BEGA CHEESE LIMITED
2021
Annual
Report
ANNUAL REPORT | B
Our vision
is to become
The Great
Australian
Food Company
Bega is a diversified branded foods
business, with an integrated value
chain from farm to consumer.
Great Food
Greater Good
We create great food and build brands
that our customers and consumers
love and trust.
We strive for a greater good by
combining our success with a positive
and lasting impact on others.
Our vision is to become The Great
Australian Food Company by
creating great food for a better
future.
Bega is a values-led organisation.
These values are reflected in our
vision and define what makes
us great.
Great People
Great Aspirations
We ensure our people will continue
to grow with Bega. We give them the
responsibility to work together and
achieve great outcomes.
We have great aspirations to go beyond our
business today. We invest in technology,
innovative products and new markets.
Contents
Contents
Performance Highlights
Performance Highlights
Chairman’s Report
Chairman’s Report
Chief Executive Officer’s Review
Chief Executive Officer’s Review
Contents
Contents
Review of Financial Performance and
Operations
Review of Financial Performance and
Operations
Directors’ Report
Directors’ Report
Performance Highlights
Performance Highlights
Auditor’s Independence Declaration
Auditor’s Independence Declaration
Corporate Governance Statement
Corporate Governance Statement
Financial Statements
Financial Statements
Chairman’s Report
Chairman’s Report
Notes to the Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Directors’ Declaration
Chief Executive Officer’s Review
Chief Executive Officer’s Review
Independent Auditor’s Report
Independent Auditor’s Report
Shareholder Information
Shareholder Information
Directors’ Report
Directors’ Report
Corporate Directory
Corporate Directory
Auditor’s Independence Declaration
Auditor’s Independence Declaration
Corporate Governance Statement
Corporate Governance Statement
Financial Statements
Financial Statements
Notes to the Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Directors’ Declaration
Independent Auditor’s Report
Independent Auditor’s Report
Shareholder Information
Shareholder Information
Corporate Directory
Corporate Directory
We’re proud to own
We’re proud to own
and manufacture
and manufacture
some of the most iconic
some of the most iconic
brands in Australia,
brands in Australia,
which have become
which have become
staples in households
staples in households
across the country.
across the country.
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Performance highlights
Performance highlights
BEGA CHEESE LIMITED 2021 | PERFORMANCE HIGHLIGHTS
Revenue
The Bega Cheese Group generated top-line revenue of $2.07 billion in FY2021, which
is 39% higher than FY2020. With the acquisition of Lion Dairy and Drinks (completed in
January 2021), Bega Cheese accelerated progress towards its goal of having 75% of
all revenue generated through branded products, finishing the year with 73% of sales
derived from branded business (59% in FY2020).
FY2021
$2.07
billion
FY2020
$1.49
billion
27%
Bulk
73%
Branded
41%
Bulk
59%
Branded
The statutory result for each of FY2021 and FY2020 includes a number of non-recurring items,
which in FY2021 related primarily to the provisional bargain purchase on business combination,
income from the early termination of two material revenue contracts, partially offset by acquisition
and integration costs, and in FY2020 related primarily to legal costs.
EBITDA ($ million)
182.7
141.7
103.0
87.8
Basic earnings per share (cents)
14.9
15.0
9.9
27.3
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
Normalised
Statutory
Normalised
Statutory
Profit after tax ($ million)
72.2
Total dividend per share (cents)
31.9
39.6
21.3
10.0
10.0
FY2020
FY2021
FY2020
FY2021
FY2020
FY2021
Normalised
Statutory
Statutory
2 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 3
Our transformation to becoming ming
The Great Australian Food Company
BEGA CHEESE LIMITED 2021 | OUR TRANSFORMATION
Bega Cheese has transformed over the past 20 years from a dairy co-operative with a strong regional
cheese brand into a diversified branded consumer goods business with an integrated and flexible
supply chain.
We have responded to significant changes in the dairy industry post deregulation to create
a resilient business with a higher-returning product mix. Over this time we have led and participated
in industry consolidation and navigated through a challenging supply environment.
2007
Grow And
Diversify
Acquisition
of Tatura
• Growth and
diversification
of milk sourcing
• Entry into nutritionals,
cream cheese and
milk powders
• Diversification of
customer base
2009
Increasing
Scale
Acquisition of
Strathmerton
• Cut, pack and
processing scale
and capability
2011
Structured For
The Future
Accessing
capital for
growth
• Successful
ASX listing
• Value release
for farmers
• Further diversification
of customer base
• Well structured for
corporate activity
• Acquisition of the
remaining stake
in Tatura
•
Investment in capacity
and increased focus
on nutritionals and
high-value dairy
products
• Developing
foodservice
and consumer
businesses
2001
Seeking New
Opportunities
Co-operative
founded in 1899
•
Industry
deregulation 2001
• Bega based co-op with
strong regional brand
• Main focus: cheddar
manufacture, process
and pack
• Long-term Australian
supply and licence
agreement with Fonterra
• Developing international
sales opportunities
The Future
The Great Australian
Food Company
Creating
great food for
a better future
• Diversified portfolio of
market-leading brands
• Efficient distribution
network servicing
customer growth
• Globally competitive
supply chain
• Direct relationship with
farmers and suppliers
• Shaping our future
through corporate
social responsibility,
sustainable practices
and circularity
2021
Transformational
Acquisition
Acquisition of
Lion Dairy and
Drinks
• Portfolio of iconic
Australian brands
• Broaden customer
base and new cold
chain distribution network
• Substantial synergies
across the supply chain
• Accelerated investments
in growth and innovation
• Further growth and
diversification of the
milk pool
2018
Strengthening
Our Supply Chain
Acquisition
of Koroit
• Growth and
diversification
of milk sourcing
• Strengthening
our dairy portfolio
•
Integrated and
flexible supply chain
• Scale ingredient
processing supporting
customer brands
• Decision to close
sub-scale manufacturing
facility in Coburg
2017
New Business
Platform
Acquisition of
grocery brands
• Entry into spreads
category
•
Iconic Australian
brands, including
Vegemite
• Extending the
Bega brand into
new categories
•
Investing in sales and
marketing capability
• Acquisition of PCA
to secure Australian
source of peanuts
4 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 5
Chairman’s Report
BEGA CHEESE LIMITED 2021 | CHAIRMAN’S REPORT
Embracing change and responding
to new circumstances, challenges
and opportunities have always
been the key to success at Bega
Cheese.
Our values are the foundations on which Bega
Cheese is built. As we work towards creating
“The Great Australian Food Company” we
always recognise that Great Food, Great
People, Great Aspirations and the importance
of the Greater Good are what drive and inspire
us.
The values of supporting each other, investing
for the future, having a passion for the
customer, growing our people and making a
difference in our communities have all been
demonstrated in FY2021. During the year the
Company continued to manage the many
impacts of COVID-19, made the largest and
most important transformational acquisition in
our
trading
initiated a community
environments, and
program
the principles of
circularity.
history, managed
focused on
volatile
The importance of consistent strategy and
strong values is perhaps never more evident
than in times of uncertainty. Our capacity to be
agile and change, while remaining confident in
the strategic direction of our business, was
again on display in FY2021 as we continued to
operate in a COVID-19 safe manner, responded
to
supplier
customer
requirements and executed the acquisition of
Lion Dairy and Drinks.
changed
and
The business continued to perform well
through uncertain
times and a major
acquisition, with revenue growth of 39% in
FY2021 to $2.07 billion, our statutory EBITDA
was $182.7 million and statutory PAT was
$72.2 million. On a normalised basis the
Company achieved EBITDA of $141.7 million,
PAT of $39.6 million and EPS of 15.0%. The
total dividend for the FY2021 year will be 10
cents per share.
As Bega Cheese continues to grow, it is
ambitious in what it seeks to achieve. The
most recent acquisition of Lion Dairy and
Drinks will see the company double annual
revenues and become a truly integrated dairy
and food company, with a supply chain that
begins with our long-standing relationships
with Australian farmers and reaches customers
in Australia and around the world with a
significant range of dairy and food products
and a suite of iconic brands. Many of these
brands hold number one or number two
6 | BEGA CHEESE LIMITED 2021
market share positions and reach our more
than 30,000 retail, convenience and food
service customers across Australia through a
variety of channels including our own chilled
distribution network, one of the largest in the
country.
It was pleasing to see the strong support of
shareholders for our Lion Dairy and Drinks
acquisition with a successful capital raise
of $392.7 million. The purchase price of
$528.2 million, from an accounting perspective
has been provisionally assessed as a ‘bargain
purchase’. The price, successful capital raise
and performance of the business have seen
the Company’s leverage ratio decrease to 2.25
in FY2021 and we expect further strengthening
of our balance sheet in FY2022.
strategically
The integration of the Bega and Lion Dairy
and Drinks businesses brings
together
20
located manufacturing
facilities, with capacity to meet our customers’
requirements wherever they may be in the
world, and deliver a range of products that
includes high-value micro proteins such
as Lactoferrin, infant formula and nutritional
powders, as well as cheddar, processed
and cream cheese, milk,
iced coffee,
flavoured milk, yoghurt, juice, Vegemite and
peanut butter.
The Company is also a joint venture partner
with Vita International in Vitasoy Australia
positioning us well to participate in the fast-
growing plant-based milk segment of the
market.
The financial performance and progress of
business development initiatives for the Dairy
and Drinks business in our first five months of
ownership have been above expectations,
with the business making an important
contribution to our FY2021 result.
We have established a subcommittee of the
Board to assist with the Lion Dairy and Drinks
integration. Deputy Chairman Peter Margin
chairs the subcommittee which includes,
CEO Paul van Heerwaarden, CFO Peter
Findlay, Executive General Manager Strategy
& Planning Steve Rae and myself. The
integration,
realisation of synergies and
identification of business development
opportunities all continue to track well. We
expect the integration subcommittee to be in
place until the end of the calendar year.
While it has been important to execute the
Lion Dairy and Drinks acquisition and quickly
begin the integration process, it has been
equally crucial to respond to the changed
circumstances in both the operations of our
business and the market.
The safety of our people and all involved in
our supply chain is of utmost importance to
the Company. We continue to prioritise safety
throughout our business and the operational
impacts of COVID-19 across all our sites and
throughout our supply chain. Specialised
COVID-19 management committees which
include senior executives, and safety and site
leadership, work closely with government
and our supply chain partners to ensure we
can continue to procure, produce and deliver
our products to our customers in Australia
and around the world.
Competition for milk remained very robust in
FY2021. While seasonal conditions were very
positive, there was only modest supply
growth of 0.6% across the industry. The
competitive circumstances for milk have
continued into FY2022 with farm gate milk
prices very strong. Positive market signals at
the farm gate for the third year in a row and
excellent seasonal conditions are seeing a
much more positive outlook from dairy
farmers in most supply regions. Excess
manufacturing and milk processing capacity
combined with the relative slow growth of
milk supply continues to be an issue in the
industry. Bega Cheese’s focus beyond the
integration of Lion Dairy and Drinks continues
to be on the efficient use of existing industry
infrastructure including toll manufacturing
opportunities
potential
consolidation. We remain optimistic regarding
milk supply growth across the industry given
much improved farming circumstances, and
farmers with
continue
experienced
farm
improvement programs.
field staff and on
to support our
further
and
We have seen changes in the market since
the onset of COVID-19. Of note is the change
in demand in the infant formula and toddler
category, particularly in China. The reduced
demand across the sector can be attributed
to the lack of international travel materially
changing the “Daigou” channel, lower than
expected birth rates in China, and stronger
support of Chinese-owned brands by
Chinese consumers.
The change in demand has had significant
impact on companies in the sector and on
many of our Australian-based customers to
whom we supply infant and toddler dairy
nutritional products. We have been pleased
to see our customers diversify their customer
portfolio and geographic spread, which
mitigates the decline. From a company
perspective we have long held the view that a
diversified customer base, which includes
both Australian and international customers,
servicing a variety of markets, is important.
While not entirely being able to offset the
reduced demand
from China, servicing
customers in markets such as Indonesia over
a great many years has helped manage the
changed demand profile.
The change in market does not alter our long-
term strategy of providing high-quality infant
and toddler dairy nutritionals to customers in
Australia and around the world. Whilst infant
and toddler nutritional products remain a
high-value and core competency of our
business, we will ensure that we “right size”
our business to respond to changes in the
market and position the business well for
future opportunities.
We continue to see improved performance in
the spreads category with both Vegemite and
Bega Peanut Butter growing market share,
and
increased distribution of B honey
continuing with both major retailers now
carrying the range. While there have been
some spikes in consumer demand associated
with lockdowns and stay at home orders,
these are well managed within the business
and are not considered material to the overall
performance.
International sales of our retail and food
service products such as cream cheese and
processed cheese continue to grow but have
been impacted by shipping delays and costs
which we continue to carefully manage and
monitor.
Sustainability and community support have
always been a part of the Bega Cheese
culture and we continue to endeavour to both
meet the expectations of our stakeholders
and support our communities. Our work and
the United Nations
alignment with
Sustainability Development Goals will be set
out in our FY2021 sustainability report.
We are continuing to build on our sustainable
farms and sustainable factories programs
and focus on circular economy initiatives in
collaboration with suppliers and customers.
In addition, we have also been working on a
clearly defined path to reduce our emissions
in support of the Paris Agreement goals.
Based on this initial work, we have committed
to reducing absolute Scope 1 and 2 GHG
emissions by 40% by 2030 and emissions
intensity by 50% per litre produced for Bega
Dairy and Drinks and per tonne produced for
Bega Cheese off a base year of 2021.
Furthermore, we are working
towards
developing a clearly defined path, aligned
with the Science Based Targets initiative
ANNUAL REPORT | 7
BRAND SPOTLIGHT
Dairy Farmers
Founded in 1900, the Dairy Farmers brand has been
synonymous with milk products for over a century. Dairy
Farmers has a scanned retail sales of $272m1, representing
approximately half of the brand’s total retail sales. With 86
products, Dairy Farmers plays a multi-category role across
milk, yoghurt, cream-based products and flavoured milk.
See www.dairyfarmers.com.au
1 IRi Total Business Scan
(AU Grocery Unweighted +
Structured Convenience),
MAT to June 2021.
The history of our organisation and our supply
chain, from paddock to plate, means that we
understand the importance of sustainability
from an environmental, economic and
community perspective. The performance
and priorities of the business in FY2021
demonstrate our capacity to be agile, the
ability to change, deal with challenges and
recognise opportunities. I thank Paul van
Heerwaarden and the entire team at Bega
Cheese and particularly acknowledge the
significant contribution of my fellow directors
and thank, our shareholders, suppliers and
customers for their continued support.
Barry Irvin
Executive Chairman
27 August 2021
(SBTi), to achieve net Zero by 2050, and will
be engaging with our material customers and
suppliers by 2022 to understand our scope 3
supply chain emissions and where reduction
opportunities exist.
Our sustainability report will provide further
detail on our emissions reduction targets and
our intention to report in accordance with the
recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD).
The challenge of sustainability is one that
must by its very nature encompass the entire
supply chain. While efforts by companies,
organisations and individuals are important, it
is as a collective that we will truly make a
difference. With this in mind, Bega Cheese is
championing a community endeavour to
introduce a pilot program in the Bega Valley
to create the most ‘circular’ region in the
world. With the pro bono support of KPMG,
Rabobank and Addisons, Bega Cheese is
working with the Local Council and NSW
State government agencies, small business,
landowners and community organisations to
coordinate and facilitate circularity projects
across the region.
Bega Cheese will assist in establishing a non-
distributing community circularity cooperative
that will serve as a model for other regions to
follow and create opportunities for new
initiatives and research to drive changed
practices and approaches across energy,
soil, biodiversity, waste, packaging, logistics,
animal care, education, the rural economy
and tourism. It is an ambitious project, but
one that has captured the imagination of the
region and been embraced by all who have
been approached to take part.
It is the commitment and endeavour of many
that drive success. Bega Cheese CEO Paul
van Heerwaarden, has
led his senior
executive and the whole Bega Cheese team
through a year of great challenge and great
ambition. In his report Paul shares his
the performance and
perspectives on
operations of the business.
We are very proud of our long history at Bega
Cheese. As we grow and change, we inevitably
say goodbye to culture-bearers who have
made great contributions to the organisation
and welcome new people who will carry the
Company forward. At last year’s AGM we said
goodbye to Richard Parbery. Richard had
served as a director for 32 years. There are no
words sufficient
to describe Richard’s
contribution to the organisation. He has been
there for each important step, always shared a
great vision for the small, regionally based
cooperative at which we began working
together in 1989 and supported the strategy
and culture as we changed structure and
made
important acquisitions and
investments that enable us to grow and move
closer to our goal of becoming The Great
Australian Food Company.
the
Thank you, Richard, for all you have done.
Richard’s departure created the opportunity
for board renewal and in February we
welcomed Harper Kilpatrick to the Board.
Harper’s background and approach will no
doubt make a great contribution to both the
culture and development of Bega Cheese as
we continue
to build on our strong
foundations.
to our consumers wishes
As we look to the future, we can see the
business we have built is well-placed to
to
respond
understand where their food comes from,
how it is produced, how it is manufactured
and packaged and how it is delivered to
them.
looking
We are a company of great heritage and
traditional values, which is exactly what the
modern consumer
for. Our
is
connection with farmers and their production
systems has been in place for generations.
Our manufacturing plants are located all
around Australia, many in regional areas. Our
products and brands are known and trusted,
and we continue to develop and deliver
products in formats that are convenient and
accessible.
8 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 9
Chief Executive Officer’s Review
BEGA CHEESE LIMITED 2021 | CHIEF EXECUTIVE OFFICER’S REVIEW
I
reflect on
As
the various challenges and
opportunities that presented themselves throughout
what was another busy and eventful year at Bega,
it is fair to say we have emerged as a significantly
larger and stronger company than what we were
over 12 months ago, particularly following the
acquisition of the Lion Dairy and Drinks business.
The year has seen the impact of a global pandemic,
increasing geopolitical tensions and competitive
pressures across the dairy industry and grocery
channels. We mustn’t forget the impact from the
devastating bushfires that ravaged many parts
of Australia more than 18 months ago and the
prolonged widespread extreme drought that ended
soon after, both of which have continued to impact
many of our farmer suppliers and employees and
the communities where they and their families
live. These challenges are unexpected and can be
difficult to plan for, but at the end of the day are part
of doing business. Importantly, we are guided by
our values when responding to these challenges
and making the decisions necessary to balance the
needs of all our stakeholders. The combination of
our increased scale, diversity, capability and risk
management provides us with the flexibility and
options to do that more effectively.
Financial performance
and transformation
Bega Cheese Ltd achieved statutory sales revenue
of $2.07 billion in FY2021 which was an increase of
39% on FY2020. Statutory EBITDA in FY2021 was
$182.7 million while statutory PAT was $72.2 million
which includes provisional bargain purchase gains
on the Lion Dairy and Drinks acquisition of $70.0
million. On a normalised basis, EBITDA was $141.7
million and PAT was $39.6 million. Net debt as at 30
June 2021 was $324.9 million resulting in a leverage
ratio of 2.25 which is well below our covenant levels
and slightly below prior year.
The financial result incorporates the Lion Dairy and
Drinks acquisition and five months of commercial
operations. The $528.2 million acquisition was
supported by a $392.7 million net capital raise
and generated one-off costs which have been
normalised in the result along with the provisional
bargain purchase gain. The integrated business
achieved a trading result better than expectations,
with positive momentum heading into FY2022,
offsetting some margin pressure
in our bulk
ingredient and contract manufacturing business in
the fourth quarter of FY2021.
10 | BEGA CHEESE LIMITED 2021
Importantly, during the year we realised the
expected benefits of key initiatives completed
towards the end of FY2020. We implemented
the recommendations of the organisational
and process benchmarking review with
supply chain cost efficiencies and overhead
reductions. The new lactoferrin facility at
Koroit is fully operational and achieved the
full year benefit from that investment. With
the combined lactoferrin capacity at our
Tatura and Koroit facilities, we are now one of
the largest lactoferrin producers in the world.
In the second half of FY2021 we were informed
that our long-term nutritional powder and
canning arrangements with Reckitt would
end in FY2022 which is a significant change
for our nutritional business. Since 2008 we
have had an association with Reckitt and its
legacy company Mead Johnson. In 2017, we
sold an infant formula drier at Tatura and an
infant formula canning plant at Derrimut to
Reckitt for $200.0 million and entered into
ten-year service and access agreements to
operate both plants and maintain access
to 25% of the plant capacity. A change in
strategy at Reckitt led to a termination notice
for the service and access agreements in
the second half of FY2021. We received
payment for contractual termination fees
of $13.9 million in FY2021 with a further
fee payment of
contractual
$41.6 million due in FY2022 as compensation
for loss of future income and access. We are
well progressed in establishing alternatives
for drying and canning to support our current
and future infant formula business. Further
detail is contained in the Review of Financial
Performance and Operations.
termination
It is also pleasing to see the year-on-year
growth and profitability within the branded
segment of our spreads business from
the acquisitions of the Mondelez grocery
business and PCA several years ago, and
the growth and profitability in our bulk
segment generated from our facility in Koroit
acquired in 2018. These acquisitions have
been integrated into the overall business for
several years and are providing returns in line
with expectations.
incorporates
Our business model
four
elements: our brand portfolio, distribution
network, manufacturing footprint and farmer
relationships. The acquisition of the Lion
Dairy and Drinks Business has transformed
and expanded each of the elements of this
business model. We are now a company
with a broad and diversified range of iconic
Australian brands. The capability and
breadth of our chilled distribution network
provides ongoing growth opportunities to
sell more of our products to more customers
through our multiple channels in addition
to our established grocery channel. Our
manufacturing network has increased with
facilities across Australia allowing us to
maintain scale and flexibility to service our
large and geographically dispersed customer
base. Our farm supplier network continues to
grow and diversify.
and milk-based beverages. These
two
product categories alone enjoy growth rates
of 4.9% and 5.9% respectively. Our 26%
market share in yoghurt and 48% market
share in milk-based beverages position us
well to capitalise on megatrends such as
the growing appeal of natural, healthy foods
and a shift to convenience, which are driving
growth across these and other product
categories.
the context
Bega was founded as a farmer co-operative
122 years ago and of our various acquisitions
of the past 15 years or so, the majority have
had similar origins as farmer co-operatives.
This heritage provides
for
the importance of our relationships with
all suppliers
in developing sustainable
businesses where we can support each other
and grow together. Direct farm milk remains
our largest source of ingredient supply
across the company and in recent years,
through acquisition or direct investment, we
have added peanuts, honey and now fruit.
The four elements of our business model
align with our core capabilities and provide
a broad platform for ongoing growth which I
will now cover in further detail.
Diversified portfolio of
market leading brands
During FY2021 we
accelerated our
transformation from a predominantly dairy-
based commodities company to one of the
largest Australian-owned diversified food
companies, with the acquisition of Lion
Dairy and Drinks. Our expanded portfolio
now includes more iconic Australian brands
across growing categories. For FY2021
our proportion of branded product sales
increased from 59% to 73% of total sales,
this will increase further in FY2022 reflecting
a full year of Bega Dairy and Drinks sales.
The acquisition has effectively doubled
the size of Bega, increasing annualised
revenue from approximately $1.5 billion to in
excess of $3 billion, and employee numbers
from approximately 2,050 to 4,150. The
acquisition has also enhanced our supply
chain capacity and capability to better serve
customers and consumers both in Australia
and internationally.
The acquisition of Lion Dairy and Drinks
consolidates a portfolio of great brands
including Bega, Vegemite, Dare, Farmers
Union, Dairy Farmers, Pura, Yoplait, B honey,
Big M, Masters, Juice Brothers, Mildura
and Berri. We have leading market share in
large, growth categories such as yoghurt
A 100-day transition plan for the integration
of Lion Dairy and Drinks, which commenced
at the time we took control of the business,
identified several workstreams to realise
the synergies announced at the time of the
acquisition. These workstreams included:
• an organisational review;
•
•
an assessment of common suppliers to
identify potential cost savings; and
optimisation of milk solids usage across
the combined entity.
We provide additional detail about these
workstreams in the Review of Financial
Performance and Operations.
Since 2017 we have been dealing with
two significant legal matters regarding our
brands: the right to use the Bega trademark
in Australia and the peanut butter trade dress
we acquired from Mondelez. In November
2020, the High Court of Australia dismissed
an application by Kraft Foods Group Brands
LLC and H.J. Heinz Company Australia
Limited for special leave to appeal from a
judgement of the Full Court of the Federal
Court of Australia upholding a decision of
the Federal Court that Bega Cheese Ltd
was the rightful owner of the trade dress of
Bega peanut butter products including the
distinctive yellow lid and yellow label. This
decision removes the uncertainty regarding
the usage of the peanut butter trade dress
which had continued to cloud commercial
discussions in recent years.
In the judgement handed down in February
2021, in proceedings brought by Fonterra
Brands Australia, the Supreme Court of
Victoria found that we are entitled to use the
Bega trademark on products outside the
scope of the trademark licence to Fonterra.
This outcome opens the opportunity for
the expanded use of the distinctive Bega
trademark across a broader
range of
products in Australia to further build value in
the Bega brand.
ANNUAL REPORT | 11
acquisition, we expanded the number and
location of direct milk supply relationships to
now extend right across all dairy regions of
Australia.
of the previous year, we see an improved
outlook for honey supply which is necessary
to support
the ongoing growth and
distribution of our B honey brand.
While seasonal conditions were highly
favourable, farm milk production across
Australia only grew a modest 0.6% with
strong competition for supply throughout the
year. In response to continued milk supply
competition, we supported dairy suppliers
through competitive milk payments, new milk
incentives and our Better Farms program,
details of which are included in the Review of
Financial Performance and Operations.
intake
through
The competitive market and pressures
on milk supply remain strong. While we
increased our milk
the
acquisition, we lost some milk supply in
Victoria due to the end of the two-year
Koroit supply guarantee with Saputo, strong
competition for milk, and supplier exits due
to retirements and alternative land use. We
have harmonised milk supply arrangements
under the One Bega integration process
including milk management, a milk services
function, dairy code complaint milk supply
contracts, and milk pricing systems for all
regions.
With the acquisition of Lion Dairy and Drinks,
we now have fruit supply arrangements
directly with contracted growers who
supplied in excess of 37,000 tonnes of
oranges, apples and pears. Growing
conditions recovered from the prior year
and harvest yields were above average in
FY2021. Intake volumes for fruit in FY2022
are expected to be similar to FY2021.
Active peanut grower engagement and
initiatives, along with
improved weather
in Queensland have seen a
conditions
significant increase in the volume of Australian
peanuts harvested. The FY2021 harvest
was the largest since 2013 following several
years of challenging growing conditions and
industry uncertainty prior to our acquisition
of PCA back in 2018. The current forecast
is for favourable weather conditions in key
growing regions in Queensland which will
support new crop planting towards the end
of calendar year 2021.
Extreme weather conditions and bushfires
in early 2020 resulted in a historically poor
honey season in FY2021 and significant
supply constraints led to higher prices. As
honey supply recovers from the challenges
Growing our people
Growing our people through opportunities
to work together towards great outcomes is
one of the four values that are the foundation
of
activities.
staff development
During FY2021 we revised our employee
performance assessment process, giving
equal weight to what we do with our
objectives, and our behaviours in achieving
these objectives.
our
The challenges faced by our people and
across our communities and the change
we have gone through at Bega Cheese
and in the industry in recent years have
been significant. Diversity and inclusion and
employee safety and wellbeing were two of
my key priorities in FY2021 and this priority
will continue into FY2022.
inclusion which
We have committed to continue to improve
diversity and
is now
formalised in the Bega Cheese Diversity
and Inclusion Policy. At Bega, we all believe
that a richly diverse workplace promotes
innovation, enhances the quality of decision
making and enables us to access and grow
the best talent. Our longer-term plans have
been formalised into a diversity and inclusion
blueprint.
incorporates
three pillars: fostering inclusive leadership,
supporting working families and developing
women leaders. Each pillar encompasses
several programs and policies that will attach
to those programs.
blueprint
The
To have great people we not only need to
ensure that they feel included and have
development opportunities; importantly we
need to ensure our people are safe and well.
While we seek to eliminate all injuries, we
realise there is more that needs to be done
and continually strive to do better through
initiatives such as our safety behavioural
leadership program which is facilitated by
DuPont Sustainable Solutions. This program
includes many facets including one on one
coaching and risk containment training for
more than 350 of our site-based leaders.
One of the outcomes from this program
which commenced over 12 months ago
has been the increased level of incident
reporting including near misses, hazards
and injuries. While I remain concerned about
the country, with
Extensive chilled
distribution network
The acquisition of Lion Dairy and Drinks has
transformed our distribution network into one
of the largest cold chain distribution networks
in
three distribution
centres, 13 cool rooms and access to 118
depots. The breadth of this geographic
footprint, along with our direct to customer
delivery capability, offers improved supply
chain reliability to our 30,000 customers,
particularly important as we support them
in navigating the challenges of the COVID-19
pandemic. This network allows us to deliver
right across Australia and make our products
available to more than 95% of the population.
Growth and flexibility across
our manufacturing footprint
Following
the Lion Dairy and Drinks
acquisition, we increased the number of
manufacturing sites in our network from eight
to 20 including highly efficient and scaled
yoghurt, flavoured milk, white milk and juice
facilities. The integration of the business will
see further opportunities to maximise the
value of our product mix returns and refine
milk management, through greater options
to direct milk product to the most efficient
and profitable use and avoid waste and
underutilisation. Given the scale of our dairy
business, the flexibility within our integrated
supply chain brings significant and growing
cost savings and revenue opportunities
as well as the ability to adapt quickly and
efficiently to the changing needs of our
customers, helping them to get products
onto supermarket shelves and into the hands
of consumers.
