Bellamy's Australia Limited
Contents
30 June 2019
Contents
Corporate directory
Letter to Shareholders from the Chairman and Deputy Chairman
Letter to Shareholders from the Chief Executive Officer
Operating and Financial Review
Statement of profit or loss and other comprehensive income
Executive team
Directors' report
Sustainability report
Corporate Governance Statement
Auditor's independence declaration
Financial statements
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Shareholder information
Definitions
Independent auditor's report to the members of Bellamy's Australia Limited
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Bellamy's Australia Limited
Corporate directory
30 June 2019
Directors
John Ho - Chair
John Murphy - Deputy Chair
Rodd Peters
Wai-Chan Chan
Shirley Liew
Company secretary
Melinda Harrison
Registered office
Share register
Bellamy’s Australia Limited
115 Cimitiere Street
Launceston TAS 7250
Telephone: (03) 6332 9200
Facsimile: (03) 6331 1583
Link Market Services Limited
Level 1, 333 Collins Street
Melbourne VIC 3000
Telephone: 1300 554 474
Facsimile: (02) 9287 0303
Email: registrars@linkmarketservices.com.au
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Stock exchange listing
Bellamy's Australia Limited shares are listed on the Australian Securities
Exchange (ASX code: BAL)
Website
https://investors.bellamysorganic.com.au
2
Bellamy's Australia Limited
Letter to Shareholders from the Chairman and Deputy Chairman
30 June 2019
27 August 2019
Dear Shareholders,
On behalf of the Board, we present to you the Annual Report for the financial year ended June 2019.
It has been an extremely busy year for the Bellamy’s leadership team, with significant progress made on a full
Bellamy’s brand relaunch of our formula and food portfolios, a substantial step change in our China sales and
marketing capability including channel and economics reset, and a concerted effort in rolling out the new
culture program at all levels of the business.
A key focus of the Board and leadership team has been on prioritising growth and investment decisions that
set the business up for the medium to longer term and this has had an impact on short term revenue and
earnings results. The decision to write-off pipeline stock levels of the old formula product was one such
significant business decision that was critical to enable the new formula product to relaunch and reset pricing
and channel economics at all levels.
Whilst we continue to wait for our SAMR licence for offline China and remain confident in achieving this, we
have substantially increased our China team in both size and capability, doubled our marketing investment at
a consumer and trade level and built out our marketplace analytics and insights capability.
We remain very positive on the path forward and believe the choices we are making are sound and best placed
to deliver sustainable shareholder value. We understand the dynamic nature of the markets we operate in and
the need to constantly reset and fine-tune our execution. We are conscious of the challenges of bedding down
the enormity of change in the business, the time this takes and also the external challenges, some of which
are outside our control. The Board is confident the settings are right to build long-term sustained value for
Bellamy’s shareholders.
In 2017, the Board established a remuneration structure that included a long-term equity incentive plan, which
aligned the interests of the Board, management and shareholders. This plan covered performance for 2017 to
2020. The Board is working on a new plan to retain executives beyond 2020 and incentivise for high
performance.
The Board maintains close operational oversight to ensure management are challenged to achieve high levels
of performance. In this regard, the CEO and Executive have performed well and responded proactively to all
challenges. The Board is satisfied the Executive team remains focussed on long-term value creation and has
avoided short-term oriented decisions.
The Board has overseen significant progress against the 2021 strategic plan. In particular:
a complete brand relaunch and portfolio review including product innovation pipeline;
a step change in marketing capability and investment;
building our people capability in key functions, importantly in China;
sourcing and logistics capability and cost reduction initiatives;
quality control and safety system and process enhancements; and
embedding the Bellamy’s high performance and behaviour program.
The Board ensures stakeholders’ interests are at the core of decision making. The Board:
has oversight of governance processes and both operational and financial compliance systems;
monitors stakeholder management and approves market communications;
ensures management appropriately balance a broader range of stakeholder interests; and
ensures management remain focussed on the future.
The Board remains focussed on thoughtful strategic decision-making, nurturing and driving a high performance
culture, balanced risk-taking and maintaining transparent communication with the Company’s stakeholders.
The long-term value creation opportunity for Bellamy’s is compelling and the Board has the patience and
fortitude to realise this opportunity.
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 Chairman
3
Bellamy's Australia Limited
Letter to Shareholders from the Chief Executive Officer
30 June 2019
27 August 2019
Dear Shareholders,
was $47m.
FY19 has been a challenging period for our business, with China demand impacted by regulatory change, a
lower birth rate and increased competition. FY19 Net Revenue decreased to $266m and normalised EBITDA
Our transformational rebrand is set to return the business to growth and is delivering early momentum since
the March transition. The rebrand represents the most significant investment in our company’s history and
includes several important changes:
premium branding, reinforced by a premium price position in Australia and China;
a superior formulation, including a world leading level of DHA for an organic formula;
Australian organic milk to support the provenance of our brand and the local industry;
compelling trade economics to drive grassroots recruitment and advocacy; and
an extended range for formula (Step 4 and pregnancy) and food (cereals, custards and exotic fruit
pouches).
In parallel, we doubled investment in both marketing and China capability to activate the brand:
marketing investment focussed on a relaunch of all digital assets, introduction of an A-grade Chinese
ambassador in Stefanie Sun, outdoor media presence and higher impact selling points; and
capability investment focussed on China sales and marketing leadership and talent to engage
consumers, expand distribution and drive ambitious joint-business-plans with the trade.
The early consumer indicators for the rebrand are positive including an uptick in e-commerce sales, brand
interest, Step 1 and Step 2 recruitment in China, consumer pricing and trade economics. The recent 6/18
June e-commerce event represents a tangible proof point, resulting in 41% like-for-like growth and a marked
change in our brand rankings across key e-commerce and social platforms.
These changes have set a new foundation for the long-term success of the brand. Short-term trade-offs were
required which impacted the FY19 financial result, including a one-off write-down of legacy-label inventory
and a deeper level of destocking and trade change-over than first anticipated. This reset is now complete
and the business enters FY20 with a clean balance sheet, positive consumer momentum and a healthy trade
It is in this context that we expect a return to sustained growth in FY20. This confidence is strengthened by
the accelerated growth in our food business and the planned launch of breakthrough new products, including
an organic ultra-premium formula series, an organic goat formula series, and a China offline organic food
We remain confident in our growth strategy and medium-term target of $500m revenue but have needed to
defer this target beyond FY21 given the ongoing SAMR registration process. Notwithstanding the timing of
this registration, we believe our medium-term target will be achieved through the success of the above-
mentioned initiatives.
Our team remains focussed on building a long-term success story and executing against the potential of an
incredible brand supported by clear macro-trends for organic, e-commerce and premiumisation. This year
has set a strong foundation; transforming our brand, our trade incentives, our capability and our product
On behalf of the Management Team and the broader business I thank you for your ongoing support.
dynamic.
range.
portfolio.
Andrew Cohen
Chief Executive Officer
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Operating and Financial Review
5
Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
The purpose of the Operating and Financial Review is to enhance periodic financial reporting and provide
shareholders with additional information regarding the consolidated entity’s operations, financial position,
business strategies and prospects. The review complements the financial statements.
Bellamy’s is a leading infant nutrition and food brand in Australia and China.
Our Business
Products
People
Customers
Vietnam.
store.
Suppliers
Bellamy’s has 40 products covering organic food, infant milk formula and toddler milk. During FY19 Bellamy’s
upgraded its formulations in its core Australian-label infant formula range (Step 1, Step 2 and Step 3) and
launched two new SKUs to extend its core range: Step 4 (for ages 3+ years) and Pregnancy Formula (for
mothers pre, during and post pregnancy). Bellamy’s also launched 12 new food products including: a new
range of exotic fruit pouches, a new range of ambient custards (the first ‘no added sugar’ range in Australia)
and extensions to its cereal range (Baby Rice with prebiotic GOS and Pumpkin Baby Rice with prebiotic GOS).
Bellamy’s employs approximately 150 FTEs. Bellamy’s branded operations employs 82 FTEs, of which over
one-third are employed overseas. Bellamy’s manufacturing operation is based in the Melbourne suburbs and
employs over 60 people.
Bellamy’s provides nutritious food and formula products for infants and children. Its products are distributed
directly and indirectly to Australia, New Zealand, China including Hong Kong, Singapore, Malaysia and
In FY19, Bellamy’s key direct customer channels for its Australian-label products were Australian supermarket
and pharmacy retailers (and their wholesale suppliers), Australian-based wholesalers supporting the pick-and-
pack and daigou networks, China-based distributors supplying cross-border e-commerce (CBEC) platforms
(such as Tmall Direct International, JD.com, Kaola), and distributors in other international markets. In addition,
Bellamy’s sells products directly to consumers online via its Australian website and its China Tmall Flagship
A significant proportion of products sold to Australian-based retailers and wholesalers are on-sold to Chinese
consumers through personal selling channels including private and public Consumer-to-Consumer (C2C)
platforms (e.g. WeChat and Taobao).
Bellamy’s products are Australian-made and certified organic with ingredients sourced from Australia and
internationally. Bellamy’s contracts directly with local and international ingredient and manufacturing suppliers.
Bellamy’s has partnered with its suppliers to support the development of the organic dairy and food industries
in Australia and internationally. This includes material commitments for organic Australian ingredients to
support the development of the local industry.
In addition to third-party suppliers, Bellamy’s manufactures a proportion of its formula products at its 90%
owned formula blending and canning facility, Camperdown Powder Pty Ltd, in Melbourne, Australia.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Our Performance
During FY19 China demand was impacted by regulatory change, a lower birth rate and increased competition.
The Company’s rebrand represents the most significant investment in Bellamy’s history and has delivered a
truly premium brand and product, including a world leading level of DHA for an organic formula. Early
momentum since the March relaunch has been positive.
In parallel, the business has doubled investment in both marketing and China capability to better activate the
brand and engage consumers. Trade and channel economics have also been reset to better incentivise trade
partners, including the daigou, social networks and e-commerce platforms.
Many of these changes required short-term trade-offs impacting the FY19 financial result, including a one-off
write-down of legacy-label inventory and a deeper level of Q3 destocking and trade change-over than originally
anticipated. This reset is now complete, and the business enters FY20 with a clean balance sheet, positive
consumer momentum and a healthy trade dynamic.
