Annual Report 2021 bestonglobalfoods.com.au BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 1 2 4 6 16 18 19 20 22 24 33 34 69 70 75 76 Contents Our year – FY21 summary Health & Nutritionals Letter from the Chairman and Chief Executive Officer Capital management Environment, health and safety, social and corporate governance Beston Technologies Directors Executives Directors’ report Auditor’s independence declaration Financial report Directors’ declaration Independent auditor’s report ASX additional information Corporate directory IMAGE Finished products are stored in a modern warehouse and distribution centre within the Murray Bridge production facility bestonglobalfoods.com.au 2 Our year – FY21 summary Achievement of our strategic imperatives is transforming the Company Lactoferrin Expansion Initiated stages 1 and 2 of the Lactoferrin expansion project to bring total capacity to 25 T from 180 ML milk; two extraction columns installed. Dairy Farm Sales Sold the dairy farms and redeployed the capital to pay down debt and increase ROCE. New Milk Supply ~30% increase in milk supply from 1 September 2020. Building Dairy Experience Key experience and skills in operations and nutraceuticals added to the dairy business. SA Government Grant Awarded $2 million South Australian Government grant for Stage 2 Lactoferrin expansion and secured second column for this stage. Jervois Infrastructure Review Jervois infrastructure review identified requirements for the facility to operate more reliably as it moves toward 24/7 operations. Initiation of Rights Issue $15.6m rights issue (completed in February) to fund Stage 2 Lactoferrin expansion and further upgrades of infrastructure at the Jervois facility. IMA Termination Agreement to terminate the IMA received shareholder approval at EGM held on 28 May 2021; Termination on 28 August 2021. Beston Global Foods Company Limited Listed in 2015 and headquartered in Adelaide, South Australia, Beston (ASX:BFC) is a proud Australian company taking the best of Australian dairy and meat produce to the world with fresh milk supplied by our valued farmers. Our dairy operations are centred in South Australia with 2 factories located at Murray Bridge and Jervois. Our meat operations are based at Shepparton in Victoria. We have approximately 300 employees and 45 dairy farmer suppliers. Our products are mainly sold in Australia, Philippines, Vietnam, Malaysia and China. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 3 Strong growth in our core dairy business to continue in FY22. Milk supply 180 150 120 90 60 30 0 ) s e r t i l f o s n o i l l i m ( l y p p u s k l i M 0 3 e n u J 8 1 0 2 0 3 e n u J 9 1 0 2 0 3 e n u J 0 2 0 2 0 3 e n u J 1 2 0 2 0 3 e n u J 2 2 0 2 Capacity Supply Forecast supply (range) Lactoferrin production ) s e n n o t ( n o i t c u d o r p n i r r e f o t c a L 25 20 15 10 5 0 Mozzarella production 0 3 e n u J 8 1 0 2 0 3 e n u J 9 1 0 2 0 3 e n u J 0 2 0 2 0 3 e n u J 1 2 0 2 0 3 e n u J 2 2 0 2 Capacity Production Forecast production (range) 20,000 15,000 10,000 5,000 0 0 ) s e n n o t ( n o i t c u d o r p a l l a e r a z z o M Revenue ) s n o i l l i m $ ( e u n e v e R 200 150 100 50 0 0 3 e n u J 8 1 0 2 0 3 e n u J 9 1 0 2 0 3 e n u J 0 2 0 2 0 3 e n u J 1 2 0 2 0 3 e n u J 2 2 0 2 0 3 e n u J 8 1 0 2 0 3 e n u J 9 1 0 2 0 3 e n u J 0 2 0 2 0 3 e n u J 1 2 0 2 0 3 e n u J 2 2 0 2 Capacity Production Forecast production (range) Dairy Meat Other Forecast revenue (range) FY21 result impacted by operational challenges... m $ 10 5 0 -5 -10 -15 -20 -25 Operational challenges $13.3 Operational challenges $13.3 1.81.8 4.44.4 2.42.4 4.04.0 3.23.2 One-off costs $5.2M One-off costs $5.2M 3.13.1 A M I -21.9-21.9 y r o t u t a t S T A P N 1 2 Y F 1.51.5 t n e m r i a p m I 0.60.6 i m s v i t c a l r e d o h e r a h S -16.7 -16.7 t l u s e r g n i t a r e p O 8.98.9 t n a P l s n o i t a r e p O For further information, refer to the Review of Operations on page 9 / d n a m e D 9 1 - I D V O C G F P s n o i t a r e p O s e a s l n i r r e f o t c a L t s o C s g n v a s i T A P N e n i l e s a B 1 2 Y F ... which have been rectified heading into FY22 4 Health & Nutritionals People across the world are looking for new ways to support their well-being and immunity, especially amidst this COVID-19 pandemic. Providing safe and sustainable products to meet that demand is a key focus for BFC. Humans have been drinking cow’s milk, making cheeses and generally consuming dairy products for millennia. This is because it is evidentially good for us. There are many components of milk that have long been studied which have real benefits in supporting healthy living. above, there are a number of components of milk that have real benefits in supporting healthy living. Over the next 12 or so months, we will be developing business cases to determine the nature of our next investment in a wider range of dairy nutraceuticals production. In July 20, BFC initiated a major expansion of its dairy nutritionals business. It replaced an old technology, low yielding Lactoferrin plant with a new high yielding Lactoferrin plant using the latest available technology supplied by Cytiva, the world’s leading Lactoferrin technology provider. The new plant is online and is producing as expected. The benefits of Lactoferrin in supporting human immune- health are well studied and confirmed. It plays a key role in the human body by preventing and fighting viral and bacterial infection. Technically, Lactoferrin is a whey protein found in small quantities in milk. It is an iron-binding glycoprotein and is one of a number of beneficial proteins found in milk. Bovine Lactoferrin is almost identical in structure as human Lactoferrin and therefore is an effective supplement for human consumption. Lactoferrin in humans is found in tears, saliva and other secretions, and is in high concentrations in breast milk to support baby’s development. When you get sick, your body naturally produces more Lactoferrin to combat infection. Taking Lactoferrin as a health supplement has been shown to boost immunity and support the natural inflammatory response in the human body. Market uses of Lactoferrin include in infant formula, health supplements, immune support in medical settings e.g. cancer treatment, nutritional foods, and personal care products. Our short term focus is on ensuring the newly commissioned Lactoferrin plant continues to consistently produce products that meet our customers’ various specifications. Different customers have technical requirements reflecting their particular use. Consistently meeting our customers’ specifications allows us to enter into long term supply arrangements. Developing our processes to provide a broader range of products with differing specifications allows us to access a range of customers across all markets. Our plant currently produces >95% purity Lactoferrin which meets current market requirements. However, we expect in the next few years the market will increasingly demand even higher grades of Lactoferrin. With the latest available technology from Cytiva at the heart of our Lactoferrin plant, we are well placed and are pro-actively working to refine our processes further to be able to produce High Purity Lactoferrin >98% purity. Being able to offer a high purity product, one that is not readily available, will provide a further competitive advantage for the company. However, we have also begun planning for the next expansion of our nutraceutical product range. As noted We have already decided to commence production of Lactoperoxidase later in FY22. When extracting Lactoferrin, Lactoperoxidase is also removed from milk but as yet, is not captured for further processing. Lactoperoxidase is an enzyme that also has anti-microbial properties. Its uses include cosmetics, oral hygiene and medical cleaning products. We have determined that with a modest investment in additional equipment, we will be able to capture the Lactoperoxidase and offer this product to the market later in FY22. In volume terms, we estimate being able to capture Lactoperoxidase at about one-third of the volume of Lactoferrin produced. Whilst not as valuable as Lactoferrin in the market, the incremental extraction cost is quite low. Other key products we will be considering are: • Whey Concentrates – D40, D90, WPC, WPI: Concentrating and purifying the whey proteins in a powder for use in infant formula, health and sports powders and drinks. • Alpha-lactalbumin: Also used in infant formula as this protein is abundant in human breast milk. • Immunoglobulins – lgG, IgD, IgE, IgF, IgM: Boosts the immune function and promotes gut health by binding some pathogenic bacteria. • Osteopontin: Found in high levels in human breast milk but in low concentration in bovine milk, this glycoprotein has strong calcium binding properties and is used in treating bone disorders. • Bovine Serum Albumin: It has 538 amino acids in its structure and is used as a media in laboratories as it has fatty acid binding properties. • Beta-lactoglobulin: It is rich in branched chain amino acids (BCAA) and is used in sports nutrition as it aids in muscle repair and growth. Each of these components of milk have different investment and operational requirements that will be evaluated, along with market opportunities to determine where we will focus our next investment to continue to extract more value from every litre of milk we process. These investments are a key part of our business plan in evolving our dairy division into a health and nutrition business over the medium term and creating value for shareholders by providing consumers safe and sustainable foods aimed at supporting people’s optimal nutrition and healthy lifestyles. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 5 In July 20, BFC initiated a major expansion of its dairy nutritionals business with a new high yielding Lactoferrin plant using the latest available technology supplied by Cytiva, the world’s leading Lactoferrin technology provider. 6 Letter from the Chairman and CEO Dear Valued Shareholder, FY21 HIGHLIGHTS Our report on the financial year ended 30 June 2021 (“FY21”) marks the significant progress made by your company, Beston Global Food Company Ltd (“Beston” or the “Company”) as we continue to transform the core dairy business. We set out at the beginning of the year with a very full strategic agenda. This work has been successfully executed. Even so, the year was a tale in two parts. Despite the significant achievements of the year on all our strategic initiatives, we faced operational issues at the Jervois factory. Whilst these issues have been rectified, and we head into the 2022 financial year (“FY22”) in a sound position, the Company’s financial results for the year under review were dominated by the impact of these operational issues as well as by the consequences of COVID-19 on sales and logistics (which affected both revenues and costs as explained below). We have released our operating guidance for the FY22 which we believe should provide confidence that FY22 will be a profitable year. In short we have: • The milk needed to meet our production targets, • The newly expanded Lactoferrin plant up and running well, • Some 85% of FY22 Mozzarella production accounted for with committed contracts and repeat customers, • Sorted out the Teflon issues within the Mozzarella plant, • A reliability team with a proactive plan to continuously improve the Jervois operations, • The people (numbers and skills) to deliver our plans, and • The funding in place to support the delivery of our plans. The year just completed was a very busy one. We have achieved a great deal in continuing to transform the Company and grow our dairy business to the point where it will achieve sustainable profitability. Our key strategic actions for the year have all been delivered. They included: • Initiating Stage 1 of the Lactoferrin expansion project. • Sale of the dairy farms and redeployment of capital to pay down debt. • • Increasing milk supply by approximately 30% to drive long term growth including Lactoferrin production. Initiating Stage 2 of the Lactoferrin project expansion on award of the $2 million South Australian government grant and securing of the second column required for this stage. • Completing a review of Jervois infrastructure requirements to enable the facility to operate more reliably at higher throughput rates on a 24/7 basis. • Added key dairy experience to the management team including Frank Baldi as Chief Operating Officer and Tina Li as General Manager, Nutritionals, along with a number of other key supervisory appointments at our core dairy operations. • Completing a rights issue of $15.6 million to provide the funds for accelerating Stage 2 of the Lactoferrin expansion, and further upgrades of infrastructure across the Jervois site. • Shareholder approval gained to terminate the Investment Management Agreement, and internalise the management arrangements, effective 28 August 2021. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 7 These achievements have positioned Beston well for the future. With the major operational issues suffered in FY21 now rectified, we are forecasting positive operating cashflows and a bottom line profit in FY22. The following table details the progress made against our five strategic imperatives: Strategic Imperative Grow Milk Supply Capacity Utilisation Status 146 million litres (“ML”) of milk received in FY21, above initial expectations. FY22 contracted supply is forecast to deliver ~155ML. Nearly all milk received is now processed through the Lactoferrin plant ahead of cheese production. Sales Pipeline Product Mix Dairy Nutraceuticals Mozzarella plant capacity utilisation increases again to ~85% in FY22 from 72% in FY21. Growth in sales of Mozzarella domestically and internationally. Approximately 50% of FY22 Mozzarella production will be sold under term contracts with blue-chip customers. Based on anticipated sales with regular, repeat customers some 85% of Beston’s Mozzarella production is accounted for heading into FY22. COVID-19 continues to impact the market in a number of ways, especially, by reducing food service sales to restaurants and other dine-in facilities, suppressing prices for uncontracted volumes and impinging on shipping timetables and container space (delaying both the arrival of plant and equipment from overseas and limiting the ability to fulfill offshore customer orders). Mozzarella sales expected to be >95% of total FY22 cheese production volumes. Lactoferrin production of ~20 tonnes (“T”) to be sold adding significantly to margins. Lactoferrin plant is producing planned output volumes and quality (95% GB specification). Planning for further expansion and/or upgrading of our nutraceutical capability will be undertaken during FY22 to determine the next phase of investment for expanding our range of dairy nutritional products. We remain energised by the opportunities and challenges ahead. The Board and management team have maintained a strict focus on delivering our strategic imperatives whilst managing the business through the daily challenges of the reporting period, including COVID-19. Lactoferrin The decision to bring forward the Stage 2 Lactoferrin plant expansion project, previously planned for late FY22, was triggered following the award of a Regional Development grant of $2 million from the South Australian (“SA”) Government. The SA Government recognised the employment benefits which could be generated from the Lactoferrin production capacity expansion as well as the broader economic benefits to the State. Accelerating the delivery of those benefits in the current economic climate has not only benefited shareholders, but has also supported the Company’s dairy farmer suppliers, as well as the biosecurity interests of the nation. We have published a significant amount of information about the Lactoferrin plant expansion project already, but in summary: • The new Lactoferrin extraction plant expansion has been commissioned. All milk supplied to the Jervois site is being processed through the two new extraction columns. We are producing Lactoferrin to the 95% GB specification (China standard), as planned. • The works included replacing the old technology column with two new Lactoferrin extraction columns, new milk separation and handling equipment, associated civil works and an additional freeze dryer. • The two new Lactoferrin columns and the new “upfront” skim milk processing facilities have provided the capacity to produce up to 25 Tpa of liquid Lactoferrin, with ~ 20T expected to be produced in FY22. • Installed freeze drying capacity is up to 13 Tpa of liquid Lactoferrin. In the short-term, the balance of liquid Lactoferrin produced will be dried by a third party under contract. A spray dryer is planned to be acquired later in FY22 to add to our in-house drying capacity. 