia
has been undergoing significant
upheaval in recent years, triggered
by the decisions taken by several
of the large commodities based
producers to reduce farm gate
prices to dairy farmers from
mid 2016. The fallout from
these decisions is transforming
the supply chain with many
dairy farmers severing their
loyalty to long-term milk buyers
and owner cooperatives.
The timing of this upheaval
has worked in favour of BFC
as we have sought to ramp up
the throughput of milk at our
dairy factories at Murray Bridge
and Jervois. Having acquired
the former business of United
Dairy Power (UDP) at a price
significantly below replacement
value in 2015, the future success
of this business, and its underlying
performance, was always going
to be directly related to the
amount of milk which we
are able to process at the plant.
Against the background of the
previous ownership of UDP
and the upheavals occurring
elsewhere in the dairy industry,
it became a challenge to bring
milk to our factories over and
above the milk supplied by our
own farms.
Through a number of initiatives,
as explained in this Annual Report,
and by having a conservatively
structured balance sheet, we have
been able to gradually build the
milk supply to the Beston Pure
Foods factory at Murray Bridge
over the past twelve months to
90 million litres on an annualised
basis (not including any milk
volumes associated with toll
manufacturing). Commitments
in place with independent dairy
farmers for the supply of milk in
conjunction with the start-up of
our new Mozzarella plant will take
the total volume of milk to at least
130 million litres per annum by the
second half of 2017-18.
FOOD SAFETY AND
BESTON TECHNOLOGIES
There is an increasing shift by
consumers around the world to
have greater understanding about
the composition of the foods they
are looking to purchase and eat.
A related trend is the increasing
concern of consumers about food
safety, counterfeiting and ethical
considerations in the manufacture
of food. Much of these concerns
about food integrity and food
safety have been driven by
social media.
After numerous food scandals in
China in recent years, consumers
in China for example are now very
aware of the need to be able to
verify the origin and authenticity
of the foods they are about to put
in their mouths. A recent survey
found that 84% of Chinese
consumers said that it was
“extremely or very important to
know where food comes from”
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(“Food Forward” Trends Report,
Weber Shandwick 2014). The
same survey found similar results
in other countries in Asia with
90% of consumers in Korea and
82% of those in Singapore
expressing concern about the
sourcing and integrity of the
foods they eat.
A recent report prepared by the
CSIRO (“Food and Agribusiness:
A road map for unlocking value-
adding growth opportunities for
Australia”, July 2017) notes that
food fraud costs the global food
industry an estimated USD 40
billion each year with the United
States (29.8%), China (13.6%) and
India (12.6%) being the largest
sources of fraudulent production.
As a consequence of rising
product fraud, the report
observes that overseas consumers
are driving a demand for increased
traceability and authenticated
provenance claims:
“Trust is a critical factor for export
markets. Traceability systems
provide the opportunity for
Australian agribusiness… to
effectively leverage the nations
clean and green reputation…”.
(page 36).
The solution to providing
assurance of provenance and
transparency around product
ingredients is what we have
achieved with our BFC OZIRIS
technology. A fundamental
component of our Beston Global
Foods business model, from the
outset, has been to provide the
consumers of our products with
the capacity to both identify and
trace the source of the ingredients
in our products and provide the
consumer with assurance around
the authenticity and quality of the
product (in other words, empower
consumers with the ability to
ensure that the product they are
about to purchase is nutritious,
healthy, safe and true to label).
With the value of the global
counterfeit market in 2015 at
USD $1.7 trillion and expected to
reach USD $2.3 trillion by 2022,
the importance of traceability
and anti-counterfeit technology
is expected to become more
prevalent for global companies
producing food and beverages,
or indeed any other consumer
product. Our Beston Global Foods
OZIRIS technology platform
has been positioned to provide
security for consumers and
also offer “big data” analytics to
businesses on their customers.
Over the past twelve months,
we have further developed the
technology to the point where
BFC now holds 11 International
Patents or Patents Pending (up
from 3 Patents or Patents Pending
at 30 June 2016) in our wholly
owned subsidiary company,
Beston Technologies Pty Ltd.
The Board has had the intellectual
property embodied in this
technology independently valued
by Deloittes Financial Advisory
and is now exploring various
options to best enable the
Company, and our Shareholders,
to capitalise on the value of the
intellectual property that has
been developed in Beston
Technologies Pty Ltd.
CHINA
Despite some setbacks along the
way in the development of our
revenue base in China since listing
(which have been exacerbated
by instances of non-performance
against contract, as previously
reported), the Company has
“stayed the course” with its
objectives in China, as part of its
long-term view on this important,
and rapidly growing market.
The Chinese economy is rapidly
transitioning from being
investment-driven to being
consumer-driven as part of the
Central Government’s long-term
growth strategy.
The refocussing to a consumption
based economy has taken
household consumption spending
in China to around 60% of GDP
(similar to Japan) and is being
reflected in increased household
spending on imported products,
particularly food. With more
money in their pockets, Chinese
consumers are now demanding
more protein. Chinese seafood
consumption per capita for
example, has tripled over recent
years and now demands around
60% of global aquaculture output.
China has also become the worlds’
top meat eating nation
(accounting for around 31% of
global meat consumption in 2014).
The consumption of dairy
products has also increased
dramatically in recent years and
China is now the largest consumer
of bottled water in the world.
In short, we are seeing one of
the strongest periods of growth in
demand for imported agricultural
products into China since the end
of the cultural revolution in 1976.
Australia is half way through
the four year transition period
of the China Australia Free Trade
Agreement (ChAFTA) and the
experience of New Zealand (which
has completed its transition to
a zero tariff regime in China for
most dairy products) suggests
that the rewards from being
properly positioned in the market,
post transition, are considerable.
BFC implemented its “direct-to-
market” model in China in FY2016
and during FY2017, has gradually
transitioned its customer base
by building relationships with
large Chinese retailers (such as
Walmart China) to create long
term, sustainable orders that can
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CLOSING REMARKS
On behalf of the Board, I would
like to acknowledge and thank
the management and staff for
their efforts and achievements
during the year. Our achievements
would not have been possible
without the enormous hard work
and dedication of our people.
To our shareholders, we thank
you for your support over this
past year and look forward to
your ongoing support as we
continue to grow and enhance
the value of your Company.
The interests of our shareholders
has, and always will, remain our
priority and take precedence
(as shown by our various
actions to date) over the
interest of management.
Finally, and at a personal level,
I would like to pay tribute to the
Board of Directors. I am very
fortunate to have a very talented
group of individuals as fellow
Directors who have quite different,
but complementary skill sets.
The Company has experienced
a very busy year, at all levels,
and I thank the Board for their
hard work, personal contributions
and support during this time.
deliver consistency of
earnings and higher margins.
BFC is now supplying its cheese
and water products into Walmart
China and other supermarket
chains and launched its first
“Beston Food Pod” in Provincial
Food Stores in Shanghai in
September. The strategy is to
provide direct-to-customer
brand and product awareness
and position Beston Global Food
products as premium quality, safe,
healthy and authentic food and
beverage products in the minds
of Chinese consumers.
LOOKING FORWARD
The past two years since listing
has been a fast-paced journey
in our quest to become a leading
Australian food producer with
a focus on rapidly growing export
markets. BFC has shown itself
to be light on its feet and able
to adapt quickly to the changing
dynamics in these markets,
through an in-house culture
of agility and innovation.
What we have done, over these
past two years, is to put in place
the framework for a growing and
sustainable business that creates
long term value for our
shareholders. The framework
embodies a number of different
business “cells” that are expected
to deliver compounding revenue
and profit returns over time.
In the short-term, this revenue
and profit growth will come from
our Dairy Division. Over this past
twelve months, we have built trust
with the dairy farming community
through various initiatives and
increased the milk supply to
our factories from 20 million litres
to 90 million litres per annum
currently. The Dairy Division was
always going to be a “throughput
game” and we are now well on
our way to realising the potential
from this 300 million litre capacity
plant. Having bought these assets
at prices substantially below
market, the key to realising
near-term value from the assets
has been all about building milk
throughput and sales, which we
are now achieving through our
efforts on both the supply side
(winning contract dairy farmers)
and the demand side (winning
National Dairy Industry Awards
to establish the premium quality
reputation of the outputs).
We believe that we have
established a competitive
advantage for our Dairy Division
over 2016-17 financial year via
our mid-size positioning, brand
names, industry awards and
distribution channels.
During the 2017-18 financial year
we will continue to progress
a number of growth initiatives
as part of placing the Company
on a stronger trajectory for
sustained earning growth.
These include the securing
of further milk supply for the
Dairy Division, evaluating the
establishment of a Dairy Farm
Real Estate Trust (DF-REIT) with an
estimated capital of $100 million
to enable the acquisition of
additional farms and exploring
the potential for realising a part
of the value developed in the
OZIRIS traceability, anti-counterfeit
and brand protection platform
held in BFC Technologies.
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CH IE F EXECUT IVE ’S REVIEW
annualised 90 million litres
excluding toll manufacturing,
an increase of 300% on the prior
year) and the move into a greater
number of SKU’s with higher
value products.
In less than two years since
listing, we have developed, and
consolidated, our business around
five core operating divisions:
Dairy, Meat and Seafood, Health
and Nutrition, International
and Technology. The operating
result of each of these divisions
is discussed below.
DAIRY
The Dairy Division delivered
a strong sales growth of over
150%, which was also reflected
in a $1.4m profit improvement
from the prior year. The growth
in sales was bolstered by
investment in the development
and launch of the Edwards
Crossing Cheese Brand with
a strong range of ‘every day
premium’ retail products launched
into Independent Grocery retailers
across Australia together with the
launch of the Beston Pure Foods
branded food service and
ingredient range.
Our focus on producing the
highest standards of quality in
our dairy products under our new
“Edwards Crossing” brand recently
resulted in the Company winning
a series of awards with the most
prestigious being the Christian
Hansen Cup for the ‘Best Cheddar
in Australia’ at the National Dairy
Industry Association of Australia
Awards along with an additional
18 gold and silver medals.
The high quality of our Cheddar
was also recognised at the
International Cheese awards
in Nantwich (UK) by being
awarded the ‘Best Australian
Cheese- Cheddar (mild).
We completed the acquisition
of the remaining assets and brands
of Australian Provincial Cheese
(APC) during the year and
relocated the production assets
of APC from Victoria to our
Murray Bridge facility. Through
this relocation, we have been able
to increase the production of our
“Mable’s” and “Grange Peak” range
of cream cheeses by 100%. Sales
growth of these cheeses increased
in the last quarter following the
launch of the Mable’s product
range into Independent Grocers
in Australia, new retailer contracts
with Lotus Shanghai in China,
and growth in ASEAN distribution
channels mainly in Thailand,
Singapore and Malaysia.
I am pleased to report on the
operational performance of our
Beston Global Food Company
for the financial year 2016-17.
The Company experienced
pleasing results in terms of
revenue growth, delivering
Group Sales (excluding investee
companies) of $24 million,
up by 49% on the prior year.
The bottom line performance
of the Company produced a
statutory net loss after tax of
$7.7 million which was significantly
down on the prior year (it should
be noted that the prior year
represented 10 months of trading
as a public company, after listing
on the ASX on 28 August, 2015.)
The principal reasons for the
statutory loss result relate to
the significant expenditures
incurred across all divisions
of the Company as a consequence
of the on-going investments
which were made in infrastructure,
new brands and geographic sales
location, the securing of additional
milk supply (to the current
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The focus of the new
infrastructure investment made
in the Dairy Division during
the year has been mainly in
three areas:
• Preparatory construction
work for the installation of
our new $26m state-of-the-art
Mozzarella Plant at Jervois.
• Recommissioning of the
hard cheese line to produce
parmesan, tilsit and raclette
premium varieties.
• Various productivity
improvement on our farms
to increase operational
efficiencies and further
enhance the quality of the
milk product.
In the second half of the year
we invested heavily in the
signing of new contracts with
independent dairy farmers
to increase our security and
availability of milk supply.
The supply of milk to our
factories has increased from
20 million litres per annum
at the start of the year to
90 million litres per annum
as at 30 June 2017, an increase
of 300%.
The contract arrangements
put in place will see this milk
supply increase to over 150 million
litres over the 2017-18 financial
year as our mozzarella plant
comes on line and will ensure
that the Division has sufficient
milk supply to support our
anticipated growth in sales.
MEAT AND SEAFOOD
The Meat and Seafood Division
delivered lower than planned
growth during the year. In part
this was due to shortfalls on sales
against budget in China because
of changes in the complex
regulations governing meat and
seafood imports to the country:
• The Chinese Government
changed the scientific definitions
on a number of seafood species
part way into the year which
meant that the export of our
primary seafood exports and
several other fish types from
Australia (and from Ferguson
Australia) were stopped
completely for a period of
around six months.
• Quarantine restrictions imposed
by the Chinese Government
presented challenges in
progressing our ready-to-eat
meat contract manufacturing.
To moderate the revenue effects
of these regulatory changes in
China, we established a market
for Australian retail frozen beef
cuts (non-processed) and secured
a new contract partner in country
to provide both retail ready frozen
packs under the BFC brand and
deliver our retail ready range of
ready-to-eat meals under licence
which are now on track and
expected to be released into
supermarkets in China in the
coming months.
Our meat operations at Scorpio
Foods achieved a number of new
contracts in other markets during
the year with the launch of its
“Yarra Valley” range of products
into the retail giant, Spinneys, in
the Middle East and the launch
into ALDI in selected states across
Australia under the ALDI
Farmwood homebrand.
BFC management have been
actively involved at Scorpio
during the year in instituting
a number of productivity
improvements which has resulted
in significant production cost
savings. Further changes are
currently being implemented to
enhance the efficiency of asset
utilisation at Scorpio and enable
output capacities to be expanded.
Seafood sales in China were
opened in wholesale, food service,
ecommerce and through the
Hondo Agricultural Contract
announced in April with a broad
range of Australian seafood
products. We experienced a slower
than expected take up in sales due
the time needed to educate the
consumer market relative to other
foreign imports, and tailoring the
packaging and marketing messages
to engage the consumer.
The sales by Hondo of Seafood
products is now gathering
momentum with demand and
sales from a broader range of
seafood products and is expected
to be boosted as the ChAFTA free
trade agreement tariffs on seafood
products continues to decline
progressively, reaching zero by
1 January 2019.
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HEALTH AND NUTRITION
The Health and Nutrition Division
delivered a lower than expected
result due to investee company
Neptune Bio-Innovation Holdings
Pty Ltd (NBI) reporting less than
expected revenues and profits and
the expenditures incurred on the
new investments made in this
Division. These new investments
include the expansion of the
AquaEssence water bottling
plant at Mount Gambier
(to treble the annual production
capacity) and development
of products for the Singapore
children’s nutrition market.