The business expects a return to sustained growth in FY20. This confidence is strengthened by the accelerated
growth in Bellamy’s food business and planned launch of breakthrough new products, including an organic
ultra-premium formula series, an organic goat formula series, and a China offline organic food range.
The business acknowledges the process for Camperdown’s SAMR registration continues. Management
retains confidence this registration will be achieved and is respectful of the SAMR process. Notwithstanding
the timing of this registration, Bellamy’s addressable market and headroom for success within the e-commerce
market remains significant.
Financial Performance
The Company achieved revenue of $266.2m (FY18: $328.7m), normalised EBITDA of $46.9m (FY18: $70.6m)
and NPAT of $30.1m (FY18: $47.0m). On a statutory basis EBITDA was $34.9m and NPAT was $21.7m
adjusted for a one-off $12.0m ($8.4m post tax) write-off of legacy inventory required to transition to Country of
Origin Labelling (CoOL) laws in Australia and as a result of changes in Chinese regulations.
Normalised financial performance for FY19 compares to FY18 in the table below:
Group
$m
Aust. Label
China label
Camperdown
Revenue
Gross Profit
Gross Margin %
Other Income
Overhead
EBITDA
EBITDA %
Depn & Amortn
Interest
Tax
Net Profit After Tax
Net Profit %
Statutory
FY19
One-offs(1)
Normalised
Statutory
FY18
One-offs(1)
Normalised
251.0
-
15.2
266.2
115.9
43.5%
1.0
(82.0)
34.9
(5.3)
1.8
(9.7)
21.7
251.0
-
15.2
266.2
115.9
43.5%
1.0
(70.0)
46.9
17.6%
(5.3)
1.8
(13.3)
30.1
11.3%
301.9
18.1
8.7
328.7
128.9
39.2%
0.5
(64.8)
64.6
(4.3)
0.9
(18.4)
42.8
301.9
18.1
8.7
328.7
128.9
39.2%
0.5
(58.8)
70.6
21.5%
(4.3)
0.9
(20.2)
47.0
14.3%
6.0
6.0
(1.8)
4.2
12.0
12.0
(3.6)
8.4
(1) Bellamy’s has followed the guidance for normalised 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 the presentation of the unaudited non-IFRS profit and loss
summary in the table above is useful for users as FY19 includes significant items that are not expected to be repeated in future years.
The table reflects the normalised earnings of the business.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Revenue
Group revenue in FY19 was $266.2m (FY18: $328.7m).
Group Revenue ($m)
328.7
153.8
266.2
136.6
234.0
240.2
125.3
133.9
121.9
67.0
58.3
48.9
24.8
24.1
FY14
100.1
118.3
174.9
129.6
FY15
FY16
FY17
FY18
FY19
1H
2H
Total
Revenue was impacted by:
Loss of Chinese-label sales of $18.2m
(vs FY18) due to Bellamy’s SAMR brand
application process at Camperdown
Impact of CBEC regulatory change and
transition for local sales channels and
smaller platforms in China
A lower prevailing birth rate in China
Increased competition, especially within
the organic segment
Short-term impact of rebrand transition
and trade consolidation
Stronger core revenue momentum was observed in Q4 following the official rebrand launch in March, following
a deeper period of destocking in Q3 than first anticipated. Food revenue growth accelerated in the second half,
+48% vs 2H18, supporting strong full year growth of 25% FY19 vs FY18.
FY19 gross profit (% of revenue) grew by 4.3% to 43.5% (FY18: 39.2%) reflecting disciplined revenue
Profitability
management and cost management.
Gross Profit (% of Revenue)
Gross margin expansion driven by:
Price increase associated with rollout of
the rebrand in Q4
Further procurement savings to offset
the cost of product upgrades and FX
Ongoing channel mix management
31.4%
32.8%
43.2%
38.1%
39.2%
43.5%
movements
FY14
FY15
FY16
FY17
FY18
FY19
Gross profit includes a $2.9m (FY18: $3.3m) charge for shortfall payments. Beyond FY19, shortfall payments
may continue over the term of the contracts and could increase or decrease depending on level of production.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Business Split
Normalised
$m
Aust. label
China label
Camperdown
Revenue
Gross Profit
Gross Margin %
Other Income
Direct Costs
Marketing
Manpower
Admin
Overhead
EBITDA
EBITDA %
Expenses
(1) Expressed net of intercompany sales.
Core
Camperdown
Group
Core
Camperdown
Group
FY19
(1)
15.2
15.2
4.0
26.3%
0.9
(1.7)
-
(1.8)
(1.4)
(4.9)
(0.0)
251.0
-
-
251.0
111.9
44.6%
0.1
(17.2)
(21.3)
(16.1)
(10.5)
(65.1)
46.9
18.7%
251.0
-
15.2
266.2
115.9
43.5%
1.0
(18.9)
(21.3)
(17.9)
(11.9)
(70.0)
46.9
17.6%
301.9
18.1
-
320.0
126.8
39.6%
0.5
(14.2)
(14.6)
(16.9)
(9.5)
(55.2)
72.1
22.5%
FY18
(1)
8.7
8.7
2.1
24.1%
(0.9)
-
-
(2.1)
(0.6)
(3.6)
(1.5)
301.9
18.1
8.7
328.7
128.9
39.2%
0.5
(15.1)
(14.6)
(19.0)
(10.1)
(58.8)
70.6
21.5%
Normalised overhead was $70.0m (FY18: $58.8m) reflecting increased investment in marketing and China
capability. On a statutory basis, overhead increased to $82.0m due to a one-off $12.0m write-off of legacy
inventory required to transition to Country of Origin Labelling (CoOL) laws in Australia and as a result of
changes in Chinese regulations.
To enable a like-for-like analysis, the following commentary refers to comparative costs on a normalised basis
and for the core business excluding Camperdown:
Direct Costs including logistics and warehousing costs increased $3.0m. On a percentage of revenue
basis, direct costs increased to 6.9% (FY18: 4.4%) driven by reduced scale in the network, structural
changes to the supply-chain relating to ingredient procurement and direct China logistics, and the non-
recurring cost of greater warehousing associated with the rebrand transition;
Marketing investment was $21.3m (FY18: $14.6m) reflecting marketing spend doubling in 2H19 vs
1H19 to support the rebrand, key launch events and increased activity with e-commerce platforms;
Manpower costs of $16.1m (FY18: $16.9m) reflect savings in discretionary manpower, incentive
remuneration costs and reduced share-based payment expense as plans amortise. These savings
offset a 33% increase in headcount, predominantly in China where headcount doubled. The full impact
of this increase was only partly captured in FY19 as hires were made progressively through the year;
Administration and Other was $10.5m (FY18: $9.5m) reflecting a material increase in the cost of
regulatory fees and insurance. Insurance represented more than 30% of Administration costs in FY19.
Inventory write-down and normalisation adjustment
The one-off normalisation adjustment of $12.0m (FY18: $6.0m) relates to the write-down of legacy inventory
that was produced in advance of changes to laws governing Country of Origin Labelling (CoOL) in Australia
and SAMR in China. The interaction of these legal changes and the long lead times required to order
ingredients and schedule production resulted in reduced flexibility to manage the sell-out of legacy product.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Group normalised EBITDA in FY19 was 17.6% of Revenue (FY18: 21.5%).
Group EBITDA ($m normalised)
23.3%
17.8%
23.8
21.5%
35.7
34.9
Group normalised EBITDA was
17.6%
impacted by:
20.9
26.0
Scale impact of reduced revenue
Gross margin expansion due to
revenue management and
procurement disciplines
Higher direct costs associated
with ingredients and China-direct
logistics
FY16
FY17
FY18
FY19
Increased marketing investment
10.1%
35.3
4.7%
0.2
2.1
FY14
8.2
4.5
FY15
19.3
19.0
1H
2H
EBITDA (% of Revenue)
Balance Sheet and Cash Flow
Cash at 30 June 2019 was $112.4m (Jun18: $87.6m).
Cash Movement
Cash was impacted by:
27.0
6.9
2.1
7.0
87.6
Higher ingredient and
Camperdown inventory levels,
largely offset by reduced finished
Capex investment primarily in
goods
Camperdown
112.4
Working capital timing difference
associated with the structural
change to direct sourcing
Jun 18
NPAT#
Inventory
Capex
Other
Jun 19
to net profit after tax
NPAT# adds depreciation and amortisation
Cash balance at 30 June 2019 was $112.4m, reflecting strong overall cash conversion. In addition, Bellamy’s
retains a $40m debt facility which was not drawn on at 30 June 2019.
Net inventory at 30 June 2019 was $96.0m (Jun18: $90.5m). The balance is stated net of a provision of $6.6m
(Jun18: $10.0m). The movement predominantly related to finished goods inclusive of the write-down. At 30
June 2019 finished goods represented approximately 3.6 months of sales and is within Bellamy’s target range.
In FY19, Bellamy’s has taken a more direct role in sourcing ingredients to increase control of its supply chain.
This has increased availability, supply security and local sourcing of organic milk as well as building stronger
relationships through the supply chain. This has enabled Bellamy’s to reduce finished goods cover and reduce
procurement costs, but also resulted in increased ingredient and working capital requirements and greater
short-term volatility in operating cash flows.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Manufacturing / Camperdown
Camperdown external revenue in FY19 was $15.2m (FY18: $8.7m) and posted a breakeven EBITDA result
for FY19 supported by growth in external customer sales.
Capital Expenditure
Bellamy’s has continued to invest in continuous improvements to quality, safety and capacity at Camperdown.
Bellamy’s has planned a major capital expansion following SAMR approval and GACC (formerly CNCA)
renewal. This upgrade is expected to cost $12-15m and will take approximately 12-15 months to implement
once initiated. Camperdown is not expected to contribute significant incremental profit to the Group business
until the major capital upgrade is completed.
The facility has sufficient production capacity to meet forecast demand of Chinese-label product and third-
party sales until the expansion is completed.
Brand and Facility Registrations
A GACC licence is required to produce product that is sold in China. This affects Australian-label products sold
through various formal and informal networks into China (including pick and pack and CBEC). Camperdown’s
GACC licence is due for renewal in December 2019.
