Corporate Directory
Bellamy’s Australia Limited
ABN 37 124 272 108
ASX Code BAL
Directors
John Ho (Chair)
John Murphy (Deputy Chair)
Rodd Peters
Wai-Chan Chan
Shirley Liew
Principal registered office & Principal administration office
Bellamy’s Australia Limited
115 Cimitiere Street
Launceston TAS 7250
Telephone:
Facsimile:
Internet:
(03) 6332 9200
(03) 6331 1583
http://investors.bellamysorganic.com.au
Company secretary
Melinda Harrison
Location of share registry
LINK Market Services
Level 1, 333 Collins Street
Melbourne VIC 3000
External auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Bellamy’s Australia Limited
1
Contents
Corporate Directory ................................................................................................................................. 1
Contents .................................................................................................................................................. 2
Letter to Shareholders from the Chairman and Deputy Chairman ......................................................... 3
Letter to Shareholders from the CEO ..................................................................................................... 4
Operating and Financial Review ............................................................................................................. 5
Directors ................................................................................................................................................ 10
Executive Team .................................................................................................................................... 11
Directors’ Report ................................................................................................................................... 12
Sustainability Report ............................................................................................................................. 19
Corporate Governance Statement ........................................................................................................ 22
Remuneration Report ............................................................................................................................ 29
Auditor’s Independence Declaration ..................................................................................................... 47
Consolidated Financial Statements ...................................................................................................... 48
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..................................... 49
Consolidated Balance Sheet ................................................................................................................. 50
Consolidated Statement of Changes in Equity ..................................................................................... 51
Consolidated Statement of Cash Flows ................................................................................................ 52
Notes to the Financial Statements ........................................................................................................ 53
Directors’ Declaration ............................................................................................................................ 86
Independent auditor’s report ................................................................................................................. 87
Shareholder Information ........................................................................................................................ 94
Sustainability Information ...................................................................................................................... 96
Bellamy’s Australia Limited
2
Message from the Chair
Letter to Shareholders from the Chairman and Deputy Chairman
28 August 2018
Dear Shareholders,
On behalf of the Board, we present to you the 2018 Annual Report for the financial year ended June 2018.
Last year, we and our fellow directors were focused on stabilising the business with our top priorities being
recruitment and retention of the executive team and completion of the Board renewal process. These were
in part achieved through implementing the 2017 turnaround long-term equity incentive plan.
This year, working closely with the executive team, the Board has focused on the Company’s strategic
direction, the turnaround plan implementation, risk management and establishing a range of targets to
monitor performance and key outcomes. The Board has maintained close operational and financial
oversight to ensure management are challenged to achieve high levels of performance. We remain focused
on building a sustainable business model.
The Board is pleased to report that significant progress has been made in FY18 by management on building
the key foundation capabilities of the business enabled by a way of working that is more agile and
disciplined steadfastly focused on premium organic nutrition and a ’pure start to life’ including.
• development of a comprehensive long-term strategic plan
• embedding revenue management disciplines and reduction in key input and direct costs
•
significant increase in brand building and marketing investment at consumer and channel level
• a step change in people bench-strength, including China capability
• deepening the use of our e-commerce, social and digital media platforms
•
the submission of our application for PRC licence from the State Administration of Market
Regulation (SAMR) (formerly the CFDA)
While there remains much work to be done and challenges to be navigated, we remain focused on
maintaining a culture of transparent communication, thoughtful strategic decision-making and balanced
risk-taking. We acknowledge the importance of our strategic partnerships and continue to deepen and
nurture these relat ionships.
The long-term opportunity for Bellamy’s is immense and this Board has the persistence and patience to
realise the long-term enterprise value creation potential. On behalf of the Board and the team of Bellamy's,
thank you for your ongoing support.
Yours sincerely
John Ho
Chairman
John Murphy
Deputy Chair
Bellamy’s Australia Limited
3
Message from the CEO
Letter to Shareholders from the CEO
28 August 2018
Dear Shareholders,
I am pleased to report that the Bellamy’s turnaround plan continues to demonstrate results in terms of
revenue growth, profitability, cashflow and the balance sheet:
• our sales and EBITDA results met upgraded guidance and set a new high for the business,
delivering a 37% increase in sales and a 65% increase in EBITDA on a normalised basis;
•
•
the 2H18 result included a materially higher gross margin and lower direct costs versus 2H17,
setting the foundation for increased investment in marketing, capability and our products;
the balance sheet has strengthened with $87.6m held in cash, zero debt and $39m in supply-chain
investments including the strategic acquisition of our CNCA licenced Camperdown facility and
establishment of a Tasmanian organic milk pool in partnership with Fonterra.
Beyond the numbers, the business has transformed over the period, in terms of process and disciplines,
but more importantly in terms of culture and capability. Today, Bellamy’s stands for a highly agile,
passionate and commercial culture, underpinned by significantly stronger talent and capability. This is true
at all levels, including the Board, management, in Australia, and most importantly for China.
Having stabilised the business, our team is now focused on a detailed 3 year growth strategy that
recognises the significant opportunity for organic infant nutrition in China and Asia more broadly. Our brand
is a pioneer and market leader in this fast-growing niche, underpinned by an Australian provenance, and
an authentic belief in organic principles and the foundational purpose of ‘a pure start to life’.
The next year will see the rollout of a number of key initiatives in this plan, including a premium brand
refresh that we believe will significantly increase our addressable market and brand equity across all
geographies. Further,
•
•
•
in 1H19 the food range will be refreshed and extended and include ranging in Woolworths in
addition to existing Coles and pharmacy channels;
in 2H19, the formula portfolio will be refreshed, nutritionally enhanced for functional ingredients
DHA, ARA and GOS, extended to include Step 4 and pregnancy products, and will include
Australian fresh milk supply;
to prepare for these important changes and regulatory transition a $6m one-off inventory provision
has been set aside impacting the FY18 statutory profit.
We remain confident in our application for SAMR registration (previously CFDA). This registration
specifically relates to Chinese label product sold exclusively in offline channels in China. While this channel
contributed less than 6% of Bellamy’s sales in FY18, we believe it represents an important future platform
for growth and continue to plan for a winning distribution model pending approval.
Although these initiatives will raise the sights of our business, it will take time to realise the benefits which
are not expected until FY20. In the FY19 year we expect a number of challenges, including the existing
delay in our SAMR registration, slowing China cross-border growth for infant formula, and recent changes
in the availability and trade pricing of our Australian competitors. On this basis, we expect more moderated
growth in FY19 while remaining confident in the medium-term outlook and our 3 year growth strategy.
The potential for our brand and size of the opportunity is clear. The management team remains focused on
executing a long-term premium brand strategy in response.
We thank you for your ongoing support.
Andrew Cohen
Chief Executive Officer
Bellamy’s Australia Limited
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Company Overview
Operating and Financial Review
Bellamy’s is a leading infant nutrition brand in the Australian and Chinese markets. Following a challenging
FY17 year, the stated turnaround plan has delivered tangible results in terms of revenue growth,
profitability, cashflow and the balance sheet.
SAMR registration of Bellamy’s Chinese-label formula is important to concluding the turnaround and
Bellamy’s remains confident in the technical merits of the application and prospects for registration. SAMR
registration specifically relates to Chinese label product sold exclusively in offline channels in China, which
contributed less than 6% of Bellamy’s sales in FY18.
The FY18 year has further built on the restructure of overhead, supply-chain and distribution channels
achieved in 2H17, including the necessary $58m capital raised to fund this restructure and acquire the
China CNCA licenced Camperdown manufacturing facility at the beginning of the period.
A more sustainable business model and profit structure has now been established, underpinned by a
number of key changes:
• Sales and Channels: Sales and distribution channels have been consolidated, leading to stable
trade pricing and margins, the removal of excess trade inventory and stronger price realisation.
• Procurement: Ingredient procurement has been diversified to establish competitive tension with
greater capacity to support growth, while minimising minimum annual volumes (MAV)
commitments.
• Processing: Manufacturing and production decisions have been optimised and our logistics
network has been restructured for lower cost, greater flexibility and a significantly reduced inventory
position and ageing profile.
• Marketing: Investment in marketing and brand is more effective and increased materially. Spend
has been redirected from low ROI agency retainers and media, to integrated brand campaigns and
social activation. Additionally, the development of a future brand refresh and investment in local
China sales and marketing capability has created a strong platform for FY19 investment.
• Supply-chain: Investment, control and the provenance of the supply-chain has also improved,
including the acquisition and integration of the Camperdown facility, establishment and investment
in an Australian organic milk pool, and transition to full control of product intellectual property.
• Portfolio Growth: Finally, a number of important future growth engines have been initiated,
including establishment of a food business unit, pending application for SAMR registration, Vietnam
market entry, and new product development including Step 4 and Pregnancy formulas and the
nutritional enhancement of existing formulas for DHA, ARA and GOS.
Together these initiatives have driven improved growth, profitability, and balance sheet strength. This
includes 37% annual group revenue growth (48% for the Australian label business), a 5.6 percentage point
increase in gross margin percentage for 2H18 versus 2H17, a 65% increase in normalised EBITDA and
cash of $87m with zero net debt.
An important step to finalising the turnaround is transition to refreshed branding, enhanced and extended
product portfolio, country of origin labelling (CoOL) compliant packaging in Australia, and SAMR registered
product in China on approval. To this end, a one-off $6m inventory provision has impacted the statutory
FY18 result and is adjusted for in the normalised earnings table below.
Financial Performance
The Company achieved revenue of $328.7m (FY17: $240.2m), EBITDA of $64.6m (FY17: $1.4m) and
NPAT of $42.8m (FY17: loss of $0.8m). Revenue growth was predominantly volume driven and included
a $8.7m contribution (from external customers) from the Camperdown manufacturing business
(Camperdown).
Bellamy’s Australia Limited
5
Company Overview
Normalised financial performance compares to FY17 in the table below:
Group
$m
Revenue
Gross Profit
Gross Margin %
Other Income
Overhead
EBITDA
EBITDA %
D&A
Net Profit/Loss After Tax
Net Profit %
FY18(1)
Statutory
328.7
128.9
39.2%
One-offs(2) Normalised
328.7
128.9
39.2%
0.6
-64.9
64.6
19.6%
4.3
42.8
13.0%
6.0
6.0
4.2
0.6
-58.9
70.6
21.5%
4.3
47.0
14.3%
Statutory
240.2
91.5
38.1%
0.2
-90.3
-1.4
0.8
-0.8
0.0%
FY17(1)
One-offs(2) Normalised
240.2
91.5
38.1%
41.4
41.4
29.0
0.2
-48.9
42.8
17.8%
0.8
28.2
11.7%
(1) Bellamy’s has followed the guidance for underlying profit as issued by the ASIC regulator guide RG230 ‘Disclosing non-IFRS
information’. The profit and loss summary with a prior period comparison in the table above, has been sourced from the accounts
but has not been subject to separate review or audit. The directors believe that the presentation of the unaudited non-IFRS
profit and loss summary in the table above is useful for users as FY18 and FY17 includes significant items that are not expected
to be repeated in future years. The table reflects the normalised earnings of the business.
(2) Refer Note 6 for details of individually significant items. In FY18, a one-off expense of $6.0m to provide for inventory write-
downs relating to the transition to SAMR registered products in China and CoOL compliant labelling in Australia as reported
above.
Revenue and Profitability
Bellamy’s group revenue grew 37% on FY17. Growth was predominantly driven by volume and a
contribution from Camperdown. Price realisation has improved, with promotional discounts minimised to
support the brand and its premium position.
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
48.9
24.8
24.1
FY14
Revenue ($m)
234.0
240.2
125.3
133.9
121.9
67.0
58.3
100.1
118.3
328.7
153.8
174.9
FY15
FY16
FY17
FY18
1H 2H
Group revenue in FY18 was
$328.7m (FY17: $240.2m).
The core business (which
excludes Camperdown)
revenue was $320.0m
(FY17: $240.2m)
representing an increase of
33.2% growth on prior year.
Camperdown revenue from
external sources was $8.7m.
Camperdown revenue from external customers was $8.7m generating an EBITDA loss for the year of
$1.4m. Importantly, Camperdown EBITDA for 2H18 improved to breakeven with material operational
progress in the last quarter.
Core Business
Revenue growth excluding Camperdown was 33.2%. On a like-for-like basis the Australian label portfolio
including Food grew 24% versus FY17, and Chinese label revenue declined by 51% impacted by delayed
SAMR registration.
Gross profit margin for FY18 was 39.6% (FY17: 38.1%). This increased to 42.5% in 2H18. The margin
increase was driven mostly by lower cost of goods sold from improved ingredient purchasing and
manufacturing arrangements. Stronger revenue management disciplines also contributed, including
reduced promotional discounts and minor price increases.
Bellamy’s Australia Limited
6
Company Overview
Expenses
To enable a more balanced analysis, this commentary refers to comparative costs on a normalised basis.
Overhead costs increased $9.9m (20.2%) on FY17 due primarily to the inclusion of Camperdown overhead
costs of $3.7m plus $3.7m additional investment in marketing in line with our long-term growth plan.
Core Business
Key changes in normalised costs for the core business (excluding Camperdown) are:
• direct costs which include logistics and warehousing costs reduced $1.2m to $14.2m despite a
33.2% increase in revenue (and a similar volume increase). Direct costs reduced to 4.4% of
Revenue (FY17: 6.4%) as distribution logistics were restructured and streamlined;
• marketing investment increased 33.5% and effectiveness improved considerably with a shift to
direct brand investment from agency fees and retainers. Expenditure was 4.6% of Revenue and is
progressing to our target level of +5%;
• employee costs increased $0.6m from FY17 as the investment in capability continues, with a
particular focus on a renewed leadership team and China sales and marketing capability;
• at-risk equity remuneration, issued as part of the turnaround plan, contributed to the cost increase
and is non-cash. Equity remuneration saw an additional increase as the probability of achieving
legacy equity plans (which included non-market conditions) were revised;
• admin & other costs increased $1.4m compared to FY17 reflecting investment in systems and
increases in other costs including insurance.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Total normalised Overhead reduced from 20.4% of Revenue in FY17 to 17.9% in FY18 including
Camperdown.
Normalised EBITDA ($m)
23.3%
10.1%
12.7
4.7%
2.3
17.8%
42.8
23.8
19.0
54.6
35.3
19.3
100.0
80.0
60.0
40.0
20.0
0.0
21.5%
70.6
35.7
34.9
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
FY14
FY15
FY16
FY17
FY18
1H
2H
EBITDA%
Improvements in gross margin
and overhead costs as a
proportion of revenue results
in an increase in the EBITDA
ratio to 21.5% (FY17: 17.8%).
In 2H18, Group EBITDA was
23.2% showing strong growth
over the 19.9% in 1H18.
Core business EBITDA was 22.6% (FY17:17.8%) and was 23.9% in 2H18.
Balance Sheet
Cash at 30 June 2018 was $87.6m (FY17: net debt of $7.8m). The strong cash conversion resulted from
the combined impact of a net profit after tax of $42.8m and net proceeds from the retail tranche of the
capital raise of $45.1m less investments $18.0m, and other working capital improvements.
Inventory reduced $3.0m to $90.5m noting a $4.4m increase in provision. The balance includes $56.9m of
finished goods which represents approximately 4.0 months of sales (FY17: 6.6 months) based on historical
selling rates. The level of inventory fluctuates monthly based on production and sales patterns, however a
level of 4-5 months is considered acceptable in the context of business growth, but has been impacted by
lower than anticipated sales in 2H18 in a more competitive trading environment.
The inventory carrying value is stated net of a provision of $10.0m (30 June 2017: $5.6m).
Bellamy’s Australia Limited
7
Company Overview
Acquisition Accounting
The cost to acquire 90% of Camperdown was $32.1m. The fair value of net tangible assets acquired was
negative $2.5m, and finite life intangible assets were $6.8m. Finitie life intangible assets will be amortised
over 2-3 years. Amortisation of $2.9m was expensed in FY18.
Goodwill is $28.2m as at 30 June 2018.
Cash Flow
Net cash generated from operating activities was $68.2m. This was generated from $42.8m profit after tax
plus other working capital improvements.
Bellamy’s invested $32.1m in Camperdown ($10.5m cash and $21.6m in equity) and $5.5m in the
Tasmanian milk pool and other upgrades. Total investment was $39.0m, $18.0m of which was funded with
cash.
Cash at 30 June 2018 was $87.6m with no debt. Bellamy’s retains a $40m debt facility which is not drawn
on at 30 June 2018.
Manufacturing / Camperdown
Camperdown had its CNCA licence suspended in July 2017. It is normal practice to suspend CNCA
licences while the authority reviews potential non-compliance. The licence suspension was lifted in August
2017 after compliance was re-affirmed. The event resulted in a number of lost orders from external
customers and impacted the 1H18 result resulting in a net EBITDA loss of $1.4m for the half. Operational
improvements and a return to production resulted in a breakeven result for 2H18.
Prior to a capital upgrade Camperdown remains sub-scale and is not expected to contribute incremental
profit to the Group business.
Capital Expenditure
The capital expansion plans are expected to cost $12-15m. It will take more than 12 months to implement
due the pending SAMR registration timelines, equipment ordering lead-times and the need to sequence
the upgrade into the production schedule.
The facility has sufficient production capacity to meet forecast demand of Chinese label product until the
expansion is completed.
SAMR Brand Registrations
As advised, a SAMR registration is required to sell Chinese label products in offline retail stores in China.
The application for this licence was submitted by Camperdown for the Bellamy’s brand in December 2017
and Bellamy’s remain confident it will be achieved.
Camperdown has already received SAMR registration for one other external customer and began
manufacturing SAMR compliant product for this customer in 2H18.
Conditional Acquisition of remaining 10% Shareholding
Bellamy’s will acquire the remaining 10% of Camperdown conditional on the success of the SAMR
application. The transaction structure provides the vendors with continued financial exposure to the
success of Bellamy’s. The original ownership structure retained financial incentive for both former and new
shareholders to collaborate through the ownership and licencing transition phase. This structure has proven
successful, however post SAMR registration is an appropriate time to implement ownership change. The
change provides Bellamy’s with greater flexibility to adapt and manage its manufacturing operations.
The strategic rationale behind the Camperdown acquisition was to provide a pathway to sell to stores in
China post 1 January 2018. This strategic rationale remains intact.
Outlook
Looking forward to FY19, Bellamy’s expects more moderated sales growth and notes the impact of a more
difficult trading environment over the last quarter, including slower Chinese cross-border market growth for
infant formula and a change in the availability, and ecommerce pricing, of Bellamy’s primary Australian and
New Zealand competitors.
Bellamy’s Australia Limited
8
Company Overview
A longer than anticipated delay in SAMR registration will continue to impact Chinese-label formula sales
and consequently given the uncertainty in timing guidance is provided for the Australian label business
only, with a base of $302m in revenue in FY18.
On the basis FY19 Australian label revenue is expected to achieve up to 10% growth on comparative FY18
revenue. FY19 EBITDA to continue at 2H18 normalised levels of between 22-25%. Growth is expected to
be predominantly achieved in 2H19 on the launch of a brand refresh. This revenue growth cycle reflects a
very strong 1H18 with changed trading conditions in 1H19.
The contribution from Camperdown is not expected to change materially in FY19 as the facility upgrade is
undertaken. MAV commitments with manufacturers and suppliers are expected to be in line with FY18.
Both of these considerations have been taken into account in the above guidance.
The medium-term outlook remains compelling, supported by category fundamentals, a differentiated
position, and future channel opportunities.
Strategic focus
Bellamy’s continues to pursue a long-term premium brand strategy, targeting a balanced scorecard of
volume growth and margin expansion over five years. Focus remains on developing the core business to
its full potential in Australia, China, and South East Asia, in the product categories of organic infant and
toddler formula and food. China, through both formal and informal channels, has particular significance to
this growth strategy.
Winning in these markets and categories requires continued investment in brand, distribution channels,
supply-chain and internal capability. The stated key investment themes are broadly outlined below:
Key Strategic Investment Themes:
BRAND MARKETING
AND PRODUCT
TRADE PARTNERSHIPS
AND DISTRIBUTION
STRATEGIC CAPABILITY
(INCL. SUPPLY-CHAIN)
Brand Assets,
Brand Premium &
Packaging
SAMR Registration
& China Offline
Strategic, Flexible
Manufacturing
Local Milk Pools
and Sourcing
Asian Rising Middle
Class Markets
Quality, Traceability
and Block-chain
NPD, Upgrades,
IP and licences
Daigou Relations &
Organic Education
Government and
Regulatory Affairs
Food as an
Incubated Business
Strategic Trade
Partnerships
Capability &
Performance Culture
Bellamy’s Australia Limited
9
Directors and Executive Team
Directors
Board of Directors
John Ho
Non-Executive Chair
(appointed 13 April 2017)
John Murphy
Independent Non-
Executive Director
Deputy Chair
Chair of Remuneration &
Nomination Committee
(appointed 18 May 2017)
Rodd Peters
Non-Executive Director
(appointed 28 February 2017)
John founded Janchor Partners and serves as its Chief Investment Officer. Janchor
Partners is a long-term industrialist investor in companies with superior long-term
value creation potential in the Asia Pacific region. He also serves as Deputy Chairman
of the Hong Kong Exchange Listing Committee, the regulatory body that provides
independent oversight of listing rules and companies in Hong Kong and is a current
director of the ASX listed company, Vocus Communications. John has extensive
business and investment experience in consumer, technology and health related
sectors, especially in Australia and China. He is an Australian citizen and holds a
Bachelor of Science in Mathematics and Bachelor of Commerce in Finance (First
Class Honours and University Medal) from the University of New South Wales.
John has over 35 years’ experience in Australia and internationally in the beverage,
food and packaging industry. He has held numerous senior leadership roles at large
multinational companies, including Managing Director of Coca-Cola Amatil Australia,
CEO of Visy Packaging and Recycling for Australasia and Managing Director of
Fosters Australia/Carlton & United Breweries.
John currently sits on the advisory board of a number of private companies including
PFD Food Services and Bladnoch Distillery, and also advises a range of companies
internationally. He previously served as Chairman of the Lantern Hotel Group.
Rodd has more than 30 years' experience as a commercial transactions lawyer and
litigation lawyer. For the first 7 years of his career he was a barrister and he then
established his own law firm in partnership in 1993. He is admitted as a solicitor of the
Supreme Court of New South Wales and the High Court of Australia. Rodd holds a
Bachelor of Laws from University of Tasmania and also a Master of Laws (Hons) from
Trinity Hall, University of Cambridge.
After being voted onto Bellamy's board at the EGM in February 2017, Rodd oversaw
the initial transition of Bellamy's turnaround plan and Board renewal and thereafter he
has remained as a non-executive director of Bellamy's.
Wai-Chan Chan
Independent Non-
Executive Director
(appointed 28 February 2017)
Wai-Chan was appointed as a Non-Executive Director in February 2017. He brings
25 years of consulting and operating experience in the consumer products and
retailing sectors, with a focus on Asia, in particular China. He advises clients in the
grocery, health and beauty, apparel and food and beverages industries on issues
related to strategy, operations, organisation, and digital.
He currently works for Oliver Wyman where he is a partner and the Global Leader of
the Consumer Goods Practice. He was also previously at the retailer Dairy Farm,
where he was the Regional North Asia Director, responsible for some 2,500 stores
across multiple formats. He was also a partner at McKinsey & Company in Greater
China. Wai-Chan holds a Ph.D. from the University of Cambridge, an M.B.A from the
Harvard Graduate School of Business Administration, and a Bachelor of Science. from
Imperial College, London.
Shirley has over 25 years’ experience in international, listed and world class
organisations in Australia as well as the UK and Asia. She has held senior commercial
finance roles and lead advisory/audit partner roles in top-tier Chartered Accounting
firms, including Grant Thornton and Ernst & Young.
Shirley currently serves on a number of advisory boards and is Chair and non-
executive Director of Outset Group (Amber Tiles Franchise) as well as both non-
executive Director and Committee Chair for audit, finance and risk for each of Lantern
Hotels Group Limited, Amber Group Australia, Hunter United Employees Credit Union
Limited and Bridge Housing Limited. She also serves as independent advisor and
member of various audit and risk committees including Transport NSW Trains and the
NSW Local Health Districts of Central Coast.
Shirley Liew
Independent Non-
Executive Director
Chair of Audit & Risk
Committee
(appointed 13 December
2017)
Bellamy’s Australia Limited
10
Directors and Executive Team
Executive Team
Executive Team
Andrew Cohen
Chief Executive Officer
Nigel Underwood
Chief Financial Officer
Melinda Harrison
General Counsel,
Company Secretary &
Head of Regulatory Affairs
Peter Fridell
Director of Operations
David Jedynak
Director of Sales &
Marketing
Andrew was appointed as Chief Executive Officer in April 2017 having been
appointed as acting Chief Executive in January 2017 and had previously held the
position of Chief Operating Officer and Chief Strategy Officer from July 2016.
Andrew brings extensive experience in grocery, retail and FMCG, including
successful and extensive China go-to-market experience in vitamins, infant formula
and dairy. Prior to joining Bellamy’s, Andrew worked as a Partner with Bain &
Company where he held a leadership role in their Consumer Products and Retail
practice and has over 15 years in the sector in management and consulting roles.
Andrew holds a Bachelor of Commerce and Arts from University of Melbourne and
an M.B.A. from Cambridge University (Dux).