As part of its business strategy,
in the area of health and nutrition,
BFC aims to be uniquely
diversified and committed
to delivering a range of
targeted health food, beverage,
supplemental nutrition and dairy
protein solutions that meet the
standards of both the domestic
and global markets.
As a result of this strategy we
have successfully rolled out our
own branded “ei8ht” Volcanic
Alkaline Water into Australian
domestic and overseas markets;
supported the launch of NBI’s
retail range of products; Type 2,
Heart Salt, BIOLyte and La Mayo
into a range of major pharmacies
and supermarkets across Australia;
and delivered on the Beston
MindChamps Joint Venture
with supply of products into
Singapore Childcare Centres.
In addition
to these key achievements,
the restart of the Dairy Protein
Plant at Jervois will be an
area of future opportunity for
BFC earnings growth with the
increased supply of liquid
whey from the increased milk
throughput at our dairy factories
to facilitate the extraction of high
value fractionated dairy proteins.
Our synergistic approach to
combine the respective strengths
and capabilities of our Health
and Dairy Divisions with the
investee company entities
of BFC has resulted in the
development of a number
of new products.
To date this includes a specially
formulated reduced fat, reduced
sodium cheddar cheese designed
for the children’s nutrition market
in Singapore and development
of an additional range of heart
healthy and high calcium
reduced fat, reduced sodium
cheddar products. We are proud
to report that this innovation has
been recognised at the 2017
South Australian Dairy Association
Awards with the award of the
Best Innovative Dairy Product
for Beston Pure Reduced Sodium
Cheddar. This is a unique and
exceptional tasting cheese
product which uses NBI’s
LoSalTM salt replacer.
We will endeavour to continue
this success and grow the health
and nutrition product portfolio
to give our customers the
opportunity to enjoy nutritious
and high-quality foods that
are better for their health.
INTERNATIONAL
In-country sales in the ASEAN
region of $2.8 million during
2016-17 (up 200%) were achieved
through a range of retail and
food service sales channels in
Thailand, Singapore and Vietnam
and the opening of an office in
Malaysia. The China operation
delivered revenues of around
$1.6m in the northern region
which was around (80%) down
due to the repositioning of sales
operations from Dalian in
northern China to the growth
regions of Shanghai, Shenzhen,
Fuzhou and Beijing.
As part of our repositioning
moves in China, we have taken
an active role in establishing
agreements with Chinese
retailers to take retail product
direct-to-consumers through
BFC experience stores within
retail stores.
Our direct-to-consumer strategy
in China reflects our objective
to generate acceptable margins
in this market as well as enable
us to align future product
development with market
demand (as we have achieved
in Thailand, for example, with
the development of our Kyubu
Japanese-style cheese snacks
resulting from in-store customer
feedback and focus groups).
During the latter part of 2016-17,
we decided to tilt our direct-to-
consumer sales model in China
more towards a “direct/own/
operate” contract model.
It was pleasing that under the
new leadership in BFC China,
we secured contracts with a range
of China retailers which included
the setup of the first BFC instore
Australian food section during the
transition period. This has ensured
a strong start to the first half
of the following financial year
under the new model with the
larger retailers where, in some
areas, we hold a direct contract
with major retailers and operate
the marketing and brand
promotion in store ourselves
to ensure we accelerate the
building of our Australian Brand
Platform with Chinese consumers.
The development and launch
of our direct to consumer
ecommerce site 8ston.com
was launched in China late in
the second half of the financial
year with solid early sales.
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external market factors in Australia
with the changing dynamics
within the Australian dairy
industry, the progressive
reduction in China import tariffs
and the rapid rise in consumer
online purchasing of premium
imported foods.
China and ASEAN are well
developed markets for seafood
and meat which is expected
to continue to remain strong
and with a trend towards
branded, trusted products.
We see the opportunity opening
up in China and the ASEAN
region also, over the next few
years, for progressively increasing
sales of dairy products as the
younger generation picks up
on the health benefits of having
dairy in their diets.
Consumers universally are
changing, with moves towards
personalised health, an increasing
role of digital technologies
in product purchase and the
evolution of food as medicine.
BFC is well positioned to benefit
from these trends with our unique
business model from farm
to plate, brand protection and
food traceability technology,
quality of supply, and ability to
sell as close as we can direct-to-
the-consumer with premium
products to meet the emerging
demand from our customers
across all our product divisions,
with our high staff commitment
and geographic and sales
channels diversity.
As part of increasing our
coverage across ASEAN through
own operated sales offices,
we initiated the opening of an
office in Malaysia in May 2017.
In Hong Kong we have decided
to appoint a number of product
specific distributors so as to be
able to take a broader range of
products from across all of our
product divisions into this market.
As a result, a joint decision was
made to close the Sunwah
Beston Joint Venture and move
to a multi-distributor arrangement.
Notwithstanding the uplift in sales
performance in the ASEAN region
during the year, the lower than
budget results in China, coupled
with the expenditures on set up
of new offices, the geographic
relocation and repositioning
of the China business and the
launch of our in-supermarket
BFC experience stores resulted
in a reduction in earnings for
the International Division
compared to the prior year.
TECHNOLOGY
Beston Global Foods has created
our own proprietary technology,
known as OZIRIS, which provides
a uniquely integrated e-commerce
platform incorporating traceability
and anti-counterfeit capabilities.
During this past year, we have
extended the architecture of the
platform to include multi-currency
and multi-lingual capabilities
for both the platform in Australia
(bestonmarketplace.com.au) and
the platform in China (8ston.com).
The opportunities for application
of the technology outside of
Beston Global Foods are
significant, as the value of the
global counterfeit market in
215 stood at USD 1.7 trillion
and is expected to reach
USD 2.3 trillion by 2022.
The OZIRIS technology has been
recognised by its peers as leading
edge, with applications in use
for verification, tracking and
assurance of provenance
across many industry sectors,
not only food.
BFC has received a number
of unsolicited and confidential
proposals from third parties in
recent months in relation to
this technology which we are
currently evaluating to determine
which, if any, are in the best
interest of BFC shareholders.
OUTLOOK
Forecasts prepared by the
United Nations and a number
of leading authorities indicate
that the world will need to
produce twice as much food
as it currently has available to
meet the expected population
growth by 2020. BFC is extremely
well positioned to capitalise
on the increasing demand
for premium, clean, and safe
Australian food products.
Our unique business model
ensures that we can maintain
our competitive advantage
against some of our global
competitors by owning security
of supply, rapidly develop
consumer brands that meet
the needs of the emerging
consumers, and sell as close
as we can direct to the
consumer with premium,
healthy products which
incorporate anti-counterfeit
technology to provide greater
assurance to our consumers
globally.
We now have proven demand in
Australia, ASEAN and increasingly
in China across our branded
product ranges. We believe that
our future operating environment
will be positively impacted by
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 - 2 0 1 7 A N N U A L R E P O R T
E XE CU T IVE SUMMAR Y
The results presented in this financial report reflect the operations of Beston Global Food Company Limited
and its subsidiaries for the financial year 30 June 2017.
IN SUMMARY:
• The net result in FY 2017 has
• The Company is progressing
• Sales revenues have increased by
49% over the prior financial year;
• Domestic sales represent around
75% of the increased sales
revenue with the balance
from overseas operations.
• ASEAN sales have increased
by 200% over the prior
financial year due to
increased Dairy sales;
• The consolidated net result
after tax is ($7.7) million.
• The results reflect decisions
taken by the Company to build
out its infrastructure during
the year and invest capital for
future growth and development,
including by expanding its
milk supplies, production
capability and product range
(including mozzarella).
been impacted by investment
in growth initiatives, lower milk
availability for processing in
the First Half and lower China
sales due to repositioning of
the business into sustainable
growth sectors of this market.
• Underlying earnings growth
is continuing to improve
in line with increased milk
volumes (now at 90 million
litres per annum, annualised),
sales market expansion and
an increased product
portfolio on offer.
• The increased supply of milk,
coupled with the additional high
value output derived from this
milk as the mozzarella plant
comes on stream, is expected
to place the Company in a strong
earnings position for FY 2018,
based on prevailing milk prices.
the consideration of a number
of initiatives to place BFC
on a trajectory for long term
sustainable growth and further
value creation for shareholders.
These include:
• Evaluation of the establishment
of a Dairy Farm Real Estate
Investment Trust (DF-REIT)
with an estimated capital of
$100 million to house the
Company’s existing dairy farms
and acquire additional farms;
• The possible divestment of
an equity interest in Beston
Technologies Pty Ltd, a wholly
owned entity of BFC, to realise
part of the value created to
date in our OZIRIS technology
and provide a basis for taking
the technology into other
markets and industry sectors.
1 2
Our unique business model
ensures that we can maintain
our competitive advantage
against some of our
global competitors.
R E VIE W OF OPER ATI ONS
During the financial year ended
30 June 2017, Beston Global Food
Company (“BFC” or “the Company)
has completed a number of
significant steps towards
implementing its strategic plans
to build long-term sustainable
value for its Shareholders.
The focus during the year has
been on consolidating the position
of BFC as a leading manufacturer,
exporter, and distributor of
premium, safe and healthy
Australian foods while investing
in key areas of the business to
ensure sustainable earnings
growth going forward.
A significant achievement in this
context has been in embedding
our brands as a premium provider
of dairy, seafood, meat and health
and nutrition products to both
domestic and emerging markets.
Winning the Christian Hansen Cup
in the DIAA National Dairy Award
for “Best Cheddar in Australia”,
in May 2017 in conjunction with
another 18 Gold and Silver awards
for our range of dairy products,
was a crowning achievement for
the year, after coming on the back
of the Royal Horticultural Society
of SA Trophy for “Champion
Cheddar” which we won in
September 2016.
These awards have paid dividends
by affirming the Company’s status
as a producer of premium foods
and opening doors to new sales
opportunities, such as being
accepted into the product
portfolio for Metcash stores
across Australia. The acceptance
of our award-winning products
into Metcash stores has also
provided a basis for introducing
other BFC manufactured premium
food and beverage products
to Metcash as well as other
wholesale and retail outlets.
The MindChamps Joint Venture in
Singapore also progressed during
the year with the development
and provision of a healthy range of
products for the MindChamp child
care centres including a reduced
fat, reduced sodium cheddar,
a product developed in-house
specifically for the children’s
nutrition market in Singapore.
1 4
1 5
FINANCIAL RESULTS
The sales revenue results
represent an increase of 49%
over the prior financial year and
have been largely underpinned by
the growth in the Dairy Industry
segment, particularly in H2.
Notwithstanding the increases
in sales in H2, the enhanced
performance has not been
sufficient to offset the loss
incurred as a result of our
investment in new brands,
technology, market development
activities and shortfall in China
sales. The Company has therefore
incurred an overall loss for
the full year of $7.7 million.
No dividend will be paid in respect
of the 2016-17 financial year.
The significant expansion of
the Company’s dairy operations
in FY17 has been facilitated by
a successful share placement to
raise $28.8 million in August 2016.
The placement obviated the need
for the Company to take on debt
or go back to shareholders
for further capital to fund the
investment required for the
Company’s growth and
development plans.
These capital expansion funds
have been utilised to bring the
Mable’s Cream Cheese line into
production (September 2016),
recommence the LeRice Dairy
snack production line
(September 2016), and install a
Hard Cheese line (March 2017)
and a new state-of-the-art
Mozzarella plant at the cheese
factory, thereby expanding the
range of premium dairy products
on offer by the Company.
This expansion has led to the
signing up of a large number
of external contract farmers to
supply milk (refer 3 below),
not only for the existing range
of dairy products, but also in
preparation for the mozzarella
project which is scheduled to
come online towards the end
of this calendar year.
With the focussed expansion
on the Company’s dairy factories
at Murray Bridge and Jervois,
a decision was made to redeem
the convertible note interest in
B.-d. Farm Paris Creek in April 2017,
and the associated organic
Wellington Dairy farm, as
announced on 4 April 2017.
Capital expansion funds were
also utilised for the acquisition
of a new bottling plant at the
AquaEssence water factory,
which when fully installed and
commissioned (by the end of the
calendar 2017), will more than
treble the production capacity.
The upgrade of the AquaEssence
plant, will ensure that we are able
to meet the increasing demand
for high quality, high Alkaline
“eight” Volcanic Water arising from
customers in Australia and China.
As previously advised to the
market, sales in China during
the financial year have been
disappointing and far lower than
expected. This resulted in the
Company initiating a restructure
of the China business in Q3 with
the appointment of Mr Bastian Bai,
previously a Senior Director with
Walmart, China. Mr Bai has
brought a wealth of experience
in the retail and distribution sector
in China and has opened up
a wider range of sales channels.
The Company expects the
outcome of this restructure in
China to flow through in sales
growth in the next financial year.
Sales for seafood grew through
the Hondo seafood supply
agreement and retail channels
compared with the prior year.
However, sales were negatively
impacted in H2FY17 when certain
Australian seafood species were
restricted for export, following
an unexpected change in import
regulations in January 2017,
that was rectified by June end.
The Company has increased its
brand presence in its domestic
and international markets through
the release of Mable’s and Edwards
Crossing branded retail cheeses,
in addition to an expanded range
of food services and ingredients
products. Ferguson Australia have
also launched a range of retail
branded seafood products
into domestic markets.
The Company’s focus on premium
healthy nutritional products
has resulted in the in-house
development of a number of
reduced sodium and reduced fat
cheeses that have been released
into the food service market.
Through the synergies which
operate with our investee
company Neptune Bio-
Innovations Holdings Pty Ltd,
BFC developed a heart friendly,
salt replaced, cheddar that
has recently won the SA Dairy
Innovation Award (August 2017).
BFC also received First Prize in
July 2017 for its manufacture
of the “Best Australian Cheddar
(Mild)” at the International
Cheese Awards, Nantwich, United
Kingdom (regarded as the number
one cheese and dairy show in
the world, this year attracting
entries from 36 countries).
The development of the
Company’s food traceability and
authentication capability based on
(Brandlok and OZIRIS) has been a
strong focus throughout the year.
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 - 2 0 1 7 A N N U A L R E P O R T
R E V I E W O F O P E R AT I O N S
This technology platform was
expanded with the launch of
the Australia Beston Marketplace
and the progress made by our
100% owned subsidiary, Beston
Technologies Pty Ltd, with the
China e-commerce platform,
8ston.com (in July 2017), all
of which has led to peer group
recognition of the ground-
breaking traceability and
authentication technology
the Company has developed.
The financials for the year ended
30 June 2017 represents the first
full financial year since the
company listed on the Australian
Stock Exchange on 28th August
2015. The consolidated statutory
net loss attributable to owners
of the Company, after providing
for income tax and research and
development tax concessions,
is ($7.7) million.