8 Now that the newly expanded Lactoferrin plant is up and running well, we are supplying samples to potential customers to drive product sales. Our sales negotiations with potential Lactoferrin customers are progressing well, with customers who have tested samples of our product providing strong positive feedback. COVID-19 supply issues slightly delayed commissioning of the new 9Tpa freeze dryer, which was completed at the end of June. By 30 June 2021 we had produced 1.2T of Lactoferrin powder using the new plant, sold 330kg to a new customer and held the equivalent of 2.2T of powder in liquid concentrate form ready for drying. Other Assets Whilst the current strategic focus is on extracting the maximum returns from the investments made in our dairy assets ( which account for around 90% of our revenues at present), the Company continues to build value in its other investments in meat, water and technologies. The performance of the meat business is discussed in the Review of Operations on page 12 of this Annual Report and the development of our technology platforms is discussed on page 19. We continue to hold our 51% interest in AquaEssence Pty Ltd (AQE), the beverage business based in Mount Gambier, SA which sources, produces and distributes high alkaline water products. AQE’s water licenses enable it to source water from the underground limestone cave aquifers adjacent to the Blue Lake at Mount Gambier. AQE markets it’s packaged water products to both the wholesale and retail sector and holds supply contracts with a number of its customers, including OTR, Flinders Private Hospital, Metcash, Drakes, MineArc and BHP. After year end, on 31 July 2021, Beston completed the sale of its interests in Neptune Bio-Innovations Pty Ltd for $1.2 million. Impact of COVID-19 As we have seen with the recent COVID-19 outbreaks on the east coast of Australia, the pandemic (and its variants) continues to pose a tangible threat to all of our lives and livelihoods. It is clear that we are all making progress towards a better way of living and working with COVID-19, and vaccines will play an important part in minimizing risks. We remain vigilant and have adopted a pro-active stance to the problem wherever we can, notwithstanding, the repeated lockdowns and interstate movement restrictions. We have maintained a heightened level of food safety and quality control procedures across all of our operations. Thankfully, we have been fortunate to have had minimal impacts from COVID-19 on our employees and their immediate families. We did feel the more personal impacts of the COVID-19 pandemic when two locations at Tailem Bend in South Australia were declared exposure sites. Our Jervois facility is immediately across the River Murray from Tailem Bend and many of our staff live in and around the area. Six of our staff were required to isolate and quarantine and the Jervois and Murray Bridge facilities went into “full COVID-19 mode”. Fortunately, all tested negative and eventually returned to work. At the time of writing, we are closely monitoring the most recent COVID-19 outbreak in Shepparton, Victoria, where our meat processing business is based. One of the main impacts of COVID-19 on our business during the year has continued to be on the demand side. Repeated lock downs in most Australian states reduced demand in the food services sector (especially restaurants and other dine-in facilities). We again saw Australian and international producers placing discounted product into the domestic and export markets to shift accumulated inventories of product. This has had the effect of suppressing prices for some of our uncontracted volumes. COVID-19 has also adversely affected international freight movements to and from Australia. We have seen exports of our products delayed due to a significant reduction in shipping services. This has placed additional pressure on our sales team to find alternative channels to market and has resulted in additional storage costs where product has been frozen for export. We have also experienced delays in our procurement from overseas suppliers due to COVID-19, most notably equipment for the Lactoferrin project expansion and replacement parts to rectify the Teflon related issues in the Mozzarella plant. Overseas manufacturers have had their operations and supply chains impacted causing lengthening lead times to manufacture. Shipping constraints have compounded these delays. We are attempting to minimize these issues going forward by placing supply orders well in advance of our expected requirements. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 9 Review of Operations Operational Performance Dairy Facilities At the beginning of the financial year, we forecast milk supply to be around 138ML. The final milk supply totaled 146ML, up 32% on the previous year. A large part of this growth came off the back of the sale of the Company’s dairy farms to Aurora Dairies, effective 1 September 2020. However, milk production from other milk suppliers also increased around 5% during the year, which was above the South Australian and national milk production outcomes for FY21. We are very pleased that our contract dairy farm suppliers have continued to see business improve after suffering several years of severe drought, and have acknowledged the support which Beston provided during these difficult times. The increased milk supply would have enabled the dairy business to deliver a profit in the financial year, had it not been for significant COVID-19 impacts and reliability issues at our Jervois site. As we reported throughout the year, the Jervois facility suffered a number of operating issues, the most notable of which was faulty Teflon coating in the Mozzarella plant (now rectified as explained below). Although sales growth was held back by COVID-19, as noted above, we succeeded in growing monthly sales from $6.5 million in July 2020 to an average of ~$8.0 million per month for 1H21, which increased to an average of ~$9.2 million per month for 2H21, an increase of approximately 42% per month from the start of the year. This strong growth was driven by increased milk supply and hard work by the sales team. Sales margins were negatively impacted during the financial year by three key factors: • Of the 146ML milk received, 130ML was committed to the production of cheese. Operational issues resulted in 16ML of milk on-sold, 13ML more than budgeted. Much of the milk on-sold was during the peak milk supply months and was sold at or below cost. • Operational issues caused some Mozzarella and whey powder from impacted production runs to be downgraded and subsequently sold at a discount to our normal high- quality products. • COVID-19 continued to suppress the market prices for uncontracted sales volumes as producers periodically moved large parcels of product into the market to shift their accumulated inventories. The following chart shows our milk supply and Mozzarella production by month. It illustrates the significant impact which the Teflon coating issues had on production in the Mozzarella plant. FY21 Production and Milk Supply s e n n o T 1,400 1,200 1,000 800 600 400 200 0 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 ) s e r t i l n o i l l i m ( k l i M Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 July-21 Aug-21 Milk used in production Milk sold Production Note: Production volumes in the chart is production of Mozzarella plus cheddar. 10 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 11 A 30% increase in milk supply from 1 September 2020 exposed the faulty Teflon coating problem and some weaknesses in the operating practices and infrastructure capabilities at Jervois. These operational issues have now been rectified, as summarised below: • Faulty Teflon coating Following a detailed investigation, it was identified that the Teflon coating in some sections of the Mozzarella facility’s pipework was deteriorating, which led to plant shutdowns for a short period in December and April. Risk Mitigation Actions: The problem has been rectified and the required spare parts from Italy have been installed. The plant is back to performing as expected. The pipework removed from service is now being re-coated with the correct grade of Teflon and becomes a set of spare pipework. The pipework will be subject to rotation into/out of service as part of a planned maintenance programme. Should an unexpected failure occur, the replacement parts are now on hand to effect a changeover that should take about 12 hours to complete, rather than the 8-9 days turnaround for sending parts off-site for re-coating. The Company is investigating its options for recovery of damages from the faulty Teflon coating. • Unreliable operation of the main boiler A number of problems with the boiler operations which provides steam for the production process, caused several site shut-downs during the financial year. Inconsistent steam availability caused temperature control issues in the production processes. Availability of suitable spares delayed repair and replacement work. While shorter term measures have been taken to improve boiler performance, the aged equipment needs to be replaced. Risk Mitigation Actions: Funding for a second boiler is included in the FY22 capital expenditure programme, and orders have been placed for delivery in September, 2021. • Breakdowns of the Multivac packaging machine The existing Multivac was initially unable to cope with the higher throughput and suffered several breakdowns. Availability of suitable spares caused delays in rectifying issues. Risk Mitigation Actions: A retro-fit package was purchased to improve the performance of the existing machine. Funding for a second Multivac is included in the FY22 capital expenditure programme, and an order has been placed. The performance issues in the Mozzarella plant had a knock-on effect on powder and Lactoferrin production due to the inconsistent supply and quality of the whey feed stream. Powder production for the year was 5,668 T. Lactoferrin production was also impacted by variability in the performance of the old plant. Lactoferrin production from the old plant was 0.64T. The old plant was shut down in November 2020, three months earlier than planned, in order to allow workers to proceed on installing the new plant and equipment for the Lactoferrin plant expansion. Production of Lactoferrin powder from the new plant commenced in April and began to ramp up in June when practical completion was achieved. To 30 June 2021, 1.2T of powder was produced with a further 2.2T of powder held in concentrate form yet to be dried. The backlog will be cleared over the next few months with the commencement of contract drying services to supplement our current drying capacity. While it has been extremely challenging with the issues encountered, especially in the Mozzarella plant and at the peak milk supply period, the rectification works which have been undertaken have highlighted the technical strength and depth of experience which has now been accumulated in the operations team at the dairy factories. Under the leadership of the Chief Operating Officer, the factory operations team has developed a more detailed preventative maintenance plan to address the broader reliability issues inherent in an older site and to tighten controls over cheese and powder production processes. The FY22 budget for the dairy operations includes a significant focus on reliability with additional staff and an increased maintenance program already under way to mitigate these risks. The chart on page 9 shows the impact of these issues specifically on Mozzarella production. Note that when Mozzarella production is lower, whey powder and cream production are also reduced. The chart shows clearly that the months where production was most impacted by the Mozzarella plant issues were November and December 20 and again in April 21. However, the impacts were also felt to a lesser extent in other months where it can be seen that milk sales exceeded the normal monthly level of around 350KL. FY21 Mozzarella production was 12,250T, 33% higher than FY20. While Mozzarella production increased, mainly off the back of greater milk supply, reliability issues at Jervois meant that some milk was sold out at low prices, and some diverted to cheddar production in H121. 12 The chart also shows the strong production performance achieved when the Teflon coating is in good condition. After the re-coating in December, production of Mozzarella for 2H21 delivered production records for the Company. Now that we have the correct grade of Teflon in the critical pipework sections, Mozzarella production has returned to record levels, with the expected yields. Maintenance activities were increased in the lower milk supply months to ensure the Jervois facility is ready and able to cope with the incoming FY22 “spring flush” period. The operational performance of the Jervois facility is expected to improve further once a new boiler and Multivac are replaced as part of the FY22 capex program. Meat Business The Provincial Food Group (“PFG”) did not achieve the sales growth planned for the business at the start of the year, mainly as a result of being in Victoria and significantly impacted by COVID-19. Operating for much of the year under the more stringent COVID-19 restrictions in place throughout Victoria, the efficiency of factory operations was much lower than under normal operating conditions. None-the-less, the PFG management team, supported by the factory personnel, has done a commendable job to maintain operations through the number of lock-down periods. A number of management changes have been made at PFG during recent months to increase the depth and breadth of the skill base, with the appointment of a new Senior Manager, a new Commercial Manager, and a new National Sales Manager. We expect these appointments will result in a significant lift in performance in PFG in FY22. Sales growth was targeted to come primarily from new products for customers in the food services and retail sectors. COVID-19 lock-downs and restrictions has meant that customers’ plans to expand their store numbers or add new products were largely put on hold. There have been signs of this situation changing, with the recent award of a new burger sales contract worth approximately $1m per annum to PFG. The business reported $10 million of sales in FY21 and has the potential to grow by around 30% in FY22 if the sales opportunities currently being pursued can be converted in a timely manner under the new leadership. PFG reported $10 million of sales in FY21 and has the potential to grow by around 30% in FY22 if the sales opportunities currently being pursued can be converted in a timely manner under the new leadership. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 13 14 Operating Outcomes and Guidance The key operating outcomes for FY21 and FY22 Guidance are summarised in the table below. Operating Outcomes and Guidance Milk Supply - ML Mozzarella Production - T Lactoferrin Production - T Group Revenue - $m Gearing - % Capital Expenditure - $m FY21 Result (Guidance) 146.0 (142-148) 12,150 (12,000-13,000) 4.0* (3.0-4.0) 113 (119-125) 41 (24-30) 16 (16-20) June 21 FY20 QTR 37.2 FY21 v FY20 FY22 Guidance FY22 v FY21 (midpoint FY22) 110.8 +32% 152-158 +6% 3,079 9,128 +33% 15,000-16,000 +28% 3.4* 26 na 6 1.4 103 49 6 +286% 18.5-21.5 +500% +10% 160-185 -8%pts 25-30 +11m 13-18 +54% -14pts – Includes Lactoferrin in concentrate extraction yet to be dried: 2.2T powder equivalent The guidance for FY22 shows an expected significant increase in Mozzarella production with the refurbished and reconditioned Jervois facility. Lactoferrin production is also expected to increase significantly with the new plant operational the full year. These are the two key factors expected to drive the Company to positive operating cash-flows and a bottom line profit for FY22, with the potential for payment of dividends. Financial Result The group financial result for FY21 was a loss of $21.8 million after tax attributable to equity holders. The majority of the reported loss is from the dairy business which accounted for approximately $16 million of the group’s loss after tax, largely driven by the impacts of COVID-19 and reliability issues at the Jervois facility as outlined above. The financial impact of the reliability issues at the Jervois dairy facility was $12.7 million and is summarised in the table below. The impacts of lower demand on volumes and prices including shipping delays, which are mostly COVID-19 related impacts, total $6.3 million. Financial Result Plant operations: Lower sales due to lower production (lost margin) Losses on disposal of milk Production/yields below target Losses on sale of down-graded product Higher repairs and maintenance and quality control costs Closure of old Lactoferrin plant Demand/COVID-19: Lower sales prices Reduced demand/shipping delays/ cancelled Orders Total pre-tax impacts Total after-tax impacts 1H21 $m 2H21 $m (2.1) (0.8) (3.1) (0.9) (0.3) (1.1) (8.3) (1.6) (0.4) (1.3) (0.1) (1.6) (0.4) (0.5) (0.5) (4.4) (2.5) (1.8) FY21 $m (3.4) (0.9) (4.7) (1.3) (0.8) (1.6) (12.7) (4.1) (2.2) (10.3) (7.2) (8.7) (6.1) (19.0) (13.3) BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 A slight delay in the completion of the Lactoferrin plant upgrade was largely due to waiting on supply of equipment from international manufacturers as a result of COVID-19 restrictions. This in turn has slightly pushed back the selling Lactoferrin from the new plant. The $4.5 million (pre-tax) that was expected to be generated had these delays not been experienced will now be pushed forward into FY22. As a result of an upgraded and refurbished Jervois facility, increased milk supply, and a full year contribution from Lactoferrin sales, the dairy business is expected to generate positive cash flows and a bottom line profit. The meat division reported sales of $10.1 million and an operating loss of $1.8 million after tax, primarily because of the impacts of COVID-19 on operating costs and sales. There remains significant under-utilised capacity in the PFG factory which provides an opportunity for future growth under the new management team. Achieving sales growth to leverage the fixed factory costs is the focus for FY22 to lift PFG into a profitable position. An impairment charge of $1.45 million has been recorded in the FY21 financial statements against the goodwill carried in relation to PFG. The impairment charge has been made as a result of the impact of COVID-19 on the operations of the business as explained above. Included in the FY21 result is an accrual for the costs of terminating the Investment Management Agreement totalling $3.1 million. Other costs including facility level non-production costs, selling and distribution costs and business support costs totalled $26.6 million, $1.9 million lower than in FY20. 