Nigel was appointed as Chief Financial Officer in April 2017, having been appointed
acting Chief Financial Officer of the Group in January 2017. Prior to joining
Bellamy’s Nigel had experience in senior finance roles in several leading companies
and was most recently Chief Financial Officer of transport operator, Keolis Downer.
Nigel holds a M.B.A., is a fellow of the Chartered Accountants Australia and New
Zealand and is a graduate member of the Australian Institute of Company Directors.
Melinda was appointed as General Counsel and Company Secretary in May 2017.
She has over 20 years’ experience in law, risk and governance in listed and privately
held companies both in Australia and internationally. Most recently, Melinda was
General Counsel at Carter Holt Harvey, one of Australia's largest wood
manufacturing business where she lead the legal function in Australia as well as
being chair of the risk committee. Prior to that Melinda held senior legal and
governance roles in a US listed group of companies based in Hong Kong,
conducting significant work in China and throughout Asia. Melinda started her career
in private practice in Corporate Advisory including at King Wood Mallesons. She
holds an M.B.A. (Hons) from the University of Hull (U.K.), a Bachelor of Laws (Hons)
from Melbourne University, a Bachelor of Arts(Hons) from Melbourne University and
recently graduated from the Australian Institute of Company Directors course with
an Order of Merit. She has also completed a certificate of Governance Practice from
the Governance Institute of Australia.
Peter joined Bellamy’s in February 2017. He has fifteen years of strategy,
operational improvement and senior finance experience. Prior to joining Bellamy’s,
he gained extensive fast-moving consumer goods experience as Strategy Director
and Supply Finance General Manager at Carlton & United Breweries. He has
previously worked with A.T. Kearney management consultants and as a mechanical
design engineer. Peter holds an M.B.A. (Dean’s list), INSEAD (France), a Bachelor
in Mechanical & Manufacturing Engineering (first-class honours), University of
Melbourne, and a Bachelor of Commerce, University of Melbourne.
David joined Bellamy’s in July 2016 and was a key advisor during the restructure of
the business. He was appointed as acting Director of Sales and Marketing in
January 2017 and confirmed in the role in June 2017. David has 13 years of
experience in strategy, private equity and venture investing, across both developed
and emerging markets. He has worked as a Principal with Bain & Company where
he focused on consumer/retail businesses, managed investment portfolios focused
on high-growth small-cap businesses and built and advised several tech start-ups.
David holds a Bachelor of Engineering (Mechatronics) and Bachelor of Computer
Science from the University of Melbourne.
Bellamy’s Australia Limited
11
Directors’ Report
Directors’ Report
Your Directors present their report on the consolidated entity consisting of Bellamy’s Australia Limited
and the entities it controlled (the Group, the Company or Bellamy’s) at the end of, or during, the
year ended 30 June 2018 as follows:
1
Information about the Directors
1.1
Names and particulars
The names of the Directors in office at any time during or since the end of the financial year are:
Director
John Ho
Rodd Peters
Wai-Chan Chan
John Murphy
Shirley Liew
Role
Non-Executive Chair
Non-Executive
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (appointed 13 December 2017)
1.2
Directorships of other listed companies
Directorships of other listed companies held by Directors in the 3 years immediately before the end of the
financial year are as follows:
Director
John Ho
Rodd Peters
Wai-Chan Chan
John Murphy
Shirley Liew
Company
-
-
-
Lantern Hotel Group
Lantern Hotel Group
Period of Directorship
-
-
-
2015-2016
2016-current
1.3
Director shareholdings
The following table sets out each Director’s relevant interest in Bellamy’s shares and options as at the date
of this report.
Director
John Ho
Rodd Peters
Wai-Chan Chan
John Murphy
Shirley Liew
Fully paid ordinary shares (No.)
8,752,182
43,600
-
-
-
Share options (No.)
-
36,257
36,257
193,373
20,878
1.Appointed 13 December 2017. Grant of options is subject to shareholder approval at the 2018 AGM.
Refer to the Tables C and D of the Remuneration Report for further details.
1.4
Directors’ Meetings
The number of Directors’ meetings held, and the number of meetings attended during the financial year
were:
Directors
Rodd Peters
Wai-Chan Chan
John Ho
John Murphy
Shirley Liew1
Board of Directors
Attended
A
14
14
14
14
8
Held
B
14
14
14
14
8
A. Number of meetings attended during
the year
B. Number of meetings held during the
time the Directors held office during the
year
1.Appointed 13 December 2017
Attendances at the Audit & Risk Committee and the Remuneration & Nominations Committee meetings
during the financial year were as follows:
Bellamy’s Australia Limited
12
Directors’ Report
Directors
Audit & Risk Committee
Remuneration & Nominations
Committee
Rodd Peters
Wai-Chan Chan
John Ho
John Murphy
Shirley Liew1
1.Appointed 13 December 2017
Attended
A
4
4
4
4
2
Held
B
4
4
4
4
2
Attended
A
1
2
2
2
1
Held
B
2
2
2
2
1
2
Share options granted to senior management
October 2017 Grant
On 2 October 2017, in accordance with the employee Long Term Incentive Plan (as approved by the
shareholders at the AGMon 26 October 2017), the group issued 50,000 conditional vesting options to new
senior management as part of their remuneration.
The exercise price for the 2 October 2017 options grant is $7.82, however the options can only be exercised
if specific performance hurdles are met. These options expire four years after the date of the grant which
should be no later than 2 October 2021.
The holders of these options do not have the right, by virtue of the option to participate in any share issue
or interest issue of the Group or of any other related body corporate.
January 2018 Grant
On 15 January 2018, in accordance with the employee Long Term Incentive Plan (as approved by the
shareholders at the AGMon 26 October 2017), the Group issued 36,585 conditional vesting options to new
senior management as part of their remuneration.
The exercise price for the 15 January 2018 options grant is $10.34, however the options can only be
exercised if specific performance hurdles are met. These options expire four years after the date of the
grant which should be no later than 15 January 2022.
The holders of these options do not have the right, by virtue of the option to participate in any share issue
or interest issue of the Group or of any other related body corporate.
April 2018 Grant
On 20 April 2018, in accordance with the employee Long Term Incentive Plan (as approved by the
shareholders at the AGMon 26 October 2017), the Group issued 38,143 conditional vesting options to
existing senior management as part of their remuneration.
The exercise price for the 20 April 2018 options grant is $20.56, however the options can only be exercised
if specific performance hurdles are met. These options expire four years after the date of the grant which
should be no later than 20 April 2022.
The holders of these options do not have the right, by virtue of the option to participate in any share issue
or interest issue of the Group or of any other related body corporate.
The details of grant of options during the year are set out below:
Directors and KMP
Executive Team
No. of options
granted in FY18
Total No. of
ordinary shares
under option at
30 June 2018
Directors
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew1
-
-
-
-
20,878
-
193,373
36,257
36,257
20,878
Further details about share based
payments to Directors and key
management personnel are included in
the Remuneration Report.
Bellamy’s Australia Limited
13
Directors’ Report
Directors and KMP
Executive Team
No. of options
granted in FY18
Total No. of
ordinary shares
under option at
30 June 2018
KMP Executives
Andrew Cohen
Nigel Underwood
Melinda Harrison
David Jedynak
Peter Fridell
Other executives
-
-
-
-
-
124,728
2,495,720
475,000
200,000
475,000
440,000
993,016
1.Appointed 13 December 2017. Grant of options is subject to shareholder approval at the 2018 AGM.
3
Company Secretary
Melinda Harrison was appointed Company Secretary of Bellamy’s Australia Limited on 5 May 2017, held
the position at the end of the financial year and continues to hold this position.
4
Corporate Governance
Bellamy’s Australia Limited ACN 124 272 108 (Company) and its associated entities are committed to
upholding a high standard of corporate governance. This corporate governance statement sets out the key
features of the Group’s governance framework and practices.
The Group has adopted corporate governance policies and practices which are designed to support and
promote the responsible management and conduct of the Group and that are based on the 3rd edition of
the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX
Recommendations).
The Company was largely compliant with the ASX Recommendations for the year ended 30 June 2018.
The Board believes that its current composition is appropriate for positioning the Company to realise the
significant, long-term opportunities that are available in Australia, China and other markets. However, the
Board will review and consider the Company’s corporate governance practices, including the composition
of the Board, on an ongoing basis with a view to making changes as the Company’s circumstances evolve.
Detailed information regarding the Company’s compliance with the ASX Recommendations is set out in
this Corporate Governance Statement.
This statement is current at 28 August 2018 and has been approved by the Company’s Board. The
Company’s Board and Committee charters, Code of Conduct and various policies referred to in this
corporate governance statement are available on the Corporate Governance section of the Company’s
website.
Refer also to the Corporate Governance Statement below.
5
Principal activities
The Company is an ASX-listed Tasmanian food brand business. The Company offers a range of organic
food and formula products for babies and toddlers. The Company's products are all Australian-made and
certified organic.
The Company offers over 30 products that are tailored to the needs of babies and toddlers.
There were no significant changes to the principal activities during the year.
6
Review of operations
A comprehensive review of operations is set out in the in the front section of this Annual Report under
Operating and Financial Review.
Since the acquisition of Camperdown, the Group has greater ownership and therefore responsibility for
production of infant milk formula. There is also greater risk associated with operating a manufacturing
environment.
Bellamy’s Australia Limited
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Directors’ Report
Changes to licensing requirements in China require infant formula sold in China after 1 January 2018 to be
licensed. Bellamy’s does not yet have its licence to sell Chinese label products within China. Bellamy’s
remains confident of obtaining this licence, however cannot estimate when the application will be assessed
and determined.
7
Events since the end of the financial year
There are no material subsequent events.
8
Future developments
The Group’s strategy is to continue to focus investment, capacity and capability on bringing the core
business of infant formula and baby food in Australia and China to full potential. The Chinese market is
particularly important to the Group due to its size and projected growth rate, driven by demographics and
changing consumer wealth and preferences.
In the near term, the Group is focused on achieving the required SAMR registration to enable importation
and sale of Chinese label product to recommence in China. Bellamy’s will then focus on taking greater
control of its marketing and distribution in China and growing the revenue from Chinese label products sold
in China. Anticipated changes to the distribution model in China will increase revenue and increase
marketing and distribution costs. It is anticipated this will have a neutral impact on profit initially and
contribute to greater long-term profitability.
In the medium term, the priority will be to strengthen the Bellamy’s consumer proposition within the organic
baby food and formula category. This will require investment in both the brand and in updating and
expanding the product range.
The Group is continually evaluating new markets and laying early foundations for longer-term growth
beyond the core business.
Further information about likely developments in the operations of the Group and the expected results of
those operations in future financial years has not been included in this report as the disclosure of the
information is likely to result in unreasonable prejudice to the Group.
9
Risk
Bellamy’s is subject to several risks, which may either individually or in combination adversely affect the
future operating and financial performance of Bellamy’s. Bellamy’s takes a proactive approach to managing
these risks. Bellamy’s has included some examples of risk mitigations in place to assist in managing these.
This section does not purport to list every risk, however provides a selection of risks that may impact future
operating or financial performance.
9.1
‘Chinese label’ product regulatory risk
Government policy and regulation may change and restrict or limit the ability to sell existing product into
key markets. This risk is most pronounced in China’s infant formula market. Currently, the Chinese
government requires a manufacturing facility to be registered with the CNCA and ‘Chinese label’ products
imported and sold in retail channels in China require SAMR (formerly CFDA) registration after 1 January
2018.
Bellamy’s submitted its SAMR application in late December 2017 and is awaiting the outcome of the
assessment. If registration with SAMR is unsuccessful, the valuation of Camperdown will be reassessed
and sales of ‘Chinese label’ infant formula products will be affected. The sale of Bellamy's 'Chinese label'
products accounted for less than 6% of total group revenue in FY18.
In addition, it should also be noted that any future regulatory changes continue to be a business risk.
To mitigate this risk, Bellamy’s:
• acquired the Camperdown manufacturing facility which had its CNCA licence granted in July 2015
with an expected renewal date in July 2019;
lodged its SAMR registration application through Camperdown in December 2017;
•
Bellamy’s Australia Limited
15
Directors’ Report
• will manage the renewal process of Camperdown’s CNCA licence closely;
•
continues to diversify revenues across multiple products, markets and channels.
9.2
‘Australian label’ product regulatory risk
Bellamy’s currently sells 'Australian label' formula through cross border e-commence (CBEC) platforms in
China.
Although the majority of ‘Australian label’ product consumed in China is ‘direct mailed’ and not distributed
through the CBEC channel, if the Group is unable to comply with any future change in regulation relating
to the CBEC channel this may negatively impact financial performance. There is also a risk of future change
to regulations governing the ‘direct mail’ channel. This could include the imposition of taxes and/or
prohibitions or measures taken to constrain the ability to undertake direct mail activity.
To mitigate this risk, Bellamy’s:
continues to educate itself of regulatory changes and routes to market in China;
•
• maintains multi-channel routes to market for the sale of its products in China;
•
•
closely monitors changes to regulation and its compliance with regulatory requirements;
continues to diversify revenues across multiple products, markets and channels.
9.3
Import testing
All food product imported into China is subjected to a sample-based quality testing, known as China
Inspection and Quarantine (CIQ) tests governed by SAMR. Should a product in a shipment fail a CIQ test,
Chinese law prevents the entire shipment from entering China, even if the affected product forms only part
of the shipment. If the Group's products, or third-party products produced by Camperdown, fail a CIQ test,
this could have a material adverse impact on the Group's business, financial performance and operations.
To mitigate this risk, Bellamy’s has:
• maintained rigour around testing its products at several stages including at the ingredient
procurement stage, throughout the manufacturing process and at the finished goods stage;
in addition, Bellamy’s tests formula products at a Chinese state-owned testing lab in China before
CIQ testing.
•
9.4
Brand damage, product quality issues
Any actual or perceived contamination, spoilage or other adulteration, product misbranding, failed product
testing or tampering may lead to a material erosion of the Group's brand reputation in China, regardless of
its merits.
The Group's failure to detect counterfeiting and imitation of its products and trademarks or a failure to
mitigate their impact could result in a material adverse impact to the Group's sales in China.
Publication of reports of contaminated or tainted dairy products by other non-Chinese manufacturers that
supply the Chinese market could negatively impact the Group’s business even if there is no direct
connection with Bellamy’s products. Regardless of merit, such reports could also lead to additional scrutiny
and testing by regulators which could impact the Group's business, financial performance and operations.
To mitigate this risk, Bellamy’s:
continues to maintain high quality controls throughout its supply chain;
•
• partners with certified third-party manufacturers with a proven record of product safety and quality;
• maintains comprehensive product quality audits of suppliers and manufacturers and testing and
batch release procedures;
• actively manages and investigates customer complaints;
•
•
continues to adopt the latest techniques to improve product security;
continues to proactively manage, monitor and enforce IP breaches.
9.5
Complex distribution channels
Sales of the Group’s ‘Australian label’ products to persons in Australia who on-sell to Chinese consumers
via e-commerce and social media platforms cannot reliably be estimated by the Group but is thought to be
substantial and the Group is highly reliant on this channel.
Bellamy’s Australia Limited
16
Directors’ Report
Accordingly, Bellamy’s has an exposure to changes in consumer demand for its products in China. A failure
by Bellamy's to predict or respond to changes in consumer preferences in China or a decrease in demand
for the Group's products in China could materially adversely impact the Group's financial and operating
performance.
To mitigate this risk, Bellamy’s:
•
•
continues to ensure the Group has a deep understanding of end consumers, key channels and
routes to market where possible;
continues to diversify revenues across multiple products, markets and channels including its food
business and direct channels with greater transparency;
9.6
Market concentration and political risk
A material proportion of the Company revenue is derived from sales in China. With any international market,
potential geo-political risks should be considered. To mitigate this risk, Bellamy’s continues to invest into
the local market and enter into other appropriate South East Asian markets, for example, most recently
Vietnam.
9.7
Shortfall payments
Bellamy’s has two material manufacturing agreements that guarantee long-term access to high quality
production facilities in Australia. The two manufacturing arrangements have minimum annual volume
commitments which run for a number of years. Where the Group is not able to fulfil minimum annual volume
commitments, it is required to make production shortfall payments. Some contracts provide rebates for
exceeding specified volumes.
Bellamy’s also enters ingredient supply contracts with minimum volume commitments. Beyond FY19,
shortfall payments may continue over the term of the contacts and could increase or decrease depending
on the level of production.
To mitigate this risk, Bellamy’s actively manages manufacturing commitments between its facilities and
manages production allocation to achieve a variety of outcomes including to minimise shortfall payments.
9.8
Workplace health & safety
Actual or potential harm to all workers and other persons in the workplace could have a reputational and
financial impact on the Group including increase in insurances, penalties and decrease in staff morale and
productivity.
To mitigate this risk, Bellamy’s:
• maintains a robust governance and reporting framework including continuous review of the risk
register for identification of new risks/hazards and mitigation strategies;
• maintains focus on Workplace Health & Safety initiatives and ensure regular stakeholder training;
•
continues to upgrade equipment (where appropriate) to improve automation and reduce manual
handling exposures;
• uses qualified external consultants to review practices and implement continuous improvements.
9.9
Loss of key people
Loss of key management personnel could have a material impact on the Group’s operating and financial
performance during the period until suitable replacements are found.
To mitigate this risk, Bellamy’s:
• ensures effective employee retention strategies including adequate remuneration, appropriate
incentives, culture, employment policies, succession planning and spread of duties are adopted;
• ensures appropriate short and long-term incentive programs are implemented;
• undertakes regular ‘gap’ analysis to continue to build capability and support future growth.
Bellamy’s Australia Limited
17
Directors’ Report
10 Environmental regulations
The Group’s operations are not regulated by any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
11 Dividends
No dividend will be paid with respect to the year ended 30 June 2018 (2017: $nil).
12
Indemnification and insurance of officers and auditors
During the financial year, the Group paid a premium in respect of a contract insuring the directors of the
Group, the Group Company Secretary and all executive officers of the Group and of any related body
corporate against a liability incurred as a director, secretary or executive officer to the extent permitted by
the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted
by law, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate
against a liability incurred as such an officer or auditor.
13 Audit
13.1
Independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 46 and forms part of the Directors’ report for the year ended 30 June 2018.
13.2
Statutory auditors
For the year ended 30 June 2018 PricewaterhouseCoopers (PwC) acted as the Group’s external auditor.
A representative from PwC will be available to the AGMto answer shareholder questions about the conduct
of the audit.
13.3 Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year are
outlined in Note 28 to the financial statements.
The Board of Directors has considered the position and, in accordance with written advice provided by
resolution of the Audit & Risk Committee, is satisfied that the provision of non-audit services, during the
year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 28 to the financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit & Risk
Committee, for the following reasons:
• all non-audit services have been reviewed and ratified by the Audit & Risk Committee to ensure
that they do not impact the impartiality and objectivity of the auditor; and
• none of the non-audit services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants.
14 Rounding of amounts
The Group is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’
Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, related
to the ‘rounding off’ of amounts in the Directors’ Report and the Financial Report. Amounts in the Directors’
Report and Financial Report have been rounded off to the nearest thousand dollars in accordance with that
ASIC Instrument.
Bellamy’s Australia Limited
18
Sustainability
Sustainability Report
Overview
Sustainability Risk Management (Sustainability) is about embracing opportunities and managing business
risks related to non-financial resources. This includes identifying opportunities to reduce dependency on
limited resources, reduce waste in their use, and ultimately reduce the cost to the Group for utilising
precious resources. Sustainability evaluates how fragile environmental assets are managed over the long
term, ensuring an appropriate balance between consumption and conservation. Bellamy’s focus on
sustainability encompasses:
responsible marketplace interactions with suppliers, customers and industry;
• health and safety of employees and customers;
•
• employee diversity and talent;
• environment protection and improvement; and
•
community support
The long-term success of Bellamy’s is impacted by the effective management of Sustainability risks and
on the willingness of stakeholders to continue to support it. This includes an appreciation of the Company’s
relationship with a broad range of stakeholders, including governments, regulators, media, bankers, share
analysts, environmental analysts, non-government organisations, the not-for-profit sector, families of
employees and community organisations which are collectively known as Society.
Bellamy’s believes a Company that successfully balances the competing interests of the Society in which
it operates will foster a favourable public opinion and in return receive a social licence to operate. It is
therefore important that Bellamy’s policies align with and protect that social licence.
Ingredient Production
Bellamy’s only produces certified organic products. Being organic is a lifestyle increasingly understood by
consumers and producers. At its core, organic produce already sets a high benchmark for environmental
sustainability.
The production of organic ingredients requires adherence to stringent sustainable organic farming and
processing practices and standards. Organic farming practices are by their very nature sustainable,
blending farming with the natural environment in which they are produced. The methods and resources
used are designed to have minimal impact on the environment with an emphasis on utilising natural
resources in the most efficient way possible. This is achieved through a focus on livestock welfare,
conservation of energy, carbon emission reduction, soil and water conservation, and production of organic
produce without the use of artificial fertilisers and chemicals.
Supply Chain, Logistics and Production
Bellamy’s takes into account supplier carbon pollution programs and awareness, their policies on emissions
and pollution, their policies on water consumption and contamination, and any corporate exposure to
negative environmental impacts.
As part of the process to ‘onboard’ suppliers, the suppliers’ organic values are evaluated for alignment with
Bellamy’s. Bellamy’s major suppliers have global sustainability and social responsibility programs in place
to ensure the sustainable and ethical sourcing and production of ingredients.
The sustainable nature of organic ingredients is at the heart of Bellamy’s supply chain decisions.
Product safety is the highest priority and Bellamy’s holds an ISO9001 certification. All manufacturers used
have food safety certifications, and employees receive regular and on-going training to ensure the quality
and safety of Bellamy’s products remain uncompromised.
On 21 June 2018, Bellamy’s announced a new strategic arrangement to increase the volume of Australian
organic milk used in the production of infant formula. The initial investment of $5.5m affirms Bellamy’s
commitment to developing the local milk pool in Australia. From a long-term sustainability perspective,
Bellamy’s has committed to take the first 20 million litres of milk from the organic milk pool annually.
Bellamy’s will continue to investigate responsible organic dairy ingredient sourcing options.
Bellamy’s Australia Limited
19
Sustainability
Bellamy’s is focused on improving supply chain and logistics, with an aim to reduce direct costs and
environmental footprint. This is achieved by improved ingredient sourcing and enhancing distribution
channels. The steps currently being undertaken are:
• minimising food miles by sourcing ingredients from local farms before sourcing from other avenues;
• purchase and incorporate more fresh milk which removes one full drying step from the production
cycle, reducing energy usage and carbon emissions;
• minimise double handling by minimising finished good movement during the production cycle
•
between drying, canning and warehousing whenever possible.
continue to encourage and develop tools that enable and encourage Australian farmers to convert
to organic farming and promote an increase in the Australian organic milk pool.
Focusing on the above areas can lead to medium and long term operational cost savings, as well as
contributing to global efforts targeting the reduction of emissions.
Bellamy’s is focused on the energy consumed in the production process. This cost is mostly incurred by
production partners; however, it is acknowledged that energy consumption in the production process
contributes to greenhouse gas emissions and the cost of finished goods. Maintaining a competitive process
for marginal production allocations encourages production partners to contain all costs and create
efficiency in the production process, including improving energy efficiency.
Packaging
Bellamy’s are a signatory to the Australia Packaging Covenant (APC). The APC aims to reduce the harmful
impact of packaging on the environment.
• Formula Packaging: the Bellamy’s formula range packaging is 100% recyclable. The cardboard
box, tin, scoop, lid, label and seal can all be recycled. For FY18 the total amount of packaging
material that could be recycled and avoid landfill was 1,998 tonnes.
• Food Packaging: Bellamy’s understands the importance of incorporating recyclable materials into
packaging, however product safety (within economic bounds) is not to be compromised. The
individual components of the food pouches are recyclable but when the components are cast
together, they are not. Bellamy’s is constantly exploring options to improve this. Due to the
significant cost barriers involved in using alternative recyclable/biodegradable packaging,
Bellamy’s are yet to adopt this change. Bellamy’s is continually monitoring and exploring new
technologies that are both commercially viable and sustainable. For FY18, the total amount of
packaging material that could be recycled and avoid landfill was 192 tonnes.
People
A diverse workplace has employees that can understand, appreciate and advocate for the needs of a
diverse range of customers. A company that encourages diversity is able to recruit, retain and prosper from
the depth of talent available from society.
Bellamy’s Equal Employment Opportunity policy is aimed at attracting and retaining the most highly skilled
employees, providing a safe and flexible work environment, free of discrimination. A risk management
approach is used to remove the factors that limit diversity without compromising valid policies such as
merit-based recruitment or promotion based on performance.
Bellamy's Diversity policy seeks to align Bellamy's management systems with its commitment to continue
to develop a culture that values and achieves diversity in its workforce and on its Board. Bellamy’s is
committed to the development of sustainable and responsible business practices in order to achieve its
diversity objectives.
Bellamy’s employees are encouraged to be brave and think innovatively, with their opinions valued.
Bellamy’s values a patchwork of eccentric diversity that enables it to be positioned in a way to achieve
something great.
Bellamy’s is committed to complying with all legislative workplace requirements, providing on-going
professional development and training, and achieving outcomes that enable Bellamy’s employees to be
the best version of themselves.