The NPAT result for the year
has been primarily impacted
by three main areas:
(1) Investment in
growth initiatives:
Owned Brands:
• The development of BFC
owned global dairy and water
brands in the first half of the year
which included multi-language
marketing collateral and
social media platforms.
The progressive launch of these
brands into the retail and food
service markets in Australia,
China and ASEAN markets
occurred late in the second
half of the financial year.
Business Development and
Customer Acquisition in China,
Australia and ASEAN:
• Broadening the customer base
and moving away from reliance
on “one-off” customers with
the signing of direct supply
agreements with larger retail
chains and food service
customers in each country,
and the development of
a core group of consistent,
repeat-order customers.
Expansion of Australian
Sales Team:
• Investment in the first half of the
year in establishing distribution
contracts for our own global
dairy and water brands into the
Australian market. This delivered
197% growth in sales in Australia
and 200% growth in ASEAN
compared to the previous year
as a result of the launch into
food service and retail chains.
The expansion in this area
included the recruitment
of a new National Retail Sales
Manager, a National Food Service
Manager, and a Group Supply
Chain Manager in addition
to partnering with a national
merchandising firm
to enable and drive the rollout
of our branded product ranges
nationally in the second half.
We expect to realise the earnings
benefits as sales volumes
increase in the H1FY18.
1 6
1 7
Goeographical Expansion:
(3) Low China sales:
• The establishment of new sales
offices into the growth regions
of Shanghai, Beijing and Fuzhou
as part of repositioning our
business in China. In ASEAN
this included opening an office
in Malaysia to be closer to our
customers in this region and
to increase our broader coverage
across ASEAN, including the
start-up of the Beston
MindChamps Joint Venture
in Singapore.
(2) Lower milk availability
in the First Half:
The extremely wet winter season
in southern parts of Australia in
the first half of the year reduced
the production of milk at our
own farms and reduced milk
available across the industry.
“Toll manufacturing” revenues
were significantly lower than
planned which in turn reduced
whey powder production
in the first half of the year.
This has been addressed in the
second half of the year with the
increase in milk supply to 90mL,
starting from June 2017.
China sales achieved were lower
than expected for the year in large
part due to the shortfalls against
budget which occurred in the
First Half. The China business was
re-positioned but sales in H2 were
not sufficient to offset the shortfall
in sales in H1, leading to the
write-off of some doubtful debts.
The Group received $0.4m as
the first milestone payment of
a $2.5m Regional Development
Grant awarded by the South
Australian Government.
Government grants relating
to costs are deferred and
recognised as income in the
period necessary to match them
to the expense they are intended
to compensate, in accordance
with AASB accounting standards.
Cost of goods sold has increased
as a percentage of sales,
compared to the prior period,
primarily due to the increased
dairy sales that have a higher
volume and lower margins
in Australia than overseas,
particularly during this financial
period as the brands have
been in establishment phase.
Selling and Administration
expenses of $21.1m reflect
an increase of $4.5m, or 27%
over the prior year.
This is primarily due to the prior
period reflecting only 9 months
of a full year, noting:
• A majority of Selling and
Administration costs are
associated with the overheads,
distribution and running
of the factories and farms.
• Extensive in-house new
product development has been
undertaken and expensed to
leverage commercialisation
opportunities such as through the
provision of heart healthy and
children’s nutritionally friendly
dairy products in new markets
(e.g. MindChamps in Singapore);
• Repositioning costs and
establishing new markets are an
investment into sales channels
which flow through in time via
increasing sales revenues; and
• Non-recurring professional
fees relating to the redemption
of the B.-d. Farm Paris Creek
Convertible Note and sale of the
Wellington Dairy, in conjunction
with fees incurred in improving
and rebuilding the Kurleah
and Pedra Branca dairy farms.
The Company continues to
maintain a strong balance sheet
with $28.7m in cash and cash
equivalents, $15.7m in trade
receivables, $9.3m in trade
payables and no debt.
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 - 2 0 1 7 A N N U A L R E P O R T
D IV IS IO NAL OPE RA TIONS
Over the past financial year, the
Company has consolidated into
five main operating segments:
(1) Dairy
(2) Meat and Seafood
(3) Health and Nutrition
(4) International Business
(5) Technology
An overview of the operations
within each of these divisions
during the past financial year
is set out below.
DAIRY
The Dairy business has delivered
strong results in FY 2017 highlighted
through the winning of a number
of prestigious awards including:
• The Christian Hansen Cup for the
“Best Cheddar in Australia” at the
National Dairy Industry Association
of Australia (DIAA) awards;
• An additional 18 Gold and Silver
awards at the same competition;
• The “Best Australian Cheese -
Cheddar (Mild)” at the International
Cheese Awards in Nantwich (UK);
• The SA Dairy awards for the
Champion Cheddar with the
“Edwards Crossing Cloth Bound”
and the best innovative product
for the “Edwards Crossing
LoSal Cheddar”.
Sales have increased by over
150% from the prior comparative
period, and by 20% from the prior
half, following the expansion of
sales channels into Metcash across
Australia, the ASEAN region, and
Food Service companies, coupled
with the expansion in the product
range of retail branded cheddar
products, Mable’s Cream Cheese,
healthy alternative dairy products
and contract manufacturing.
A substantial capital expansion
program was undertaken in the
Dairy division to increase the
product range in the factory, to
resurrect product lines that were
previously dormant, and introduce
new product lines, including:
• Commissioning of the LeRice
Dairy Snack line and national
supply of product to Coles
and Woolworths through
our contract with Lion Dairy
and Drinks in Australia;
• Installation and production
of the Mable’s range of Cream
Cheeses in the Factories;
• Installation and production
of the Hard Cheese range of
cheeses in the Factories; and
Not only did this impact our own
farms (reducing production from
the expected 20 million litres down
to 15 million litres, as above) the
factory was also impacted by lower
milk availability. This resulted in “toll
manufacturing” revenues being
significantly lower than planned
which in turn reduced whey powder
production. Milk from contracted
dairy supply farms was not received
until late Q4 which is expected to
translate into cheese product revenues
in the following financial year.
The herd was independently
valued at 30 June 2017, with the
value decreasing due to the lower
export market cattle prices, which
is used as the basis of the valuation.
Other achievements for the
year include:
• Sales of over 3,200 tonnes
of cheese;
• Sales of over 1,500 tonnes
of whey powder;
• Sales of 100 tonnes of
• Procurement of state-of-the-art
cream cheese;
mozzarella equipment with
production scheduled before
the end of the calendar year.
In addition, investment into our own
farms has continued with the herd
size at over 2,800 head of cattle and
full year production of 15 million
litres of milk. Milk production was
lower than expectations due to
the extremely wet winter season
in the southern parts of Australia.
• Milk processed of 38 million litres;
• Processing over 900 tonnes
of LeRice; and
• Production of the first batch of low
sodium “heart healthy” cheese
for health-conscious consumers.
The profit results achieved in the
Dairy division reflect a turnaround of
$1.4 million over the previous period.
1 8
The seafood catching and processing
capability has increased significantly
over the prior financial year.
seafood D I V I S I O N A L O P E R AT I O N S C O N T I N U E D
BFC management have been actively involved
at Scorpio during the year instituting a number
of productivity improvements which has
resulted in significant production cost savings.
2 0
meat 2 1
products into a range of major
pharmacies and supermarkets
across Australia;
MEAT AND SEAFOOD
packs into Australian
Independent Retail stores
in the first half 2017;
The Meat segment incorporates
the convertible note with
Scorpio Foods in addition
to meat sales across the
Domestic and International
markets. Notable achievements
for the financial year include:
• Sales growth in the production
of Yarra Valley Lamb Shank
product under the ALDI brand;
• Yarra Valley range listed
in Spinneys retail stores
in the Middle East;
• Relocation and consolidation
of Campbells production facilities
to Shepparton to be closer to
customers and reduce transport
costs; and
• Development of a BFC owned
and branded retail beef range
for the China market.
The Seafood segment incorporates
the lobster licences owned by
the Company, the Company’s 32%
investment in Ferguson Australia
and on-sales into the Company’s
sales offices in overseas locations.
The seafood catching and
processing capability has increased
significantly over the prior financial
year with key achievements in:
• Release of a range of Ferguson
branded retail ready seafood
• Sales of Australian seafood
• Commenced expansion of
in China through Hondo sales
channels of $120k under the
announced BFC supply contract.;
• Lobster processing increased by
26% to 480 tonnes per annum
from 380 tonnes per annum in
the prior corresponding period;
• Processing of Southern Blue Fin
Tuna increased by 14% to
840 tonnes per annum from
735 tonnes per annum in the
prior corresponding period; and
• Over 3.5 tonnes of King Crab
caught for sale.
HEALTH AND NUTRITION
The Health segment includes:
• 51% interest in AquaEssence Pty
Ltd high PH Volcanic water;
• 20% Investment in Neptune
Bio-Innovations;
• Development of a healthy,
high nutritional, product range
for children in Singapore; and
• Wine sales in overseas markets.
Throughout the financial year
a number of achievements have
been delivered, most notably:
• Launch of Sweet & Gentle,
Heart Salt, BIOlyte and Le Mayo
AquaEssence high pH alkaline
volcanic water facility with
container shipments of products
to China by financial year end;
• Commenced supply of products
into 33 of the MindChamps
Childcare Centres through
the Beston MindChamps
Joint Venture;
• Security of supply of liquid whey
for the restart of the Lactoferrin
Protein Plant at Jervois as a result
of securing additional supplies
of milk;
• In-house development of
reduced sodium reduced fat
cheddar specifically designed
for the children’s nutrition market
in Singapore.
• Winning the best innovative
product for the “Edwards
Crossing LoSal Cheddar” at the
SA Dairy awards in conjunction
with Neptune Bio-Innovations
Holdings Pty Ltd;
• Development of an additional
range of heart healthy reduced
fat, reduced sodium cheddar
products in conjunction with
Neptune Bio-Innovations
Holdings Pty Ltd.
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 - 2 0 1 7 A N N U A L R E P O R T
D I V I S I O N A L O P E R AT I O N S C O N T I N U E D
INTERNATIONAL
BUSINESS
Our operations in the ASEAN
region have experienced sales
growth of over 200% over the
prior year and an 80% sales
growth over the prior half.
The following achievements
have also occurred:
• Launch of the Japanese branded
“Kyubu” cheese range into retail
stores in Singapore, Thailand
and Vietnam;
• Launch of Mable’s Cream Cheese
brand into a range of Singapore
retail stores;
• Sales growth of ingredients
to key ASEAN food service
customers;
• Signing of the MM Mega
contract in Vietnam in May 2017,
with the launch of Kyubu into
19 MM Mega stores across
Vietnam;
• Opening a new office
in Malaysia;
• Delivering a range of healthy
products designed for children’s
nutritional requirements into the
Singapore Beston MindChamps
Joint Venture.
The restructure of the China
business, under the new Chief
Executive (China), Bastian Bai has
resulted in the signing of direct
contracts with leading Chinese
retailers, including Walmart China.
The first shipments of BFC cheese
and water are now moving into
Walmart stores across China.
BESTON CHEF INTERNATIONAL COMPETITION
Over the past twelve months,
and as part of its International
Marketing efforts, BFC has been
approached by a number of highly
regarded Chefs and restaurateurs
seeking BFC food and beverage
products to experiment with the
creation of new innovative food
dishes based around the use of
our food products as ingredients.
The approaches have been
stimulated by industry publicity
surrounding the winning of so
many high profile awards for our
dairy products, all within such
a short time since we reopened
the dairy processing facilities at
Murray Bridge and Jervois, and
by the recognition that all of our
BFC products are “true to label”
in the sense of being premium,
healthy, traceable and safe to eat
(i.e. not able to be counterfeited).
One of these approaches led,
for example, to the provision
of a “Gourmet Food Tent” at the
Port Adelaide/Gold Coast AFL
Football game in Shanghai in
May 2017 where innovative meals
using purely BFC food products
(incorporating ingredients from
our dairy, seafood, meat and
health and nutrition range) were
prepared by a leading Shanghai
based Chef. Another, different
example, is the level of following
which the Company has received
on the Facebook page for its
“Kyubu” cheese product where
consumers share recipes and
ideas for innovative uses of
Kyubu in food preparation.
The level of interest shown
in BFC products by the culinary
community in Asia has resulted in
the Board of BFC taking a decision
to formally establish a “Beston
Chef International Competition”.
Over the next twelve months, a
leading Chef will be selected from
each of the countries in the Asia
Pacific in which we currently operate
(i.e. China, Thailand, Vietnam,
Hong Kong, Malaysia and Singapore)
and brought to Adelaide to compete,
along with a Chef selected
from Australia, in a competition
designed to reward the competitor
who is judged to develop the most
innovative and flavoursome meals
using only BFC food and beverage
products as ingredients.
The event will be held in
conjunction with the 2018
Annual General Meeting
(i.e. on the evening preceding the
AGM) and will be judged by an
independent panel of technical
experts and culinary dignitaries.
BFC expects to receive
international media coverage
for the event and has already
received a confidential
unsolicited expression of interest
from a well-established media
company seeking television
rights to the event.
Shareholders of BFC will be given
priority seating to the event, at no
charge, with seats limited to 200 in
number. Participation at the event
will also be provided to the major
wholesale and retail distribution
companies with which BFC is now
engaged, such as Walmart China,
Lacto Asia and Metcash.
The Board of BFC has taken the view
that this “Beston Chef International
Competition” will provide a low
cost and effective way of
enhancing the clean, green,
healthy, trustworthy image of BFC
products across the Asia Pacific
region and further promote the
“Beston Foods” brand in the eyes
of consumers in these countries.
2 2
2 3
TECHNOLOGY
A fundamental component
of BFC’s business model, from
the outset, has been to empower
the consumers of our products
with the capacity to both identify
and understand (track-and-trace)
the ingredients in the products
and assure themselves that the
products they are looking to
purchase and eat, have not
been counterfeited.
After finding that off-the-shelf
technology to meet our
requirements did not exist
anywhere in the world, BFC
set about creating our own
technology, now known as OZIRIS.
The OZIRIS technology is a unique
integrated e-commerce platform
which incorporates traceability
and Brandlok anti-counterfeiting
capabilities. The architecture of
the platform is multi-currency
and multi-lingual.
The OZIRIS technology has been
recognised by its peers as leading
edge, with applications in use for
verification, tracking and assurance
of provenance across many
industry sectors, not only food.
As at 30 June 2016 BFC held
3 International Patents for the
technology in its 100% owned
Beston Technologies Pty Ltd.
As at 30 June 2017, BFC now holds
11 International Patents or Patents
pending for the technology.
• Product wastage is also
growing in line with the growth
in product counterfeiting.