During FY2021 we consolidated several
lines across our network. This included
individually wrapped processed cheese slice
capacity at our Ridge Street site at Bega and
our Strathmerton facilities. The transfer of
volume and the consolidation of site capacity
is largely complete, and our focus is now
on maximising the efficiency of both plants.
We also further consolidated some of our
production lines across the Koroit and Tatura
facilities.
Direct relationships with
farmers and other suppliers
Our strong farmgate relationships have long
been a cornerstone of our integrated value
chain. Through the Lion Dairy and Drinks
12 | BEGA CHEESE LIMITED 2021
BEGA CHEESE LIMITED 2021 | CHIEF EXECUTIVE OFFICER’S REVIEW
this increase, it has allowed our site-based
teams and frontline leaders to focus on
key risks particularly those related to traffic
management and machine safety. Further
detail about health and safety is included
in the Review of Financial Performance and
Operations.
across the country. With more than 40% of all
food and groceries distributed by Foodbank
nationally going back to support regional and
rural communities, the location of so many
of our operations and key relationships, the
partnership with Foodbank is at the centre of
what we do in the community.
nature of community transmission and the
rapidly evolving government measures
to contain the pandemic are not without
challenge, we remain well-positioned with
increased product, geographic and channel
diversification. Our extensive manufacturing
and distribution network and our ability to
adjust supply to meet fluctuating demand
allows us to ensure the availability of our
much-loved brands for consumers.
Geopolitical tensions, which have seen a
change in demand for some products in
the international market, will continue for
the foreseeable future. While we have a
particular focus on the China market for both
infant formula and dairy products, we will
continue to look for opportunities to further
diversify our customer base across a variety
of markets to mitigate the potential ongoing
impact resulting from these tensions.
Our capital investment program will prioritise
projects that increase capacity and support
innovation in key growth categories, and
reduce safety and environmental
risks.
We will also continue our investments to
extract value in our upstream operations in
ingredients and bulk manufacturing that are
critical in maintaining our security of supply
into our value added branded business.
Throughout the sale process of Lion Dairy
and Drinks there was lengthy period of
underinvestment in growth and supply chain
efficiency. This provides us with further
opportunities
for high-returning capital
projects.
to
like
I would
thank our
In closing,
employees, the executive team, the Board,
our farmer suppliers and other suppliers for
their significant support throughout what has
been both a challenging and productive year.
To our customers and the consumers of our
products, thank you for your dedication and
support, which have brought us so much
closer to realising our vision of becoming The
Great Australian Food Company.
In FY2021, we donated more than 750,000
kilograms of product to Foodbank, equating
to more than 1.5 million meals for Australians
in need. In addition, we produced more
than 230,000 litres of fresh white milk for
Foodbank’s National Collaborative Supplier
Program, providing greater certainty and
reliability for the Foodbank supply chain.
Outlook for FY2022 and Beyond
The ownership of a new portfolio of market-
leading brands, along with a more flexible
and diverse manufacturing and supplier
footprint, will provide us with significant
growth opportunities across the branded
and bulk segments of the business. We
will focus on selling more product to more
people through our expanded networks,
accelerate our pipeline of product innovation
and leverage the benefit of a complementary
product range and distribution channels,
including
international
markets. We will further grow earnings and
continue to realise synergies from the Lion
Dairy and Drinks acquisition over the year
ahead, including operational efficiencies,
procurement and milk optimisation. We also
expect a reduction in our leverage ratio and
an increase in earnings per share over the
first full year of ownership.
channels
into
Milk supply will remain competitive through
FY2022, with historically high opening farm
gate milk prices and the ongoing challenge
of overcapacity across processors. Positive
market signals at the farm gate for the third
year in a row, and favourable seasonal
conditions, are providing a more positive
outlook from dairy farmers in most supply
face
regions, but
challenges
from climate change and a
shortage of available farm labour.
farmers continue
to
Paul van Heerwaarden
Chief Executive Officer
27 August 2021
remain steadfast
COVID-19 continues to impact our staff
and communities both in Australia and
internationally. We
in
our commitment to the safety, health and
wellbeing of staff, staying open for business
and providing our range of quality food
products to our customers. Having modified
our ways of working over the past 18 months
to minimise the impact and ongoing risk of
COVID-19, we constantly look for better ways
to ensure the wellbeing of our people and
our communities. While the unpredictable
ANNUAL REPORT | 13
Our Bega Aspire Leadership Development
Program develops capability in our aspiring
leaders, giving them exposure to senior
leaders, the opportunity to forge new internal
networks and work on projects that have a
lasting impact on the business.
The Bega Graduate Program continued this
year and to support the development of our
graduates, and early career staff already
working in the business, we introduced
#HeartLEADER a development program
focused
relationships,
connected
empathy, business agility and leading with
heart, specifically designed for millennials,
our leaders of tomorrow.
on
The ongoing development and support of
our leaders with these initiatives and the
resulting behavioural benefits, which extend
beyond safety, diversity and inclusion, are
very important for growing our people and
setting the cultural expectations for the
business.
Supporting the community
Our commitment to sustainability stems
from our value of supporting each other. We
strive to ensure that our business continues
to develop sustainably by reducing our
impact on the natural environment and
making a positive contribution to society.
To date, this commitment has been guided
by our comprehensive Corporate Social
Responsibility (CSR) strategy, which ensures
we focus on the areas of CSR with the most
material impact and aligns our activities with
the United Nations Sustainable Development
Goals. Our five areas of focus are: food and
nutrition, packaging, water sustainability,
greenhouse gas emissions, and diversity,
inclusion and equality.
The acquisition of the Lion Dairy and Drinks
business brings an increase in our overall
footprint and further opportunity to grow
sustainably as a business. We look forward
to aligning and consolidating the progressive
approaches to sustainability of Lion into
our program in coming reporting cycles.
Priorities and progress to date will be shared
in our FY2021 Sustainability Report.
Our ongoing partnership with Foodbank
supports more than 2,500 frontline charities,
local communities, and 3,000 schools
The Greater Good and Corporate Social Responsibility
Our Corporate Social Responsibility (CSR) framework sets our agenda for addressing the
impacts of our business and where we can contribute to progress in sustainable development.
The framework is based on three critical aspects of our business where we can make a
difference to the greater good: our products, our people and communities, and our planet.
Our priorities are aligned
with the UN Sustainable
Development Goals
Within our framework we have five sustainability priorities and we invest directly in programs and activities aligned with these areas, whilst
our Bega Better Farms program helps improve our farmer suppliers’ resource sustainability and efficiency. These programs and activities
are aligned with the UN Sustainable Development Goals and are described in more detail in our annual sustainability report.
Making better,
healthier food
Keeping everyone
healthy at work
Food and nutrition
Packaging
Reformulating products
to align with nutritional
profiling standards and
designing product
alternatives to meet
specific dietary
requirements.
Developing more
sustainable packaging
solutions to improve
recyclability, with an
alignment to the
Australian Packaging
covenant.
Water
sustainability
Greenhouse gas
emissions
Investing in capital to
improve water systems
and process redesign
to improve water
management
throughout our
operations.
Carbon target scope
one and two emissions
targets established:
- 40% reduction in
absolute emissions
by 2030
- Net zero emissions
by 2050
Diversity,
inclusion
and equality
Creating an inclusive
culture, embracing
diversity and treating
people with respect.
Bega Cheese is moving beyond sustainability to circularity in the Bega Valley
We are very proud to have initiated an important transformation
project to build a more resilient Bega Valley region through
adopting and embedding circular economy principles. With the
specialist circular economy support of KPMG and Rabobank,
alongside the Bega Valley Shire Council and input from local
NSW State Government representatives, we have created The
Circularity Co-operative that will co-invest in a range of
research and circularity capability
infrastructure assets,
programs, digital platforms and accelerators to create a legacy
for the future generations of the Bega Valley.
A circular economy is about more than just recycling
1 Using resources more efficiently by changing the way we think
about production processes. Is the product the best way to
meet the demand? Could we use fewer or different resources
in its production?
2 Design differently: for example by considering reuse, repair and
recycling options in advance of production
3 Product reuse for same purpose
4 Product repair, maintenance and revision
5 Processing and reuse of materials
6 Recover energy from materials
1. Rethink
and reduce
2. Redesign
Use
M
l
e
v
a
c
r
o, Meso, M i c ro le
6. Redesign
Making food
that our
customers
and
consumers
trust
Food safety
and quality
Speaking
honestly
about our
products
Responsible
marketing
Food
nutrition
People
safety
Helping the
community thrive
Community
contribution
and expectation
Our
Products
Our
People and
Communities
Diversity,
inclusion
and equality
Recognising
that everyone
has something
to give
Greater
Good
Our
Planet
People
capability
Making people’s
potential a reality
Land
management
Supporting
sustainable
farm practices
Water
sustainability
Greenhouse
gases
Responding to the
challenges of
climate change
Ensuring every
drop counts
Packaging
Packaging for
a better planet
Waste
Producing more,
wasting less
3. Reuse
4. Repair and
remanufacturing
5. Recycling
7 Lastly, waster disposal and incineration without energy recovery
7. Disposal
is avoided where possible
14 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 15
Our business model
Creating sustainable value from farm to consumer
Farmers and other suppliers
Bulk processing
Packaged goods processing
BEGA CHEESE LIMITED 2021 | OUR BUSINESS MODEL
Our core capabilities
Direct
relationship with
our farmers and
other suppliers
Globally
competitive
supply chain
Food manufacturers,
marketers and traders
Bulk segment
The acquisition
of Lion Dairy and
Drinks strengthens
our value chain and
builds on our core
capabilities.
Contract packing
and private label
Bega branded
business
Diversified
portfolio of
market leading
food brands
Distribution
network
Efficient
distribution
network serving
customer growth
Foodservice and
retail customers
Key
Consumers
Branded segment
Product flow
Supplier
Internal Bega process
Bega’s direct customer
Bega’s indirect customer
ANNUAL REPORT | 17
Bega’s business model focuses
on four core capabilities which
represent our integrated value
chain. These are supported
and enabled by a high
performing and capable team,
while our values guide our
growth in a sustainable and
ethical way. This also defines
how our activities are grouped
as part of segment reporting.
Bega maintains strong relationships with
farmers and other suppliers which ensures
provenance and quality throughout the supply
chain. Through our Bega Better Farms
program, we work closely with our suppliers to
support sustainable farm practices.
Our bulk business incorporates large-scale
and efficient ingredient processing facilities
that provide security of supply for our branded
business. These bulk processing facilities also
to manufacture and sell
utilise capacity
ingredient and nutritional products to a range
of food manufacturers, marketers and traders.
Our branded business incorporates packaged
goods processing facilities and a portfolio of
heritage Australian brands with category
leadership positions. Our branded products
are sold to a wide range of retail and food
service customers in Australia and in export
through an efficient distribution
markets
network. The scale of the branded business
supports continuous investment in consumer
research, product innovation and marketing.
In order to maximise the utilisation and
efficiency of our packaged goods processing
facilities, we also contract pack and toll
process products for a range of customers
under long-term contractual arrangements.
The acquisition of the Lion Dairy and Drinks
business provides operational synergies
and an enhanced flexible, integrated supply
chain. This enables us to manage milk and
ingredients across the network in the most
effective way and ensures our bulk and
branded businesses work together to reduce
cost and to maximise the value we can extract
from
ingredients. The acquisition also
increases our customer reach through a highly
efficient national chilled distribution network,
further
which provides opportunities
leverage our combined brand and product
portfolio.
to
16 | BEGA CHEESE LIMITED 2021
Australian retail categories
and consumer brands
Portfolio of leading iconic brands in seven key consumer
categories. Many of these brands have become trusted household
names by generations of consumers. This portfolio creates a
strong foundation for growth and value creation.
As part of our vision to become The Great Australian Food
Company, we aspire to being the number one or two brand
owner in multiple categories over $500 million.
Category
Category size $m1 Category growth1 Bega share1
Brand portfolio
BRAND SPOTLIGHT
Farmer’s Union
With a 132 year heritage, Farmers Union is Australia’s
most loved plain Greek-style yoghurt1. Yoghurt
continues to be a growth category, and Farmers
Union is well-positioned with its 24 product portfolio,
generating a 6.7% increase in estimated retail sales
to $137m2. See www.farmersunionyogurt.com.au
1 Iri Aztec In-Home Panel database, based on the percentage
of households that purchased MAT to 20 June 2021
2 IRi Total Business Scan (AU Grocery Unweighted +
Structured Convenience), MAT to June 2021
Fresh
white milk2
1,913
0.4% 13%
Yoghurt
1,472
4.7% 26%
Milk based2
beverages
836
5.6% 50%
Spreads
633
1.7% 31%
Chilled juice 605
3.9% 24%
Creams
and custards 509
5.5% 11%
Water ice
50
-8.5% 82%
Benefits of breadth and scale
The categories cover a broad spectrum of consumer needs, uses,
consumption occasions and sales channels. Our brand and product
portfolio increases our relevance with customers and creates innovation
and further growth opportunities. A strong brand and consumer products
portfolio ensures the business is more resilient and enables us to move
up the value chain. The scale of our consumer products portfolio has
also created efficiencies in marketing activity, with learnings from trends,
innovation and consumer insights often having relevance across multiple
categories. Bega is also represented in the growing plant-based food
segment through our investment in the Vitasoy joint venture.
Sustainability as a growth driver
Today, consumers seek brands and ingredients that are natural,
healthier, less processed, and sustainably sourced. Most of our brands
contain ingredients sourced directly from farmers. This direct connection
to source and Bega’s focus on farming sustainability becomes a driver
for brand growth.
18 | BEGA CHEESE LIMITED 2021
Future focus
Further growth will be realised through:
Taking our brands to new consumers, markets and channels. We
can now reach a larger customer and consumer base with an enhanced
product offer by utilising our expanded distribution network and sales
capability in Australia and internationally.
Innovating beyond the core with new products. The combined
insights and technical
marketing capability, sharing of consumer
knowledge will unlock new product innovation and ways to generate
consumer demand.
1 Data extracted from IRi Total Business Scan (AU Grocery Unweighted + Structured Convenience),
MAT to June 2021 and AC Nielsen Scan data MAT to June 2021
2 Excludes non dairy
Review of
Financial Performance
and Operations
BEGA CHEESE LIMITED 2021 | REVIEW OF FINANCIAL PERFORMANCE AND OPERATIONS
• strong retail sales volume and mix across the branded segment in
• expanded the 500ml Farmers Union Greek Yoghurt with lactose-
retail
free, protein and vitamin D offerings
Bega conducted a number of programs during the year to support
farmers. These included:
Key highlights
The Bega Cheese Group took a significant step towards achieving its
strategic objectives in the second half of the FY2021 through the
acquisition of 100% of the Lion Dairy and Drinks business for $528.2
million. After a taking control of the business in January, management
implemented a 100-day action plan and in late FY2021 commenced a
stream of work focused on realising synergies. This work involved
organisational change, rapid procurement negotiations and milk
optimisation across the network.
This synergy program is on target to achieve the $41 million of
annualised benefits announced to the market and $36 million of
synergies in the first full year of ownership.
The transition of the Group into a branded domestic food supplier has
helped mitigate fluctuations in commodity and foreign exchange
pricing and softness in the infant formula market. The Group completed
an organisational review in 1H FY2021 and completed the lactoferrin
plant at Koroit which was operational throughout FY2021.
Finance and operational overview
Bega Cheese generated top line statutory revenue of $2.07 billion, up
39%, statutory EBITDA of $182.7 million, up 108%, statutory profit after
tax of $72.2 million, up 239% and statutory earnings per share of 27.3
cents (FY2020 9.9 cents).
As in previous years, the Group will report on both the statutory result
and the normalised result for FY2021 compared to the prior year.
Commentary in this report focuses on the normalised result. The
normalising adjustments to the statutory results are detailed in the
table on page 25.
•
favourable sales pricing on commodity sales within the bulk
segment
• achievement of organisational cost savings programmes
• continuous improvement cost savings across the manufacturing
and supply chain network
• settlement of Kraft Heinz legal proceedings.
Bega Cheese continues to maintain a strong balance sheet, with
normalised EBITDA to net debt ratio down to 2.25 times, well within
covenant limits notwithstanding the acquisition of Lion Dairy and
Drinks for $528.2 million. This acquisition was mostly funded through a
net capital raise of $392.7 million in December 2020.
The Group received 1.12 billion litres of milk during FY2021, up 17% on
the 955 million litres received in FY2020, including milk procured in
Bega Dairy and Drinks from the date of acquisition. The Group
acknowledges the loyalty of our milk suppliers and welcomes new
suppliers.
The Group continues to make significant progress towards achieving
its key strategic objectives.
The strategic pillars that underpin those objectives are:
• a diversified portfolio of market-leading food brands
• an efficient distribution network servicing customer growth
Bega Cheese generated normalised EBITDA of $141.7 million, up 38%,
normalised profit after tax of $39.6 million, up 24% and normalised
earnings per share of 15.0 cents (FY2020 14.9 cents).
• a globally competitive integrated supply chain
• direct relationships with farmers and suppliers.
The Group faced a number of challenges throughout FY2021. These
included:
Progress towards achieving strategic objectives
Diversified portfolio of market leading brands
• strong competition for milk supply and increases in farm gate milk
prices
• strengthening Australian dollar
impacting USD denominated
commodity sales
•
•
infant formula, particularly in China impacting customer volume
requirements
reacting to the unpredictable nature of COVID-19 transmission in
the community
• volatile sales across the Foodservice channel impacted by
COVID-19 restrictions
With the November 2020 acquisition of Lion Dairy and Drinks
(completed in January 2021), Bega Cheese accelerated progress
towards its goal of having 75% of all revenue generated through
branded product, finishing the year with 73% of sales derived from
branded business, up from 59% in the prior year.
Bega now holds
two market share
the number one or
position in Australia across flavoured milk beverages, yoghurt, and
table spreads.
The increase in scale and expertise arising from the Lion Dairy
and Drinks acquisition will project the business to new levels of
product development whilst increasing execution capability on market
launches.
Despite these challenges, the Group was able to more than mitigate
these through:
•
rapid integration of Lion Dairy and Drinks and achievement of
synergy target run rates
The business released a new Vegemite Squeeze format during the
year and continued to grow B honey, with Woolworths and Metcash
now carrying the range. Capitalising on the growing trend of healthier
foods and the shift to easier more convenient ways of eating and
snacking, the business:
• maximising production and a full year earnings from the new
Lactoferrin plant at Koroit
•
launched new flavours and a new 4x110g pack format in its Dairy
Farmers range
• entered the 150g segment with a no added sugar fruited offering in
• grower advances for peanut farmers to cover initial planting costs
• seasonal loans for dairy farmers and payments structures that are
sympathetic to seasonal requirements
• agronomy services for peanut growers provided by three Bega
agronomists that work with farmers directly on best practice
• environmental consulting and financial support for key projects,
and
• budget and farm planning services.
Efficient distribution network servicing customer growth
The acquisition of Lion Dairy and Drinks increased the Group’s
distribution and reach. This enables Bega to offer customers a better
customer proposition at a more efficient cost.
Bega has 133 logistics locations across Australia servicing more than
30,000 customers across all states. These logistics locations form one
of the largest cold chain distribution networks in the country, with
unparalleled connectivity between metropolitan, satellite and regional
Australia. The network has the capability to deliver 3,200 truckloads
per week and 850 million litres of product annually. This provides Bega
with the capability to serve most of Australia’s population via a range of
freight options from large vehicles or rail through to small route trucks
and coastal freight. Bega’s salesforce calls on these customers either
in person or through a corporate call centre and has a robust
technology platform in place to manage orders, delivery and payment.
A significant portion of the network only transacts and delivers a small
sample of the Group’s product range, providing opportunity for further
cross sell of Bega products, and improved utilisation of this asset base.
Bega Cheese is a truly national supplier in a fragmented industry. The
business continually assesses opportunities to optimise this distribution
network, improve the customer experience and innovate its customer
service proposition to better meet the needs of customers and
consumers.
its Yoplait range, and
• expanded its range of Yoplait Petit Miam, No Added Sugar and
Famers Union Greek Yoghurt kids snacking yoghurt (pouches).
In milk-based beverages the company launched new salted chocolate
and white chocolate flavoured milk products in its Dairy Farmers
branded range and maintained the momentum of growth in the Dare
brand with the development of No Sugar Added products and a
rotation of new flavours.
The success of these launches capitalises on opportunities in the
growing yoghurt and milk-based beverages product categories and
marks the way for additional capital spend into yoghurt which is an
area of strategic importance.
Globally competitive integrated supply chain
The acquisition of Lion Dairy and Drinks accelerated the Company’s
transformation from a predominantly dairy based business to one of the
largest and growing Australian-owned diversified food companies, with
a strong mix of high value-add iconic branded products and one of the
largest cold chain distribution networks in Australia.
Bega now has a fully integrated supply chain from farmer to consumer
across dairy, citrus and nut-based products. This creates the
opportunity for Bega to add value at each stage in the product life cycle
and seek out opportunities as they arise across retail branded and
commodity markets.
Bega now has access to more profitable revenue streams for its milk.
The milk value stream can be maximised by avoiding waste and
secondary market reduced pricing. With multiple product streams
across 20 manufacturing facilities around Australia, Bega can also now
balance fat and protein between product categories and different sites,
to optimise returns. Bega now has a far broader dairy collection
network. This provides increased access to dairy areas such as
Gippsland and Tasmania, creating a larger and more resilient milk pool.
Direct relationships with our farmers and suppliers
Bega deals directly with approximately 1,100 dairy, fruit and peanut
growers across Australia. These farmers produce approximately
1.5 billion litres of milk and 59,000 tonnes of peanuts, oranges, apples
and pears between them.
These direct farming relationships allow Bega to have provenance with
most of the product that it produces. It also allows for genuine,
meaningful relationships to be struck with suppliers. That creates the
opportunity for Bega to support sustainable and responsible farming
of produce.
20 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 21
Significant events
Integration
To support the integration of Lion Dairy and Drinks, Bega Cheese
embarked on a 100-day plan upon taking control of the business. The
100-day plan focused on organisational change, synergy benefits and
integration of key policies and controls to ensure a strong governance
framework is maintained across the business. This in turn gave rise to
streams of work to deliver the synergy targets communicated to the
market at the time of acquisition. These streams include:
• An organisational review to assess the combined organisation
structure and assist with potential efficiencies. This process
included benchmarking costs against global best practice. As a
result, the Group identified and addressed opportunities across
finance, technology, sales, engineering and other central services
and benefits from these changes have already started to flow for
FY2022.
• An assessment of common suppliers to identify cost savings in the
areas of technology and personnel services, packaging and media.
• A consolidation of logistics and warehousing with a number of
contract negotiations planned for the first half of FY2022.
•
Identification of the most effective permutations on milk flow through
our manufacturing assets for return optimisation. The broader
processing capability and end-product optionality across the Group
post-acquisition means a far more effective use of milk solids.
Bega entered into a transition services agreement with Lion for fifteen
months after acquisition date. This transition services agreement
covered the provision, by Lion, of some accounting services such as
treasury and accounts payable, payroll services and the hosting and
application management of technology services. At the end of the
FY2021 Bega has transitioned all services except for technology.
Bega has also commenced planning a final Enterprise Resourcing
Platform solution for migrating the businesses onto a single platform.
COVID–19
The Group continually navigated uncertainty in its supply chain and
customer base throughout FY2021. However, none of the issues that
arose due to COVID-19 materially impacted the performance of the
business.
The safety and wellbeing of Bega’s employees, suppliers, customers,
and communities was and remains the highest priority.
Measures with which the Group responded to the COVID-19 pandemic
include:
• COVID-19 safety plans for all sites and documentation of a
comprehensive set of policies and procedures for staff to use.
These have been audited by WorkSafe.
• Formal contract tracing for our employees where there is potential
that they have visited COVID-19 exposure sites.
• A COVID-19 special leave policy to enable employees to stay at
home if unwell, or be tested, without financial disadvantage. This
leave can also be used when employees choose to get vaccinated.
• Segregation of shifts and people, and where possible, separate
amenities and zones for contractors and transport drivers.
• A COVID-19 executive crisis committee to manage our response
consistently across the business and to external stakeholders.
Maintaining Bega’s supply chain efficiency during lockdown has been
a challenge, with close contact isolation requirements having the
potential to dramatically reduce plant and warehouse capacity. There
has also been significant pressure on some of our suppliers and
service providers. Bega has mitigated much of this risk to date through
its diversified manufacturing footprint, strong internal controls and
extensive distribution network.
Safety
Safety is fundamental to our business and we recognise our current
Total Reportable Injury Frequency Rate (TRIFR) needs to improve. We
are committed to ensuring a healthy and safe work environment for our
employees, contractors and visitors to our sites. Our safety culture
encompasses our employees’ beliefs, values and attitudes with
respect to safety and this helps ensure we effectively manage any
safety risks present in our activities.
The integration of the Bega Dairy and Drinks business is a key area of
focus for our safety program. We have rolled out a safety behavioural
leadership program facilitated by DuPont Sustainable Solutions which
has progressed significantly at Bega Dairy and Drinks’ sites.
Employee relations
Over the course of FY2021 we negotiated seven enterprise bargaining
agreements across our sites. These agreements are very important for
both our employee groups and the Company. They ensure our
collective interests are considered and aligned. They could not be
achieved without the significant contributions made by all our Group
employees and union representatives
involved. There are 15
agreements due for negotiation and renewal in FY2022.
BEGA CHEESE LIMITED 2021 | REVIEW OF FINANCIAL PERFORMANCE AND OPERATIONS
Sustainability
This year we have championed a pilot program in the Bega Valley to
create the most “circular” region in the world. Further detail about this
innovative initiative can be found in the Chairman’s Report and on
pages 14 to 15 of this year’s Annual Report.
Supporting farmers
As required by the Dairy Industry Code of Conduct, there are Standard
Form Agreements for all new agreements that Bega Cheese Limited,
Tatura Milk Pty Ltd and Bega Dairy and Drinks Pty Ltd enter into with
dairy farmer suppliers.
Environmental regulations and management
- Legislative framework
Our business is subject to multiple Federal and State Environmental Acts
and Regulations. These include reporting and other requirements under
the National Greenhouse and Energy Reporting Act 2007 (Cth), the Clean
Energy Act 2011 (Cth), the Protection of the Environment Operations Act
1997 (NSW), Environment Protection Act 1993 (SA), the Environment
Protection Act 1970 (Vic), the Environmental Management and Pollution
Control Act 1994 (Tas), the Environmental Protection Act 1986 (WA), the
Environmental Protection Act 1994 (Qld) and the National Environment
Protection Measures.
The Group’s manufacturing sites are licensed under State Environment
Protection Regulations. The licences stipulate performance standards as
well as specific monitoring requirements for emissions such as noise, air,
odour and wastewater. We are pleased to report there were no
infringements or notices from the relevant Environment Protection
Authorities during FY2021.
In addition, during FY2021, the Group complied with all statutory and
voluntary environmental reporting requirements and continues to
monitor and report energy intensity and greenhouse gas emissions.
Major environmental initiatives
Initiatives to improve our environmental performance during FY2021
include:
• Obtaining funding through the Victorian Government’s Business
Recovery Energy Efficiency Fund to develop a five year ‘Energy
Productivity & Emissions Reduction Roadmap’.
•
Implementing a standard supplier on-boarding platform at the start of
the year to enable us to assess all current and potential suppliers
against the requirements outlined in our Ethical Sourcing Policy.
• Achieving Roundtable on Responsible Palm Oil (RSPO) Supply
Chain Certification (SCC) for relevant manufacturing sites, with
Bega (Ridge Street) being the first of these, certified in July 2020
and our Strathmerton site gaining certification in June 2021.
• Completing a research program to successfully test the production
of high-density polyethylene two and three litre milk bottles with a
high level of recycled content.
• Completing our transition away from PVC cheese slice clamshells,
having approved the use of PET across all of our cheese slice
clamshell packaging. We also launched recycled PET (‘rPET)
cheese slice clamshells with Woolworths, to include 30% post-
consumer ‘rPET’.
These are available on our website at: www.begacheese.com.au/
farm-services/milk-supply-agreements/
Our Bega Better Farms program, commenced in 2018, helps dairy
farmers develop and improve their businesses through capital grants,
advice and training. Our field officers assess applications against the
expectations of our farm report checklist and work to identify
opportunities for improvement.
This year we launched a consumer-facing Better Farms Program
website which tracks the program’s achievements highlighting them to
Australian consumers. We also commissioned an independent, third-
party audit to assure our stakeholders that grants under the program
are allocated to eligible farms, and that funds are spent on agreed
projects. This information is also publicly available on the website. We
look forward to expanding this program to our Bega Dairy and Drinks
suppliers.
Modern Slavery prevention
Bega Cheese completed its first Modern Slavery Statement in March
2021 which was in relation to FY2020. Prior to the acquisition of Lion
Dairy and Drinks, Point Advisory a sustainable strategy consultancy
company was engaged to assess the risks of modern slavery on our
supply chain. The final report includes several recommendations
which are to be implemented over the next two years. The program
has now been expanded to include Bega Dairy and Drinks. The Bega
Cheese Ltd Modern Slavery Statement for FY2021 is expected to be
finalised towards the end of the 2021 calendar year.
Insurance matters
General insurance premiums continued to be impacted by a high
number of global claims particularly in the Food and Beverage sector
where many manufacture and storage facilities are constructed from
expanded polystyrene panel which is a concern for underwriters.
Directors and Officers insurance premiums also came under significant
pressure due to the high level of claims incurred by underwriters.