Bellamy’s Australia Limited
20
Sustainability
Governance
Bellamy’s defines risk broadly, and it includes a focus on governance, climate change, greenhouse gas
emissions, exposure to Environment, Social and Governance (ESG) obligations, changing stakeholder
perception and customer preferences, legislative changes and water management.
All ESG areas are considered risks and failure to properly address them will compromise the sustainable
growth of the business. The Board has delegated to executive management the responsibility to identify
actual and emerging risks and set in place programs to appropriately mitigate those risks. The Board has
established oversight of these programs through the Audit & Risk Committee who work with the executive
team to determine risk tolerance.
The Risk policy is described in the Corporate Governance Statement of this Annual Report.
Bellamy’s is aware of the potential introduction of the Modern Slavery Bill 2018 (Cth), and although there
is no evidence of modern slavery occurring within the supply chain of Bellamy’s, Bellamy’s will continue to
build a strong governance framework and work with our suppliers and supply chain to gain visibility in this
space.
Our organic supply chain is audited and certified by relevant organic certifying authorities. Bellamy’s will
seek Modern Day Slavery to be included in the assessment criteria used by the certifying authorities.
Community Engagement
Bellamy’s firmly believes in being a responsible corporate citizen and developing lasting and meaningful
engagement with the communities who support it. Bellamy’s has a proud history of donating funds, time
and resources to charities, research and community groups.
Some examples of recent community engagement include:
• Primary sponsorship with the Clown Doctors™ Australia;
• Financial support for the Launceston Tornadoes, a Tasmanian-based women’s basketball team
playing in the South East Australia Basketball League;
• Sponsorship of the Cancer Council Launceston Fun Run Walk; and
• Annual Gold Sponsorship of the Bellamy’s Kid-I-Am event.
Bellamy’s are constantly pursuing community engagement opportunities that align to Bellamy’s values and
have a positive impact on the community.
Continual Improvement
Bellamy’s sustainability program ensures robust protection of future growth, as well as ensuring costs are
not uneconomically exposed to sustainability risk factors.
Bellamy’s will progressively extend coverage of its own sustainability programs, and to the extent
commercially able, seek to align these practices with those of suppliers and production partners.
Additional Sustainability information is provided on page 96.
Bellamy’s Australia Limited
21
Corporate Governance
Corporate Governance Statement
Bellamy’s Australia Limited ACN 124 272 108 (Company) and its associated entities are committed to
upholding a high standard of corporate governance. This corporate governance statement sets out the key
features of the Company’s governance framework and practices.
The Company has adopted corporate governance policies and practices which are designed to support
and promote the responsible management and conduct of the Company and that are based on the 3rd
edition of the ASX Recommendations.
The Company was largely compliant with the ASX Recommendations for the year ended 30 June 2018.
The Board believes that its current composition is appropriate for positioning the Company to realise the
significant, long-term opportunities that are available in Australia, China and other markets. However, the
Board will review and consider the Company’s corporate governance practices, including the composition
of the Board, on an ongoing basis with a view to making changes as the Company’s circumstances evolve.
Detailed information regarding the Company’s compliance with the ASX Recommendations is set out in
this Corporate Governance Statement.
This statement is current at 28 August 2018 and has been approved by the Company’s Board. The
Company’s Board and Committee charters, Code of Conduct and various policies referred to in this
Corporate Governance Statement are available on the Corporate Governance section of the Company’s
website.
Board of Directors
The role of the Board
The Board recognises its overriding responsibility to act honestly, fairly, diligently and in accordance with
the law in serving the interests of the Company’s shareholders as well as its employees, customers and
the community. Under the constitution, the Board is vested with accountability to shareholders for the
management of the Group.
The Board has delegated responsibility for the operation and administration of the Company and Group to
the CEO and executive management. Responsibilities are delineated by formal authority delegations.
Senior executives reporting to the CEO have their roles and responsibilities defined in position descriptions.
The Board’s role, responsibilities, powers, duties and functions and the matters specifically reserved to the
Board or its Committees are detailed in the Board Charter. A copy of the Board Charter is available from
the Company’s website.
Board composition
The Board currently consists of five Non-Executive Directors, of whom three are independent Non-
Executive Directors (including the Deputy Chairman). Details of each director, including the skills,
experience, relevant expertise and period of office, are disclosed on page 10.
The Board considers that individually and collectively the Directors bring a level of skill, knowledge and
experience that enables the Board to discharge its responsibilities effectively. The following table
summarises the key skills and experience of the directors:
Skills/Experience
Governance
Accounting/Audit
Finance/Banking
Risk/Compliance
Strategy
Crisis Management
Internal Business focus on China/Asia
Food Manufacturing
Brand/Marketing
FMCG/Retail
Logistics
Legal
Human Resource Management and Remuneration
Number of Directors
4
3
4
4
4
3
4
2
3
2
2
1
3
Bellamy’s Australia Limited
22
Corporate Governance
The Board, with the assistance of the Remuneration & Nominations Committee, periodically reviews the
mix of skills, expertise and experience of the Board and considers whether the composition and
membership remain appropriate to meet the Board’s objectives. The Board has determined that together
the directors possess a comprehensive mix of skills, expertise and experience to discharge its
responsibilities.
Director independence
Currently, a majority of directors on the Board are independent Non-Executive Directors.
The Board considers that the Deputy Chairman, John Murphy, Wai-Chan Chan and Shirley Liew are each
independent. The Chairman, John Ho, as well as Rodd Peters are not independent as they are nominees
of substantial shareholders of the Company, Janchor Partners and Black Prince Private Foundation
respectively.
Accordingly, while the Board complies with Recommendation 2.4 (which recommends that a majority of the
Board should be independent directors) it does not comply with Recommendation 2.5 (which provides that
the chair should be independent).
The Board considers that John Ho and Rodd Peters each bring objective and independent judgement to
Board deliberations and add significant value to the Board given their experience and skills. John Ho is an
experienced investor with extensive international business expertise, including in relation to the Australian
and Chinese markets. Rodd Peters is an experienced lawyer with many years of practice in commercial
law, litigation and compliance.
John Murphy was appointed to the Board and elected Deputy Chairman on 18 May 2017. The creation of
the Deputy Chairman role reflects the Board’s commitment to ensuring that there is active participation from
independent directors in the leadership of the Board (recognising that the Chairman is not an independent
director). Each director (except Shirley Liew who was appointed this year) stood for election at the 2017
AGM and was elected.
Director
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew
Role
Chair, Non-Executive Director
Deputy Chair, Non-Executive Director
Chair of Remuneration & Nominations Committee
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chair of Audit & Risk Committee
Independence
Not independent
Independent
Independent
Not independent
Independent
Further detail is contained in the Board Charter.
Director selection, nomination and appointment
The Board will continue to consider Board renewal and succession planning on an ongoing basis and is
focused on identifying suitable candidates for further appointments to the Board.
The Company’s process for the selection, nomination and appointment of Directors involves a formal
selection process undertaken by the Board, with the assistance of the Remuneration & Nomination
Committee.
The Board establishes criteria about the general qualifications and experience as well as the specific
qualifications that a candidate should possess.
Appropriate checks on any potential candidates are conducted before a person is appointed by the Board
or put forward to shareholders as a candidate for election as a Director.
The Company provides formal letters to all new Directors and senior executives setting out the key terms
and conditions of their appointment.
Shareholders are provided with all material information in the Company’s possession that is relevant to a
decision on whether to elect or re-elect a Director in the notice of AGM.
Further detail is contained in the Remuneration & Nomination Committee Charter.
Bellamy’s Australia Limited
23
Corporate Governance
Induction and ongoing professional development
The Remuneration & Nomination Committee is responsible for formulating the induction process in respect
of new directors and the review of the same, alongside the development of any programs or identification
of any opportunities necessary to ensure the directors develop and maintain the skills and knowledge they
require to fulfil their roles effectively.
Further detail is contained in the Remuneration & Nomination Committee Charter.
Performance evaluation
Board
The Board Charter requires that each year the Board will conduct an evaluation of its effectiveness and
performance that evaluates:
•
•
•
its own performance, including against the requirements of its Charter;
the performance of its committees; and
the performance of individual directors, against both measurable and qualitative indicators.
A performance evaluation of the Board, the committees and each director was conducted in FY18.
Senior Executives
The Remuneration & Nomination Committee monitors and advises on the periodic performance of senior
executives. The CEO initiates performance reviews of the executive whereby the individual is assessed
against agreed goals and objectives.
Performance evaluations of senior executives have been undertaken during the current financial year in
accordance with that process. The outcomes of the review and the link to individual remuneration levels
are discussed in the Remuneration Report.
Remuneration
Disclosure regarding the remuneration of the Company's Non-Executive Directors, the CEO and CFO are
set out in the Remuneration Report.
The CEO and each senior executive have a written contract with the Company. The Remuneration Report
sets out details of each written contract of members of the Company’s key management personnel (KMP).
Company Secretary
The Company Secretary is accountable to the Board through the Chair and all directors have access to the
Company Secretary.
The Company Secretary’s role in respect of matters relating to the proper functioning of the Board includes
advising the Board and its Committees on governance matters, monitoring that Board and committee
policies and procedures are followed, coordinating all Board business (including agendas, Board papers,
minutes, communication with regulatory bodies and ASX, and all statutory and other filings) and providing
a point of reference for dealings between the Board and employees.
Further detail is contained in the Board and Committee Charters.
Board Committees
The following Committees assist the Board in carrying out its responsibilities:
• Audit & Risk Committee; and
• Remuneration & Nomination Committee.
An overview of the role and responsibilities, composition, and membership as at 30 June 2018 of each
committee is provided below.
Bellamy’s Australia Limited
24
Corporate Governance
Committee
Roles and
responsibilities
Audit & Risk Committee
Remuneration & Nomination
Committee
The primary purpose of the Audit &
Risk Committee is to monitor and
advise the Board on:
The primary roles of the Remuneration
& Nomination Committee are to assist
the Board:
financial reporting;
•
• external audit;
•
•
risk management; and
internal control structure.
Members as at 30 June
2018
• Shirley Liew (Chair)
• John Murphy
• Rodd Peters
• Wai-Chan Chan
The chair of the Audit & Risk
Committee is an independent director
who is not the chair of the Board and
the majority of the committee’s
members are independent.
•
•
•
•
to attract and retain suitable
directors and senior executives;
to ensure that directors and
executives are fairly and
responsibly remunerated;
to evaluate the performance of
directors and executives; and
to ensure that there are appropriate
succession plans.
• John Murphy (Chair)
• John Ho
• Wai-Chan Chan
The chair of the Remuneration &
Nomination Committee is an
independent director who is not the
chair of the Board and the majority of
the committee’s members are
independent.
Composition
The committee must comprise of:
The committee must comprise of:
• a minimum of 3 members of the
• a minimum of 3 members of the
Board;
Board;
• only Non-Executive Directors;
• a majority of independent
• only Non-Executive Directors;
• majority of independent directors;
directors; and
and
• an independent director who is
• an independent director who is
nominated by the Board as chair,
who is not chair of the Board.
nominated by the Board as chair,
who is not chair of the Board.
The Company’s Audit & Risk Committee composition complies with the ASX Listing Rules and ASX
Recommendations.
The Company’s Remuneration & Nomination Committee composition complies with the ASX Listing Rules
as it comprises all Non-Executive Directors. A majority of the directors on the committee are independent
directors and it therefore complies with Recommendation 8.1, that a majority of members should be
independent. See Audit & Risk Committee Charter and Remuneration & Nomination Committee Charter for
further information.
Details of the number of meetings held by the Board and its committees during FY18, and attendance by
Board members, are disclosed on page 12.
Details of each committee member, including the skills, experience, relevant expertise, independence and
period of office, are disclosed on page 10.
Risk framework
Risk management and identification
The Company has employed ongoing risk management processes.
The Company has a Risk Committee comprised of senior executives which reports to the Audit & Risk
Committee. The Risk Committee maintains a risk register that identifies the key risks facing the business
and the status of initiatives implemented to manage them. This risk register is reviewed and updated on a
regular basis.
The Audit & Risk Committee has responsibility for monitoring risk and reporting to the Board on the
Company’s risk management framework including:
Bellamy’s Australia Limited
25
Corporate Governance
identifying, assessing, monitoring and managing risk; and
•
• any material changes to the group's risk profile.
The Company undertakes annual reviews of the risk management framework to ensure that it continues to
be sound. The Company has undertaken a review of its risk management process in FY18.
The Board ensures that adequate external insurance cover is in place appropriate to the Company’s size
and risk profile.
The Company also regularly considers its material exposure to economic, environmental and social
sustainability risks.
Internal audit
The Company does not have an internal audit function.
Due to the Company’s size and business structure, the Company has not had an internal audit function.
Under the Audit & Risk Committee Charter, the Audit & Risk Committee is responsible for providing an
independent and objective assessment to the Board regarding the adequacy, effectiveness and efficiency
of the Company’s risk management and internal control processes. The Committee has full and complete
access to the Company’s executives, external auditor and to external advisers.
External auditor
The external auditor attended the Company’s 2017 AGM and was available to answer questions.
The Company will request that its external auditor attend the Company’s 2018 AGM and be available to
answer questions.
CEO and CFO declaration
A decision by the Board to approve the Company's financial statements for a financial period is subject to
receipt from its CEO and CFO of a declaration that, in their opinion, the financial records of the entity have
been properly maintained and that the financial statements comply with the appropriate accounting
standards and give a true and fair view of the financial position and performance of the entity and that the
opinion has been formed on the basis of a sound system of risk management and internal control which is
operating effectively.
Such declarations were received by the Board in respect of both the half-year and full-year financial
statements for 2018.
Governance policies
Code of Conduct
The Company has a comprehensive Code of Conduct that applies to its Directors, senior executives and
employees. The code addresses (amongst other things):
Improper use of Bellamy assets or intellectual property;
• Compliance with laws and regulations;
• Fair trading and dealing;
• Conflicts of interest;
•
• Privacy;
• Employment practices;
• Whistleblowing;
• Community engagement; and
• Public communications and disclosures.
Securities Trading Policy
The Company’s Long-Term Incentive Scheme does not allow participants to enter into transactions
(whether through the use of derivatives or otherwise) that limit the economic risk of participating in the
scheme.
This is supported by the Company's Securities Trading Policy under which employees are prohibited from
entering into transactions using financial products that operate to limit the economic risk associated with
Bellamy’s Australia Limited
26
Corporate Governance
holding vested and unvested Company securities. Further, all employees are prohibited from entering into
margin loan arrangements to fund the acquisition of any of the Company's securities.
Diversity
Bellamy's is committed to developing a fair and inclusive work environment that embraces diversity. The
Company recognises the importance of diversity to commercial success. Bellamy's approach to diversity
is underpinned by six key principles including:
• maintaining a respectful, safe and inclusive working environment that is respectful of individual
differences and attributes;
• eliminating artificial barriers to career progression by providing support and mentoring;
• by developing and offering flexible work practices to meet the differing needs of employees;
•
• employing a fair and effective process for appointment to roles based on relative ability,
recruiting and retaining a skilled and diverse workforce;
•
performance and potential; and
fostering a culture, including through education and training, that rewards people for furthering the
objectives under this policy.
Bellamy’s Diversity Policy is further underpinned by its management systems and a comprehensive People
and Culture Program.
The Board is committed to improving its workplace diversity throughout the organisation. To help achieve
this, in FY18, the Board, together with the Remuneration & Nomination Committee, established measurable
objectives for attaining gender diversity.
The measurable objectives, and Bellamy’s progress towards achieving them, is assessed annually by the
Board (on recommendation of the Remuneration & Nomination Committee) and is reported on in the Annual
Report each year. The achievement of these outcomes is included in the CEO’s objectives and the Charter
of the Board also reflects these accountabilities.
The Board recognises the importance of diversity in the workplace and is focused on achieving a balanced
representation of women on the Board and in senior positions over a reasonable transition period. In FY18,
the Company’s Board has one female representative with the appointment of Ms Shirley Liew in December
2017. Whilst there has been a decrease in overall representation throughout the Company from 71% to
62% in FY18, there has been an increase in female senior management from 42% to 50%. Further, 65%
of new recruits during FY18 were women.
24 August 2017
4 July 2018
Board
Senior Executive*
All employees
0%
42%
71%
20%
50%
62%
Board Measurable
Objective
40%
50%
50%
* defined as KMP and other senior managers
Continuous Disclosure
The Company has adopted a Continuous Disclosure Policy which establishes processes and procedures
designed to ensure that directors and management are aware of and fulfil their obligations in relation to the
timely disclosure of material price-sensitive information. Under the policy, the Board will be responsible for
managing the Company's compliance with its continuous disclosure obligations.
Communicating with shareholders
The Board has established the Shareholder Communications Policy, which is designed to promote effective
two-way communication with shareholders.
The Board ensures that shareholders are informed of all material information relating to the Company by
communicating via:
continuous disclosure to the ASX;
•
• media releases and publication of information on the Company’s website; and
Bellamy’s Australia Limited
27
Corporate Governance
•
through its annual and half year reports.
The Company provides shareholders with the option of communicating with the Company and the
Company’s share registry (Link Market Services Ltd) electronically. Shareholder’s communication
preferences can be updated at any time by the member at the share registry’s website.
At the AGM, the Board encourages the effective participation of shareholders in accordance with the
Company’s Shareholder Communications Policy. At the AGM, the Chair will provide time for questions and
comments from security holders.
Bellamy’s Australia Limited
28
Remuneration
Remuneration Report
Message from the Chairman of the Board and
Chairman of the Rumeration & Nominations Committee
The Board of Bellamy’s presents the Remuneration Report for the financial year ended 30 June 2018.
During FY17, the Company made significant changes to its key management personnel and Board
composition in order to execute its turnaround and growth strategy. The Board and Remuneration
&Nomination Committee also considerably re-designed the Company's remuneration program to focus
executives on achieving this strategy and to retain top talent and incentivise stretch performance.
The first year of the turnaround strategy has seen considerable results, with a year-on-year increase of
65% on normalised EBITDA and strong share price growth. These results are underpinned by exceptional
performance at the executive level. Accordingly, remuneration results for executives has reflected the
performance of the Company for FY18.
Despite driving performance linked to the achievement of the turnaround strategy, the Board and
Remuneration & Nomination Committee has not lost sight of the importance of focusing executives on
important non-financial metrics underpinning the strength of the Company's business. Non-financial
performance remains a key element to the delivery of remuneration incentives, including the setting of key
performance indicators for the short-term incentive program and the discretions available to the Board to
claw back awards.
Throughout FY18, Bellamy’s has continued to refine its way of working. The Board has appointed a new
Director, Shirley Liew, which has further enhanced the Board’s skillset in areas including governance,
financial and operating control frameworks, food safety and quality control.
In addition, significant progress has been made on the development of a comprehensive 2021 strategic
roadmap for the business and cascading this through the organisation, underpinned by the CEO
implementing an enhanced leadership team structure and setting the business to a way of working that is
more agile, dynamic and accountable. Supporting this, was the implementation of a new culture platform
aimed at driving high performance.
At the 2017, AGM shareholders expressed support for the turnaround strategy and the renewed
remuneration program through the feedback received on the 2017 Remuneration Report.
The Company’s FY18 remuneration program has been extended to incorporate the newly acquired
Camperdown Powder staff and senior management in its consideration and fully integrates a reward and
recognition framework that focuses on key objectives including the integration of the Company within the
group and safety.
Our FY18 Remuneration Report has been prepared with the goal of transparently communicating
remuneration outcomes for FY18 and highlighting the success of the Company’s re-designed remuneration
structure, which is aligned to our strategic objectives for the current year and beyond.
On behalf of the Board, we recommend the Report to you and we look forward to receiving your feedback
at the 2018 AGM.
John Ho
Chairman
John Murphy
Deputy Chairman and Chair of the
Remuneration & Nominations Committee
Bellamy’s Australia Limited
29
Remuneration
The Report has been set out as follows:
Remuneration Report
Message from the Chairman of the Board
Key management personnel
Remuneration governance
ROLE OF THE REMUNERATION & NOMINATION COMMITTEE
ENGAGEMENT OF REMUNERATION CONSULTANTS
Remuneration principles, strategy & outcomes
REMUNERATION PRINCIPLES
REVIEW OF REMUNERATION STRATEGY & FRAMEWORK
REMUNERATION STRATEGY & FRAMEWORK
EXECUTIVE REMUNERATION STRUCTURE
REMUNERATION MIX
RELATIONSHIP BETWEEN KMP REMUNERATION OUTCOMES AND FY18 COMPANY PERFORMANCE
Executive Contracts
Non-executive directors’ remuneration
CURRENT FEE LEVELS AND FEE POOL
PARTICIPATION IN TURNAROUND LTI PLAN
The Board of Bellamy’s oversees the Company’s remuneration practices and policies to ensure that they:
• drive a culture of performance;
•
reward executives for the delivery of results and the achievement of Bellamy’s short-term financial
objectives and long-term business strategy; and
• provide a framework for the ultimate goal of delivering value for shareholders.
This report outlines the remuneration framework and outcomes applicable to the Company's key
management personnel for the year ended 30 June 2018. It also enables our investors to understand the
costs and benefits associated with Bellamy’s remuneration practices and policies and the link between
Bellamy’s performance and the remuneration paid to the CEO and KMP executives.
This report has been prepared in accordance with Section 300A of the Corporations Act 2001 (Cth).
Bellamy’s Australia Limited
30
Remuneration
Key management personnel
The term key management personnel (KMP) refers to those persons having the authority and responsibility
for planning, directing and controlling the activities of the Consolidated entity (Group), directly or indirectly
and includes any director of the Group (whether executive or otherwise).
The KMP of Bellamy’s for the year ended 30 June 2018 were:
Non-executive Directors
John Ho
John Murphy
Rodd Peters
Wai-Chan Chan
Shirley Liew
KMP Executives
Andrew Cohen
Nigel Underwood
Peter Fridell
David Jedynak
Melinda Harrison
Role
Chairman
Deputy Chairman
Non-executive Director
Non-executive Director
Chair Audit & Risk Committee
Date Appointed
13 April 2017
18 May 2017
28 February 2017
28 February 2017
13 December 2017
Chief Executive Officer
Chief Financial Officer
Director of Operations
Director Sales & Marketing
General Counsel, Company Secretary &
Regulatory Affairs
11 January 2017
11 January 2017
12 June 2017
12 June 2017
8 May 2017
Remuneration governance
Role of the Remuneration & Nomination Committee
The role of the Remuneration & Nomination Committee is to assist the Board by ensuring that Bellamy’s:
• has appropriate remuneration policies and practices which enable Bellamy’s to attract, motivate,
and retain non-executive directors and executives and to ensure sustainable value for our
shareholders;
fairly and responsibly remunerates non-executive directors and executives having regard to
Bellamy’s overall strategy and objectives, the performance of Bellamy’s, the performance of the
executives, and the general market environment; and
•
• has polices to evaluate composition of the Board, individual directors and executives and ensure
succession plans are in place (including for the recruitment or appointment of non-executive
directors and executives).
The Remuneration & Nomination Committee is responsible for assessing performance against KPIs and
determining the STI and LTI to be paid. To assist in this assessment, the committee receives detailed
reports on financial performance from management which is based on independently verifiably data.
In the event of serious misconduct or a material misstatement in the Company’s financial statements the
Remuneration & Nomination Committee can cancel or defer performance-based remuneration and may
also claw back performance-based remuneration paid in previous financial years.
The Remuneration & Nomination Committee has a Charter which outlines the terms of reference under
which it operates. It is available online at www.bellamysorganic.com.au.
Engagement of remuneration consultants
The Remuneration & Nomination Committee periodically engages independent remuneration consultants
to advise and assess the remuneration of the Chairman, Non-executive Directors, CEO and those
executives reporting to the CEO. These advisors are engaged by, and report directly to, the Remuneration
& Nomination Committee and are used to:
• provide updates on remuneration trends, regulatory changes, market analysis and shareholder and
proxy advisor views; and
• assist in the review, design, and development of CEO and senior executive reward levels and
arrangements (including short-term and long-term incentives).
No remuneration recommendations from external consultants were received in FY18. During FY18, Mercer
Consulting Australia Pty Ltd (Mercer) was engaged to provide the valuation of options grants to new
Bellamy’s Australia Limited
31
Remuneration
directors and senior executives (issued under the existing LTI Plan), but did not provide any
recommendations on the participants, quantum for participants, or the hurdles.
Remuneration principles, strategy & outcomes
Remuneration principles
Bellamy’s approach to remuneration is framed by the strategic direction and operational demands of the
business, the international context and market complexity in which Bellamy’s operates, and the importance
of linking executive remuneration to sustainable shareholder returns over the long-term.
The principles that underpin our remuneration approach include:
•
•
•
•
•
•
to attract, motivate and retain top talent executives and directors;
to align rewards with the creation of sustainable value for shareholders including through long-term
equity-based incentives and performance metrics linked to total shareholder value;
to align rewards with strategic objectives and the Board’s high-performance expectations;
to drive behaviours that align with the interests of our shareholders;
to implement a robust and transparent remuneration decision making process and performance
review system; and
to reward exceptional performance.
Attract, motivate, and retain top talent
Bellamy’s operates in a global market which is highly regulated and challenging and, therefore, needs to
attract, motivate, and retain executives and directors who have the requisite skills and ability to perform at
the highest of levels, in order to ensure they deliver on Bellamy’s strategic objectives and contribute to the
ongoing financial performance of Bellamy’s, and create sustainable value for shareholders.