The opportunities for application
of the technology outside of
BFC are significant:
• The value of the global counterfeit
market in 2015 stood at USD 1.7
trillion and is expected to
reach USD 2.3 trillion by 2022;
• The global anti-counterfeiting
packaging market is expected
to grow at an annualised rate
of 14% per annum and to
reach USD 207 billion by 2021;
• North America is the highest
revenue generating market
for global anti-counterfeiting;
• The USA has been the hardest
hit country for trade in fake
goods (IP infringements
represent 20% of the total value
of customs seizures in the USA);
• China is the country where most
fake goods originate, followed
by India;
• Food fraud costs the global
food industry an estimated
USD 40 billion each year;
• The top 5 foods which give
consumers most safety concerns
are seafood, meat, take-aways,
dairy and fresh produce; and
The OZIRIS technology developed
by BFC incorporates block chain
technology and enables users
to generate “big data” on their
customers which they can then
store, manage and analyse
to identify trends and obtain
niche insights (to assist, for
example, with future product
development and marketing.)
In recent months BFC has received
a number of unsolicited and
confidential indicative proposals
from third parties in relation to the
business of Beston Technologies
Pty Ltd which is wholly owned
by BFC. These proposals are varied
in their approach and include
the possibility of third parties
acquiring an equity interest
in Beston Technologies and/or
taking the technologies into other
markets and industry sectors.
BFC is in the process of
evaluating these various
indicative proposals to determine
which, if any, are in the best
interests of BFC shareholders.
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 - 2 0 1 7 A N N U A L R E P O R T
M ILK S UPPL Y
A key factor affecting the earnings
growth of the dairy operations of
BFC is milk supply. The marginal
revenues derived from increased
throughput of milk have a positive
and increasing impact on bottom
line profits as the volumes of milk
processed in factories goes up.
When BFC acquired the business
of United Dairy Power (UDP),
out of Receivership in September
2015, we acquired a dairy
processing plant with a production
capacity of 300 million litres
(albeit that the factories had been
closed in April 2015). After we
reopened the plant, as Beston
Pure Foods, in October 2015,
re-instated the export licences
and substantially re-built and
repaired the Murray Bridge factory,
we re-started production with a
throughput of 20 million litres of
milk, mainly from our own farms.
Since this time (i.e. over the past
18 months), we have gradually
built our milk supply to the Beston
Pure Foods factory in Murray
Bridge to 90 million litres on an
annualised basis, by signing up
milk supply contracts with dairy
farmers. The current annualised
milk supply has returned the
factories to production rates
similar to the rate they were
operating at prior to their closure
in April 2015. We have also
negotiated commitments for
supply which will start coming
on stream from the start of
calendar 2018 and take our
annualised committed supply
of contract milk to around 140
to 130 million litres by mid 2018.
MOZZARELLA
The additional supply of
milk coming on stream to our
Beston Pure Foods dairy will
coincide with the commissioning
and production ramp up of our
new state-of-the-art mozzarella
plant at Jervois.
A large proportion of the plant,
including cheese vats acquired
from the Netherlands and New
Zealand arrived on site several
months ago and the “First Factory
Acceptance” test (FAT test) on the
cooker/stretcher being fabricated
in Italy has been completed in
recent weeks. Once the final
FAT has been made, the machine
which is recognised as one of the
most efficient machines in the
world, will be shipped to Australia
for installation in the newly
renovated factory at Jervois.
The new mozzarella plant replaces
the “Caboolture plant” which was
sold off by the Receivers of the
former United Dairy Power (UDP)
business. Once the plant is fully
commissioned, BFC expects to
produce a minimum of 5,000
tonnes of mozzarella per annum.
There is currently a global
shortage of high quality mozzarella
with the result that the Company
expects the initial annual
production of 5,000 tonnes to be
fully committed. The production
capacity of the new plant is
14,650 tonnes per annum.
The commissioning of the
mozzarella plant will produce
increased volumes of whey
as a by-product of the production
process which will enable
the Company to increase the
production of its gold medal
winning whey powder at the
Jervois milk powder factory
as well as provide the feed stock
required for the production
of Lactoferrin, immunoglobulin
and other pharmaceutical grade
nutraceuticals at the adjoining
dairy protein fractionation plant,
owned by BFC.
2 4
The supply of milk at our factories has
increased from 20 million litres per annum
at the start of the year to 90 million litres per
annum as at 30 June 2017, an increase of 300%.
dairy M I L K S U P P LY C O N T I N U E D
CONTRACT MILK
The build-up of contracted milk
supplies for Beston Pure Foods
has been achieved through a
deliberate strategy of building trust
with independent dairy farmers.
When the operations of United
Dairy Power were closed by the
Receiver, the dairy farmers who
had been supplying UDP then
signed contracts with other
milk processing companies
and primarily with the large
players in the industry.
Our challenge at BFC was
to bring these dairy farmers
back to supplying the operations
at Murray Bridge and Jervois,
and securing supply from
other contract dairy farmers.
We have done so by building
trust with the dairy farming
community via a number
of different initiatives.
In January 2016, we announced
the establishment of a “Cheese
Bank” by which we would take in
milk from dairy farmers which was
surplus to the amounts they had
contracted to produce for other
dairy companies and process the
milk into cheese. Farmers are paid
for the milk 30 days after delivery
at market prices. The cheese
produced from this initiative has
been placed in a “Bank” and stored
for maturation into aged (vintage)
cheese. When sold, a portion of
the net profits from this cheese
bank will be provided to the
dairy farmers to assist in the
education of their children.
The allocation of funds from
this initiative has now started
with the first release of Edwards
Crossing Vintage Cheese
(e.g. a number of scholarships
have been provided to students
through the Dairy Australia
“Cows Create Careers” program
in the South east of South
Australia and the Murray land
region). BFC has also collaborated
with a number of tertiary
educational institutions to bring
students into the Company for
short periods to provide work
experience to assist in their
career development.
The Cheese Bank initiative
was also offered to dairy farmers
in 2016 who had been referred
to BFC by industry leaders as
being in desperate financial
plight and in need of immediate
assistance to secure additional
income for their needs.
Further assistance was provided
to the dairy farming community
through sponsorships and other
support from BFC to organisations
such as Lifeline and the
Freemason’s Foundation Centre
for Men’s Health at the University
of Adelaide which are directly
involved in providing depression
counselling and medical
assistance to dairy farmers
in rural communities.
Following up on these various
initiatives, executives from
BFC held numerous “Town Hall”
meetings in the key milk
producing regions across
Southern Australia over the
last twelve months to outline
our forward plans to dairy farmers
and the opportunities for them
to supply milk to our factories
when they come out of contract
with other processors. “Open
Days” have also been held at
the Murray Bridge factory to
show dairy farmers and their
families how the milk produced
on their farms is treated and
processed in our factories.
An important part of the
“Open Day” events has been
to demonstrate the relevance
(and application) of our OZIRIS
technology which enables farmers
to track-and-trace their milk
through to its end destination.
The significance of this
technology has been recognised
and featured in a program on
innovation compiled by Channel 9
and first shown on television in
Australia on April 11, 2017. http://
www.9now.com.au/everyday-
innovators/2017/clip
cj1d34rzf00050hlsrxmgoy4b .
The momentum generated
by these various initiatives has
enabled us to engage with the
dairy farming community on a
transparent, and objective basis to
negotiate contracts for milk supply
which are mutually beneficial and
which recognise the long-term
needs and aspirations of both
parties to the contract (i.e. both
BFC and the Dairy Farmer).
2 6
2 7
GOING FORWARD
Milk production in Australia
has fallen by around 20% over
the last ten years in response
to the cost/price pressures placed
on dairy farmers. The total
quantity of milk produced in
Australia is likely to be at or below
9 billion litres for the 2016-17 year,
the first time in 21 years.
The drop in milk production in
Australia has occurred precisely
at a time when the demand for
dairy products in China and Asia
has been rising. China is now the
fastest growing cheese importer in
the world as consumers recognise
the health benefits and sensory
attractions of eating cheese.
New Zealand dairy producers
have been able to exploit the
rising demand for cheese and
other dairy products in China
as a result of having a free trade
agreement with China since 2008
and now control about half of
China’s imported cheese market.
Prior to the signing of Australia’s
Free Trade Agreement with China
(ChAFTA) at the end of 2015,
Australian’s held 18% of China’s
imported cheese market.
In the year since introduction
of ChAFTA, the import tax rate
on Australian Cheese has fallen
from 12 percent to 9.6 percent
and the value of cheese imports
from Australia by value has risen
by 1 percentage point.
When the 4-year phase-in term
of the ChAFTA agreement expires,
(that is, as from 2020), Australia
will be able to export cheese
to China tax free and be well
placed to capitalise on the
expected 7 percent annual growth
in demand for cheese in China.
Similar opportunities exist in
key markets in Asia.
BFC intends to capitalise on the
emerging opportunities in export
markets, as well as the retail and
food service markets in Australia,
by continuing to secure additional
milk supplies to enable the
company’s production facilities
to move towards full capacity
utilisation. Our operating model,
from day one, was to have at least
20% of our milk supply from farms
controlled by BFC so as to ensure
security of supply and have the
balance of our requirements met
from contracted, independent
dairy farmers with whom we
have a long-term relationship.
An underlying objective of our
milk supply policies, is to retain
and grow our access to quality
assured, grass derived, milk from
certified herds under controlled
circumstances. The fulfilment
of this objective is important
to ensure that we are easily able
to satisfy the different export
regulations in different countries
and satisfy consumer driven needs.
The securing of additional
milk through contracted supply
arrangements with independent
dairy farmers is, by nature
demanding on working capital.
BFC has a policy of paying farmers
on time, 30 days after delivery
of their milk. The milk is then
turned into cheese and matured
for 3 to 6 months, with the result
that the cash returned to BFC
from the milk purchases can
take 6 to 9 months (or longer,
depending on the type of cheese
produced). An advantage of
producing mozzarella cheese
is that this cheese is sold “fresh”
soon after production, with the
result that the turnaround of cash
is much faster (i.e. typically within
2 to 3 months of production).
In order to meet its milk supply
objectives (and fund the planned
increase in milk supply without
the necessity to call on debt),
the Board of BFC has resolved
to evaluate the setting up of a
Dairy Farm Real Estate Investment
Trust (DF-REIT). The initiative
would free up working capital
for further contract milk purchases
and expand the total supply of
milk available to our Beston Pure
Foods factories at Murray Bridge
and Jervois.
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 - 2 0 1 7 A N N U A L R E P O R T
BFC has a proven track record in managing
dairy farms and is able to provide assurance
on operational, financial and strategic
management issues to DF-REIT investors.
farms 2 9
DAIRY FARM REIT
The Dairy Farm Real Estate
Investment Trust (DF-REIT),
if established, would entail a
capital raising of $100 million
in the Trust to both:
• Acquire the existing dairy farms
and dairy herds owned by BFC;
and
• Provide capital for the acquisition
of additional dairy farms to
supply milk to our Beston Pure
Foods dairy factories.
The transaction would achieve
a number of beneficial outcomes
for BFC and our shareholders
including:
• Free up capital to provide
funds for additional contract
milk purchases;
• Redeploy the capital currently
tied up in our dairy farms
to higher revenue and profit
driving assets;
• Realise the value of existing dairy
farm assets (BFC would expect to
book a profit on the farm assets,
most of which were acquired
initially at prices reflecting only
bank debt outstandings);
• Secure access to an additional
35-40 million litres of milk per
year (thereby providing the
Company with around 20%
of its own milk supply, when
the factories at Murray Bridge
and Jervois are operating at
full capacity of 300 million litres
per annum;
• Enable the growth of our
dairy business to be matched
to the needs of our customers
(i.e. for hard cheese, mozzarella,
specialty cheeses, dairy desserts
etc) with known, low volatile,
sources of milk solid inputs
• Provide the balance sheet
capacity to fund suitable
acquisitions by BFC for
expanding its business.
BFC would retain management
control over the Dairy Farm REIT
portfolio and earn a management
fee for operating the dairies
(thereby generating another
source of revenue for the
Company). BFC has a proven track
record in managing dairy farms
and is able to provide assurance
on operational, financial and
strategic management issues to
DF-REIT investors.
While no definitive structures or
arrangements have as yet been
put in place, it is likely that the
DF-REIT investment opportunity
would be offered to institutional
and farmland investors in Australia
and overseas who are looking for
long-term exposure to the dairy
farm land in Australia. BFC has
been approached by a number
of parties on a confidential
and exploratory basis over
the past twelve months who
have an interest in investing
in dairy farm land in Australia
for long-term income and
capital growth returns.
Some of these parties are foreign
institutions who also have an
interest in securing access to
a stable supply of value-added
dairy products for their home
countries while having confidence
in the source and quality of the
raw milk inputs.
The DF-REIT will have a tied long
- term contract for milk supply
back to BFC.
Once the Board has completed
its evaluation, and if a final
decision is made to proceed,
Independent Advisors will be
appointed to assist BFC in
arranging, structuring and
marketing the DF-REIT investment
opportunity. The transaction
is expected to take 6 to 9 months
from the point of initiation
through to completion.
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 - 2 0 1 7 A N N U A L R E P O R T
OU TL OOK
The Directors of BFC believe
that the various initiatives which
have been outlined above will
enable the intrinsic value of the
portfolio of assets which have
been put together in the
Company to be realised for
the benefit of Shareholders.
The dairy factories now operated
as Beston Pure Dairies were
acquired for the initial public
offering (IPO) of BFC at prices
which are around one-fifth of their
current replacement values and
were included in the IPO at their
cost of acquisition. Similarly,
the Dairy Protein Plant adjacent
to the Jervois factory was
acquired at around one-third of its
replacement value and included
in the IPO at its cost of acquisition.
Having bought the assets at
extremely attractive prices, the
focus of management efforts over
the past two years has been to
realise the true economic value
of these assets through various
production optimisation initiatives
and by increasing the throughput
of milk. This “value - extraction”
is now being achieved as our
efforts on the demand side
(e.g. by winning National and
International Awards to establish
the premium quality reputation of
our market place) come together
with our efforts on the supply
side (e.g. product expansion,
production optimisation and
increased milk supply).
As explained at the 2016 Annual
General Meeting and in the report
to Shareholders on the 2017 Half
Year Results, the Board of BFC
took a deliberate decision to build
out its infrastructure during the
2016-17 financial year and invest
capital for the further growth and
development of the Company.
This build out has included:
• The re-commissioning of a hard
cheese line for the production
of parmesan and other varieties
of hard cheese (including
gruyere, raclette and tilsit);
• The procurement of a state-of-
the-art mozzarella plant from
Italy (and ancillary equipment
from the Netherlands and NZ)
which is currently in the process
of being installed at Jervois;
• Investment on our farms
to improve productivity;
• Further development of our
Beston Technologies business;
• Expansion of our Australian
national sales coverage to
achieve increased sales in
retail and food service outlets;
• Securing additional milk
supply by entering into contract
arrangements with independent
dairy farmers; and
• The re-commissioning of the
dairy fractionation (bionutrient)
plant at Jervois.