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 Organic infant formula brand in December 2017.
Bellamy’s remains confident registration will be achieved. Bellamy’s makes no representation of likely timing
of the registration. No revenues from this registration are expected in FY20.
Camperdown received SAMR registration for an external customer in December 2017. This is due for renewal
in December 2022.
Conditional Acquisition of remaining 10% Shareholding
Bellamy’s will acquire the remaining 10% of Camperdown conditional on the success of our SAMR application.
The transaction structure provides the vendors with continued financial exposure to the success of Bellamy’s.
Our Outlook
Bellamy’s outlook for FY20 is:
10-15% group net revenue growth at an EBITDA margin consistent with last year, with revenue growth
anticipated to accelerate in 2H20 with new product launches;
continued strong gross margin and investment in marketing and China capability.
Bellamy’s remains confident in its growth strategy and medium-term target of $500m revenue but has deferred
this target beyond FY21 given the ongoing SAMR registration process.
The outlook statement must be considered in context of the business risks explained on pages 13 through 15
of this annual report.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Our Risks
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.
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 GACC and Chinese-label products imported and sold
in retail channels in China require SAMR (formerly CFDA) registration post 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 organic infant formula products will be affected. The sale of Bellamy's Chinese-label
organic products accounted for less than 6% of total group revenue in FY18 and made no contribution to
revenue in FY19.
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 GACC licence granted in July 2015 with
an expected renewal date in December 2019;
lodged its SAMR registration application through Camperdown in December 2017;
will manage the renewal process of Camperdown’s GACC licence closely; and
continues to diversify revenues across multiple products, markets and channels.
Australian-label product regulatory risk
Bellamy’s recognises a substantial proportion of sales of its Australian-label organic formula is consumed in
China by Chinese consumers supplied through either cross border e-commerce (CBEC) platforms or via ‘direct
Both of these channels are regulated by Australian and Chinese governments and hence are exposed to any
mail’ channels.
future change in regulations.
To mitigate this risk, Bellamy’s:
Import testing
continues to educate itself on 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; and
continues to diversify revenues across multiple products, markets and channels.
All food product imported into China is subjected to sample-based quality testing, known as China Inspection
and Quarantine (CIQ) tests. These tests are 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,
it could have a material adverse impact on the Group's business, financial performance and operations.
To mitigate this risk, Bellamy’s:
maintains rigor around testing its products at several stages including at the ingredient procurement
stage, throughout the manufacturing process and at the finished goods stage; and
tests formula products to China standards at a Chinese part state-owned testing lab in China before
CIQ testing.
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Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
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 Australia or 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 materially 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 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; and
continues to proactively manage, monitor and enforce IP breaches.
Complex distribution channels
Sales of the Group’s Australian-label organic 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.
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 have a material adverse impact the Group's financial and operating
performance.
To mitigate this risk, Bellamy’s:
to market where possible; and
Market concentration and political risk
continues to ensure the Group has a deep understanding of end consumers, key channels and routes
continues to diversify revenues across multiple products, markets and channels including its food
business and direct channels with greater transparency.
A material proportion of the Group’s 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 in the
local market and enter into other appropriate South East Asian markets, most recently Vietnam.
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 contracts 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 minimising shortfall payments.
14
Bellamy's Australia Limited
Operating and Financial Review
30 June 2019
Workplace health & safety
morale and productivity.
To mitigate this risk, Bellamy’s:
Actual or potential harm to any workers and other persons in the workplace could have a reputational and
financial impact on the Group, including increases in insurance premiums, penalties and decrease in staff
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; and
uses qualified external consultants to review practices and implement continuous improvements.
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; and
undertakes regular ‘gap’ analysis to continue to build capability and support future growth.
15
Bellamy's Australia Limited
Executive team
30 June 2019
Andrew Cohen
Chief Executive Officer
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 its Consumer Products
and Retail practice and has over 15 years’ experience 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
Nigel Underwood
(Dux).
Chief Financial Officer
Nigel was appointed as Chief Financial Officer in April 2017, having been
appointed acting Chief Financial Officer of the Group in January 2017. Nigel
has over 20 years of listed company financial, reporting and corporate
governance experience. Nigel’s experience spans a range of international
businesses in a variety of industries. Many roles have been undertaken during
periods of substantial organisational and industry change. Nigel holds an
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 Harrison
General Counsel,
Company Secretary and
2017. Melinda has over 20 years’ experience in law, risk and governance in
Head of Regulatory Affairs
listed and privately held companies both in Australia and internationally. Prior
Melinda was appointed as General Counsel and Company Secretary in May
Peter Fridell
Director of Operations
Peter joined Bellamy’s in February 2017. Peter has over 15 years’ of strategy,
to Bellamy’s, Melinda was General Counsel at Carter Holt Harvey and 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 Corporate
Advisory at King & Wood Mallesons. Melinda holds an M.B.A. (Hons) from the
University of Hull (U.K.), a Bachelor of Laws (Hons) from the University of
Melbourne, a Bachelor of Arts (Hons) from the University of Melbourne and is
a graduate member of the Australian Institute of Company Directors (Order of
Merit). Melinda has also completed a certificate of Governance Practice from
the Governance Institute of Australia.
operational improvement and senior finance experience. Prior to joining
Bellamy’s, Peter gained extensive fast-moving consumer goods experience as
Strategy Director and Supply Finance General Manager at Carlton & United
Breweries. Peter has previously worked with A.T. Kearney management
consultants and as a mechanical design engineer. Peter holds an M.B.A.
(Dean’s list) from INSEAD (France), a Bachelor in Mechanical & Manufacturing
Engineering (first-class honours) from the University of Melbourne, and a
Bachelor of Commerce from the University of Melbourne.
David Jedynak
Marketing
Director of Sales and
David joined Bellamy’s in July 2016 and was a key advisor during the
restructure of the business. David was appointed as Director of Sales and
Marketing in June 2017 having been appointed as acting Director in January
2017. David has over 13 years’ experience in strategy, private equity and
venture investing, across both developed and emerging markets. David has
worked as a Principal with Bain & Company where he focussed on
consumer/retail businesses, managed investment portfolios focussed 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.
16
Bellamy's Australia Limited
Executive team
30 June 2019
17
Bellamy's Australia Limited
Directors' report
30 June 2019
Directors’ Report
18
Bellamy's Australia Limited
Directors' report
30 June 2019
The Directors present their report together with the financial statements on the consolidated entity consisting
of Bellamy's Australia Limited ('Company' or 'parent entity') and the entities it controlled ('Group') at the end
of, or during, the year ended 30 June 2019.
Directors
The following persons were Directors of Bellamy's Australia Limited during the whole of the financial year and
up to the date of this report:
John Ho - Chair
John Murphy - Deputy Chair
Rodd Peters
Wai-Chan Chan
Shirley Liew
Principal activities
The Company is an ASX-listed Tasmanian food brand business. The Group offers a range of Organic food
and formula products for babies and toddlers, which are all Australian-made and certified Organic.
The Group offers 40 products that are tailored to the needs of babies and toddlers.
There were no significant changes to the principal activities during the financial year.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The profit for the Group after providing for income tax and non-controlling interest amounted to $22,114,000
(30 June 2018: $43,267,000).
A comprehensive review of operations is set out in the front section of this Annual Report on pages 5 to 15
of the Operating and Financial Review (‘OFR’).
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial
years.
Likely developments and expected results of operations
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 focussed on achieving the required State Administration for Market Regulation
('SAMR') registration to enable importation and sale of Chinese-label product to recommence in China. The
Group 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.
19
Bellamy's Australia Limited
Directors' report
30 June 2019
In the medium term, the priority will be to strengthen the Group’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.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State
law. The Group recognises that a commitment to the sustainable management of our financial, environmental
and social impact is fundamental to the success and well-being of both our business and our stakeholders.
Further information on the Group’s safety and sustainability initiatives can be found in the Sustainability
Report on pages 38 to 43 of the Annual Report.
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
John Ho (appointed 13 April 2017)
Non-Executive Director and Chair
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 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. John
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. John has extensive business and
investment experience in consumer, technology and health related sectors,
especially in Australia and China.
Vocus Group Limited (ASX: VOC) (since 2018)
None
None
8,752,182 ordinary shares
None
John Murphy (appointed 18 May 2017)
Independent Non-Executive Director and Deputy Chair
John has over 35 years’ experience in Australia and internationally in the
beverage, food and packaging industry. John has held numerous senior
leadership roles at large multinational companies, including Managing
Director of Coca-Cola Amatil Australia, Chief Executive Officer 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 and also advises a range of
companies internationally.
None
Former Chair of Lantern Hotel Group Limited (ASX: LTN) (June 2015 - June
2016)
Chair of Remuneration and Nomination Committee
None
193,373 options over ordinary shares
20
Bellamy's Australia Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Rodd Peters (appointed 28 February 2017)
Non-Executive Director
Bachelor of Laws from University of Tasmania and also a Master of Laws
(Hons) from Trinity Hall, University of Cambridge
Rodd has over 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. Rodd is admitted
as a solicitor of the Supreme Court of New South Wales and the High Court
of Australia.
None
None
None
43,600 ordinary shares
36,257 options over ordinary shares
Wai-Chan Chan (appointed 28 February 2017)
Independent Non-Executive Director
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.
Wai-Chan 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. Wai-Chan currently works for Oliver Wyman where
he is a partner and the Global Leader of the Consumer Goods Practice. Wai-
Chan 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. Wai-Chan was also a partner at McKinsey & Company in
Greater China.
None
None
None
None
36,257 options over ordinary shares
Shirley Liew (appointed 13 December 2017)
Independent Non-Executive Director
Shirley has over 25 years’ experience in international, listed and world class
organisations in Australia as well as the UK and Asia. Shirley 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 Pty Limited, Hunter
United Employees Credit Union Limited and Bridge Housing Limited. Shirley
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.
Non-executive Director of Lantern Hotel Group Limited (ASX: LTN) (since
June 2015)
None
Chair of Audit and Risk Committee
None
20,878 options over ordinary shares
21
Bellamy's Australia Limited
Directors' report
30 June 2019
'Other current directorships' quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Name
Title:
Qualifications:
Experience and expertise:
Melinda Harrison
General Counsel, Company Secretary and Head of Regulatory Affairs
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. Melinda has also completed a
certificate of Governance Practice from the Governance Institute of
Australia.