Bega appointed new brokers in 2020 which assisted with the
restructure of the Group’s insurance program enabling premium
increases to be kept to a minimum in FY2021. Prior to the acquisition
of Lion Dairy and Drinks general insurance premiums totalled $17.2
million for the year. Additional premiums of $6.8 million were incurred
when Lion Dairy and Drinks was added to the insurance program on
25 January 2021.
While the general insurance market continues to experience rate
increases and capacity pressure in the FY2022 renewal period, we
were pleased with the outcome achieved with the assistance of our
brokers. The Group plans to introduce a captive during FY2022 with
the objective of driving further structural change in our general
insurance strategy which we expect will result in more favourable
premium outcomes in the future.
22 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 23
Legal action
Kraft
In November 2017, Kraft Foods Group Brands LLC and H.J. Heinz
Company Australia Limited (collectively referred to as Kraft Heinz)
commenced proceedings against Bega Cheese claiming that they were
the rightful owner of the trade dress (yellow lid, clear jar, yellow label with
red or blue peanut device) of the Bega Cheese peanut butter products.
In 2019, the Federal Court of Australia determined that Bega Cheese was
the rightful owner of the relevant rights in the peanut butter trade dress
and ordered that Kraft Heinz may not use, sell or advertise and promote
its own peanut butter products using the Bega trade dress. This decision
was upheld by the Full Court of the Federal Court in 2020.
Kraft Heinz filed an application in the High Court of Australia seeking
special leave to appeal from the judgment of the Full Court of the
Federal Court. On 13 November 2020, the High Court dismissed this
application. The decision of the Full Court of the Federal Court stands
and confirms Bega Cheese’s ownership of the trade dress rights.
In June 2021, Bega Cheese entered into a confidential settlement with
Kraft Heinz for monetary relief and legal costs payable in respect of the
legal proceedings. Under the terms of settlement, Kraft Heinz paid
$9.25 million to Bega Cheese. Bega Cheese received these monies in
June 2021.
Given the settlement agreement, the Federal Court proceeding to
determine costs and damages has now been dismissed. In addition,
court proceedings in New York have been closed and the New York
arbitration file has been dismissed. The two New York proceedings,
related to the claims made by Kraft Heinz regarding the trade dress,
but were put on hold pending the outcome of the Australian Federal
Court proceedings. This resolves all outstanding issues relating to the
Kraft Heinz dispute.
Fonterra
In 2017, Fonterra Brands Australia commenced legal proceedings in
the Supreme Court of Victoria in relation to the scope of the 2001
trademark licence between Bega Cheese and Fonterra. On 25
February 2021, the Supreme Court of Victoria held that Bega Cheese,
as owner, is entitled to use the Bega trademark on those of its products
that are outside the scope of the Fonterra licence, without Fonterra’s
consent.
Fonterra has an ongoing exclusive licence to use the Bega trademark
on natural cheddar cheese, processed cheddar cheese, string cheese
and butter. Bega Cheese’s counterclaims in respect of alleged
breaches of the trademark licence by Fonterra were dismissed. Neither
party appealed the decision. The Court ordered that Fonterra pay
Bega Cheese’s costs in relation to the claim and that Bega Cheese pay
Fonterra’s costs in relation to the counterclaim. The amounts payable
by the parties have not yet been determined.
Termination of customer contract
In the second half of FY2021, one of the Group’s major customers,
Reckitt, notified the Group that two arrangements will cease ahead of
their contractual expiry date. The first relates to an access and services
agreement at a plant in Derrimut which will end in October 2021, prior
to its original end date of December 2026. The second relates to the
Tatura MSD2 dryer access and services agreement that will end in
January 2022, prior to its original end date of December 2026.
To compensate for the loss of future earnings, the Group expects to
receive contractual termination fees totalling $55.5 million in relation
to both arrangements across FY2021 and FY2022. The Group is
currently considering any potential implications of the termination for
infant formula products as well as cost out initiatives.
Dividends paid in FY2021
On 27 August 2020 Bega Cheese declared a final FY2020 fully franked
dividend of 5.0 cents per share, representing a distribution of $10.7
million. The Directors activated the Group’s Dividend Reinvestment
Plan (DRP) for this dividend. The DRP, offers ordinary shareholders in
Australia and New Zealand the opportunity to acquire fully paid
ordinary shares without transaction costs. Shares purchased under
the DRP were allotted on 7 October 2020 and raised $0.8 million in
new share capital.
On 24 February 2021 Bega Cheese declared an interim fully franked
dividend of 5.0 cents per share, representing a distribution of $15.1
million. The Directors again activated the Group’s DRP for this dividend.
Shares purchased under the DRP were allotted on 26 March 2021 and
raised $1.7 million in new share capital.
On 27 August 2021 Bega Cheese declared a final fully franked dividend
of 5.0 cents per share representing a distribution of $15.1 million, an
increase of $4.4 million compared to the 2020 final dividend. The DRP
will also be available for this dividend.
Dividends paid to shareholders in relation to the FY2021 year will total
$30.2 million which represents an $8.8 million increase over the
dividends paid in respect of FY2020 which totalled $21.4 million.
Reconciliation of statutory and normalised
performance
As in previous years, the Group will report on both the statutory result
and the normalised result for FY2021 compared to the prior year.
Commentary in this report focuses on the normalised result.
GROUP STATUTORY RESULT FY2021
On a statutory reporting basis, the Group generated:
$ million
EBITDA
EBIT
PBT
PAT
EPS
FY2021
FY2020
$182.7
$107.7
$97.4
$72.2
$87.8
$42.0
$31.0
$21.3
27.3 cents
9.9 cents
GROUP NORMALISED RESULT FY2021
The statutory result for the Group in each of FY2021 and FY2020
included several one-off items, most of which related to corporate
activity. While these items all had a financial impact on the statutory
performance of the Group, they do not affect the underlying financial
performance of the business.
To provide a more meaningful understanding of the underlying financial
performance, we have made normalising adjustments to the statutory
financial statements for each of these items. These are set out in more
detail in the table on page 25. On a normalised basis the Group generated:
$ million
EBITDA
EBIT
PBT
PAT
EPS
FY2021
$141.7
$68.8
$60.1
$39.6
FY2020
$103.0
$57.2
$46.2
$31.9
15.0 cents
14.9 cents
BEGA CHEESE LIMITED 2021 | REVIEW OF FINANCIAL PERFORMANCE AND OPERATIONS
MATERIAL ITEMS IMPACTING GROUP
NORMALISED RESULT FY2021 AND PRIOR
YEAR
Normalising adjustments in FY2021 consist of the following:
• One off costs incurred in relation to the evaluation, acquisition and
integration of Lion Dairy and Drinks totalling EBITDA of $62.2
million, including stamp duty, acquisition transaction costs, debt
funding (where not allocated against liabilities), excess transition
services arrangement charges from Lion, consultancy and legal,
redundancy, separation costs, and project team resourcing.
• Provisional gains relating to the acquisition of Lion Dairy and Drinks of
$70.0 million which includes a bargain purchase gain of $67.7 million.
•
Income associated with the termination of the Derrimut and MSD2
access and services agreement by Reckitt is expected to be a total
of $55.5 million across FY2021 and FY2022. EBITDA of $29.8
million has been recognised in FY2021 and a remaining $25.7
million is to be recognised in FY2022.
• Proceeds from the legal settlement with Kraft Heinz for monetary
relief and legal costs of $9.3 million.
• Other costs include expensing of certain Software as a Service
(SaaS) applications under a revised accounting policy, one-off legal
and other expert advisory fees relating the Kraft Heinz and Fonterra
proceedings and the impairment of obsolete equipment assets.
The table below demonstrates the movement between the financial performance for statutory reporting purposes and the normalised financial
performance for the Group. These adjustments have not been subject to specific audit procedures.
Per
Financial
Statements
$m
LDD
Transaction
Related
Costs
$m
Gains
Relating
to LDD
Acquisition
$m
Reckitt
Termination
Fees
$m
Kraft Legal
Settlement
$m
Other
Costs
$m
Normalised
Outcome
$m
Consolidated
Period ending 30 June 2021
Revenue
Cost of sales
Gross profit
EBITDA
Depreciation, amortisation
and impairment
EBIT
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
2,073.4
(1,608.2)
465.2
182.7
(75.0)
107.7
(10.3)
97.4
(25.2)
72.2
-
-
-
-
-
-
62.2
(70.0)
-
62.2
1.6
63.8
(4.7)
59.1
-
(70.0)
-
(70.0)
-
(70.0)
(13.9)
-
(13.9)
(29.8)
-
(29.8)
-
(29.8)
8.9
(20.9)
Gross margin - percentage
Basic earnings per share - cents
22.4%
27.3
-
-
-
-
-
-
2,059.5
(1,608.2)
451.3
(9.3)
5.9
141.7
-
(9.3)
-
(9.3)
2.8
(6.5)
2.1
8.0
-
8.0
(2.3)
5.7
(72.9)
68.8
(8.7)
60.1
(20.5)
39.6
24.2%
15.0
Consolidated
Period ending 30 June 2020
Revenue
Cost of sales
Gross profit
EBITDA
Depreciation, amortisation
and impairment
EBIT
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Gross margin - percentage
Basic earnings per share - cents
Per Financial
Statements
$m
Koroit
Acquisition
Costs
$m
Legal
Costs
$m
Other
Costs
$m
Normalised
Outcome
$m
1,493.2
(1,204.2)
289.0
87.8
(45.8)
42.0
(11.0)
31.0
(9.7)
21.3
19.4%
9.9
-
-
-
0.3
-
0.3
-
0.3
(0.1)
0.2
-
-
-
9.6
-
9.6
-
9.6
(2.9)
6.7
-
-
-
5.3
-
5.3
-
5.3
(1.6)
3.7
1,493.2
(1,204.2)
289.0
103.0
(45.8)
57.2
(11.0)
46.2
(14.3)
31.9
19.4%
14.9
24 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 25
Cash flow, net debt and group capital management
Cash flows
The Group generated the following cash flows in FY2021:
$ million
FY2021
FY2020
Operating activities
$111.4
$138.0
Investing activities
Financing activities
($546.7)
$499.6
($52.9)
($91.0)
Balance sheet capital management
The Group continues to receive support from its bankers and has the
following facilities:
•
•
a primary Syndicated Debt Facility with Coöperatieve Rabobank
U.A.
(Rabobank Australia Branch) and Westpac Banking
Corporation (Syndicate Bankers)
an Inventory Facility and a Trade Receivables Facility provided
by Rabobank, and
Key operating activities generating cash flow in FY2021 were:
•
other guarantee facilities provided by Westpac.
net profit after tax and after adjusting back non-cash items of
depreciation and amortisation and the gains from the acquisition
of Lion Dairy and Drinks of $75.0 million
In December 2020, the Group undertook a successful capital raise to
help fund the acquisition of Lion and Dairy and Drinks, with the balance
of purchase price funded from debt.
•
•
improvement in working capital of $13.9 million through strong
receivable and creditor management.
Key investing activities generating cash flow in FY2021 were:
•
payment of $514.5 million (after cash acquired) for the acquisition
of Lion Dairy and Drinks
• payments totalling $22.2 million for capital investment
• payments totalling $10.0 million for investments in software.
Key financing activities generating cash flow in FY2021 were:
•
•
net proceeds from the capital raise and issue of shares of
$390.2 million to fund the Lion Dairy and Drinks acquisition
increase in net borrowings of $145.0 million to fund balance
of the Lion Dairy and Drinks acquisition not funded through capital
raise
• dividend payments of $23.3 million.
Net debt at year end
Bega Cheese Group had consolidated net debt of $324.9 million as of
30 June 2021, compared to $231.2 million at 30 June 2020, an
increase of $93.7 million. The significant movement in net debt arose
from $125.1 million of net proceeds from borrowings to partially fund
the acquisition of Lion Dairy and Drinks, capital and software
investment of $32.2 million, dividend payments of $23.3 million,
principal lease payments of $12.3 million and additional unrecognised
bank guarantees of $13.0 million. These increases were partially
offset by operating cash inflows of $111.4 million.
In August 2021, the Group renewed the Rabobank Trade Receivables
Facility, with an expiry date of 31 January 2023. Syndicated facilities
one and two were successfully refinanced with Rabobank and
Westpac on 23 December 2020. Facility 1 increased from $70.0
million to $140.0 million; Facility 2 remains at $140.0 million and both
facilities were extended to mature on 10 November 2023.
Notwithstanding the acquisition of Lion Dairy and Drinks, the
normalised EBITDA to net debt
from
2.35 times to 2.25 times and is well within year end bank covenant
requirement of 3.0 times. Bega Cheese expects its leverage ratio
to continue to trend favourably throughout FY2022 and is very well
placed to meet future covenant requirements.
leverage ratio reduced
Capital investment
Bega Cheese Group capital expenditure
totalled
$26.8 million (FY2020: $42.2 million). The Group’s FY2021 capital
works programme centred on:
in FY2021
•
•
•
•
infrastructure upgrades across various sites
installation and commissioning of equipment to support new
product innovation such as Vegemite Squeeze
various projects to improve safety
implementation of energy saving initiatives across multiple
locations to reduce costs.
BEGA CHEESE LIMITED 2021 | REVIEW OF FINANCIAL PERFORMANCE AND OPERATIONS
Commentary on other investing activity
Capitol Chilled Foods
The Group increased its shareholding in Capitol Chilled Foods
(Australia) Pty Ltd (CCFA), a regional milk processor based in Canberra,
from 25% to 100% via the acquisition of Lion Dairy and Drinks (who
owned the other 75%).
180 Nutrition
Effective November 2020, the Group acquired the remaining 39%
share in 180 Nutrition Pty Ltd, increasing its controlling share to 100%.
In June 2021, five 180 Nutrition Protein bars and blends were ranged
in Coles.
Risk management
The senior management team is responsible for designing and
implementing systems to minimise and control risks associated with
the Group’s operations, and it reports regularly to the ARC and the
Board on those risks. The ARC is also responsible for overseeing and
assessing the process of financial and non-financial risk management
and compliance. The Board reviews the Group’s risk management
framework at least annually to satisfy itself that this framework
continues to be sound and that the Group is operating with due regard
to the risk appetite set by the Board, including in respect of
contemporary and emerging risks such as conduct risk, digital
disruption, cyber-security, privacy and data breaches, sustainability
and climate change. A review has been carried out by the Board
during the 2021 financial year reporting period.
The CEO and CFO have reported to the Board on the effectiveness of
the Group’s management of its material business risks. The Group has
an enterprise-wide risk management framework which manages risks
through understanding and responding to the uncertainties the Group
faces including supporting the needs of our customers, enabling
excellent supplier relationships, maintaining a safe and energised
workforce with shared values and an agreed code of conduct.
The internal audit function provides independent and objective
assurance on the adequacy and effectiveness of the Group’s systems
for risk management, internal control and governance, along with
recommendations to improve the effectiveness and efficiency of these
systems and processes. The Group Internal Audit Manager who has
also been assigned key Governance and Assurance responsibilities
reports to the Company Secretary with direct engagement with the
CFO, CEO and Chair of the ARC. Key financial and non-financial risks
are included on page 28 to 30.
26 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 27
BEGA CHEESE LIMITED 2021 | REVIEW OF FINANCIAL PERFORMANCE AND OPERATIONS
Key financial and non-financial risks include:
Strategic risks
Sources of risk
Risk mitigation strategies
Geopolitical Tensions
• Diversification of revenue mix through the Lion Dairy and Drinks acquisition and a
Escalation of trade tensions with China to a point
where Australian (or New Zealand) dairy products
are locked out.
reduction in revenue exposure to China.
• A focus on building nutritional markets in new regions.
• Growing international footprint in new markets.
Operational risks
Sources of risk
COVID-19 Exposure
Presence of COVID-19 resulting in the loss of
multiple site workforces, or a severe supply chain
disruption impacting commercial viability.
Lion Dairy and Drinks Integration
to
successfully
acquired
Failure
businesses impacting synergies, cultural alignment,
and long-term value creation.
integrate
Customer Diversity
Too much dependency on major domestic
supermarkets and a concentration of
retail
customers, resulting in lost growth opportunities.
•
‘On the ground’ employee presence in developing markets.
• The business has engaged external specialists to support the integration, with a
focus on key areas of opportunity such as finance, procurement, and organisational
development.
• A steering committee is in place to oversee the integration. Committee members
include Non-Executive Directors.
•
International growth strategy inclusive of an increasing in-market presence within key
international markets.
• Growing non-retail product mix.
Substantial changes in consumer demand resulting
from government imposed pandemic restrictions
impacting sales.
Risk mitigation strategies
Risk Mitigation Activities
• Group wide COVID-19 response plans and policies.
• Cross functional management response team that oversees the appropriate
management of employees.
• Executive led Crisis Management Team meeting regularly for the duration of the
pandemic.
•
Site COVID-19 self-assessment process that is overseen by internal audit.
• Global monitoring of key ports.
•
Business continuity plans referencing production and supply chain alternatives in the
event of a disruption.
• Focus on channel and product diversity to meet fluctuations in consumer behaviour
• Leverage extensive manufacturing and distribution network to ensure available
product supply
Dairy Returns and Milk Supply
• Emphasis on maintaining strong farmer relationships and delivering a competitive
customer base than previously existed.
Serious harm to employees, visitors, or contractors
due to poor safety systems or culture.
• Comprehensive safety management systems inclusive of incident management.
• Acquisition of Lion Dairy and Drinks has resulted in a far larger and more diverse
Health and Safety Management
• Executive level performance measures include safety performance.
Competitive returns on product mix may significantly
impact Bega Cheese’s ability to acquire milk.
farm gate milk price.
• More geographically diverse spread of site assets.
• Focus on higher returning dairy categories.
Technology risks
Sources of risk
Cyber Security
A cyber security event or attack materially affecting
operations and involving significant remediation
resources.
Risk mitigation strategies
• Bega has aligned its technology processes to the ISO 27001 Information Security
Management System (ISMS) standard and has adopted the NIST CSF (Cyber
Security Framework). NIST ensures a standard approach to activities of identifying
security risks, implementing security controls and monitoring cyber resiliency.
• Periodic reviews of our NIST rating is conducted by an external assurance provider.
• A cyber security dashboard is provided to the Executive and Audit and Risk
Committee.
• NIST maturity evaluation and improvement plan.
• Cyber security insurance coverage is in place.
• Real-time analysis of security alerts generated by applications and network hardware.
• Anti-virus and anti-malware software in place and regularly updated along with
‘Endpoint Detection and Response’ as additional layer of protection.
• Secure Email Gateway reduces the risk of malware and phishing emails.
• Organisation-wide awareness and training programs.
• Enterprise-wide backup and system recovery solution in case of cyber event.
Ageing Technology Infrastructure
• Technology-based infrastructure renewal process.
Failure of technology used corporately and within
our sites due to it not being maintained or renewed
on a regular basis.
• Operational technology is reviewed and upgraded in conjunction with industry
standards.
• Corporate systems have been converted to a cloud-based solution.
• Enhancements to corporate system infrastructure is subject to regular review and
approval processes.
• Capital approval process that prioritises safety investment.
• Frequent reporting of safety performance to the Board.
• Engagement of external specialists to support ongoing improvement.
Major Food Safety Event
A major food safety event due to the provision of
out of specification product to market that results
in serious injury or illness to consumers.
•
Immediate escalation of potential major incidents to members of the Executive and if
required the Board.
• Frequent external reviews of premises by external parties (including major
supermarket customers).
• Product recall process that is frequently tested and reviewed.
• Mature quality management system that is compliant to international standards.
• Appropriate food safety certifications held.
• Regular process of quality-based internal audits on third party warehouses and
suppliers of materials.
Natural Disaster Management
• Business continuity plans (BCP) that provide redundancy in terms of production,
A major disaster that results in the loss of at least
one site.
critical staff, and the procurement of materials.
• Emergency response plans that are regularly tested.
•
Industrial special risks insurance coverage that is regularly reviewed.
• System back up plans in the event of a major loss of technology.
•
Increased number of sites (due to the Lion Dairy and Drinks acquisition) across
multiple regions dilutes the impact.
Environmental Impact
• Environmental ‘hotline’ reporting process.
On-going (or major) environmental issues that
result in community outrage and/or penalties.
• Board oversight of environment incidents and action taken.
• Monitoring of changes in environmental legislation.
• Regular community engagement.
•
Internal and external environmental audits of sites.
• Training of site-based staff.
• Environmental incident reporting process and site based operating standards.
28 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 29
People risks
Sources of risk
Risk mitigation strategies
Underpayment of Employees
• Use of third-party specialists to monitor compliance.
Material underpayment of employees resulting in a
sub-optimally motivated and productive workforce,
penalties and reputation loss.
Culture
Inconsistent behaviour and ways of working
(culture) associated with key events such as major
acquisitions.
•
Internal reconciliations of payroll.
• Regular review of employee terms of employment to Awards and National
Employment Standards.
•
Improved access to payroll information through implementation of Workday
•
•
Incident response process that prioritises payroll related matters.
Integration of acquisitions with a focus on uniting our people through a set of common
values, policies and expected behaviours.
• One consistent company-wide process for performance reviews, and for reward and
recognition.
• Talent retention and succession planning initiatives.
Inability to Attract and Retain Talent
• “Inside First” recruitment strategy.
Inability to attract and retain key people, resulting in
a loss of critical skills and knowledge.
• Performance review and development process.
• Remuneration governance overseen by Board sub-committee.
Financial and commercial risks
Sources of risk
Currency Exposures
Significant exposure (long or short) to a negative
commodity or currency movement, resulting in a
significant loss of profit.
• Talent recognition process.
Risk mitigation strategies
• Hedging program in line with the Board-approved Treasury Policy.
• Board approval for milk pricing.
• Pricing analysis to recover unfavourable commodity and currency movement.
• Alternate or dual supplier sourcing strategy.
Capital Management
• Control framework surrounding treasury, credit, capital management, capital
Having insufficient capital available to the business.
expenditure and delegations of authority.
• Dual bank syndicate with multiple facilities.
• Bank relationships and covenant reporting.
• Dual transaction banks.
• Working capital optimisation
Inventory management oversight processes.
-
- Strong debtor controls.
- Comprehensive credit insurance program.
- Payment protection and vendor assurance tools.
Loss of Critical Supplier
•
Identification of alternative suppliers of items determined to be critical.
A critical supplier being unable to provide services,
materials, or packaging.
• Development of flexible formulations.
• Response plans within site held BCPs.
Loss of Critical Customer
• Ongoing ranging underpinned through long-term agreements with critical customers.
• Capital purchases of plant and equipment incorporating flexible materials or inputs.
A critical customer is lost resulting in significant loss
of revenue.
• Strategic review conducted to identify new markets and channels, domestically and
international.
• Spread exposure through acquisition.
• Focus capital expenditure on innovation and new product streams.
30 | BEGA CHEESE LIMITED 2021
BRAND SPOTLIGHT
Dare
Dare is the number one iced coffee brand
in Australia, with a market share of 49.2%1.
With ten different coffee flavours to choose
from, it has become Australia’s favourite
iced coffee2. With broad distribution in
grocery, convenience and general trade,
Dare has estimated retail scanned sales of
$267m1. See www.dareicedcoffee.com.au
1 IRi Total Business Scan (AU Grocery
Unweighted + Structured Convenience),
MAT to June 2021. Unscanned sales
2 IRi Aztec In-Home Panel database, based on the percentage
of households that purchased MAT to 20 June 2021
ANNUAL REPORT | 31
Directors’ Report
Your Directors present the Annual Financial Report of the
Bega Cheese Group for the year ended 30 June 2021
Barry Irvin – AM
Executive Chairman Bega Cheese Limited
Barry Irvin is recognised globally for his extensive experience in the dairy industry and has been Chairman of
Bega Cheese Limited since 2000. Barry’s leadership has seen Bega grow from a small regionally based dairy
company to now the third largest dairy company in Australia, supplying a large range of dairy and grocery
products in Australia and around the world.
Barry’s depth of knowledge of the industry includes a significant understanding of the issues affecting Australian
dairy farmers, the key investments required to meet changing consumer needs and the management of long term
customer relationships.
Barry was awarded the NAB Agribusiness Leader of the Year 2009 and the Rabobank Leadership Award
2011. Barry is very aware of the importance of social responsibility, he has been Chairman of Giant Steps, an
organisation providing services to children and young adults with autism since 2002. In 2008 Barry was awarded
a Member of the Order of Australia for contributions to children with disability and the Australia dairy industry.
Other BGA Committees:
• Member of Dairy and Drinks Integration Committee
Former Directorships in the last 3 years:
• Nil
Other Directorships:
• Chairman of Giant Steps Australia
• Director of Vitasoy Australia Pty Ltd
Peter Margin
BSc (Hons), MBA
Independent Director since September 2020 and Deputy Chairman
Peter has many years of leadership experience in major Australian and International food companies, including
Executive Chairman of Asahi Holdings (Australia) Pty Ltd, Chief Executive of Goodman Fielder Ltd and before
that Chief Executive and Chief Operating Officer of National Foods Ltd.
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Terry O’Brien
FCPA, FAICD
Independent Director since September 2017
Terry brings to the Board a wealth of experience in the food industry, including a period of the Chairmanship of the
Australian Food and Grocery Council and has been responsible for leading growth and acquisition strategies over
many years in the industry.
Terry was, from 2001 until 2017, the Managing Director of Simplot Australia Pty Limited, the US owned, but Australian
centric, food processor and marketer managing leading Australian brands including Birds Eye, Edgell and John West.
Since announcing his retirement in early 2017, Terry has transitioned to a portfolio career and sits on a number of
Australian Company Boards. An accountant by training, Terry has been active in finance and management roles in the
textile industry for ten years and in the food industry for over 30 years.
Other BGA Committees:
• Chair of the Nomination Remuneration & Human Resources Committee
• Member of the Audit & Risk Committee
Other Directorships:
• Chairman of A.G Thompson Pty Ltd (t/a Kookaburra Sport)
• Chairman of Bundaberg Brewed Drinks Pty Limited
Former Directorships in the last 3 years:
• Chairman of Clean Seas Seafood Limited (ASX:CSS)
Rick Cross
B.Ag Sci (Hon),
GAICD
Director since December 2011
Rick was appointed to the Board following the merger of Bega Cheese Limited and Tatura Milk Industries Pty Ltd.
Rick joined the Tatura Milk Industries’ Board in 2003 and was heavily involved in negotiating the initial subscription
by Bega of 70% shareholding in Tatura Milk Industries. Rick also took a lead role in negotiating the scheme of
arrangement for Bega to acquire the remaining 30% of Tatura Milk Industries in December 2011.
Rick has represented dairy farmers in many various industry roles, and was formerly the Chair of Murray Dairy, Inc. He
also owns and actively manages a progressive dairy farm in northern Victoria.
Other BGA Committees:
• Chair of the Milk Services Committee
• Member of the Nomination Remuneration
& Human Resources Committee
Other Directorships:
• Nil
Former Directorships in the last 3 years:
• Nil
Other BGA Committees:
• Chair of Dairy and Drinks Integration Committee
Other Directorships:
• Non-executive Director of Costa Group Holdings
(ASX:CGC)
• Non-executive Director of Nufarm Ltd (ASX:NUF)
Former Directorships in the last 3 years:
• Director of Bega Cheese Limited (ASX:BGA)
• Non-executive Director of Pact Limited (ASX:PGH)
Patria Mann
B Ec, FAICD
Independent Director since September 2019
Patria is an experienced Non-executive Director with over 17 years’ Board experience across various sectors.
Patria qualified as a Chartered Accountant and was a former Partner at KPMG. She brings strong ASX, audit, risk
management and governance experience to the Board.
She is a Fellow of the Australian Institute of Company Directors.
Raelene Murphy
B BUS, FCA, GAICD
Independent Director since June 2015
Raelene Murphy has over 30 years’ experience in strategic, financial and operational leadership in both
industry and professional advisory. In her professional advisory career, she specialised in operational and
financial restructuring including merger and acquisition integration. She was formerly a Managing Director at
KordaMentha and a Partner in a national accounting firm where she led the corporate turnaround practice. Her
industry experience includes CEO of the Delta Group and senior executive roles in the Mars Group.
Raelene is a Fellow of Chartered Accountants Australia and New Zealand.
Other BGA Committees:
• Chair of Audit and Risk Committee
• Member of Nomination Remuneration & Human
Resources
Other Directorships:
• Non-executive Director of Elders Limited (ASX:ELD)
• Non-executive Director of Integral Diagnostics
Limited (ASX:IDX)
• Non-executive Director of Altium Limited (ASX:ALU)
• Non-executive Director of Ross House Investments
Pty Limited (Stillwell Motor Group)
Former Directorships in the last 3 years:
• Non-executive Director of Clean Seas Seafood
Limited (ASX:CSS)
• Non-executive Director of Service Stream Limited
(ASX:SSM)
Other BGA Committees:
• Member of Audit & Risk Committee
Other Directorships:
• Non-executive Director of Event Hospitality Entertainment Limited (ASX:EVT)
• Non-executive Director of Ridley Corporation Limited (ASX:RIC)
Former Directorships in the last 3 years:
• Non-executive Director of Allianz Australia Limited
Harper Kilpatrick
BSc Agriculture,
MBA, FCA, GAICD
Director since April 2021
Originally from Northern Ireland, Harper and his wife own and operate two dairy farms near Koroit in Western Victoria.
Harper’s career has centred around agriculture and agribusiness. His career in agribusiness included several senior
executive roles with Glenfarm Holdings rendering business in the UK, and Deputy CFO / Head of Finance with Almarai
Co., the market leading GCC food and beverage company based in Riyadh, Kingdom of Saudi Arabia.