In short, the Company has
incurred a lot of expense and
capex during the financial year
without the associated earnings
benefit which will flow through
in 2017-18 fiscal year and beyond.
FY18 will benefit from the
increased throughput of milk
in the Beston Pure Foods dairy
factories, and the completion
and on-streaming of the
mozzarella plant from the second
quarter. The increased supply
of milk coupled with the additional
high value output which will be
derived from this milk, is expected
to place the Company in a strong
earnings position for FY 2018,
based on prevailing milk prices.
3 0
Our synergistic approach to combine the
respective strengths and capabilities of our
Health and Dairy Divisions with the investee
company entities of BFC, has resulted in the
development of a number of new products.
health nutrition O U T L O O K C O N T I N U E D
To some extent, the decision
of the Board to build out the
operating infrastructure in the
2016-17 financial year and invest
in new plant and equipment has
been timed to take advantage of
the disarray in the dairy industry
over the past twelve months and
to establish BFC as a Company
that can be trusted by the farming
community. But, to a large extent,
the decisions have also been
centred around the opportunity
to consolidate the operations
of the Company at the “right time”
in the industry cycle and place
BFC on a trajectory for long term
growth and further value creation
for shareholders.
Notwithstanding some setbacks in
China during the year, which have
been addressed and rectified, the
Company has stayed the course
that was set out in the Prospectus
at the time of the IPO. We have a
globally focussed business model,
products and intellectual property
that are world’s best practice and
scaleable and a modus operandi
that recognises the need to
keep innovating and stay at the
premium end of the markets
in which we operate. We have
recognised from the outset, that
the future growth of the business
is not going to come simply
from servicing the domestic
market, and that we therefore
need to grow sensibly, and
steadily, into overseas markets
in order to secure long term,
sustainable results.
C O R P O R AT E G O V E R N A N C E
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 2017 Corporate Governance
Statement is dated as at 30 June
2017 and reflects the corporate
governance practices in place
throughout the 2017 financial year.
The 2017 Corporate Governance
Statement was approved by the
Board on 13 September 2017.
A description of the Company’s
current corporate governance
practices is set out in the
Corporate Governance Statement
which can be viewed at
www.bestonglobalfoods.com.au .
3 2
FINANCIAL REPORT
CONTENTS
Directors’ Report
34
Auditors’ Independence Declaration 46
Financial Statements
Notes to the Consolidated
Financial Statements Contents
Directors’ Declaration
Independent Auditor’s Report
to the Members
ASX Additional Information
47
53
102
103
108
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 - 2 0 1 7 A N N U A L R E P O R T
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 2017. Throughout the
report, the consolidated entity is referred to as the Group.
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 N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper (appointed 7 September 2016)
During the year the principal continuing activities of the Group consisted of:
Marketing and distribution of dairy, seafood, meat, wine, water, health and nutrition products into
local and international markets.
Production of milk, cheese and other dairy related products.
Production and processing of meat products.
Development and production of health and well-being focused food, beverage and pharmaceutical
products.
technology.
Processing of high pH natural spring water.
Development and commercialisation of end-to-end food traceability and anti-counterfeit
Development and commercialisation of a premium food e-commerce platform.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
There were no dividends provided for during the year ended 30 June 2017 (2016: $0.006 cents). Dividends
paid during the year ended 30 June 2017 were $2,179,447, paid on 31 October 2016, relating to the prior year
final dividend (2016: nil)
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 14 to 32.
There were no significant changes in the state of affairs of the consolidated entity during the year, not
otherwise disclosed in this annual report.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected the Group's
operations, results or state of affairs, or may do so in future years.
Refer to the operating and financial review on pages 14 to 32 for information on likely developments
and future prospects of the Group.
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
Beston Global Food Company Limited
14
30 June 2017
and Section 28(3) of the
licences regulated by SA Water pursuant to section 56 of the
EPA’s
.
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
15
30 June 2017
D IR E CTORS’ RE PO RT
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 2017. Throughout the
report, the consolidated entity is referred to as the Group.
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 N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper (appointed 7 September 2016)
During the year the principal continuing activities of the Group consisted of:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Marketing and distribution of dairy, seafood, meat, wine, water, health and nutrition products into
local and international markets.
Production of milk, cheese and other dairy related products.
Production and processing of meat products.
Development and production of health and well-being focused food, beverage and pharmaceutical
products.
Processing of high pH natural spring water.
Development and commercialisation of end-to-end food traceability and anti-counterfeit
technology.
Development and commercialisation of a premium food e-commerce platform.
There were no dividends provided for during the year ended 30 June 2017 (2016: $0.006 cents). Dividends
paid during the year ended 30 June 2017 were $2,179,447, paid on 31 October 2016, relating to the prior year
final dividend (2016: nil)
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 14 to 32.
There were no significant changes in the state of affairs of the consolidated entity during the year, not
otherwise disclosed in this annual report.
3 4
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected the Group's
operations, results or state of affairs, or may do so in future years.
Refer to the operating and financial review on pages 14 to 32 for information on likely developments
and future prospects of the Group.
Beston Global Food Company Limited
14
30 June 2017
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 2017. Throughout the
report, the consolidated entity is referred to as the Group.
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 N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper (appointed 7 September 2016)
During the year the principal continuing activities of the Group consisted of:
Marketing and distribution of dairy, seafood, meat, wine, water, health and nutrition products into
local and international markets.
Production of milk, cheese and other dairy related products.
Production and processing of meat products.
Development and production of health and well-being focused food, beverage and pharmaceutical
products.
technology.
Processing of high pH natural spring water.
Development and commercialisation of end-to-end food traceability and anti-counterfeit
Development and commercialisation of a premium food e-commerce platform.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
There were no dividends provided for during the year ended 30 June 2017 (2016: $0.006 cents). Dividends
paid during the year ended 30 June 2017 were $2,179,447, paid on 31 October 2016, relating to the prior year
final dividend (2016: nil)
3 5
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 14 to 32.
There were no significant changes in the state of affairs of the consolidated entity during the year, not
otherwise disclosed in this annual report.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected the Group's
operations, results or state of affairs, or may do so in future years.
Refer to the operating and financial review on pages 14 to 32 for information on likely developments
and future prospects of the Group.
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
EPA’s
Beston Global Food Company Limited
30 June 2017
and Section 28(3) of the
14
.
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
15
30 June 2017
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT Experience and
expertise
Dr Roger Sexton is an investment banker and a company director. He has extensive
experience in the agricultural sector, having worked in senior positions with 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, 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 (now Productivity
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
17,853,205
Experience and
expertise
Other current
directorships
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.
• 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
3,476,445
3 6
Beston Global Food Company Limited
30 June 2017
16
DIRECTORS’ REPORT 3 7
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, is an Industry professor at Adelaide University 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
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 2017
17
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT 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
400,000
Experience and
expertise
Other current
directorships
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 is currently 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.
• Commissioner, Deputy Chair, Australian Fisheries Management Authority
• Director, Energy Consumers Australia
• Director- GPEX- Medical Education and Training
• Director, Environment Protection Agency SA
• Director, Australian Egg Corporation Limited
• Chair, Council Solutions - Shared services/ Procurement
Former directorships in
last 3 years
-
Special responsibilities
• Member of the audit and risk committee
Interests in shares
Ordinary shares
175,000
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 a
non-executive director of ASX listed company AusTin Mining Limited, non-executive director of Titomic
Limited, company secretary of Wilgena Resources Limited, non-executive director and company secretary of
the not-for-profit Unity Housing Company and director and treasurer of Variety SA.
The numbers of meetings of the Company's Board of Directors and of each Board committee held during the
year ended 30 June 2017, and the numbers of meetings attended by each Director were:
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
15
12
14
14
15
9
15
15
15
15
15
11
8
-
-
3
8
4
8
-
-
4
8
4
-
1
1
1
-
-
-
1
1
1
-
-
A = Number of meetings attended
during the year
B = Number of meetings held during the time the Director held office or was a member of the committee
3 8
Beston Global Food Company Limited
30 June 2017
18
Beston Global Food Company Limited
19
30 June 2017
DIRECTORS’ REPORT 3 9
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 a
non-executive director of ASX listed company AusTin Mining Limited, non-executive director of Titomic
Limited, company secretary of Wilgena Resources Limited, non-executive director and company secretary of
the not-for-profit Unity Housing Company and director and treasurer of Variety SA.
The numbers of meetings of the Company's Board of Directors and of each Board committee held during the
year ended 30 June 2017, and the numbers of meetings attended by each Director were:
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
15
12
14
14
15
9
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
15
15
15
15
15
11
8
-
-
3
8
4
8
-
-
4
8
4
-
1
1
1
-
-
-
1
1
1
-
-
Beston Global Food Company Limited
30 June 2017
19
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT The Directors present the Beston Global Food Company Limited 2017 remuneration report, outlining key
aspects of our remuneration policy and framework, and remuneration awarded this year. The remuneration
report has been audited.
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
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
Non-executive Chairman
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
S Ebert
S Hartwig
Chief Executive Officer
Chief Financial Officer
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.
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 2017, BPAM was paid $2,380,498 under this arrangement (2016: $1,595,980).
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 nil for the year ended 30 June 2017 (2016:
fee was waived).
4 0
Beston Global Food Company Limited
30 June 2017
20
DIRECTORS’ REPORT 4 1
The key metrics of the fee are summarised below:
Beston Global Food Company Limited
ASX All Ordinaries Accumulation Index
$0.410
$48,530.36
$0.225
$54,897.11
-45.12%
13.12%
The All Ordinaries Accumulation Index is a benchmark used to measure total investment performance, and is
largely used to compare the performance of professionally managed funds. It is a publicly available
measurement of the trend of price movements, incorporating the dividends paid.
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 12 months to 30 June 2017:
A x B x C
$103,351,403.00
-58.24%
17.5%
$0.00
Based on the share price performance during the period, no expense has been recognised for the year ended
30 June 2017.
The following table shows key performance indicators for the group over the last three years:
Net profit after tax ($000's)
Net tangible assets ($000's)
Share price at year end (cents)
Basic earnings per share (cents)
Dividends provided for ($'000)
(7,749)
120,572
22.5
(1.8)
-
(1,716)
107,124
40.4
(0.5)
2,179
(1,103)
20,342
-
(5.4)
-
Beston Global Food Company Limited
30 June 2017
21
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT 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.
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
D Taylor
$
60,000
60,000
40,000
40,000
40,000
39,999
40,000
40,000
40,000
9,333
32,667
-
-
30,778
2016
2016
2016
2016
2016
2016
2016
220,110
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
5,700
5,700
3,800
3,800
3,800
3,800
3,800
3,800
3,800
743
3,103
-
-
2,924
20,767
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
4,341,726
-
985,735
-
-
-
-
-
-
-
-
-
-
$
65,700
4,407,426
43,800
1,029,535
43,800
43,799
43,800
43,800
43,800
10,076
35,770
-
-
33,702
5,327,461
5,568,338
No share-based payment in the form of Founders' Rights options were granted during the year from Beston
Global Food Company Limited (2016: $140,418). Refer to part (f)(i) of this remuneration report for further
details.
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.
Dr Roger Sexton AM
Mr Stephen Gerlach AM
Ms Petrina Coventry
Mr Jim Kouts
Mr Ian McPhee AO PSM
Mr Catherine Cooper
In addition, Directors will be entitled to statutory superannuation.
$60,000
$40,000
$40,000
$40,000
$40,000
$40,000
4 2
Beston Global Food Company Limited
30 June 2017
22
DIRECTORS’ REPORT 4 3
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.
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
S Ebert
Total
4,648,274
660,060
57,142
142,857
-
-
-
800,000
-
-
-
400,000
175,000
-
12,404,931
2,816,385
-
-
-
-
401,194
17,853,205
3,476,445
57,142
142,857
400,000
175,000
401,194
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.
R N Sexton
S Gerlach
P Coventry
J Kouts
I McPhee
C Cooper
S Ebert
Total
12,404,931
2,816,385
-
-
-
-
401,194
-
-
-
-
-
-
-
(12,404,931)
(2,816,385)
-
-
-
-
(401,194)
-
-
-
-
-
-
-
No loans were made to KMP or their related parties during the year.
Beston Global Food Company Limited
30 June 2017
23
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT 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 Pty Ltd is controlled by a family member of Dr Sexton who has no pecuniary interest in Main &
Cherry Pty Ltd. During the year, the Group purchased wine stock from Main & Cherry Pty Ltd 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:
Cost of goods sold
Inventory
Trade payables to Main & Cherry Pty Ltd
There were no other transactions with KMP or their related parties during the year.
30 June
2016
$
1,533,329
16,435
586,131
4 4
Beston Global Food Company Limited
30 June 2017
24
DIRECTORS’ REPORT 4 5
As at the date of this report, there were no 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.
During the financial year, 16,023,704 founders' rights have been exercised by KMP and non KMP executives.
During the financial year, Beston Global Food Company Limited paid a premium of $26,309 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.
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.
No person has applied to the Court under section 237 of the
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.
for leave to bring
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under
section 237 of the
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.
This report is made in accordance with a resolution of Directors.
R N Sexton
Chairman
Beston Global Food Company Limited
30 June 2017
25
Beston Global Food Company Limited
26
30 June 2017
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT 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 Limited for the financial year ended
30 June 2017, 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
31 August 2017
4 6
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DIRECTORS’ REPORT Beston Global Food Company Limited
ABN 28 603 023 383
F INA N CI AL STA TEME NTS
Contents
Financial statements
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows (direct method)
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
4 7
Page
29
31
32
33
34
83
84
These financial statements are the consolidated financial statements for the Group consisting of Beston
Global Food Company Limited and its subsidiaries. A list of subsidiaries is included in note 13.
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
Level 9, 420 King William 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 14 and in the directors' report on page 34, both of which are not
part of these financial statements.