Align remuneration with business performance and sustainable shareholder returns
In the development of its 2017 Long Term Incentive plan, Bellamy’s has ensured that there is a robust
correlation between executive reward and long-term shareholder value. Bellamy’s remuneration approach:
• differentiates individual rewards commensurate with contribution to overall results and according
to responsibility, performance, and potential; and
• provides executives with an incentive to meet and exceed challenging performance targets set by
the Board.
Aligns rewards with the implementation of business strategy
Bellamy’s sets performance measures and targets that support its business performance in both the short
and long term and ensures performance measures and targets are clearly defined, relevant to the
executive’s role, linked to total shareholder value and closely aligned with the overall business strategy.
Good governance
Bellamy’s Remuneration & Nomination Committee’s Charter clearly outlines its objectives and terms of
reference. Its approval process sees the Remuneration & Nomination Committee reviewing and
recommending the Key Performance Indicators of the CEO and CEO direct reports and Board approving,
based on recommendations of the Remuneration & Nomination Committee, remuneration for the CEO and
all executives who report to the CEO.
Review of remuneration strategy & framework
The remuneration strategy & framework and associated programmes are reviewed regularly to ensure that
they:
continue to align with the Bellamy’s strategic objectives;
focus executives’ effort on the long-term strength of Bellamy’s; and
•
•
• provide clear and direct alignment with shareholder interests through share ownership, i.e.,
executives are rewarded when shareholders are rewarded.
During 2H18, the STI program was broadened to include participation by all employees as part of a newly
developed culture program designed to reward staff at all levels of the Company who demonstrate
exceptional performance. In addition, a new culture program provides a platform aligned to nurturing and
Bellamy’s Australia Limited
32
Remuneration
rewarding capability. This program ensures the Company continues to motivate and retain key talent who
will grow to be future leaders within the business.
The new program incorporates a comprehensive competency framework whereby participants are
assessed on measures including financial metrics, value addition, teamwork and leadership, as well as
consideration to KPI’s which have been cascaded down from the CEO. This encourages a good corporate
culture in which employees are rewarded not only for achieving KPI’s, but recognises how they were
achieved and promotes leadership skill development across all levels of the Company.
Remuneration strategy & framework
The remuneration strategy sets the direction for the remuneration framework and drives the design and
application of remuneration practices and policies for executives of Bellamy’s (including KMP).
Executive remuneration structure
In FY18, the Board closely reviewed the participants, quantum, and measures for both the STI and LTI
plans. The components of Bellamy’s remuneration framework have not been changed. Details are set out
below:
Component
Remuneration Approach & Performance Link
Total Fixed
Remuneration
(TFR)
- Salary
- Statutory
superannuation
Executive TFR levels are market-aligned by comparison to similar roles in ASX-listed
companies that have comparable market capitalisation, revenues, and financial metrics
relevant to the executive’s role, knowledge, skills and experience, and individual
performance.
This ensures that Bellamy’s attracts, motivates, and retains top talented executives to
deliver on Bellamy’s business strategy and contribute to the Bellamy’s ongoing financial
performance.
Short Term
Incentive (STI)
- Annual
incentive
opportunity
delivered in
cash
The Bellamy’s STI plan rewards the CEO and those executives reporting to him (including
the KMP executives) for performance against a pre-determined scorecard of measures
linked to Bellamy’s short-term business performance (12 months) and individual
performance. Performance measures may vary from year to year depending on the
business’s objectives and are chosen on the basis that they will increase financial
performance, market share, and shareholder returns.
The STI plan is designed to encourage and reward high performance and for this reason
it places a proportion of the executives’ remuneration at-risk against targets linked to the
Company’s annual performance objectives. This supports the alignment between the
interests of the executive, Bellamy’s and our shareholders.
Long-term
Incentive (LTI)
- An award of
options with
performance
assessed over
3 or more
years
A new form of LTI plan was implemented in FY17 called the Turnaround LTI Plan. The
purpose of the Turnaround LTI Plan is to focus the executives’ efforts on the achievement
of sustainable long-term shareholder value creation and the long-term financial success
of Bellamy’s.
The Turnaround LTI Plan was designed as a replacement for the FY17, FY18 and FY19
LTI awards, and accordingly, no additional LTI award was granted to KMP during FY18.
The provision of LTI plan awards via options for ordinary shares in Bellamy’s encourages
long-term share exposure for the executives and, therefore, drives behaviours that align
with the interests of our shareholders.
Remuneration mix
The Board recognises that each executive needs a significant portion of their remuneration to be at-risk
and be linked to Bellamy’s annual business objectives and actual performance and has ensured that the
remuneration mix is aligned with the creation of sustainable value for shareholders.
Due to the importance of the continuing turnaround strategy for Bellamy’s, in FY17, the Board created a
larger weighting for long-term variable remuneration; with a reduction in the short-term variable
component. No LTI awards were granted in FY18 to KMP Executives, as the FY17 award was intended
as a 3 year turnaround grant. In FY18, the Executive KMP's ‘at risk’ components remain unchanged as
follows:
Bellamy’s Australia Limited
33
Remuneration
TFR
Short Term
Incentive (At-
Target)1
Short Term
Incentive
(Stretch)1
Long Term
Incentive (At
Target
Opportunity)2
Long Term
Incentive
(Maximum
Opportunity)2
KMP Executives
Andrew Cohen
Nigel Underwood
Peter Fridell
David Jedynak
Melinda Harrison
$820,000
$350,000
$350,000
$350,000
$325,000
28%
20%
20%
20%
20%
47%
30%
30%
30%
30%
70%
46%
43%
46%
21%
139%
93%
86%
93%
42%
1. The short-term incentive is the total payment (either at-target or stretch) as a % of TFR.
2. The long-term incentive refers to the value of any grant as a % of TFR. The % in this table represents the value of options
granted to KMP executives under the Turnaround LTI plan in FY17, annualised over the three years in which the Turnaround
LTI plan replaces usual LTI awards.
The mix of each at-target component as a percentage of the current KMP’s TFR is shown in the graph
below.
Relationship between KMP remuneration outcomes and FY18 company performance
Total fixed remuneration
The TFR of the CEO and all KMP (other than the Company's General Counsel and Company Secretary)
has remained unchanged from FY17.
On 1 January 2018 the Company’s General Counsel and Company Secretary’s total fixed remuneration
was increased from $285,000 to $325,000 (an increase of 14%). This change was introduced to reflect
increases to the level of responsibilities associated with the role and to better align with the executive
team.
Short term incentive arrangements
The FY18 STI awards are set based on achievement against a combination of financial and non-financial
KPIs. These are used to ensure a balance between short term financial measures and more strategic
non-financial measures which in the medium to longer term will support the growth of Bellamy’s.
Performance is measured against the following KPIs:
• Financial – actual results compared to budgeted results for items including EBIT, EBITDA, PBT
and NPAT.
• Business growth – NPAT, earnings per share, price earnings ratio, sales growth and discipline,
acquisitions and new customers/strategic partnerships.
• Business management – cash generation, capital management, working capital management,
inventory turnover, cost/revenue ratios, and staff utilisation.
• Strategy – development, approval, implementation, and achievement.
• People – leadership, development, safety, retention, and high-performance.
Measures and targets against which performance will be measured are established during the annual
strategic review and budgeting process undertaken by Bellamy’s. Relative weighting of fixed and variable
components for target performance are set according to the scope of the executive’s role.
Performance for each measure is assessed on a range of Threshold, Target, and Stretch. The stretch
target is set by the Board for each measure at a level that ensures maximum STI is payable only where
performance has truly and substantially exceeded expectations. Threshold performance is set annually
and is generally 90% of target performance but this will depend on the performance measure.
Bellamy’s Australia Limited
34
Remuneration
% STI measure performance
% STI at-target payable
Threshold
90%
60%
Target
100%
100%
Stretch
110%+
101% to 167%
The Board has discretion to adjust STI outcomes up or down to ensure that individual outcomes are
appropriate to recognise both the “What” and the “How”. For example, not just achieving KPI’s but
displaying behaviours appropriate to achieving them, such as leadership, teamwork and embodying the
company values.
Details of KMP executives’ STI payments for the year ended 30 June 2018, the proportion to be received
for at-target and stretch performance, achieved STI, and the amounts forfeited are shown in the tables
below.
CEO’s FY18 KPIs and STI Outcomes
Mr Cohen’s performance for FY18 has been assessed based on consideration of Mr Cohen’s important
and significant role in the execution of strategic objectives of Bellamy’s during FY18, including his
leadership, direction and prioritisation of activities.
The performance measures for FY18 were set by the Board in early FY18 and are set out below. The
performance measures were based on the continuing focus on Bellamy’s short-term financial
performance and achievement of the longer-term turnaround of Bellamy’s.
Financial measures for the CEO and Direct Reports are based on normalised Earnings Before Interest &
Tax (EBIT), Sales Revenue and Gross Profit Margin. The normalised result is the statutory result, excluding
individually significant items not expected to be repeated in future years. These hurdles have been in place
for several years and takes into account that there are certain matters of a non-recurring nature which may
not accurately reflect underlying performance.
The non-financial measures were specific to the CEO's role and required him to establish a fully defined
and adaptable 2021 strategy that clearly articulated the pathway for Bellamy’s to become a Global and
Iconic Infant Brand and transform the organisation to a high-performing FMCG group that could deliver the
aspirations of the strategic plan with high retention and high engagement of employees. The non-financial
measures focussed on Sales Growth & Discipline, Strategic Cost Position, Supply-Chain Flexibility, Brand
Investment & Penetration, and Strategy & People both domestically and internationally.
Key Performance Indicators
Financial
Normalised EBIT ($m)1
Sales Revenue ($m)
Gross Profit Margin %
Non-financial
Sales Growth & Discipline
Strategic Cost Position
Supply-Chain Flexibility
Brand Investment & Penetration
Strategy & People
Total
Weighting
(%)
Achievement
(As a % of FY18
Stretch Target)
Paid Out
24%
30%
6%
8%
8%
8%
8%
8%
100%
128.20%
114.51%
101.46%
100.00%
125.00%
100.00%
100.00%
125.00%
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
1. Normalised EBIT excludes the significant items not expected to be repeated in future years, namely provision for inventory
write downs relating to the transition to SAMR registered products in China and CoOL compliant labelling in Australia.
The CEO performed highly on all the non-financial measures being:
•
•
•
the development and roll-out of a comprehensive 2021 strategic roadmap for the business in April
2018 which was cascaded through the organisation underpinned by the CEO implementing a new
leadership team and creating an agile, dynamic and accountable culture;
the implementation of a supply chain flexibility strategy with the establishment of key supplier
agreements for overseas and local milk;
significant improvements in cost structures aligned to the longer-term strategy (ingredients and
direct/other overheads);
Bellamy’s Australia Limited
35
Remuneration
•
•
investment in capability in key strategic pillars for the business – being Innovation, Food and China
strategy; and
the implementation of a new culture program which enhanced communication and feedback
within the organisation and which recognises and rewards exceptional talent.
The improved financial performance of Bellamy’s is reflected in the FY18 financial measures exceeding
the stretch performance measure and a stronger cash position and inventory position (both owned and
trade stock).
Mr Cohen has demonstrated strong leadership in both the turnaround phase (1H18) and moving to
building the important key business foundations required to support delivery of the longer-term strategy
(2H18). Accordingly, the amount of STI awarded to Mr Cohen recognises his individual performance and
the strongly improved financial performance of Bellamy’s in FY18.
Other KMP executive’s STIs outcomes for FY18
All other KMP were assessed on the same financial measures and substantially the same non-financial
measures as the CEO relevant to their portfolios, with specific focus on their respective areas of
accountability. This ensured consistency across key areas of focus within the company.
Summary of FY18 STI payments to KMP executives
FY18 STI Payment
STI Opportunity ($)
At Target
Stretch1
Andrew Cohen
Nigel Underwood
Peter Fridell
David Jedynak
Melinda Harrison
230,885
70,000
70,000
70,000
61,000
384,808
105,000
105,000
105,000
91,500
STI
Achieved
($)2
370,000
91,000
105,000
105,000
91,500
STI
Achieved
(%)
Stretch
96.2%
86.7%
100.0%
100.0%
100.0%
% Stretch
STI
Forfeited
3.8%
13.3%
0.0%
0.0%
0.0%
1. KMP executives’ STIs have a stretch component that is designed to encourage above at-target performance
2. STI amounts indicated to have been achieved in respect of the year ended 30 June 2018 are subject to an annual
review and only payable subsequent to 30 June 2018 upon ratification and recommendation by the Remuneration &
Nomination Committee and approved by the Board of Directors.
Company financial performance
The following graphs and table provides details of the relationship between KMP executives’ at-risk
remuneration (based on the 3 key financial measures) and Bellamy’s overall financial performance:
60.0
40.0
20.0
0.0
(20.0)
Net Profit ($m)
38.3
24.7
13.6
28.2
(0.8)
7.2
(8.0)
47.0
42.8
20.4
22.4
1.3
1.4
(0.1)
9.1
5.9
3.2
FY14
FY15
FY16
FY17
FY18
1H
2H
Normalised
As explained earlier, the STI is
based on a range of business
building metrics that are designed
to grow profitability and shareholder
returns.
While not directly linked to profit,
the STI does correlates with short
term profitability.
To ensure decisions are not short-
term focused, the LTI complements
the STI by driving longer term
perspective of value creation.
Bellamy’s Australia Limited
36
Remuneration
25.00
20.00
15.00
10.00
5.00
0.00
The LTI is directly related to
improvements. As the LTI is mostly
option related, executives do not
receive any reward unless
shareholder value is increased
above the hurdles set at the date of
grant.
The LTI has greater leverage than
the STI, meaning the executives
have more to gain by ensuring long-
term value creation and avoiding
actions that may result in a STI but
damage long-term value.
Measure
Net Revenue1 ($000)
Net Revenue Growth
EBIT2 ($000)
EBIT Growth
Share price at start of year
Share price at end of year
Share price growth
Interim dividend (cents per share)
Final dividend/distribution (cents per share)
Total dividend/distribution (cents per share)
Basic EPS (cents per share)
Average STI payout as a % at-target for
eligible KMP executives3
2018
$328,704
37%
$66,242
58%
$6.91
$15.54
125%
$0.00
$0.00
$0.00
39.2
2017
$240,182
3%
$42,007
(23%)
$10.21
$6.91
(32%)
$0.00
$0.00
$0.00
(0.8)
2016
$234,083
87%
$54,306
342%
$4.37
$10.21
134%
$0.041
$0.078
$0.119
39.8
2015
$125,302
204%
$12,286
497%
$1.30
$4.37
236%
$0.00
$0.0286
$0.0286
9.8
148.05%
121.17%
150.05%
138.89%
1. The net revenue for 2016 is the restated number;
2. For 2017 normalised EBIT has been used as it excludes the significant items not expected to be repeated in future
years, including inventory write-downs, FX losses, legal, accounting and restructuring costs which were necessary for
Bellamy’s in FY17. For 2018, normalised EBIT excludes significant items not expected to be repeated in future years,
namely provision for inventory write downs relating to the transition to SAMR registered products in China and CoOL
compliant labelling in Australia.
3. Only the CEO and CFO participated in the FY17 STI plan.
Turnaround long-term incentive plan
The Board recognises the work required to execute the strategic objectives of Bellamy’s in order to deliver
ongoing sustainable earnings growth and provide increased returns in the short term, and most importantly
increased wealth for our shareholders over the long-term.
To execute the strategy, Bellamy’s needed to motivate and retain a strong and capable CEO and executive
leadership team; but also, directors who have extensive skills and experience to operate in such an
environment. This is especially important due to:
the complexity of the Bellamy’s business;
•
• Bellamy’s operating in a global market and a highly regulated market; and
•
the need to carefully manage brand risk during the period of turnaround.
For this reason, in FY17 the Board implemented a long-term incentive plan specifically to motivate and
retain executives during the turnaround. The Turnaround LTI plan was designed as a one-off grant replacing
the Company's standard LTI program for FY17, FY18 and FY19 and with the goal of achieving a $500
million increase in shareholder value over the 3-year period. In its first year of operation, a significant
increase in shareholder value has been achieved.
As the Turnaround LTI plan grants were designed to cover awards for FY17, FY18 and FY19, no new
grants were made to Executive KMP in FY18. The general terms and conditions that apply to the
Turnaround LTI plan are set out below. Specific details applicable to the FY17 grants to Executive KMP
can be found in the 2017 Remuneration Report. Details of grants made to Board members are set out in
the section dealing with Non-executive Director Remuneration.
Bellamy’s Australia Limited
37
Remuneration
Participants
What are
options?
Executive KMP and certain Non-executive Directors. All Executive KMP awards were made
in FY17, and therefore no Executive KMP received a grant under the Turnaround LTI Plan in
FY18.
An option to acquire a fully paid ordinary share in the Company (subject to payment of an
exercise price), that will only vest and become exercisable if performance hurdles are
satisfied.
Do participants
pay for
options?
Options are granted as part of remuneration and therefore there is no payment provided in
connection with a grant. However, participants are required to pay an exercise price to
exercise the options and receive shares, should the options vest in accordance with their
terms.
What is the
grant
frequency?
What is the
performance
period?
A single grant covering 3 years of equity remuneration.
The TSR Hurdle is based on the Company's share price growth on a compound basis
performance over the relevant performance period. A TSR hurdle has been chosen as it is
directly linked to the Company’s share price growth and therefore the increase in value
created for shareholders. Further details on the hurdle is set out below.
What is the
performance
hurdle and why
was it chosen?
The TSR Hurdle is based on the Company's share price growth on a compound basis
performance over the relevant performance period. A TSR hurdle has been chosen as it is
directly linked to the Company’s share price growth and therefore the increase in value
created for shareholders. Further details on the hurdle is set out below.
How does the
TSR
performance
hurdle work?
Company’s TSR
Less than 50% of target
50% of target
Above 50% but less than 100% of target
At or above 100% of target
% of options that will vest in tranche 2
Nil
50%
Between 50% and 100%, as determined
on a pro-rata, straight line basis
100%
The share prices used to calculate the TSR performance of the Company will be measured
as follows:
•
•
the opening share price is the Volume Weighted Average Price (VWAP) of the
Company's ordinary securities traded on ASX for the 10 trading days prior to the offer
date; and
the closing share price will be the VWAP of the Company's ordinary securities traded on
ASX for the 10 trading days following the announcement of the Company's annual results
(or half year results, where applicable) in respect of each performance period in the Total
Performance Period (or following the announcement of the half yearly results in respect
of the Third Performance Period).
How is the TSR
performance
hurdle tested?
Tranche 1 options that do not vest at the end of the first performance period will be eligible
for re-testing at the end of the second performance period. Tranche 1 and 2 options that do
not vest at the end of the second performance period, will be eligible for re-testing after the
end of the third performance period. Any options that do not vest following testing at that time
will lapse.
Process for
assessing
performance
conditions
The Board has determined that the TSR performance hurdle will be assessed based on the
growth in the Company’s share price from the opening share price over the relevant
performance period. The Board believes the LTI provides the right measure and appropriately
challenging target for participants.
What are the
rights attaching
to the options?
What happens
on cessation of
employment?
No voting rights or entitlements to dividends are attached to the options.
If a participant ceases to be employed within the Group due to termination for cause (for
example, as a result of actual or alleged serious misconduct), any and all unvested options
held at the time will lapse with effect from the date of cessation of employment.
If a participant gives notice of resignation from employment with any Group Company, in
circumstances where, in the Board's opinion, the Group Company was entitled to terminate
the participant’s employment without notice or payment in lieu of notice or for actual or alleged
Bellamy’s Australia Limited
38
Remuneration
misconduct, any and all unvested options the participant holds at that time will lapse on the
date of cessation of their employment.
If a participant ceases to be employed within the Group for any other reason, a pro rata portion
of any unvested options held at that time will lapse on the date of cessation of employment,
unless the Board determines otherwise.
What happens
on a change of
control?
Generally, where there is a change of control event that involves, or has resulted in, a person
acquiring more than 50% of the voting rights in the Company, any and all of the unvested
options issued to participants will vest (and the outstanding vesting conditions will be waived)
from the date on which the person's voting interests in the Company increases from below to
above 50% (as disclosed in the relevant substantial holding notice given to ASX).
The Turnaround LTI grant was issued with the 13 June 2017 Prospectus and was designed to align Board
and Executive decisions and discretionary effort with the interests of shareholders. The program ventured
4.2% of the shares in BAL, with a total cost of $9.85m spread over 3.5 years.
The program incentivised participants to generate over $500m increase shareholder value over 3.5 years.
The details of the grant were as follows:
Participants
FY17
Turnaround
LTI Grant
Cohen
Underwood
Jedynak
Fridell
Harrison
Other Execs
Options
Granted
1,675,000
475,000
475,000
440,000
200,000
575,000
Directors3
265,887
e
c
i
r
P
e
s
i
c
r
e
x
E
3
4
6
.
5
$
1
e
u
l
a
V
r
i
a
F
5
4
0
.
2
$
1
5
.
7
$
Share Based Payment Expenses ($)2
FY17
FY18
FY19
FY20
FY21
Total
45,436
12,885
12,885
11,935
5,425
15,597
921,340
261,277
261,277
242,024
110,011
316,282
921,343
261,276
261,276
242,024
110,011
316,282
921,343
261,276
261,276
242,024
110,011
316,282
615,913
174,661
174,661
161,793
73,542
211,432
3,425,375
971,375
971,375
899,800
409,000
1,175,875
7,229
556,352
537,094
537,094
359,042
1,996,811
Total
4,105,887
111,392
2,668,563
2,649,306
2,649,306
1,771,044
9,849,611
1. Fair value is determined at the date of the grant. For non-director participants, the fair value of $2.045 was determined on 13 June
2017. For Directors, the fair value of options of $7.51 was determined following shareholder approval at the 2017 AGM.
2. Share based payments expense is amortised on a straight line basis over the performance period. The expense to be recognised
in FY19-FY21 is subject to vesting assessments of each Tranche.
3. Details of share based payments expense for Shirley Liew have not been included in the above table as the the offer to Shirley
was made in FY18, and was not part of the FY17 Turnaround LTI grant.
There were no subsequent grants in FY18 for those who received options in FY17. The Board will consider
programs beyond FY20 in future periods.
LTI Vesting Outcomes
In FY18, the Board approved the following vesting outcomes for the CEO's LTI awards:
• 37,575 sign-on offer options, approved in August 2017 (with a nil exercise price and a fair value of
each option at the grant date of $9.98).
• 369,125 ‘FY15’ Grant options, approved in September 2017 (having an exercise price of $9.88 and
a fair value of each option at the grant date of $1.21).
No other Executive KMP had options due to vest in FY18.
Executive Contracts
The remuneration and other terms of employment for the executives are covered in formal employment
contracts that have no fixed terms. Bellamy’s may terminate an executive immediately for cause, in which
case the executive is not entitled to any payment other than the value of total fixed remuneration (and
accrued entitlements) up to the termination date.
Bellamy’s Australia Limited
39
Remuneration
Executive
Notice
Period by
Bellamy’s
Notice
period by
Executive
Payment in
lieu of
notice
Redundancy
Redundancy
for
fundamental
change in
role
Andrew Cohen,
Chief Executive
Officer
Nigel Underwood,
Chief Financial
Officer
Peter Fridell,
Director of
Operations
David Jedynak,
Director Sales &
Marketing
Melinda Harrison,
General Counsel
& Company
Secretary
6 months
6 months
Yes
Yes
6 months
6 months
Yes
Yes
6 months
6 months
Yes
No
6 months
6 months
Yes
No
6 months
6 months
Yes
No
Redundancy payment of 6
months’ salary and will
include
applicable
any
payment in lieu of notice.
Redundancy payment of 6
months’ salary and will
include
applicable
any
payment in lieu of notice.
Redundancy
is
payment
calculated in accordance with
the Company or Group’s
policy and will include any
applicable payment in lieu of
notice.
is
Redundancy
calculated in accordance with
the Company or Group’s
policy and will include any
applicable payment in lieu of
notice.
Redundancy
is
calculated in accordance with
the Company or Group’s
policy and will include any
applicable payment in lieu of
notice.
payment
payment
Non-executive directors’ remuneration
Bellamy’s remuneration policy for non-executive directors aims to ensure that Bellamy’s can attract and
retain suitably qualified and experienced directors having regard to:
•
•
•
•
the level of fees paid to non-executive directors of other comparable Australian listed companies;
the growing size and complexity of Bellamy’s operations;
the responsibilities and work requirements of Board members; and
the skills and diversity of Board members.
Current fee levels and fee pool
Under the ASX Listing Rules, the total amount paid to all non-executive directors in any financial year must
not exceed the amount fixed in a general meeting of the Company. This amount is currently $1,000,000 as
determined by Shareholders at the AGM held on 20 October 2015.
For FY18, non-executive directors’ annual fees (exclusive of any superannuation entitlements) were:
Name
Base Fee
Chair Audit &
Risk Committee
Chairman1
Deputy Chairman2
Director
$200,000
$120,000
$75,000
$0
$0
$15,000
Chair of
Remuneration
& Nomination
Committee
$0
$0
$15,000
Member of
Audit & Risk
Committee
$0
$3,000
$3,000
Member of
Remuneration
& Nomination
Committee
$0
$0
$3,000
1.