Other BGA Committees:
• Nil
Other Directorships:
• Finance Director of the Australian Dairy Conference
Pty Ltd
Former Directorships in the last 3 years:
• Nil
32 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 33
Principal activities
The principal activity of the Bega Cheese Group in the course of
the financial year was receiving, processing, manufacturing and
distributing dairy and other food-related products. A number of
key events in relation to the activities of the Group during the year
ended 30 June 2021 are set out in the Chairman’s report, the Chief
Executive Officer’s review and the Review of Financial Performance
and Operations which are to be read in conjunction with this
Directors’ report.
Dividends
Interim ordinary dividend for the year
ended 30 June 2021 of 5.0 cents
Final ordinary dividend for the year
ended 30 June 2020 of 5.0 cents
Interim ordinary dividend for the year
ended 30 June 2020 of 5.0 cents
Final ordinary dividend for the year
ended 30 June 2019 of 5.5 cents
2021
$m
2020
$m
15.1
10.7
-
-
-
-
10.7
11.8
In addition to the above dividends, since the end of the financial
year the Directors have recommended payment of a final ordinary
dividend of $15.1 million (5.0 cents per fully paid share) to be paid on
24 September 2021.
Review of operations
A comprehensive review of operations is set out in the Review of
Financial Performance and Operations.
Significant changes in the state of affairs
Other than that disclosed in the Chairman’s report, the Chief
Executive Officer’s review and the Review of Financial Performance
and Operations there have been no significant changes in the state of
affairs of the Bega Cheese Group since the last Annual Report.
Indemnification and insurance
premiums for officers
During the financial year, the Bega Cheese Group paid a premium in
respect of a contract insuring the Directors and all executive officers
of the Group and of any related body corporate against a liability
incurred as such a Director or executive officer, not exceeding the
extent permitted by law. The contracts of insurance prohibit disclosure
of the nature of the liabilities and the amount of the premiums. The
Group has not otherwise, during or since the financial year, except
to the extent permitted by law, indemnified or agreed to indemnify an
officer of the Group or any related body corporate against a liability
incurred as such an officer. This does not include remuneration or
employment related benefits, any sum payable pursuant to a financial
support direction or contribution notice issued in respect of any
pension scheme, fines and pecuniary penalties for a deliberate or
intentional act, nor amounts, which are prohibited to be paid by law.
Each Director has entered into a deed of access and indemnity with
the Group, which indemnifies them for losses incurred as a Director
or officer of Bega Cheese and places an obligation on the Bega
Cheese Group to maintain a current Directors’ and Officers’ policy
with a reputable insurer for the period of the Director’s tenure and for
a seven year tail period (or longer if there is an unresolved outstanding
claim against the Director) and a contractual right of the Director to
access Group records for the period of the Director’s tenure and for a
seven year tail period (or longer if there is an unresolved outstanding
claim against the Director).
The Company has also agreed to indemnify the Company Secretary
and certain senior executives for all liabilities to another person (other
than the Company or a related body corporate) that may arise from
their position, except where the liability arises out of conduct involving
a lack of good faith. The agreement stipulates that the Company
will meet the full amount of any such liabilities, including costs and
expenses.
Company secretary
The Company Secretary registered with the ASX is Brett Kelly FCA,
GAICD. Brett Kelly was appointed to the position of Company
Secretary in 2002. Brett Kelly holds a Bachelor of Commerce in
Accounting and is a Chartered Accountant with 36 years’ experience.
He has also been a graduate member of the Australian Institute of
Company Directors since 2006. Brett Kelly completed the Certificate
in Governance and Risk Management with the Governance Institute
of Australia in December 2011.
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Meetings of Directors and Board Committees
Meetings of the Board of Directors
The principal activity of the Bega Cheese Group in the course of
the financial year was receiving, processing, manufacturing and
distributing dairy and other food-related products. A number of
key events in relation to the activities of the Group during the year
ended 30 June 2021 are set out in the Chairman’s report, the Chief
Executive Officer’s review and the Review of Financial Performance
and Operations which are to be read in conjunction with this
Directors’ report.
Meetings of the Audit & Risk Committee
Barry Irvin
Rick Cross5
Patria Mann
Raelene Murphy
Terry O’Brien
Richard Parbery1
Held and Eligible
Attended
Peter Margin2
Harper Kilpatrick4
Held and Eligible
Attended
20
20
20
20
20
6
17
5
20
19
20
20
19
6
17
5
1.
Richard Parbery resigned as Director and a member of the
Audit & Risk Committee effective 27 October 2020.
2. Peter Margin commenced as Director on 8 September 2020.
3.
Peter Margin was appointed as a member and of the Dairy and Drinks Integration
Committee on 23 December 2020 and Chair of the Committee on 14 January 2021.
4. Harper Kilpatrick commenced as Director on 6 April 2021.
5.
6.
Rick Cross was appointed as a member and Chair of the Milk
Services Committee by Special Resolution on 17 July 2020.
Barry Irvin was appointed as a member of the Dairy and Drinks
Integration Committee on 23 December 2020.
Directors gave apologies in advance of the meetings they were unable to attend.
Raelene Murphy
Patria Mann
Richard Parbery1
Terry O’Brien
6
6
1
6
6
6
1
6
Meetings of the Nomination, Remuneration
and Human Resources Committee
Held and Eligible
Attended
Terry O’Brien
Rick Cross
Raelene Murphy
6
6
6
6
6
6
Meetings of the Milk Services Committee
Held and Eligible
Attended
Rick Cross 4
4
4
Meetings of the Dairy and Drinks
Integration Committee
Held and Eligible
Attended
Peter Margin3
Barry Irwin6
8
8
8
8
34 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 35
Remuneration report (audited)
Letter from the Nomination, Remuneration and Human Resources Committee (NRHRC) Chair
Dear Shareholders,
On behalf of the Board of Bega Cheese Limited (Bega Cheese or the Group), I am pleased to present you with our FY2021 Remuneration
Report. At Bega, we remain committed to ensuring that we have remuneration structures in place which support our strategy and values (“Great
Food, Great People, Great Aspirations and Greater Good”) and that our reward outcomes align with sustainable long term value creation in the
interests of our shareholders and other stakeholders. In FY2021 there was alignment of the reward outcomes for Key Management Personnel
(KMP) to the financial results of the Group with a strong EBITDA and operating cash flow outcome. The non-financial measure in the Short Term
Incentive (STI) Plan for the CEO and CFO of improvement in Group safety performance was not achieved which was reflected in their variable
reward outcome.
We understand that as the Group grows, there are greater expectations regarding the overall disclosure and transparency of our Remuneration
Report. This year we have looked to improve readability and provide you with a streamlined Remuneration Report. We hope you will find this to
be simpler, more informative and more transparent. We welcome your feedback.
FY2021 performance & strategy highlights
FY2021 has been a transformative year for Bega Cheese. In January 2021, Bega Cheese completed the Lion Dairy and Drinks acquisition
which essentially doubled the size of the Group and diversified the Group’s portfolio by bringing together great brands including Bega Cheese,
Vegemite, Dare, Farmers Union, Dairy Farmers, Yoplait, B honey, Big M, Masters, Juice Brothers and Berri.
Linking remuneration outcomes with Group performance
Having regard to the Group performance highlights noted above:
•
the FY2021 STI vested at 70%, 88% and 90% respectively for the three members of the KMP. This outcome reflects the overall growth and
delivery on our EBITDA targets and robust cash flow management. However, it also acknowledges that our safety performance this year
was not as expected and the part of the STI relating to safety performance has been forfeited by the CEO and his executive reports. Refer
Section “FY2021 STI outcomes for further detail; and
•
performance rights granted under the FY2019 Long Term Incentive (LTI) (tested at 30 June 2021) lapsed, reflecting that the performance
hurdles of EPS and ROFE were not achieved. Refer section “LTI awards vesting in FY2021” for further detail.
Overall remuneration outcomes for our Executive KMP are commensurate with the performance delivery and our shareholders’ experience.
Remuneration changes in FY2021
The Group has made the following changes in FY2021:
•
To ensure Bega continues to provide market competitive remuneration to our executives, adjustments were made to the total fixed
remuneration for the Executive KMP, reflecting the increased size and complexity of their roles following the acquisition of Lion Dairy and
Drinks. In making these adjustments, the NRHRC had regard to benchmarking data sourced from external remuneration consultants for
comparable organisations based on the revenue and market capitalisation for the combined Group (although Total Fixed Remuneration was
positioned conservatively relative to this data between the 25th and 50th percentile of the comparator group); and
•
The Board has determined that the FY2021 LTI Plan will be assessed against EPS only given that it was a transitional year for the Group
(rather than ROFE and EPS as per the FY2020 LTI Plan).
Conclusion
We are excited for the year ahead, folding Dairy & Drinks into our annual cycle and continuing our journey as the Great Australian Food
Company. We look forward to further feedback from our shareholders on this FY2021 Remuneration Report.
Terry O’Brien
Chair of the Nomination,
Remuneration & Human Resources Committee
36 | BEGA CHEESE LIMITED 2021
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Key Management Personnel (KMP)
This report sets out the remuneration of the Executive Chairman and Non-executive Directors as well as the Chief Executive Officer (CEO)
and the Chief Financial Officer (CFO). These individuals represent the KMP of the Group being those accountable for planning, directing and
controlling the affairs of the Group during the financial year to 30 June 2021.
The executive positions comprising KMP are determined by the NRHRC in consultation with the Executive Chairman and the CEO. During
the year there were changes to the composition of the Board. Peter Margin was reappointed to the Board as an Independent Director on
8 September 2020. Richard Parbery retired from the Board as a Supplier Director on 27 October 2020 and Harper Kilpatrick was appointed as
a Supplier Director to the Board on 6 April 2021.
Name
Executive KMP
Barry Irvin
Paul van Heerwaarden
Position Held
Executive Chairman
Chief Executive Officer
Executive Director
Peter Findlay
Chief Financial Officer
Non-Executive Directors
Term
Full year
Full year
Full year
Peter Margin
Raelene Murphy
Terry O’Brien
Rick Cross
Patria Mann
Deputy Chairman
Appointed 8 September 2020
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full year
Full year
Full year
Full year
Harper Kilpatrick
Non-Executive Director
Appointed 6 April 2021
Richard Parbery (former)
Non-Executive Director
Until 27 October 2020
Overview of FY2021 Executive Remuneration Framework
At Bega, our executive remuneration framework is designed to attract, motivate and retain highly qualified and experienced executives, to
encourage decision making in the long term interests of our shareholders and align with our values of “Great Food, Great People, Great
Aspirations and Greater Good.”
Our Reward structures ensure linkage between remuneration and business performance while motivating and incentivising our Executive KMP
to deliver on our strategy. Our Reward structures ensure that we:
• appropriately remunerate employees for their role,
• motivate employees to perform in the best interests of the company,
• make remuneration decisions in a way that provides equity and consistency in and between roles,
• ensure remuneration outcomes are aligned with our short-term and long-term objectives,
• support effective governance, and
• attract the talent we need to underpin strategy execution.
ANNUAL REPORT | 37
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
FY2021 Fixed remuneration outcomes
(a) Overview
As noted above, TFR is reviewed annually by the NRHRC having regard to individual and Group performance, the skills and experience of
the individual, the size and complexity of the individual’s role and the KMP’s total remuneration package. In setting TFR, to remain market
competitive, the NRHRC will have regard to appropriate external market benchmarks.
(a) Review of TFR in 2021
Following the acquisition of Lion Dairy & Drinks in January 2021 (which essentially doubled the size of the Group and resulted in increased scope
and complexity of Executive KMP roles), the Group sourced current remuneration market data for comparable organisations based on the
revenue and market capitalisation for the combined Group to ensure Bega continues to provide market competitive remuneration to our KMP.
Having regard to this benchmarking data and the external data provided by independent remuneration advisors, the following changes were
made to the TFR of Executive KMP:
•
Executive Chairman: consistent with previous years, the Board agreed that the TFR of the Executive Chairman be split as to his
responsibilities as Chairman of the Board and as to his responsibilities as the most senior executive of the Group. Following a review of
the Executive Chairman’s executive and non-executive duties, the Board increased the Executive Chairman’s TFR relating to his executive
duties by 2% from 1 September 2020 (in line with general annual salaried employee increases).
Following the acquisition of Lion Dairy and Drinks, the Board further increased the Chairman’s remuneration to reflect the increased
responsibilities as Chairman of the Group.
The Executive Chairman’s current total remuneration package is $678,200 (with a TFR of $490,000 relating to his executive duties and the
Chairman’s Board Fee of $188,200 relating to his Director duties).
•
•
CEO: the TFR of the CEO was increased by 2% from 1 September 2020, in line with the general annual salaried employee increases in
the Group. Following the acquisition of Lion Dairy and Drinks and having regard to the above market data, the CEO’s remuneration was
increased to $1,017,00 effective 1 February 2021. The lift to his remuneration reflects the increase in scope and complexity of managing the
Group following the acquisition. Despite this increase, the CEO’s remuneration is still positioned at the 25th percentile of the comparator
group in the market benchmarks.
CFO: similarly to the CEO, the CFO’s TFR was adjusted from 1 September 2020 by 2% in line with general annual salaried employee
increases in the Group. The CFO’s TFR was increased to $670,000 effective from 1 February 2021 reflecting the increased scope and
complexity of his role following the Lion Dairy and Drinks acquisition. However, the CFO’s remuneration is still positioned conservatively
between the 25th percentile and the median of the relevant comparator group.
The pay mix of our Executive Chairman, CEO and CFO are set out below (excluding Chairman Board Fees).
Executive Chairman
50%
25%
25%
CEO
50%
25%
25%
CFO
50%
25%
25%
$-
$400,000
$800,000
$1,200,000
$1,600,000
$2,000,000
Fixed Remuneration
STI Maximum Opportunity
LTI Maximum Opportunity
An overview of our Executive KMP remuneration framework is set out below.
Remuneration Element
Description
Fixed Remuneration
Total fixed remuneration (TFR) comprises of cash salary, superannuation contributions, and other non-monetary
benefits such as additional superannuation contributions.
50% of Total
Maximum Opportunity
TFR is not subject to specific performance or deliverables criteria and is generally considered fixed for the duration
of the relevant annual review period.
TFR is reviewed annually by the NRHRC regarding individual and Group performance, the skills and experience of
the individual, the size and complexity of the individual’s role and the KMP’s total remuneration package.
Further information can be found under FY2021 Fixed remuneration outcomes.
Short-Term Incentive
25% of Total
Maximum Opportunity
The objective of the Short-Term Incentive (STI) Plan is to reward participants for achieving annual goals linked
with the Group’s strategy.
Payments under the STI Plan are subject to agreed performance outcomes as approved by the Executive
Chairman and the NRHRC for the CEO and CFO.
Further information can be found under FY2021 STI outcomes.
Long-Term Incentive
25% of Total
Maximum Opportunity
The objective of the Long-Term Incentive (LTI) Plan is to reward participants for long-term performance and
long-term value creation for shareholders.
The LTI Plan is subject to the achievement of performance hurdles as determined by the NRHRC.
Further information can be found under LTI awards granted in FY2021.
Linking remuneration outcomes with Group performance
The key indicators of Group performance and shareholder wealth relevant to the remuneration of KMPs that have been extracted from the
FY2021 financial statements are as follows:
Key
performance
indicator
FY2021
Actual
FY2021
Normalised
FY2020
Actual
FY2020
Normalised
FY2019
Actual
FY2019
Normalised
FY2018
Actual
FY2018
Normalised
FY2017
Actual
FY2017
Normalised
FY2021 vs FY2020
Normalised
Amount %
Enterprise
value
Profit
before tax
Profit
after tax
Dividends
per share
Earnings
per share
Share price
at 30 June
Total
shareholder
return
KMP total
remuneration
$m 2,087
2,087
1,190
1,190
1,309
1,309
1,617
1,617
882
1,334
897
75
$m 97.4
60.1
31.0
46.2
8.4
44.9
50.9
69.0
198.0
43.2
13.9
30
$m 72.2
39.6
21.3
31.9
4.4
30.9
28.8
44.0
138.7
30.3
7.7
24
Cents 10.00
10.00
10.00
10.00
11.00
11.00
11.00
11.00
10.00
10.00
-
Cents
27.3
15.0
9.9
14.9
2.1
14.9
15.6
23.9
90.9
19.9
0.1
-
1
$
5.89
5.89
4.38
4.38
4.70
4.70
7.29
7.29
6.40
6.40
1.51
34
% 34.61
34.61
(4.81)
(4.81)
(33.01)
(33.01)
15.51
15.51
16.70
16.70
39.42
(819)
$’000 4,446
4,446
2,940
2,940
3,025
3,025
3,658
3,658
5,415
5,415
1,503
51
Bega Cheese Enterprise Value is calculated as at 30 June each year as market capitalisation plus debt less cash, with the FY2017 normalised
amount excluding the impact of a one-off large cash balance pending the settlement of the Mondelez Grocery Business acquisition that
followed on 4 July 2017.
38 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 39
FY2021 STI outcomes
(a) Overview
Executive KMP have part of their total remuneration delivered under the Group’s STI Plan, which is designed to reward for the achievement of
performance hurdles that are linked to the annual objectives which are tied to the Group’s overarching strategy.
The payment of the STI is subject to the actual performance of the individual and the Group against determined financial and non-financial
criteria and is also subject to the achievement of Group and individual gateways (i.e. if these gateways are not met, there will be no payment
under the STI).
The maximum STI awards that Executive KMP were eligible to receive in respect of FY2021, as well as FY2021 STI outcomes, are set out in
the table below. These outcomes reflect the Group’s performance against key metrics. See section (b) below for an overview of performance
against the STI performance measures for each Executive KMP.
Executive KMP
Barry Irvin
Paul van Heerwaarden
Peter Findlay
Maximum STI
opportunity ($)
Maximum STI (% of
fixed remuneration)
% of maximum
FY2021 STI awarded
% of maximum
FY2021 STI forfeited
$233,065
$435,242
$281,868
50%
50%
50%
70%
88%
90%
30%
12%
10%
(b) Performance against FY2021 STI measures
The below table sets out the FY2021 STI outcomes for the Executive Chairman. These outcomes resulted in the FY2021 STI gateways opening
and achievement of Group and individual STI outcomes. The NRHRC reviewed the performance of the Executive Chairman and recommended
the following outcomes for Board approval. The recommend STI was approved, and payment made in cash.
STI component
EBITDA
Return on Funds Employed
Personal Objectives
% Barry Irvin, Executive Chairman
20%
20%
60%
20%
0%
50%
The below table sets out the FY2021 STI outcomes for the CEO and CFO. The performance of the Group resulted in the FY2021 STI gateways
opening and achievement of Group and individual STI outcomes. The NRHRC reviewed the performance of the CEO and CFO and recommended
the following outcomes for Board approval, which were approved.
STI component
% Paul van Heerwaarden, CEO
Peter Findlay, CFO
EBITDA
OH&S
Free Cash Flow
Personal Objectives
55%
10%
15%
20%
57%
0%
15%
16%
57%
0%
15%
18%
In accordance with the STI Plan, EBITDA stretch targets for FY2021 were partly achieved and thus reflected in the STI outcome pertaining to
the EBITDA component.
The payment for the CEO and the CFO will be partly made in the form of a share issue ensuring a continued focus on cash generation. The
use of shares for short term incentive delivery is designed to align employees with the goals of the organisation and to encourage the CEO and
the CFO to become more significant shareholders in Bega Cheese to align their personal economic interest with shareholders. There are no
restrictions on the shares issued under the STI plan. The CEO and CFO can trade the issued shares immediately subject to the organisation’s
security trading policies.
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
(c) FY2021 STI terms – further detail
The STI component for the Executive Chairman, the CEO and CFO are determined in accordance with the STI Plan as approved annually by
the Board. The table below outlines the key terms and conditions applying to the STI arrangements for the Executive KMP during the FY2021.
Component
Detail
Opportunity levels
50% of fixed remuneration for Executive Chairman, CEO and CFO
Performance period
STI awards are assessed over the 12-month financial year. Any STI award payments are made after
performance is tested at the end of the performance period.
Vehicle
Gateway
Executive Chairman: STI awards are delivered in cash.
CEO and CFO: STI awards are delivered in shares to encourage alignment between the interests of the CEO
and CFO and Bega’s shareholders. The amount of the STI to be delivered in shares is determined by the
NRHRC annually. 50% of the FY2021 STI will be delivered in shares.
The Executive Chairman, CEO and CFO are only entitled to a payment under the STI Plan if specific Group
performance and individual gateways are achieved. These gateways ensure that STI payments are aligned to
the Group’s key strategic and business objectives.
The Group gateways are as follows:
•
•
no STI payments are made unless the Group achieves or exceeds targeted profit (having accrued for the
payout of the program in that year); and
no STI payments are made if during the year there is a major safety, quality or environmental event that
was within the reasonable control of the Group.
Individual gateways apply to the Chairman, CEO and CFO meaning that no STI payment is made unless the
individual KMP executed their duties in a proper and effective manner, by
•
•
•
leading by example and being a role model for safety, quality, and the environment;
demonstrating collegiate behaviour and active participation in workgroup meetings; and
being an upholder and promoter of the Company values and behaviours.
The CEO and CFO need to meet additional individual performance gateways relating to participation in
safety, quality and environmental programs as well as a minimum performance rating.
Personal Objectives
Each Executive KMP are subject to financial performance measures and performance objectives. In terms of the:
Process for setting
performance
measures
•
•
financial performance objectives, refer section (b) above.
the personal objectives, they were clearly linked to the key strategic areas set for the business and aligned
with the Group’s values. Performance objectives include improvement in Group safety performance, cost
reduction, productivity improvements, and business growth.
The criteria to be applied are reviewed by the Board on an annual basis to ensure that they closely align with
the specific corporate, leadership and financial objectives of the Group.
The strategic plan, business and operating plans and annual budgets are the key reference points used in
determining the criteria.
Each year the NRHRC makes a recommendation to the Board for approval in respect of the determined
criteria for all KMP.
In FY2021 each Executive KMP had a documented performance agreement that set individual performance
objectives, described success factors for each objective and identified development opportunities that would
help them in their current and future roles.
Performance
Assessment
Each Executive KMP’s performance was assessed at the end of the financial year against their agreed
objectives. Overall performance was assessed considering what was achieved in total across all objectives,
how this was achieved and by an assessment of personal adherence to the Group’s values.
40 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 41
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Component
Detail
Governance
Executive Chairman performance
(c) FY2021 LTI key terms – further detail
The table below sets out the key terms attached to the LTI awards granted to the Executive KMP during the year.
At the end of the financial year the NRHRC reviews the performance of the Executive Chairman relating
to his executive duties against determined criteria.
CEO performance
At the end of the financial year the Executive Chairman assesses the actual performance of the CEO
against determined criteria.
CFO performance
At the end of the financial year, the CEO assesses the actual performance of the CFO against the
determined criteria.
Outcome recommendations are submitted to the NRHRC prior to being submitted to the Board for final
review and approval. Board approval is required before the STI is paid.
Component
Overview
Instrument
Board Discretion
The Board has absolute discretion to amend any component of the STI for the KMP.
LTI awards granted in FY2021
(a) Overview
Detail
The FY2021 LTI Plan is designed to reward the Executive Chairman, the CEO and executive
reports for long-term performance and long-term value creation for shareholders.
•
•
Executive Chairman (cash): The Executive Chairman is a substantial shareholder of Bega
Cheese and his personal financial interests are already aligned with other shareholders.
The opportunity to receive further shares in Bega Cheese under a share-based long-term
incentive plan may be seen to provide the Executive Chairman with an opportunity to
increase his shareholding in a manner not available to other substantial shareholders. As
such, the Executive Chairman’s LTI is to be paid in cash if the performance hurdle is met.
CEO and CFO (performance rights): given that the CEO and CFO are not substantial
shareholders in Bega Cheese the Board has agreed that the best way to align the
performance of the CEO and CFO with the interests of shareholders is for the outcome
available under their long-term incentive to be based on performance rights over ordinary
shares in the Company. The number of performance rights for the LTI Performance Rights
Plan is calculated using the ‘face value’ method (see below). Subject to the satisfaction
of the performance hurdles and the vesting conditions (set out below), each performance
right issued under the plan is converted into one fully paid ordinary share in the Group.
The group operates two LTI Plans, one for the Executive Chairman and one for the CEO and executive reports.
Exercise price
Nil.
The purpose of the LTI is to:
•
assist in the retention, motivation and reward of the Executive Chairman, CEO and executive reports;
•
link the reward of the Executive Chairman, CEO and executive reports to shareholder value creation; and
•
align the economic interests of the CEO and executive reports with shareholders by providing an opportunity to be rewarded via an equity
interest in the Group based on creating shareholder value. The Executive Chairman and CEO and executive reports have identical LTI
performance targets.
As noted above, key changes were made to the FY2021 LTI plan. That is, the FY2021 grant will be assessed against EPS only. ROFE will be
considered for inclusion in future LTI grants.
(b) FY2021 LTI awards
The table below outlines the face value of LTI awards granted to Executive KMP during FY2021.
Allocation methodology
The face value of the performance rights for allocation purposes is calculated by taking the
five-day volume weighted average price of Bega Cheese Limited shares at the Grant Date, and
deducting the present value of expected dividends forgone over the duration of the FY2021
Plan (i.e. the dividends not received until the performance rights vest).
The face value used to allocate the FY2021 LTI grant was $4.15. The fair value used for
accounting purposes for the FY2021 LTI grant was $4.17.
Performance period
The FY2021 LTI grant was granted on 1 July 2020 and is subject to a performance period from
1 July 2020 to 30 June 2023.
Executive KMP
Barry Irvin
Paul van Heerwaarden
Maximum LTI
opportunity ($)
Maximum LTI opportunity
(% of fixed remuneration)
Number of performance
rights issued
$212,698
$376,599
50% of fixed remuneration
50% of fixed remuneration
N/A (see further detail below)
Peter Findlay*
$276,667
50% of fixed remuneration
90,746
66,666
* The maximum LTI opportunity of 50% of TFR for Peter Findlay represents his annualised LTI opportunity. His LTI opportunity changed from
30% to 50% during the year and he received a weighted average LTI award of 46%.
42 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 43
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Component
Detail
Performance measures
Performance measure
The table below outlines performance measure and vesting schedule applying to the FY2021
LTI Plan as it applies to the Executive Chairman, CEO and executive reports to the CEO.
Vesting percentage
EPS growth targets FY2021-FY2023
LTI awards vesting in FY2021
(a) Overview
The FY2019 LTI award was tested in FY2021 (i.e. on 30 June 2021). 55% of this award was tested against EPS growth targets and 45% was
tested against ROFE targets, with vesting subject to continued employment over the performance period.
The FY2019 LTI performance hurdles were not met and as a result no cash payment was made to the Executive Chairman and no performance
rights vested into shares for the CEO; 51,343 performance rights lapsed. The CFO did not participate in the FY2019 LTI Plan.
Nil vesting
below 20% over the performance period
(b) Further detail
50% vesting
at 20% over the performance period
Pro-rated vesting between
50% and 100%
between 20% and 24% over the performance period
100% vesting
at 24% or above over the performance period
The Board retains the discretion to adapt the calculation of the LTI Plan measure of the Earnings
Per Share performance hurdle to reflect the impact of significant events, such as capital raising
or corporate activity, that may occur during the performance periods.
Service condition
There will be no vesting under the LTI unless the Executive KMP remain employed with the
Group during the entire performance period of the relevant plan.
Performance rights that have not vested as a result of performance measures not being met will
automatically lapse and no cash payment made to the Executive Chairman, unless otherwise
determined by the Board.
Dividend and voting rights
There are no voting or dividend rights until the performance rights vest and are automatically
exercised and then ordinary shares are held in the Group. Additional performance rights are not
granted as a result of holding performance rights when dividends are declared by the Group.
Restrictions on transfer
The CEO and CFO may not transfer or encumber the performance rights with a security
interest without the consent of the Board.
Malus
All performance rights will also lapse in other circumstances, including, but not limited to,
where the CEO and CFO has acted fraudulently or dishonestly in the opinion of the Board.
Further detail in respect of the terms of previous LTI awards (i.e. the FY2019 LTI and FY2020 LTI) are set out below.
Component
Grant Dates
Vesting Dates
Performance Period
Executive Chairman
CEO and CFO
FY2019 LTI (FY2019-FY2021): 1 July 2018
FY2020 LTI (FY2020-FY2022): 1 July 2019 (CEO), 11 November 2019
(CFO - being the date of appointment)
(FY2019 LTI): 30 June 2021
(FY2020 LTI): 30 June 2022
(FY2019 LTI): 1 July 2018 – 30 June 2021
(FY2020 LTI): 1 July 2019 – 30 June 2022
Potential Value of the Plan
(FY2019 LTI): $202,437
(FY2019 LTI): CEO: $358,374
(FY2020 LTI): $207,498
(FY2020 LTI): CEO: $367,566, CFO: $95,453
Subject to the satisfaction of the performance
hurdles and vesting conditions of the relevant
plan
Subject to the satisfaction of the performance
hurdles and vesting conditions of the relevant
plan
Face Value
Not applicable
(FY2019 LTI): $6.98
(FY2020 LTI): $4.45
Performance Rights issued
Not applicable
(FY2019 LTI): CEO: 51,343
(FY2020 LTI): CEO: 82,599, CFO: 21,450
44 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 45
Executive KMP remuneration statutory table
Details of each of the Executive KMP’s remuneration for FY2021 (calculated in accordance with the applicable Accounting Standards) are set
out below.