Melinda was appointed as General Counsel and Company Secretary in May
2017. Melinda has over 20 years’ experience in law, risk and governance in
listed and privately held companies both in Australia and internationally.
Prior to joining the Group, Melinda was General Counsel at Carter Holt
Harvey, one of Australia's largest wood manufacturing business where she
led 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 at King & Wood Mallesons.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held
during the year ended 30 June 2019, and the number of meetings attended by each Director were:
Full Board
Attended
Held
Audit and Risk Committee
Attended
Held
Attended
Remuneration and
Nomination Committee
Held
3
3
3
3
3
John Ho
John Murphy
Rodd Peters
Wai-Chan Chan
Shirley Liew
10
10
10
9
10
10
10
10
10
10
4*
4
3
4
4
4
4
4
4
4
3
3
3*
3
3*
Held: represents the number of meetings held during the time the Director held office or was a member of
the relevant committee.
*
By invitation, not a member of the relevant committee
22
Bellamy's Australia Limited
Directors' report
30 June 2019
Options over ordinary shares
Options over ordinary shares of Bellamy's Australia Limited under option at the date of this report are as
follows:
Grant date
Expiry date
29 June 2015
23 December 2015
30 June 2016
30 June 2016
3 October 2016
13 June 2017
2 October 2017
26 October 2017
20 April 2018
28 August 2018
24 October 2018
2 January 2019
29 June 2020
23 December 2020
30 June 2020
22 December 2020
3 October 2021
13 June 2021
2 October 2021
13 June 2021
20 April 2022
28 August 2022
13 December 2021
2 January 2023
Exercise Number
price
under
option
$1.200
$4.870
$9.880
$9.880
$14.040
388,522
207,214
369,125
283,250
296,681
$5.643 3,738,090
$7.820
50,000
265,887
$5.643
38,143
$20.560
59,406
$9.670
$11.190
20,878
200,000
$7.380
5,917,196
No person entitled to exercise the options had or has any right by virtue of the option to participate in any
share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
Bellamy's Australia Limited issued 101,935 ordinary shares on the exercise of options during the year ended
30 June 2019 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the Directors and Executives of the Company for costs incurred, in their
capacity as a Director or Executive, for which they may be held personally liable, except where there is a lack
of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the Directors and
Executives of the Company against a liability to the extent permitted by the Corporations Act 2001 (Cth)
('Corporations Act'). The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor
of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act for leave to bring proceedings
on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose
of taking responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year
by the auditor are outlined in note 23 to the financial statements.
23
Bellamy's Australia Limited
Directors' report
30 June 2019
The Directors are satisfied that the provision of non-audit services during the financial 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.
The Directors are of the opinion that the services as disclosed in the financial statements do not compromise
the external auditor's independence requirements of the Corporations Act for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity
and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and
Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management
or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing
economic risks and rewards.
●
Officers of the Company who are former partners of PricewaterhouseCoopers
There are no officers of the Company who are former partners of PricewaterhouseCoopers.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors' Reports)
Instrument 2016/191 ('ASIC Instrument'), relating to 'rounding-off'. Amounts in this report have been rounded
off in accordance with that ASIC Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act is
set out on page 53 of this annual report.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act.
24
Bellamy's Australia Limited
Directors' report
30 June 2019
25
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
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●
●
Bellamy's Australia Limited
Directors' report
30 June 2019
Remuneration Report (audited)
The Remuneration Report details the key management personnel ('KMP') remuneration arrangements for
the Group, in accordance with the requirements of the Corporations Act 2001 (Cth) ('Corporations Act') and
its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including all directors.
The KMP of the Group during the financial year ended 30 June 2019 ('FY19') consisted of the following
Key management personnel
Directors of Bellamy's Australia Limited:
John Ho - Non-Executive Chair
John Murphy - Independent Non-Executive Director and Deputy Chair
Rodd Peters - Non-Executive Director
Wai-Chan Chan - Independent Non-Executive Director
Shirley Liew - Independent Non-Executive Director
and the following persons:
Andrew Cohen - Chief Executive Officer
Nigel Underwood - Chief Financial Officer
Peter Fridell - Director of Operations
David Jedynak - Director of Sales and Marketing
Melinda Harrison - General Counsel, Company Secretary and Regulatory Affairs
All KMP held their positions for the duration of FY19.
Remuneration Report
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to KMP
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of
strategic objectives and the creation of value for shareholders, and it is considered to conform to market best
practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies
the following key criteria for good reward governance practices:
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
is transparent.
The Remuneration and Nomination Committee is responsible for determining and reviewing remuneration
arrangements for its Directors and Executives. The performance of the Group depends on the quality of its
Directors and Executives. The remuneration philosophy is to attract, motivate and retain high performance
and high quality personnel.
The Remuneration and Nomination Committee has a Charter which outlines the terms of reference under
which it operates. It is available online at www.bellamysorganic.com.au.
In consultation with external remuneration consultants (refer to the section 'Use of remuneration consultants'
below), the Remuneration and Nomination Committee has structured an executive remuneration framework
that is market competitive and complementary to the reward strategy of the Group.
26
Bellamy's Australia Limited
Directors' report
30 June 2019
The reward framework is designed to align executive reward to shareholders' interests. The Board have
considered that it should seek to enhance shareholders' interests by:
●
focusing on aligning rewards with sustained growth in shareholder wealth, including long-term equity-
based incentives with performance metrics linked to Total Shareholder Return ('TSR'), as well as
focusing the executive on key non-financial drivers of value;
attracting and retaining high calibre executives; and
providing clear and direct alignment with shareholder’s interests through share ownership, i.e. executives
are rewarded when shareholders are rewarded.
●
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
Non-Executive Directors' remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-
Executive Directors' fees and payments are reviewed annually by the Remuneration and Nomination
Committee. The Remuneration and Nomination Committee may, from time to time, receive advice from
independent remuneration consultants to ensure Non-Executive Directors' fees and payments are
appropriate and in line with the market. Consistent with the year ended 30 June 2018 ('FY18'), the Chairman
has again made the personal decision to waive his Board fees.
ASX listing rules require the aggregate Non-Executive Directors' remuneration be approved by shareholders
at a general meeting. The most recent determination was at the Annual General Meeting held on 20 October
2015, where the shareholders approved a maximum annual aggregate remuneration of $1,000,000.
The Board recognises the participation of Directors in the financial year ended 30 June 2017 ('FY17')
Turnaround Long Term Incentive ('LTI') plan was not usual, however it was 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 Chairman did not participate in the initial FY17
Turnaround LTI plan grant, and no other Turnaround LTI offers or grants were made to Directors during FY19.
Executive KMP remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive KMP remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
Executive fixed remuneration 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.
The Board believes that each executive should have a significant portion of their remuneration at-risk and
linked to the Group’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 the Group, 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 FY19 to existing KMPs as the FY17 award was intended as a 3-year
turnaround grant.
This ensures that the Group attracts, motivates, and retains top tier talented executives to deliver on its
business strategy and contribute to the Group’s ongoing financial performance.
27
Bellamy's Australia Limited
Directors' report
30 June 2019
The Group’s short-term incentive ('STI') plan rewards the Chief Executive Officer ('CEO') and those
executives reporting to him (including the KMP executives) for performance against a pre-determined
scorecard of measures linked to the Group's business performance (12 months) and individual performance.
Performance measures may vary from year to year depending on the Company’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, 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, the Company and its
shareholders.
CEO’s FY19 KPIs and STI outcomes
Andrew Cohen’s performance for FY19 has been assessed based on consideration of his important and
significant role in the execution of strategic objectives of the Group during FY19, including his leadership,
direction and prioritisation of activities.
The performance measures for FY19 were set by the Board in early FY19 and are set out below. The
performance measures were consistent with those set in the previous financial year and ensure continued
focus on achieving the Group's 2021 strategic plan. The STI rewards short-term financial performance, while
the LTI plan encourages long-term growth in shareholder value.
Financial measures for the CEO are based on normalised Earnings Before Interest Tax & Depreciation
('EBITDA'), Sales Revenue and Gross Profit Margin. The normalised result excludes individually significant
items not expected to be repeated in future years. These hurdles have been in place for several years and
take into account that there are certain matters of a non-recurring nature which may not accurately reflect
underlying performance. By adjusting for these items, management are not discouraged from making short-
term decisions that ultimately benefit long-term value creation.
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 the Group to become a Global and Iconic
Infant Brand, and transform the organisation to a high-performing Fast-Moving Consumer Goods ('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 and Discipline, Strategic Cost Position,
Supply Chain Flexibility, Brand Investment and Penetration, and Strategy and People both domestically and
internationally.
Key performance indicators
Financial:
Normalised EBITDA ($m)
Sales Revenue ($m)
Gross Profit Margin %
Non-financial:
Sales Growth and Discipline
Strategic Cost Position
Supply Chain Flexibility
Brand Investment and Penetration
Strategy and People
Total
Achieve-
ment (As a
% of FY19
Stretch
Target)
%
Weighting
%
Paid out
24%
18%
18%
53.30%
76.06%
101.21%
8%
8%
8%
8%
8%
80.00%
100.00%
100.00%
80.00%
90.00%
100%
No
No
Yes
Yes
Yes
Yes
Yes
Yes
28
Bellamy's Australia Limited
Directors' report
30 June 2019
The financial measures for FY19 were largely not achieved:
●
revenue and normalised EBITDA were lower than the targets set by the Board. While a range of
uncontrollable factors contributed to this outcome, the Board did not consider they warranted adjustment
of the targets. It was noted however, that strategically in FY19, marketing expenditure doubled and the
Group undertook a significant investment in people, particularly in China.
gross profit margin was achieved through significant improvement in ingredient costs and supply chain
flexibility, together with the launch of margin accretive nutritionally enhanced products.
●
The CEO performed strongly on the non-financial measures with significant progress on all KPIs being
achieved at both at-target and stretch levels.