In order to ensure good governance and independence the Chairman made the personal decision to waive his Board fees, and
this was approved at the 18 May 2017 Board meeting.
2. The Deputy Chairman is the Chair of the Remuneration & Nomination Committee and does not receive an additional fee for this
role.
Directors may also be reimbursed for travel and other expenses incurred in attending to Bellamy’s affairs.
No Directors provided additional consultancy services over and above their Directors Fee remuneration.
Bellamy’s Australia Limited
40
Remuneration
All non-executive directors enter into a service agreement with the company in the form of a letter of
appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the
office of director. There are no retirement benefit schemes for directors other than statutory superannuation
contributions, and non-executive directors’ remuneration must not include a commission on, or a
percentage of, the profits or income of Bellamy’s.
Participation in Turnaround LTI plan
The Board recognises that the participation of directors in an equity-based plan is not usual.
Given the company is continuing its critical turnaround phase, it is especially important to have high calibre
directors with the requisite and specific skills and the time commitment available to guide the Company in
achieving the turnaround strategy. The Turnaround LTI plan is one of the components in being able to
attract such talent to the Board in the Company's specific circumstances.
As noted in the FY17 Remuneration Report, the Board decided that instead of simply increasing the cash
component of director fees to attract the most suitable Board talent, it would use an at-risk LTI to motivate
and recognise the significant amount of additional effort that will be required over and above what is
considered in the ordinary course of business for a Board as part of the turnaround of Bellamy’s.
Recognising the potential conflict that an LTI plan could create for Directors, the LTI plan design is only
linked to Total Shareholder Return. That is, there is no business performance or subjective metrics that
need to be assessed for vesting. Hence, this LTI plan for Directors further achieves the objective of aligning
the long-term enterprise value creation of the company and the total Director remuneration over the next
few years.
The Chairman did not participate in the initial FY17 Turnaround LTI plan grant.
The terms of grants made under the Turnaround LTI Plan to directors in FY18 are the same as those made
to executives as described in the section of this Remuneration Report outlining Executive Remuneration,
subject to the following differences:
Participants
Only the newly appointed non-executive director has been offered an FY18 LTI, which is
subject to shareholder approval at the 2018 AGM.
Offer Date
The offer was made in December 2017, subject to approval at the 2018 AGM.
What is the
performance
period?
The grant will be divided into two tranches. The performance period that applies to each
tranche is set out below.
December 2017 Offer
% of
Grant
Performance
measure
Tranche 1
50%
Tranche 2
50%
Total
Shareholder
Return
Total
Shareholder
Return (TSR)
First
Performance
Period
Second
Performance
Period
Third
Performance
Period
13/12/17 to
31/12/19
1/1/20 to
31/12/20
1/1/21 to
30/6/21
1/1/20 to
31/12/20
1/1/21 to
30/6/21
Note: The last testing for vesting may occur up to 30 September 2021 in respect to all the
grants made in FY18.
What is the
allocation price
and how was it
determined?
The exercise price of each grant is as follows:
Grant Date
Exercise price
Allocation Price
Tranche 1
Allocation Price
Tranche 1
13 December
2017
$11.19
$3.57
$3.55
The allocation prices for tranche 1 and tranche 2 of each grant was based on the fair value.
The fair value is calculated using a binomial option pricing model, which takes into
Bellamy’s Australia Limited
41
Remuneration
consideration factors such as the performance hurdles, probability of those hurdles being
achieved, share price volatility, expected life of the award, dividend yield and risk-free rate.
What happens
on cessation of
office?
If a director ceases to be a director of the Board as a result of actual or alleged serious
misconduct, unless the Board determines otherwise, all options held will lapse with effect
from the date they cease office.
In all other circumstances, the options will be pro-rated (based on the proportion of the
measurement period that has elapsed) and remain on foot and subject to the original vesting
condition, unless the Board exercises a discretion to treat them otherwise.
Shareholder
approval
Shareholders previously approved grants to certain directors under this Plan at the 2017
AGM. Approval for the grant to the new director will be sought from shareholders at the
2018 AGM.
Signed in accordance with a resolution of the Board of Directors.
John Ho
Chairman
John Murphy
Deputy Chairman
Dated at Melbourne this 28th day of August, 2018
Bellamy’s Australia Limited
42
Remuneration
Details of the nature and amount of each element of the remuneration
Table A: Remuneration for KMP for the year ended 30 June 2018
Year
Salary
Non-Executive Directors
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew
KMP Executives
Andrew Cohen
Nigel Underwood
David Jedynak
Peter Fridell
Melinda Harrison
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Short Term Benefits
Post-employment Benefits
STI
Payment1
$
Non-
monetary
Benefits
$
-
-
-
-
-
-
-
-
-
-
370,000
295,379
91,000
40,000
105,000
-
105,000
-
91,500
-
-
-
-
-
-
-
-
-
-
-
-
-
48,665
44,309
-
-
-
-
-
-
Superannu
ation
$
-
-
12,201
1,517
7,410
2,470
7,410
4,904
4,716
-
20,048
19,385
20,048
7,758
20,048
1,207
20,048
1,207
20,048
3,294
Long-term
employment
benefits
$
-
-
-
-
-
-
-
-
-
-
5,100
-
510
-
510
-
510
-
471
-
Share
Based
Payments
Options2
$
-
-
404,620
5,258
75,866
986
75,866
986
10,946
-
1,428,261
1,035,465
261,277
12,916
261,277
12,916
242,024
11,964
110,011
5,438
Total
Performance
Related %
$
-
-
545,249
31,078
161,276
29,456
161,276
58,127
65,305
-
2,638,744
2,123,096
757,796
269,998
723,131
26,830
703,878
25,878
511,798
43,401
%
0%
0%
74%
17%
47%
3%
47%
2%
17%
-
68%
63%
46%
20%
51%
48%
49%
46%
39%
13%
$
-
-
128,428
24,303
78,000
26,000
78,000
52,237
49,643
-
815,335
772,867
336,296
165,015
336,296
12,707
336,296
12,707
289,768
34,669
1. The amounts shown for STI relates to the actual payments for FY17 and the approved amounts for FY18.
2. The fair value of options as at the date of their grant has been determined in accordance with AASB 2 Share-based Payments. The amount shown is the amortised expense for FY18.
For the new Director, Shirley Liew, the options are subject to shareholder approval at the 2018 AGM.
Bellamy’s Australia Limited
43
Remuneration
Share based payments
Table B: Share-based payments granted as remuneration to KMP during FY18
Year
Option Series
Grant Date
Number Granted1
Value of Options
Granted2
Number Vested
Percentage of
Grant Forfeited
Non- Executive Directors
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew1
KMP Executives
Andrew Cohen
Nigel Underwood
David Jedynak
Peter Fridell
Melinda Harrison
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant3
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
FY18 Grant
FY17 Grant
-
-
-
13 Jun 17
13 Jun 17
-
13 Jun 17
13 Dec 17
-
-
13 Jun 17
-
13 Jun 17
-
13 Jun 17
-
13 Jun 17
-
13 Jun 17
-
-
-
193,373
36,257
-
36,257
20,878
-
-
1,843,345
-
475,000
-
475,000
-
440,000
-
200,000
-
-
-
395,448
74,416
-
74,416
74,326
-
-
3,762,028
-
973,750
-
973,750
-
902,000
-
410,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
369,125
35,575
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1. For the new Director, Shirley Liew, the options are subject to shareholder approval at the 2018 AGM.
2. The value of the options is amortised over the period from grant date to the vesting date for purposes of accounting and KMP remuneration reporting. The fair value of the FY18 options offered in
December 2017 was $3.57 for Tranche 1 and $3.55 for Tranche 2. The last exercise date of the December 2017 options is 13 December 2021.
3. Cohen’s grant for FY17 includes 168,345 options issued under the FY17 legacy LTI plan and 1,675,000 options issued under the FY17 Turnaround LTI plan.
Bellamy’s Australia Limited
44
Remuneration
Options over shares in Bellamy’s Australia Limited
Table C: Movements during FY18 in the options over shares in the Company held, directly, indirectly or beneficially, by each KMP, including their related parties.
Year
Options held at
Start of Year
Granted as
remuneration
in the period
Vested in FY18
and
exercisable
Non-Executive Directors
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew
Andrew Cohen
Nigel Underwood
David Jedynak
Peter Fridell
Melinda Harrison
2018
2017
2018
2017
2018
2017
2018
2017
20181
2017
2018
20172
2018
2017
2018
2017
2018
2017
2018
2017
-
-
193,373
-
36,257
-
36,257
-
-
-
2,533,295
689,950
475,000
-
475,000
-
440,000
-
200,000
-
-
-
-
193,373
-
36,257
-
36,257
20,878
-
-
1,843,345
-
475,000
-
475,000
-
440,000
-
200,000
-
-
-
-
-
-
-
369,125
37,575
-
-
-
-
-
-
-
-
Exercised
during the
reporting
period
-
-
-
-
-
-
-
(37,575)
-
-
-
-
-
-
-
-
-
Options
forfeited
Options held at
End of Year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
193,373
193,373
36,257
36,257
36,257
36,257
20,878
-
2,495,720
2,533,295
475,000
475,000
475,000
475,000
440,000
440,000
200,000
200,000
1. For the new Director, Shirley Liew, the options are subject to shareholder approval at the 2018 AGM.
2. The Board approved the vesting of Cohen’s 37,575 sign-on offer options and Cohen exercised them in August 2017 with a nil exercise price and a fair value of each option at the grant date of
$9.98.
Bellamy’s Australia Limited
45
Remuneration
Fully paid ordinary shares of Bellamy’s Australia Limited
Table D: Movement during FY18 in the shares of Bellamy’s held, directly, indirectly or beneficially, by each
KMP, including their related parties.
Year
Shares held at
Start of Year
Net other changes
Shares Held at End
of Year1&2
Non-executive Directors
John Ho
John Murphy
Wai-Chan Chan
Rodd Peters
Shirley Liew
KMP Executives
Andrew Cohen
Nigel Underwood
Peter Fridell
David Jedynak
Melinda Harrison3
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
7,671,294
6,779,284
-
-
-
-
-
-
-
-
13,750
13,750
-
-
-
-
-
-
3,475
3,475
1,080,888
892,010
-
-
-
-
43,600
-
-
-
37,5754
-
-
-
-
-
13,400
-
458
-
8,752,182
7,671,294
-
-
-
-
43,600
-
-
-
51,325
13,750
-
-
-
-
13,400
-
3,933
3,475
1. There were no shares held nominally by KMP as at 30 June 2018 and as at the date of this report.
2. The shareholding for the exiting directors and former KMP executives are shown at the end of their term, not the end of the year.
3. The shares shown for Harrison are held directly by a family member.
4. Received as a result of exercise of options.
Bellamy’s Australia Limited
46
Auditor’s Declaration
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Bellamy's Australia Limited for the year ended 30 June 2018, 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 Bellamy's Australia Limited and the entities it controlled during the
period.
Alison Tait
Partner
PricewaterhouseCoopers
Melbourne
28 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Bellamy’s Australia Limited
47
Financial Statements
Consolidated Financial Statements
Contents
Consolidated Statement of Profit and Loss and Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditors Report
49
50
51
52
53
86
87
Bellamy’s Australia Limited
48
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
for the year ended 30 June 2018
Note
2018
$’000
2017
$’000
Revenue
Cost of sales
Gross Profit
Other income
Direct costs (distribution & other costs)
Employee costs
Marketing and innovation costs
Administrative and other costs
Earnings before interest and tax, depreciation and
amortisation (EBITDA)
Depreciation and amortisation
Earnings before net interest and tax (EBIT)
Net interest revenue/(expense)
Profit/(Loss) before income tax
Income tax expense
Net Profit/(Loss) after income tax
Other comprehensive income (net of tax)
Items that may be reclassified to profit and loss
Changes in the fair value of cash flow hedges
Exchange differences arising from translation of wholly
owned foreign entities
Total other comprehensive income
Total comprehensive income for the year
Total net profit attributable to:
Non-controlling interest
Owners of Bellamy’s Australia Limited
Total net profit/(loss) for the year
Total comprehensive income attributable to:
Non-controlling interest
Owners of Bellamy’s Australia Limited
Total comprehensive income for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
5
6
5
6
6
6
6
7
328,704
(199,830)
128,874
240,182
(148,661)
91,521
582
248
(21,074)
(19,004)
(14,578)
(10,233)
64,567
(4,298)
60,269
927
61,196
(18,380)
42,816
45
843
888
43,703
(451)
43,267
42,816
(451)
44,154
43,703
39.2
37.2
(22,258)
(15,992)
(10,919)
(41,220)
1,380
(787)
593
(1,270)
(677)
(131)
(809)
540
(447)
93
(716)
-
(809)
(809)
-
(716)
(716)
(0.8)
(0.8)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
Bellamy’s Australia Limited
49
Financial Statements
Consolidated Balance Sheet
as at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets (net)
Total Non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivatives
Current tax liabilities
Total Current Liabilities
Non-current liabilities
Provisions
Total Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
Note
2018
$’000
2017
$’000
20(a)
8
9
17
15
10
12
17
13
14
16
14
17
16
18
19
87,634
49,317
90,453
-
2,748
230,153
3,784
40,079
6,798
50,661
280,812
69,108
62
1,663
232
2,344
73,409
45
45
73,454
207,358
120,870
11,843
74,645
207,358
17,479
37,057
93,497
274
2,051
150,358
1,006
1,740
3,537
6,283
156,641
37,726
25,264
2,329
34
-
65,353
29
29
65,382
91,259
53,795
5,635
31,829
91,259
Minority Interest
Total equity attributed to the owners of Bellamy’s
Australia Limited
(21)
-
207,379
91,259
The above Consolidated Balance Sheet should be read with the accompanying notes.
Bellamy’s Australia Limited
50
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Foreign
currency
translation
reserve
$’000
Cash flow
hedge reserve
Share based
payment
reserve
Non-
Controlling
Interest
Retained
earnings
Total
$’000
$’000
$’000
$’000
$’000
Issued capital
$’000
53,795
-
-
-
-
67,075
-
120,870
40,216
-
-
-
13,579
-
-
53,795
Balance as at 1 July 2017
Acquisition of Camperdown
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive
income
Issue of shares (net of
transaction costs)
Dividends
Share based payments
Balance as at 30 June 2018
Balance as at 1 July 2016
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive
income
Issue of shares (net of
transaction costs)
Dividends
Share based payments
Balance as at 30 June 2017
(820)
-
-
843
843
-
-
-
23
(373)
-
(447)
(447)
-
-
-
(820)
(25)
-
-
45
45
-
-
-
21
6,480
-
-
-
-
-
5,340
11,820
(565)
3,767
-
540
540
-
-
-
(25)
-
-
-
-
-
2,713
6,480
-
430
(451)
-
(451)
-
(21)
-
-
-
-
-
-
-
-
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Bellamy’s Australia Limited
31,829
-
42,816
-
42,816
-
-
-
74,645
91,259
430
42,365
888
43,253
67,075
-
5,340
207,358
40,176
83,221
(809)
-
(809)
-
(7,538)
-
31,829
(809)
93
(716)
13,579
(7,538)
2,713
91,259
51
Financial Statements
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
Cash flows from operating activities
Cash receipts from customers
Cash payments to suppliers and employees
Cash generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Proceeds from sale of property plant & equipment
Purchases of property, plant & equipment
Proceeds on sale of investments
Purchase of production rights
Payment for acquisition of controlled entity (net of cash
acquired)
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from share issue
Proceeds of borrowings
Repayment of borrowings
Dividends paid to Company’s shareholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash equivalents
Cash and cash equivalents at the beginning of the financial
year
Effects of exchange rate changes
Cash and cash equivalents at the end of the financial
year
Note
2018
$’000
2017
$’000
20 (b)
317,012
(232,551)
84,461
861
-
(17,080)
68,241
-
(2,028)
-
(5,500)
(10,453)
(17,981)
45,097
(25,202)
-
19,895
70,155
17,479
-
237,018
(269,433)
(32,415)
94
-
(876)
(12,522)
(45,718)
48
(273)
297
-
(544)
(472)
13,175
65,452
(40,319)
(7,135)
31,173
(15,018)
32,295
202
20 (a)
87,634
17,479
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying
notes.
Bellamy’s Australia Limited
52
Financial Statements
Notes to the Financial Statements
For the year ended 30 June 2018
These are the consolidated financial statements of Bellamy’s Australia Limited and its subsidiaries. A list
of all subsidiaries is included in Note 23. The financial statements are presented in the Australian currency.
1
Significant changes in the current reporting period
On 3 July 2018, the Company acquired Camperdown Powder Pty Ltd for $32.1m through a 90% share of
A.C.N. 619 661 611 Pty Ltd.
On 15 January 2018, the Company announced the conditional acquisition of the remaining 10% of the
Camperdown operations for total consideration of approximately $3.6m (based on Bellamy’s share price at
15 January 2018). On completion, this acquisition will result in the Company beneficially owning 100% of
the shares in Camperdown.
For detailed discussion of the Company’s performance and financial position refer also to the Operating
and Financial Review on pages 5 to 9. This review identifies costs that are not expected to recur in future
financial years.
2
Segment information
a) Description of segments
Operating segments are determined in accordance with AASB 8 Operating Segments. To identify the
operating segments of the business, management has considered the business from both a geographical
and functional perspective, as well as considering the way information is reported to management and the
Board.
The operating segments have been redefined based on the geographical location of the retailer/reseller in
respect of the direct sale by the Company to reflect how the business is now managed. The three operating
segments are as follows:
i)
ii)
iii)
Australia – revenues derived from sales to retailers and other resellers within Australia.
Overseas Sales – revenue derived from sales to distributors and online customers overseas.
Australia Manufacturing – manufacturing of formula and other powders
Senior management assess the performance of the operating segments based on a measure of underlying
earnings before interest and tax (EBIT). This measurement basis excludes the effects of non-recurring
expenditure from the operating segments such as restructuring costs and one-off items to ensure
comparability of the underlying operating result. Interest income and expenditure are not allocated to
segments.
Significant items relate to significant changes in the business during the past financial year and are
identified due to their nature and magnitude on the assessment of segment performance. During the
financial year the significant item relates to inventory provisions for the transition to SAMR registered
products in China and Country of Origin Labelling (COOL) compliant labelling in Australia. In the prior year
the costs that are associated with the turnaround plan and include costs arising from the supply chain reset,
professional fees and restructuring costs that are not expected to recur in future financial years. These
have been included as non-recurring and are excluded by management when assessing the underlying
EBITDA of the segments.
Customer concentration information. In the Australia Sales segment one customer purchased $69.7m,
representing 21% of total Group Revenue (FY17: $34.0m, 14%). In the International Sales segment, one
customer purchased $82.0m representing 25% of total Group Revenue (FY17: $51.4m, 21%). No other
single customers represent greater than 10% of revenue.
A reconciliation of segment EBITDA to profit before income tax is provided in (b) below.
Total assets and liabilities are measured in a manner consistent with that in the financial statements. These
assets are allocated based on the operations of the segment and physical location of the asset.
Bellamy’s Australia Limited
53
Financial Statements
2018
Segment revenues
Underlying segment EBITDA *
Segment EBITDA %
Total segment assets
Total segment liabilities
Other disclosures
Depreciation & amortisation
Income Tax
2017
Segment revenue
Underlying segment EBITDA *
Segment EBITDA %
Total segment assets
Total segment liabilities
Other disclosures
Depreciation & amortisation
Income Tax
Australia
Sales
Overseas
Sales
$’000
$’000
Australia
Manufactur
ing
$’000
Elims
$’000
Group
Total
$’000
248,252
74,669
30.1%
181,486
60,345
963
19,700
189,859
27,667
14.6%
130,838
38,198
731
(606)
95,887
31,315
32.7%
10,145
7,961
15
638
77,708
16,636
21.4%
7,980
4,955
56
737
13,090
(1,408)
(10.8)%
43,300
49,430
3,320
(1,933)
-
-
-
-
-
-
-
(28,525)
(26,458)
(48,551)
(47,528)
-
(25)
(27,385)
(1,508)
(3,468)
(3,428)
-
-
328,704
78,118
23.8%
186,380
70,208
4,298
18,380
240,182
42,794
17.8%
135,350
39,725
787
131
b) Reconciliation of the underlying segment EBITDA to profit before tax
Underlying segment EBITDA
Unallocated corporate costs *
Significant items /non-recurring:
Inventory provisions and write-down
Restructuring costs
Fonterra payment for supply chain reset
Costs associated with the acquisition of Camperdown Powder
and indirect capital raising costs
Professional fees of a non-recurring nature
Ineffective foreign exchanges hedge losses
Net interest revenue/(expense)
Depreciation & Amortisation
Profit/(loss) before tax
*Non-trading entity costs
2018
$’000
2017
$’000
78,118
42,794
(7,578)
(4,845)
(5,973)
-
-
-
-
-
64,567
927
(4,298)
(6,838)
(1,449)
(27,500)
(1,083)
(2,980)
(1,564)
(41,414)
(1,270)
(787)
61,196
(677)
Bellamy’s Australia Limited
54
Financial Statements
c) Reconciliation of segment assets and liabilities
Australia Sales
Overseas Sales
Australian
Manufacturing
Elims
Group Total
2018
$'000
2017
$'000
2018
$'000
2017
$'000
2018
$'000
2017
$'000
2018
$'000
2017
2018
$'000
2017
$'000
Segment assets
181,486 130,838
10,145
7,980
43,300
-
(48,548)
(3,468)
186,380 135,351
cash
Unallocated
Cash
and
equivalents
Current tax assets
Deferred tax assets
(net)
Total assets
87,634
17,479
-
274
6,798
3,537
280,812 156,641
Segment liabilities
60,345
38,198
7,961
4,955
49,430
-
(47,528)
(3,428)
70,208
39,725
Unallocated
Provisions
(employee benefits)
Borrowings
Derivatives
Current tax liabilities
Total Liabilities
3
Earnings per share
Basic earnings per share (a)
Dilute earnings per share (b)
a) Basic earnings per share
608
358
62
25,264
232
2,344
34
-
73,454
65,382
2018
cents
2017
cents
39.2
37.2
(0.8)
(0.8)
The calculation of basic earnings per share is based on the profit/(loss) attributable to ordinary shareholders
of $42,815,000 (2017:($809,000)) and the weighted average number of shares outstanding of 109,230,834
(2017: 96,736,658).
b) Diluted earnings per share
The calculation of diluted earnings per share is based on the weighted average number of shares
outstanding of 115,113,993, including unexercised employee options of 5,883,159 (2017: 6,891,010).
The calculation does not include 300,000 shares to be issued to the vendors of Camperdown Powder Pty
Ltd when conditions subsequent have been achieved. It also does not include 20,878 options offered to
directors which have not yet been approved by the shareholders.
4
Dividends to shareholders
No dividends have been paid during the year, in respect of the financial year ended 30 June 2017 (2017:
Fully franked dividend of 7.8c in relation to FY16).
As at 30 June 2018, the level of 30% franking credits available to shareholders on a tax paid basis was
$35,100,144 (2017: $12,506,612). The franking credits available are based on the balance of the dividend
franking account in the prior year tax return adjusted in relation to the current income tax liabilities for the
year ended 30 June 2018. The ability to utilise franking credits is dependent upon the ability to declare
dividends.
Bellamy’s Australia Limited
55
Financial Statements
5
Revenue
Revenue from continuing operations
328,704
240,182
2018
$’000
2017
$’000
Other income
Sundry income
Total other income
Revenue recognition
Measurement of revenue
582
582
248
248
Revenue is measured at fair value of the consideration received or receivable after taking into account any
trade discounts and volume rebates allowed.
Timing of recognition
Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of
significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.
All revenue is stated net of the amount of goods and services tax (GST).
6
Expenses and significant items
Cost of sales
Shortfall payments
Direct costs
Inventory provisions and write offs1
Employee costs
Wages & salaries2
Restructuring costs1
Share based payments
Administrative & Other
Fonterra payment for the supply chain reset1
Costs associated with the acquisition of Camperdown
Powder and indirect capital raising costs1
Professional fees of a non-recurring nature1
Ineffective foreign exchange hedge losses1
Net finance (revenue)/costs
Interest revenue
Interest expense
Depreciation and amortisation
Depreciation – property, plant & equipment
Amortisation of product development costs
Amortisation of software
Amortisation of customer contracts and licences
10(b)
12
12
12
2018
$’000
2017
$’000
3,289
2,000
5,973
6,838
11,178
-
4,053
-
-
-
-
(1,157)
230
698
510
190
2,900
9,401
1,449
2,289
27,500
1,083
2,980
1,564
(94)
1,364
280
387
120
-
1. The items above are defined as significant items due to their nature and magnitude and have been
included as non-recurring for the underlying EBITDA for the segment disclosure – refer Note 2 for
more details.
2. Wages and salaries exclude direct production staff whose wages are allocated to the direct cost of
inventory.
Bellamy’s Australia Limited
56
Financial Statements
3.
Interest revenue is reported under the heading of net finance costs and recognised using the
effective interest rate method.
7
Income tax expense
a) Amounts recognised in profit or loss:
Current tax expense
Deferred tax expense/(benefit)
Total income tax expense
b) Numerical reconciliation between tax expense and profit before tax.