Short-term benefits
Post-employment
benefits
Long-term benefits
Share-based payment
Total
Year
Cash Salary
and fees
Short-term
Incentive(1) Superannuation Leave(2) Long-term
Incentive(3)
$
$
$
$
$
2021
2020
725,332
163,146
25,000 81,321
72,234
569,565
-
25,000 49,957
(108,949)
Executive Chairman
Barry Irvin (5)
Executives
Paul van Heerwaarden
2021
844,392
408,273
25,000 191,704
2020
2021
2020
2021
2020
725,238
225,960
25,000 78,730
612,588
264,409
21,694 65,464
371,152
95,953
18,258 34,983
-
155,617
-
-
-
-
8,910 53,254
Peter Findlay (6)
Colin Griffin (7)
Total Executive
Remuneration
Equity settled
performance rights(4)
All
amounts
$
-
-
$
1,067,033
535,573
128,462
1,597,831
(197,728)
857,200
112,860
1,077,015
21,636
541,982
-
-
(17,789)
199,992
-
-
-
-
-
-
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Non-Executive Directors’ remuneration
Remuneration policy and arrangements
The Board sets Non-Executive Director fees in line with the key objectives of the Group’s remuneration policy set out below.
•
•
Market competitive: in setting Directors’ fees, the Board takes into consideration the Group’s existing remuneration policies, fees paid by
comparable companies and the level of remuneration required to attract and retain Directors of the appropriate caliber. The Board will also
have regard to the size and complexity of the Company’s operations, as well as the workload and time commitments and responsibilities of
their roles.
Independence and impartiality: To maintain independence and impartiality, Non-executive Directors are not entitled to any form of incentive
payments and the level of their fees is not set with reference to measures of Group performance (with the exception of the Executive
Chairman who participates in the STI and LTI plan based on his TFR which relates to his executive duties).
Aggregate fee pool
The Group pays Chair and Committee fees to the Non-executive Directors out of the maximum aggregate fee pool of $1,200,000 per annum
approved by shareholders at the 2017 Annual General Meeting.
Fees and other benefits
Directors’ fees were adjusted effective 1 November 2020 by 2% in line with the average salaried employees annual increases across the Group
which were effective 1 September 2020. There were no changes to Committee fees. The Chairman’s fee below represents the Board Fees
relating to his role as a Non-Executive Director (he does not receive additional Committee fees).
The following table summarises the previous and current level of all Directors’ fees and allowances (all allowances are paid inclusive
of superannuation):
Rate as from 1/7/2020
Rate as from 1/11/2020
2021
2,182,312
835,828
71,694 338,489
72,234
241,322
3,741,879
Board fees
2020
1,821,572
321,913
77,168 216,924
(108,949)
(193,881)
2,134,747
Chairman of the Board
(1) The STI amount for the CEO and CFO relates to the accrual for the current year outcome and the difference in last year’s STI accrual and the value of shares received on the allocation date.
(2) The expense relates to the combined long service and annual leave accrual during the year.
(3) Long-term incentive based on the achievement of specified milestones of the Executive Chairman’s LTI Plan. The amount reflects the expense for the FY2019 to FY2021 proportion of the
cash incentive due to vest in 2021. Further details of the Executive Chairman’s LTI Plan are set out in the Summary of Plans above.
(4) In accordance with accounting standards, remuneration includes the amortisation of the fair value at grant date of performance rights issued under the LTI Plans that are expected to
vest, less any write-back on performance rights lapsed or expected to lapse as a result of actual or expected performance against Plan hurdles. The value disclosed in the above Table
represents the portion of fair value allocated to this reporting period and is not indicative of the benefit, if any, that may be received by the Executive should the performance conditions
with respect to the relevant long term incentive plan be satisfied. The amount of $241,322 in FY21 reflects current year expense of $527,081 for the FY20 to FY22 plan and the FY21 to
FY23 plan; less the write-back of expense incurred in prior periods relating to unvested rights that were forfeited in respect of the FY19 to FY21 plan $285,760. Further details of the
CEO’s and CFO’s LTI Plan are set out in the Summary of Plan above.
(5) Includes remuneration for Non-executive Chairman responsibilities. Due to the Executive Chairman’s leave of absence during the FY2020 year he did not participate in the FY2020 STI
program. He did not receive the Chairman’s allowance or accrue leave for the period of his absence in FY2020.
(6) Peter Findlay commenced as CFO on 11 November 2019.
(7) Colin Griffin ceased as CFO on 10 November 2019.
Deputy Chairman
Director fees
Committee fees
Chair of Audit & Risk Committee
Audit & Risk Committee member allowance
Chair of NRHRC
NRHRC member allowance
Chair of Milk Services Committee
Milk Services Committee member allowance
Chair of the Dairy and Drinks Integration Committee
$
184,500
-
92,250
24,000
10,000
17,500
8,750
10,000
5,000
-
$
188,200
144,100
94,100
24,000
10,000
17,500
8,750
10,000
5,000
130,000
Non-executive Directors are also entitled to be reimbursed for reasonable travel, accommodation and other expenses incurred while engaged
on the business of the Group.
46 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 47
Non-Executive Directors – Statutory remuneration
Remuneration governance
Overview of remuneration governance framework
The fees paid or payable to the Non-Executive Directors of the Group in respect of FY2021 are set out in the table below.
The Board, supported by the NRHRC, is responsible for the remuneration strategy, principles and procedures for employees of the Group.
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Non-executive Directors
Rick Cross
Harper Kilpatrick (1)
Peter Margin (2) (3)
Patria Mann (4)
Raelene Murphy
Terry O'Brien (3)
Jeff Odgers (5)
Richard Parbery (6)
Max Roberts (7)
Total Director Remuneration
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Year
Director Fees
Superannuation
$
$
$
Total
$
111,803
102,581
22,006
-
102,103
93,876
20,097
-
9,700
8,705
1,909
-
149,036
30,227
179,263
-
94,505
75,951
115,282
107,656
110,487
108,676
-
92,694
31,126
92,694
-
164,050
622,636
735,597
-
8,978
7,215
10,952
10,227
17,062
10,324
-
8,806
2,957
8,806
-
15,714
81,785
69,797
-
103,483
83,166
126,234
117,883
127,549
119,000
-
101,500
34,083
101,500
-
179,764
704,421
805,394
(1) Harper Kilpatrick commenced with the Board on 6 April 2021.
(2) Peter Margin resigned from the Board on 31 January 2019. He was reappointed to the Board as an Independent Director on 8 September 2020.
(3) During a superannuation audit, shortfalls in superannuation payments were discovered for Peter Margin and Terry O’Brien. These shortfalls were paid to the individuals in October 2020.
(4) Patria Mann commenced with the Board on 9 September 2019.
(5) Jeff Odgers resigned from the Board on 30 June 2020.
(6) Richard Parbery resigned from the Board on 27 October 2020.
(7) Max Roberts received Board Chairman allowance from 1 July 2019 to 28 January 2020 and retired from the Board on 29 January 2020.
The NRHRC operates under a formal charter to assist the Board in relation to its responsibilities in identifying, attracting and remunerating
Directors, the Executive Chairman, the CEO and the CFO. The NRHRC provides guidance to the Executive Chairman and the CEO in implementing
decisions of the Board in relation to remuneration and strategic human resource planning.
An overview of the NRHRC responsibilities are set out below.
Role
Details
Recommendations to the Board
The Board takes recommendations from the NRHRC in setting the remuneration of
Executive KMP. The NRHRC assesses and makes recommendations to the Board on
any changes to the composition of the Board with a view to ensuring that it can operate
effectively and efficiently and adequately discharge its responsibilities and duties.
In formulating its recommendations, the NRHRC considers a range of factors including:
• group financial performance
•
•
•
remuneration market data for KMP operating in similar listed organisations and
industry sectors
remuneration components and weightings of fixed and variable remuneration
the performance levels and contribution of the individual KMP.
Advice and Assistance to the Board
The NRHRC advises and assists the Board to ensure that the Group:
•
•
•
has coherent human resources policies and practices which enable the Group to
attract and retain Directors and executives who will create value for shareholders and
that support the Group’s wider objectives and strategies
fairly and responsibly remunerates Directors and executives, having regard to
the performance of the Group, the performance of the executives and the market
remuneration environment
has effective human resources policies and procedures to attract, motivate and retain
appropriately skilled people to meet the Group’s current and future needs.
Further details of the role of the NRHRC are provided in the FY2021 Corporate Governance Statement published on the Bega Cheese Limited
website (www.begacheese.com.au/investors/corporate-governance).
Executive KMP service agreements
The CEO and CFO as well as the Executive Chairman in relation to the executive duties have service agreements, the key terms of which were
unchanged as follows:
Term
Ongoing, subject to termination rights set out in the service agreement.
Termination by Group
Six months’ notice or payment in lieu of such minimum notice, or without notice where
the termination is “for cause.” Forthwith in the event of incapacity or breach of the service
agreement by the Executive Chairman without remedy.
Termination by Executive
Six months’ notice or lesser period as agreed by the Group.
Payments on Termination
Salary and statutory entitlements up to the date of termination and, if applicable, payment
in lieu of the minimum notice period as per above.
Use of remuneration consultants
In accordance with its Charter, the NRHRC can engage with remuneration consultants. During the year, Ernst and Young provided an independent
review of external remuneration data relating to Executive Chairman, Board fees and Executive Remuneration. No remuneration recommendations
as defined in section 9B of the Corporations Act 2001 were obtained in FY2021.
48 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 49
Other matters
Related party transactions
During the year, some KMP and their related entities engaged in related party transactions with Bega Cheese Group relating to the supply of
milk and peanuts. These transactions were on the same normal commercial terms as other suppliers and are summarised in the table below:
Payments made by the Group during the year
Sales made by the Group during the year
Amounts outstanding at year end
Amounts receivable at year end
Consolidated
2021
$
5,610,522
406,131
255,894
50,708
2020
$
8,440,785
344,374
521,141
34,769
No Executive KMP or their related parties held any loans with the Group during the financial year FY2021.
Shareholdings
The number of shares held by Directors and KMP during the year including their close family members and entities related to them are as follow:
2021 – Numbers of
ordinary shares
Executive Chairman
Barry Irvin
Executive KMP
Paul van Heerwaarden
Peter Findlay
Non-executive Directors
Rick Cross
Harper Kilpatrick (1)
Peter Margin (2)
Patria Mann
Raelene Murphy
Terry O’Brien
Balance at
start of year
Shares purchased STI shares awarded Other changes
2,007,841
11,000
-
47,857
-
190,000
-
-
20,000
8,964
13,323
26,546
-
8,400
-
14,357
4,445
1,992
4,449
-
47,670
20,243
-
-
-
-
-
-
-
Balance at the
end of the year
2,018,841
122,073
20,243
198,400
3,699
14,357
24,445
10,956
17,772
-
-
-
-
-
3,699
-
-
-
-
(2,668,995)
BEGA CHEESE LIMITED 2021 | DIRECTORS’ REPORT
Likely developments and expected
results of operations
Other than as disclosed in the Chairman’s review, the Chief Executive
Officer’s review and the review of financial performance and operations
information on likely developments has not been included because
disclosure would likely result in unreasonable prejudice to the Group.
Rounding of amounts
The Group is of a kind referred to in 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 one hundred thousand dollars, or in certain
cases, to the nearest dollar.
Matters subsequent to the end of the financial year
On 27 August 2021, the Directors declared a final fully franked dividend
of 5.0 cents per share, which represents a distribution of $15.1 million.
No other matters or circumstances occurring subsequent to
the end of the financial year have significantly affected, or may
significantly affect, the operations of the consolidated entity, the
results of those operations, or the state of affairs of the consolidated
entity in future years.
Auditor
Details of the amounts paid or payable to PricewaterhouseCoopers
(PwC) Australia for audit and non-audit services provided during the
financial year are set out in note 34.
The Board of Directors have considered the position and in
accordance with advice from the Audit & Risk Committee 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 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit & Risk
Committee to ensure they do not impact the impartiality and
objectivity of the auditor
none of the services undermine the general principles relating to
auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
A copy of the Auditor’s Independence Declaration as required under
section 307C of the Corporations Act 2001 is set out on page 53.
This report is made in accordance with a resolution of the Directors.
Barry Irvin
Executive Chairman
Bega
Raelene Murphy
Independent Director
Melbourne
27 August 2021
Richard Parbery (3)
2,668,995
(1) Harper Kilpatrick was appointed to be a Director of Bega Cheese Ltd on 6 April 2021. He owned shares in the Company before becoming a Director.
(2) Peter Margin was appointed to be a Director of Bega Cheese Ltd on 8 September 2020.
(3) Richard Parbery ceased to be a Director of Bega Cheese Ltd on 27 October 2020, therefore his shareholdings are no longer required to be disclosed.
50 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 51
Auditor’s Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Bega Cheese Limited for the year ended 30 June 2021, I declare that to
the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bega Cheese Limited and the entities it controlled during the period.
Paddy Carney
Partner
PricewaterhouseCoopers
Sydney
27 August 2021
BRAND SPOTLIGHT
Simply Nuts
Representing the first significant extension
for the Bega brand outside of dairy, Bega
has consolidated its share leadership of
the peanut butter category with an
estimated retail sales of $99m1. Launched
in 2019 from peanuts sourced directly from
52 | BEGA CHEESE LIMITED 2021
Australian farmers, the Simply Nuts
product extension has grown 72% in
estimated retail sales to $11m1.
See www.simplynuts.com.au
1 AC Nielsen Scan data MAT to 06 July 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
ANNUAL REPORT | 53
Corporate Governance Statement
The Bega Cheese Group is committed to achieving and maintaining the highest standards of accountability
and transparency in the management and conduct of its business.
The Board has adopted corporate governance policies and practices that it believes are consistent with the continued growth and success of
the Group and the ongoing enhancement of value for the Bega Cheese Group shareholders.
The Corporate Governance Statement outlines the key aspects of the Group’s corporate governance framework and is available on the Group’s
website at www.begacheese.com.au/investors/corporate-governance/
The Board considers that the Group’s corporate governance framework and practices have complied with the ASX Recommendations for the
financial year, except otherwise detailed in the Corporate Governance Statement.
BRAND SPOTLIGHT
Vegemite
A 97 year-old Australian icon, Vegemite leads the yeast
spreads category with a retail share of 91%1. Vegemite
Squeezy is the latest addition to Vegemite, a brand that is
continually innovating by sharing ways to enjoy its much
loved taste in meals as well as on toast. The range has
grown to 11 products domestically, with an estimated
retail sales of $70m1. See www.vegemite.com.au
1 AC Nielsen Scan data MAT to 06 July 2021
54 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 55
Index to Financial Statements
58
59
60
61
62
62
62
62
62
62
63
63
63
63
63
64
64
64
65
66
66
67
68
68
68
69
69
69
70
71
71
72
72
72
73
74
74
77
78
78
78
79
80
80
80
80
81
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
HOW NUMBERS ARE CALCULATED
1 Significant Events in the Accounting Period
1a Acquisition of Lion Dairy and Drinks
1b Capital Raising
1c Dividend Reinvestment Plan
1d Kraft Legal Action
1e Fonterra Legal Action
1f Termination of Customer Contract
1g Director Appointments
1h Revised Syndicate Facility
1i Effective Tax Rate
2 Segment Information
2a Description of Segments
2b Segment Information Provided to the CODM
2c Other Segment Information
3 Earnings Per Share
4 Dividends to Shareholders
5 Revenue and Other Income
6 Expenses
7
Income Tax
7a Income Tax Expense
7b Numerical Reconciliation of Income Tax
Expense to Prima Facie Tax Expense
7c Amounts Recognised Through Other
Comprehensive Income
7d Amounts Recognised Through Equity
7e Movements in Deferred Tax
7f Income Taxes Paid
8 Trade and Other Receivables
9 Other Assets
10 Derivative Financial Instruments and
Other Financial Assets
11 Inventories
12 Property, Plant & Equipment
13 Leases
14 Intangible Assets
15 Trade and Other Payables
16 Other liabilities
17 Borrowings
18 Derivative Financial Instruments - Liabilities
19 Provisions
20 Share Capital
20a Share Capital
20b Movement in Share Capital Value
and Number of Shares
21 Reserves
22 Notes to the Consolidated
Statement of Cash Flows
22a Reconciliation of Cash and Cash Equivalents
22b Reconciliation of Profit for the Period to Net
Cash Flows from Operating Activities
RISK
23 Critical Accounting Estimates and Judgements
24 Financial Risk Management
82
82
82
82
82 Market Risk - Foreign Exchange Risk
83 Market Risk - Group Sensitivity
84
24a Market Risk
Market Risk - Cash Flow and Fair
Value Interest Rate Risk
84 Market Risk - Interest Rate Sensitivity
84
86
86
87
87
88
24b Credit Risk
24c Liquidity Risk
24d Financing Arrangements
24e Maturities of Financial Liabilities
24f Fair Value Estimation
25 Capital Risk Management
89 GROUP STRUCTURE
89
89
89
89
89
26 Parent Entity Financial Information
26a Summary Financial Information
26b Guarantees Entered into by Parent Entity
26c Contingent Liabilities of the Parent Entity
26d Contractual Commitments for the Acquisition
of Property, Plant or Equipment
90
90
91
91
92
93
93
93
93
94
94
94
94
94
94
95
95
95
96
27 Subsidiaries, joint arrangements and associates
27a Interest in Joint Venture
27b Interest in Associate
28 Business Combination
29 Closed Group Disclosure
UNRECOGNISED ITEMS
30 Contingent Liabilities
31 Commitments
31a Capital Commitments
32 Subsequent Events
32a Dividend
FURTHER DETAILS
33 Related Party Transactions
33a Terms and Conditions of Related Party Transactions
33b Related Party Transactions with Group Entities
33c Key Management Personnel
Remuneration and Transactions
34 Remuneration of Auditors
35 Share-based payments
36 Summary of Significant Accounting Policies
56 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 57
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Revenue
Cost of sales
Gross profit
Other revenue
Other income
Distribution expense
Marketing expense
Occupancy expense
Administration expense
Acquisition related expenses
Impairment of assets
Finance costs
Share of profit of equity accounted investments
Provisional gain on bargain purchase
Profit before income tax
Income tax expense
Profit for the year attributable to owners of Bega Cheese Limited
Other comprehensive income/(expense):
Items that may be reclassified to profit or loss
Cash flow hedges, net of tax
Total other comprehensive (expense)
Total comprehensive income for the year attributable to owners of Bega Cheese Limited
Earnings per share for profit attributable to ordinary equity holders of the parent:
Basic earnings per share
Diluted earnings per share
CONSOLIDATED
2021
$m
2,073.4
(1,608.2)
465.2
2020
$m
1,493.2
(1,204.2)
289.0
25.3
13.5
(156.5)
(52.3)
(26.6)
(165.3)
(62.2)
(2.2)
(10.4)
1.2
67.7
97.4
(25.2)
72.2
(1.3)
(1.3)
70.9
2021
Cents
27.3
27.2
9.0
4.9
(86.6)
(35.7)
(14.0)
(123.3)
-
(1.1)
(11.3)
0.1
-
31.0
(9.7)
21.3
(1.3)
(1.3)
20.0
2020
Cents
9.9
9.9
Notes
5
5
5
6
6
27
28
7a
3
3
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Current tax assets
Other assets
Total current assets
Non-current assets
Financial assets at fair value through other comprehensive income
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Other assets
Intangible assets
Investments accounted for using the equity method
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other liabilities
Derivative financial instruments
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Other liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Capital and reserves attributable to owners of Bega Cheese Limited
Total equity
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Notes
22
8
10
11
9
10
12
13
7e
9
14
27
15
16
18
13
19
17
13
16
19
7e
20a
21
CONSOLIDATED
2021
$m
87.2
348.9
1.1
345.0
13.3
37.9
833.4
-
908.5
103.4
4.6
0.1
589.5
46.6
2020
$m
22.9
69.5
1.3
257.4
10.7
47.9
409.7
0.7
446.0
8.8
6.7
2.0
548.1
1.4
1,652.7
1,013.7
2,486.1
1,423.4
477.4
42.8
2.1
25.5
18.4
118.7
684.9
391.9
79.1
0.5
24.6
44.4
540.5
1,225.4
1,260.7
875.7
25.9
359.1
1,260.7
1,260.7
233.3
20.1
0.1
3.0
-
49.5
306.0
247.2
8.3
-
2.9
45.0
303.4
609.4
814.0
480.5
20.8
312.7
814.0
814.0
58 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 59
BEGA CHEESE LIMITED 2021 | FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Consolidated
Balance as at 1 July 2019
Profit for the year
Other comprehensive
income for the year
Transactions with owners in
their capacity as owners:
- Issue of shares, net of transaction
costs and tax (note 20)
- Share-based payments relating
to incentives (note 35)
- Dividends provided for or paid (note 4)
Balance as at 30 June 2020
480.5
Share
capital
$m
477.5
Share-based
payment
reserve
$m
Capital
profits
reserve
$m
Hedging
reserve
$m
Transactions with
non-controlling
interests
$m
Retained
earnings
$m
Total
$m
1.2
34.0
0.3
(12.6)
313.9
814.3
-
-
3.0
-
-
-
-
-
(0.8)
-
0.4
-
-
-
-
-
-
(1.3)
-
-
-
-
-
-
-
-
34.0
(1.0)
(12.6)
21.3
21.3
-
-
-
(22.5)
312.7
(1.3)
3.0
(0.8)
(22.5)
814.0
Balance as at 1 July 2020
480.5
0.4
34.0
(1.0)
(12.6)
312.7
814.0
Profit for the year
Other comprehensive
income for the year
Transactions with owners in
their capacity as owners:
- Issue of shares, net of transaction
costs and tax (note 20)
- Share-based payments relating
to incentives (note 35)
- Dividends provided for or paid (note 4)
Balance as at 30 June 2021
-
-
395.2
-
-
875.7
-
-
-
6.4
-
6.8
-
-
-
-
-
-
(1.3)
-
-
-
-
-
-
-
-
72.2
72.2
-
(1.3)
-
395.2
-
6.4
(25.8)
(25.8)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers inclusive of goods and services tax
Payments to suppliers and employees inclusive of goods and services tax
Net payments to Trade Receivables Facility
Interest and other costs of financing paid
Interest received
Income taxes paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for shares in unlisted companies
Payments for property, plant and equipment
Net proceeds from sale of property, plant and equipment
Payments for intangible assets
Payment for acquisition of subsidiaries, net of cash acquired
Net cash (outflow) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Principal elements of lease payments
Net proceeds from issue of shares
Dividends paid to Bega Cheese Limited's shareholders
Net cash inflow/(outflow) from financing activities
Net increase /(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
CONSOLIDATED
2021
$m
2020
$m
Notes
2,221.7
(2,086.5)
1,691.6
(1,494.9)
(12.7)
(10.5)
0.1
(0.7)
111.4
-
(22.2)
-
(10.0)
(514.5)
(546.7)
205.0
(60.0)
(12.3)
390.2
(23.3)
499.6
64.3
22.9
87.2
(35.4)
(11.3)
0.3
(12.3)
138.0
(1.0)
(42.8)
5.0
(14.1)
-
(52.9)
18.2
(87.0)
(2.7)
-
(19.5)
(91.0)
(5.9)
28.8
22.9
7f
22
28
4
22
34.0
(2.3)
(12.6)
359.1 1,260.7
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
60 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 61
BEGA CHEESE LIMITED 2021 | FINANCIAL STATEMENTS
Notes to the Financial Statements
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
How numbers are calculated
1. Significant events in the accounting period
A. Acquisition of Lion Dairy and Drinks
On 26 November 2020, the Group announced that it had entered into a binding agreement to acquire all of the shares in Lion Dairy and Drinks
(“LDD”) for a net purchase price of $528.2 million with the final acquisition price net of cash acquired being $514.5 million. The acquisition
successfully completed on 25 January 2021. The acquisition of LDD shares was funded by a combination of capital raising proceeds and
refinanced syndicated debt facilities. A provisional bargain purchase gain of $67.7 million and acquisition related costs of $63.8 million have been
recognised in the Group’s consolidated statement of comprehensive income for the year ended 30 June 2021 (Refer to note 28 for further details).
Following the acquisition, the entities of the Lion Dairy and Drinks were consolidated within the Branded Segment as Bega Dairy and Drinks
(“BDD”).
B. Capital raising
On 26 November 2020, the Group announced an underwritten entitlement offer and placement to raise $401 million at an offer price of $4.60
per share. The capital raising comprised:
•
a 1 for 4.5 pro-rata accelerated non-renounceable entitlement offer, comprising an Institutional Entitlement Offer, and a Retail Entitlement
Offer, raising approximately $220 million; and
• an Institutional Placement, raising approximately $181 million.
The offer price of $4.60 represented a 9.1% discount to the last traded price of $5.06 on 20 November 2020. The successful capital raising
resulted in net proceeds of $392.7 million (net of costs and tax) in undertaking the capital raise and an additional 87,179,032 ordinary fully paid
shares being issued.
C. Dividend reinvestment plan
The Group’s Dividend Reinvestment Plan (DRP) will be activated for the FY2021 final fully franked dividend. The DRP is optional and offers
ordinary shareholders in Australia and New Zealand the opportunity to acquire fully paid ordinary shares without transaction costs. Shares
allocated under the DRP will be derived from new issued ordinary shares. The shares issued rank pari passu with other ordinary shares already
on issue. The allocation price will be determined in accordance with the DRP rules as the arithmetic average of the daily volume weighted average
market price of all Bega Cheese Limited shares sold through a normal trade on the ASX trading system over the five business days commencing
on the day of the record date.
A shareholder can elect to participate in or terminate their involvement in the DRP at any time. Election notices for participation in the DRP in
relation to the FY2021 final fully franked dividend to be paid on 24 September 2021 must be recorded by the registry by 5:00 pm on 3 September
2021 to be effective for that dividend.
D. Kraft Legal action
In November 2017, Kraft Foods Group Brands LLC and H.J. Heinz Company Australia Limited (collectively referred to as Kraft Heinz) commenced
proceedings against Bega Cheese claiming that they were the rightful owner of the trade dress (yellow lid, clear jar, yellow label with red or blue
peanut device) of the Bega Cheese peanut butter products. In 2019, the Federal Court determined that Bega Cheese was the rightful owner of
the relevant rights in the peanut butter trade dress and the Court ordered that Kraft Heinz may not use, sell or advertise and promote its own
peanut butter products using the trade dress. This decision was upheld by the Full Court of the Federal Court of Australia in 2020.
Kraft Heinz then filed an application in the High Court of Australia seeking special leave to appeal from the judgment of the Full Court of the
Federal Court, however on 13 November 2020, the High Court of Australia dismissed Kraft Heinz’s application for special leave to appeal. The
dismissal of the special leave application means that the decision of the Full Court of the Federal Court of Australia stands and confirms Bega
Cheese’s ownership of the trade dress rights.
In June 2021, Bega Cheese entered into a confidential settlement with Kraft Heinz regarding the issues of monetary relief and legal costs payable
in respect of the legal proceedings. Under the terms of settlement, Kraft Heinz paid $9.25 million to Bega Cheese, which was received by Bega
Cheese in June 2021. In addition, the New York court proceedings relating to this matter have been dismissed, the New York arbitration file
relating to this matter has been closed and the Federal Court proceedings to determine costs and damages relating to this matter have been
dismissed. This resolves all outstanding issues relating to this matter.
1. Significant events in the accounting period (cont.)
E. Fonterra Legal action
In 2017, Fonterra Brands Australia commenced legal proceedings in the Supreme Court of Victoria in relation to the scope of the 2001 trade
mark licence between Bega Cheese and Fonterra. On 25 February 2021, the Supreme Court of Victoria held that Bega Cheese is entitled to
use the Bega trade mark, as owner of the trade marks, on its products, outside of the scope of the Fonterra licence, without Fonterra’s Consent.
Fonterra has an ongoing exclusive licence to use the Bega trade mark on natural cheddar cheese, processed cheddar cheese, string cheese
and butter. Bega Cheese’s counter claims in respect of alleged breaches of the trade mark licence by Fonterra were dismissed. Neither party
appealed the decision. Fonterra was ordered to pay Bega Cheese’s costs in relation to the claim. Bega Cheese was ordered to pay Fonterra’s
costs in relation to the counterclaim. The amounts payable by the parties have not yet been determined.
F. Termination of customer contract
In April 2017, the Group sold the MSD2 dryer at Tatura, Victoria (“MSD2”) and its infant formula finishing plant at Derrimut, Victoria (“Derrimut”)
to Reckitt’s subsidiary Mead Johnson Nutrition (Australia) Pty Ltd for $200 million. The transaction included services and access agreements
with Reckitt for MSD2 and finishing plant expiring on 31 December 2026.
During the year, Reckitt has notified the Group that the contractual arrangements for the Derrimut will cease in October 2021 and January 2022
for MSD2. To compensate for the loss of future earnings, Reckitt has agreed to pay contractual termination fees of $34.4 million for the MSD2
and $21.1 million for the Derrimut. In FY2021 Bega received $8.6 million of cash and recognised $14.3 million of income in respect to MSD2
and received $5.3 million of cash and recognised $15.5 million of income for Derrimut. The remaining $41.6 million of cash will be received in
FY2022 and $25.7 million of income recognised in FY2022.
The Derrimut and MSD2 arrangements both include a service and facility component, and of the total FY2021 income of $29.8 million, $15.9
million is recognised in Other revenue for the terminated facility access fees (See note 5) and the remaining $13.9 million is recognised in
Services revenue.
G. Director appointments
On 8 September 2020, Bega Cheese announced the appointment of Peter Margin as an Independent Director and Deputy Chairman of the
Company.
On 6 April 2021, Bega Cheese announced the appointment of Harper Kilpatrick as a Supplier Director of the Company.
H. Revised syndicate facility
On 23 December 2020, Bega Cheese Group entered into a revised syndicated debt facility structure with its financiers (Refer to “note 24d” for
further details).