Achievement highlights for qualitative KPIs include:
Sales Growth and Discipline
disciplined approach to sales/rebrand and trade inventory management
enabling an important reset of channel economics to rebuild strong brand
foundation;
Strategic Cost Position
significant improvements in cost structures aligned to the longer-term
strategy (ingredients and direct costs);
Supply Chain Flexibility
Country of Origin labelling (CoOL) standards achieved through fresh milk
integration into the supply chain. Ongoing improvement to supply chain
flexibility and reducing input costs exceeded the expectation set in the
strategic plan and set the business up well for future profitable growth;
Brand Investment and
Penetration
reformulation of nutritionally enhanced products was successfully executed,
incorporating DHA, ARA, GOS into formula and food products;
Strategy and People
continued investment in the innovation pipeline which will help drive the next
wave of growth, including ultra premium, Step 4, pregnancy milk and food;
investment in capability in key strategic pillars for the business – being
Innovation, Food and China strategy, including a step change in capability
across the organisation, with a particular focus on marketing and sales
capability in China;
the continued embedding of the renewed culture program which enhanced
communication and feedback within the organisation and recognises and
rewards exceptional talent.
Andrew Cohen has continued to demonstrate strong leadership during the most significant rebrand the
Company has ever embarked on and through resetting key business foundations required to deliver on the
longer-term strategy. The significantly reduced award for financial performance aligns with shareholder
requirements for revenue growth and profitability. Accordingly, the amount of STI awarded to Andrew Cohen
recognises his individual performance and the achievement of a significant portion of the FY19 non-financial
stretch KPIs as set by the Board.
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.
29
Bellamy's Australia Limited
Directors' report
30 June 2019
Summary of FY19 STI payments to Executive KMP
FY19 STI payment
KMP Executives
Andrew Cohen
Nigel Underwood
Peter Fridell
David Jedynak
Melinda Harrison
STI
opportunity
STI
opportunity
STI
achieved**
At Target Stretch*
STI
achieved
Stretch
$
$
$
%
230,885
70,000
70,000
70,000
65,000
384,808
105,000
105,000
105,000
97,500
177,181
52,500
52,500
52,500
48,750
46.0%
50.0%
50.0%
50.0%
50.0%
*
KMP Executives’ STIs have a stretch component that is designed to encourage above at-target
performance.
** STI amounts indicated to have been achieved in respect of FY19 are subject to an annual review and
only payable subsequent to 30 June 2019 upon ratification and recommendation by the Remuneration
and Nomination Committee and approval by the Board of Directors.
Turnaround Long-Term Incentive Plan
A new form of LTI plan was implemented in FY17 called the Turnaround Long-Term Incentive Plan
('Turnaround LTI Plan'). The purpose of the Turnaround LTI Plan was to focus the executives’ efforts on the
achievement of sustainable long-term shareholder value creation and the long-term financial success of the
Group.
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. Details of the Turnaround
LTI Plan are outlined on page 31.
30
Bellamy's Australia Limited
Directors' report
30 June 2019
Participants
Executive KMP and certain Non-Executive Directors. All Executive KMP
awards were made in FY17 or on commencement of employment.
What is the grant frequency?
A single grant covering 3 years of equity remuneration.
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 performance hurdle
and why was it chosen?
The TSR hurdle is based on the Company's share price growth on a
compound basis over the relevant performance period. A TSR hurdle was
chosen as it is directly linked to the Company’s share price growth and
therefore the increase in value created for shareholders.
How is the TSR performance
hurdle tested?
Each Tranche is tested against the TSR performance hurdle over the
performance period, in accordance with the applicable opening and closing
share prices.
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.
The closing share price is 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).
When are the test dates for the
FY17 LTI Grant?
The test date for Tranche 1 options will be following the announcement of
the Company's 2019 annual results (end of the first performance period).
The test date for Tranche 2 options will be following the announcement of
the Company's 2020 annual results (end of the second performance period).
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 by the end of the second
performance period, will be eligible
the
announcement of the Company's 2021 half-year results (the end of the third
performance period). Any options that do not vest following testing at that
time will lapse.
re-testing
following
for
What is the exercise price?
The exercise price for the initial Turnaround LTI grant of options in FY17 is
$5.643.
What share price is required for
vesting?
For the initial FY17 turnaround grant, a share price of $8.47 is required for
the minimum vesting of 50% of the grant, while a share price of $11.29 is
required for 100% vesting.
The Turnaround LTI Plan was designed as a replacement for the FY17, FY18 and FY19 LTI awards, and
accordingly, there were no subsequent grants in FY18 or FY19 for those who received options in FY17.
The provision of LTI plan awards via options for ordinary shares in the Company encourages long-term share
exposure for the executives and, therefore, drives behaviours that align with the interests of shareholders.
31
Bellamy's Australia Limited
Directors' report
30 June 2019
The FY17 Turnaround LTI grant to Executives was designed to cover three years of equity reward, and
continues to motivate and retain executives during the key turnaround phase of the business. As the FY17
LTI Plan now commences its third year of operation, a key objective of the Board is to implement a newly
designed LTI Plan in FY20 which takes into consideration a balanced approach to hurdle setting, aligns with
shareholder expectations and continues to motivate and retain key executives to support the growth of the
business beyond FY20.
Use of remuneration consultants
The Remuneration and 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 and
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 FY19. During FY19, Mercer
Consulting Australia Pty Ltd was engaged to provide the valuation of options grants to new 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.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 24 October 2018 AGM, 95.69% of the votes received supported the adoption of the remuneration
report for the year ended 30 June 2018. The Company did not receive any specific feedback at the AGM
regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of KMP of the Group are set out in the following tables.
Short-term benefits
Post-
employ-
ment
benefits
Long-term
benefits
Share-
based
payments
Cash
salary
Cash
and fees** bonus
Non-
Super-
monetary annuation
2019
$
$
$
$
Long
service
leave
$
Equity-
settled
options*
$
Total
$
Non-executive Directors:
J Ho
J Murphy
R Peters
W-C Chan
S Liew
-
123,000
78,000
78,000
90,000
-
-
-
-
-
-
-
-
-
-
-
11,685
7,410
7,410
8,550
-
-
-
- 390,614 525,299
73,240 158,650
-
73,240 158,650
-
8,035 106,585
-
Executive KMP:
A Cohen
N Underwood
D Jedynak
P Fridell
M Harrison
799,509 177,181
52,500
329,509
52,500
329,509
52,500
329,509
48,750
304,509
2,461,545 383,431
-
81,065
-
-
-
20,531
20,531
20,531
20,531
20,531
81,065 137,710
6,297 1,110,353 2,113,871
1,505 261,277 746,387
1,505 261,277 665,322
1,505 242,024 646,069
1,391 110,011 485,192
12,203 2,530,071 5,606,025
32
Bellamy's Australia Limited
Directors' report
30 June 2019
*
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 FY19.
** From 1 July 2018 salary payments were changed from fortnightly to monthly. FY18 total salary payments
therefore reflect a higher cash payment due to timing of fortnightly salary payments.
Short-term benefits
Post-
employ-
ment
benefits
Long-term
benefits
Share-
based
payments
Cash
salary
Cash
and fees bonus
Non-
Super-
monetary annuation
2018
$
$
$
$
Long
service
leave
$
Equity-
settled
options*
$
Total
$
Non-executive Directors:
J Ho
J Murphy
R Peters
W-C Chan
S Liew**
-
128,428
78,000
78,000
49,643
-
-
-
-
-
-
-
-
-
-
-
12,201
7,410
7,410
4,716
-
-
-
- 404,620 545,249
75,866 161,276
-
75,866 161,276
-
65,305
10,946
-
Executive KMP:
A Cohen
N Underwood
D Jedynak
P Fridell
M Harrison
815,335 370,000
336,296
91,000
336,296 105,000
336,296 105,000
289,768
91,500
2,448,062 762,500
-
48,665
-
-
-
20,048
20,048
20,048
20,048
20,048
48,665 131,977
5,100 1,428,261 2,638,744
510 261,277 757,796
510 261,277 723,131
510 242,024 703,878
471 110,011 511,798
7,101 2,870,148 6,268,453
*
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.
** Options of S Liew were approved by shareholders at the 2018 AGM.
Consistent with FY18, the Chairman has again made the personal decision to waive his Board fees.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-executive Directors:
J Ho
J Murphy
R Peters
W-C Chan
S Liew
Executive KMP:
A Cohen
N Underwood
D Jedynak
P Fridell
M Harrison
Fixed remuneration
2018
2019
At risk - STI
At risk - LTI
2019
2018
2019
2018
-
-
-
-
-
8%
7%
8%
8%
10%
-
-
-
-
-
14%
12%
15%
15%
18%
-
74%
46%
46%
8%
53%
35%
39%
37%
23%
-
74%
47%
47%
17%
54%
34%
36%
34%
22%
-
26%
54%
54%
92%
39%
58%
53%
55%
67%
-
26%
53%
53%
83%
32%
54%
49%
51%
60%
33
Bellamy's Australia Limited
Directors' report
30 June 2019
Service agreements
agreements are as follows:
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these
Period of notice to terminate by
Period of notice to terminate by
the Executive KMP
the Group*
CEO and CFO
Other Executive KMP
6 months
6 months
6 months**
6 months***
*
Payment in lieu of the notice period may be provided (based on the executive’s fixed remuneration). The
Group may also terminate at any time without notice for serious misconduct.
** Redundancy payments for the CEO and CFO is a payment of 6 months’ salary and will include any
applicable payment in lieu of notice.
*** Redundancy payments for all Executive KMP (other than the CEO and CFO) is calculated in accordance
with the Company or Group policy (Fair Work Act 2009 (Cth) legislated requirements) and will include
any applicable payment in lieu of notice.
Andrew Cohen and Nigel Underwood's service agreements provide for a payment in lieu of notice on a
fundamental change in role.
KMP have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
year ended 30 June 2019.