Profit/(loss) before tax from continuing operations
Prima facie tax payable at 30% (2017:30%)
Non-deductible expenditure
Other
Share Based Payments
Effect of different overseas tax rates
Impact of Controlled Foreign Company Rules
R&D benefits
Under (over) provision from prior periods
Total income tax expense
Weighted average effective tax rates
8
Trade and other receivables
Current
Trade receivables (a)
Loss allowance provision
Other receivables
2018
$’000
2017
$’000
19,635
(1,255)
18,380
1,948
(1,817)
131
2018
$’000
2017
$’000
61,196
18,359
90
(18)
(191)
(711)
560
-
291
18,380
30%
(677)
(203)
455
-
-
(1,043)
1,071
(149)
-
131
(19%)
2018
$’000
2017
$’000
43,856
(116)
43,740
5,577
49,317
33,942
(100)
33,842
3,215
37,057
a) Accounting for trade receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. As
collection of the amounts is expected in one year or less they are classified as current assets. Due to the
short-term nature of the current receivables, their carrying amount is considered to be the same as their
fair value. Impairment risk is low – less than 0.25% of trade receivables were over 30 days overdue at 30
June 2018, (2017:nil) and all material trade receivables from overseas customers are invoiced in Australian
dollars and backed by bank guarantees.
Bellamy’s Australia Limited
57
Financial Statements
b) Credit risk
The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9,
which permits the use of the lifetime expected loss provision for all trade receivables. The loss allowance
provision as at 30 June 2018 is determined as follows:
2018
Expected loss rate
Gross carrying
amount
Loss allowance
provision
2017
Expected loss rate
Gross carrying
amount
Loss allowance
provision
Current
$’000
0.3%
43,789
116
Current
$’000
0.3%
31,815
100
More than 30
days $’000
-
More than 60
days $’000
-
More than 120
days $’000
-
71
-
(4)
-
-
-
More than 30
days $’000
-
More than 60
days $’000
-
More than 120
days $’000
-
945
-
1,169
-
13
-
Total
$’000
0.3%
43,856
116
Total
$’000
0.3%
33,942
100
2018
$’000
2017
$’000
Opening loss allowance 1 July
Increase in loss allowance recognised in profit or loss during the period
As at 30 June
100
16
116
60
40
100
The gross carrying amount of trade receivables is $43.9m (2017: $33.9m).
During the period, the Group made no write offs of trade receivables it did not expect to receive future cash
flows from and did not make any recoveries from collection of cash flows previously written off.
9
Inventories
Raw materials
Finished goods
Goods in transit
2018
$’000
2017
$’000
18,406
58,851
13,196
90,453
10,483
83,014
-
93,497
Inventories are measured at lower of cost and net realisable value.
Key Judgements and Estimates
Inventory values are stated net of provision of $10.0m (FY17: $5.6m). The provision for inventory write-
downs was increased $6.0m resulting from the transition to SAMR registered products in China and CoOL
compliant labelling in Australia.
The valuation of inventory is considered an area of significant judgement. Inventory is valued at lower of
cost or net realisable value. The value is dependent on the revenue forecasts and the estimated impact of
regulatory change. Should revenue forecasts not be achieved or the regulatory impact differs from that
estimated, the net realisable value of inventory as assessed at 30 June 2018 may be impacted.
Bellamy’s Australia Limited
58
Financial Statements
10 Property, plant and equipment
a) Carrying amounts
Plant and Equipment
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated depreciation
Total Property Plant & Equipment
b) Reconciliation of carrying amount
2018
Balance as at 1 July 2017
Acquisition of Camperdown
Additions
Disposals
Depreciation expense
Balance as at 30 June 2018
2017
Balance as at 1 July 2016
Additions
Disposals
Depreciation expense
Balance as at 30 June 2017
2018
$’000
2017
$’000
5,384
(1,947)
3,437
541
(194)
347
3,784
1,336
(590)
746
369
(108)
261
1,006
Plant &
equipment
$’000
Leasehold
improvements
$’000
Total
$’000
746
1,527
1,856
(79)
(613)
3,437
261
-
171
-
(85)
347
1,006
1,527
2,028
(79)
(698)
3,784
Plant &
equipment
$’000
Leasehold
improvements
$’000
Total
$’000
786
260
(91)
(209)
746
319
13
-
(71)
261
1,105
273
(91)
(280)
1,006
Bellamy’s Australia Limited
59
Financial Statements
11 Business Combinations
On 3 July 2017, the Group acquired 90% ownership in A.C.N. 619 661 611 Pty Ltd, incorporated on 9 June
2017, which owns 100% of the issued capital of Camperdown Powder Pty Ltd (ABN 56 168 982 250).
Details of the purchase consideration, the net assets acquired, and goodwill are as follows:
Fair Value
Consideration
Consideration
Cash
Issue of shares in BAL
Consideration
$’000
10,500
21,612
32,112
Assets and Liabilities acquired
Cash
Property, plant and equipment
Inventory
Trade and other receivables
Other current assets
Intangible assets
Trade and other payables
Deferred tax assets
Deferred tax liabilities
Provisions
Net Assets acquired
Less: non-controlling interests
Add: goodwill
Net assets acquired
$’000
47
1,527
454
567
56
6,800
(5,256)
2,269
(2,100)
(61)
4,303
(430)
28,239
32,112
The valuation of finite life intangible assets included a valuation of customer contracts and operating
licences which were valued at $6.8m. The valuation was based on discounted future cash flow
methodology. This balance is to be amortised over 2-3 years.
12
Intangible assets
The Group’s intangible assets include: goodwill, licences and customers contracts arising from business
combinations, production access rights and other intangibles as follows:
2018
$’000
2017
$’000
Goodwill and Intangible Assets
At valuation
Impairment
Licences and Customer Contracts
At valuation
Accumulated amortisation
Production access
At cost
Accumulated amortisation
Other intangibles
At cost
Accumulated amortisation
Total intangible assets
At cost
Accumulated amortisation and impairment
Net intangible assets
Bellamy’s Australia Limited
28,239
-
28,239
6,800
(2,900)
3,900
5,500
-
5,500
3,140
(700)
2,440
43,679
(3,600)
40,079
-
-
-
-
-
-
1,740
2,248
(508)
1,740
60
Financial Statements
2018
Balance as at
1 July 2017
Additions -
Acquisition of
Business
Additions - Internal
Development
Additions - Purchased
Disposals
Amortisation expense
Balance as at
30 June 2018
Allocated to Segment:
-Australia
-International
-Manufacturing
2017
Balance as at
1 July 2016
Additions - Internal
Development
Disposals
Amortisation expense
Balance as at
30 June 2017
Allocated to
Segment:
-Australia
-International
-Manufacturing
Goodwill
$’000
Licences &
Customer
Contracts
$’000
Production
Access
$’000
Other
$’000
Total
$’000
-
-
28,239
6,800
-
-
-
28,239
-
-
28,239
28,239
-
-
(2,900)
3,900
-
-
3,900
3,900
-
-
-
5,500
-
-
5,500
5,500
-
-
5,500
1,740
1,740
-
35,039
666
734
(700)
2,440
2,440
-
-
2,440
666
6,234
(3,600)
40,079
7,940
-
32,139
40,079
Goodwill
$’000
Licences &
Customer
Contracts
$’000
Production
Access
$’000
Other
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,704
544
-
(508)
1,740
1,740
-
-
1,740
1,704
544
-
(508)
1,740
1,740
-
-
1,740
Goodwill
For the purposes of assessing impairment:
• Assets are grouped at the lowest levels for which there are separately identifiable cash inflows,
which are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units).
• Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The
allocation is made to the CGU from the business combination in which the goodwill arose.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value-in-use.
The Group tests whether goodwill and other intangible assets have suffered any impairment in accordance
with the accounting policy.
Bellamy’s Australia Limited
61
Financial Statements
Licences and customer contracts
The licences and customer contracts were acquired as part of a business combination (see Note 11 for
details). They are recognised at their fair value at the date of acquisition and are subsequently amortised
on a straight-line based on the timing of projected cash flows as follows:
• Customer contracts
• Licences
• Production rights
- 3 years
- 2 years
- 5 years
Production Rights acquired under contract provide Bellamy’s with first access rights to a Tasmanian organic
fresh milk pool. These are shown at historical cost and will be amortised in line with usage in production
over 5 years, based on the length of the contract.
Other intangibles
Other intangibles consist of software, trademarks and product development costs. Refer to Note 32 for
more detailed description.
Intangible Assets Allocation
The goodwill and intangibles have been allocated to the Camperdown CGU for the purpose of impairment
testing. The allocation of intangibles for Camperdown at 30 June 2018 include the following:
Goodwill
Intangibles – licences
Intangibles – customer contracts
Camperdown
$000
28,239
1,800
2,200
The recoverable amount of CGU is determined based on fair value less costs to sell. This calculation is
based on a cash flow projection, based on assumptions for a market participant and taking into account
the risks associated with the cash flows. The fair value model is a 10 year cash flow model using a discount
rate approximating a pre-tax discount rate of 15% determined to be applicable to manufacturing / canning
facilities involved in the infant formula manufacturing industry.
Key judgements and estimates
The fair value model includes volumes for a current manufacturing contract that has a SAMR licence and
estimated production volumes for Bellamy’s Chinese label product assuming successful SAMR registration.
The fair value model also assumes:
- The facility upgrade is completed and provides increased production capacity and efficiency
- Three SAMR registered brands will be produced at the facility and will continue to attract a premium
price to Australian label production
- The valuation assumes licences and registrations are maintained over a period of 10 years. There
is no growth in production output once the facility upgrade is completed and inflation is 2% pa.
The valuation will be reassessed if Camperdown’s application for SAMR registration for Bellamy’s Chinese
label product is rejected.
13 Trade and other payables
Current
Unsecured:
Trade payables
Sundry payables and accrued expenses
Payables are unsecured and are usually paid for 30 days from end of month.
2018
$’000
2017
$’000
52,870
16,238
69,108
30,448
7,278
37,726
Bellamy’s Australia Limited
62
Financial Statements
14 Borrowings
Current
Secured
Trade financing (a)
Asset purchase liabilities (b)
Total current borrowings
Non-Current
Secured
Asset purchase liabilities (b)
Total non-current borrowings
Total borrowings
2018
$’000
2017
$’000
62
-
62
-
-
62
25,259
5
25,264
-
-
25,264
Additional information on finance facilities available
a) HSBC provides a working capital facility to the Group in an aggregate amount of $40 million, together
with a credit card facility of $250,000 and a bank guarantee facility of $200,000 (together, the
“facilities”). The working capital facility is comprised of several sub-facilities with specific conditions
and limits, with the effect that the Group’s ability to utilise the working capital facility is subject to those
conditions being satisfied and those limits not being exceeded. The facilities are secured over assets
of the Group and are subject to the Group complying with its obligations (including financial covenants)
under those facilities. At 30 June 2018, the aggregate amount outstanding under the facilities was $nil
(2017: $25.2 million) and the Group was in compliance with its obligations under those facilities. Based
on current forecasts, the Group expects that the Group will remain in compliance with those
obligations. Subject to the terms of its manufacturing agreement, Fonterra has a second-ranking
security over the assets of the Group. In February 2018, the facility was extended for a further 2 years.
b) There are no asset purchase liabilities outstanding as at 30 June 2018. Bank accepted letters of credit
are provided from time to time in relation to export sale orders and are secured by the underlying
receivable balance.
Recognised fair value measurements
Fair value hierarchy
To provide an indication about the reliability of the inputs used in determining fair value, the Group has
classified its financial instruments into the three levels prescribed under the accounting standards. An
explanation of each level follows underneath the table.
Recurring fair value
measurements as at 30 June
2018
Total Financial Assets
Financial Liabilities
Derivatives used for hedging
Foreign exchange contracts
Total Financial Liabilities
Recurring fair value
measurements as at 30 June
2017
Total Financial Assets
Financial Liabilities
Derivatives used for hedging
Foreign exchange contracts
Total Financial Liabilities
Notes
Level 1
Level 2
Level 3
Total
Notes
Level 1
232
232
Level 2
Level 3
-
34
34
Total
232
232
-
34
34
-
-
-
-
-
-
-
-
There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.
Bellamy’s Australia Limited
63
Financial Statements
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the
end of the reporting period.
Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices
at the end of the reporting period. The quoted market price used for financial assets held by the Group is
the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using
valuation techniques which maximise the use of observable market data and rely as little as possible on
entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3. This is the case for unlisted equity securities.
Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include:
•
•
the use of quoted market prices or dealer quotes for similar instruments
the fair value of forward foreign exchange contracts is determined using forward exchange rates
at the balance sheet date
15 Other assets
Current
Prepayments
2018
$’000
2017
$’000
2,748
2,051
Prepayments for 2018 are primarily for insurance covering the period to 31 March 2019. (2017: payments
are primarily for insurance covering the period to 31 March 2018).
16 Provisions
Current
Employee entitlements
Minimum annual volume provision
Non-Current
Employee entitlements
2018
Balance as at 1 July 2017
Accrued during the year
Payments made
Balance as at 30 June 2018
2018
$’000
2017
$’000
563
1,100
1,663
45
1,708
329
2,000
2,329
29
2,358
Minimum
annual
volume
$’000
Employee
Entitlements
$’000
Total
$’000
2,000
3,289
(4,189)
1,100
358
250
-
608
2,358
3,539
(4,189)
1,708
Bellamy’s Australia Limited
64
Financial Statements
2017
Balance as at 1 July 2016
Accrued during the year
Payments made on termination
Balance as at 30 June 2017
Minimum
annual
volume
$’000
Employee
Entitlements
$’000
Total
$’000
-
2,000
-
2,000
474
185
(301)
358
474
2,185
(301)
2,358
Refer Note 25 for further information on accounting for minimum annual volume provision (shortfall
payments).
Manufacturing contracts
The accounting for manufacturing contracts is based on estimates and judgements in relation to future
production levels. Based on the current forecast the Company has assessed that the economic benefit of
the manufacturing contracts exceeds the cost of the contracts (including anticipated shortfall payments)
and therefore the contracts are not considered onerous. Further information with respect to production
shortfall payments is included in Note 25.
17 Tax
Current (asset) / liability
Income tax payable/(refundable)
Deferred tax balances recognised
Temporary differences relating to income
Temporary differences relating to spending
Inventories
Other liabilities
Employee entitlements
Foreign exchange losses
Tax losses
Overseas operating losses
Share based payments
Other assets and liabilities
Capital raising costs (equity)
Net deferred tax balances recognised
Represented by
Deferred tax assets
Deferred tax liabilities
Movement in recognised deferred tax balances
Opening balance
Recognised in income
DTA on acquisition of Camperdown Powder
DTL on acquisition of Camperdown Powder
Recognised in equity
Deferred tax assets not recognised
Australian Tax Consolidated Group
Tax losses: capital
Temporary differences: revenue
2018
$’000
2017
$’000
2,344
(274)
2,197
(3,279)
195
26
3,284
270
1,820
1,509
776
6,798
10,077
(3,279)
6,798
3,537
1,254
2,269
(2,100)
1,838
6,798
-
138
1,210
108
342
-
499
822
(175)
593
3,537
3,909
(372)
3,537
1,500
1,817
-
-
220
3,537
201
-
201
-
Bellamy’s Australia Limited
65
Financial Statements
Tax losses of $7.1m (2017: nil) were recognised as deferred tax assets (tax effected balance of $2.6m) in
acquisition accounting for the interest in Camperdown Powder Pty Ltd. Refer note 11 Business
Combinations.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the deferred
tax asset can be utilised.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Governance over Taxation
• The Board has approved a Tax Policy which governs Company’s approach to taxation and how
this approach is aligned with business and sustainability strategy
• Tax Risk Management forms part of the overall risk management
• The performance of the tax strategies, tax risk management, tax transactions such as inter-
company funding, material tax incentives, country-by-country activities and current disputes with
tax authorities is reported to the Board.
There are no matters for which it would be expected that the Taxation Authorities in the jurisdictions
Bellamy’s operates would take a materially different view.
18
Issued capital
a) Fully paid ordinary shares
Opening balance at 1 July
Issue of ordinary shares during
the year:
Issued to retail investors
Issued to owners of
Camperdown
Employee options exercised
Dividend reinvestment plan
Institutional investment offer
Closing balance at 30 June
2018
Shares
99,679,345
2017
Shares
96,656,397
2018
$’000
2017
$’000
53,795
40,216
-
9,738,250
3,190,042
708,467
-
-
113,316,104
-
-
-
30,128
2,992,820
99,679,345
46,256
21,613
366
(1,160)
120,870
-
-
-
404
13,175
53,795
On 3 July 2017 the acquisition of a 90% interest in Camperdown was completed, at which time the issuing
of 3,190,042 shares to Isa Sun Pty Ltd as Trustee for the Huddy Horizon Trust (representing the remaining
consideration in connection with the acquisition) was committed. The share price at this date was $6.78.
These shares were later issued 11 October 2017 following completion of conditions subsequent. Placement
details set are out in the Prospectus dated 13 June 2017.
On 6 July 2017, 9,738,250 shares were issued on completion of the Retail Entitlement Offer made to eligible
retail shareholders in accordance with the Prospectus dated 13 June 2017.
b) Share options granted under the Group’s employee share option plan
The following options were granted to new senior management under the Bellamy’s Australia Limited
employee option plan during the year.
• October 2017 - 50,000 options having a vesting date of 31 March 2020 (Tranche 1) and 31 March
2021 (Tranche 2).
• 15 January 2018 – 36,585 options having a vesting date of 31 March 2020 (Tranche 1) and 31
March 2021 (Tranche 2).
• 20 April 2018 – 38,143 options having a vesting date of 30 September 2020 (Tranche 1) and 30
September 2021 (Tranche 2).
At the AGM on 26 October 2017, shareholders approved the grant of 265,887 options to Directors. The
terms of the grant are set out in the prospectus dated 13 June 2017.
On 13 December 2017, 20,878 options were offered to a new director under the long-term incentive
program, subject to receiving shareholder approval at the 2018 AGM. These options will have a vesting
Bellamy’s Australia Limited
66
Financial Statements
date of 31 March 2021 (Tranche 1) and 31 March 2022 (Tranche 2). 25,011 options were forfeited as a
result of eligible employees ceasing employment with the Group.
As at 30 June 2018, executives and employees held options over 5,883,159 (2017: 6,891,010) ordinary
shares of the Group. Note: a further 20,878 options intended for a new director will not be allocated until
shareholder approval is received at the AGM.
The holders of these options do not have the right, by virtue of the option to participate in any share issue
or interest issue of the Group or of any other related body corporate. Until they are exercised, the options
carry no rights to dividends and no voting rights.
c) Capital management
Management and the Board of Directors monitor the capital of the Group in order to maintain a prudent
debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can
effectively fund the operations in line with business growth objectives.
The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial
assets.
Management effectively manages the Group’s capital by assessing the Group’s risk and adjusting its capital
structure in response to changes in these risks. These responses include the management of debt levels,
distributions to shareholders and share issues.
In response to this analysis, on the 13 June 2017, the Group issued a prospectus to increase capital by
$60.4 million. This capital raise provided funding for the supply chain reset, the Camperdown acquisition
and reducing reliance on debt funding.
The net debt to cash position as at the end of the reporting period is as follows:
Total borrowings
Less cash and cash equivalents
Net debt / (cash)
2018
$’000
2017
$’000
62
(87,634)
(87,572)
25,264
(17,479)
7,785
The 13 June 2017 Prospectus and the 17 July 2017 Supplementary Prospectus successfully raised $60.4
million (gross) proceeds with a timing that traversed 30 June 2017 as follows:
Allotted Shares (‘000)
Capital Proceeds ($’000)
Capital Raise Costs ($’000)
Net Proceeds ($’000)
Institutional
Component
23/06/2017
Retail
Component
07/07/2017
2,993
9,738
14,216
(1,535)
12,681
46,257
(1,160)
45,097
Applications for refund of 3,339 shares were received under the supplementary prospectus. These shares
were transferred/sold to the underwriters.
19 Reserves (net of income tax)
Foreign currency translation
Share based payments
Cash flow hedge reserve
Non controlling interest
Bellamy’s Australia Limited
2018
$’000
2017
$’000
23
11,820
21
(21)
11,843
(821)
6,480
(24)
-
5,635
67
Financial Statements
Foreign currency translation reserve
Balance at the beginning of the year
Exchange differences arising on translating net assets of foreign
operations
Balance at the end of the year
2018
$’000
2017
$’000
(821)
843
23
(373)
(448)
(821)
Exchange differences relating to the translation of the results and net assets of the Group’s foreign
operations are recognised directly in other comprehensive income and are accumulated in the foreign
currency translation reserve.
Share based payments reserve
Balance at the beginning of the year
Arising on share-based payments
Balance at the end of the year
2018
$’000
2017
$’000
6,480
5,340
11,820
3,767
2,713
6,480
The reserve relates to share options granted by the Group to its Directors and employees under its Long-
term Incentive Plan. Further details are provided in Note 30.
Cash flow hedge reserve
Balance at the beginning of the year
Arising from changes in fair value of hedging instruments
Income tax effect
Balance at the end of the year
2018
$’000
2017
$’000
(24)
(24)
69
21
(565)
773
(232)
(24)
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in the cash flow hedge reserve within equity, limited to the cumulative change in fair
value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss.
Non controlling interest
Balance at the beginning of the year
Arising from acquisition of Camperdown Powder Pty Ltd
Movement in retained profits/(losses) for the year
Balance at the end of the year
20 Additional cash flow information
a) Cash and cash equivalents
2018
$’000
2017
$’000
-
430
(451)
21
-
-
-
-
2018
$’000
2017
$’000
Cash and cash equivalents
87,634
17,479
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in
banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash
equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related
items in the balance sheet as follows:
Bellamy’s Australia Limited
68
Financial Statements
b) Reconciliation of profit for the period to net cash flows from operating activities
Reconciliation of profit for the year to net cash from
operating activities
Profit after tax
Adjust for non- cash items
Depreciation
Amortisation
Loss on sale – plant and equipment
Profit on sale of investments
Stock provision movements
Provision for doubtful debts
Net exchange movements
Interest on asset purchase
Share based payments
Movements in working capital
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
(Increase)/decrease in net tax assets
(Decrease)/increase in trade payables
(Decrease)/increase in provisions
Net cash from operating activities
21 Financial Risk Management
a) Financial risk management policies
2018
$’000
2017
$’000
42,816
(809)
698
3,600
-
-
4,499
16
949
-
-
(12,275)
(1,455)
(697)
(643)
31,383
(650)
68,241
280
508
44
(15)
5,374
40
(881)
2
2,713
(3,210)
(31,119)
2,924
(12,806)
(10,647)
1,884
(45,718)
The Group’s financial instruments consist mainly of loans and deposits with banks, accounts receivable
and payable, loans to subsidiaries, and foreign exchange derivatives.
b) Financial risk exposures
The Group is exposed to interest rate, liquidity and credit risks and exposure to foreign exchange and
equity price risk.
Interest rate risk
The Group’s main interest rate risk arises from borrowings, which expose the Group to cash flow interest
rate risk.
Liquidity risk
Liquidity risk is managed by maintaining sufficient cash and monitoring forecast cash flows. The Group’s
approach to liquidity management involves projecting cash flows in major currencies and considering the
level of liquid assets necessary to meet these.
2018
Financial assets
Cash and cash
equivalents
Receivables
Total financial assets
Financial Liabilities
Trade payables
Derivative
Borrowings
Total financial liabilities
Net financial assets
Bellamy’s Australia Limited
Weighted
Average
Interest
Rate %
Floating
Interest
Rate
$’000
Fixed Interest
Rate Mature
within 1 Year
$’000
Fixed Interest
Rate Mature
later than 1
Year
$’000
Non-
interest
bearing
$’000
Total 2018
$’000
2.8%
0.0%
61,382
-
61,382
-
-
-
-
61,382
-
-
-
-
(62)
(62)
(62)
-
-
-
-
-
-
-
-
26,252
43,740
69,992
(52,870)
(232)
-
(53,102)
16,890
87,634
43,740
131,374
(52,870)
(232)
(62)
(53,164)
78,210
69
Financial Statements
2017
Weighted
Average
Interest
Floating
Interest
Rate
Fixed
Interest Rate
Mature
within 1 Year
Fixed Interest
Rate Mature
later than 1
Year
Non-
interest
bearing
Total
2017
Rate %
$’000
$’000
$’000
$’000
$’000
Financial assets
Cash and cash
equivalents
Receivables
Total financial assets
Financial Liabilities
Trade payables
Derivative
Borrowings
Total financial
liabilities
Net financial assets
Credit risk
0.9%
4,963
-
4,963
-
-
-
10.9%
-
-
(25,264)
(25,264)
4,963
(25,264)
-
-
-
-
-
-
12,516
33,842
46,348
17,479
33,842
51,321
-
(25,264)
(30,483)
(55,747)
15,875
(4,426)
Credit risk arises from exposure to customers and deposits with financial institutions. Management
monitors credit risk by actively assessing and rating quality and liquidity of counter parties, through a
combination of obtaining external credit ratings, credit checks and past experience. Individual risk limits are
set in accordance with the Group’s Credit Policy. The compliance with credit limits by customers is regularly
monitored by management.