I. Effective tax rate
The Group’s effective company tax rate is calculated as income tax expense divided by profit before tax. Income tax expense captures taxes on
profits and excludes other types of taxes for example GST, FBT, payroll tax and PAYG tax paid on behalf of employees. The effective company
tax rate will differ from the statutory company tax rate of 30 per cent due to non-temporary differences. The prima facie effective tax rate of
the Group is 25.9% which is lower than the statutory corporate tax rate given the large accounting gain included in profit before tax that is
not assessable. Given the significant acquisition of the BDD Group this period there have also been a number of one off acquisition related
transaction costs including stamp duty.
62 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 63
2. Segment information
A. Description of segments
The Group determines the reporting segments based on financial and other management reports reviewed by the Executive Chairman, Chief
Executive Officer and Chief Financial Officer, in their capacity as the Chief Operating Decision Makers (CODM).
2. Segment information (cont.)
Prior period comparative segment information as follows:
The Group has two reporting segments:
i. Branded – the manufacture of value added consumer products for owned and externally owned brands.
ii. Bulk – the manufacture of bulk dairy ingredients, nutritional and bio nutrient products.
On 25 January 2021, Bega Cheese acquired Lion Dairy and Drinks and has been included in the Branded reporting segment to reflect the
consumer products that the business manufactures and how information is provided to the CODM to make business decisions regarding
resource allocation.
The CODM assesses the performance of the reporting segments based on a measure of EBITDA. In addition, the CODM take into account
current year events by segment so that normalised business performance is assessed.
Unallocated overheads relate to corporate and legal costs that cannot be reasonably classified into a segment.
Inter-segment eliminations represent elimination of sales and profit in stock arising from inter-segment sales at an arm’s length transfer price.
In the year ended 30 June 2021, included in the amount is $70.0 million of provisional gains relating to the acquisition of Lion Dairy and Drinks.
B. Segment information provided to the CODM
The segment information provided to the CODM for the reportable segments for the year ended 30 June 2021 is as follows:
Branded
$m
Bulk
$m
Unallocated
overheads
$m
Inter-segment
eliminations
$m
Group
total
$m
Year ending 30 June 2021
Revenue
EBITDA
Depreciation, amortisation and impairment
EBIT
Interest revenue
Interest expense
Profit before income tax
Income tax expense
Profit for the year
1,519.9
94.5
897.5
98.9
-
(79.7)
Impact of current year events on profit before tax
Acquisition related expenses
Provisional gain on bargain purchase
Reckitt termination fees
Kraft Legal Settlement
Other costs
(3.9)
-
-
-
-
-
-
29.8
-
(2.1)
(59.9)
-
-
9.3
(5.9)
(344.0)
2,073.4
69.0
-
70.0
-
-
-
182.7
(75.0)
107.7
0.1
(10.4)
97.4
(25.2)
72.2
(63.8)
70.0
29.8
9.3
8.0
(362.8)
1,493.2
(0.4)
87.8
(45.8)
42.0
0.3
(11.3)
31.0
(9.7)
21.3
(9.6)
(0.3)
(5.3)
Branded
$m
Bulk
$m
Unallocated
overheads
$m
Inter-segment
eliminations
$m
Group
total
$m
Year ending 30 June 2020
Revenue
EBITDA
Depreciation, amortisation and impairment
EBIT
Interest revenue
Interest expense
Profit before income tax
Income tax expense
Profit for the year
878.6
76.0
977.4
42.3
-
(30.1)
Impact of current year events on profit before tax
Legal costs
Acquisition related expenses
Other costs
-
-
-
-
-
-
(9.6)
(0.3)
(5.3)
-
-
-
C. Other segment information
Segment revenue
Sales between segments are carried out at arm’s length and eliminated on consolidation. The revenue from external parties reported to the
CODM is measured in a manner consistent with that in the Consolidated Statement of Comprehensive Income. Segment sales by destination
are as follows:
Sales to external customers in Australia
Branded
Bulk
Total sales to external customers in Australia
Sales to external customers in other countries
Branded
Bulk
Total sales to external customers in other countries
Total sales to external customers
CONSOLIDATED
2021
$m
1,269.6
252.6
1,522.2
250.3
300.9
551.2
2020
$m
649.8
319.9
969.7
228.8
294.7
523.5
2,073.4
1,493.2
64 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 65
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
3. Earnings per share
4. Dividends to shareholders (cont.)
Earnings per share for profit from continuing operations attributable
to ordinary equity holders of the parent:
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the denominator
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Contingent employee incentives
Shares used as the denominator in calculating diluted earnings per share
Profit attributable to the ordinary equity holders of the Group
used in calculating earnings per share
4. Dividends to shareholders
Recognised amounts:
2021 Interim dividend of 5.00 cents
2020 Final dividend of 5.00 cents
2020 Interim dividend of 5.00 cents
2019 Final dividend of 5.50 cents
Total dividend
Issue of shares under the DRP
Net cash outflow
Unrecognised amounts:
2021 Final dividend of 5.00 cents
2020 Final dividend of 5.00 cents
The dividends paid in 2021 and 2020 were fully franked. The 2021 final dividend will be fully franked.
CONSOLIDATED
2021
Cents
27.3
27.2
2020
Cents
9.9
9.9
2021
Number
2020
Number
264,273,802
214,163,264
646,341
349,081
264,920,143
214,512,345
2021
$m
72.2
2020
$m
21.3
COMPANY
Full year
2021
$m
Full year
2020
$m
15.1
10.7
-
-
25.8
(2.5)
23.3
15.1
-
-
-
10.7
11.8
22.5
(3.0)
19.5
-
10.7
Value of the dividend franking account
CONSOLIDATED
COMPANY
2021
$m
102.2
2020
$m
101.9
2021
$m
15.8
2020
$m
26.6
The value of the dividend franking account represents the balance of the franking account as at the end of the year, adjusted for franking credits
and debits that will arise from the settlement of liabilities or receivables for income tax.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of the subsidiaries were paid
as dividends.
5. Revenue and other income
Sales of goods
Services
Total revenue
Other revenue
Royalties
Contract termination fees
Other
Total other revenue
Other income
Rental income
Interest income
Legal settlement proceeds
Gain on equity interest
Other
Total other income
CONSOLIDATED
2021
$m
1,990.4
83.0
2,073.4
2020
$m
1,450.8
42.4
1,493.2
8.2
15.9
1.2
25.3
1.0
0.1
9.3
2.3
0.8
13.5
7.9
-
1.1
9.0
1.6
0.3
-
-
3.0
4.9
The Group recognises the majority of its revenue from contracts with customers for the transfer of goods at a point in time. Refer to note 36e for
further explanation of the Group’s revenue recognition policy.
The gain on equity interest during the year relates to the Group’s fair value adjustment for the 25% pre-acquisition ownership in CCFA arising
from the Lion Dairy and Drinks acquisition.
Revenues of approximately $623.8 million (2020: $223.6 million) are concentrated in a small number of external customers.
66 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 67
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 6. Expenses
Profit before income tax includes the following specific expenses.
CONSOLIDATED
7.
Income tax (cont.)
Loss/(profit) on disposal of property, plant and equipment
Write-off of intangible assets
(Decrease)/increase in inventory provisions
(Decrease)/increase of bad and doubtful debts
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Impairment of property, plant and equipment
Impairment of intangible assets
Impairment of investments
Amortisation of intangible assets
Trade Receivables Facility costs
Employee benefit expense:
- Defined contribution superannuation expense
- Other employee benefits expense
Total employee benefit expense
Finance costs:
- Interest on bank loans
- Lease liability interest
- Other finance costs
Total finance costs
7.
Income tax
A. INCOME TAX EXPENSE
Current tax (expense)
Deferred tax (expense) from the origination and reversal of temporary differences
Adjustments recognised in the current year in relation to tax of prior years
Total income tax expense
2021
$m
0.1
(0.4)
(0.8)
(0.1)
49.0
12.8
2.2
-
-
11.0
2.5
23.7
324.9
348.6
4.7
2.1
3.6
10.4
CONSOLIDATED
2021
$m
(14.7)
(8.6)
(1.9)
(25.2)
2020
$m
(0.3)
-
1.7
0.5
35.0
2.6
-
0.1
1.0
7.1
3.8
16.6
211.0
227.6
8.2
0.7
2.4
11.3
2020
$m
(6.4)
(3.6)
0.3
(9.7)
Judgement is required in determining the provision for income taxes. There are certain transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain as at the end of the financial year. The Group estimates its tax
liabilities based on its understanding of the tax law. Where the final tax outcome of these matters is different from the amounts recorded, such
differences will impact the amount of current or deferred income tax liabilities in the period such determination is made.
B. NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE
TO PRIMA FACIE TAX EXPENSE
Profit from continuing operations before income tax
Tax (expense) at the Australian tax rate of 30% (2020 - 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income
Non-deductible expenses
Other assessable income
Other deductible expenses
Tax incentives
Adjustments in respect of prior year
De-recognition of previously recognised tax losses
Previously unrecognised capital losses used
Previously unrecognised tax losses used to reduce deferred tax expense
Current year tax losses not recognised
Total income tax expense
C. AMOUNTS RECOGNISED THROUGH OTHER COMPREHENSIVE INCOME
Aggregate current and deferred tax arising in the reporting period and not recognised
in net profit or loss but through other comprehensive income in respect of:
Movement in hedging reserve
Total amount recognised through other comprehensive income
D. AMOUNTS RECOGNISED THROUGH EQUITY
Aggregate current and deferred tax arising in the reporting period and not recognised
in net profit or loss or other comprehensive income but through equity in respect of:
Lease transition adjustment
Share issue costs
Total amount recognised through equity
CONSOLIDATED
2021
$m
2020
$m
97.4
(29.2)
21.3
(10.9)
(0.3)
-
10.1
0.2
(1.9)
(4.2)
-
11.6
(11.8)
(25.2)
31.0
(9.3)
0.7
(1.0)
-
0.2
(0.1)
0.4
0.3
(0.4)
0.2
-
(0.8)
(9.7)
CONSOLIDATED
2021
$m
2020
$m
0.6
0.6
-
-
CONSOLIDATED
2021
$m
2020
$m
-
2.5
2.5
0.5
-
0.5
68 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 69
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
E. MOVEMENTS IN DEFERRED TAX
Movements in deferred tax in the year are detailed below:
Consolidated
Year ending 30 June 2021
Deferred tax assets
Doubtful debts
Inventories
Sundry accrued expenses
Black hole expenditure
Employee provisions
Other provisions
Leased assets
Share issue costs
Fair value of derivatives
Tax losses
Other
Total deferred tax assets
Deferred tax (liabilities)
Property, plant and equipment
Investments
Brand names
Software
Other
Total deferred tax (liabilities)
Total deferred tax
Consolidated
Year ending 30 June 2020
Deferred tax assets
Doubtful debts
Inventories
Sundry accrued expenses
Black hole expenditure
Employee provisions
Leased assets
Share issue costs
Tax losses
Total deferred tax assets
Deferred tax (liabilities)
Property, plant and equipment
Brand names
Software
Fair value of derivatives
Other
Total deferred tax (liabilities)
Total deferred tax
Opening
balance
$m
Reclassification
$m
Provisional
acquisition
$m
Charged
to income
$m
Charged
to equity
$m
Closing
balance
$m
0.2
2.9
4.4
2.8
16.0
-
0.4
0.8
-
5.8
-
33.3
(16.4)
-
(42.5)
(11.3)
(1.4)
(71.6)
(38.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.7
4.6
2.1
-
2.6
8.8
(0.6)
-
-
-
0.3
19.5
-
(4.3)
(11.2)
-
-
(15.5)
4.0
(1.7)
(6.0)
(1.0)
(2.8)
(1.2)
(8.8)
-
-
0.2
(5.8)
-
(27.1)
0.7
4.3
11.4
2.2
(0.1)
18.5
(8.6)
-
-
-
-
-
-
-
2.5
0.6
-
-
3.1
-
-
-
-
-
-
3.1
0.2
1.5
5.5
-
17.4
-
(0.2)
3.3
0.8
-
0.3
28.8
(15.7)
-
(42.3)
(9.1)
(1.5)
(68.6)
(39.8)
Opening
balance
$m
Reclassification
$m
Provisional
acquisition
$m
Charged
to income
$m
Charged
to equity
$m
Closing
balance
$m
-
2.0
5.6
2.4
14.5
-
1.1
1.3
26.9
(16.3)
(42.5)
(6.4)
(0.1)
(1.4)
(66.7)
(39.8)
-
-
-
-
-
-
-
4.5
4.5
-
-
-
-
-
-
4.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.2
0.9
(1.2)
0.4
1.5
(0.1)
(0.3)
-
1.4
(0.1)
-
(4.9)
0.1
-
(4.9)
(3.5)
-
-
-
-
-
0.5
-
-
0.5
-
-
-
-
-
-
0.5
0.2
2.9
4.4
2.8
16.0
0.4
0.8
5.8
33.3
(16.4)
(42.5)
(11.3)
-
(1.4)
(71.6)
(38.3)
7.
Income tax (cont.)
Deferred tax assets and liabilities in the Consolidated Balance Sheet have been disclosed based on whether the taxable entity they relate to has
a legally enforceable right to set off the recognised amounts. These are presented as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
CONSOLIDATED
2021
$m
4.6
(44.4)
(39.8)
2020
$m
6.7
(45.0)
(38.3)
Unused tax losses for which no deferred tax asset has been recognised as at 30 June 2021 are $55.1 million (2020: $17.7 million), the potential
tax benefit of this at 30% is $16.5 million (2020: $5.3 million). Unused capital losses for which no deferred tax asset has been recognised as at 30
June 2021 are $13.7 million (2020: $13.7 million), the potential tax benefit of this at 30% is $4.1 million (2020: $4.1million).
F. INCOME TAXES PAID
Income taxes paid is included in the Consolidated Statement of Cash Flows as follows:
Income taxes (paid) included in operating activities
Total income taxes (paid)
8. Trade and other receivables
Current assets
Trade receivables
Allowance for impairment of receivables
Net trade receivables
Goods and services tax (GST) receivable
Accrued revenue
Amounts receivable under Trade Receivables Facility
Other debtors
Total trade and other receivables
CONSOLIDATED
2021
$m
(0.7)
(0.7)
CONSOLIDATED
2021
$m
303.8
(9.4)
294.4
23.3
5.8
6.8
18.6
348.9
2020
$m
(12.3)
(12.3)
2020
$m
31.5
(0.6)
30.9
7.7
12.0
14.7
4.2
69.5
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally
due for settlement within 30 to 60 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of
consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group
holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised
cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in
note 36.
Accrued revenue primarily relates to receivables from customers under product supply contracts whereby the revenue has yet to be invoiced.
The Group utilises a Trade Finance Facility (‘Trade Receivables Facility’) with the Coöperatieve Rabobank U.A. (Australia Branch) (Rabobank)
whereby it may purchase receivables from the Group at a discount. This facility is utilised by the Group as a primary source of working capital. The
maximum available at any time under the facility was $200.0 million during the financial year. Most eligible receivables sold to Rabobank are insured
by the Group with the Group retaining a continuing involvement asset of 10%, representing its maximum exposure under the facility. 90% of the
value of receivables sold by the Group into this facility are de-recognised as an asset as the contractual rights to cashflows from these receivables
have expired on acceptance of the sale to Rabobank. The Trade Receivables Facility is a fully committed facility and was extended to 31 January
2023 in August 2021. The funded value of the Group’s Trade Receivables Facility was $136.9 million as at 30 June 2021 (2020: $153.3 million).
70 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 71
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS CONSOLIDATED
CONSOLIDATED
12. Property, plant and equipment
9. Other assets
Current assets
Prepayments
Trade Receivables Facility continuing involvement asset
Other assets
Total current other assets
Non-current assets
Prepayments and other
Total non-current other assets
Total other assets
10. Derivative financial instruments and other financial assets
Current assets
Foreign currency options
Foreign currency forwards – cash flow hedges
Foreign currency forwards – fair value hedges
Total current derivative financial instruments
Non-current assets
Financial assets at fair value through other comprehensive income (FVOCI) - unlisted equity securities
Total non-current financial assets
Total financial assets
2021
$m
12.8
16.1
9.0
37.9
0.1
0.1
38.0
CONSOLIDATED
2021
$m
1.1
-
-
1.1
-
-
1.1
2020
$m
17.3
18.7
11.9
47.9
2.0
2.0
49.9
2020
$m
-
0. 0.8
0.5
1.3
0.7
0.7
2.0
Derivative financial instruments relate to foreign currency contracts used for hedging. Further information on these contracts is given in note 24a.
No material amounts were incurred due to ineffectiveness of cash flow hedges or gains or losses on fair value hedges attributable to the hedging
instrument or the hedged item.
11. Inventories
The write-down of inventories to net realisable value requires judgement in assessing future commodity prices, other market conditions, product
shelf life and provisions for quality.
Land and buildings
At cost
Accumulated depreciation
Total land and buildings
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Construction in progress
Total property, plant and equipment
The movements in property, plant and equipment are:
Consolidated
Year ending 30 June 2021
Balance at the beginning of the financial year
Provisional acquisitions through business combinations
Capital expenditure
Disposals
Depreciation
Impairment
Transfers
Balance at the end of the financial year
Year ending 30 June 2020
Balance at the beginning of the financial year
Capital expenditure
Disposals
Depreciation
Transfers
2021
$m
467.5
(50.2)
417.3
834.0
(378.6)
455.4
35.8
908.5
Construction
in progress
$m
Land and
buildings
$m
Plant and
equipment
$m
9.6
17.9
26.8
-
-
-
(18.5)
35.8
35.7
42.2
-
-
(68.3)
9.6
164.0
260.1
-
-
(8.3)
-
1.5
417.3
161.7
-
(3.3)
(5.3)
10.9
164.0
272.4
209.0
-
(0.1)
(40.7)
(2.2)
17.0
455.4
245.9
-
(1.2)
(29.7)
57.4
272.4
2020
$m
207.9
(44.0)
163.9
619.7
(347.3)
272.4
9.7
446.0
Total
$m
446.0
487.0
26.8
(0.1)
(49.0)
(2.2)
-
908.5
443.3
42.2
(4.5)
(35.0)
-
446.0
Raw materials and work in progress
Finished goods
Maintenance spares
Provisions
Carrying amount of inventories at lower of cost or net realisable value
2021
$m
139.6
195.6
22.7
(12.9)
345.0
2020
$m
125.0
137.0
9.1
(13.7)
257.4
CONSOLIDATED
Balance at the end of the financial year
72 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 73
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
13. Leases
14. Intangible assets (cont.)
The balance sheet shows the following amounts relating to leases:
Right-of-use assets
At cost
Accumulated depreciation
Total right-of-use assets
Right-of-use assets
Properties
Equipment
Motor vehicles
Total right-of-use assets
CONSOLIDATED
2021
$m
121.7
(18.3)
103.4
CONSOLIDATED
2021
$m
82.5
17.0
3.9
103.4
2020
$m
15.6
(6.8)
8.8
2020
$m
6.6
1.2
1.0
8.8
Brands
$m
Software
$m
Water
Rights
$m
Goodwill
$m
Other
$m
Consolidated
Year ending 30 June 2021
Balance at the beginning of the financial year
Provisional acquisitions through
business combinations
Additions
Disposals
Amortisation
140.4
37.2
-
-
-
Balance at the end of the financial year
177.6
Year ending 30 June 2020
Balance at the beginning of the financial year
140.4
Additions
Amortisation
Impairment
-
-
-
Balance at the end of the financial year
140.4
53.5
4.4
10.1
(0.4)
(10.6)
57.0
51.2
9.1
(6.7)
(0.1)
53.5
5.6
346.5
-
-
-
-
0.9
-
-
-
5.6
347.4
5.6
346.5
-
-
-
-
-
-
5.6
346.5
2.1
0.2
-
-
(0.4)
1.9
2.4
0.1
(0.4)
-
2.1
Total
$m
548.1
42.7
10.1
(0.4)
(11.0)
589.5
546.1
9.2
(7.1)
(0.1)
548.1
Additions to the right-of-use assets during the 2021 financial year were $14.0 million (2020: $4.6 million) and $101.3 million were acquired through
business combinations.
Lease liabilities
Current
Non-current
Total lease liabilities
The statement of comprehensive income shows the following accounts relating to leases:
Depreciation charge of right-of-use assets
Interest expense (included in finance cost)
The total cash outflow for leases in 2021 was $14.4 million (2020: $3.4 million).
14. Intangible assets
Brands
Water rights
Software
Goodwill
Other
Total intangible assets
74 | BEGA CHEESE LIMITED 2021
CONSOLIDATED
2021
$m
25.5
79.1
104.6
CONSOLIDATED
2021
$m
12.8
2.1
CONSOLIDATED
2021
$m
177.6
5.6
57.0
347.4
1.9
589.5
2020
$m
3.0
8.3
11.3
2020
$m
2.6
0.7
2020
$m
140.4
5.6
53.5
346.5
2.1
548.1
Brands and other identifiable intangible assets
Brands and other identifiable intangible assets purchased by the Group are initially recognised at cost, or at their fair value if acquired as part of
a business combination.
These identifiable intangible assets are subsequently measured:
•
if they have a finite life, at cost less amortisation, and
•
if they have an indefinite life, at cost less accumulated impairment losses.
Finite life brands or other identifiable intangible assets are amortised on a straight-line basis over the shorter of their contractual or useful
economic life, being three to 25 years. They are also tested for impairment when an indicator of impairment may exist.
Indefinite life identifiable intangible assets are not amortised but are instead tested for impairment annually, or more frequently if there is an
indicator of impairment. Brands or other identifiable intangible assets are determined to have an indefinite life where there is an intention to
maintain and support the brand or other intangible asset for an indefinite period.
Water rights
Water rights are indefinite life identifiable intangible assets and were acquired as part of the acquisition of the Strathmerton and Peanut Company
of Australia (PCA) facilities. Water rights are attributable to the Branded segment. Impairment was tested by reference to third party market
valuation based on recent transactions and related data.
Software
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application over the contract period.
As such the Group does not receive a software intangible asset at the contract commencement date. For SaaS arrangements, the Group
assesses if the contract will provide a resource that it can control to determine whether an intangible asset is present. If the Group cannot
determine control of the software, the arrangement is deemed a service contract and any implementation costs including costs to configure or
customise the cloud provider’s application software are recognised as operating expenses when incurred.
Costs incurred to obtain access to the cloud provider’s application software are generally recognised as operating expenses when the services
are received.
Costs incurred for the development of software code that enhances, modifies or creates additional capability to existing for on-premise are
capitalised if it meets the recognition criteria for an intangible asset.
Certain internal and external costs directly incurred in acquiring and developing software are capitalised if it they meet the recognition criteria of
an Intangible asset and are amortised on a straight-line basis over their estimated useful lives, being 3 to 10 years. Capitalised costs are tested
for impairment when an indicator of impairment exists.
ANNUAL REPORT | 75
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 14. Intangible assets (cont.)
14. Intangible assets (cont.)
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the net identifiable assets of the acquired business at the date of
acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets.
Goodwill is not amortised but 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 related to that entity.
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 (CGU) that are expected to benefit from the business combination in which the goodwill arose.
Bega Foods impairment assessment
The Group has identified the Mondel z Grocery Business, acquired in July 2017 and renamed Bega Foods, to be a CGU. This CGU includes
goodwill of $230.3 million and capitalised brands of $140.0 million. The Bega Foods CGU produces branded grocery products including Vegemite,
peanut butter and honey for sale to domestic customers.
This CGU is subject to annual impairment testing as it holds indefinite life intangible assets. Impairment testing requires a high degree of
judgement in assessing whether the carrying value of assets is supported by their recoverable amount. The recoverable amount of the Bega
Foods CGU has been determined using the ‘value in use’ approach.
In calculating the recoverable amount of the Bega Foods CGU a discounted cash flow model was utilised forecasting cash flows for the period
FY2022 to FY2026. A number of assumptions were made in respect of matters which are not certain, including the following key assumptions:
• a long-term nominal growth rate of 2% beyond the forecast period
• with advice from independent experts, applied post tax discount rate of 6.5%
•
In FY2021 EBITDA was positively impacted by additional retail demand as a result of COVID-19. Given the uncertainty generated by the
pandemic the Group has not forecast for this increased demand to be sustained and expects to return to normal levels of demand in FY2022.
EBITDA growth over the forecast period is expected from new products, operational efficiencies and increases in pricing.
Using the above assumptions, the recoverable amount was not less than the carrying value of the Bega Foods CGU as at 30 June 2021 and as
a result no impairment was required.
Sensitivity analysis
Management has considered the following changes in key assumptions to be reasonably possible
Variance from base case
Long-term growth rate
Discount rate
Forecast EBITDA per annum
0.5%
1.0%
5.0%
lower
higher
lower
Based on the above sensitivity analysis, a reasonably possible change in any single assumption would not result in the recoverable amount of the
Bega Foods CGU being lower than its carrying value as at 30 June 2021.
Bulk impairment assessment
Due to structural changes of the Group during the year, the Goodwill $117.0 million relating to the 2018 acquisition of the Koroit Processing Facility
has been included within a new Bulk Segment CGU. The CGU includes all the assets of the Bulk Segment which incorporates the assets of the
Tatura, Lagoon St (Bega), and Koroit manufacturing sites.
This view has been formed as the Bulk Segment is deemed to be the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The cash inflows of the Bulk Segment are driven by available milk volumes
which is utilised across all manufacturing sites in the segment and can be diverted to the site that can produce the highest return on that milk.
This CGU is subject to annual impairment testing as it holds indefinite life intangible assets. Impairment testing requires a high degree of
judgement in assessing whether the carrying value of assets is supported by their recoverable amount. The recoverable amount of the Bulk CGU
has been determined using the ‘value in use’ approach.
In calculating the recoverable amount of the Bulk CGU a discounted cash flow model was utilised forecasting cash flows for the period FY2022
to FY2026. A number of assumptions were made in respect of matters which are not certain, including the following key assumptions:
• a long-term nominal growth rate of 1.75% beyond the forecast period
• with advice from independent experts, applied post tax discount rate of 6.5%
•
EBITDA of the CGU is expected to reduce in FY2022 reflecting higher opening farmgate milk prices. Beyond FY2022 farmgate milk prices
and dairy commodity prices are expected to trend towards long term historical averages.
• Milk volumes are projected to reduce from FY2021 in FY2022 levels and are assumed to remain constant thereafter.
Using the above assumptions, the recoverable amount was not less than the carrying value of the Bulk CGU as at 30 June 2021 and as a result
no impairment was required.
Sensitivity analysis
Management has considered the following changes in key assumptions to be reasonably possible
Variance from base case
Long-term growth rate
Discount rate
Forecast EBITDA per annum
0.5%
1.0%
10.0%
lower
higher
lower
Based on the above sensitivity analysis, a reasonably possible change in any single assumption would not result in the recoverable amount of the
Bulk CGU being lower than its carrying value as at 30 June 2021. However, if the actual EBITDA per annum is 17% lower than forecast into
perpetuity, an impairment would occur where the CGU’s recoverable amount would become lower than its carrying amount.
As a result of the annual impairment reviews, no impairment losses for the Group’s CGUs have been recognised in the year.
15. Trade and other payables
Current liabilities
Trade payables
Accrued charges and sundry creditors
Total trade and other payables
CONSOLIDATED
2021
$m
315.5
161.9
477.4
2020
$m
201.8
31.5
233.3
The average credit period on purchases is the month end after the goods are received, except for utilities and certain professional fees. No
material amounts of interest are charged on late payments and the amounts are unsecured.
Judgement is used in assessing trade payables due to suppliers under product supply contracts that require a periodic reconciliation to specific
terms of those contracts. From time to time there may be differences of opinion between the Group and the supplier as to the amount payable
under the contracts. Such differences are usually resolved amicably between the parties having regard to the relevant contract. Where such
differences are unresolved at reporting dates the Group seeks additional information and professional advice in the context of the relevant
contract in forming a view as to the amount to be accrued for at the reporting date.
76 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 77
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 16. Other liabilities
Current liabilities
Deferred income
Trade Receivables Facility continuing involvement liability
Total current other liabilities
Non-current liabilities
Deferred income
Total non-current other liabilities
Total other liabilities
17. Borrowings
Non-current - at amortised cost
Secured term loans
Borrowing costs
Total borrowings
For further details on borrowings and facilities, see note 24d.
18. Derivative financial instruments – liabilities
Current liabilities
Foreign currency forwards - cash flow hedges
Total derivative financial instruments - liabilities
For further details on derivatives, see note 24.