Options
There were no shares issued to Non-executive Directors and other KMP as part of compensation during the
The terms and conditions of each grant of options over ordinary shares affecting remuneration of Non-
Executive Directors and other KMP in this financial year or future reporting years are as follows:
Fair value
per option
Grant date
3 Oct 2016
13 Jun 2017
26 Oct 2017*
24 Oct 2018**
Vesting date and
exercisable date
Expiry date
Exercise
at grant
price
date
Sep 2019
3 Oct 2021
Sep 2019 and Sep 2020
13 Jun 2021
Sep 2019 and Sep 2020
13 Jun 2021
Mar 2020 and Mar 2021
13 Dec 2021
$14.040
$5.643
$5.643
$11.190
$3.520
$2.045
$7.510
$2.185
*
The grant of options to Directors was approved by shareholders at the AGM on 26 October 2017. The
offer was made to Directors on 13 June 2017 as part of the Turnaround LTI Grant.
** The grant of options to S Liew was approved by shareholders at the AGM on 24 October 2018. The offer
was made to S Liew on her commencement as a Director on 13 December 2017.
34
Bellamy's Australia Limited
Directors' report
30 June 2019
Number of
options
Vesting date
and
Fair value
per option
Exercise
at grant
Name
granted
Grant date
exercisable date Expiry date
price
date
Non-Executive
Directors:
J Murphy*
R Peters*
W-C Chan*
S Liew*
Executive KMP:
A Cohen
N Underwood
P Fridell
D Jedynak
M Harrison
Name
A Cohen
96,686 26 Oct 2017
96,687 26 Oct 2017
18,129 26 Oct 2017
18,128 26 Oct 2017
18,129 26 Oct 2017
18,128 26 Oct 2017
10,439 24 Oct 2018
10,439 24 Oct 2018
369,125 30 Jun 2016
283,250 30 Jun 2016
168,345 3 Oct 2016
837,500 13 Jun 2017
837,500 13 Jun 2017
237,500 13 Jun 2017
237,500 13 Jun 2017
220,000 13 Jun 2017
220,000 13 Jun 2017
237,500 13 Jun 2017
237,500 13 Jun 2017
100,000 13 Jun 2017
100,000 13 Jun 2017
Sep 2019
Sep 2020
Sep 2019
Sep 2020
Sep 2019
Sep 2020
Mar 2020
Mar 2021
Sep 2017
Sep 2018
Sep 2019
Sep 2019
Sep 2020
Sep 2019
Sep 2020
Sep 2019
Sep 2020
Sep 2019
Sep 2020
Sep 2019
Sep 2020
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Dec 2021
13 Dec 2021
30 Jun 2020
22 Dec 2020
3 Oct 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
13 Jun 2021
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$11.190
$11.190
$9.880
$9.880
$14.040
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$5.643
$7.510
$7.510
$7.510
$7.510
$7.510
$7.510
$2.190
$2.180
$1.210
$1.580
$3.520
$2.050
$2.040
$2.050
$2.040
$2.050
$2.040
$2.050
$2.040
$2.050
$2.040
*
For Directors, the grant date is the date of receiving shareholder approval at the relevant AGM.
Options granted carry no dividend or voting rights.
The number of options over ordinary shares granted to and vested by Directors and other key management
personnel as part of compensation during the year ended 30 June 2019 are set out below:
Number of Number of Number of Number of
options
options
granted
granted
options
vested
options
vested
during the during the during the during the
year
2019
year
2018
year
2019
year
2018
-
-
283,250
369,125
35
Bellamy's Australia Limited
Directors' report
30 June 2019
Additional information
The earnings of the Group for the five years to 30 June 2019 and the factors that are considered to affect
total shareholder return ('TSR') are summarised below:
Net revenue* ($'000)
EBITDA Statutory ($'000)
EBITDA Normalised** ($'000)
Share price at financial year end ($)***
Total dividends paid (cents per share)
Basic earnings per share (cents per
share)
Average STI payout as a % at-target for
eligible KMP Executives****
2019
2018
2017
2016
2015
266,238
34,925
46,925
8.31
-
328,704
64,567
70,540
15.54
-
240,182
1,380
42,794
6.91
-
234,083
54,613
54,613
10.21
0.12
125,302
12,733
14,045
4.37
0.03
19.51
39.61
(0.80)
39.80
9.80
75.35%
148.05%
121.17%
150.05%
138.89%
The net revenue for 2016 is the restated number.
*
** Normalised EBITDA has been used as it excludes the significant items not expected to be repeated in
future years, including inventory write-downs, foreign exchange losses, legal, accounting and
restructuring costs which were necessary in FY17, provision for inventory write downs relating to the
transition to SAMR registered products in China and CoOL compliant labelling in Australia in FY18, and
provision for inventory write downs relating to the rebrand in FY19.
*** The opening share price in 2015 was $1.30.
**** Only the CEO and CFO participated in the FY17 STI Plan.
Relationship between KMP outcomes and Company performance
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 correlate with short term profitability, as
well as key initiatives which build the platform to support future growth of the business.
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.
Additional disclosures relating to KMP
Shareholding
The number of shares in the Company held during the financial year by each Director and members of
Executive KMP of the Group, including their personally related parties, is set out below:
Balance at
the start of
the year
Received
as part of
remuner-
ation
Additions
Disposals/
other
Balance at
the end of
the year*
Ordinary shares
J Ho
R Peters
A Cohen
D Jedynak
M Harrison
8,752,182
43,600
51,325
13,400
3,933
8,864,440
-
-
-
-
-
-
-
-
-
-
1,300
1,300
- 8,752,182
43,600
-
51,325
-
13,400
-
-
5,233
- 8,865,740
*
There were no shares held nominally by KMP as at 30 June 2019 and as at the date of this report.
Only Directors and other members of KMP with holdings are disclosed above.
36
The number of options over ordinary shares in the Company held during the financial year by each Director
and members of Executive KMP of the Group, including their personally related parties, is set out below:
the year
Granted
Exercised
other
the year
Expired/ Balance at
forfeited/
the end of
Balance at
the start of
2,495,720
193,373
36,257
36,257
20,878
475,000
440,000
475,000
200,000
4,372,485
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 2,495,720
-
-
-
-
-
-
-
-
193,373
36,257
36,257
20,878
475,000
440,000
475,000
200,000
- 4,372,485
Balance at
Vested and
the end of
exercisable
the year
652,375
652,375
652,375
652,375
Only Directors and members of Executive KMP with holdings are disclosed above.
This concludes the remuneration report, which has been audited.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the
Bellamy's Australia Limited
Directors' report
30 June 2019
Option holding
Options over ordinary shares
J Murphy
R Peters
W-C Chan
S Liew
A Cohen
N Underwood
P Fridell
D Jedynak
M Harrison
Options over ordinary shares
A Cohen
Corporations Act.
On behalf of the Directors
John Ho
Chairman
27 August 2019
Melbourne
___________________________
___________________________
John Murphy
Deputy Chairman
37
Bellamy's Australia Limited
Sustainability report
30 June 2019
Sustainability Report
38
Bellamy's Australia Limited
Sustainability report
30 June 2019
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 continued 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 topics of this report have been determined based on the assessment of materiality as outlined under the
Global Reporting Initiatives (GRI) standard 1.3. While the GRI standards have been consulted, they have not
been used in full.
Bellamy’s has considered the environmental and social impacts of its operations and focussed this report on
the most important matters for a broad range of stakeholders. Bellamy’s focuses on identifying areas that
provide opportunities for positive and meaningful change that deliver long-term positive societal outcomes. At
the heart of this goal is a belief in the harmony of financial performance and ESG considerations.
Who we are
Bellamy’s is a team of 150 people, with offices located in 4 countries, having a shared goal of providing a pure
start to life for infants and children.
Recognising the importance of attracting and retaining the most highly skilled employees, Bellamy’s provides
a safe and flexible work environment free of discrimination. Through Bellamy’s Equal Employment Opportunity
(EEO) policy, a risk management approach is adopted to remove factors that could limit diversity whilst
continuing to encourage merit-based recruitment and promotion based on performance. Bellamy’s is
committed to developing a culture that values and achieves diversity in both its workforce and on its Board of
Directors.
Employees of Bellamy’s are encouraged to be brave and are an interwoven patchwork of talented and diverse
individuals. Bellamy’s are committed to complying with all legislative workplace requirements, providing
ongoing professional development and training, and encouraging Bellamy’s employees to be the best version
of themselves.
Bellamy’s is committed to the development of sustainable and responsible business practices in order to
achieve its diversity objectives. Bellamy’s is proud of its workforce mix, with over 60% of the Bellamy’s
workforce being female, and over 50% of senior management positions being occupied by females. Bellamy’s
has a strong belief that diversity garners the creativity of ideas and fabrication of strong teams. Bellamy’s will
continue to strive to achieve its diversity goals.
Further information on Bellamy’s people and diversity can be found on page 49 of this annual report.
Production
Bellamy’s produces certified organic products. Being organic is a lifestyle increasingly understood by
consumers and producers. At its core, organic produce 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.
39
Bellamy's Australia Limited
Sustainability report
30 June 2019
During the financial year Bellamy’s introduced a reformulated formula range to the market. The new formulation
has the addition of Docosahexaenoic Acid (commonly and herein referred to as DHA). Bellamy’s have
reviewed the Company’s supplier sustainability statement and are satisfied the DHA being used in Bellamy’s
products is sustainably sourced and produced.
Bellamy’s is committed to improving the sustainability of the environment in which it operates. During FY19,
Bellamy’s consulted the final report published by the Task Force on Climate-Related Financial Disclosures
(commonly and herein referred to as the TCFD) and reviewed Bellamy’s susceptibility to climate-related risks.
Bellamy’s has limited exposure to the impacts of climate-related risks. Bellamy’s has a regionally diverse range
of suppliers, mitigating the risk of climate change on ingredient supplies and production.
As part of the process of ‘onboarding’ suppliers, the suppliers’ organic values are evaluated for alignment with
Bellamy’s. Bellamy’s considers supplier carbon pollution programs and awareness, supplier policies on
emissions and pollution, supplier policies on water consumption and contamination, and any corporate
exposure to negative environmental impacts.
Bellamy’s major suppliers have global sustainability and social responsibility programs in place to ensure the
sustainable and ethical sourcing and production of ingredients.
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 ongoing training to ensure the quality and
safety of Bellamy’s products remain uncompromised. Bellamy’s is constantly working to improve its quality
standards and is currently working toward obtaining ISO22000 accreditation which would further elevate
Bellamy’s already high-quality standards.
Our organic supply chain is audited and certified by relevant organic certifying authorities.