The financial statements were authorised for issue by the Directors on 31/08/2017. 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 2017
28
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT F I N A N C I A L S TAT E M E N T S
Sale of goods
Other revenue
Other income
Cost of sales of goods
Other expenses from ordinary activities
Selling and distribution
Administration
Other
Establishment costs
Finance income
Finance expenses
Share of profit/(loss) from associates
Income tax benefit
Notes
2
2
3(a)
3(c)
3(c)
9(a)
4
Exchange differences on translation of foreign operations
8(b)
Loss is attributable to:
Owners of Beston Global Food Company Limited
Non-controlling interests
Total comprehensive loss for the period is attributable to:
Owners of Beston Global Food Company Limited
Non-controlling interests
30 June
2016
$'000
15,999
2,963
18,962
3,022
(8,538)
(677)
(8,945)
(794)
(6,154)
(3,124)
1,465
(114)
1,351
(156)
(1,929)
209
(1,720)
(48)
(48)
(1,768)
(1,716)
(4)
(1,720)
(1,764)
(4)
(1,768)
4 8
Beston Global Food Company Limited
30 June 2017
29
4 9
Cents
(0.54)
(0.54)
(0.54)
(0.54)
Basic earnings per share
Diluted earnings per share
Basic earnings per share
Diluted earnings per share
20
20
20
20
Beston Global Food Company Limited
30 June 2017
30
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT F I N A N C I A L S TAT E M E N T S
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Biological assets
Deferred tax assets
Intangible assets
Trade and other payables
Current tax liabilities
Employee benefit obligations
Deferred tax liabilities
Employee benefit obligations
Contributed equity
Other reserves
Accumulated losses
Capital and reserves attributable to owners of Beston Global Food
Company Limited
Non-controlling interests
Notes
5(a)
5(b)
6(e)
6(b)
5(b)
13(c)
6(a)
6(c)
6(d)
6(f)
5(c)
4(a)
6(g)
6(d)
6(g)
8(a)
8(b)
8(c)
13(b)
30 June
2016
$'000
19,372
26,610
7,965
-
53,947
-
16,935
38,267
4,241
4,096
10,349
73,888
127,835
8,705
875
50
9,630
1,884
7
1,891
11,521
116,314
113,472
5,569
(3,670)
115,371
943
116,314
5 0
Beston Global Food Company Limited
30 June 2017
31
5 1
Notes
21,471
-
(1,954)
19,517
(1)
19,516
Profit/(loss) for the half-year
Other comprehensive income/(loss)
-
-
-
(48)
(1,716)
-
(1,716)
(48)
(4)
-
(1,720)
(48)
Contributions of equity, net of
transaction costs and tax
Non-controlling interests on acquisition
of subsidiary
Founders' Rights share reserve
8(a)
12
8(b)
92,001
-
-
92,001
-
-
5,617
5,617
-
-
-
-
92,001
-
5,617
97,618
-
92,001
948
-
948
948
5,617
98,566
Profit/(loss) for the half-year
Other comprehensive income/(loss)
-
-
-
(443)
(7,749)
-
(7,749)
(443)
(258)
-
(8,007)
(443)
Contributions of equity, net of
transaction costs and tax
Dividends provided for or paid
Founders' Rights share reserve
8(a)
11(b)
8(b)
28,455
-
5,608
34,063
-
-
(5,608)
(5,608)
-
(2,179)
-
(2,179)
28,455
(2,179)
-
26,276
-
-
-
-
28,455
(2,179)
-
26,276
Beston Global Food Company Limited
30 June 2017
32
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT F I N A N C I A L S TAT E M E N T S
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services
tax)
xxx
Interest paid
Income taxes paid
Interest received
Deposits to secure export shipments
Payments for acquisition of businesses, net of cash acquired
Payments for property, plant and equipment
Payments for intangible assets
Repayment of loans by related parties
Advances and redemptions of convertible notes
Payments for livestock
Payments for equity investments
Refund of deposits
Proceeds from sale of livestock
Proceeds from issues of shares
Transaction costs on issue of shares
Dividends paid to Company's shareholders
Proceeds from government grants
Loans from related parties
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Notes
9(a)
12
6(a)
6(f)
6(c)
8(a)
8(a)
11(b)
5(a)
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
5 2
Beston Global Food Company Limited
30 June 2017
33
N OTE S T O THE CONSOLIDATED
F IN ANCIA L ST ATEMENTS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Segment information
Revenue
Other income and expense items
Income tax benefit
Financial assets and financial liabilities
Non-financial assets and liabilities
Impairment
Equity
Cash flow information
Financial risk management
Capital management
Business combination
Interests in other entities
Contingent liabilities and contingent assets
Commitments
Events occurring after the reporting period
Related party transactions
Share-based payments
Remuneration of auditors
Earnings per share
Parent entity financial information
Summary of significant accounting policies
5 3
Page
54
35
37
56
38
57
39
58
40
59
43
62
49
68
51
70
53
72
54
73
57
76
57
77
58
78
61
80
62
81
62
81
62
82
65
84
66
85
66
85
68
87
69
88
Beston Global Food Company Limited
34
30 June 2017
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
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.
The segment information provided to the executive management committee for the reportable segments for
the year ended 30 June 2017 is as follows:
$'000
$'000
$'000
$'000
$'000
$'000
External customers
Other revenue
Finance income
Share of profit/(loss)
from associates
19,520
359
389
571
424
-
770
18
26
2,206
18
273
-
(274)
(380)
-
Cost of sales
Selling and distribution
Administration
Finance costs
Other expenses
(10,726)
(1,179)
(7,829)
(62)
(147)
(509)
(215)
(345)
-
-
(599)
(355)
(915)
(27)
(22)
(2,341)
(318)
(906)
-
(66)
-
-
-
-
-
(20)
(317)
(145)
-
759
836
559
-
(263)
(1,019)
(7,465)
62
(358)
Total segment assets
145,804
17,385
20,799
7,182
8,023
199,193
(52,884)
146,309
Total assets includes:
Capital expenditure
Total segment
liabilities
7,921
-
404
-
-
-
(72,597)
(9,932)
(2,738)
(2,598)
(6,453)
(94,318)
82,149
(12,169)
There was no impairment charge or other significant non-cash item recognised in 2017.
5 4
Beston Global Food Company Limited
30 June 2017
35
5 5
The segment information provided to the executive management committee for the reportable segments for
the year ended 30 June 2016 is as follows:
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
External customers
Other revenue
Share of profit/(loss)
from associates
11,869
620
4,664
44
4,968
25
-
(52)
(104)
Cost of sales
Selling and distribution
Administration
Other expenses
Establishment costs
Finance costs
(7,338)
(435)
(8,046)
(618)
-
(19)
(3,163)
(24)
(339)
(6)
-
-
(1,875)
(29)
(408)
(2)
-
-
391
240
-
(293)
(2)
(31)
(1)
-
-
1,197
-
-
(1,173)
(10)
(56)
(29)
-
-
Gain on bargain
purchase
Management fee from
associate
2,876
-
-
-
5
1,140
-
-
-
-
(5,267)
677
-
5,304
(177)
(65)
(138)
(6,154)
(95)
-
-
xxx
Total segment assets
Total segment
liabilities
124,225
18,595
21,291
3,585
9,526
177,222
(49,387)
127,835
(60,228)
(10,667)
(2,549)
(1,063)
(1,767)
(76,274)
64,753
(11,521)
There was no impairment charge or other significant non-cash item recognised in 2016.
Beston Global Food Company Limited
30 June 2017
36
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The Group derives the following types of revenue:
Sales revenue
Leasing income
Management fees
30 June
2016
$'000
15,999
1,823
1,140
2,963
18,962
Revenue is recognised for the major business activities using the methods outlined below.
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.
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.
See note 22(e) for the recognition and measurement of other revenue.
5 6
Beston Global Food Company Limited
30 June 2017
37
Other items
Government grants
Gain on bargain purchase
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
Operating lease expense
Fair value (gain)/loss on revaluation of assets held for sale
Interest income
Finance charges paid for financial liabilities
Net exchange losses on foreign currency borrowings
Notes
12
Notes
6(a)
6(c)
6(b)
Notes
10(a)
5 7
30 June
2016
$'000
141
-
2,881
3,022
30 June
2016
$'000
98
6,119
3,829
830
1,596
5
3
306
-
30 June
2016
$'000
1,465
1,465
(19)
(95)
(114)
1,351
Beston Global Food Company Limited
30 June 2017
38
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Current tax
(Increase) decrease in deferred tax assets
Increase (decrease) in deferred tax liabilities
Prior year adjustment
Loss from continuing operations before income tax
Tax at the Australian tax rate of 30.0% (2016 - 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
Overseas entity CFC Profits
Non-recognition of DTA on foreign revenue losses
Prior year under/over
Other non-deductible items
Sundry items
Fair value revaluation on Assets held for sale
Income tax benefit
Notes
6(d)
6(d)
Notes
30 June
2016
$'000
875
875
(1,804)
720
-
(1,084)
(209)
30 June
2016
$'000
(1,929)
(579)
360
(153)
47
(186)
-
281
-
21
-
-
(209)
30 June
2016
$'000
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
8(a)(i)
(1,421)
5 8
Beston Global Food Company Limited
30 June 2017
39
5 9
30 June
2016
$'000
935
281
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30.0%
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(d) for information about
recognised tax losses and significant judgements made in relation to them.
Cash at bank and in hand
30 June
2016
$'000
19,372
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 22(k) for the Group’s
other accounting policies on cash and cash equivalents.
Trade receivables
Provision for impairment (see note
10(b))
Receivables from related parties
Other receivables
Prepayments
Goods and services tax (GST)
receivable
Convertible notes receivable (ii)
30 June
2016
Non-
current
$'000
-
-
-
-
-
-
-
-
-
Current
$'000
12,299
-
12,299
1,282
1,696
111
2,638
8,584
26,610
Total
$'000
12,299
-
12,299
1,282
1,696
111
2,638
8,584
26,610
Beston Global Food Company Limited
30 June 2017
40
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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 10(b) and 22(l)
respectively.
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 was entitled to convert the note at the discretion of the Group, after satisfaction of certain objectives
and financing conditions. The convertible note was relinquished on 4 April 2017.
On 25 August 2015, the Group entered into convertible notes with potential to acquire a 40% interest in both
Scorpio Foods Pty Ltd and Australian Provincial Cheese Pty Ltd for an amount of $2,400,000 and $1,100,000
respectively. These notes were issued at a 9.5% interest rate, and at the discretion of the Group, may be
converted to that number of ordinary shares which equate to 40% of the investees. On 20 June 2016, the
convertible note terms were extended for a period of 12 months or until the investee companies meet their
forecasts.
On 11 August 2016, the Group entered into an additional convertible note with Scorpio Foods Pty Ltd for an
amount of $300,000. The note was issued at a 9.5% interest rate and converts to that number of shares which
equates 5% of the investee. The Group may convert the note at its discretion.
On 15 September 2016, the Group acquired the assets of Australian Provincial Cheese Pty Ltd and was repaid
the convertible note as part of the transaction. The convertible note with Scorpio Foods Pty Ltd was
unaffected by this transaction.
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.
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as
their fair value. For non-current receivables, the fair values are also not significantly different to their carrying
amounts.
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 10.
6 0
Beston Global Food Company Limited
30 June 2017
41
6 1
30 June
2016
$'000
7,343
147
22
770
-
369
54
8,705
Trade payables
Amounts due to associates
Goods and services tax (GST) payable
Accrued expenses
Government grants
Payroll liabilities
Other payables
Trade payables are unsecured and are usually paid within 30 days of recognition.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to
their short-term nature.
Beston Global Food Company Limited
30 June 2017
42
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Cost or fair value
1,824
264
64
-
-
2,152
Opening net book
amount
Acquisition of subsidiary
Additions
Disposals
Depreciation charge
Closing net book amount
1,824
17,959
3,753
-
-
23,536
264
2,902
225
-
(83)
3,308
64
1,778
10,051
-
(733)
11,160
Cost or fair value
Accumulated
depreciation
Net book amount
23,536
3,391
11,893
-
23,536
(83)
3,308
(733)
11,160
Opening net book
amount
Acquisition of subsidiary
Additions
Disposals
Assets classified as held
for sale
Depreciation charge
Closing net book amount
Cost
Accumulated
depreciation
Net book amount
23,536
-
-
-
(1,857)
-
21,679
21,679
-
21,679
3,308
-
848
-
(257)
(147)
3,752
11,160
374
7,248
(254)
(102)
(60)
18,366
3,975
19,155
(223)
3,752
(789)
18,366
-
-
150
-
(7)
143
150
(7)
143
143
-
155
(3)
-
(41)
254
302
(48)
254
-
-
135
(8)
(7)
120
127
(7)
120
120
-
74
-
-
(21)
173
201
(28)
173
2,152
22,639
14,314
(8)
(830)
38,267
39,097
(830)
38,267
38,267
374
8,325
(257)
(2,216)
(269)
44,224
45,312
(1,088)
44,224
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 22(o) for the other accounting policies relevant to property, plant and equipment.
6 2
Beston Global Food Company Limited
30 June 2017
43
6 3
During the year ended 30 June 2017 a contractual agreement was entered into for the disposal of the
Wellington farm, which comprised part of the Dairy segment operations. As at 30 June 2017, the terms of the
agreement had been formalised for the sale of a number of tangible and intangible assets relating to
Wellington, however settlement did not occur until after the balance date.
The assets relating to Wellington have been reclassified as held for sale as at 30 June 2017 and have been
separately disclosed within the consolidated balance sheet at their net realisable value, being their fair value
per the agreement less cost of disposal. A loss on revaluation has been recognised and separately disclosed
within Note 3 (b).
Assets classified as held for sale
Loss on FV of Assets held for sale
Assets reclassified from property, plant and equipment and intangible assets
Livestock
30 June
2016
$'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 2017, the Group held a total of 2,834 cattle (2016 - 2,675).
Opening balance
Increases due to purchases
Increases due to acquisitions of businesses
Decreases due to livestock sold
Change in fair value
Closing balance
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.
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.
Beston Global Food Company Limited
30 June 2017
44
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
Tax losses and offsets
Employee benefits
Accruals
Tax only assets
Total deferred tax assets
30 June
2016
$'000
2,031
17
21
2,027
4,096
The deferred tax assets include an amount of $3,543,145 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.
Property, plant and equipment
Intangible assets
Other
30 June
2016
$'000
720
1,164
-
1,884
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.
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.
6 4
Beston Global Food Company Limited
30 June 2017
45
6 5
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.
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.
Raw materials and stores
Finished goods – at cost
30 June
2016
$'000
445
7,520
7,965
The costs of individual items of inventory are determined using weighted average costs. See note 22(m) for
the Group’s other accounting policies for inventories.
Inventories recognised as expense during the year ended 30 June 2017 amounted to $14,437,941 (2016 -
$8,538,344).
There were write-downs of inventories during the year of $92,391 (2016 - nil).