CONSOLIDATED
CONSOLIDATED
19. Provisions
2021
$m
26.7
16.1
42.8
0.5
0.5
2020
$m
1.4
18.7
20.1
-
-
43.3
20.1
CONSOLIDATED
2021
$m
393.0
(1.1)
391.9
CONSOLIDATED
2021
$m
2.1
2.1
2020
$m
248.0
(0.8)
247.2
2020
$m
0.1
0.1
Current liabilities
Employee benefits
Onerous contracts
Restructuring provision
Restoration provision
Other provisions
Total current provisions
Non-current liabilities
Employee benefits
Onerous contracts
Restoration provision
Total non-current provisions
Total provisions
2021
$m
90.7
11.4
6.3
0.6
9.7
118.7
8.9
5.2
10.5
24.6
2020
$m
49.5
-
-
-
-
49.5
2.9
-
-
2.9
143.3
52.4
Consolidated
Year ending 30 June 2021
Balance at the beginning of the financial year
Provisional acquisitions through
business combinations
Charged to profit or loss
Amounts used during the year
Balance at the end of the financial year
Onerous
contracts
$m
Restructure
provision
$m
Restoration
provision
$m
Other
provisions
$m
-
21.3
-
(4.7)
16.6
-
3.9
14.1
(11.7)
6.3
-
11.0
0.1
-
11.1
-
8.3
2.7
(1.3)
9.7
Total
$m
-
44.5
16.9
(17.7)
43.7
The current provision for employee benefits includes accrued annual leave, vesting sick leave and long service leave. Long service leave covers all
unconditional entitlements where employees have completed the required period of service. The amount of the provision presented as current of
$90.7 million (2020: $49.5 million) is due to the Group not having 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 expected to be taken or paid within the next 12 months:
Current leave obligations expected to be settled after 12 months
CONSOLIDATED
2021
$m
22.8
2020
$m
11.9
78 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 79
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
20. Share capital
A. Share capital
Share capital - ordinary shares fully paid
B. Movement in share capital value and number of shares
Ordinary shares on issue at 1 July 2019
Shares issued under Dividend Reinvestment Plan
Ordinary shares on issue at 30 June 2020
Ordinary shares on issue at 1 July 2020
Shares issued under Placement and Institutional Entitlement Offer
Shares issued under Retail Entitlement Offer
Shares issued under Dividend Reinvestment Plan
Shares issued to management under STI scheme
Share issue transaction costs, net of tax
Ordinary shares on issue at 30 June 2021
CONSOLIDATED
2021
$m
875.7
2020
$m
480.5
Ordinary
shares
Number
’000
213,734
703
214,437
214,437
62,156
25,024
437
573
-
Ordinary
shares
$m
477.5
3.0
480.5
480.5
285.9
115.1
2.5
-
(8.3)
302,627
875.7
Ordinary shares entitle the holder to participate in dividends and share in the proceeds of winding up the Company in proportion to the number
of 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. There are no different rights,
preferences or restrictions among the class of ordinary shares.
21. Reserves
Share-based payment reserve
Capital profits reserve
Hedging reserve
Transactions with non-controlling interests reserve
Total reserves
CONSOLIDATED
2021
$m
6.8
34.0
(2.3)
(12.6)
25.9
2020
$m
0.4
34.0
(1.0)
(12.6)
20.8
The share-based payment reserve is used to recognise the fair value of shares and performance rights issued to employees by the Company.
The capital profits reserve is as a result of historical capital transactions.
The hedging reserve is used to record gains or losses on hedging instruments (cash flow hedges) that are recognised directly in equity, as
described in note 36.
The transactions with non-controlling interests reserve records the difference arising as a result of the acquisition of the non-controlling interest
in Tatura Milk Industries Pty Ltd.
22. Notes to the Consolidated Statement of Cash Flows
A. RECONCILIATION OF CASH AND CASH EQUIVALENTS
Cash and cash equivalents
Balance per statement of cash flow
B. RECONCILIATION OF PROFIT FOR THE PERIOD
TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit after income tax
Adjustments for non-cash, investing and financing items:
Depreciation of non-current assets
Amortisation of intangible assets
Loss/(profit) on sale of property, plant and equipment
Write-off of intangible assets
Impairment of tangible assets
Impairment of intangible assets
Impairment of investments
Fair value adjustment to derivatives
Non-cash employee expense/(benefit) - share-based payments
Income from Reckitt termination fees not yet received
Share of profit of equity accounted investments
Gain on bargain purchase
Gain on equity interest
Changes in operating assets and liabilities:
(Increase)/decrease in assets:
Trade and other debtors and GST recoverable
Inventories
Prepayments
Current and deferred tax assets
Increase/(decrease) in liabilities:
Trade and other payables
Provision for income taxes payable excluding taxation on investments
Changes in provisions
CONSOLIDATED
2021
$m
87.2
87.2
2020
$m
22.9
22.9
72.2
21.3
61.8
11.0
0.1
0.4
2.2
-
-
0.2
6.4
(16.0)
(1.2)
(67.7)
(2.3)
8.6
(13.8)
8.1
6.6
19.1
17.8
(2.1)
37.6
7.1
(0.3)
-
-
0.1
1.0
(2.4)
(0.8)
-
(0.1)
-
-
61.0
15.3
13.4
(2.0)
(14.9)
-
1.7
Net cash flow from operating activities
111.4
138.0
80 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 81
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
Risk
24. Financial risk management (cont.)
23. Critical accounting estimates and judgements
The Group’s exposure to foreign exchange risk at the end of the reporting period is expressed as follows:
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.
In particular, information about significant areas of estimation, uncertainty and critical judgement in applying accounting policies that have the
most significant effect on the amount recognised in the financial statements are described in note 7 - income tax, note 8 - trade and other
receivables, note 11 - inventories, note 14 - intangible assets, note 15 - trade and other payables and note 28 - business combination.
24. Financial risk management
The Group’s activities expose it to a variety of financial risks: market risks (including currency risk and interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management approach focusses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts to hedge
certain risk exposures. Derivatives are exclusively used for hedging purposes, not for trading or other speculative purposes. The Group uses
different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in case of interest rate,
foreign exchange and aging analysis for credit risk.
Financial management is carried out by the treasury function within the finance department under policies approved by the Board of Directors
and overseen by the Audit & Risk Committee. Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s
operating units, by applying principles provided by the Board that has overall responsibility for risk management. The Board also approves
policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of financial instruments, and investment of excess
liquidity.
A. Market risk
The Group’s activities expose it primarily to market risks in relation to foreign currency and interest rate movements. The Group enters into a
variety of derivative financial instruments to manage exposures which include forward foreign currency contracts to hedge exchange rate risks
from the sale of exported goods and purchase of imported goods.
Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not
the entity’s functional currency. The Group exports dairy products and is exposed to foreign exchange risk, primarily movements in exchange
rates of US dollar and Japanese Yen. The Group also makes purchases including capital equipment, ingredients and packaging that exposes it
to movements in exchange rates of US dollar, NZD and Euro. The risk is measured using sensitivity analysis and cash flow forecasting. Forward
contracts and options are currently used to manage these risks.
The Group’s risk management policy is to match known and highly probable future cash flows in foreign currencies, for cash flow and fair value
hedge accounting purposes, with forward exchange contracts in the same currency and with closely corresponding settlement dates. 30- 80%
of its estimated foreign currency exposures in respect of forecast sales over the subsequent 12 months are hedged. All material foreign currency
purchases are hedged on execution of contracts.
Consolidated
At 30 June 2021
Cash flow hedges
US Dollar (sell)
Japanese Yen (sell)
Options
US Dollar (Bought call)
At 30 June 2020
Cash flow hedges
US Dollar (sell)
Euro (sell)
Japanese Yen (sell)
Fair value hedges
Euro (sell)
US Dollar (sell)
Contract
amount in
foreign
currency
m
Weighted
average
forward
rate
Contract
amount
$m
Market
value
assets
$m
Market
value
liabilities
$m
75.2
2.2
57.9
179.4
0.7695
83.3564
-
-
82.7
64.8
0.7831
1.1
64.3
2.7
2.2
(4.3)
(45.6)
42.2
1.6
165.8
(2.6)
(30.7)
0.6856
0.6105
73.7603
0.6097
0.6802
0.8
-
-
-
0.5
(2.0)
(0.1)
-
-
(0.1)
-
-
-
Group sensitivity
The Group sensitivity for cash flow exposures is based on the financial instruments held on 30 June 2021, had the Australian dollar strengthened
or weakened by 10% against the US dollar with all other variables held constant. The analysis is performed on the same basis for 2020 and has
no material impact on profit after tax due to the Group aiming to fully hedge its foreign currency exposures and the accounting treatment of the
instruments held. The sensitivity on the Group’s hedging instruments is detailed in the following table:
Equity
AUD strengthens 10% - increase
AUD weakens 10% - (decrease)
CONSOLIDATED
2021
$m
6.4
(7.3)
2020
$m
2.8
(3.5)
82 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 83
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
24. Financial risk management (cont.)
Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. Historically, the Group has used interest rate swaps as appropriate to manage interest rate risk. Due to a sustained low market interest
rates, there were no interest rate swaps in place at 30 June 2020 or 2021 but the use of interest rate swaps is regularly monitored and reviewed
as to their effectiveness by the Group. All borrowings were denominated in Australian dollars during 2021 and 2020.
As at the reporting date, the Group had the following interest bearing borrowings and assets outstanding:
Fixed rate instruments
Assets
Vat and supplier loans
Liabilities
Lease liabilities
Variable rate instruments
Assets
Cash and cash equivalents
Liabilities
Bank overdrafts and loans
Net exposure to interest rate risk on variable rate instruments
An analysis by maturities is provided in note 24e.
Interest rate sensitivity
CONSOLIDATED
2021
$m
2020
$m
0.1
0.1
(104.6)
(11.3)
87.2
22.9
(391.9)
(304.7)
(247.2)
(224.3)
At 30 June 2021, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant, the Group’s
post-tax profit for the year would have been $1.7 million higher/(lower) (2020: $2.1 million higher/(lower)).
Loss Allowance
B. Credit risk
Credit risk is managed on an entity basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with
banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed
transactions. For banks and financial institutions, only independently rated parties with a minimum rating of “AA” are accepted. For customers,
the finance function assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The compliance with credit limits by
customers is regularly monitored by management.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in note 8 and note 10.
For some trade receivables, the Group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit that can be
called upon if the counterparty is in default under the terms of the agreement. In addition, the Group obtains credit insurance over export debtors
and some Australian customers.
Year ending 30 June 2020
Expected loss rate
Gross carrying amount - trade receivables
Loss Allowance
24. Financial risk management (cont.)
The maximum exposure to credit risk is as follows:
Cash and cash equivalents
Trade receivables
Accrued revenue
Other receivables
Fair value derivatives
Total credit risk exposure
CONSOLIDATED
2021
$m
87.2
294.4
5.8
37.4
1.1
425.9
2020
$m
22.9
30.9
12.0
23.8
1.3
90.9
There is considered to be limited credit risk in the balances of other receivables due to their nature as entities with which close commercial
relationships are maintained, related parties or government agencies. The Group manages amounts payable by direct milk suppliers to the Group
for supplier advances, loans or other prepayments for milk so as to mitigate any material exposure to default.
The ageing analysis of trade receivables is set out in the table below. The credit quality of financial assets that are neither past due nor impaired
is assessed based on the application of the credit risk policies described above. The expected impairment loss calculation for trade receivables
considers the impact of past events, and exercises judgment over the impact of current and future economic conditions when considering the
recoverability of outstanding trade receivable balances at the reporting date. Subsequent changes in economic and market conditions may result
in the provision for impairment losses increasing or decreasing in future periods.
Consolidated
Year ending 30 June 2021
Expected loss rate
Gross carrying amount - trade receivables
Current
$m
More than 30
days past due
$m
More than 60
days past due
$m
More than 90
days past due
$m
3.8%
11.2
0.4
11.1%
3.8
0.4
Total
$m
303.8
63.3%
12.9
8.2
9.4
0.2%
275.9
0.4
0.0%
30.4
-
0.0%
0.0%
-
-
-
-
54.4%
1.1
0.6
CONSOLIDATED
2021
$m
0.6
8.8
0.1
(0.1)
9.4
31.5
0.6
2020
$m
0.1
-
0.5
-
0.6
Opening loss allowance
Acquisitions through business combinations
Increase in loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
Closing loss allowance
84 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 85
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
24. Financial risk management (cont.)
24. Financial risk management (cont.)
C. Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through committed
credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, the
Group maintains flexibility in funding by maintaining availability under committed credit lines. The Group manages liquidity risk by continuously
monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities.
D. Financing arrangements
The Group had access to the following borrowing facilities at the end of the reporting period:
Undrawn facilities expiring within one year
Undrawn facilities expiring beyond one year
Drawn facilities
Total facilities
Total facilities are represented by:
Syndicated Facility - Revolving Cash Advance Facility maturing 10 November 2023
Syndicated Facility - Revolving Cash Advance Facility maturing 10 November 2023
Syndicated Facility - Revolving Cash Advance Facility maturing 30 September 2022
Syndicated Facility - Term Facility maturing 30 September 2022
Inventory Facility
Overdraft Facility
Total facilities
CONSOLIDATED
2021
$m
100.0
87.0
393.0
580.0
140.0
140.0
100.0
100.0
100.0
-
580.0
2020
$m
100.0
168.5
248.0
516.5
70.0
140.0
100.0
100.0
100.0
6.5
516.5
The Group financing arrangements include a syndicated facility funded by Coöperatieve Rabobank U.A. (Australia Branch) (Rabobank) and
Westpac Banking Corporation (Westpac), (Syndicated Debt Facility). The Syndicated Debt Facility includes three revolving cash advance facilities
totalling $380 million (with maturity dates between 30 September 2022 and 31 November 2023) and a term facility totalling $100 million (with a
maturity date of 30 September 2022).
In addition to the Syndicated Debt Facility, the Group continues to operate a stand-alone Inventory Facility (matures on 30 March 2022) and is not
subject to cross-charges or cross-guarantees, except as disclosed in note 26.
The Syndicated Debt Facility and Inventory Facility are secured by equitable mortgages and floating charges on the assets of Bega Cheese
Limited and its subsidiaries subject to the Deed of Cross Guarantee as disclosed in note 27.
Under the Syndicated Facilities, the Group is required to comply with the following covenants:
i.
the leverage ratio is not greater than 3.00 times;
ii.
the interest cover ratio must be equal or greater than 2.50 times; and
iii. shareholder funds must be equal or greater than $750 million.
The Group has complied with these and previous covenants throughout the reporting period.
E. Maturities of financial liabilities
The following table analyses the Group’s financial liabilities. The amounts disclosed in the table are contractual undiscounted cash flows:
Consolidated
At 30 June 2021
Non-derivatives
Lease liabilities
Secured bank loans
Trade and other payables
Derivatives
Inflows
Outflows
Total financial liabilities
At 30 June 2020
Non-derivatives
Lease liabilities
Secured bank loans
Trade and other payables
Derivatives
Inflows
Outflows
Total financial liabilities
0-12
months
$m
1-2 years
$m
2-5 years
$m
>5 years
$m
Total
contractual
cash flows
$m
Carrying
amount
$m
(26.2)
(7.3)
(477.4)
75.4
(77.4)
(512.9)
(3.5)
(6.2)
(233.3)
44.0
(42.9)
(241.9)
(22.6)
(145.4)
(44.0)
(254.8)
-
-
-
-
-
-
(37.9)
-
-
-
-
(130.7)
(407.5)
(477.4)
75.4
(77.4)
(104.6)
(391.9)
(477.4)
-
(2.1)
(168.0)
(298.8)
(37.9)
(1,017.6)
(976.0)
(3.2)
(53.3)
(5.6)
(201.3)
-
-
-
-
-
-
(0.4)
-
-
-
-
(56.5)
(206.9)
(0.4)
(12.7)
(260.8)
(233.3)
44.0
(42.9)
(505.7)
(11.3)
(247.2)
(233.3)
-
(0.1)
(491.9)
F. Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The
fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and financial assets at fair value
securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the
current bid price.
The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The fair value
of forward exchange contracts is determined using forward exchange market rates at the reporting date. The carrying value less impairment
provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available
to the Group for similar financial instruments. The Directors consider that the carrying amounts of financial assets and financial liabilities recorded
at amortised cost in the financial statements approximates to their fair values. All fair value instruments are measured using quoted prices from
active markets where available.
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7
Financial Instruments: Disclosures requires disclosure of fair value measurements by level under the following fair value measurement hierarchy:
i. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
ii.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
iii.
86 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 87
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 24. Financial risk management (cont.)
The following table presents the Group’s assets and liabilities measured and recognised at fair value at the end of the reporting periods:
Group structure
26. Parent entity financial information
Consolidated
At 30 June 2021
Assets
Foreign currency options
Total assets
Liabilities
Foreign currency forwards - cash flow hedges
Total liabilities
At 30 June 2020
Assets
Foreign currency forwards - cash flow hedges
Foreign currency forwards - fair value hedges
Financial assets at fair value through other comprehensive
income (FVOCI) - unlisted equity securities
Total assets
Liabilities
Foreign currency forwards - cash flow hedges
Total liabilities
25. Capital risk management
Level 2
$m
Level 3
$m
Total
$m
A. Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
1.1
1.1
(2.1)
(2.1)
0.8
0.5
-
1.3
(0.1)
(0.1)
-
-
-
-
-
-
0.7
0.7
-
-
1.1
1.1
(2.1)
(2.1)
0.8
0.5
0.7
2.0
(0.1)
(0.1)
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholder's equity
Issued capital of parent entity
Reserves
Share-based payment reserve
Capital profits reserve
Hedging reserve
Retained earnings
Total equity
(Loss)/profit after tax for the year
Total comprehensive (loss)/income
BEGA CHEESE
2021
$m
481.1
1,978.7
(583.7)
(1,025.7)
2020
$m
424.0
1,406.4
(507.4)
(805.3)
953.0
601.1
879.0
1.7
32.6
(1.3)
41.0
953.0
(20.2)
(20.9)
481.1
0.4
32.6
-
87.0
601.1
13.2
13.0
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern and generate adequate returns
to shareholders. Consistent with others in the industry, the Group monitors its capital on the basis of net debt, total equity and gearing ratio.
Borrowings
Add back: borrowing costs
Unrecognised bank guarantees
Cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
CONSOLIDATED
2021
$m
391.9
1.1
19.1
(87.2)
324.9
1,260.7
26%
2020
$m
247.2
0.8
6.1
(22.9)
231.2
814.0
28%
Current assets and liabilities of Bega Cheese include intercompany loans.
B. Guarantees entered into by parent entity
The parent entity has entered into a deed of cross guarantee in relation to the debts of its subsidiaries as described in note 27.
C. Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020 except as disclosed in note 30.
D. Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2021, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling $5.6 million
(2020: $3.8 million). These commitments are not recognised as liabilities as the relevant assets have not yet been received.
88 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 89
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
27. Subsidiaries, joint arrangements and associates
27. Subsidiaries, joint arrangements and associates (cont.)
Country of
incorporation
Nature of
relationship
2021 % of
ownership
interest
2020 % of
ownership
interest
180 Nutrition Pty Ltd
BDD Australia Pty Ltd*
BDD Foods Pty Ltd*
BDD Milk Pty Ltd*
Bega Cheese Benefit Fund Ltd
Bega Cheese Investments Pty Ltd
Bega Dairy and Drinks Pty Ltd*
Bega Dairy and Drinks Finance Pty Ltd*
Bega Dairy and Drinks (NZ) Ltd
Bega Dairy and Drinks Services Pty Ltd*
Bega Insurance Pte Ltd
Berri Pty Ltd*
Berri Asia Sdn Bhd
Blowflex Mouldings Pty Ltd*
Capitol Chilled Foods (Australia) Pty Ltd*
Dairy & Drinks Singapore Pte Ltd
Dairy Farmers Pty Ltd*
Dairy Vale Foods Pty Ltd*
Malanda Dairyfoods Pty Ltd*
National Foods Holdings Ltd*
National Foods Beverage Holdings Pty Ltd*
Peanut Company of Australia Pty Ltd*
QUD Pty Ltd*
Shanghai Great Lion Food & Beverages Management Co Ltd
Tatura Milk Industries Pty Ltd*
Tatura Cheese Industries Pty Ltd
Vitasoy Australia Products Pty Ltd
CBH Fresh Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Singapore
Australia
Malaysia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
Australia
Australia
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Australia
Australia
Associate
Joint venture
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
20
61
-
-
-
100
100
-
-
-
-
-
-
-
-
25
-
-
-
-
-
-
100
-
-
100
100
-
-
* A party to the Deed of Cross Guarantee dated 21 February 2021
Interest in joint venture
Capitol Chilled Foods (Australia) Pty Ltd (CCFA)
The principal activity of the joint venture is liquid milk and chilled food distribution. As part of the Lion Dairy and Drinks acquisition the Group
acquired the 75% remaining interest in CCFA. The Group financial statements include the following results of the joint venture up to the date
of full acquisition:
Share of profit of equity accounted investments
Investments accounted for using the equity method
CCFA
2021
$m
0.4
-
2020
$m
0.1
1.4
Interest in associate
Vitasoy Australia Products Pty Ltd (Vitasoy)
The interest in Vitasoy was acquired as part of the Lion Dairy and Drinks acquisition. The principal activity of the associate is the manufacture,
marketing and sales and distribution of plant-based beverages. The Group financial statements include the following results of the associate
from the date of acquisition:
Share of profit of equity accounted investments
Investments accounted for using the equity method
Accounting policies applied for associates are described in note 36b.
28. Business combination
VITASOY
2021
$m
0.8
46.6
2020
$m
-
-
Lion Dairy and Drinks
On 25 January 2021 the Group completed the acquisition of 100% of shares in Lion Dairy and Drinks legal entities, renamed Bega Dairy
and Drinks. Bega Dairy and Drinks’ core business is the manufacture, marketing and sales and distribution of Milk Based Beverages,
Yogurt, Chilled Juices, Cream and Custard and White Milk. The results of these entities are included in the Branded segment from the
date of acquisition.
The accounting for the acquisition has been provisionally determined as at 30 June 2021 as the acquisition-date fair value process is well
progressed. Management is continuing to assess the fair value of the opening balance sheet which will result in adjustments to the fair
value attributable to the net assets acquired as reported below.
Provisional fair value
$m
Cash and cash equivalents
Trade and other receivables
Inventories
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments accounted for using the equity method
Deferred tax assets
Trade and other payables
Lease liabilities
Provisions
Deferred tax liabilities
Provisional fair value of identifiable net assets acquired
Purchase consideration:
Cash paid
Adjustment for pre-acquisition ownership in CCFA
Total purchase consideration
Provisional gain on bargain purchase
13.7
229.5
73.8
41.8
487.0
101.3
45.8
19.5
(208.2)
(99.2)
(89.5)
(15.5)
600.0
(528.2)
(4.1)
(532.3)
67.7
90 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 91
Total acquisition-related costs incurred to date are $63.8 million (before tax). The total costs have been incurred in the current financial year. These
acquisition costs are not included in the purchase consideration disclosed above. These costs are included in the Group’s consolidated statement
of comprehensive income for the year ended 30 June 2021 and are disclosed as a significant item (see note 2).
The net cash paid including acquired cash and cash equivalents was $514.5 million.
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS
28. Business combination (cont.)
29. Closed group disclosure (cont.)
A provisional bargain purchase gain of $67.7 million has been recognised in the Group’s consolidated statement of comprehensive income
for the year ended 30 June 2021 as the provisional fair value of the net assets of the acquired business is greater than the consideration paid.
A provisional gain on bargain purchase was recognised given the acquisition-date fair value process is well progressed. The gain will not be
assessable income for tax purposes
The acquisition date fair value of CCFA was $16.4 million, resulting in a gain of $2.3 million on Bega’s existing investment. Property, plant and
equipment and land and buildings were the most significant balances consolidated by the Group in relation to CCFA on acquisition.
The fair value of acquired trade receivables is $225.8 million. The gross contractual amount for trade receivables due is $234.6 million, of which
$8.8 million is expected to be uncollectible.
There were no acquisitions in the year ending 30 June 2020.
29. Closed group disclosure
Entities that are party to a Deed of Cross Guarantee under which each company guarantees the debts of the other are included in note 27.
These companies represent a “closed group” for the purposes of the Instrument 2016/785, issued by the Australian Securities and Investments
Commission. By entering into the deed these entities have been relieved from the requirement to prepare a financial report and Directors’ report
under the Instrument.
The statement of Comprehensive Income and the Balance Sheet for this closed group are shown below:
Profit before income tax
Income tax expense
Profit for the year
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Current tax assets
Other assets
Total current assets
Non-current assets
Financial assets at fair value through other comprehensive income
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Other assets
Intangible assets
Investments accounted for using the equity method
Total non-current assets
CLOSED GROUP
2021
$m
97.7
(25.2)
72.5
CLOSED GROUP
2021
$m
82.5
348.1
1.1
344.9
13.3
37.9
827.8
-
908.5
103.4
4.6
0.1
589.5
46.6
1,652.7
2020
$m
31.0
(9.7)
21.3
2020
$m
22.9
69.5
1.3
257.4
10.7
47.9
409.7
0.7
446.0
8.8
6.7
2.0
548.1
1.4
1,013.7
LIABILITIES
Current liabilities
Trade and other payables
Other liabilities
Derivative financial instruments
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Other liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
Unrecognised items
CLOSED GROUP
2021
$m
477.1
42.8
2.1
25.5
18.4
118.6
684.5
391.9
79.1
0.5
24.5
44.4
540.4
1,224.9
1,255.6
867.7
24.9
363.0
1,255.6
2020
$m
233.3
20.1
0.1
3.0
-
49.5
306.0
247.2
8.3
-
2.9
45.0
303.4
609.4
814.0
480.5
20.8
312.7
814.0
30. Contingent liabilities
The Group enters into product supply agreements with ongoing requirements to reconcile to specific contractual terms (see note 14). Contingent
liabilities may arise where completion of the reconciliation process subsequent to a reporting date results in a payable greater than the amount
accrued. The Group is currently subject to separate legal actions by Fonterra (see note 1), the outcome of which is uncertain at the date of this
report. Based on all available information and professional advice, management considers there are no significant contingent liabilities at 30 June
2021. The Group has bank guarantees as at 30 June 2021 totalling $19.1 million (2020: $6.1 million).
31. Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Plant and equipment - payable within one year
CONSOLIDATED
2021
$m
9.1
2020
$m
4.7
Total assets
2,480.5
1,423.4
92 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 93
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 32. Subsequent events
The financial impact of the transactions set out below which occurred after 30 June 2021 has not been recognised in these financial statements.
33. Related party transactions (cont.)
A. Terms and conditions of related party transactions
Transactions between the Group and related parties are conducted on normal commercial terms and conditions.
B. Related party transactions with group entities
Details of transactions between the Group and other related parties are disclosed below. During the year until full acquisition, the Group had the
following transactions with CCFA:
Payments made by the Group during the year
Sales made by the Group during the year
Amounts outstanding at year end
Amounts receivable at year end
A. Dividend
On 27 August 2021, the Directors declared a final fully franked dividend of 5.0 cents per share, which represents a distribution of $ 15.1 million.
The Group’s Dividend Reinvestment Plan (DRP) will be activated for the FY2021 final fully franked dividend. The DRP is optional and offers
ordinary shareholders in Australia and New Zealand the opportunity to acquire fully paid ordinary shares without transaction costs. Shares
allocated under the DRP will be derived from new issued ordinary shares. The shares issued rank pari passu with other ordinary shares already
on issue. The allocation price will be determined in accordance with the DRP rules as the arithmetic average of the daily volume weighted average
market price of all Bega Cheese Limited shares sold through a normal trade on the ASX trading system over the five business days commencing
on the day of the record date.
A shareholder can elect to participate in or terminate their involvement in the DRP at any time. Election notices for participation in the DRP in
relation to the FY2021 final fully franked dividend to be paid on 24 September 2021 must be recorded by the registry by 5:00 pm on 3 September
2021 to be effective for that dividend.
Further details
33. Related party transactions
Sales made to CCFA
Rent paid by CCFA to Bega Cheese
Amounts payable by CCFA to Bega Cheese at period end
After completion of the BDD acquisition, the Group had the following transactions with Vitasoy:
Sales made to Vitasoy by BDD
Management fees paid by Vitasoy to BDD
Other charges paid by Vitasoy to BDD
Dividend paid by Vitasoy to BDD
Further details of the joint venture and associate are included in note 27.
CONSOLIDATED
2021
$m
4.0
0.1
-
CONSOLIDATED
2021
$m
5.0
2.3
3.5
1.0
2020
$m
8.1
0.2
1.9
2020
$m
-
-
-
-
C. Key management personnel remuneration and transactions
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Share-based payments
Total employee benefits
CONSOLIDATED
2021
$
2020
$
3,640,776
2,879,082
153,479
410,723
241,322
4,446,300
146,965
107,975
(193,881)
2,940,141
During the year, some KMP and their related entities engaged in related party transactions with Bega Cheese Group relating to the supply of milk
and sale of peanuts. These transactions were on the same normal commercial terms as other suppliers and customers and are summarised in
the table below:
CONSOLIDATED
2021
$
2020
$
5,610,521
8,440,785
406,130
255,893
50,707
344,374
521,141
34,768
CONSOLIDATED
2021
$
2020
$
Further details of key management personnel remuneration are disclosed in the Remuneration Report.
34. Remuneration of auditors
Audit services
PwC Australia - Audit and review of financial statements
1,467,270
870,261
Non-audit services
PwC Australia - Other services
PwC Australia - Assurance services
853,000
929,000
38,250
-
From time to time the Group may engage PwC Australia on assignments additional to the statutory audit duties where their experiences with the
Group is important, provided such assignments do not give rise to a potential conflict of interest. During the current year PwC provided non-audit
services relating to the Acquisition of BDD, GST compliance, tax compliance and share schemes.
35. Share-based payments
Expenses arising from Bega Cheese Limited Long-Term Incentive and Short-Term Incentive Plans
The Long-term Incentive Plans (LTIs) are designed to provide long-term incentives to the CEO and executive team to deliver shareholder
returns. Under the 2019-2021 LTI Plan (2021 Plan), the 2020-2022 LTI Plan (2022 Plan) and the 2021-2023 LTI Plan (2023 Plan), each
member of the executive team is granted share rights which only vest if certain performance standards are met.
The total number of performance rights outstanding at 30 June 2021 was 646,341 (2020: 349,081). The 2021 Plan did not vest, resulting
in a write-back of amounts expensed in previous years.
Certain executives and staff have been awarded Short-term Incentive (STI) payments that will be partly made in the form of Bega Cheese
Limited Shares.
Details of the movements in LTI performance rights are disclosed in the Remuneration Report.
94 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 95
BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 35. Share-based payments (cont.)