Foreign exchange risk
The Group has exposure to movements in foreign currency exchange rates through:
• Sales to distributors and customers in foreign currency
• Purchases of inventory
• Translations of net investments in foreign subsidiaries denominated in foreign currencies
Bellamy’s Australia Limited’s functional currency is Australian dollars. For the internal operations in the
entities in Singapore, Hong Kong and China, all income and expenses are conducted in local currency.
The Group imports ingredients to meet production requirements and has exposure to USD and EUR
movements directly where it purchases ingredients on its own behalf and indirectly through purchases of
finished products where the Group’s product manufacturers purchase ingredients on its behalf.
In order to hedge against the exposure to fluctuations in exchange rates associated with the highly probable
purchase of ingredients, the Group enters into forward exchange contracts, which are designated as cash
flow hedges.
Exposure of overseas debtors to foreign exchange risk is minimal as these transactions in Australia are
primarily denominated in AUD while local offices are in their functional currency.
Forward exchange contracts
The Board’s risk management policy is to hedge up to 100% of committed foreign currency cash flows
within the next twelve months (mainly inventory purchases in EUR), subject to a review of the cost of
implementing each hedge. At 30 June 2018, approximately 100% of inventory purchases were hedged in
respect of foreign currency risk (2017: 100%).
At balance date, details of the significant outstanding forward exchange contracts, stated in Australian
dollar equivalents are:
Bellamy’s Australia Limited
70
Financial Statements
Average
exchange rate
Foreign
currency
(in foreign
currency)
Contract value
(AUD)
Mark to market
assets
Mark to market
liabilities
2018
$
2017
$
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Hedging
Imports:
Maturing
within 12
months
Buy Euro
Buy USD
Buy CNY
0.6238
0.7385
4.9006
0.6600
-
-
10,921
1,300
7,100
1,175
-
-
17,454
1,760
425
1,780
-
-
-
-
-
-
-
(230)
(1)
(1)
(34)
-
-
At the reporting date, the net amount of unrealised losses under forward exchange contracts hedging
anticipated purchases of inventory is $232,000 (2017: $34,000).
Derivative financial instruments – foreign exchange forward
contracts
Carrying amount
Notional amount
Maturity date
Hedge ratio
Change in fair value of outstanding hedging instruments since 1 July
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year (including forward points)
2018
$’000
230
17,454
Jul-18 – Aug-18
1:1
(3)
3
0.6251
Derivative financial instruments – foreign exchange forward
contracts (USD)
Carrying amount
Notional amount
Maturity date
Hedge ratio
Change in fair value of outstanding hedging instruments since 1 July
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year (including forward points)
Derivative financial instruments – foreign exchange forward contracts
(CNY)
Carrying amount
Notional amount
Maturity date
Hedge ratio
Change in fair value of outstanding hedging instruments since 1 July
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year (including forward points)
2018
$’000
1
1,760
Aug-18
1:1
(11)
11
0.7464
2018
$’000
1
425
Sep-18
1:1
(7)
7
4.8445
2017
$’000
34
1,780
Sep-17
1:1
1
(1)
0.6600
2017
$’000
-
-
-
-
-
-
-
2017
$’000
-
-
-
-
-
-
-
The foreign exchange forward contracts are denominated in the same currency as the highly probable
future inventory purchases (EUR), therefore the hedge ratio is 1:1.
Foreign currency exposures arising on translation of net investments in foreign subsidiaries are
predominantly unhedged.
Bellamy’s Australia Limited
71
Financial Statements
22 Parent entity supplementary information
The following information has been extracted from the books and records of the parent and has been
prepared in accordance with Australian Accounting Standards.
Balance Sheet
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Statement of Profit or Loss and Other Comprehensive Income
Total profit
Total comprehensive income
Guarantees
Contingent liabilities - Refer Note 24
Contractual commitments
23 Subsidiaries
Name
2018
$’000
2017
$’000
160,420
2,626
163,046
1,872
-
1,872
161,174
120,870
11,820
28,484
161,174
65,407
1,475
66,882
1,978
-
1,978
64,904
53,795
6,480
4,629
64,904
23,841
23,841
12,086
12,086
-
-
-
-
Company
Number
Principal
activity
Place of
incorporation
and operation
Ownership %
2018
2017
Bellamy’s Organic Pty Ltd
Bellamy’s Kitchen Pty Ltd
Yum Mum Pty Ltd
Bellamy’s Organic (South East Asia) Pte Ltd
A.C.N. 619 661 611 Pty Ltd
Camperdown Powder Pty Ltd
Little Treasure (Aust) Pty Ltd
Camperdown Leura Star Brands Pty Ltd
Duri Brands Pty Ltd
Bellamy’s Organic (Hong Kong) Company Ltd
Bellamy’s Food Trading (Shanghai) Co Ltd
11 125 461 903
147 551 639
50 148 896 280
201205554M
619 661 611
168 982 250
103 217 232
610 595 803
600 737 595
CRN 1795740
310000400709335
(a)
(d)
(d)
(a)
(b)
(c)
(e)
(e)
(e)
(a)
(a)
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Hong Kong
China
100
100
100
100
90
100
50
51
51
100
100
100
100
100
100
-
-
50
51
51
100
100
Investment vehicle
(a) Sale and distribution of organic food and formula products for babies and toddlers
(b)
(c) Manufacturing powdered milk products
(d) Non-operating
(e) Brand and trademark ownership entity
Bellamy’s Australia Limited
72
Financial Statements
The following entities were acquired when Camperdown was acquired on 3 July 2017 and were either
liquidated or sold for a nominal value to other shareholders during the financial year.
Name
Camperdown Vchina Brands Pty Ltd
Camperdown TMP Brands Pty Ltd
Comarco Pty Ltd
Camperdown AIMI Brands Pty Ltd
(f)
Joint venture sales and marketing entity
Company
Number
Principal
activity
609 645 052
600 788 912
155 983 038
601 363 437
(f)
(f)
(f)
(f)
Place of
incorporation
and operation
Australia
Australia
Australia
Australia
Ownership %
3 Jul
2017
51
51
51
51
2018
0
0
0
0
The following entities have financial reporting periods that are not synchronised with the parent entity. The
financial reporting year ends with respect to these entities are:
Bellamy’s Organic (Hong Kong) Company Ltd
Bellamy’s Food Trading (Shanghai) Co Ltd
Bellamy’s Organic (South East Asia) Pte Ltd
31 December
31 December
31 March
24 Contingent liabilities and contingent assets
a) Contingent liabilities
On 23 February 2017 and 8 March 2017 Slater & Gordon Limited and Maurice Blackburn commenced a
representative proceeding (shareholder class action) in the Federal Court of Australia against the Group.
The statement of claim includes allegations of contraventions of the Corporations Act 2001 (Cth) in relation
to misleading or deceptive conduct and continuous disclosure obligations.
The proceedings have, to date, mostly been consumed with procedural issues relating to the fact that there
are two near-identical class actions. The Group will continue to vigorously defend the proceedings. The
statements of claim served by the applicants do not quantify, and it is too early in the process to assess,
these claims to provide a reliable assessment of the likely quantum of any damages that may become
payable if its defence is unsuccessful in whole or in part.
b) Contingent assets
As at the date of this report the Group is not aware of any reportable contingent assets.
25 Commitments for expenditure
a) Shortfall payments
Bellamy’s has two material manufacturing agreements that guarantee long-term access to the highest
quality production facilities in Australia. Bellamy’s has not recorded these contractual rights as contingent
assets. The two manufacturing arrangements have minimum volume commitments which run for a number
of years. Where the Group is not able to fulfil minimum volume commitments, it is required to make
production shortfall payments. Some contracts provide for rebates for exceeding specified volumes.
Rebates are recorded in inventory in accordance with the relevant accounting standard.
Bellamy’s also enters ingredient supply contracts with Minimum Volume Commitments which are
accounted for in the same way as Manufacturing volume commitments.
The minimum volume commitments are based on the contract year (which differs from the Group’s financial
year). At each reporting period, a provision is raised when production thresholds have not been met or the
Group does not have the ability to meet the threshold under the contractual terms.
In FY18, an expense of $3.3m has been recognised in cost of goods sold as a shortfall expense, for which
there is a provision of $1.1m (refer Note 16). In FY19 if production levels remain consistent with FY18 a
higher expense may be incurred. Beyond FY19 shortfall payments and the related expense may continue
over the term of the contacts and could increase or decrease depending on the level of production.
b) Other
As at the date of this report, the Group had capital commitments of $382,000 (2017: $Nil).
Bellamy’s Australia Limited
73
Financial Statements
26 Operating lease arrangements
Non-cancellable operating lease commitments
Not later than 1 year
Later than one year and not later than 5 years
Later than 5 years
2018
$’000
2017
$’000
881
1,640
-
2,521
309
819
-
1,128
Operating lease commitments primarily relate to leasing arrangements for premises.
27 Subsequent events
There are no material subsequent events.
28 Auditor’s remuneration
a) Auditor of the parent entity
Audit of the financial statements
Due diligence and other assurance services for the equity raise
Other audit, tax and compliance related services
Total paid to PricewaterhouseCoopers
b) Auditors of the wholly owned overseas subsidiaries
Audit of the financial statements
Other tax and compliance services
Total paid to PricewaterhouseCoopers
29 Related party transactions
a) Parent entities
The parent entity within the Group is Bellamy’s Australia Limited.
b) Subsidiaries
A list of subsidiaries is provided in Note 23.
2018
$
345,000
-
-
345,000
2018
$
70,000
7,531
77,531
2017
$
402,000
500,851
12,587
915,438
2017
$
130,000
6,000
136,000
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
Balances and transactions between the Group and its controlled entities, which are related parties of the
Group, have been eliminated on consolidation and are not disclosed in this Note. Details of transactions
between the Group and other related parties are disclosed below.
c) Transactions with related parties
Key management personnel compensation
The key management personnel compensation included in ‘employee costs’ (see Note 6) is as follows:
Bellamy’s Australia Limited
74
Financial Statements
Short term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share based payments
2018
$’000
2017
$’000
3,259
132
7
-
2,870
6,268
2,657
108
-
457
1,295
4,517
Individual Directors and executive compensation disclosures
Information regarding individual Directors and key management personnel compensation and some equity
instruments disclosures as required by the Corporations Regulations 2M.3.03 is provided in the
Remuneration Report section of the Directors’ Report.
Apart from the details disclosed in this Note, no Director has entered into a material contract with the Group
since the end of the previous financial year and there were no material contracts involving Directors’
interests existing at year end.
There were no loans outstanding at reporting date between the Group and key management personnel.
Other key management personnel transactions with the Group or its controlled entities
From time to time, key management personnel of the Group or its controlled entities, or their related entities,
may purchase goods from the Group. These purchases are on the same terms and conditions as those
entered into by other group employees or customers and are trivial or domestic in nature.
Shareholdings
The number of ordinary shares held in Bellamy’s Australia Limited as at the date of this report and as at
the end of the reporting period, by each key management person, including their related parties, are as
follows:
Number
Directors
R Peters
W Chan
J Ho
J Murphy
S Liew
KMP Executives
A Cohen
N Underwood
M Harrison
D Jedynak
P Fridell
1 July 2017 or
when
commenced
-
-
7,671,294
-
-
13,750
-
3,475
-
-
Movement
during year
Balance at 30
June 2018
Balance at
Reporting Date
43,600
-
1,080,888
-
-
37,575
-
458
13,400
-
43,600
-
8,752,182
-
-
51,325
-
3,933
13,400
-
43,600
-
8,752,182
-
-
51,325
-
3,933
13,400
-
Options over ordinary shares
The number of options over Bellamy’s Australia Limited ordinary shares held as at the date of this report
and as at the end of the reporting period, by each key management person, including their related parties
are set out below.
2018
Directors
J Murphy
R Peters
W Chan
S Liew
Balance
at 1 July
2017
Granted as
remuneration
in FY18
Vested in
FY18 and
exercisable
Exercised
during
FY18
Forfeited
during
FY18
Pending
forfeiture
Held as at
30 June
2018 1
193,373
36,257
36,257
-
-
-
-
20,878
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
193,373
36,257
36,257
20,878
Bellamy’s Australia Limited
75
Financial Statements
Balance
at 1 July
2017
Granted as
remuneration
in FY18
Vested in
FY18 and
exercisable
Exercised
during
FY18
Forfeited
during
FY18
Pending
forfeiture
Held as at
30 June
2018 1
KMP Executives
A Cohen
N Underwood
M Harrison
P Fridell
D Jedynak
2,533,295
475,000
200,000
440,000
475,000
2017
-
-
-
-
-
369,125
-
-
-
-
(37,575)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,495,720
475,000
200,000
440,000
475,000
Balance
at 1 July
2016
Granted as
remuneration
in FY17
Vested in
FY17 and
exercisable
Exercised
during
FY17
Forfeited
in FY17
Pending
Forfeiture
Held as at
30 June
2017
193,373
36,257
36,257
2,533,295
475,000
200,000
440,000
475,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Directors
J Murphy
R Peters
W Chan
KMP Executives
A Cohen
N Underwood
M Harrison
P Fridell
D Jedynak
Former KMP
L McBain
S Ollington
-
-
-
689,950
-
-
-
-
193,373
36,257
36,257
1,843,345
475,000
200,000
440,000
475,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,356,795
328,793
239,154
40,021
116,348
-
(468,776)
-
1,010,825
-
1,127,173
368,814
30 Share based payments
a) Employee Option Plan
The Chief Executive Officer and other senior management held, as part of their remuneration, conditional
vesting options over 5,883,159 (2017: 6,891,010) ordinary shares of the Group comprising the:
•
•
•
2016 year grants which were made on 23 December 2015, and 30 June 2016;
2017 year grants which were made on 3 October 2016, and 13 June 2017; and
2018 grants which were made on 2 October 2017, 13 December 2017, 15 January 2018 and 20
April 2018.
FY16 grant
The exercise price for the FY16 grant of options is $4.87 (adjusted). The options can only be exercised if
specific performance hurdles are met. Refer to the remuneration report on pages 29 to 42 for detail
regarding the performance hurdles. These options expire five years after the grant date, which should be
no later than 23 December 2020.
Additional grant on 30 June 2016
A subsequent grant of 689,950 options was made on 30 June 2016. The options were granted under the
LTI plan.
FY17 grant
The exercise price for the FY17 grant of options is $14.04 (adjusted). The options can only be exercised if
specific performance hurdles are met. Refer to the Remuneration Report on pages 29 to 42 for detail
regarding the performance hurdles.
Additional grant on 13 June 2017
The exercise price for the subsequent grant of options is $5.643. The options can only be exercised if
specific performance hurdles are met. Refer to the Remuneration Report on pages 29 to 42 for detail
regarding the performance hurdles.
Bellamy’s Australia Limited
76
Financial Statements
FY18 grant
The exercise price for the FY18 grant of options are as follows:
•
•
•
•
2 October 2017 grant - $7.82
13 December 2017 grant - $11.19
15 January 2018 grant - $10.34
20 April 2018 grant - $20.56
The options can only be exercised if specific performance hurdles are met. Refer to the Remuneration
Report on pages 29 to 42 for detail regarding the performance hurdles.
b) Other movements
During the current financial year 776,440 options were exercised. 647,301 options were forfeited.
c) Fair value of options granted during the year
The fair value of the options granted during the year under the Long-Term Incentive Plan are as follows:
•
•
•
•
2 October 2017 grant - $2.56 for Tranche 1 and for $2.53 Tranche 2.
13 December 2017 grant - $3.56 for Tranche 1 and $3.56 for Tranche 2.
15 January 2018 grant - $4.12 for Tranche 1 and $4.08 for Tranche 2.
20 April 2018 grant - $7.84 for Tranche 1 and $7.89 for Tranche 2.
d) Expenses arising from share-based payment transactions
The value of options granted to key management personnel are amortised over the period from the grant
date to the vesting date for accounting purposes. Share based payments expense in relation to key
management personnel for FY18 is as follows:
Name
Directors
J Murphy
W Chan
R Peters
S Liew
KMP Executives
A Cohen
A Cohen
A Cohen
N Underwood
M Harrison
P Fridell
D Jedynak
Total
Option
series
Grant date
No. of
options
Exercise
Price ($)
Share based
payment
expense FY18 ($)
FY17 Grant
FY17 Grant
FY17 Grant
FY18 Grant1
FY16 Grant2
FY17 Grant
FY17 Grant
FY17 Grant
FY17 Grant
FY17 Grant
FY17 Grant
13/6/2017
13/6/2017
13/6/2017
13/12/17
30/6/2016
3/10/2016
13/6/2017
13/6/2017
13/6/2017
13/6/2017
13/6/2017
193,373
36,257
36,257
20,878
652,375
168,345
1,675,000
475,000
200,000
440,000
475,000
4,372,485
5.643
5.643
5.643
11.190
9.880
14.140
5.643
5.643
5.643
5.643
5.643
404,620
75,866
75,866
10,946
297,665
209,256
921,340
261,277
110,011
242,024
261,277
2,870,148
1 Subject to shareholder approval at the 2018 AGM.
2 37,575 options of the FY16 Grant of 689,950 options vested in August 2017 with a nil exercise price.
31 Deed of cross guarantee
Bellamy’s Australia Limited and Bellamy’s Organic Pty Ltd executed a deed of cross guarantee on 16
February 2015 under which each company guarantees the debts of the other. By entering into the deed,
the wholly owned subsidiaries have been relieved from the requirement to prepare a financial report and
Directors’ Report under ASIC Corporations (wholly-owned Companies) Instrument 2016/785 issued by the
Australian Securities and Investments Commission. They represent a “Closed Group” for the purposes
of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by
Bellamy’s Australia Limited, they also represent the “extended closed Group”.
Bellamy’s Australia Limited
77
Financial Statements
32 Summary of significant accounting policies
Reporting entity
Bellamy’s Australia Limited is a listed public company incorporated in Australia. The address of the principal
place of business and registered office is as follows:
115 Cimitiere Street
Launceston
Tasmania 7250
The entity’s principal activities are to offer a range of organic food and formula products for babies and
toddlers. The Company’s products are certified organic.
The consolidated financial statements and notes represent those of Bellamy’s Australia Limited and
Controlled Entity (the “Consolidated Group” or “Group”).
The separate financial statements of the parent entity, Bellamy Australia Limited, have not been presented
within this financial report as permitted by the Corporations Act 2001.
The principal accounting policies adopted in the preparation of these consolidated financial statements 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 Bellamy’s Australia Limited
and its subsidiaries.
Basis of preparation
These consolidated general purpose financial statements have been prepared in accordance with
Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. Bellamy’s Australia Limited is a for-profit entity for the purpose of preparing
the financial statements.
The financial statements were authorised for issue on 28 August 2018 by the Directors of the Group.
Early adoption of standards
The Group has early adopted AASB 9 – Financial Instruments.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of available for sale financial assets, financial assets and liabilities.
Compliance with IFRS
The consolidated financial statements of the Bellamy’s Australia Limited group also comply with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB).
a) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bellamy’s
Australia Limited (‘company’ or ‘parent entity’) as at 30 June 2018 and the results of all subsidiaries for the
year then ended. Bellamy’s Australia Limited and its subsidiaries together are referred to in this financial
report as the Group or the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to
govern the financial and operating policies, generally accompanying a shareholding of more than one-half
of the voting rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
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.
Bellamy’s Australia Limited
78
Financial Statements
b)
Income tax
The income tax expense for the financial reporting period comprises current income tax expense (income)
and deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated
using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax
liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the
relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the financial year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of the
profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets
also result where amounts have been fully expensed but future tax deductions are available. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the deferred
tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and
joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable
future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and liability
will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists,
the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where it is intended that the net settlement or
simultaneous realisation and settlement of the respective asset and liability will occur in future periods in
which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
Bellamy’s and its wholly owned Australian controlled entities have implemented the tax consolidation
legislation. Bellamy’s, as the head entity in the tax consolidated group and its wholly owned Australian
controlled entities continues to account for their own current and deferred tax amounts. These tax amounts
are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its
own right. In addition to its own current and deferred tax amounts, Bellamy’s also recognises the current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under the tax
funding agreement with the tax consolidated entities are recognised as amounts receivable from or payable
to other entities in the Group.
c) Foreign currency translation
Items included in the Financial Information of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (“the functional currency”). The
consolidated financial statements are presented in Australian dollars.
Transactions in foreign currencies are converted at the exchange rates in effect at the dates of each
transaction. Amounts payable to or by the Group in foreign currencies have been translated into Australian
currency at the exchange rates ruling on balance date. Gains and losses arising from fluctuations in
exchange rates on monetary assets and liabilities are included in the income statement in the period in
which the exchange rates change, except when deferred in equity as qualifying cash flow hedges.
d) Employee expenses and entitlements
Provision is made for employee expenses arising to the end of the reporting period. Employee expenses
that are expected to be settled within one year have been measured at the amounts expected to be paid
when the liability is settled. Employee expenses payable later than one year have been measured at the
present value of the estimated future cash outflows to be made for those benefits. In determining the
Bellamy’s Australia Limited
79
Financial Statements
liability, consideration is given to employee wage increases and the probability that the employee may
satisfy any vesting requirements.
Provision has been made in the accounts for benefits accruing to employees up to balance date, such as
annual leave, long service leave and bonuses. No provision is made for non-vesting sick leave as the
anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be
paid. Annual leave provisions are measured at their nominal amounts using the remuneration rates
expected to apply at the time of settlement and are classified in other payables. Long service leave
provisions are measured as the present value of expected future payments to be made in respect of
services provided by employees up to reporting date.
Expected future payments are discounted using market yields at reporting date on Australian corporate
bonds with terms to maturity that match estimated future cash outflows.
All on-costs, including superannuation, payroll tax, workers’ compensation premiums and fringe benefits
tax are included in the determination of provisions.
e) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are
shown within short-term borrowings in current liabilities on the Balance Sheet.
f) Borrowings
Loan facilities are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in the income statement over the period of the borrowings using
the effective interest method.
Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual
drawdown of the facility, are capitalised and amortised on a straight-line basis over the term of the facility.
g)
Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less
any provision for doubtful debts. Trade receivables are generally due for settlement based upon trading
terms negotiated with customers. Sales to export distributors are generally receivable before shipment or
secured by letter of credit for longer periods. Sales to domestic customers are generally receivable
approximately 45 days from invoice.
For trade receivables, the Group applies the simplified approach to providing for expected credit losses
prescribed by AASB 9, which requires the use of the lifetime loss provision for all trade receivables. Any
credit losses are written off to Administrative Costs in the profit and loss.
h)
Inventories and cost of sales
Inventories are measured at the lower of cost and net realisable value. Net realisable value represents the
estimated selling price for inventories less all estimated costs of completion and costs necessary to make
the sale.
Cost of sales includes the purchase cost of inventory and includes recurring shortfall payments.
i)
Intangible assets
All classes of intangible assets are reviewed for impairment each reporting period.
Goodwill
Goodwill on acquisition of subsidiaries is included in intangible assets and is measured at cost less
impairment. Goodwill is not amortised, but it is tested for impairment annually, or more frequently if events
or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated
impairment losses. Impairment is determined using a fair value model as described in Note 12, which
estimates production volumes for Bellamy’s Chinese Label product assuming successful SAMR
registration.
Goodwill is allocated to the Australian Manufacturing segment in Note 2.
Bellamy’s Australia Limited
80
Financial Statements
Trademarks, licences and customer contracts, and production rights
Separately registered trademarks are reported at historical cost and are not amortised. Licences and
customer contracts were acquired in a business combination and are recognised at fair value at the
acquisition date. They each have a finite useful life and are subsequently carried at cost less accumulated
amortisation. They are amortised over a 2-3-year period. Production Rights acquired under contract provide
Bellamy’s with first access rights to a Tasmanian organic fresh milk pool. These are shown at historical
cost and will be amortised in line with usage in production over the length of the contract of 5 years.
Product Research and Development
Expenditure during the research phase of a project is recognised as an expense when incurred.
Development costs are capitalised only when the project is expected to deliver future economic benefits
and those benefits can be reliably measured.
Product development costs are amortised over 3 years, or where the product line is discontinued, the
balance is written off during that financial period.
Software
Costs associated with maintaining software are recognised as an expense as incurred. Development costs
that are directly attributable to the design, testing and implementation of identifiable software products
controlled by the group are recognised as intangible assets when the following criteria are met
it is technically feasible to complete the software so that it will be available for use
•
• management intends to complete the software and use it
•
•
it can be demonstrated how the software will generate probable future economic benefits, and
the expenditure attributable to the software during its development can be reliably measured.
Software is amortised over the shorter of 3 years or the length of any contract related to the development
of the software.
j) Accounting policy choice for non-controlling interests
The group recognises non-controlling interests in an acquired entity either at fair value or at the non-
controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is
made on an acquisition-by-acquisition basis. For the non-controlling interests in Camperdown Powder Pty
Ltd, the group elected to recognise the non-controlling interests in at its proportionate share of the acquired
net identifiable assets.
See Note 32(n) for the group’s accounting policies for business combinations.
k)
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).
l) Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value, less where applicable, any
accumulated depreciation or amortisation.
Plant and equipment
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated
depreciation and any accumulated impairment.
The carrying amount of plant and equipment is reviewed annually by the Directors to ensure it is not in
excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of
the expected net cash flows which will be received from the assets’ employment and subsequent disposal.