Beston Global Food Company Limited
30 June 2017
46
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Cost
Opening net book
amount
Additions - acquisition
Additions - internal
development
Acquisitions of businesses
Closing net book amount
Cost
Accumulation
amortisation
Net book amount
Opening net book
amount
Additions - acquisition
Additions - internal
development
Acquisitions of businesses
Assets classified as held
for sale
Amortisation charge
Closing net book amount
Cost
Accumulated
amortisation
Net book amount
-
-
-
-
535
535
535
-
535
535
-
-
1,312
-
-
1,847
1,847
-
1,847
-
-
210
153
-
363
363
-
363
363
-
995
-
-
(105)
1,253
1,358
(105)
1,253
-
-
-
-
543
543
543
-
543
543
485
-
735
-
(283)
1,480
1,763
(283)
1,480
-
-
4,949
-
-
4,949
4,949
-
4,949
4,949
-
-
-
-
-
4,949
4,949
-
4,949
25
25
2
-
3,932
3,959
3,959
-
3,959
3,959
107
-
-
(27)
-
4,039
4,039
-
4,039
25
25
5,161
153
5,010
10,349
10,349
-
10,349
10,349
592
995
2,047
(27)
(388)
13,568
13,956
(388)
13,568
* Software includes capitalised development costs being an internally generated intangible asset.
For the year ended 30 June 2017, there was amortisation was recognised for the first time in relation to
software, as specific assets were deemed in use by the Group. The Group amortises IT development and
software from the date of first use, using the straight line method over 3-5 years.
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.
6 6
Beston Global Food Company Limited
30 June 2017
47
6 7
Customer contracts were acquired as part of the AQUAessence Pty Ltd and Australian Provincial Cheese Pty
Ltd business combinations. 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.
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. Refer to note 7 for further discussion relating to
impairment assessment.
Leave obligations (i)
30 June
2016
Non-
current
$'000
Current
$'000
Total
$'000
50
7
57
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
$136,579 (2016 - $49,604) 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.
Current leave obligations expected to be settled after 12 months
30 June
2016
$'000
15
Beston Global Food Company Limited
30 June 2017
48
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The Group performed its annual impairment test in June 2016 and 2017. The Group considered the
relationship between its market capitalisation and book value, among other factors, when reviewing for
indicators of impairment. At 30 June 2017, the market capitalisation of the Group was below the book value
of its equity, indicating a potential impairment of goodwill.
Goodwill which has been acquired through business combinations, and intangible assets with indefinite lives
such as lobster quota's and water licenses, are allocated to the Dairy, Seafood and Health CGUs, which are
operating and reporting segments for the purposes of impairment testing. Meat and Distribution CGUs have
no allocated goodwill or indefinite life intangibles, and as such have not been subject to impairment testing.
Assumptions have been tested in each of the segments, with conservative estimates applied to ensure each
of the CGUs are robust in their assessment of future cash flows.
The recoverable amount of the Dairy CGU, $84.3 million as at 30 June 2017, has been determined based on a
value in use calculation using cash flow projections from financial budgets and forecasts, approved by senior
management, and covering a five year period. The pre-tax discount rate applied to the cash flow projections
is 11.38% and the cash flows beyond the five-year period are extrapolated using a 2.1% growth rate that is the
same as the long-term average growth rate. It was concluded that the fair value less costs of disposal did not
exceed the value in use.
As a result of this analysis management did not identify impairment for this CGU.
The recoverable amount of the Seafood CGU, $23.5 million as at 30 June 2017, has been determined based
on a value in use calculation using cash flow projections from financial budgets and forecasts, approved by
senior management, and covering a five year period. The pre-tax discount rate applied to the cash flow
projections is 10.24% and the cash flows beyond the five-year period are extrapolated using a 2.1% growth
rate that is the same as the long-term average growth rate. It was concluded that the fair value less costs of
disposal did not exceed the value in use.
As a result of the analysis management did not identify impairment for this CGU.
The recoverable amount of the Health CGU, $29.1 million as at 30 June 2017, has been determined based on
a value in use calculation using cash flow projections from financial budgets and forecasts, approved by
senior management, and covering a five year period. The pre-tax discount rate applied to the cash flow
projections is 10.82% and the cash flows beyond the five-year period are extrapolated using a 2.1% growth
rate that is the same as the long-term average growth rate. It was concluded that the fair value less costs of
disposal did not exceed the value in use.
As a result of this analysis management did not identify impairment for this CGU.
6 8
Beston Global Food Company Limited
30 June 2017
49
6 9
The calculation of value in use for Dairy, Health and Seafood operating segments is most sensitive to the
following assumptions:
•
•
Discount rates; and
Growth rate estimates used to extrapolate cash flows beyond the forecast period
Discount rates represent the current market assessment of the risks specific to each CGU, taking into
consideration the time value of money and individual risks of the underlying assets that have not been
incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances
of the Group and its operating segments, and is derived from the Group's weighted average cost of capital
(WACC).
The WACC takes into account both debt and equity, despite the Group having no debt facility. The cost of
equity is derived from the expected return on investment by the Group's investors. Segment-specific risk is
incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly
available market data. Adjustments to the discount rate are made to factor in the specific amount and timing
of the future tax flows in order to reflect a pre-tax discount rate.
An increase of the pre-tax discount rate to 11.88% (i.e. +0.5%) in the Dairy CGU would result is a decrease in
the recoverable amount of $7.5 million. This decrease would not result in impairment.
An increase of the pre-tax discount rate to 10.74% (i.e. +0.5%) in the Seafood CGU would result is a decrease
in the recoverable amount of $1.6 million. This decrease would not result in impairment.
An increase of the pre-tax discount rate to 11.32% (i.e. +0.5%) in the Health CGU would result is a decrease in
the recoverable amount of $2.0 million. This decrease would not result in impairment.
Rates are based on published industry research. Management have intentionally used conservative growth
rate estimates when extrapolating cash flows beyond the forecast period. Growth rate estimates of 2.1% were
used across all CGUs. As growth rates are in line with long term growth rates, no sensitivities have been
performed.
Beston Global Food Company Limited
30 June 2017
50
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Ordinary shares - fully paid
Opening balance 1 July 2015
Share issue via Initial Public Offering - 28 August 2015
Less: Equity raising costs
Deferred tax credit recognised directly in equity
Exercise of Founders' Rights
Share issue via placement - 31 August 2016
Less: Equity raising costs
30 June
2016
Shares
363,241,052
30 June
2016
$'000
113,472
21,471
100,000
121,471
(9,420)
1,421
5,608
28,823
147,903
(368)
77,526,766
285,714,286
363,241,052
-
-
16,023,704
64,051,111
443,315,867
-
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.
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.
Share-based payments
Foreign currency translation
30 June
2016
$'000
5,617
(48)
5,569
7 0
Beston Global Food Company Limited
30 June 2017
51
7 1
30 June
2016
$'000
-
5,617
-
5,617
-
(48)
(48)
Opening balance
Issue of shares held by entity to employees
Employee Share Trust to employees
Balance 30 June
Opening balance
Currency translation differences arising during the year
Balance 30 June
The share-based payments reserve is used to recognise Founders' Rights issued to non-executive Directors.
This represents the fair value at grant date.
Exchange differences arising on translation of the foreign controlled entity are recognised in other
comprehensive income as described in note 22(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.
Movements in accumulated losses were as follows:
Opening balance
Net loss for the period attributable to equity holders of the parent
Dividends
Balance 30 June
Notes
11(b)
30 June
2016
$'000
(1,954)
(1,716)
-
(3,670)
Beston Global Food Company Limited
30 June 2017
52
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Notes
3(b)
13(c)
Loss for the year
Adjustment for
Depreciation and amortisation
Bad debts written off
Non-cash employee benefits expense - share-based payments
Net loss on disposal of fixed assets
Fair value adjustment to biological assets
Share of loss from associates
Foreign exchange loss
Transaction costs expensed on issue of shares
Interest Income
Interest expense
Gain on bargain purchase
Inventory write-off
Gain on disposal of livestock
Grant income received
Change in operating assets and liabilities:
(Decrease)/Increase in trade and other receivables
Increase in inventories
Increase in deferred tax assets
Increase in trade and other payables
(Decrease)/Increase in provision for income taxes payable
Increase in deferred tax liabilities
Increase in other provisions
Net cash inflow (outflow) from operating activities
30 June
2016
$'000
(1,720)
830
430
1,199
5
3
156
(95)
1,356
1,465
(19)
(2,881)
-
-
-
(16,366)
(7,577)
(1,804)
6,660
875
720
57
(16,706)
7 2
Beston Global Food Company Limited
30 June 2017
53
7 3
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.
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's exposure to foreign currency risk at the end of the reporting period, expressed in Australian
dollar, was as follows:
Trade receivables
Trade payables
30 June 2016
CNY
$'000
USD
$'000
-
(1,647)
-
-
During the year, the following foreign exchange related amounts were 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
THB
$'000
987
(28)
30 June
2016
$'000
(95)
(95)
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:
THB/AUD exchange rate - increase 10%
THB/AUD exchange rate - decrease 10%
CNY/AUD exchange rate - increase 10%
CNY/AUD exchange rate - decrease 10%
USD/AUD exchange rate - increase 10%
USD/AUD exchange rate - decrease 10%
2016
$'000
(99)
81
-
-
183
(150)
Beston Global Food Company Limited
30 June 2017
54
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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
19,372
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance date. At
30 June 2017, 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
2016
$'000
193
(193)
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.
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)).
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.
7 4
Beston Global Food Company Limited
30 June 2017
55
7 5
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 7 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
-
430
(430)
-
As at 30 June 2017, trade receivables of $4,137,375 (2016 - $1,228,643) 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
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.
Beston Global Food Company Limited
30 June 2017
56
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
There were no dividends provided for during the year ended 30 June 2017 (2016: $0.006 cents). Dividends
paid during the year during the year ended 30 June 2017 were $2,179,447, paid on October 31 2016, relating
to the prior year final dividend (2016: nil).
On 15 September 2016, the Company acquired the manufacturing assets of Australian Provincial Cheese Pty
Ltd ("APC") necessary to continue operation of its business, namely production of the Grange Peak and
Mable's cream cheese products. The acquisition has been accounted for using the acquisition method, which
has given rise to goodwill on acquisition. The financial statements include the results for APC for the year
from acquisition date.
The award-winning Grange Peak and Mable's products are distributed in both Australian and overseas
markets. The Group will continue the production and distribution of these products through integration of
APC's manufacturing assets with Beston Pure Dairies Pty Ltd's Murray Bridge factory.
Details of the purchase consideration, the nets assets acquired and goodwill are as follows:
xxx
Purchase consideration:
Cash paid
Settlement of debtors
Settlement of loans
Settlement of convertible note
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
xxx
Plant and equipment
Intangible assets: Customer contracts
Net identifiable assets acquired
xxx
Add: Goodwill acquired
Less: Deferred Tax Liability recognised on acquisition of Customer contracts
Net assets acquired
xxx
xxx
The acquired business contributed revenues of $841,528 and a net loss of $527,060 to the Group for the
period from 15 September 2016 to 30 June 2017. The loss is partially due to one-off setup and integration
costs, as well as inefficiencies in the manufacturing line. It is anticipated that these will be rectified in the
subsequent financial year.
7 6
Beston Global Food Company Limited
30 June 2017
57
7 7
It is impractical to include what the revenue and profit of the Group would have been for the half-year if the
acquisition had occurred at the beginning of the period, since APC had to stall operations prior to acquisition
and the information is not readily available.
Acquisition-related costs of $30,929 are included in other expenses in the consolidated statement of
comprehensive income and in operating cash flows in the consolidated statement of cash flows.
The Group’s principal subsidiaries at 30 June 2017 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.
Beston Global Food
Company Limited
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 Pty Ltd
Australia
Australia
Australia
Australia
Thailand
Hong Kong
China
Australia
Australia
Interest in:
Share capital
Retained earnings
2016
%
100.0
100.0
100.0
100.0
98.0
100.0
100.0
100.0
51.0
2016
%
- Food services
- Dairy farming
- Dairy production
- Sales and distribution
2.0 Sales and distribution
- Sales and distribution
- Sales and distribution
- Technology developer
49.0 Water products
30 June
2016
$'000
948
(5)
943
Beston Global Food Company Limited
30 June 2017
58
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Accumulated NCI
Revenue
Profit for the period
Profit/(loss) allocated to NCI
< blank header row >
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
30 June
2016
$'000
491
483
8
1,961
5
1,956
1,964
963
30 June
2016
$'000
61
30
30
15
30 June
2016
$'000
49
(2,256)
2,224
17
7 8
Beston Global Food Company Limited
30 June 2017
59
7 9
2016
%
Ferguson
Australia Pty Ltd
Neptune
Bio-Innovations
Pty Ltd
Australia
32
Associate
Equity method
Australia
20
Associate
Equity method
52
2016
$'000
4,997
11,938
16,935
(1)
(2)
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. This
investment is contained within the Seafood segment of the Group.
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. This investment
is contained in the Health segment of the Group.
The above entities are private companies with no quoted price available.
Cash and other cash equivalents
Other current assets
Total current assets
Blank header
< blank header row >
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
< blank header row >
Financial liabilities (excluding trade payables)
Other non-current liabilities
Total non-current liabilities
< blank header row >
< blank header row >
30 June
2016
$'000
44
2,428
2,472
6,310
2,347
2,488
4,835
431
80
511
30 June
2016
$'000
5,938
891
6,829
3,750
441
1,676
2,117
79
185
264
Beston Global Food Company Limited
30 June 2017
60
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Opening net assets
(Loss)/profit for the period
Distributions
Closing net assets
Group share in %
Group's share in $
Goodwill
Carrying amount
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
< blank header row >
30 June
2016
$'000
4,875
(764)
(675)
3,436
32.0%
1,131
3,866
4,997
30 June
2016
$'000
54,288
5
(331)
(329)
(58)
(764)
-
30 June
2016
$'000
8,721
(523)
-
8,198
20.0%
1,640
10,298
11,938
30 June
2016
$'000
4,434
160
(418)
(66)
-
(523)
-
The Group had no contingent assets or liabilities at 30 June 2017 (2016 - nil).
8 0
Beston Global Food Company Limited
30 June 2017
61
8 1
The Group leases its offices under non-cancellable operating leases expiring within 3 years. The Group also
leases farm equipment under non-cancellable leases expiring within 5 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
79
51
130
The Group has finance leases and hire purchase contracts for various items of plant and machinery. The
Group’s obligations under finance leases are secured by the lessor’s title to the leased assets. Future
minimum lease payments under finance leases and hire purchase contracts, together with the present value
of the net minimum lease payments are, as follows:
Within one year
Later than one year but not later than five years
30 June
2016
$'000
-
-
-
At 30 June 2017, the Group had commitments of $8,044,016 relating to milk supply purchases from farmers.
These milk purchase commitments have terms of between 1 and 3 years.
At 30 June 2017, the Group had commitments of $7,008,614 relating to equipment capital expenditure. These
capital expenditure commitments have terms of less than 1 year.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected the Group's
operations, results or state of affairs, or may do so in future years.
Interests in subsidiaries are set out in note 13(a).