15 Closing comments The financial results for FY21 highlight what a challenging year it was, especially with the Jervois facility reliability issues and the COVID-19 pandemic continuing its impact longer than anyone anticipated. That said, our dairy business is now well positioned to deliver positive operating cash flows and a profitable bottom line. As we said at the opening of this letter, we have: • The milk needed to meet our production targets, • Sorted out the Teflon issues within the Mozzarella plant, • A reliability team with a good plan to continue to improve Jervois operations, • The newly expanded Lactoferrin plant up and running well, • The people we need (numbers and skills) to deliver our plans, • The funding in place to support the delivery of our plans, and • Some 85% of FY22 Mozzarella accounted for with committed contracts and repeat customers. We are confident that the hard work over the last 12 months, and indeed the work undertaken to establish the building blocks in the preceding five years, has positioned the Company exceptionally well to deliver positive operating cash flows and a profitable result in the coming year. Our workforce remains committed to producing premium quality dairy and meat products for Australian and international consumers. Our Company is proud to be an essential contributor, via these products, to the health and wellbeing of the Australian population and with the expansion of our Lactoferrin production facility, to be an important contributor to the biosecurity of our nation. The recent resignation of CEO, Jonathan Hicks, for family reasons was a sad day for those of us who know John well. The Board, in its announcement on 30 July 2021, acknowledged John’s contribution to Beston since he joined the Company in January 2019. We know all of the team here at Beston would join us in wishing John the very best for the future. Darren Flew will continue in the role of Interim CEO while the Board conducts a national and international executive search for a replacement. We would again like to acknowledge the effort and contribution that our employees have made over this challenging period. The continued strong support of our dairy farm suppliers, as well as our shareholders, is also acknowledged and very much appreciated. Roger Sexton Chairman 27 August 2021 Darren Flew Interim Chief Executive Officer 16 Capital Management Beston implemented its strategy to fund investment in Lactoferrin production and growth in FY21. Cash flows derived in FY22 will include a full year contribution from the new Lactoferrin operations and will provide the foundation for funding further investment in FY23 and beyond. As a consequence of the capital management actions including the revised banking arrangements, the Group has sufficient funding to be able to execute its business plans. The proceeds from the sale of the farms was $40.1 million which, after costs, netted cash inflows of $39.0 million. These funds were initially applied to reduce debt ahead of progressive investment over the remainder of the year in the Lactoferrin plant expansion. A further $15.3 million after costs was subsequently raised from investors during the year. An entitlement offer supported by a placement programme was completed in February 21 and raised $15.6 million. A total of $9.2 million was initially raised through the offer. The residual $6.4 million raised was placed with institutional investors. A Share Purchase Plan offer, initiated in June 20 following completion of an institutional placement in June 20, closed in July 20 and raised a further $2.1 million. The above capital management actions have funded the expansion of the Lactoferrin facility at Jervois and are reflected in the Group consolidated statement of cash flows in the financial report. The funding of the Lactoferrin expansion was also supported by the award of a $2.0 million Regional Development Grant from the South Australian Government. The proceeds from this Grant will be received progressively in the FY22 financial period. Towards the end of FY20, Beston executed a number of capital management initiatives to fund the strategic investment in a significantly expanded Lactoferrin production capability at its Jervois dairy factory and reposition its balance sheet. The key aims have been to: • increase the underlying cash generation of the dairy business through the investment in increased Lactoferrin production, and • reduce debt to provide greater capacity to fund future growth opportunities whilst providing a greater level of protection against unexpected or uncertain events such the impacts of COVID-19. The key actions undertaken were: • completing the sale of the dairy farms on 1 September 2020. • completing a capital raise in February 2021 • deploying the funds raised into high returning Lactoferrin production activities and paying down debt to reduce gearing levels. In addition, the company has worked with its principal bankers to restructure the Group’s banking facilities to better match the needs of the business through FY22 and beyond. The revised facilities were implemented in August 21 ahead of the FY22 peak milk supply season commencing. The following table summarises the liquidity position of the company as at 30 June 21 as though the new facilities were in place at 30 June 21. Facilities Types Mortgage Term Loan Equipment Lease and Hire Purchase Working Capital Limits $m 3.0 23.0 13.0 15.3 54.3 Drawn 30 June 2021 $m 3.0 23.0 5.0 2.2 33.2 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 17 18 Environment, health and safety, social and corporate governance Our Company commits to conduct its operations whilst meeting the highest standards of environmental care, and health and safety for all stakeholders consistent with our vision of taking healthy eating to the world’s growing communities with Australia’s best food. The 2021 financial year again proved to be very challenging in managing the actual and potential impacts of COVID-19 on our people, operations and products. Maintaining safe and reliable operations at our three operating sites has been paramount in our efforts to ensure that we continue to be able to accept and process milk to support our dairy farmer suppliers as well as to be able to supply our dairy and meat products to our customers and consumers. We are very thankful for the efforts of our workforce at each site as we have continued to learn about the spread and control of COVID-19 in the community. Our team at Shepparton especially worked through a number of lock downs in Victoria and did an outstanding job maintaining operations despite some significant operating constraints at times. So far we have managed without major disruption at our operations which is in no short measure due to the response of our people who have embraced the need to be extremely careful in all that they do and for each other. A positive from the events of the past twelve months has been an opportunity to have more frequent conversations with our workforce about health and safety practices, as a result of which, we continue to see improvement in general workplace safety risk identification, reporting and compliance. There were no major safety incidents during the year. The company supports the view that a high vaccination rate is important to opening up communities to allow greater personal freedoms and restore our quality of life. This will also obviously generate improved economic activity which is necessary for sustaining the quality of life we all seek. We are actively encouraging our employees to become fully vaccinated through providing support such as time off to obtain a vaccination and modest incentives for reward those who have been vaccinated. The company’s dairy operations have again grown significantly. Milk supply in FY21 increased to 146ML from 111ML, up 32%. This continues our record of growth since the Mozzarella plant at Jervois was commissioned in 2018. Operational activities at Jervois were also expanded with the completion of the new Lactoferrin plant towards the end of the financial year. This growth is not only very good for the Company, but it also supports sustainable regional economies by growing employment in our factories, on farms and for other suppliers to these regionally located operations. As we have grown quite quickly, we have been very mindful of minimising the environmental impact of our growth. The Company takes a continuous improvement approach to all aspects of its activities. We have implemented a number of improvement initiatives to ensure that we minimise our environmental impacts as we grow: • Water use: Opportunities to increase recycling of water to reduce water usage and waste water disposal volumes are also being pursued. The potential to capture more waste heat from process water is also being examined. • Packaging and waste: Operating efficiently also includes a focus on reducing waste across all aspects of what we do. Packaging in particular is a source of waste in our communities and we seek to find better ways to reduce the amount of packaging associated with the materials we buy and the products we supply. • Energy consumption/greenhouse gases: We are constantly seeking efficiency gains to reduce the consumption of energy at our sites. We installed 354kw of solar power generation at Provincial Foods in Shepparton during the year and are examining the feasibility of a much larger solar power generation capability at the Jervois facility. Investment in upgrading older equipment, such as boilers, not only benefits operational reliability but reduces energy consumption. We participate in a number of industry forums focussed on identifying and implementing solutions to reduce the environmental impacts of our operations and those of the industry generally. Forums such as the Dairy Manufacturing Sustainability Council and The Australian Packaging Covenant Organisation, as well as industry bodies such as Dairy Australia provide the opportunity to promote and share ideas and actions regarding the sustainable operations of our industry. As noted in our discussion on Beston Technologies on page 19, a potential application of the technology we have developed in-house is in the field of recycling of packaging. Our technology has the potential to improve the efficiency and effectiveness of recycling of packaging generally which can assist manufacturers meet their (now legislated) obligations to ensure that there is a high level of recycling of the packaging they produce. We understand that when we make sourcing decisions, our actions can influence broader community outcomes, especially in the regions in which we operate. We seek wherever practicable to source products from suppliers who have good environmental, social and safety practices. We have been able to meet our Modern Slavery reporting obligations partly as a result of our awareness of these issues. The Board has established appropriate practices and processes to ensure that the highest standards of Corporate Governance are met. These are regularly reviewed for both compliance and in light of current best practices. Further details of the key Corporate Governance policies can be found on the Company’s website. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 19 Beston Technologies One of the key objectives of BFC in supplying premium, healthy food and beverage products to consumers, has been to enable consumers to verify the provenance of the products and be assured that they are safe to consume. In order to achieve this objective, as previously reported to shareholders, BFC has built a proprietary technology platform, which has been awarded with 13 patents, including 2 Block Chain patents granted in the USA and Australia. The Technology comprises OZIRIS™, an encrypted end-to- end traceability and verification platform, and BRANDLOK, a serialised verification application. These technology solutions have been successfully deployed in support of BFC’s exports into ASEAN and China, and within the domestic market. This has enabled retailers, consumers and logistics partners in the supply-chain to have recognisable traceability and verification of contracted goods. In so doing it has assisted in reducing financial cost and food waste through fraudulent counterfeiting while also providing confidence to purchasers and avoiding retail brand damage. Under a collaboration agreement with US Technology company Digimarc Corporation, its Digimarc SDK imperceptible digital watermarking has been integrated into the evolved Beston Technologies platform to gain enhanced protection against the counterfeiting of food labels and/or adulteration of branded food products (in overseas markets in particular). Externally audited trials conducted at BFC’s Jervois dairy factory revealed exceptional data accuracy from installed conveyor belt test scanners, which has opened up the opportunity to use the technology in waste management applications (via identification and sorting of packaging materials). The terms of an OEM technology license Agreement have been resolved and a joint application to the technology into intelligent waste sorting, and recycling of plastic packaging, is being actively supported with several partners in the waste management and recycling industries. The application of the technology will assist the Dairy Industry, and BFC, to meet its legislated obligations to use up to 75% recycled plastics in its packaging by 2025. The new enhanced mobile and windows environments now embedded in the OZIRIS technology platform is currently undergoing Beta trials within BFC’s own cross-border food ingredients product range (particularly Lactoferrin), and with several other Australian Food and beverage companies. Collaborations to improve the prospects of progressive in- market applications of a high-quality retail traceability and provenance via Software-as-a-Service (SaaS) have been made with Deakin Universities Centre for Supply-chain and Logistics (CSCL), the Australian Dairy Farmers (ADF), the Australian Food and Grocery Corporation (AFGC), the Australian Meat Processor Corporation (AMPC) and the SA Limestone Coast food cluster. The objective, on completion of the various projects currently underway, is to achieve the commercial launch of the technology as a SaaS offering to customers on a royalty basis. Over the past twelve months, significant enhancements, have been made to the technology to enable the broader market deployment of the platform as a retail Software as Service (SaaS) technology. These enhancements have been achieved through a collaboration with the University of Technology Sydney (Computer Sciences), supported by the Australian Governments DIIS Entrepreneurs Programme, and a 3-year award of the prestigious CSIRO supported SIEF Ross Metcalfe Business Fellowship grant. The grant support has enabled the development of Series 3.1 OZIRIS™ Plus - into a new IOS and Android application, using the latest languages for iPhone and google mobile devices. Additionally, in-the-cloud data backend management systems using both MS Azure and Amazon AWS platforms has enabled dual access and service options to be provided for potential SaaS Licences. The various enhancements have meant that OZIRIS is now a more agile, interoperable technology, capable of working with various data interfaces, anywhere in the world. Distributors and foreign retailers can remotely verify the origin, health and safety compliances of exported products, track and trace the logistics and ingredients of goods, and thereby reduce border clearance delays and customer disputes. The interest shown in the technology from a wide diversity of industries, and potential customers, has confirmed the integrity and viability of the technology. Work is currently underway to add Distributed Ledger and Smart Contract applications to the technology, particularly as it applies to the Australian Dairy industry and its supply-chain into retail and food services markets. The efficiency gains which can be derived from these applications is being investigated in parallel by Dairy Australia (DA), Australian Dairy Farmers (ADF), and the South Australian Dairy Authority (SADA). 20 Directors The Company has a well-defined Board succession and renewal planning process to identify and nominate potential new directors to the Board in a professional manner, as well as maintaining the current diverse balance of experience across different industries it currently possesses. The Board reviews potential new directors considered suitable for appointment and assesses them against a range of criteria including skills, experience, knowledge, personal qualities, ability to exercise independent judgement and diversity required to discharge the Board’s duties. The Board ultimately makes selections of the preferred candidates for positions of Directors, if required to be filled, and does so with a view to ensuring that the Board maintains an appropriate mix and balance of skills and that succession plans are in place for Directors. The Board is currently comprised of highly experienced business leaders from different backgrounds who collectively possess the skills, experience, tenure and diversity considered necessary to appropriately govern an ASX-listed organisation in the food production industry. Roger Sexton Chairman Dr Roger Sexton is an investment banker and company director. He holds Doctorate and Master’s Degrees in Economics from North Carolina State University and an Honours Degree (First Class) in Economics from the Flinders University of South Australia. Roger has extensive experience in the agricultural sector, having undertaken tertiary studies in agricultural economics, in addition to finance and business management. On graduation, he worked for the Bureau of Agricultural Economics and was an Executive Director of the Industries Assistance Commission, specialising in rural industries. Stephen Gerlach Non-Executive Director Stephen Gerlach is Chancellor of Flinders University. He is also the Chairman of Adelaide Capital Partners Pty Ltd, Gerlach Asset Development Pty Ltd, Ebony Energy Ltd and a Director of Beston Global Foods Ltd and Beston Pacific Asset Management Pty Ltd. He was formerly the Chairman of Santos Limited, Futuris Corporation Ltd (subsequently known as Elders Ltd), Equatorial Mining Ltd, Elders Australia Ltd, Challenger Listed Investments Limited, Amdel Ltd, and Penrice Ltd. Petrina Coventry Independent Non-Executive Director Petrina Coventry is Industry Professor and Director of Development with the Adelaide University Faculty of Professions and Business School. She previously held Global Vice President roles with the General Electric Company and The Coca Cola Company in the United States and Asia and more recently CHRO with Santos Ltd. 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. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 21 Ian McPhee Independent Non-Executive Director 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 a Distinguished Honorary Professor at the College of Business and Economics, Australian National University, a member of the Council of Central Queensland University, and a director of Ian McPhee Consulting Pty Ltd. Joanna Andrew Independent Non-Executive Director (Appointed 7 December 2020) Neil Longstaff Independent Non-Executive Director (Appointed 1 January 2021) Ms Andrew has experience in Governance, Corporate Law, Board Advisory, Risk, Workplace Investigations, Strategy and Business Development. She also has experience in agribusiness and health sciences and focuses in the areas of agriculture and logistics. Joanna is currently Chair, South Australian Produce Market Limited and was formerly Chair of Wine Grape Growers Australia and Chair of their Audit, Finance and Risk Committee. She was recognised in 2017 as one of South Australia’s young business entrepreneurs in the inaugural InDaily 40under40 awards. Joanna will serve as a member of the Board’s Audit and Risk Committee, and will Chair BFC’s committee for Remuneration and Nomination. Mr Longstaff has had a career across a range of food categories. He has spent more than 20 years working at executive levels and consulting within the dairy industry, including roles as Chief Executive Officer of Kyvalley Dairy Group and General Manager, Commercial Group with Murray Goulburn Co-operative. His commercial experience in the dairy industry has included both branded and commodity products within domestic and export markets. Prior to his career in the dairy industry, Neil held marketing and sales roles with companies including Lanes Biscuits, SPC, Heinz, Nabisco and Nicholas Kiwi. Neil will serve as a member of BFC’s committee for Audit and Risk. Cheryl Hayman Independent Non-Executive Director (Appointed 25 August 2021) Catherine Cooper Independent Non-Executive Director (Resigned 4 December 2020) Jim Kouts Independent Non-Executive Director (Resigned 31 December 2020) Cheryl Hayman brings international experience including significant strategic and marketing expertise derived from a 20 year corporate career which spanned local and global consumer and retail food organisations. Her skills include developing marketing and business strategy across diverse industry segments, growth orientated innovation and product development. Cheryl has expertise in traditional and digital communications, an ability to carve out a competitive edge for business development and the ability to drive strategic brand development. Cheryl is a current director of ASX listed Shriro Holdings Ltd and HGL Ltd, a director of Chartered Accountants ANZ and a prior director of Clover Corporation. She also holds other unlisted and not- for-profit board roles. Catherine is an experienced Non Executive Director with an extensive portfolio of approximately 50 Board positions over 18 years. After a professional career as a commercial lawyer, Catherine moved into the business world in 1992 and has developed wide knowledge and experience across a broad range of sectors such as agribusiness, food and health, energy and water, and science and technology. Career highlights include the establishment of a national joint venture Rural Bank, being awarded as a Telstra Business Woman of the Year finalist twice, inclusion in an international management program at GE in New York and more recently winning a position in the ASX Top 200 Chairman’s Mentoring program run by the AICD. Jim has served as a senior executive and non- executive director in major companies in the energy, financial service and business tourism industries and has also held various senior positions in the public sector. He is currently Chair of Home Start Finance, Chair of the Adelaide Convention Bureau, Non-Executive Director of the Adelaide Venue Management Corporation and is Strategic Advisor to Adelaide Airport Ltd. 22 Executives Darren Flew Interim Chief Executive Officer Frank Baldi Chief Operating Officer Hamish Browning General Manager, Agribusiness Darren Flew is a highly experienced senior finance executive known for strong commercial and strategic capabilities focussed on driving achievement of business goals. Before joining BFC in March 2018, he spent 19 years at Santos in various senior finance roles including Chief Financial Officer Eastern Australia Business Unit and was variously responsible for finance, commercial, strategy, business development, procurement, joint venture engagement, environment, cultural heritage and regulatory engagement. Prior to joining Santos, Darren worked for Baulderstone Hornibrook (construction) as their Group Finance Manager for 3 years. He qualified as a chartered accountant in 1985 working for Ernst & Young and spent time in Singapore and Toronto before leaving in 1996. Frank commenced with Beston on 1 October, 2020. He is highly regarded, well credentialed, and comes to BFC with a significant background and experience in the Dairy and FMCG Industries. Over his 30-year career, Frank has held a number of Senior Leadership and Strategic roles for Tatura Milk Industries, Bega Cheese, SunRice, Visy and more recently Freedom Foods where he was instrumental in the completion and commissioning of their Lactoferrin investment, along with other brand development and nutritional products portfolio. Hamish’s career spans over 25 years in agriculture and food with Elders Ltd, Frontier International Agri Pty Ltd (Ruralco J/V, ASX:RHL), Thomas Foods International, and Beston Global Food Company. Senior management and administration roles held within these companies include Managing Director, Chief Operations Officer, General Manager, Senior Trader, and Chairman. Hamish has a Graduate Diploma in Financial Services – AFMA, Cert IV in Frontline Business Management, Global Agribusiness Program - Harvard Business School and Executive Change Management Program – Aus Graduate School of Mgt. Tina Li Chief Commercial Officer Nicholas Wagner Interim Chief Financial Officer A highly experienced commercial business development executive, Tina brings a track record of market value creation, brand development and growth strategy within rapidly changing and transitioning environments. Skilled in implementing strategic direction, product and brand strategy, partnerships and developing global markets, Tina has previously held senior management roles at Fonterra, Nuchev, Devondale Murray Goulburn, and Synlait. Tina has also hold independent director seat at a Not-for-Profit board. She is a registered student mentor at Melbourne Business School and Chartered Accountants Australia and New Zealand. Tina holds a Master of Business Administration from University of Melbourne, is a Chartered Accountant, and a member of Australian Institute of Company Directors. Nick is a senior finance executive with over 15 years’ experience and has been with Beston since 2017. He oversees the financial management, funding, and investments of the domestic and international operations. Before joining BFC, Nick has held several senior finance roles in ASX listed entities including Elders Ltd, Viterra Inc, OZ Minerals Ltd, and Codan Ltd. Nick’s commercial experience was built on a professional foundation gained working for big 4 accounting firm PwC, both in Australia and overseas. Nick has completed both a Bachelor of Commerce and a Master of Business Administration from the University of Adelaide, is a graduate and member of the AICD, and is a Chartered Accountant (CAANZ). BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 23 24 The advanced technology used in our production processes requires skilled people to operate and maintain our plants. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 25 Directors' report The Directors present their report on the consolidated entity consisting of Beston Global Food Company Limited (’the Company’) and the entities it controlled at the end of, or during, the year ended 30 June 2021. Throughout the report, the consolidated entity is referred to as the Group. Directors The following persons were Directors of Beston Global Food Company Limited during the whole of the financial year and up to the date of this report unless otherwise stated: • R N Sexton • S Gerlach • P Coventry • I McPhee • C Cooper (resigned 4 December 2020) • J Kouts (resigned 31 December 2020) • J Andrew (appointed 7 December 2020) • N Longstaff (appointed 1 January 2021) • C Hayman (appointed 25 August 2021) Principal activities During the year the principal continuing activities of the Group consisted of: (a) Production of dairy, meat, and water products for sale into local and international markets. (b) Development and production of health and well-being focused food, beverage and pharmaceutical products. (c) Development and commercialisation of end-to-end food traceability and anti-counterfeit technology. Dividends – Beston Global Food Company Limited There were no dividends provided for during the year ended 30 June 2021 (2020: nil). Review of operations Information on the operations and financial position of the Group and its business strategies and prospects is set out in the review of operations on pages 9 to 15. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the year. Events since the end of the financial year Except for the sale of the Group’s investment in NBI as noted in Note 14(c) of the attached Financial Statements, and the completion of the debt refinance review as noted in Note 7(e) of the attached Financial Statements, no matter of circumstance has occurred subsequent to the period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. The uncertainty being created by the current COVID-19 outbreaks on Australia’s eastern seaboard is of continuing concern to everyone, of course. That said, history shows that pandemics such as COVID- 19 sooner or later do get contained and controlled, enabling life to return to the “normality” that we knew before the onset of the pandemic. The focus of the management team, in managing the various challenges thrown up by COVID-19, has been, and will continue to be, on calmly and confidently building the business of BFC with an eye to the future so that we are in a good position to capitalise on the opportunities which will emerge from the return to “normal”, post the pandemic. Likely developments and expected results of operations Refer to the operating and financial review on pages 9 to 15 for information on likely developments and future prospects of the Group. Environmental regulation The Group and its activities in Australia are subject to strict environmental regulations. The Group’s manufacturing facilities in Jervois, Murray Bridge and Shepparton operate under various licences and permits under state, federal and territory laws in Australia. Beston Global Food Company regularly monitors its compliance with licenses and permits in various ways, including through its own environmental audits as well as those conducted by regulatory authorities and other third parties, and to the best of the Directors’ knowledge all activities have been undertaken in compliance with or in accordance with a process agreed with the relevant authority. The Company has not incurred any significant liabilities under any environmental legislation during the financial year. There have been no significant known breaches of the Group’s licence conditions or any environmental regulations to which it is subject. 26 Directors’ report Information on directors Roger Sexton AM B.E c (Hons), M. Ec, PhD (Econ), FAICD, FAIM, S.F.Fin, C.Univ, Chair – non-executive Experience and expertise Dr Roger Sexton is an investment banker and a company director. He has extensive experience in the agricultural sector, having worked for the Bureau of Agricultural Economics and undertaken post-graduate studies in agricultural economics and business. 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 Former directorships in last 3 years Special responsibilities Stephen Gerlach AM LL.B, FAICD Non-executive director Experience and expertise Other current directorships Former directorships in last 3 years Special responsibilities • Founder of Beston Global Food Company Limited • Chair of the Board • Member of audit and risk committee 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 the Chancellor of Flinders University. Stephen was a Director and Chairman of Santos Ltd, and Elders Limited, and Chairman of Equatorial Mining Ltd. Stephen has also been a Director of a number of other public companies including Southcorp Holdings Ltd, and has been, and continues to be, involved in many not for profit organisations including the Australian Cancer Research Foundation, the General Sir John Monash Scholarship Foundation, Foodbank SA and Chair, Psychosis Australia Trust. Chairman, AML3D Ltd (since 30 August 2020) • Founder of Beston Global Food Company Limited • Member of the remuneration and nomination committee Petrina Coventry B.Ed., M. Phil. (Ethics), MBA, EMBA, FAHRI Non-executive director Experience and expertise Petrina has spent over twenty years working in Asia, the United States and Europe in global leadership and director roles with The General Electric Company, The Coca Cola Company and Procter and Gamble. Her experience covers multiple industries including energy, technology, education, fast moving consumer goods and financial services. Her work in organisational transformation, company performance and governance has led to increased involvement with governments, industry associations and consulting groups across the Asian region. Petrina is an ethicist by background and works with several universities in the area of education around governance and professional ethics. Other current directorships Former directorships in last 3 years Special responsibilities Member of the remuneration and nomination committee Joanna Andrew LL B (Hons), B. Hsc, GAICD Non-executive director Experience and expertise Ms Andrew has experience in Governance, Corporate Law, Board Advisory, Risk, Workplace Investigations, Strategy and Business Development. She also has experience in agribusiness and health sciences and focuses in the areas of agriculture and logistics. Joanna is currently Chair, South Australian Produce Market Limited and was formerly Chair of Wine Grape Growers Australia and Chair of their Audit, Finance and Risk Committee. She was recognised in 2017 as one of South Australia’s young business entrepreneurs in the inaugural InDaily 40under40 awards. Joanna will serve as a member of the Board’s Audit and Risk Committee, and will Chair BFC’s committee for Remuneration and Nomination. Other current directorships Former directorships in last 3 years Special responsibilities Member of the audit and risk committee BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 27 Ian McPhee AO PSM, B.Bus., B.A, FCPA, FCA, GAICD Non-executive director Experience and expertise Ian served as the Auditor-General of Australia until June 2015. He holds a Bachelor of Business (Accountancy) degree and a Bachelor of Arts (Computing Studies) degree. Ian is a Fellow of CPA Australia and a Fellow of Chartered Accountants Australia and New Zealand. He is currently a Member of the International Ethics Standards Board for Accountants and a Distinguished Honorary Professor at the College of Business and Economics, Australian National University. Ian is also a member of the Council of Central Queensland University. He is the former Deputy Chair of the Australian Accounting Standards Board. Other current directorships Former directorships in last 3 years Special responsibilities Neil Longstaff B.Bus, GAICD Non-executive director Experience and expertise Other current directorships Former directorships in last 3 years Special responsibilities Cheryl Hayman B.Com, FAICD, FGIA Non-executive director Experience and expertise Other current directorships Former directorships in last 3 years Special responsibilities Chair of the audit and risk committee Mr Longstaff has had a career across a range of food categories. He has spent more than 20 years working at executive levels and consulting within the dairy industry, including roles as Chief Executive Officer of Kyvalley Dairy Group and General Manager, Commercial Group with Murray Goulburn Co-operative. His commercial experience in the dairy industry has included both branded and commodity products within domestic and export markets. Prior to his career in the dairy industry, Neil held marketing and sales roles with companies including Lanes Biscuits, SPC, Heinz, Nabisco and Nicholas Kiwi. Neil will serve as a member of BFC’s committee for Audit and Risk. Member of the audit and risk committee Cheryl Hayman brings international experience including significant strategic and marketing expertise derived from a 20 year corporate career which spanned local and global consumer and retail food organisations. Her skills include developing marketing and business strategy across diverse industry segments, growth orientated innovation and product development. Cheryl has expertise in traditional and digital communications, an ability to carve out a competitive edge for business development and the ability to drive strategic brand development. Cheryl is a current director of ASX listed Shriro Holdings Ltd and HGL Ltd, a director of Chartered Accountants ANZ and a prior director of Clover Corporation. She also holds other unlisted and not-for-profit board roles. • Shriro Holdings Ltd • HGL Limited Clover Corporation Ltd • Member of the remuneration and nomination committee • Member of the audit and risk committee Company Secretary Richard Willson, B.Acc, FCPA, FAICD Richard Willson is an experienced, Non-Executive Director, Company Secretary and CFO with more than 20 years’ experience predominantly within the mining, technology and agricultural sectors for both publicly listed and private companies. Richard has a Bachelor of Accounting from the University of South Australia, is a Fellow of CPA Australia, and a Fellow of the Australian Institute of Company Directors. He is a Non-Executive Director of Titomic Limited (ASX:TTT), AusTin Mining Limited (ASX:ANW), Thomson Resources Limited (ASX:TMZ), PNX Metals Limited (ASX:PNX), 8IP Emerging Companies Limited (ASX:8EC), Unity Housing Company Ltd and Variety SA; and Company Secretary of a number of ASX Listed Companies. Richard is the Chairman of the Audit Committee of Titomic Limited, AusTin Mining Limited, and Unity Housing Company, and is the Chairman of the Remuneration & Nomination Committee of Titomic Limited. 28 Directors’ report Meetings of directors The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2021, and the numbers of meetings attended by each Director were: Other key management personnel Name J Hicks D Flew Position Chief Executive Officer Chief Financial Officer Meetings of committees Full meetings of directors Audit and risk Remuneration and nomination A 23 23 23 9 23 12 14 10 B 23 23 23 9 23 12 14 11 A 5 – – 2 5 2 – 3 B 5 – – 2 5 2 – 3 A – 1 1 – – – 1 – B – 1 1 – – – 1 – R N Sexton S Gerlach P Coventry N Longstaff I McPhee J Andrew J Kouts C Cooper A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year Remuneration report The Directors present the Beston Global Food Company Limited 2021 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) Key management personnel (KMP) covered in this report (b) Remuneration policy and link to performance (c) Executive contracts (d) Remuneration expenses for non-executive KMP (e) Directors’ arrangements (f) Additional statutory information (a) Key management personnel covered in this report Name R N Sexton S Gerlach P Coventry I McPhee J Kouts (resigned 31 December 2020) C Cooper (resigned 7 December 2020) J Andrew (appointed 7 December 2020) N Longstaff (appointed 1 January 2021) C Hayman (appointed 25 August 2021) Position Non-executive Chairman Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director (b) Remuneration policy and link to performance The Group outsources all 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. (c) Executive contracts (i) Management fee The Group had a formal Investment Management Agreement (IMA) 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 2021, BPAM was paid $1,445,347 under this arrangement (2020: $2,130,000). On 28 May 2021, the internalisation of the IMA was approved by shareholders at the EGM. The approval resulted in a termination fee being paid to BPAM consisting of $1.13m in cash and 21,125,000 shares. The share price on 29 May was $0.092 per share, and an expense of $3,073,500 was recognised on this date. The date at which the agreement is to be settled 28 August 2021. The Chief Executive Officer and Chief Financial Officer are employed by the Investment Manager until 28 August 2021, along with some other personnel deployed into the Company. During the financial year the remuneration of the Chief Executive Officer and the Chief Financial Officer, including superannuation entitlements and bonuses awarded, totalled $350,000 and $304,931 respectively (2020: $393,868 and $333,844 respectively). Their shareholdings at 30 June 2021 consisted of fully paid ordinary shares totalling 307,600 and 481,528 respectively (2020: 156,500 and 151,212 respectively). Neither the Chief Executive Officer or Chief Financial Officer have a formal bonus arrangement or other entitlement to remuneration or shares in the Company in respect of the financial year. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 29 (ii) Performance fee On 28 May 2021, the internalisation of the IMA was approved by shareholders at the EGM. As part of this agreement, BPAM ceased to hold an entitlement to any performance fee for the period. No expense has been recognised for the year ended 30 June 2021. (d) Link between remuneration and performance Statutory performance indicators The following table shows key performance indicators for the group over the last five years: Loss for the year attributable to owners of ($'000) Basic earnings per share (cents) Share price at year end (cents) Net tangible assets per share (cents) Dividend payments ($,000) 2021 2020 2019 2018 2017 (21,821) (3.4) 13.5 11.7 – (11,579) (2.5) 8.5 15.7 – (26,975) (6.1) 12.0 13.7 – (12,593) (2.8) 17.5 23.6 – (7,749) (1.8) 22.5 28.3 – (e) Remuneration expenses for non-executive directors The following table shows details of the remuneration expense recognised for the Group’s non-executive directors for the current and previous financial year measured in accordance with the requirements of the accounting standards. Figure 7: Non-executive remuneration Name R N Sexton S Gerlach P Coventry J Kouts I McPhee C Cooper J Andrew N Longstaff Total NED remuneration Year 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Short-term benefits Cash bonus $ Cash salary $ Post-employment Superannuation benefits $ Share-based payments Share options Shares $ $ 60,000 60,000 40,000 40,000 40,000 40,000 20,000 40,000 40,000 40,000 17,282 40,000 22,923 – 20,000 – 260,205 260,000 – – – – – – – – – – – – – – – – – – 5,700 5,700 3,800 3,800 3,800 3,800 1,900 3,800 3,800 3,800 1,642 3,800 2,178 – 1,900 – 24,720 24,700 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Total $ 65,700 65,700 43,800 43,800 43,800 43,800 21,900 43,800 43,800 43,800 18,924 43,800 25,101 – 21,900 – 284,925 284,700 30 Directors’ report (f) Director arrangements The Board has resolved to provide for non-executive Director’s fees (per annum) of up to a maximum of $350,000 in total with effect from Listing. In addition to earning a Director’s fee, a Director may also be paid fees or other amounts as the Directors determine if a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any other special duties. Dr Roger Sexton AM Mr Stephen Gerlach AM Ms Petrina Coventry Ms Joanna Andrew Mr Ian McPhee AO PSM Mr Neil Longstaff Annual maximum fee $60,000 $40,000 $40,000 $40,000 $40,000 $40,000 In addition, Directors will be entitled to statutory superannuation. Dr Sexton and Mr Gerlach 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. (g) Additional statutory information (i) Reconciliation of options, deferred shares and ordinary shares held by KMP Share holdings 2021 Name Current KMP R N Sexton S Gerlach P Coventry J Andrew I McPhee N Longstaff Total Former KMP C Cooper J Kouts Total Balance at the start of the period Acquired during the period Balance at the end of the period or date ceasing to be KMP 19,352,726 3,476,445 57,142 – 1,348,837 – 24,235,150 355,000 142,857 497,857 2,519,904 1,558,142 – – 401,163 103,704 4,582,913 – – – 21,872,630 5,034,587 57,142 – 1,750,000 103,704 28,818,063 355,000 142,857 497,857 The above statutory reconciliation does not take into account the shares which will be issued to the Investment Manager as part of the internalisation of the Investment Management Agreement. Refer to Note 4 of the attached Financial Statements. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 31 32 Directors’ report (ii) Loans to key management personnel Proceedings on behalf of the company No loans were made to KMP or their related parties during the year. (iii) Other transactions with key management personnel There were no other transactions with KMP of their related parties during the year. This is the end of the audited remuneration report. No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Shares under option (a) Unissued ordinary shares Non-audit services As at the date of this report, there were no unissued ordinary shares under option. No options were granted to the Directors or any of the key management personnel of the Company since the end of the financial year. The following non-audit services were provided by the entity’s auditor, Ernst & Young Australia. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that the auditor independence was not compromised. Insurance of officers and indemnities (a) Insurance of officers During the financial year, Beston Global Food Company Limited paid premiums with respect to a contract 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 insurance contract prohibits disclosure of the liability’s nature and the amount of the insurance premium. 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. Ernst & Young Australia received, or are due to receive, the following amounts for provisions of non-audit services: Taxation services Tax compliance services Tax due diligence services Total remuneration for taxation services Total remuneration for non-audit services 30 June 2021 $’000 30 June 2020 $’000 68 – 68 68 57 – 57 57 Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. (b) Indemnity of auditor This report is made in accordance with a resolution of Directors. 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. R N Sexton Chairman Adelaide BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 Auditor’s Independence Declaration 33 34 Financial report for the year ended 30 June 2021 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 37 38 39 40 41 69 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 35 36 Beston Global Food Company Limited ABN 28 603 023 383 Annual financial report for the year ended 30 June 2021 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 14. 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 on page 9 and in the directors report on page 25, both of which are not part of these financial statements. The financial statements were authorised for issue by the Directors on the 27th August 2021. 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: bestonglobalfoods.com.au BESTON GLOBAL FOOD COMPANY LIMITED | FINANCIAL REPORT 2021 37 Consolidated statement of comprehensive income For the year ended 30 June 2021 Revenue from continuing operations Sale of goods Other revenue Other income Expenses Cost of sales of goods Other expenses from ordinary activities Operating overheads Selling and distribution Corporate overheads and business support Other expenses from ordinary activities Loss from operations Finance income Finance expenses Net finance expense Impairment of non-financial assets Internalisation of IMA Loss before income tax Income tax benefit Loss for the period Item that may be reclassified to the profit or loss Exchange differences on translation of foreign operations Items that will not be reclassified to the profit or loss Changes in the fair value of equity instruments at FVOCI Other comprehensive gain for the period, net of tax 30 June 2021 $'000 112,420 48 112,468 30 June 2020 $'000 103,028 142 103,170 826 5,121 (110,641) (93,872) (12,218) (3,766) (10,593) (91) (24,015) 4 (690) (686) (1,485) (3,074) (13,185) (3,186) (12,056) - (14,008) 29 (1,606) (1,577) (1,732) - Notes 2 2 5(a) 5(b) 5(b) 5(b) 5(b) 5(b) 5(c) 5(c) 8(a),(b) 4 (29,260) (17,317) 6 7,389 5,144 (21,871) (12,173) 10(b) 10(b) (63) 600 537 (57) 300 243 Total comprehensive loss or the period (21,334) (11,930) 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 (21,821) (50) (21,871) (21,284) (50) (21,334) (11,579) (594) (12,173) (11,336) (594) (11,930) Loss per share attributable to the ordinary equity holders Basic earnings/(loss) per share Diluted earnings/(loss) per share 20(a) 20(b) (3.38) (3.38) (2.55) (2.55) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 38 Consolidated balance sheet As at 30 June 2021 30 June 2021 $'000 30 June 2020 $'000 Notes Current assets Cash and cash equivalent Trade and other receivables Inventories Investments Assets held for sale Non current assets Receivables Right-of-use assets Property, plant and equipment Deferred tax assets Intangible assets Total assets Current liabilities Trade and other payables Borrowings Employee benefit obligations Non-current liabilities Borrowings Employee benefit obligations Deferred tax liabilities Total liabilities Net assets Contributed equity Other reserves Accumulated losses Non-controlling interests Total equity 7(a) 7(b) 8(c) 14(c) 3 7(b) 7(c) 8(a) 8(d) 8(b) 7(d) 7(e) 8(e) 7(e) 8(e) 8(d) 10(a) 10(b) 10(c) 14(b) 922 18,752 18,874 1,200 – 39,748 150 155 55,543 27,506 7,081 10,556 13,286 12,631 – 38,565 75,038 150 311 41,762 19,453 8,634 90,435 130,183 70,310 145,348 18,439 1,529 789 20,757 31,709 110 1,713 33,532 54,289 13,784 26,221 585 40,590 23,429 299 1,045 24,773 65,363 75,894 79,985 174,636 (6,411) (91,533) 76,692 159,337 (8,892) (69,712) 80,733 (798) (748) 75,894 79,985 The above consolidated balance sheet should be read in conjunction with the accompanying notes. BESTON GLOBAL FOOD COMPANY LIMITED | FINANCIAL REPORT 2021 39 NCI $'000 (154) (594) – (594) Total equity $'000 80,113 (12,173) 243 (11,930) Consolidated statement of changes in equity For the year ended 30 June 2021 Attributable to the owners of Beston Global Food Company Limited Share capital $'000 Other reserves $'000 Accum losses $'000 Total $'000 Notes Balance at 1 July 2019 147,535 (9,135) (58,133) 80,267 Profit/(loss) for the period Other Comprehensive Income Total Comprehensive income for the period 10(b) Issue of share capital As at 30 June 2020 Balance at 1 July 2020 – – – 11,802 – 243 243 – (11,579) – (11,579) (11,579) 243 (11,336) – 11,802 – 11,802 159,337 (8,892) (69,712) 80,733 (748) 79,985 159,337 (8,892) (69,712) 80,733 (748) 79,985 Profit/(loss) for the period Other Comprehensive Income Total Comprehensive income for the period 10(b) – – – – 537 537 (21,821) – (21,821) (21,821) 537 (21,284) (50) – (50) (21,871) 537 (21,334) Issue of share capital 10(a), (b) 15,299 1,944 – 17,243 – 17,243 As at 30 June 2021 174,636 (6,411) (91,533) 76,692 (798) 75,894 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 40 Consolidated statement of cash flows For the year ended 30 June 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid 30 June 2021 $'000 30 June 2020 $'000 Notes 106,761 (137,414) 4 (622) 105,618 (117,763) 29 (1,590) Net cash outflows from operating activities 11(a) (31,271) (13,706) Cash flows from investing activities Payments for PP&E Payments for intangibles Proceeds on disposal of seafood assets (net of costs) Proceeds on disposal of Dairy Farms (net of costs) Proceeds on disposal of livestock Net cash inflows from investing activities Cash flows from financing activities Proceeds from the issue of shares Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Loans from related parties 8(a) 8(b) 3 10(a) (16,244) (315) – 39,004 280 22,725 15,299 4,105 (20,517) 156 – (5,653) (320) (281) 8,315 970 3,031 11,546 12,256 (4,500) 81 – Cash inflows/(outflows) from financing activities (957) 19,383 Net increase/(decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Net foreign exchange differences (9,503) 10,556 (131) 8,708 1,920 (72) Cash and cash equivalents at the end of period 7(a) 922 10,556 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. BESTON GLOBAL FOOD COMPANY LIMITED | FINANCIAL REPORT 2021 41 Contents of the notes to the consolidated financial statements 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 Disposal of Dairy Farms Internalisation of Investment Management Agreement 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 Interests in other entities Contingent liabilities and contingent assets Commitments Events occurring after the reporting period Related party transactions Remuneration of auditors Earnings per share Parent entity financial information Summary of significant accounting policies 42 44 44 44 45 45 46 48 51 52 53 54 56 56 58 58 58 58 59 60 60 61 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 42 1 Segment results (a) Description of segments The Group’s executive management committee, consisting of the Chief Executive Officer and the Chief Financial Officer, examines the Group’s performance both from a product and geographic perspective and has identified four reportable segments of its business: • The Australian Dairy segment which owns production plants and uses milk to produce cheese and other dairy products. • The Australian Meat segment is focused on production of high quality and innovative meat and related products for expanding domestic and export markets. • The Australian Other segment includes other Australian domiciled businesses developing technological software for tracking the provenance and authenticity of goods, as well as the production of spring water and related products. • The International Other segment includes foreign entities providing sales support and customer support for customers of the consolidated entity. • The Corporate segment provides business support to the operating segments. (b) Segment results The segment information for the year ended 30 June 2021 and the year ended 30 June 2020 provided to the executive management committee for the reportable segments, including segment assets and liabilities, are as follows: 2021 Revenue Contracts with domestic customers Contracts with international customers Other revenue Other income Finance income Total revenue Expenses Cost of Sales Other operating costs Selling and distribution Business support Loss on disposal Finance costs Impairment expense Internalisation of IMA Corporate allocation Total expenses Operating result before tax Attributable to owners of Beston Attributable to NCI Total segment assets; including Capital expenditure Total segment liabilities Australian Dairy $’000 Australian Meat $’000 Australian Other $’000 International Other $’000 Corporate $’000 Total $’000 81,551 20,658 37 226 – 102,472 (101,294) (10,107) (3,664) (3,765) (91) – – – (6,413) 10,080 – – – – 10,080 (9,246) (1,717) (78) (1,030) – – (1,485) – (641) (125,334) (14,197) (22,862) (22,862) – 78,993 15,100 (42,493) (4,117) (4,117) – 12,472 905 (4,741) 131 – 11 – – 142 (101) (394) (24) (41) – – – – (20) (580) (438) (438) (50) 1,831 138 (456) – – – – – – – – – (228) – – – – (6) – – – 600 4 604 – – – (5,529) – (690) – (3,074) 7,080 91,762 20,658 48 826 4 113,298 (110,641) (12,218) (3,766) (10,593) (91) (690) (1,485) (3,074) – (234) (2,213) (142,558) (234) (234) – 261 – 59 (1,609) (1,609) – 36,626 101 (6,658) (29,260) (29,260) (50) 130,183 16,244 (54,289) BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 43 (b) Segment results (continued) 2020 Revenue Contracts with domestic customers Contracts with international customers Other revenue Other income Finance income Total revenue Expenses Cost of Sales Other operating costs Selling and distribution Business support Finance costs Impairment expense Share of profit/(loss) from associates Corporate allocation Total expenses Operating result before tax Attributable to owners of Beston Attributable to NCI Total segment assets; including Capital expenditure Total segment liabilities Australian Dairy $’000 Australian Meat $’000 Australian Other $’000 International Other $’000 Corporate $’000 Total $’000 64,318 26,117 47 1,723 4 92,209 (80,975) (9,838) (3,021) (4,149) – – – (3,062) 12,379 – – 66 – 12,445 (12,526) (2,667) (139) (1,179) – – – (464) 106 – 12 2,571 – 2,689 (52) (669) (26) (149) – (1,732) – (86) – 108 – 302 – 410 (319) (11) – (337) – – – (17) – – 83 459 25 567 – – – (6,242) (1,606) – – 3,629 76,803 26,225 142 5,121 29 108,320 (93,872) (13,185) (3,186) (12,056) (1,606) (1,732) – – (101,045) (16,975) (2,714) (684) (4,219) (125,637) (8,836) (8,836) – 93,306 4,796 (52,837) (4,530) (4,530) – 12,374 1,100 (5,596) (25) 568 (594) 1,830 83 (520) (274) (274) – (89) – 50 (3,652) (3,652) – 37,927 9 (6,458) (17,317) (16,724) (594) 145,348 5,988 (65,361) FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 44 2 Revenue 3 Disposal of Dairy Farms The Group derives the following types of revenue: Contracts with customers Leasing income Total revenue 30 June 2021 $’000 112,420 48 112,468 30 June 2020 $’000 103,028 142 103,170 (a) Recognising revenue from major business activities Revenue is recognised for the major business activities using the methods outlined below. (i) Sale of goods Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer. Revenue from the sale of dairy and meat products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods to the customer’s location. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g. rebates, case deals). (b) Disaggregation of revenue from contracts with customers The Group derives revenue from the sale of goods in the following major geographical regions: 30 June $'000 Dairy 30 June $'000 Meat 30 June $'000 Other 30 June $'000 Total Sale of goods 2021 Australia Asia Europe North America 81,551 17,127 1,637 1,894 10,080 – – – Total 102,209 10,080 2020 Australia Asia Europe North America Total 64,318 24,065 1,291 761 12,379 – – – 90,435 12,379 131 – – – 131 106 108 – – 214 91,762 17,127 1,637 1,894 112,420 76,803 24,173 1,291 761 103,028 On 31 August 2020, Beston Farms Pty Ltd sold its farming assets, including the farms, related property, plant and equipment, and biological assets which had been reclassified as Assets held for sale as at 30 June 2020. In addition to these assets, the sale inventory consisting of mainly stock feed was finalised on 31 August 2020. Cash Received Less: disposal related costs Total disposal consideration Less: Assets held for sale disposed Property, plant and equipment Biological assets Intangible assets Less: Other assets disposed Inventory Add: Liabilities disposed Payroll liabilities Loss on disposal of assets Notes 31 August 2020 $'000 40,128 (1,124) 39,004 (28,318) (5,658) (4,589) (38,565) (675) 132 (104) 4 Internalisation of Investment Management Agreement The Group had a formal Investment Management Agreement (IMA) 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 2021, BPAM was paid $1,445,347 under this arrangement (2020: $2,130,000). On 28 May 2021, the internalisation of the IMA was approved by shareholders at the EGM. The approval resulted in a termination fee being paid to BPAM consisting of $1.13m in cash and 21,125,000 shares. The share price on 29 May was $0.092 per share. The date at which the agreement is to be settled 28 August 2021. The total expenditure recognised in the period relating to the internalisation of the management agreement is: Total cash consideration Share-based consideration Number of shares Share price on date of shareholder approval Value of share-based consideration Total share-based consideration Total expense relating to IMA 28 May 2021 $'000 1,130 21,125,000 $0.092 1,944 1,944 3,074 Notes 10(b) 5(b) BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 45 30 June 30 June 2021 $’000 2020 $’000 Notes 8(d) 8(d) – – – – (8,053) (3,651) 668 (4) (1,740) 247 (7,389) (5,144) (7,389) (5,144) 5 Other income and expense items 6 Income tax benefit 30 June 2021 $'000 30 June 2020 $'000 Notes (a) Income tax benefit – 2,445 14(c) 600 – Current tax Current tax – 1,282 Total current tax expense Deferred income tax Increase in deferred tax assets Increase/(decrease) in deferred tax liabilities Other adjustment Total deferred tax benefit Income tax benefit 8(a),(b), 7(c) 8(a),(b), 9 4 (a) Other income Net gain on disposal of assets Reversal of prior year impairment of financial assets Fair value adjustments to biological assets Other items Government grants (b) Break down of expenses by nature Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation Impairment of financial assets Impairment of non-financial assets Internalisation of Management Agreement Management fee Other expenses Net loss on disposal of assets Consultancy expenses Short term & low value lease expense Rates and taxes Repairs and maintenance Insurance expenses Logistics and marketing expenses (c) Finance income and costs Interest income Net exchange gains Finance income Finance charges paid for financial liabilities Net exchange losses Finance costs 11(a) Net finance costs 33 193 826 1,074 320 5,121 (10,267) (10,216) 104,068 90,968 15,542 3,001 – 1,485 3,074 1,445 3,724 91 1,980 467 3,686 2,219 2,578 8,775 14,209 2,994 – 1,732 – 2,306 4,112 – 2,093 669 3,390 2,875 2,246 6,653 141,868 124,031 4 – 4 29 – 29 (622) (1,590) (68) (690) (16) (1,606) (686) (1,577) (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax Tax at the Australian tax rate of 30.0% (2020 – 30.0%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: IMA Internalisation expense Impairment of Provincial Food Group goodwill Entertainment Reversal of NBI asset impairment Derecognition of foreign tax losses Derecognition of DTA Sundry items 30 June 30 June 2021 2020 $’000 (29,260) $’000 (17,317) (8,778) (5,195) 922 446 5 (180) 211 – (15) – – 6 – – 257 (212) Income tax benefit (7,389) (5,144) (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised 30 June 30 June 2021 $’000 20,067 2020 $’000 18,894 Potential tax benefit @ 30.0% 6,020 5,668 The Directors have not recognised a deferred tax asset in relation to the tax losses on the basis that the entity is still in its establishment phase. See note 8(d) for information about recognised tax losses and significant judgements made in relation to them. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 46 7 Financial assets and financial liabilities (a) Cash and cash equivalents Cash at bank and in hand (b) Trade and other receivables Trade receivables Provision for impairment Other receivables Prepayments Goods and services tax (GST) receivable 30 June 30 June 2021 $’000 922 2020 $’000 10,556 30 June 2021 Current Non-current $’000 $’000 – 14,184 – (254) Total $’000 14,184 (254) 30 June 2020 Current Non-current $’000 $’000 – 10,636 – (254) 13,930 1,095 2,021 1,706 18,752 – 13,930 10,382 150 – – 150 1,245 2,021 1,706 699 1,365 840 18,902 13,286 – 150 – – 150 Total $’000 10,636 (254) 10,382 849 1,365 840 13,436 (i) Trade and other receivables 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 22(n)(iii) and 22(l) respectively. This category generally applies to trade and other receivables. (ii) Fair value of trade and other receivables Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. For non-current receivables, the fair values are also not significantly different to their carrying amounts. (iii) Impairment and risk exposure Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit risk, foreign currency risk and interest rate risk can be found in note 12. (c) Leases Group as a Lessee The group entered into a lease contract for the property used for its head office on 30 June 2020. The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: As at 1 July 2019 Additions Depreciation Expense As at 30 June 2020 As at 1 July 2020 Additions Depreciation Expense As at 30 June 2021 Property $’000 Total $’000 311 – 311 311 – 156 155 311 – 311 311 – 156 155 The following are the amounts recognised in the profit and loss: Depreciation of right-of-use assets Interest expense on lease liabilities Short term lease expense (Corporate overheads and business support) Low-value-asset lease expense (Corporate overheads and business support) 30 June 30 June 2021 $’000 156 – – – 2020 $’000 – – 238 4 156 242 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 47 30 June 2020 $'000 278 167 365 447 – 237 3,416 2,333 14,978 4,000 26,221 293 419 – – 22,717 23,429 49,650 (d) Trade and other payables Current liabilities Trade payables Goods and service tax (GST) payable Accrued expenses Deferred grant income Payroll liabilities Other creditors 30 June 30 June 2021 $’000 15,035 585 831 – 588 1,400 2020 $’000 11,204 – 1,157 193 773 457 18,439 13,784 Trade payables are unsecured and are usually paid within 30 days of recognition. (i) Fair value of trade and other payables The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. (e) Borrowings Current interest–bearing loans and borrowings Lease liabilities Equipment finance Equipment finance Equipment finance Equipment finance Insurance Loan Secured lending Secured lending Secured lending Working capital facility Total current interest–bearing loans and borrowings Non–current interest–bearing loans and borrowings Lease liabilities Equipment finance Secured lending Secured lending Working capital facility Interest rate % 9.23% 2.46% 3.00% 3.02% 3.56% 2.39% BBSY + 2.50% BBSY + 2.05% BBSY + 2.00% BBSY + 2.05% Maturity August 2022 June 2024 February 2024 February 2024 December 2025 July 2021 November 2023 November 2023 September 2020 November 2023 9.23% 3.56% BBSY + 2.50% BBSY + 2.05% BBSY + 2.05% August 2022 December 2025 November 2023 November 2023 November 2023 Total non–current interest–bearing loans and borrowings Total interest–bearing loans and borrowings Subsequent to the year end, on the 4th August 2021, the Group completed an annual review of its debt facilities with the Group’s lenders. These revised facilities increased the equipment finance facilities by $6 million, and increased other short and long term facilities by $14 million. 30 June 2021 $'000 245 436 321 – 95 14 418 – – – 1,529 41 4,136 2,579 1,953 23,000 31,709 33,238 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 48 8 Non–financial assets and liabilities (a) Property, plant and equipment At 1 July 2019 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2020 Opening net book amount Additions Disposals Assets classified as held for sale and other disposals Impairment charge Depreciation charge Closing net book amount At 30 June 2020 Cost or fair value Accumulated depreciation Net book amount At 1 July 2020 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2021 Opening net book amount Additions Depreciation charge Closing net book amount At 30 June 2021 Cost or fair value Accumulated depreciation Net book amount Land $'000 Buildings $'000 Plant and equipment $'000 Furniture, fittings and equipment $'000 Motor vehicles $'000 27,999 – 27,999 27,999 – (292) (17,354) – – 10,353 10,353 – 10,353 10,353 – 10,353 10,353 – – 10,353 10,353 – 10,353 5,603 (737) 4,866 4,866 1,663 (192) (6,019) – (241) 77 83 (6) 77 83 (6) 77 77 37 (7) 36,613 (1,925) 34,688 34,688 3,449 (113) (4,687) (813) (1,877) 30,647 35,080 (4,433) 30,647 35,080 (4,433) 30,647 30,647 15,901 (2,318) 107 44,230 120 (13) 107 50,981 (6,751) 44,230 355 (170) 185 185 51 (40) (5) (23) (51) 117 374 (257) 117 374 (257) 117 117 259 (49) 327 633 (306) 327 530 (100) 430 430 490 – (252) – (101) 567 677 (110) 567 677 (110) 567 567 47 (88) 526 724 (198) 526 Total $'000 71,100 (2,932) 68,168 68,168 5,653 (637) (28,317) (836) (2,270) 41,761 46,567 (4,806) 41,761 46,567 (4,806) 41,761 41,761 16,244 (2,462) 55,543 62,811 (7,268) 55,543 Property, plant and equipment is stated at historical cost less depreciation and impairment. Land is carried at cost. Depreciation is calculated using the straight–line method to allocate their cost amount, net of their residual values, over their estimated useful lives: • Buildings • Plant and equipment 20 – 50 years 5 – 40 years • Furniture, fittings and equipment 3 – 10 years • Motor vehicles 7 – 15 years See note 22(q) for the other accounting policies relevant to property, plant and equipment. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 49 Internally generated software* $'000 Goodwill $'000 Customer contracts $'000 Lobster quota's $'000 Water licenses $'000 Total $'000 8,159 – 8,159 8,159 – – (755) – – 7,404 7,404 – 7,404 7,404 – 7,404 7,404 – – (1,485) – 5,919 5,919 – 5,919 2,142 (559) 1,583 1,583 58 – – (896) (246) 499 1,304 (805) 499 1,304 (805) 499 499 315 – – (167) 647 1,619 (972) 647 1,496 (789) 707 707 262 – – – (443) 526 1,758 (1,232) 526 1,758 (1,232) 526 526 – – – (216) 310 1,758 (1,448) 310 4,949 – 4,949 4,949 – (4,949) – – – – – – – – – – – – – – – – – – – 4,039 – 20,785 (1,348) 4,039 19,437 4,039 – – (3,834) – – 205 205 – 205 205 – 205 205 – – – – 205 205 – 205 19,437 320 (4,949) (4,589) (896) (689) 8,634 10,671 (2,037) 8,634 10,671 (2,037) 8,634 8,634 315 – (1,485) (383) 7,081 9,501 (2,420) 7,081 At 1 July 2019 Cost or fair value Accumulated amortisation Net book amount Year ended 30 June 2020 Opening net book amount Additions Disposals Assets classified as held for sale and other disposals Impairment charge Amortisation charge Closing net book amount At 30 June 2020 Cost or fair value Accumulated amortisation Net book amount At 1 July 2020 Cost or fair value Accumulated amortisation Net book amount Year ended 30 June 2021 Opening net book amount Additions Disposals Impairment charge Amortisation charge Closing net book amount At 30 June 2021 Cost or fair value Accumulated amortisation Net book amount (b) Intangible assets * Software includes capitalised development costs being an internally generated intangible asset. (i) Amortisation methods and useful lives The Group amortises IT development and software from the date of first use, using the straight–line method over 3–5 years. 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. 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. (ii) Impairment tests for goodwill and other indefinite life intangibles Goodwill and other indefinite life intangibles have been tested for impairment. Based on valuations undertaken of the Dairy CGU to which the goodwill relates, goodwill relating to the meat segment was impaired by $1.485 million. Refer to note 9 for further discussion relating to impairment assessments. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 50 8 Non-financial assets and liabilities (continued) (ii) Deferred tax liabilities (c) Inventories Current assets Raw material and stores Finished goods 30 June 30 June 2021 2020 $’000 $’000 3,284 15,590 18,874 3,004 9,627 12,631 The balance comprises temporary differences attributable to: Property, plant and equipment Intangible assets Other 30 June 30 June 2021 $’000 2020 $’000 1,677 – 36 1,713 995 – 50 1,045 (i) Assigning costs to inventories (iii) Tax consolidation 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. (ii) Amounts recognised in profit or loss Inventories recognised as expense during the year ended 30 June 2021 amounted to $93,801,343 (2020 - $80,751,412). There were write-downs of inventories during the year of $1,010,460 (2020 - $354,365). (d) Deferred tax balances (i) Deferred tax assets 30 June 30 June 2021 $’000 2020 $’000 26,854 267 46 254 237 (152) 27,506 18,057 262 72 260 519 283 19,453 The balance comprises temporary differences attributable to: Tax losses and offsets Employee benefits Accruals Tax only assets Intangibles Other Total deferred tax assets Significant estimates As at 30 June 2021, the Group has deferred tax assets totalling $27.5m, mostly comprising of carried forward tax losses. The Group’s detailed financial model, referred to in Note 22(a)(vi), indicates that it is probable that the Group will generate sufficient future taxable profit against which the tax losses can be utilised within a 5-year period. The losses can be carried forward indefinitely and have no expiry date. Members of the tax consolidated group and tax sharing agreement Beston Global Food Company Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 11 February 2015. Beston Global Food Company Limited is the head entity of the tax consolidated group. Members of the tax consolidated group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote. Tax effect accounting by members of the tax consolidated group Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the stand-alone taxpayer approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. These tax amounts are measured as if each entity in the tax consolidated group continues to be a separate taxable entity in its own right. The nature of the tax funding agreement is discussed further below. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Nature of the tax funding agreement Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement, the wholly-owned entities fully compensate Beston Global Food Company Limited for any current tax payable assumed and are compensated for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits transferred to Beston Global Food Company Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount charged under the tax funding agreement and the allocation under AASB Interpretation 1052, the head entity accounts for these as equity transactions with the subsidiaries. The amount receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 51 The head entity may also require payment of interim funding amounts to assist with its obligation to pay tax instalments. (e) Employee benefit obligations 30 June 2021 30 June 2020 Current $’000 789 Non- current $’000 110 Total Current $’000 899 $’000 585 Non- current $’000 299 Total $’000 884 Leave obligations (i) The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. CGU-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. 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 2.5% were used across all CGUs. (i) Leave obligations (i) Australian Dairy CGU The recoverable amount of the Australian Dairy CGU, $129.0 million as at 30 June 2021, has been determined based on a fair value less cost to sell calculation using cash flow projections from financial budgets and forecasts covering a five year period, with input from an independent valuation specialist, and approved by senior management. The impacts of COVID-19 on future cash flows was considered when determining inputs for the fair value less cost to sell calculations. The carrying value of goodwill allocated to the Australian Dairy CGU is $1,092,067, and the carrying value of indefinite life intangible assets allocated to the Australian Dairy CGU is $79,662. Key drivers which impact the recoverable amount of the Australian Dairy CGU are detailed below in 9(b). Management have determined that a reasonable possible change in the key assumptions of the fair value less costs of disposal calculation would not cause the carrying amount to exceed the recoverable amount of the Dairy CGU. As a result of this analysis management did not identify impairment for this CGU. (ii) Australian Meat CGU The recoverable amount of the Australian Meat CGU, $10.4 million as at 30 June 2021, has been determined based on a fair value less cost to sell calculation using cash flow projections from financial budgets and forecasts covering a five year period, with input from an independent valuation specialist, and approved by senior management. The impacts of COVID-19 on future cash flows was considered when determining inputs for the fair value less cost to sell calculations. The carrying value of goodwill allocated to the Australian Meat CGU is $4,828,242, and the carrying value of indefinite life intangible assets allocated to the Australian Meat CGU is $nil. Key drivers which impact the recoverable amount of the Australian Meat CGU are detailed below in 9(c). Management have determined that a reasonable possible change in the key assumptions of the fair value less cost of disposal calculation would cause the carrying amount to exceed the recoverable amount of the Australian Meat CGU. As a result of this analysis management have identified a $1.49 million impairment in Goodwill for this CGU. 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 $789,770 (2020 - $585,885) is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months. 30 June 30 June 2021 $’000 195 2020 $’000 192 Current leave obligations expected to be settled after 12 months 9 Impairment (a) Management analysis The Group performed its annual impairment test in June 2020 and 2021. The Group considered the relationship between its market capitalisation and book value, among other factors, when reviewing for indicators of impairment. At 30 June 2021, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of assets. Goodwill which has been acquired through business combinations, and intangible assets with indefinite lives such as water licenses, are related to the Australian Dairy and Australian Meat operating and report segments, which are CGUs for the purposes of impairment testing. These assets have been tested for potential impairment using assumptions relevant for each of the CGU’s. Conservative estimates have been applied to ensure each of the CGUs are robust in their assessment of future cash flows. 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 CGUs, and is derived from the Group’s weighted average cost of capital (WACC). FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 52 9 Impairment (continued) (b) Key assumptions – Dairy The calculation of fair value of the Dairy operating GCU is most sensitive to the following assumptions: • Discount rates; • The price of milk paid to farmers and other suppliers; • The volume of milk obtained from farmers and other suppliers; • The yields achieved through the production process; and • Gross margin. (i) Discount rates The pre-tax discount rate applied to the cash flow projections is 13.4% and the cash flows beyond the five-year period are extrapolated using a 2.5% 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 exceed the value in use, and an impairment of the Meat CGU goodwill balance was recognised per 9(a)(ii). An increase of the pre-tax discount rate to 14.9% (i.e. +1.5%) in the Australian Meat CGU would result in a decrease in the recoverable amount of $1.6 million. This decrease would result in a further impairment of $1.6 million. Each of the sensitivities below assumes that a specific assumption moves in isolation, while all other assumptions are held constant. A change in one of the aforementioned assumptions could be accompanied by a change in another assumption, which may increase or decrease the net impact. (ii) Gross margin A decrease of the gross margin by 2.5% in the Australian Meat CGU would result in a decrease in the recoverable amount of $3.7 million. This decrease would result in a further impairment of $3.7 million. (i) Discount rates (iii) Real sales growth The pre-tax discount rate applied to the cash flow projections is 13.4% and the cash flows beyond the five-year period are extrapolated using a 2.5% growth rate that is the same as the long-term average growth rate. An increase of the pre-tax discount rate to 14.9% (i.e. +1.5%) in the Dairy CGU would result in a decrease in the recoverable amount of $24.4 million. This decrease would not result in impairment. (ii) Milk supply prices A decrease in the real growth rate achieved by 2.5% in the Australian Meat CGU would result in a decrease in the recoverable amount of $2.8 million. This decrease would result in a further impairment of $2.8 million. 