As announced in 2018, Bellamy’s formed a strategic arrangement to increase the volume of Australian organic
milk used in the production of infant formula. From a long-term sustainability perspective, Bellamy’s are
committed to taking the first 20 million litres of milk from the organic milk pool annually. Bellamy’s are
continually investigating responsible organic dairy ingredient sourcing options.
Bellamy’s are proud of the Company’s track record relating to the environment, reporting no environmental
incidents or breaches in the Company’s history.
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 (FY18: 100%). The
cardboard box, tin, scoop, lid, label and seal can all be recycled. For FY19 the total amount of
packaging material that could be recycled and avoid landfill was 2,308 tonnes (FY18: 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 are currently exploring a TerraCycle program to enhance the recyclability of food
packing and are committed to continually monitoring and exploring new technologies that are both
commercially viable and sustainable. For FY19, the total amount of packaging material that could be
recycled and avoid landfill was 186 tonnes (FY18: 192 tonnes).
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.
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Bellamy's Australia Limited
Sustainability report
30 June 2019
Bellamy’s prides itself in being at the forefront of governance matters and constantly strives to improve its
governance framework. Bellamy’s is aware of the recent introduction of the Modern Day Slavery Act (2018)
(herein referred to as the ‘Act’). Although there is no obligation for Bellamy’s to report adherence to the Act
until 30 June 2020, Bellamy’s are being proactive in analysing the supply chain to ensure strict compliance
with the Act. Bellamy’s expects to be compliant in FY20.
Bellamy’s risk management framework is described in the Corporate Governance Statement of this Annual
Report.
Community Engagement
Bellamy’s firmly believes in being a responsible corporate citizen and developing lasting and meaningful
engagement with the communities in which it operates. 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;
Primary sponsorship of the Kid I Am event in Tasmania;
Providing financial assistance to Giant Steps Australia;
Business participation in Clean Up Australia Day;
Regular stock donation to Food Bank Australia;
Stock provided to Baobag: Great Australian Mothers’ Group; and
Sponsorship of the Cancer Council Women’s 5km run.
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.
Bellamy’s are constantly pursuing community engagement opportunities that align with 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 it is
commercially viable, seek to align these practices with those of suppliers and production partners. Bellamy’s
will strive to enhance its sustainability initiatives in FY20.
Specific 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; and
With a regionally diverse supply chain, is not at risk of changes to climatic conditions in any single
region.
Environment
Ingredient Production – Emissions, Effluents and Waste
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.
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Sustainability report
30 June 2019
Bellamy’s prefers to source ingredients from Australian farmers, however, has access to production from
farmers in New Zealand, Europe 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.
Ingredient Production – Supplier Credentials
Organic farmers must be certified organic. Certification is required from a certifying body approved by 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.
Supply Chain and Logistics – Energy
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.
Production – Energy
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 market, they pursue practices to reduce energy 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%
(FY18: 0.2%).
Packaging – Emissions, Effluents and Waste
Bellamy’s seeks to have 100% of its packaging as recyclable, however at this stage only 96.7% (FY18: 96.3%)
is achievable (expressed as a % of the weight of packaging materials produced).
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 the recyclability of ingredient packaging during the tendering and on-boarding
process.
People
Workplace Health and Safety
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 a standing item on the Board agenda.
LTIFR for FY19 is <0.01% (FY18: <0.01%).
Capability and Diversity
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’.
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Sustainability report
30 June 2019
In addition to performance, Bellamy’s encourages workplace diversity to ensure the voice of the customer is
heard and understood. At 30 June 2019:
67% of the workforce is female (FY18: 60%)
57% of leadership team is female (FY18: 50%)
100% are committed.
Employee Turnover
For the period 1 July 2018 to 30 June 2019, Bellamy’s employee turnover rate was 13%.
Health and Society
Health and Wellbeing – Product Quality
Bellamy’s understands breast feeding 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 an informed
choice to bottle feed.
Ethical marketing of Bellamy’ products complying with World Health Organisation (WHO) guidelines both in
substance and form.
Health and Wellbeing – 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)
Tasmanian Department of Health
Australian Competition and Consumer Commission (ACCC)
Dairy Food Safety Victoria (DFSV)
Department of Agriculture and Water Resources (DAWR)
State and Territory Departments of Health
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 Shareholders
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.
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
Corporate Governance Statement
44
Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
The Board of Bellamy’s Australia Limited ACN 124 272 108 (Company) is pleased to present the 2019
Bellamy’s Corporate Governance Statement. This Corporate Governance Statement sets out the key features
of the Company’s governance framework and practices for the financial year ended 30 June 2019, and outlines
the Company’s corporate governance framework.
The Company and its associated entities are committed to upholding a high standard of corporate governance
and has adopted policies and practices which are designed to support and promote the responsible
management and conduct of the Company. These policies and practices are based on the 3rd edition of the
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX
Recommendations).
The Company was compliant with the ASX Recommendations for the year ended 30 June 2019 other than
Recommendation 2.5 (as the Chairman is not independent). 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. In order to maintain the existing high standards of corporate governance,
the Board will continue to 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 as at 27 August 2019 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, consumers and the
community. Ultimately, it is the Board’s responsibility to work with the Executive management to instill a positive
culture that aligns with the Company’s values. 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 pages 20 and 21 of the annual report.
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:
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
S K I L L S / E X P E R I E N C E
N U M B E R O F D I R E C T O R S
C O R P O R A T E G O V E R N A N C E
C O R P O R A T E G O V E R N A N C E
O P E R A T I O N S
O P E R A T I O N S
China / Asia business experience
Governance
Accounting / Audit
Risk / Compliance
Strategy
Crisis management
Food manufacturing
Brand / Marketing
FMCG / Retail
Legal
Finance / Banking
T E C H N I C A L
Logistics
T E C H N I C A L
Human resource management and remuneration
The Board, with the assistance of the Remuneration & Nominations Committee, annually 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, is not independent as he is a nominee of a substantial shareholder of
the Company, Janchor Partners. Further, Rodd Peters is not independent as he was an advisor to a substantial
shareholder in the last three years.
Accordingly, the Company does not comply with Recommendation 2.5 (which provides that the Chair should
be independent).
The Board considers that John Ho brings objective and independent judgement to Board deliberations and
adds significant value to the Board given his experience and skills. John Ho is an experienced investor with
extensive international business expertise, including in relation to Australian and Chinese markets.
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 there is active participation from
independent directors in the leadership of the Board (recognising the Chairman is not an independent director).
Each director (except Shirley Liew who was appointed at the 2018 AGM) 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
focussed on identifying suitable candidates for further appointments to the Board.
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
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.
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 FY19. The
evaluation process was facilitated by the Chairman and involves:
the completion of questionnaires/surveys by each director or member of the committee;
the provision of a report to each director with feedback on the performance of the Board of committees
based on survey results; and
a meeting between the Board or committee to discuss areas for improvement.
Senior Executives
The Remuneration & Nomination Committee monitors and advises on the periodic performance of senior
Executives. The CEO initiates performance reviews twice per year for each 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.
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
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 roles and responsibilities, composition, and membership as at 30 June 2019 for each
Committee is provided below.
Committee
Audit & Risk Committee
Roles and responsibilities
Members as at 30 June 2019
Composition
The primary purpose of the Audit
& Risk Committee is to monitor
and advise the Board on:
financial reporting;
external audit;
risk management; and
internal control structure.
Shirley Liew (Chair)
John Murphy
Rodd Peters
Wai-Chan Chan
The chair of the Audit & Risk
Committee
independent
is an
director who is not the chair of the
Board and all of the committee’s
members are independent.
The committee must comprise of:
a minimum of 3 members of
of
directors
roles
&
Remuneration & Nomination
Committee
the
The
primary
Remuneration
Nomination
Committee are to assist the Board:
to attract and retain suitable
directors and senior executives;
to
and
ensure
fairly and
executives are
responsibly remunerated;
to evaluate the performance of
directors and executives; and
to ensure 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.
The committee must comprise of:
a minimum of 3 members of the
the Board;
Board;
only Non-Executive Directors;
independent
a majority of
only Non-Executive Directors;
of
majority
independent
directors;
directors;
an independent director who is
nominated by the Board as
Chair, who is not Chair of the
Board.
an independent director who is
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 Recommendations 2.1 and 8.1, that a majority of members should be
independent and the Chair be independent. Refer to the Audit & Risk Committee Charter and Remuneration
& Nomination Committee Charter for further information.
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
Details of the number of meetings held by the Board and its committees during FY19, and attendance by Board
members, are disclosed on page 22 of the annual report. Details of each committee member, including the
skills, experience, relevant expertise, independence and period of office, are disclosed on pages 20 and 21 of
the annual report.
CEO and CFO declaration
A decision by the Board to approve the Company's financial statements for a financial period is subject to a
declaration from the CEO and CFO 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 2019.
Diversity
Bellamy's is committed to developing a fair and inclusive work environment that embraces diversity. The
Company recognises the importance of diversity to its 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, performance
recruiting and retaining a skilled and diverse workforce;
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 workplace diversity throughout the organisation.
In FY18, the Board, together with the Remuneration & Nomination Committee, established measurable
objectives for attaining gender diversity. The Board has carried forward these objectives for FY19, as set out
below.
Board
Senior Executives**
All employees
Board measurable objective
40%
50%
50%
4 July 2018
20%
50%
62%
30 June 2019
20%
57%
67%
The measurable objectives, and Bellamy’s progress towards achieving them, is assessed annually by the
Board (on recommendation of the Remuneration & Nomination Committee).
The Board recognises the importance of diversity in the workplace and is focussed on achieving a balanced
representation of women on the Board and in senior positions over a reasonable transition period. In FY19,
the Company’s Board has one female representative with the appointment of Ms Shirley Liew in December
2017. The Company is proud to announce that in FY19 there has been an increase in overall female
representation throughout the Company* from 62% to 67% in FY19 and an increase in female senior
executives** from 50% to 57%. Further, 70% of new recruits during FY19 were women.
* data does not include employees at Camperdown Powder
** defined as KMP and other senior managers employed by Bellamy’s Group (not including Camperdown Powder)
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
Ethical and responsible behaviour
The Company has a number of practices and policies in place to instil a culture of acting lawfully, ethically and
responsibly.