The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
Bellamy’s Australia Limited
81
Financial Statements
Depreciation
The depreciable amount of all fixed assets, excluding freehold land, is depreciated on a straight-line basis
over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for
use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and equipment
•
IT Hardware
• Motor Vehicles
• Furniture and fittings
•
Leasehold improvements
Useful life
4 years
8 years
10 years
Life of lease
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance
sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains or losses are included in the profit and loss statement. When revalued assets are sold, amounts
included in the revaluation reserve relating to that asset are transferred to retained earnings.
m) Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the
lower of the fair value of the leased property and the present value of the minimum lease payments. The
corresponding rental obligations, net of finance charges, are included in other long-term payables. Finance
lease payments are allocated between interest expense and reduction of lease liability over the term of the
lease. The interest expense is determined by applying the interest rate implicit in the lease to the
outstanding lease liability at the beginning of each lease payment period. Finance leased assets are
depreciated on a straight-line basis over the shorter of the asset’s estimated useful life and the lease term.
Where the risks and rewards of ownership are retained by the lessor, leased assets are classified as
operating leases and are not capitalised. Rental payments are charged to the income statement on a
straight-line basis over the period of the lease.
n) 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
liabilities incurred to the former owners of the acquired business
•
•
• equity interests issued by the group
•
•
fair value of any asset or liability resulting from a contingent consideration arrangement, and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination
are, with limited exceptions, measured initially at their fair values at the acquisition date. The group
recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either
at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable
assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
consideration transferred,
•
• amount of any non-controlling interest in the acquired entity, and
• acquisition-date fair value of any previous equity interest in the acquired entity
Bellamy’s Australia Limited
82
Financial Statements
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less
than the fair value of the net identifiable assets of the business acquired, the difference is recognised
directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a
financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit
or loss.
o) Accounts payable
These amounts represent liabilities for goods provided prior to the end of the reporting period and which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition, however some
manufacturers retain ownership in the inventory until payment for it is received.
p) Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events,
for which it is probable that an outflow of economic benefits will result, and that outflow can be reliably
measured.
q) Financial Instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at
fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets classified at fair value through profit and loss
From time to time the Group may hold listed investments for the purposes of trading, such investments are
classified at fair value though profit and loss. These investments are measured at fair value with changes
in carrying amount being included in profit or loss. Fair value is determined with reference to ASX quoted
bid prices.
r) Goods and Services Tax (GST)
Revenues, expense and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of an expense. \Receivables
and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
s) Share based payments
Equity-settled share-based payments to employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date. Details regarding the determination of the fair
value of equity-settled share-based transactions are set out in Note 30. The fair value determined at the
grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding
increase in equity. At the end of each reporting period, the Group revises its estimate of the number of
equity instruments expected to vest. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefits reserve.
t) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the new share issue are
shown in equity as a deduction, net of tax, from the proceeds.
Bellamy’s Australia Limited
83
Financial Statements
u) Comparative figures
When required by the Accounting Standards, comparative figures are adjusted to conform to changes in
presentation for the current financial year.
In the event that the Group retrospectively applies an accounting policy, makes a retrospective restatement
or reclassifies items in its financial statements, an additional (third) Balance Sheet as at the beginning of
the preceding period in addition to the minimum comparative financial statements is presented.
Comparative information is reclassified where appropriate to enhance comparability and provide more
appropriate information to users.
v) Adoption of new and revised Accounting Standards
The group has applied the following standards and amendments for the first time for their annual reporting
period commencing 1 July 2017:
• AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax
Assets for Unrealised Losses’;
• AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107, and
• AASB 2017-2 ‘Amendments to Australian Accounting Standards – Further Annual Improvements
2014-2016 Cycle’.
w) New Accounting Standards for application in future periods
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2018 reporting periods and have not been early adopted by the group. The group’s assessment of
the impact of these new standards and interpretations is set out below:
Title of
standard
Nature of
change
AASB 15 Revenue from Contracts with Customers
The AASB has issued a new standard for the recognition of revenue. This will replace AASB
118 which covers revenue arising from the sale of goods and the rendering of services and
AASB 11 which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good
or service transfers to a customer.
The standard permits either a full retrospective or a modified retrospective approach for the
adoption.
Impact
Management have assessed the impacts of applying the new standard on the group’s financial
statements and it is not expected to have a material impact on the reported results and financial
position of the Group.
Date of adoption
by group
Mandatory for financial years commencing on or after 1 January 2018. The Group intends to
adopt the standard using the modified retrospective approach which means that the cumulative
impact of the adoption will be recognised in retained earnings as of 1 January 2018 and that
comparatives will not be restated.
Title of
standard
Nature of
change
AASB 16 Leases
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the
balance sheet, as the distinction between operating and finance leases is removed. Under the
new standard, an asset (the right to use the leased item) and a financial liability to pay rentals
are recognised. The only exceptions are short term and low-value leases.
The accounting for lessors will not significantly change.
Impact
The standard will affect primarily the accounting for the group’s operating leases. As at the
reporting date the group has non-cancellable operating lease commitments of $2,521,000, see
Note 26. The group estimates that approximately 30-35% of these relate to payments for short-
Bellamy’s Australia Limited
84
Financial Statements
term and low value leases which will be recognised on a straight-line basis as an expense in
profit or loss.
Management have assessed the impacts of applying the new standard on the group’s financial
statements and it is not expected to have a material impact on the reported results and financial
position of the Group.
The Group has not yet assessed what other adjustments, if any, are necessary as a result of
the different treatments of variable lease payments, extension options, and termination options.
These amounts are not considered to be material.
Date of adoption
by group
Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group
does not intend to adopt the standard before its effective date. The Group intends to apply the
simplified transition approach and will not restate comparative amounts for the year prior to first
adoption.
There are no other standards that are not yet effective and that would be expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
x) Rounding of Amounts
The Group is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’
Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument
amounts in the Directors’ Report and the financial statements are rounded off to the nearest thousand
dollars, unless otherwise indicated.
Bellamy’s Australia Limited
85
Financial Statements
Directors’ Declaration
for the year ended 30 June 2018
In the Directors’ opinion:
(a) The financial statements and notes set out on pages 48 to 85 are in accordance with the
Corporations Act 2001, including:
i.
ii.
complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements, and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018
and of its performance for the financial year ended on that date, and
(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 31 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 31.
Note 32 confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and the Chief Financial
Officer required by Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Board of Directors.
John Ho
Chair
John Murphy
Director
Dated at Melbourne this 28th day of August, 2018
Bellamy’s Australia Limited
86
Audit Report
Independent auditor’s report
Independent auditor’s report
To the members of Bellamy's Australia Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Bellamy's Australia 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 2018 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 2018
the consolidated statement of profit or loss and other 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 a summary of
significant accounting policies
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 and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of
the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Bellamy’s Australia Limited
87
Audit Report
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
Audit scope
Key audit matters
• Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
The scope of our audit
procedures included an
audit of the financial
information of the Group’s
Australian Sales segment,
given its financial
significance to the Group.
• We also performed specific
risk- based procedures over
the operations in Singapore,
China and Camperdown
which were not
quantitatively material to the
Group’s financial report
• Amongst other relevant
topics, we communicated
the following key audit
matters to the Audit and
Risk Committee:
− Acquisition
accounting of
Camperdown
− Carrying value of goodwill
− Valuation of inventory
− Accounting for
shortfall
provisions
•
These are further described
in the Key audit matters
section of our report.
•
For the purpose of our audit
we used overall Group
materiality of
$3 million, which represents
approximately 5% of the
Group’s profit before tax.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit 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 profit
before tax because, in our
view, it is the benchmark
against which the
performance of the Group is
most commonly measured.
• We utilised a 5% threshold
based on our professional
judgement, noting it is
within the range of
commonly acceptable profit
related thresholds in the
industry.
Bellamy’s Australia Limited
88
Audit Report
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.
Key audit matter
How our audit addressed the key audit matter
Acquisition accounting of Camperdown
Refer to note 11
On 3 July 2017, the Group acquired 90% of the shares
in
A.C.N 619 661 611 Pty Ltd (“Camperdown” - the
holding company of the Camperdown Powder
manufacturing facility), for $32.1 million
consideration.
The Group is required by Australian Accounting
Standards to identify all assets and liabilities of the
newly acquired entity and estimate the fair value of
each item. Any excess that is not attributed to an
asset or liability is recognised as goodwill.
At 30 June 2018, the acquisition accounting is
final. The acquisition resulted in the recognition of
$2.5 million of net identified liabilities, finite life
intangibles assets of $6.8 million and $28.2
million of goodwill.
The Group prepared a valuation model to support
the fair value of finite life assets which included
customer lists and the licence acquired.
We considered the accounting for the acquisition
a key audit matter due to the:
•
significant judgement required by the
Group in identifying the assets and
liabilities acquired and determining their
fair value, in particular the finite life
intangibles
• magnitude of the business acquisition
As part of our audit procedures for the acquisition
we performed the following procedures, amongst
others:
- Obtained the sale and purchase agreement
to identify and understand key terms and
conditions regarding the purchase price.
- Recalculated the value of shares allocated to
the ASX quoted share price on the date of
acquisition, and traced the cash paid through
to banking records.
-
-
-
-
-
-
Physically counted a sample of inventory on
hand at the date of acquisition.
Assessed other assets and liabilities as at
acquisition date and inspected supporting
documentation on a sample basis to ensure
they have been appropriately recognised.
Compared the tax losses recognised to
Camperdown’s forecast taxable income to
assess the ability to recover the tax losses.
Assessed the valuation model for the fair value
of the customer lists by considering key
customer contracts and the forecast cash flows.
Assessed the valuation model for the fair value
of the licence by considering the term of the
licence and forecast cash flows.
Tested the mathematical accuracy of the
calculation of the resultant goodwill after
the allocation of purchase price to the
assets and
liabilities.
Bellamy’s Australia Limited
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Audit Report
Key audit matter
Valuation of goodwill
Refer to note 12
The Group holds intangible assets at 30 June 2018
amounting to $40.1 million, of which $28.2 million
relates to goodwill.
Under Australian Accounting Standards, the
Group is required to assess indefinite life
intangible assets for impairment annually.
identified Camperdown as a cash
The Group
generating unit (CGU) and the goodwill and
intangible assets were allocated to this CGU.
The Group performed an impairment assessment for
the CGU by calculating the fair value less costs of
disposal.
The Group assessed the fair value by considering the
value a third party would attribute to the business,
based on cash flow projections for a 10 year period. The
cash flow forecasts include the assumption of an
upgrade to production capacity and the market values
for canning contracts which would be applicable for a
facility with licences to export to China under the State
Administration for Market Regulation (SAMR). These
cash flows were risk adjusted and discounted to
determine a fair value.
The Group did not identify any impairment for the CGU.
We considered the carrying value of goodwill as a key
audit matter as the balance is material and significant
judgement is required by the Group in estimating the
fair value less cost of disposal. This included
considering key judgements such as the:
•
•
•
SAMR licence
production capacity
sales value per tin attributed to the
canning process.
How our audit addressed the key audit matter
We assessed the allocation of assets and liabilities for
the CGUs and were satisfied they were directly
attributable to the individual CGU.
To evaluate the cash flows included in the fair value
model (the model) and the process by which it was
developed we, performed the following procedures,
amongst others:
-
-
-
-
-
Tested the mathematical accuracy and
integrity of the model’s calculations.
Assessed the appropriateness of a 10 year
cash flow model.
Assessed the cash flows by developing an
understanding of the key assumptions in
the model, including costs to upgrade the
facility, production capacity, the sales value
per tin attributed to canning and
manufacturing costs.
Compared the assumed sales value per tin
for canning included in the model to
external information.
Considered the risk adjustment applied to the
cash flows by developing an understanding of
the status of licencing for exporting product
under SAMR.
With the assistance of PwC internal valuation experts,
we assessed the discount rate used in the impairment
assessment by comparing it to our view of an
acceptable range based on market data, comparable
companies and industry research.
We performed a sensitivity analysis by reducing the
production volumes and sales value within a
reasonably foreseeable range. We found that the fair
value remained
in excess of the carrying value of the assets.
Bellamy’s Australia Limited
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Audit Report
Key audit matter
How our audit addressed the key audit matter
Valuation of inventory
Refer to note 9
The Group’s inventories at 30 June 2018 amounted to
$90.5 million.
Inventory predominantly consists of infant milk
formula, baby food and associated raw materials
which are held at third party or owned distribution
centres across Australia and China.
Inventory is measured at the lower of cost or net
realisable value. To assess net realisable value, the
Group estimates the future sales value of inventory
and, where this is less than the cost of inventory,
writes down the value of inventory to the estimated
sales value.
The Group is required to comply with Country of
Origin Labelling (CoOL) laws for Australian domestic
products manufactured after 1 July 2018 and Chinese
regulation for the import of product into China from 1
January 2018.
The Group has assessed the impact of the regulatory
changes on the carrying value of inventory on hand
and provided and an additional $5.9 million at 30
June 2018.
We considered this a key audit matter due to the size
of the inventory balance and the judgement required
by the Group to estimate the future sales value of
inventory. This included considering factors such as:
•
•
•
•
•
product expiry dates
expected sales volumes
expected sales prices
the impact of changes in regulations in China
the impact of changes in packaging
requirements in Australia
As part of our audit procedures to assess the valuation
of inventory we performed the following procedures
amongst others;
•
•
•
•
•
•
Tested raw materials and finished
products costing, on a sample basis, to 3rd
party invoices from the relevant suppliers.
Inspected a sample of sales invoices after
year- end to assess whether products are
sold above their cost price.
Examined the Group’s report that provides
a list of the expiry dates of raw materials
and compared a selection of raw materials
which were close to expiry to the Group’s
list of raw materials contained in the
inventory provision.
Examined the Group’s report that provides
a list of the expiry dates of finished goods
and the Group’s sales forecast to develop
an understanding of whether the finished
goods were expected to be sold within the
expiry window as required by key
customers. To the extent inventory is
forecast to be close to expiry, we assessed
whether the finished goods were included
in the inventory provision.
Tested the accuracy of the expiry dates in
the underlying report by comparing the
expiry date listed for a sample of finished
goods to the expiry date on the product
label
Considered changes in regulations in
Australia and China and the Group’s plans
for transition to the new regulatory
requirements. We assessed
the adequacy of the provision based on a
range of possible outcomes.
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91
Audit Report
Key audit matter
How our audit addressed the key audit matter
Accounting for shortfall provisions
Refer to note 16
The Group has three key contractual arrangements
for the manufacture of finished goods and a raw
material purchase arrangement. These contracts have
minimum volume commitments and where the Group
is not able to fulfil these minimum volume
commitments, it is required to make production
shortfall payments to the relevant manufacturers.
The minimum volume commitments are based on
each individual contract year (which differs from
the Group’s financial year). At each financial year-
end, the Group raises a provision when production
thresholds have not been met or the Group does
not have the ability to meet the threshold under the
contractual terms.
We considered the accounting for shortfall
provisions a key audit matter given the judgement
required by the Group in:
•
•
assessing the ability to reach
production thresholds for the
contract year based on production
forecasts.
estimating the amount of provision
required at 30 June 2018.
To assess the recognition of supplier
provisions we, amongst other things;
•
•
•
•
•
Inspected all material supplier contracts to
identify and develop an understanding of
the key terms and thresholds for minimum
order volumes for each contract
Compared the Group’s historical
production and purchase records for each
contract’s minimum order volume period
to the relevant supplier invoices to assess
the accuracy of the Group’s internal
records.
Considered the Group’s ability under
the respective contracts to meet the
volume threshold for the remaining
period of the applicable contract year
by considering the maximum
production levels specified in the
contract.
Compared the actual production plus the
estimated production volume for the
remaining contract period for each
contract to the Group’s minimum annual
volume calculation.
Tested the calculation of the resulting
shortfall provision.
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 2018, including the Corporate Directory,
Chairman's Letter, Message from the CEO, Operating and Financial review, Directors and Executive
Team, Directors' Report, Sustainability Report Corporate Governance Statement, Shareholder
Information and Sustainability Information, 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
identified above and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, 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.
Bellamy’s Australia Limited
92
Audit Report
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: http://www.auasb.gov.au/auditors_responsibilities/ar1.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 30 to 46 of the Directors’ Report for the year
ended 30 June 2018.
In our opinion, the remuneration report of Bellamy's Australia Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing
Standards.
PricewaterhouseCoopers
Alison Tait
Partner
Bellamy’s Australia Limited
Melbourne
28 August 2018
93
Other Information for Shareholders
Shareholder Information
Bellamy’s Australia Limited and controlled entities
The following additional information is provided in accordance with the ASX Listing Rules as at 14 August
2018.
Number of holders of equity securities
Ordinary share capital
113,316,104 shares are held by 14,430 shareholders. At a general meeting, every shareholder present in
person or by proxy, attorney or representative has one vote on a show of hands, on a poll, one vote for
each fully paid share held.
Unlisted options over ordinary share capital
A total of 5,904,037 options are held by 22 individual option holders, including 20,878 of options not yet
approved by shareholders. The options do not carry any voting rights.
Distribution of holders of equity securities
Ordinary shares
No. of equity securities held
No. of holders
No. of shares
% of shares
1 to 1000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
Substantial shareholders
Name
JP Morgan Nominees Australia
Citicorp Nominees Pty Ltd
Black Prince Private Foundation
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited GSCO ECA
Quality Life Pty Ltd
10,031
3,978,744
3.51%
4,231
9,491,285
8.38%
544
388
39
3,940,599
3.48%
8,694,121
7.67%
87,211,355
76.96%
15,233
113,316,104
100.00%
Number of
ordinary
shares
% of voting
power advised
19,486,703
17.20
16,352,132
14.43
13,317,106
11.75
9,516,172
8,334,448
6,840,810
8.40
7.36
6.04
Bellamy’s Australia Limited
94
Other Information for Shareholders
Twenty largest shareholders
Rank Name
Number of
ordinary
shares held
% of capital
held
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
JP Morgan Nominees Australia
Citicorp Nominees Pty Ltd
Black Prince Private Foundation
HSBC Custody Nominees (Australia) Ltd
HSBC Custody Nominees (Australia) Ltd-GSCO ECA
Quality Life Pty Ltd
Miss Mengjie Liu
National Nominees Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
Netwealth Investments Ltd
Invia Custodian Pty Limited
BNP Paribas Nominees Pty Ltd – A/C 1
BNP Paribas Nominees Pty Ltd – A/C 2
Bicheno Investments Pty Ltd
National Nominees Limited – A/C 1
National Nominees Limited – A/C 2
Mrs Ping Wang
HSBC Custody Nominees (Australia) Limited
JBWere (NZ) Nominees Limited
Total
Total remaining holders balance
TOTAL
19,486,703
16,352,132
13,317,106
9,516,172
8,334,448
6,840,810
2,115,158
1,818,441
975,445
865,215
770,780
585,000
583,468
504,238
490,000
410,488
385,000
318,313
300,000
274,635
17.20
14.43
11.75
8.40
7.36
6.04
1.87
1.60
0.86
0.76
0.68
0.52
0.51
0.44
0.43
0.36
0.34
0.28
0.26
0.24
84,243,552
29,072,552
74.34
25.66
113,316,104
100.00
Bellamy’s Australia Limited
95
Other Information for Shareholders
Sustainability Information
The following information is provided to assist assessment of Bellamy’s sustainability risk and mitigations.
It is important to note that Bellamy’s:
•
Is not a primary producer
• Does not own or manage farms
• Does not own or manage livestock
• Does not directly set farm gate pricing for milk products
• With a regionally diverse supply chain, is not at risk of changes to climatic conditions in any
single region
The following information is not audited.
Category
Sub-category Sustainability
Approach
Environment
Ingredient
Production
Risk
Emissions,
Effluents and
Waste
Supplier
Credentials
Supply Chain
and Logistics
Energy
Production
Energy
Organic farmers use only natural products to nurture their crops
and livestock. Sustainable farming practices work in harmony
with the environment including water harvesting and effluent
repurposing.
Superior farming practices and broad geographical dispersion
of organic farmers minimise the impact of localised climatic
changes.
Bellamy’s prefers to source ingredients from Australian farmers,
however has access to production from farmers in New
Zealand, Europe, United Kingdom and the United States of
America, reducing risk associated with regional climatic
production shocks and supporting long-term growth in demand
for Bellamy’s products.
Organic farmers must be certified organic. Certification is
required from certifying body approved National Association for
Sustainable Agriculture, Australia (NASAA). This process is
rigorous and covers inputs, farming practices and outputs. In
addition, producers of dairy products must maintain
accreditation with dairy safety authorities.
Bellamy’s source ingredients from local producers to the extent
possible to reduce ‘food miles’. This also reduces the input costs
and carbon emissions.
The ingredients with the greatest food miles per kg are imported
milk powders. Bellamy’s will continue to work with local milk
producers and support their conversion to organic farming via
contracting with milk processors to purchase liquid or powdered
milk.
they
pursue
The most significant energy cost to Bellamy’s is the energy
required to spray dry liquid milk, hydrated milk powders and
other ingredients into dry powder.
Spray drying is undertaken by the major manufacturers, who
themselves have sustainability policies. As this is a competitive
energy
market,
consumption/cost for commercial reasons in addition to the
social benefits.
Bellamy’s will increase the volume of liquid milk used in
production as/when Australian farmers can produce it. This has
the benefit of reducing the volume of spray drying and reducing
production costs.
It is estimated that a 10% increase in energy prices could
increase Bellamy’s cost of goods sold by 0.2%.
practices
reduce
to
Packaging
Emissions,
Effluents and
Waste
Bellamy’s seeks to have 100% of its packaging as recyclable,
however at this stage only 96.3% is achievable (expressed as a
% of the weight of packaging materials produced).
Bellamy’s Australia Limited
96
Other Information for Shareholders
Category
Sub-category Sustainability
Approach
Risk
Packaging food products must ensure a perfect seal against
bacteria entering the product and must be economically viable.
Bellamy’s will continue to work with packaging providers to help
achieve a goal of 100% recyclable material.
Bellamy’s also considers
packaging during the tendering and on-boarding process.
recyclability of
ingredient
the
People
Safety
Capability and
Diversity
Health and
Society
Health and
Wellbeing
Product
Quality
Bellamy’s will never compromise on quality and never
compromise on safety.
Bellamy’s has a broad range of policies in place to ensure a safe
environment for employees. It is included in the KPI’s of the
leadership team and standing item on the Board agenda.
•
LTIFR for FY18 is <0.01%
Capability and performance culture is a source of competitive
advantage. Bellamy’s applies a high-performance framework
which considers ‘how actions are done’ with as much emphasis
as ‘what actions are done’.
In addition to performance, Bellamy’s encourages workplace
diversity to ensure the voice of the customer is heard and
understood. At 30 June 2018:
•
•
•
60% of the workforce is female
50% of leadership team is female
100% are committed.
feeding
Bellamy’s understands breast
is best, but also
understands that sometimes circumstances can impact this
ability. Bellamy’s products are available for those parents who
cannot breast feed or make who make an informed choice to
bottle feed.
Bellamy’s will never compromise on:
1. Certified organic
2. Made in Australia
3. No added sugar
4. No artificial colours or flavours
5. No artificial preservatives
6. No synthetic pesticides
7. No GMOs
8. No BPA
Ethical marketing of our products complying with World Health
Organisation (WHO) guidelines both in substance and form.
Quality
Assurance
Bellamy’s tests product quality and facility hygiene at multiple
levels including inputs, several stages of production, and output.
Regulation
Compliance
The regulators in the infant formula and food industry all share
a common goal ensuring the absolute highest standards in food
safety for consumers.
Bellamy’s formula is produced to a paediatric standard.
Bellamy’s only partners with producers and manufacturers who
subscribe to this high standard.
Regulators include:
•
Food Standards Australia New Zealand (FSANZ)
• Australian Competition and Consumer Commission
(ACCC)
• Dairy Food Safety Victoria (DFSV)
• Department of Agriculture and Water Resources
(DAWR)
• State and Territory Departments of Health
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97
Other Information for Shareholders
Category
Sub-category Sustainability
Approach
Society
Risk
Giving back to
the
Community
Bellamy’s explores avenues to give back to the community that
lead to value creation and a better understanding of the benefits
of an organic lifestyle. Philanthropy is sustainable when both
parties ‘win’ from the engagement.
In FY18, Bellamy’s supported:
• Clown doctors
• Kid-I-am
• Cancer Council Launceston Fun Run Walk
•
Launceston Tornadoes
Bellamy’s also supports the philanthropy of others:
• Staff can receive paid time to attend fund raising
•
events.
In limited circumstances, direct or event-based
donations are made.
Shareholder
Value
Brand Value
Reputation
and Brand
The Bellamy’s brand is the Company’s most important asset.
Stewardship of the brand reflects the values of the company.
Stakeholder
Communication
Informed
stakeholders
Distinction is drawn between marketing Bellamy’s products and
providing information about Bellamy’s company.
As a company, Bellamy’s provides information to the market as
soon as there is a material change in circumstances and/or a
false market is forming. Refer to Continuous Disclosure Policy.
Public commentary meets all regulatory obligations, but
Bellamy’s does not seek publicity, nor does it comment on other
companies, or provide commentary on channel performance.
The absence of commentary through formal channels in-itself is
an indication that there is no new information that needs to be
disclosed.
Sustainability practices help reduce cost, reduce environmental impact and ensure the manufacture of
Bellamy’s products and continue to operate in a sustainable manner.
Bellamy’s Australia Limited
98