36. Summary of significant accounting policies (cont.)
Entitlements due under employee share schemes
Expense/(benefit) in relation to LTIs and STIs
Total employee share scheme expense/(benefit)
CONSOLIDATED
2021
$
6.4
6.4
2020
$
(0.8)
(0.8)
The movement on the share-based payment reserve is included in the Consolidated Statement of Changes in Equity.
36. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Bega Cheese
and the entities it controlled at year end or from time to time during the financial year. Bega Cheese is domiciled in New South Wales and is
incorporated in Australia.
The financial statements were authorised for issue by the Directors on 27 August 2021. The Directors have the power to amend and re-issue the
financial statements.
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 (AASB), and the Corporations Act 2001. Bega Cheese is a for-profit entity for the purpose of
preparing the financial statements and is a company limited by shares.
Compliance with IFRS
The consolidated financial statements of Bega Cheese also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Critical accounting estimates
The preparation of financial statements in conformity with Australian Accounting Standards 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. Areas where
assumptions and estimates are significant to the financial statements are disclosed in note 23. Certain items in the Consolidated Statement of
Cash Flows have been reclassified in the prior period to better reflect their nature as operating activities rather than investing activities.
B. Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bega Cheese (Company or parent entity) as at
30 June 2021 and the results of all subsidiaries for the year then ended. Bega Cheese and the entities it controlled together are referred to in this
financial report as the ‘Group’ and the ‘consolidated entity’.
Subsidiaries are all 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.
The acquisition method of accounting is used to account for business combinations by the Group. Intercompany transactions, balances
and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Joint ventures and associates
Interests in joint ventures and associates are accounted for using the equity method, after initially being recognised at cost in the consolidated
balance sheet. The interest in joint ventures and associates are accounted for using the equity method after initially being recognised at cost in the
consolidated balance sheet. Under the equity method of accounting, joint ventures and associates are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of post-acquisition profits or losses of the joint venture or associate in profit or loss, and the Group’s
share of movements in other comprehensive income of the joint venture or associate in other comprehensive income. Distributions received or
receivable from joint venture and associate are recognised as a reduction in the carrying amount of the investment.
Early adoption of standards
The Group has elected not to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2020.
Details relating to the joint venture and associates are set out in note 27.
Adoption of new standards
There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future
reporting periods and on foreseeable future transactions.
Change of accounting policy - Software-as-a-Service (SaaS) arrangements
During the year ended 30 June 2021, the Group revised its accounting policy in relation to configuration and customisation costs incurred in
implementing Software-as-a-Service (SaaS) arrangements with cloud providers. The change in accounting policy resulted from the implementation
of agenda decisions issued by the IFRIC Interpretations Committee (IFRIC) clarifying its interpretation of how current accounting standards apply
to these types of arrangements.
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application over the contract period.
The Group previously capitalised costs incurred in configuring or customising SaaS arrangements as intangible assets, as the Group considered
that it would benefit from those costs to implement the SaaS arrangements over the software’s useful life.
The treatment set out in the IFRIC agenda decision requires that the costs incurred can only be recognised as an intangible asset if the
implementation activities create a separate resource that the entity controls. Costs that do not result in intangible assets are recognised as
operating expenses when the services are received.
As a result of this change in accounting policy, the Group has determined FY2021 costs totalling $2.1 million relating to the configuration and
customisation of SaaS arrangements would need to be expensed as the amounts paid did not create separate intangible assets controlled by
the group.
The change in policy has been applied retrospectively and no comparative information has been required to be restated.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and
liabilities (including derivative instruments).
C. Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker. The Chief
Operating Decision Maker, who are responsible for allocating resources and assessing performance of the reporting segments, are the
Executive Chairman, the Chief Executive Officer and the Chief Financial Officer.
D. Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Bega Cheese and its subsidiaries’ functional and
presentation currency.
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, except when they are deferred in equity as
qualifying cash flow hedges.
96 | BEGA CHEESE LIMITED 2021
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 36. Summary of significant accounting policies (cont.)
36. Summary of significant accounting policies (cont.)
E. Revenue recognition
Revenue is recognised to the extent that the Group satisfies a performance obligation where control of the goods or services passes to the
customer, and the transaction price can be readily identified. Revenue is measured at the agreed price being the amount to which the entity
expects to be entitled in exchange for goods and services. Amounts disclosed as revenue are net of returns, trade allowances, rebates and
amounts collected on behalf of third parties.
Judgement is used in assessing revenue from customers under product supply contracts that require a periodic reconciliation to specific terms of
those contracts. From time to time there may be differences of opinion between the Group and the customer as to the amount receivable under
the contracts. Such differences are usually resolved amicably between the parties having regard to the relevant contract.
Advertising of Bega-owned retail brands in conjunction with certain customers where the Group has some control over the way the money is
invested, and a similar service could be provided by another party, the cost of this activity has been recognised separately as an advertising
expense, consistent with prior periods.
The Group does not have any contracts where the period between the transfer of the promised product or services to the customer and payment
by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction prices for the time value of money.
Revenue is recognised for the major business activities as follows:
Sale of goods and disposal of assets
Revenue from the sale of goods and disposal of other assets is recognised at a point in time when the Group has passed control of promised
goods or assets to the customer. Transfer of control to the customer occurs when the product has been shipped to the location specified by the
customer and the customer accepts the product. The delivery terms include cost and freight (CFR) and cost, insurance and freight (CIF). These
terms mean the Group is responsible for providing shipping services up until the date at which control of the goods passes to the customer. The
Group assesses these sales at December and June reporting period and adjusts for those where control has not transferred to the customer.
Rebates and sale incentives to customers that have variable consideration are only included in revenue when it is highly probable that the inclusion
will not result in significant adjustments in the future.
The Group procures some ingredients from customers which are used to produce finished goods sold to the same customers. Payments for these
ingredients are offset against the revenue earned from those customers where the payments are not deemed to be for distinct goods or services
as defined in the standard. The Group has not recognised the ingredients purchased from customers as inventory, instead recognising the items
in other assets.
Services
Revenue from services relating to certain production agreements with customers is recognised over time in the reporting period in which the
performance obligation is met.
Royalties and rental revenue
Revenue is recognised over time on an accruals basis in accordance with the substance of the relevant agreement. Royalties and licence fees for
use of its brand names with customers is recognised when the performance obligation is satisfied (for the use of intellectual property).
Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
Dividends
Dividends are recognised as revenue when the right to receive payment is established.
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 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 deducted from the cost of the asset and are credited to profit or
loss on a straight-line basis over the expected lives of the related assets.
G. Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax
rate 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.
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, the deferred income tax is not recognised if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
reporting date 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 for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. 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.
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. 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 fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration
arrangement and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred. 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. On an acquisition-by-acquisition basis, the
Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable
assets acquired is recorded as goodwill. If the fair value of the net identifiable assets acquired exceeds the consideration transferred this amount
is recognised immediately as a gain on bargain purchase in the Consolidated Statement of Comprehensive Income.
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.
Impairment of assets
I.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows that are
largely independent of the cash flows from other assets or groups of assets or cash generating units (CGUs).
The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Fair value measurement is covered by AASB 13 and defines fair value of an asset as the price that
would be received to sell the asset in an orderly transaction between market participants at the measurement date. The Group uses a discounted
cash flow model to assess the value in use for impairment testing purposes of its CGUs.
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 36. Summary of significant accounting policies (cont.)
36. Summary of significant accounting policies (cont.)
The Group uses discounted cash flow modelling to assess the value in use for impairment testing. The estimated future cash flows are based on
reasonable underlying financial and operational assumptions at the time including having regard to each of:
•
recent actual historical performance
• business plans, budgets and other forecasts reflecting the short to medium-term outlook
•
strategic plans defining the longer-term outlook and strategy approved for the business and related identifiable intangible assets.
The future cash flows are discounted to their present value using a discount rate reflecting the appropriate weighted average cost of capital based
on capital market conditions, risk free rates, underlying growth rates and the risks specific to the asset at the time of the assessment. Key cash
flow and discount rate assumptions are based on management judgement and also refer to external data and input from independent experts
as required.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting period.
J. Cash and cash equivalents
For the purpose of presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash on hand and deposits
held at call with financial institutions. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
K. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days.
Collectability of trade receivables is reviewed on an on-going basis. Debts that are known to be uncollectible are written off by reducing the
carrying amount directly.
A loss allowance provision (allowance for impairment of trade receivables) is recognised for the lifetime expected credit losses from trade
receivables. The loss allowance considers the impact of past events including historical loss rates, and exercises judgment over the impact
of current and future economic conditions when considering the recoverability of outstanding trade receivable balances at the reporting date.
Subsequent changes in economic and market conditions may result in the loss allowance provision increasing or decreasing in future periods.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency
in payments are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss within administration expense. When a trade receivable for which an impairment
allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against administration expense in profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
• The rights to receive cash flows from the asset have expired
•
The Group 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 transferred substantially all the risk
and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risk and rewards of the asset, but has
transferred control of the asset.
When the Group transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to
what extent it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset
is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
L. Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on hand by the method
most appropriate to each particular class of inventory, with the majority being valued on a first in first out basis. Milk is valued at average annual
cost, including committed price increases in respect of the reporting period.
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 or other appropriate cost allocation apportionments.
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.
M. Other assets
Other assets
The Group procures some ingredients from customers which are used to produce finished goods sold to the same customers. Payments for
these ingredients are offset against the revenue earned from those customers where the payments are not deemed to be for distinct goods or
services as defined in the standard.
The Group has not recognised the ingredients purchased from customers as inventory, instead recognising the items in other assets.
Prepayments
The Group recognises upfront payments to suppliers for exclusive supply as a prepayment on the balance sheet. The prepayments are amortised
on a straight-line basis over the period of exclusive supply. The Group mitigates the credit risk of direct milk suppliers through management of
payables to the suppliers.
N. Investments and other financial assets
Loans and receivables
The Group classifies its investments in the following categories: loans and receivables and financial assets at fair value through other comprehensive
income financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
included in current assets, except for those with maturities greater than 12 months after the reporting date that are classified as non-current
assets. Loans and receivables are included in trade and other receivables (note 8) in the balance sheet.
Loans and receivables are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition of the financial
asset. They are subsequently carried at amortised cost using the effective interest method. They are derecognised when the rights to receive
cash flows from them have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and
FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the
group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of
the receivables, see note 24 for further details.
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 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, 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.
Financial assets at fair value through other comprehensive income (FVOCI)
Certain shares held by the Group are classified as being financial assets at fair value through other comprehensive income (FVOCI) and are stated
at fair value. Fair value is determined in the manner described in note 23. Gains and losses arising from changes in fair value are recognised
through other comprehensive income with the exception of impairment losses that are recognised directly in profit or loss. Where the investment is
disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in reserves is included in profit or loss for the period.
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 36. Summary of significant accounting policies (cont.)
36. Summary of significant accounting policies (cont.)
O. Derivatives and hedging activities
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including
forward foreign exchange contracts and options. The Group does not enter into derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value
at the end of each reporting period. The accounting for subsequent changes in fair value assumes that the derivative is designated as a hedging
instrument and depends on the nature of the item being hedged.
At the inception of the hedge relationship the Group documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and
on an on-going basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting
changes in fair values or cash flows of the hedged item.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 24. Movements in the hedging reserve
in shareholders’ equity are shown in the Consolidated Statement of Changes in Equity. The full fair value of a hedging derivative is classified as a
non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and otherwise as a current asset or liability.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss
within other income or administration expenses.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for instance, when the
forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export
sales is recognised in profit or loss within “revenue”. However, when the forecast transaction that is hedged results in the recognition of a non-
financial asset (for example, inventory or fixed assets) the gains and losses previously deferred in equity are transferred from equity and included
in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the
case of inventory, or as depreciation in the case of fixed assets.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit
or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
reclassified to profit or loss.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any
changes in the fair value of the hedged items that are attributable to the hedged risk. The gain or loss relating to the ineffective portion is
recognised in profit or loss within other income or administration expenses.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective
interest method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.
P. Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of the items. Cost may also include any gains/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 replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net
of their residual values, over their estimated useful lives, as follows:
• buildings, 10 to 50 years
• plant and equipment, 2 to 30 years.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in profit or loss.
Q. Leases
The Group leases various Buildings (Offices and Warehouses), Motor Vehicles and Equipment (Forklifts and Other Equipment). The building rental
agreements are generally for fixed periods between 2 and 20 years with options to extend for further 1 to 10 years. Other lease contracts are
typically made for fixed periods of between 2 and 10 years. Leases identified as Short term (12 months or less) and low value will continue to
be recognised in the profit or loss as a lease expense. Lease terms are negotiated on an individual bases and contain a wide range of different
terms and conditions.
Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non lease
components when possible, however for real estate for which the group is lessee, it has elected not to separate and includes all non lease
components as a single lease component.
Lease liabilities are recognised by the Group at the commencement date of the lease and are measured at the present value of lease payments
to be made over the lease term. Lease payments include fixed payments and variable lease payments that depend on an index or rate. Lease
payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The incremental borrowing rate is used unless the implicit interest rate in the lease is readily determined. The lessee’s incremental borrowing rate
is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset
in a similar economic environment with similar terms, security, and conditions. Determining the incremental borrowing rate requires significant
judgement. The discount rate is derived from key external market-based rates, the Group’s credit margin, location of the asset and the length of
the lease.
Right-of-use lease 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 lease 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 incentive received. Right-of-use lease assets are depreciated on a straight
line basis in the profit or loss over the lease term.
R. Intangible assets
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets.
Goodwill is not amortised but 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 related to that entity.
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.
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 36. Summary of significant accounting policies (cont.)
36. Summary of significant accounting policies (cont.)
Brands and other identifiable intangible assets
Brands and other identifiable intangible assets purchased by the Group are initially recognised at cost, or at their fair value if acquired as part of
a business combination.
U. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be
required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
These identifiable intangible assets are subsequently measured:
•
if they have a finite life, at cost less amortisation, and
•
if they have an indefinite life, at cost less accumulated impairment losses.
Finite life brands or other identifiable intangible assets are amortised on a straight-line basis over the shorter of their contractual or useful
economic life, being three to 25 years. They are also tested for impairment when an indicator of impairment may exist.
Indefinite life identifiable intangible assets are not amortised but are instead tested for impairment annually, or more frequently if there is an
indicator of impairment. Brands or other identifiable intangible assets are determined to have an indefinite life where there is an intention to
maintain and support the brand or other intangible asset for an indefinite period.
Such assets are tested for impairment in accordance with the policy stated in note 36j.
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application over the contract period.
As such the Group does not receive a software intangible asset at the contract commencement date. For SaaS arrangements, the Group
assesses if the contract will provide a resource that it can control to determine whether an intangible asset is present. If the Group cannot
determine control of the software, the arrangement is deemed a service contract and any implementation costs including costs to configure or
customise the cloud provider’s application software are recognised as operating expenses when incurred.
Costs incurred to obtain access to the cloud provider’s application software are generally recognised as operating expenses when the services
are received.
Costs incurred for the development of software code that enhances, modifies or creates additional capability to existing for on-premise are
capitalised if it meets the recognition criteria for an intangible asset.
Certain internal and external costs directly incurred in acquiring and developing software are capitalised if it they meet the recognition criteria of
an Intangible asset and are amortised on a straight-line basis over their estimated useful lives, being 3 to 10 years.
Capitalised costs are tested for impairment when an indicator of impairment exists.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the
acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
S. Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid. 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.
Borrowings
T.
Establishment fees are capitalised against borrowings and amortised over the period of the facility to which it relates. Should it be probable
that the facility will not be fully utilised, the related establishment fees are written off to profit and loss as soon as the underutilisation has been
identified.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
after the reporting date.
Borrowing costs are expensed as incurred unless they relate to significant qualifying assets.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking
into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an
asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the
Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it.
Restoration provisions
Provisions for the costs to restore (make good) leased plant assets to their original condition, as required by the terms and conditions of the lease, are
recognised when the obligation is incurred, either at the commencement date or as a consequence of having used the underlying asset during a particular
period of the lease, at the directors’ best estimate of the expenditure that would be required to restore the assets. Estimates are regularly reviewed and
adjusted as appropriate for new circumstances.
Restructurings
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation
in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both
necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.
V. Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and vesting sick leave that are expected to be settled 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 liability for accumulating sick leave and annual leave is recognised
in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees
render the related service is recognised in the provision for employee benefits and 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. 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 on high quality corporate bonds with terms to maturity
that match, as closely as possible, the estimated future cash outflows.
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 date, regardless of when the actual settlement is expected to occur.
Retirement benefit obligations
All employees of the Group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death. All employees receive fixed
contributions from the Group and the Group’s legal or constructive obligation is limited to these contributions.
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS 36. Summary of significant accounting policies (cont.)
36. Summary of significant accounting policies (cont.)
Share-based payments
The fair value of rights granted under the Bega Cheese Limited Long-Term Incentive Plan is recognised as an employee benefit expense with
a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the rights granted at the
beginning of the scheme, which includes any market performance conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of performance rights that are expected to vest. The total expense
is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of
each period, the entity revises its estimates of the number of performance rights that are expected to vest based on the non-marketing vesting
conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit sharing based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a liability where contractually obliged or where there
is a past practice that has created a constructive obligation.
W. Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds.
X. 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.
Y. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary
shares outstanding during the financial year.
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
•
the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
Z. Research and development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset
can be recognised, development expenditure is recognised as an expense in the period as incurred.
AA. 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 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.
AB. Rounding of amounts
The Company is of a kind referred to in 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 hundred thousand dollars, or in certain cases, the nearest dollar.
AC. Parent entity financial information
The financial information for the parent entity, Bega Cheese, disclosed in note 26 has been prepared on the same basis as the consolidated
financial statements, except as set out below:
i.
ii.
Investments in subsidiaries and joint venture entities
Investments in subsidiaries and joint venture entities are accounted for at cost in the financial statements of Bega Cheese.
Dividend income
Dividends receivable from subsidiaries and joint venture entities are included in Bega Cheese’s income statement.
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BEGA CHEESE LIMITED 2021 | NOTES TO THE FINANCIAL STATEMENTS Director’s Declaration
Independent Auditor’s Report
In the Directors’ opinion
a.
the financial statements and notes set out on pages 58 to 107
are in accordance with the Corporations Act 2001, including
Note 36a confirms that the financial statements also comply
with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
i.
ii.
complying with Accounting Standards, the
Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
The Directors have been given the declarations by the
Chief Executive Officer and Chief Financial Officer required
by section 295A of the Corporations Act 2001.
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
This declaration is made in accordance
with a resolution of the Directors.
b.
there are reasonable grounds to believe that
the Group will be able to pay its debts as and
when they become due and payable, and
c.
at the date of this declaration, there are reasonable grounds
to believe that the members of the extended closed Group
identified in note 27 will be able to meet any obligations or
liabilities to which they are, or may become, subject by virtue
of the deed of cross guarantee described in note 27.
Barry Irvin
Executive Chairman
Bega
Raelene Murphy
Independent Director
Melbourne
27 August 2021
Independent auditor’s report
To the members of Bega Cheese Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Bega Cheese Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 30 June 2021
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
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Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
• For the purpose of our audit we used overall Group materiality of $5.1 million, which represents
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit
approximately 0.25% of the Group’s revenue.
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on
the financial report as a whole.
• We chose Group revenue because, in our view, revenue is reflective of the Group's operating activities and
provides a level of materiality which, in our view, is appropriate for the audit having regard to the expected
requirements of users of the Group's financial report.
• We utilised a 0.25% threshold based on our professional judgement, noting it is within the range of
commonly acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
BEGA CHEESE LIMITED 2021 | INDEPENDENT AUDITOR’S REPORT
Key audit matter
How our audit addressed the key audit
matter
Accounting for business combination – Lion
Dairy and Drinks
(Refer to note 28)
Assisted by PwC valuation experts in aspects of our
work, our procedures included the following, amongst
others:
The Group acquired Lion Dairy & Drinks (renamed
Bega Dairy & Drinks) during the financial year for a
total purchase consideration of $528.2 million and
recorded a provisional gain on bargain purchase of
$67.7 million. The details of the acquisition are
disclosed in note 28.
The business combination accounting was a key audit
matter because of the magnitude of the acquisition
and judgement involved in determining provisional
fair values for Bega Dairy and Drinks’ opening
balance sheet.
The Group applied judgement when accounting for
the acquisition, including identifying assets and
liabilities of the newly acquired business and
estimating the fair value of each asset and liability for
initial recognition.
evaluating the Group’s provisional business
combination accounting against the
requirements of Australian Accounting
Standards, key transaction agreements, our
understanding of the business acquired and its
industry and minutes of directors’ meetings.
assessing the fair values of the acquired assets
and liabilities recognised, including:
o considering key assumptions used in the asset
valuations that estimated fair value in light of
historical performance and market data
o considering the valuation methodology in the
asset valuation models in light of the
requirements of Australian Accounting
Standards
o considering the appropriateness and
completeness of provisions recognised
o assessing the competence and capability of
management’s experts
Cloud computing arrangements
(Refer to note 14 and note 36)
At the year end, the Group has recognised software
intangible assets of $57 million and disclosed a
change in accounting policy.
The accounting for cloud computing arrangements
was a key audit matter due to the magnitude of
software costs recognised as intangible assets on the
balance sheet at 30 June 2021 and the judgement
required by the Group in determining an appropriate
accounting treatment in light of the Australian
Accounting Standards and recent IFRIC Agenda
decisions.
assessing the mathematical accuracy of the
Group’s calculation of the resulting provisional
gain on bargain purchase.
considering the adequacy of the business
combination disclosures in note 28 in light of the
requirements of Australian Accounting
Standards.
Assisted by PwC technical accounting specialists in
aspects of our work, our procedures included the
following, amongst others:
evaluating the Group’s previously capitalised
software costs in light of the requirements of
Australian Accounting Standards and recent
IFRIC Agenda decisions.
understanding and assessing the Group’s cloud
computing software arrangements through
reviewing the relevant legal contracts and related
legal advice received.
evaluating management’s assessment to
determine whether software costs should be
derecognised.
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ANNUAL REPORT | 111
BEGA CHEESE LIMITED 2021 | INDEPENDENT AUDITOR’S REPORT
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 36 to 50 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Bega Cheese Limited for the year ended 30 June 2021
complies with section 300A of the Corporations Act 2001.
The carrying value of goodwill and other
indefinite lived intangible assets - Bega Foods
and Bulk
(Refer to note 14)
At the year end, the Group has recognised goodwill
and indefinite lived intangible assets in relation to the
Bega Foods and Bulk cash generating units (CGUs) of
$487.3 million. The Group assesses goodwill and
other indefinite lived intangible assets for impairment
annually at the CGU level.
The carrying value of goodwill and other indefinite
lived intangibles was a key audit matter due to:
The magnitude of the goodwill and indefinite lived
intangible asset balances held by the Group.
The judgement required in determining a change in
the Group’s CGUs.
The judgement required by the Group in assessing
whether an impairment was required.
considering the adequacy of the change in
accounting policy disclosure in note 36 in light of
the requirements of Australian Accounting
Standards.
Assisted by PwC valuation experts in aspects of our
work, our procedures included the following, amongst
others:
obtaining the Group’s value in use models for the
Bega Foods and Bulk CGUs and checking the
mathematical accuracy of the calculations.
considering whether the Group’s determination of
CGUs was consistent with our understanding of the
nature of the Group’s operations and in compliance
with Australian Accounting Standards.
evaluating the Group’s cash flow forecasts included
in the value in use models and the process by which
they were developed, with reference to the
historical performance of the businesses.
comparing the forecasts in the models to the Board
approved budget.
assessing key growth assumptions within the
models for reasonableness with reference to
external market data where possible.
assessing the methodologies and the main
assumptions included in the models. In particular,
comparing the discount and long term growth rates
used in the models with rates generally observed in
the industry.
assessing the sensitivity of the calculations by
varying the key assumptions, using a range of
possible rates.
considering the accounting policies and disclosures
in note 14 in light of Australian Accounting
Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2021, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
112 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 113
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Paddy Carney
Partner
Sydney
27 August 2021
Shareholder Information
The shareholder information set out below was applicable as at 30 June 2021:
Distribution of Equity Securities
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number
7,054
5,243
1,573
1,197
176
15,243
There were 634 holders of less than a marketable parcel of ordinary shares.
Equity Security Holders
The names of the twenty largest holders of quoted equity securities are listed below:
Investor Name
Number of Shares % of Total Shares on Issue
1 Ethical Partners Funds Management Pty Limited
2 FIL Investment Management Australia Limited
3 Vinva Investment Management Limited
4 Dimensional Fund Advisors Limited
5 The Vanguard Group, Inc.
6 Spheria Asset Management Pty Limited
7 Perpetual Limited
8 WAM Capital Limited
9 Vanguard Investments Australia Limited
10 BlackRock Investments, LLC
11 Argo Investments Limited
12 Macquarie Asset Management Holding Pty Limited
13 State Street Global Advisors Australia Limited
14 Norges Bank Investment Management
15 Regal Funds Management Pty Limited
16 Copia Investment Partners Limited
17 First Sentier Investors Realindex Pty Limited
18 AMP Capital Investors Limited
19 Messrs Roy A & Anthony P Medich
20 BlackRock Investment Management (Australia) Limited
17,156,168
15,894,969
14,091,453
10,868,931
8,732,862
7,913,875
7,845,987
7,763,887
6,345,788
5,744,907
5,546,932
5,031,390
4,141,218
4,115,915
3,525,403
3,350,000
3,297,614
2,968,789
2,819,019
2,803,712
5.7
5.3
4.7
3.6
2.9
2.6
2.6
2.6
2.1
1.9
1.8
1.7
1.4
1.3
1.1
1.1
1.1
1.0
0.9
0.9
Total
139,958,819
46.3
*Shareholdings related to KMP including Directors are detailed in the Remuneration Report.
Voting rights
On a show of hands every member present at a meeting in person
or by proxy shall have one vote and upon a poll each share shall
have one vote.
114 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 115
Corporate Directory
Advisors
Auditor
PricewaterhouseCoopers
One International Towers Sydney Watermans Quay
Barangaroo NSW 2000
Solicitors
Addisons
Level 12, 60 Carrington Street
Sydney NSW 2000
Bankers
Rabobank Australia Limited Level 16, Darling Park Tower 3
201 Sussex Street
Sydney NSW 2000
Westpac Banking Corporation 360 Collins Street
Melbourne VIC 3000
Stock Exchange Listing
Bega Cheese Limited shares are listed on the Australian
Securities Exchange (ASX) – Code BGA
Executive Team
Paul van Heerwaarden
Chief Executive Officer
Peter Findlay
Chief Financial Officer
Colin Griffin
Executive General Manager Contract Manufacturing
Mark McDonald
Executive General Manager Beverage Operations
David McKinnon
Executive General Manager Human Resources
Entity Information
Bega Cheese Limited
Directors & Company Secretaries
Directors
Barry Irvin
Executive Chairman
Rick Cross
Director
Harper Kilpatrick
Director
Patria Mann
Independent Director
Peter Margin
Independent Director
Raelene Murphy
Independent Director
Terry O’Brien
Independent Director
Company Secretary
Brett Kelly
Adam McNamara
Executive General Manager Bega Foods
Stephen Rae
Executive General Manager Strategy & Planning
Hamish Reid
Executive General Manager Nutritionals & Ingredients
Antonietta Timms
Executive General Manager Operational Excellence
Darryn Wallace
Executive General Manager Bega Beverages Sales & Marketing
Trading as “Bega Cheese” ABN 81 008 358 503
The Annual Report includes the results of Bega Cheese Limited (Bega Cheese, Company or parent entity) and the results of the subsidiaries,
joint venture and associate. Bega Cheese and its subsidiaries together are referred to in this financial report as the Bega Cheese Group
(Group or consolidated entity).
Principal Registered Office
Share Registry
Reporting Period
Link Market Services Limited Tower 4, 727
Collins Street
Docklands VIC 3008
T: 1300 554 474
This Annual Report is for the year ended
30 June 2021 and is referred to as FY2021
23 Ridge Street
Bega NSW 2550
T: 02 6491 7777
E: admin@bega.com.au
W: www.begacheese.com.au
116 | BEGA CHEESE LIMITED 2021
BRAND SPOTLIGHT
DAILY JUICE
Daily Juice is a nationally distributed chilled fruit and
vegetable juice brand, with an estimated retail sales
of $77m1. Available in a wide range of flavours, Daily
Juice comes in impulse (250ml, 500ml ) and take
home sizes (1, 2 & 3L). Daily Juice has the highest
awareness amongst its competitors at 74%2 and has
grown 9.7% in estimated retail sales over the past
year1. See www.dailyjuice.com.au
1 IRi Total Business Scan (AU Grocery Unweighted +
Structured Convenience), MAT to June 2021
2 Total awareness measure - Nature Brand Tracking June 2021
ANNUAL REPORT | 117
Manufacturing
Footprint
Manufacturing Facilities
Bentley
Salisbury
Koroit
Tatura
Port Melbourne
8
White Milk and
Milk Based Beverages
1
Milk Based Beverages Hub
3
Cheese
2
Dairy Powder and Fats
2
Peanuts
2
Juice
1
Yoghurt
1
Spreads
1
Plant-based – Joint Venture
Malanda
Tolga
Kingaroy
Crestmead
Penrith
Wetherill Park
Smithfield
Leeton
ACT
Bega Lagoon and Ridge Streets
Wodonga
Strathmerton
Morwell
Chelsea
Lenah Valley
118 | BEGA CHEESE LIMITED 2021
ANNUAL REPORT | 119
BEGA CHEESE LIMITED
2021
Annual
Report
A | BEGA CHEESE LIMITED 2021