Beston Global Food Company Limited
30 June 2017
62
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
The following transactions occurred with related parties:
Sales of goods to investee entities
Management fees from investee entities
Remuneration received for directors services
Interest income from investee entities
Purchases of electronic equipment from other related parties
Purchases of various goods and services from related parties
Management fees to the Investment Manager
Reimbursement of costs associated with business formation
30 June
2016
$
220,110
20,767
-
-
5,467,879
5,708,756
30 June
2016
$
-
1,140,000
136,562
778,662
-
(4,260,089)
(1,595,980)
(640,000)
The Group entered into the following transactions with related parties:
•
•
•
•
•
•
•
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
The following balances are outstanding at the end of the reporting period in relation to transactions with
related parties:
8 2
Beston Global Food Company Limited
30 June 2017
63
8 3
30 June
2016
$
1,705,312
(1,054,389)
30 June
2016
$
18,003
14,500
-
32,503
Current receivables
Current payables
Beginning of the year
Loans advanced
Loans converted to sales proceeds
End of year
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.
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.
The key metrics of the fee are summarised below:
Beston Global Food Company Limited
ASX All Ordinaries Accumulation Index
$0.4100
$48,530.36
$0.225
$54,897.11
-45.12%
13.12%
The All Ordinaries Accumulation Index is a benchmark used to measure total investment performance, and is
largely used to compare the performance of professionally managed funds. It is a publicly available
measurement of the trend of price movements, incorporating the dividends paid.
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 2017:
A x B x C
$103,351,403.00
-58.24%
17.5%
$0.00
Beston Global Food Company Limited
30 June 2017
64
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
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 2017, the Group has recognised a share-based payment reserve of $8,524 (2016:
$5,616,721) in relation to the rights. The share-based payments expense in the consolidated statement of
comprehensive income is nil (2016: $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.
These Founders' Rights were exercised on 7 December 2016. The share price on the date of exercise was
$0.35.
8 4
Beston Global Food Company Limited
30 June 2017
65
8 5
Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expense were as follows:
Founders' Rights
30 June
2016
$
1,198,780
During the year the following fees were paid or payable for services provided by the auditor of the entity and
its related practices:
Audit and review of financial statements
Tax compliance services
Total remuneration of Ernst & Young
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
2016
$
94,738
65,896
160,634
30 June
2016
Cents
(0.54)
-
(0.54)
Beston Global Food Company Limited
30 June 2017
66
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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)
The Founders' Rights per note 18(a) have not been included in the diluted earnings per share calculation as
they are anti-dilutive for the period presented.
Loss attributable to the ordinary equity holders of the Company used in
calculating basic earnings per share:
From continuing operations
From discontinued operations
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
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings per share
30 June
2016
$'000
(1,716)
-
(1,716)
(1,716)
(1,716)
2016
Number
317,839,878
8 6
Beston Global Food Company Limited
30 June 2017
67
8 7
30 June
2016
$'000
29,745
88,337
118,082
2,380
1
2,381
115,701
113,472
5,617
(3,388)
-
-
115,701
(2,392)
(2,392)
The individual financial statements for the parent entity show the following aggregate amounts:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Reserves
Share-based payments
Accumulated losses
Dividends paid
Foreign currency translation reserve
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016.
Beston Global Food Company Limited
30 June 2017
68
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
This note provides a list of the significant accounting policies adopted in the preparation of these
consolidated financial statements to the extent they have not already been disclosed in the other notes
above. 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.
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
. Beston Global Food Company Limited is a for-profit entity for the purpose of preparing the financial
statements.
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).
These financial statements have been prepared under the historical cost basis, except for Biological Assets
which are recognised at fair value less costs to sell.
As a consequence of an IFRS Interpretation Committee (IFRIC) agenda decision issued in November 2016,
management has amended its accounting policy to recognise a deferred tax liability on indefinite life
intangibles acquired as part of a business combination. The amendment resulted in an increase of $1.2
million to goodwill and deferred tax liabilities as at the beginning of the earliest comparative period.
All other accounting policies are consistent with those applied in the previous financial year.
The Group has applied the following standards and amendments for the first time in their annual reporting
period commencing 1 July 2016:
•
AASB 2014-4
There has been no material impact to the Group's results or disclosures as a result of these new standards.
The adoption of these amendments did not have any impact on the current period or any prior period and is
not likely to affect future periods.
The Group also elected to adopt the following amendments early:
•
•
AASB 2016-2
, and
As these amendments merely clarify the existing requirements, they do not affect the Group’s accounting
policies or any of the disclosures.
8 8
Beston Global Food Company Limited
30 June 2017
69
8 9
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.
The Group carries its biological assets at fair value, with changes in fair value being recognised in the
statement of comprehensive income. The Group engaged an independent valuation specialist to assess the
fair value of biological assets at 30 June 2017. A valuation methodology based on fair value less costs of
disposal was used. Refer to note 6 (c) for further disclosures.
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The value in use
calculation is based on a Discounted Cash Flow ("DCF") model, with cash flows derived from the forecast for
the next five years, and do not include restructuring activities that the Group is not yet committed to or
significant future investments. These estimates are most relevant to goodwill and other intangible assets with
indefinite useful lives recognised by the Group. The key assumptions used to to determine the recoverable
amount for the different CGUs are disclosed and further explained in note 7.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will
be available against which the losses can be utilised. Management judgement is required to determine the
amount of deferred tax asset that can be recognised, based on the likely timing and the level of future taxable
profits, together with future tax planning strategies. Further details on deferred tax balances are disclosed in
note 6 (d).
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2017 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.
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.
AASB 9
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.
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 of the Group’s asset
and liabilities.
● Classification and measurement
of the Group’s financial assets
and liabilities is expected to
remain consistent under the
new standard.
● At 30 June 2017, 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.
Beston Global Food Company Limited
30 June 2017
70
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
AASB 15
AASB 16
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.
While the Group has yet to
undertake a detailed assessment of
the impact of AASB 15, the Group
does not expect there to be a
material impact for the Group’s
revenue from customers.
● All revenue from contracts with
customers recognised by the
Group as at 30 June 2017 relates
to the sale or resale of goods,
with a single performance
obligation.
● Satisfaction of the performance
obligation occurs at the point in
time of transfer of ownership of
the goods to the customer.
● Transaction price is generally a
fixed consideration. No
allocation of variable
consideration is needed.
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, 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.
While the Group has yet to
undertake a detailed assessment of
the impact of AASB 16, the Group
does not expect there to be a
material impact of the Group’s asset
and liabilities.
● The standard will affect primarily
the accounting for the Group’s
operating leases. At the
reporting date, the Group has
lease commitments currently
disclosed as operating leases of
$0.37 million (refer to note 15)
over a period of 2 years.
● Some commitments disclosed
relate to milk purchases will not
qualify as leases under AASB 16.
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.
Standards that are not yet effective that would be expected to have an immaterial impact on the entity in the
current or future periods include:
9 0
Beston Global Food Company Limited
30 June 2017
71
9 1
•
•
•
•
AASB 2016-2
AASB 2016-5
AASB Interpretation 22
IFRIC Interpretation 23
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 2017 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.
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 22(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 transferred asset. 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
statement of comprehensive income, consolidated statement of changes in equity and consolidated balance
sheet respectively.
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 between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting (see (iii) below), after initially being
recognised at cost.
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 22(j).
Beston Global Food Company Limited
30 June 2017
72
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
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.
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.
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 statement of profit or loss and 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.
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.
9 2
Beston Global Food Company Limited
30 June 2017
73
9 3
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.
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.
The income tax expense or credit 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.
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.
Beston Global Food Company Limited
30 June 2017
74
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
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.
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 15). 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.
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.
9 4
Beston Global Food Company Limited
30 June 2017
75
9 5
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 acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognised in profit or loss.
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 of disposal 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.
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.
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 10(b) for a description of the Group's impairment policies.
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.
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.
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BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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 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 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.
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.
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.
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.
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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, held-to-maturity investments and loans and receivables
are calculated using the effective interest method is recognised in the statement of profit or loss as part of
revenue from continuing operations.
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.
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 7.
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.
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BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
The Group's accounting policy for land and buildings is explained in note 6(a). 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(a).
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 22(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.
Goodwill is measured as described in note 22(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).
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.
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
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9 9
•
•
•
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.
Refer to note 6(f) for details about amortisation methods and periods used by the Group for intangible assets.
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.
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 consolidated balance sheet.
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 balance sheet if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting period, regardless of
when the actual settlement is expected to occur.
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.
Beston Global Food Company Limited
30 June 2017
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BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
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.
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.
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.
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.
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.
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.
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.
1 0 0
Beston Global Food Company Limited
30 June 2017
81
1 0 1
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.
The financial information for the parent entity, Beston Global Food Company Limited, disclosed in note 21
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 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.
Beston Global Food Company Limited and its wholly-owned Australian controlled entities have implemented
the tax consolidation legislation.
Refer to note 4 for further details.
Beston Global Food Company Limited
30 June 2017
82
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT DIRECTORS’ DECLARATION
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 47 to 101 are in accordance with the
, including:
(i)
(ii)
(iii)
complying with Accounting Standards, the
mandatory professional reporting requirements, and
and other
complying with International Financial Reporting Standards , as disclosed in note 22(a)(i), and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2017
and of its performance for the financial year ended on that date, and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
This declaration has been made after receiving the declarations required to be made to the directors by the
Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the
for the financial year ended 30 June 2017.
This declaration is made in accordance with a resolution of Directors.
R N Sexton
Director
Adelaide
31/08/2017
1 0 2
Beston Global Food Company Limited
83
30 June 2017
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
1 0 3
Independent Auditor's Report to the Members of Beston Global Food
Company Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Beston Global Food Company Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the
financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2017 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
1. Accounting for Deferred Tax Assets
Why significant
How our audit addressed the key audit matter
At 30 June 2017 the Group held net deferred
tax assets of $3,710,000. The determination of
deferred tax assets is judgmental due to the
requirement to estimate future taxable profits.
The estimation of future taxable profits is
necessary in order to determine if the deferred
tax assets are recoverable.
The judgments related to deferred tax assets are
outlined in note 22(g) and note 6(d).
We involved our tax specialists to assess the Group’s
calculation of deferred tax assets.
We evaluated the Group’s forecast taxable income
model methodology, assumptions and estimates. We
assessed the likelihood of future taxable income to
support the recognition of deferred tax assets. We
examined the forecasts of taxable income, and
checked that they were able to be reconciled with the
Group’s budgets approved by the Board. We also
considered the forecast against those used in the
impairment assessment discussed within section 2
below.
We assessed the consolidated entity’s disclosures
about income taxes which are included within note
22(g) and note 6(d).
2.
Impairment Assessment of Non-current Assets
Why significant
How our audit addressed the key audit matter
In accordance with Australian Accounting
Standards, the Group assesses throughout the
reporting period whether there is any indication
that an asset may be impaired. Additionally,
intangible assets with indefinite useful lives and
goodwill balances are tested for impairment
annually. Impairment testing was performed by
the Group at 30 June 2017 for each cash
generating unit carrying goodwill, indefinite life
intangibles or where indicators of impairment
were evident as disclosed within note 7.
We evaluated the assumptions and methodologies
used by the Group in the impairment assessment. In
doing so we:
-
-
-
assessed the judgments used in the
determination of cash generating units;
assessed the forecasted cash flows which we
reconciled to the Board approved budget for
the year ending 2018; and
assessed the inputs used to formulate the
discount rates, growth rates and terminal
values. We compared these assumption to
external market data where possible.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
1 0 5
Why significant
How our audit addressed the key audit matter
Impairment testing is complex and judgmental
since it is based on assumptions and estimates of
future performance. Key assumptions,
judgments and estimates used in the Group’s
impairment testing have been set out at note 7.
We involved our valuation specialists to assist in the
impairment assessments of each cash generating
unit.
Furthermore, we assessed the adequacy of the
financial report disclosures regarding the impairment
assessment.
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2017 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
1 0 7
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in page
year ended 30 June 2017.
44
4
0 to
of the directors' report for the
In our opinion, the Remuneration Report of Beston Global Food Company Limited for the year
ended
30 June 2017, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the
Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Mark Phelps
Partner
Adelaide
31 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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 8 September 2017.
Ordinary Share Capital
443,315,867 fully paid Ordinary Shares are held by 3,902 individual Shareholders.
All Ordinary Shares carry one vote per share.
There are no restricted securities or securities subject to voluntary escrow.
There is no current on-market buyback.
Distribution of Equity Securities
The number of shareholders, by size of holding, in each class are:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
149
735
712
2031
275
There are 418 holders of unmarketable parcels of Shares.
Substantial Shareholders
(As disclosed in substantial holding notices given to the Company)
Name
Australia Aulong Auniu Wang Food Holdings Pty Ltd
Kunteng Pte Ltd
I.G. Investment Management Ltd
Allianz SE
Ordinary Shares
Number of
Shares Held
Percentage of
Issued Shares
66,894,345
64,051,111
44,007,117
21,955,164
14.9%
14.99%
9.93%
6.04%
1 0 8
1 0 9
Twenty largest holders of Quoted Equity Securities
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
KUNTENG PTE LTD
AUSTRALIA AULONG AUNIU WANG FOOD HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
BLUE RIDGE HOLDINGS PTY LTD
FIRST BOOM INVESTMENTS LIMITED
FIRST BOOM INVESTMENTS LIMITED
BNP PARIBAS NOMS PTY LTD
HISHENK PTY LTD
S GERLACH PTY LTD
PERSHING AUSTRALIA NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
ABORIGINAL CONTRACTING WA PTY LTD
MR ANGELO CARBONE
MR HUI SONG
HWR NOMINEES PTY LTD
MR IAN GREGORY GRIFFITHS & MRS SUSAN JANE GRIFFITHS
MR PETER VERHOEVEN
MR MICHAEL LOMBARDOZZI
BEACON LIGHT (SA) PTY LTD
DREELAN NOMINEES PTY LTD
Number of
Shares Held
Percentage of
Issued Shares
82,452,417
64,051,111
54,449,834
40,676,118
16,611,905
11,428,572
8,333,334
7,523,240
4,100,000
2,816,385
2,682,307
2,546,522
1,568,212
1,220,989
1,181,194
1,000,000
838,430
800,000
800,000
714,286
712,500
18.60%
14.45%
12.28%
9.18%
3.75%
2.58%
1.88%
1.70%
0.92%
0.64%
0.61%
0.57%
0.35%
0.28%
0.27%
0.23%
0.19%
0.18%
0.18%
0.16%
0.16%
Business Objectives and Use of Cash
Beston Global Food Company Limited has used Cash and Cash Equivalents held at the time of listing
in a manner consistent with its stated business objectives.
BESTON GLOBAL FOOD COMPANY LIMITED - 2017 ANNUAL REPORT