10 Equity (a) Contributed equity An increase of the milk supply prices by 5.0% in the Dairy CGU would result in a decrease in the recoverable amount of $80.4m million. This decrease would not result in impairment. 30 June 2021 Shares 30 June 2020 Shares 30 June 2021 $’000 30 June 2020 $’000 (iii) Milk supply volume A decrease of the milk supply volumes by 5.0% in the Dairy CGU would result in a decrease in the recoverable amount of $58.9 million. This decrease would not result in impairment. (iv) Production yields A decrease of the production yields by 2.5% in the Dairy CGU would result in a decrease in the recoverable amount of $14.2 million. This decrease would not result in impairment. (v) Gross margin A decrease in the gross margin by 2.5% in the Dairy CGU would not result in impairment. (c) Key assumptions - Australian Meat The calculation of fair value of the Australian Meat GCU is most sensitive to the following assumptions: • Discount rates; • Real sales growth; and • Gross margin. Each of the sensitivities below assumes that a specific assumption moves in isolation, while all other assumptions are held constant. A change in one of the aforementioned assumptions could be accompanied by a change in another assumption, which may increase or decrease the net impact. Ordinary shares - fully paid 842,674,408 588,842,084 174,636 159,337 (i) Movements in ordinary share capital Balance 30 June 2020 Opening balance 1 July 2020 Placement of shares Placement of shares Placement of shares Capitalised transaction costs Number of shares 588,842,084 588,842,084 13,671,990 103,169,567 136,990,767 – $’000 159,336,738 159,336,738 1,162,120 6,706,022 8,904,400 (1,473,528) Balance 30 June 2021 842,674,408 174,635,752 (ii) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 53 (b) Other reserves (c) Accumulated losses 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. (b) Other reserves Financial assets at FVOCI Unallocated shares Share based payments Foreign currency translation Financial assets at FVOCI Opening balance Revaluation – gross Disposal of financial assets Balance 30 June Share–based payment reserve Opening balance Internalisation of IMA Balance 30 June Foreign currency translation Opening balance Currency translation differences arising during the year Balance 30 June Notes 14(c) 4 30 June 30 June 2021 $'000 (7,793) 1,944 (562) 2020 $'000 (8,393) – – (499) (6,411) (8,892) (8,393) 600 – (7,793) – 1,944 1,944 (8,693) – 300 (8,393) – – – (499) (63) (442) (57) (562) (499) (i) Nature and purpose of other reserves Financial assets at FVOCI The financial assets at FVOCI reserve is used to revalue financial assets (equity instruments, as per elected upon adoption of AASB 9 Financial Instruments) through other comprehensive income. Gains and losses on these financial assets are never recycled to the profit and loss. Share-based payment reserve The share-based payment reserve is used to recognise shares required to be issued on August 28 for the purpose of internalising the Investment Management Agreement with BPAM. This represents the fair value of the shares at the date that the internalisation received shareholder approval, being May 28th 2021. Foreign currency translation 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 Balance 30 June 30 June 30 June 2021 $’000 (69,712) (21,821) 2020 $’000 (58,133) (11,579) (91,533) (69,712) 11 Cash flow information (a) Reconciliation of loss after income tax to net cash outflow from operating activities Notes 5(b) 14(c) 9 4 8(c) Profit/(loss) after tax Non-cash adjustments: Depreciation & amortisation expense Reversal of impairment of financial asset Impairment of non-financial assets Internalisation of IMA Bad debts written off Fair value adjustment to biological assets Foreign exchange loss Inventory write-off Adjustment to lease liability Grant income Non-operating activities: (Gain)/loss on disposal of fixed assets Loss on disposal of livestock Change in: (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories Increase in deferred tax assets Increase/(decrease) in trade payables Increase/(decrease) in deferred tax liabilities Increase/(decrease) in other provisions Net cash outflow from operating activities 30 June 30 June 2021 $’000 (21,871) 2020 $’000 (12,173) 3,001 2,994 (600) 1,485 3,074 27 – 1,732 – 406 – (1,282) 68 1,010 – (193) 16 354 260 (320) 91 54 (2,445) 241 (5,493) 1,897 (8,262) (8,053) 1,207 (3,651) 3,761 (1,780) 668 (1,741) (38) 579 (31,271) (13,706) FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 54 12 Financial risk management Sensitivity 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. 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: (a) Market risk (i) Foreign exchange risk Foreign exchange risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a foreign currency) and the Group’s net investments in foreign subsidiaries. Foreign exchange contracts are utilised as a short-term tool to mitigate some foreign exchange risk. These open contracts as at 30 June 2021 are immaterial in nature. Exposure Index 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% Impact on post-tax profit 30 June 2021 30 June 2020 $’000 – – (16) 20 (33) 40 $’000 – – (16) 20 (22) 27 The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar, was as follows: (ii) Interest rate risk 30 June 2021 30 June 2020 USD CNY THB USD CNY THB $’000 $’000 $’000 $’000 $’000 $’000 Trade receivables Trade payables 363 – 181 (1) – (1) 247 209 – (1) – (3) Amounts recognised in profit or loss and other comprehensive income During the year, the following foreign exchange related amounts were recognised in profit or loss: Amounts recognised in profit or loss Net foreign exchange gain/(loss) included in other income/other expenses Total net foreign exchange gains/(losses) recognised in profit before income tax for the period 30 June 30 June 2021 $’000 2020 $’000 (68) (68) (16) (16) 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 external debt facilities and cash at bank held at variable rates. Cash and cash equivalents Borrowings (excluding fixed rate) Sensitivity 30 June 30 June 2021 $’000 922 (27,965) 2020 $’000 10,556 (47,681) (27,043) (37,125) The following sensitivity analysis is based on the interest rate risk exposures in existence at balance date. At 30 June 2021, if interest rates had moved as illustrated in the table below, with all other variables held constant, post-tax profit and equity would have been impacted as follows: Interest rates – increase by 50 basis points Interest rates – decrease by 50 basis points 30 June 30 June 2021 $’000 (161) 161 2020 $’000 (195) 195 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 55 (iii) Price risk Exposure 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 (iii) Past due but not impaired 30 June 30 June 2021 $’000 254 27 (27) 254 2020 $’000 257 406 (409) 254 As at 30 June 2021, trade receivables of $3,477,407 (2020 - $2,490,417) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. 30 June 30 June 2021 $’000 3,043 430 4 3,477 2020 $’000 2,255 204 31 2,490 Up to 3 months 3 to 6 months 6 to 9 months At 30 June (c) Liquidity risk The Group monitors its risk to a shortage of funds using a liquidity planning tool. The Group’s objective is to maintain a sufficient cash surplus in order to pay its debts as and when they fall due. All financial liabilities of the Group are non-derivatives and have contractual maturities of up to 4 years. 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, and therefore require a continuous supply of milk. The Group manages commodity risk by where possible entering into longer term relationships with key suppliers that create more certainty around key commodity prices. (b) Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The maximum exposure to credit risk before any credit enhancements at the end of each reporting period is the carrying amount of the financial assets (refer note 7(b)). (i) Risk management Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Management have regular reporting and assessment of key customers credit risk in order to manage this. (ii) Trade receivables 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. Outstanding customer receivables and contract assets are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance obtained from reputable banks and other financial institutions. An impairment analysis is performed at each reporting date based on the expected credit loss. The provision amounts are based on the expected recoverability risk for past due debtors. The provision reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions, and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. 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 22(n)(iii) for information about how impairment losses are calculated. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 56 12 Financial risk management (continued) (c) Liquidity risk (continued) (i) Maturities of financial liabilities The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments: On demand $'000 Less than 3 months $'000 3 to 12 months $'000 1 to 5 years $'000 Over 5 years $'000 Total $'000 17,510 929 14 17,510 943 (1) 418 1,097 1,514 – 27,532 4,177 31,709 – – 18,438 27,964 5,274 51,676 3,636 – – 3,636 10,042 – 70 10,112 106 3,653 209 3,968 – 38,426 298 38,724 – 13,784 – 42,079 – 577 – 56,440 At 30 June 2021 Non–derivatives Trade and other payables Borrowings Lease liabilities Total non–derivatives At 30 June 2020 Non–derivatives Trade and other payables Borrowings Lease liabilities Total non–derivatives 13 (a) Capital management Risk management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. (b) Dividends There were no dividends provided for during the year ended 30 June 2021 (2020: $nil). 14 Interests in other entities (a) Material subsidiaries The Group’s principal subsidiaries at 30 June 2021 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. Name of entity Country of incorporation and operation Ownership interest held by the Group Ownership interest held by NCI Principal activities 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 Food (Shanghai) Co. Limited Beston Technologies Pty Ltd AQUAessence Pty Ltd Provincial Food Group Pty Ltd Australia Australia Australia Australia Thailand Hong Kong China Australia Australia Australia 2021 % 100.0 100.0 100.0 100.0 98.0 100.0 100.0 100.0 51.0 100.0 2020 % 100.0 100.0 100.0 100.0 98.0 100.0 100.0 100.0 51.0 100.0 2021 % – – – – 2.0 – – – 49.0 – 2020 % – – – – 2.0 – – – 49.0 – Food services Dairy farming Dairy production Sales and distribution Sales and distribution Sales and distribution Sales and distribution Technology developer Water products Protein processing BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 57 (b) Non-controlling interests (NCI) 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. Interest in: Share capital AQUAessence Pty Ltd - Summarised balance sheet Current assets Current liabilities Current net assets Non-current assets Non-current liabilities Non-current net assets Net assets Accumulated NCI AQUAessence Pty Ltd - Summarised statement of comprehensive income Revenue Profit/(loss) for the period Total comprehensive income Profit/(loss) allocated to NCI AQUAessence Pty Ltd - Summarised statement of cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increases/(decreases) in cash and cash equivalent (c) Investments 30 June 30 June 2021 2020 $’000 $’000 (798) (748) 139 454 (315) 1,230 454 776 461 204 138 (103) (103) (50) 163 – (167) (4) 152 468 (316) 1,336 4 1,332 1,016 154 118 (1,212) (1,212) (594) 50 – 14 64 Name of entity Neptune Bio-Innovations Pty Ltd Total investments Country of incorporation and operation Australia % of ownership interest 2020 % 10 2021 % 10 Measurement method FVOCI Carrying amount 2020 $’000 – – 2021 $’000 1,200 1,200 Subsequent to the balance date, an offer was received from Neptune Bio-Innovations Pty Ltd (NBI) to purchase the equity and convertible notes that constituted the Group’s investment in NBI for $1.2million. While the sale transaction was not executed before the balance date, the offer was an indicator of the fair value of the convertible notes and equity investments as at 30 June 2020. The transaction was successfully settled on 31 July 2021. As such, the investment has been reclassified as a current asset per the Balance Sheet. The previous impairment of the convertible note was reversed to the extent of the sale amount ($0.60 million) through recognition of Other Income, per the disclosure in note 5(a). The previous impairment of the equity investment was reversed to the extent of the sale amount ($0.60 million) using the Revaluation Reserve per note 10(b). FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 58 15 Contingent liabilities and contingent assets 18 Related party transactions The Group had no contingent assets or liabilities at 30 June 2021 (2020 – nil). (a) Subsidiaries Interests in subsidiaries are set out in note 14(a). 16 Commitments (b) Key management personnel compensation At 30 June 2021, the Group had commitments of $240,625,930 relating to milk supply purchases from farmers. These milk purchase commitments have terms of between 1 and 9 years. At 30 June 2021, the Group had nil commitments relating to equipment capital expenditure. 17 Events occurring after the reporting period Except for the sale of the Group’s investment in NBI as noted in Note 14(c), and the completion of the debt refinance review as noted in Note 7(e), no matter of circumstance has occurred subsequent to the period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. The uncertainty being created by the current COVID-19 outbreaks on Australia’s eastern seaboard is of continuing concern to everyone, of course. That said, history shows that pandemics such as COVID- 19 sooner or later do get contained and controlled, enabling life to return to the “normality” that we knew before the onset of the pandemic. The focus of the management team, in managing the various challenges thrown up by COVID-19, has been, and will continue to be, on calmly and confidently building the business of BFC with an eye to the future so that we are in a good position to capitalise on the opportunities which will emerge from the return to “normal”, post the pandemic. Short term employee benefits Post-employment benefits 30 June 30 June 2021 $’000 260 25 285 2020 $’000 260 25 285 (c) Transactions with other related parties The following transactions occurred with related parties: Sales of goods and services Sale of goods to related parties Remuneration paid for directors services Interest income from related parties Purchases of goods and services Purchases of various goods and services from related parties Management fee for Directors interests via the investment manager Cost of internalisation of Investment Management Agreement 30 June 30 June 2021 2020 $’000 $’000 114 – 230 (60) 177 (5) 200 (452) (1,445) (2,306) (3,074) – The Group entered into the following transactions with related parties: • Provision of additional directors’ services to all associates and investee entities • Purchases of products from associates and investee entities for export and on-sale to third parties • Procurement of management services from the Investment Manager BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 59 (d) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: 19 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the entity and its related practices: Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Fees for assurance services that are required by legislation to be provided by the auditor Fees for other assurance and agreed-upon- procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm Fees for other services: Tax compliance services Tax due diligence services Capital and debt advisory services Total fees to Ernst & Young (Australia) [A] Fees to other overseas member firms of Ernst & Young (Australia) [B] Total auditor remuneration [A] + [B] 30 June 30 June 2021 $’000 2020 $’000 273 285 – – 68 – – 341 – 341 – – 57 – – 342 – 342 Outstanding balances receivable/(payable) Current receivables Current payables (e) Loans to/from related parties Loans to other related parties Beginning of year End of year 30 June 30 June 2021 2020 $’000 $’000 3 (300) 101 (532) 30 June 30 June 2021 $’000 2020 $’000 33 33 33 33 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. (f) Terms and conditions (i) Transactions with the Investment Manager The Group had a formal Investment Management Agreement (IMA) 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. On 28 May 2021, the internalisation of the IMA was approved by shareholders at the EGM. The approval resulted in a termination fee being recognised payable to BPAM consisting of $1.13m in cash and 21,125,000 shares. The share price on 29 May was $0.092 per share. The date at which the agreement is the be settled 28 August 2021, with the IMA payable until this date. The Investment Manager was also previously entitled to receive a performance fee for outperformance by BFC. On 28 May 2021, the internalisation of the IMA was approved by shareholders at the EGM. As part of this agreement, BPAM ceased to hold an entitlement to any performance fee for the period. No expense has been recognised for the year ended 30 June 2021. (ii) Transactions with other related 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 trading 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. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 60 20 Earnings per share 21 Parent entity financial information (a) Basic earnings/(loss) per share (a) Summary financial information 30 June 30 June The individual financial statements for the parent entity show the following aggregate amounts: 30 June 2021 30 June 2020 $’000 $’000 6,137 75,415 81,552 13,978 73,710 87,688 1,945 4,045 5,989 1,945 6,151 8,096 75,563 79,592 174,636 (6,915) (92,158) 75,563 159,081 (8,393) (71,096) 79,592 Profit/(loss) for the period (21,062) (12,358) Total comprehensive income/(loss) (21,062) (12,358) (b) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020. From continuing operations attributable to the ordinary equity holders From discontinued operations Total basic earnings/(loss) per share attributable to the ordinary equity holders (b) Diluted earnings/(loss) per share From continuing operations attributable to the ordinary equity holders From discontinued operations Total diluted earnings/(loss) per share attributable to the ordinary equity holders 2021 Cents (3.38) 2020 Cents (2.55) – – (3.38) (2.55) 30 June 30 June 2021 Cents 2020 Cents ASSETS Current assets Non-current assets Total assets LIABILITIES Current liabilities Non-current liabilities Total liabilities (3.38) (2.55) Net assets – – (3.38) (2.55) EQUITY Issued capital Reserves Accumulated losses Total equity (c) Reconciliation of earnings used in calculating earnings per share Basic earnings/(loss) per share Loss attributable to the ordinary equity holders used in calculating basic earnings/ (loss) per share: From continuing operations From discontinued operations Diluted earnings/(loss) per share Loss from continuing operations attributable to the ordinary equity holders Used in calculating basic earnings/(loss) per share Used in calculating diluted earnings/(loss) per share 30 June 30 June 2021 $’000 2020 $’000 (21,871) – (21,871) – (11,579) – (11,579) – – – (21,871) (11,579) (21,871) (11,579) (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings/ (loss) per share 2021 Number 2020 Number 644,707,646 454,590,999 BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 61 22 Summary of significant accounting policies 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. (a) Basis of preparation These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Beston Global Food Company Limited is a for- profit entity for the purpose of preparing the financial statements. (i) Going concern basis The consolidated financial statements are prepared on a going concern basis which contemplates continuity of normal operations and the realisation of assets and liabilities in the normal course of business having considered the matters set out in Key judgements, estimates and assumptions and Note 7(e) Borrowings. (ii) Compliance with IFRS The consolidated financial statements of the Beston Global Food Company Limited Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (iii) Historical cost convention These financial statements have been prepared under the historical cost basis, except for assets held for sale, certain investments, and Biological Assets which are recognised at fair value less costs to sell. (iv) New and amended standards adopted by the Group The Group has applied, for the first time, certain standards and amendments which are effective for the first time in their annual reporting period commencing 1 July 2020. There are no new standards, interpretations or amendments to existing standards that are effective for the first time that have a material impact in current or future reporting periods and on foreseeable future transactions. (v) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by the Group. The Group has assessed that none of these are relevant to the Group. Standards not yet effective 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. None of these are expected to have a material effect on the financial statements. (vi) Key judgements, estimates and assumptions 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. Financial forecasting Management maintains a detailed financial model that it uses to forecast the future performance of each of its segments within the Group, and the Group. This model was updated for the latest available information as at 30 June 2021. Key uses of the financial model include understanding expected financial performance, capital expenditure, cash-flow and capital and debt management requirements of the Group. The financial model is also the key input for valuation purposes, including impairment assessments. Significant assumptions that drive the forecast outcomes are subject to detailed review for reasonableness by management, and approval by the Board. By their nature, financial forecasts are inherently uncertain and dependent upon realisation of critical assumptions. Should expected future business conditions change, this could lead to a change in these critical assumptions which could have a material impact on the forecast financial performance of the Group, assessment of the recoverable amount of assets for impairment purposes, and recognition of deferred tax assets. Impairment of non-financial assets 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 fair value less cost to sell calculation is based on the detailed financial model as discussed in 16(c)(i), with cash flows derived from the forecast for the next five years. The key drivers used to determine the recoverable amount for the different CGUs are disclosed and further explained in note 1(b). Recoverability of deferred tax balances 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 8(d). Fair value assessments Management uses their judgement in selecting an appropriate valuation technique for financial instruments and investments not quoted in an active market. Where assets are a carried at fair value, and where there are no observable market prices, the Group undertakes a fair value assessment utilising expected future cash flows less estimated costs of disposal. This is relevant to investments in associates accounted for using the fair value method, and assets held for sale. Wherever possible, future cash flow estimates are based on information obtained from the investee entity, and the Group assesses reasonableness of this information and applies judgement to ensure that the expected future cash flow estimates are appropriate. Such estimates and judgements are subject to change as a result of changing economic and operation conditions. Actual cash flows may therefore differ from forecasts and could result in the recognition of impairment charges in future periods. Further details on assets held for sale are disclosed in note 3, and further details on investments in associates accounted for using the fair value method are disclosed in note 14(c). FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 62 22 Summary of significant accounting policies (continued) (b) Principles of consolidation (c) Segment reporting 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 2021 and the results of all subsidiaries for the year then ended. Beston Global Food Company Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. (i) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note 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. (ii) Associates Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds 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. (iii) Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in Note 22(j). 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. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars ($), which is Beston Global Food Company Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses are presented in the consolidated income statement on a net basis within other income or other expenses. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the date of initial transactions. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • income and expenses for each 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. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 63 (e) Revenue recognition Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer. Revenue from the sale of dairy and meat products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods to the customer’s location. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g. rebates, case deals) 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. (f) Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets. 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 Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Beston Global Food Company Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (h) Leases The Group has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117 and IFRIC 4. (g) Income tax • Group as a lessee 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 Group’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 The Group applies a single recognition and measurement approach for all leases, except short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. • Right-of use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. • Lease liabilities FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 64 22 Summary of significant accounting policies (continued) (h) Leases (continued) At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. • Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low- value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $10,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. (i) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the following: • • fair values of the assets transferred liabilities incurred to the former owners of the acquired business • equity interests issued by the Group • fair value of any asset or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non- controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the • consideration transferred, • amount of any non-controlling interest in the acquired entity, and • acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. (j) Impairment of non-financial assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs 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. (k) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet. (l) Trade receivables Trade receivables are recognised initially at the transaction price as determined under AASB 15, less provision for impairment. See note 7(b) for further information about the Group’s accounting for trade receivables and note 12(b) for a description of the Group’s impairment policies. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 65 (m) Inventories Raw materials and stores, work in progress and finished goods Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (n) Investments and other financial assets (i) Classification and measurement With the exception of trade receivables, the Group initially 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. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Trade receivables are measured at the transaction price determined under AASB 15. The classification of financial assets depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI (for a debt instrument), it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets fair value through profit and loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Financial assets at fair value through profit or loss are carried in the Consolidated balance sheet at fair value with net changes in fair value recognised in the statement of profit or loss. This includes convertible notes within the Trade and other receivables balance and certain investments within Investments in the Consolidated balance sheet. Financial assets at amortised cost This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost includes trade receivables and other receivables within the Trade and other receivables balance in the Consolidated balance sheet. Financial assets designated at fair value through OCI (equity instruments) Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. (ii) Recognition and derecognition The Group initially recognises a financial asset when it becomes party to the contractual provisions of the instrument. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when: • The right to receive cash flows from the asset have expired; or • The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. (iii) Impairment The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 66 22 Summary of significant accounting policies (continued) (n) Investments and other financial assets (continued) (iii) Impairment (continued) For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to- maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. Impairment testing of trade receivables is described in Note 12 (b). (o) Financial liabilities (i) Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, and loans and borrowings. (ii) Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Loans and borrowings This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing borrowings. (iii) Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. (p) Assets held for sale The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position. (q) Property, plant, and equipment The Group’s accounting policy for land and buildings is explained in note 8(a). All other property, plant and equipment is stated at historical cost less depreciation and impairment. 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 8(a). The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 67 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. (s) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (t) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the consolidated balance sheet. (ii) Other long-term employee benefit obligations The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. The obligations are presented as current liabilities in the 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. (iv) Share-based payments Employees and Directors of the Group may receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. The cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. (r) Intangible assets (i) Goodwill 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). (ii) Trademarks and licences Separately acquired trademarks and licences are shown at historical cost. Trademarks, licences and customer contracts acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. (iii) Software (e-commerce platform and other applications) Costs associated with maintaining software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: • it is technically feasible to complete the software so that it will be available for use • management intends to complete the software and use or sell it • • there is an ability to use or sell the software it can be demonstrated how the software will generate probable future economic benefits • adequate technical, financial and other resources to complete the development and to use or sell the software are available, and • the expenditure attributable to the software during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. (iv) Amortisation methods and periods Refer to note 8(b) for details about amortisation methods and periods used by the Group for intangible assets. FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 68 22 Summary of significant accounting policies (continued) (iv) Share-based payments (continued) (x) Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. (y) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (z) Parent entity financial information 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. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Beston Global Food Company Limited. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to receive the dividend is established. (ii) Tax consolidation legislation Beston Global Food Company Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. Refer to note 6 for further details. 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. (u) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (v) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (w) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: • the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2021 69 Directors’ declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 36 to 68 are in accordance with the Corporations Act 2001, including: (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (iii) complying with International Financial Reporting Standards , as disclosed in note 22(a) (ii), and (iv) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 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 Corporations Act 2001 for the financial year ended 30 June 2021. This declaration is made in accordance with a resolution of Directors. R N Sexton Director Adelaide 70 BESTON GLOBAL FOOD COMPANY LIMITED | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BESTON GLOBAL FOOD COMPANY LIMITED 2021 71 BESTON GLOBAL FOOD COMPANY LIMITED | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BESTON GLOBAL FOOD COMPANY LIMITED 2021 72 BESTON GLOBAL FOOD COMPANY LIMITED | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BESTON GLOBAL FOOD COMPANY LIMITED 2021 73 BESTON GLOBAL FOOD COMPANY LIMITED | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BESTON GLOBAL FOOD COMPANY LIMITED 2021 74 BESTON GLOBAL FOOD COMPANY LIMITED | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BESTON GLOBAL FOOD COMPANY LIMITED 2021 ASX ADDITIONAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2021 75 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 2021. Ordinary Share Capital Twenty largest holders of Quoted Equity Securities 863,799,408 fully paid Ordinary Shares are held by 3,213 individual Shareholders. Rank Name Number of Shares Held % 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: Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Securities 796,502,633 61,915,870 4,078,667 1,278,990 23,248 % 92.21 7.17 0.47 0.15 0.00 Number of holders 706 1,465 502 394 146 % 21.97 45.60 15.62 12.26 4.54 Total Unmarketable Parcels 863,799,408 100.00 0.24 2,110,880 3,213 100.00 21.16 680 Substantial Shareholders (As disclosed in substantial holding notices given to the Company) Kunteng Pte Ltd Australia Aulong Auniu Wang Food Holdings Pty Ltd Allianz SE Wilson Asset management Group Regal Fnds Management Pty Ltd Number of Shares Held % 64,051,111 14.99% 66,894,345 14.90% 55,469,040 64,490,586 60,006,351 9.21% 7.65% 6.95% 1 2 3 4 CITICORP NOMINEES PTY LIMITED 70,941,590 8.21 KUNTENG PTE LTD 64,051,111 7.42 CS THIRD NOMINEES PTY LIMITED 60,006,351 6.95 AUSTRALIA AULONG AUNIU WANG FOOD HOLDINGS PTY LTD 54,449,834 6.30 5 HSBC CUSTODY NOMINEES 53,056,301 6.14 (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD 43,913,060 6 7 BNP PARIBAS NOMS PTY LTD 8 HISHENK PTY LTD 9 BESTON PACIFIC ASSET MANAGEMENT PTY LTD 32,931,673 25,426,502 22,107,630 5.08 3.81 2.94 2.56 10 BLUE RIDGE HOLDINGS PTY LTD 18,000,000 2.08 11 FIRST BOOM INVESTMENTS LIMITED 11,428,572 1.32 12 WILLOUGHBY CAPITAL PTY LTD 10,259,118 13 14 FIRST BOOM INVESTMENTS LIMITED 8,333,334 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 7,459,389 15 MNA FAMILY HOLDINGS PTY LTD 6,294,118 16 MR MERVYN KENNETH BARTLEMAN 5,150,513 17 MR JEFFREY YEH 18 EDM TRANSPORT PTY LTD 19 MR REGINALD GEORGE KENNETH NEALIE & MRS TERESA NEALIE 4,642,985 4,500,000 4,000,490 1.19 0.96 0.86 0.73 0.60 0.54 0.52 0.46 20 CITICORP NOMINEES PTY LIMITED 3,618,337 0.42 Total Balance of register Grand total 510,570,908 59.11 353,228,500 40.89 863,799,408 100.00 76 Corporate directory BESTON GLOBAL FOOD COMPANY LIMITED ABN 28 603 023 383 Annual Report for the period ended 30 June 2021 INCORPORATION Incorporated in Australia on 24 November 2014 DIRECTORS Roger Sexton Stephen Gerlach Petrina Coventry Ian McPhee Joanna Andrews Neil Longstaff Cheryl Hayman INTERIM CEO Darren Flew Chairman Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director 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 BANKERS National Australia Bank BESTON GLOBAL FOOD COMPANY LIMITED | ANNUAL REPORT 2021 bestonglobalfoods.com.au