Our values
The Company is committed to a high level of integrity and ethical standards across all business practices. To
ensure a high level of integrity and ethical standards, the Company has a Code of Conduct and 11 core values
(known as ‘the 11 things we think are pretty important’) (the 11 things) which outline the Company’s
expectation of employees and its representatives. The 11 things are highlighted in every office of the Company
on a large wall for all employees and visitors to see.
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’s 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.
The objective of the Code of Conduct is to:
provide a benchmark for professional behaviour throughout Bellamy’s;
make Directors and employees aware of the consequences if they breach the policy.
support Bellamy’s business reputation and corporate image within the community; and
Speak Up Policy
In 2019 the Company introduced the Bellamy’s Australia Speak Up Policy. The Policy aims to protect
employees past and present, officers, contractors, suppliers and associates in the event that they are witness
to or are the subject of potential misconduct. The Policy outlines the process for making a complaint, and
details the methods of maintaining the confidentiality of a concerned person’s complaint.
This Policy and its process complies with the recent Treasury Laws Amendment (Enhancing Whistleblower
Protections) Act 2019 (Cth).
All employees receive training upon induction, as well as annual training on this Policy as well as other policies
that relate to compliance with laws and regulation. The Policy is accessible to employees of the Company on
the Company’s intranet as well as on the Company’s website.
Anti-Bribery and Corruption Policy
In 2019 the Company introduced an Anti-Bribery and Corruption Policy that applies to all Company entities,
directors, officers, employees and business partners. The Policy uses the legal definition of bribery, and
prohibits conduct that involves improperly offering a benefit to a public official or someone in business in order
to obtain or retain business or an advantage. The Policy is accompanied with a procedure that is required to
be used by employees to ensure that anti-corruption and bribery laws are not breached.
As with the Company’s Speak Up Policy, all employees receive annual training on this Policy. The Policy is
also accessible to employees of the Company on the Company’s intranet as well as on the Company’s website.
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Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
Securities Trading Policy
The Company has a Securities Trading Policy which establishes a procedure for employees, directors and
connected persons (Relevant Persons) to purchase or deal in the Company’s securities. There are specific
trading windows whereby Relevant Persons are allowed, restricted or prohibited from dealing in the Company’s
securities depending on the relevant disclosures of the Company. If the Relevant Person applies to deal in
securities in a restricted trading window, the dealing in securities must then be approved by General Counsel
of the Company.
Under the Policy, Relevant Persons are prohibited from entering into transactions using financial products that
operate to limit the economic risk associated with 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.
All employees are trained on the Securities Trading Policy upon commencing with the Company and annually
thereafter. The Policy is accessible to staff on the Company intranet as well as on the Company’s website.
Risk management and financial reporting
Risk management and identification
The Company has employed ongoing risk management processes in order to understand and effectively
manage risk.
The Company has a Risk Committee, which is chaired by the Company’s General Counsel (Melinda Harrison)
and is comprised of all Executives. The Committee 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:
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 FY19.
The Board ensures that adequate external insurance cover is in place appropriate to the Company’s size and
risk profile.
Internal audit
During FY19, the Board considered and engaged an external advisor to assist the Company with its internal
audit function.
Previously the Board considered that, due to the Company’s size and business structure, the Company would
not benefit from an internal audit function. However, given the expansion of the Company’s operations in China,
the Board considered it worthwhile to engage an external advisor to assist with the internal audit function of its
China business. Doing so will bring a systematic, disciplined approach to evaluating the effectiveness of risk
management in the Company’s operations in China.
External auditor
The external auditor (PricewaterhouseCoopers) attended the Company’s 2018 AGM and was available to
answer questions. The Company has requested that PricewaterhouseCoopers (who remains the Company’s
external auditor) attend the Company’s 2019 AGM and be available to answer questions.
Economic, environmental and social sustainability risks
Sustainability across all risk profiles is important for the long-term growth of the Company. The Company takes
sustainability seriously and understands that sustainability is increasingly becoming important to its
stakeholders. For the Company, sustainability risk management means embracing opportunities that may be
created out of risks and managing business risks related to non-financial resources. During the financial year,
the Company has reviewed its material exposure to economic, environmental and social sustainability risks. A
detailed exploration of the Company’s exposure to material economic risks is discussed in the operating
financial review on pages 13 through 15 of this annual report.
51
Bellamy's Australia Limited
Corporate Governance Statement
30 June 2019
With respect to environmental and social sustainability risks, the Company considered the recommendations
of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).1 The Company
does not have any material exposure to environmental and social sustainability risks. As the Company does
not own or operate farms or operate directly in the agricultural industry, the Company is not materially exposed
to any physical or transitional climate-related risks.2 The Company mitigates its exposure to the physical
climate-related risks facing the agricultural industry by engaging a diverse supply chain that spans across
various countries. A diverse supply chain reduces the Company’s reliance on a particular region’s agricultural
industry.
The Company is a signatory to the Australia Packaging Covenant, an organisation that aims to reduce the
harmful impact of packaging on the environment. In addition to this, all of Bellamy’s formula packaging is 100%
recyclable.
For details on the Company’s sustainability agenda, and an in depth discussion of the Company’s position on
sustainability as well as the various projects currently directed toward elevating the Company’s sustainability,
please refer to the Company’s Sustainability Report at page 38 of this annual report.
While the Company does not have any material exposure to environmental and social sustainability risks, it is
constantly reviewing this position in line with the Company’s risk management framework.
Continuous Disclosure
The Company has 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. The Continuous Disclosure Policy assists management and directors in
understanding their obligations in relation to complying with the ASX Listing Rules.
Under the Continuous Disclosure Policy, the Company Secretary is nominated as the person with the primary
responsibility for all communications with the ASX in relation to Listing Rule matters and the Board is
responsible for managing the Company’s compliance with its continuous disclosure obligations. The Policy
also provides that the Chair of the Company, CEO, CFO and their delegates are authorised to speak on behalf
of the Company to major investors and stockbroking analysts.
All disclosures made according to the continuous disclosure guidelines are disclosed to the ASX and published
on the Investor Relations section of the Company’s website. The Board ensures its compliance with continuous
disclosure obligations by considering potential continuous disclosure issues at each Board meeting.
Communicating with shareholders
The Board has a 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
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 at the share registry’s website. Additionally, the Company has a dedicated member of its
investor team who works to provide prompt responses to shareholder inquiries.
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 shareholders.
1 The TCFD is an industry-led task force with the mission of developing voluntary, consistent climate-related financial risk disclosures for
use by companies in providing information to investors, lenders, insurers and other stakeholders. The Final Report of the TCFD is available
online at: https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf.
2 See pp. 5-6 ot the Final Report of the TCFD for a description of physical and transition climate-related risks, available online at:
https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf.
52
Auditor’s Independence Declaration
As lead auditor for the audit of Bellamy's Australia Limited for the year ended 30 June 2019, I declare
that to the best of my knowledge and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
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
27 August 2019
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.
53
Bellamy's Australia Limited
Financial statements
30 June 2019
Financial Statements
54
Bellamy's Australia Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Revenue
Cost of goods sold
Gross profit
Other income
Expenses
Distribution and other direct costs
Employee benefits expense
Marketing and innovation costs
Administrative and other costs
Earnings before interest and tax, depreciation and amortisation
(EBITDA)
Finance revenue
Finance expense
Depreciation and amortisation expense
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Note
Consolidated
2019
$'000
2018
$'000
3
266,238
(150,366)
328,704
(199,830)
115,872
128,874
4
1,007
582
(30,893)
(17,938)
(21,293)
(11,830)
(21,074)
(19,004)
(14,578)
(10,233)
34,925
64,567
1,758
(9)
(5,317)
1,157
(230)
(4,298)
31,357
61,196
(9,694)
(18,380)
21,663
42,816
5
5
6
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
103
501
604
45
392
437
Total comprehensive income for the year
22,267
43,253
Profit for the year is attributable to:
Non-controlling interest
Owners of Bellamy's Australia Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Bellamy's Australia Limited
Basic earnings per share
Diluted earnings per share
(451)
22,114
(451)
43,267
21,663
42,816
(451)
22,718
(451)
43,704
22,267
43,253
Cents
Cents
33
33
19.51
18.54
39.61
37.59
The above statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes
55
Bellamy's Australia Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Income tax
Employee benefits
Provisions
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Note
Consolidated
2019
$'000
2018
$'000
7
8
9
10
11
12
13
14
15
16
17
112,355
43,689
96,018
4,949
257,011
87,634
49,225
90,453
2,840
230,152
5,808
39,704
7,141
52,653
3,784
40,079
6,798
50,661
309,664
280,813
72,964
65
108
2,000
735
1,430
77,302
69,108
62
232
2,344
563
1,100
73,409
67
67
45
45
77,369
73,454
232,295
207,359
Equity
Issued capital
Reserves
Retained profits
Equity attributable to the owners of Bellamy's Australia Limited
Non-controlling interest
Total equity
18
19
120,870
14,687
97,210
232,767
(472)
120,870
11,414
75,096
207,380
(21)
232,295
207,359
The above statement of financial position should be read in conjunction with the accompanying notes
56
Bellamy's Australia Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits
$'000
Non-
controlling
interest
$'000
Total
equity
$'000
Balance at 1 July 2017
53,795
5,637
31,829
-
91,261
Profit/(loss) after income tax expense for
the year
Other comprehensive income for the
year, net of tax
Total comprehensive income for the year
Non-controlling interest on acquisition of
Camperdown
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction
costs (note 18)
Share-based payments (note 34)
-
-
-
-
-
43,267
(451)
42,816
437
-
-
437
437
43,267
(451)
43,253
-
-
430
430
67,075
-
-
5,340
-
-
-
-
67,075
5,340
Balance at 30 June 2018
120,870
11,414
75,096
(21)
207,359
Consolidated
Issued
capital
$'000
Reserves
$'000
Retained
profits
$'000
Non-
controlling
interest
$'000
Total
equity
$'000
Balance at 1 July 2018
120,870
11,414
75,096
(21)
207,359
Profit/(loss) after income tax expense for
the year
Other comprehensive income for the
year, net of tax
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Share-based payments (note 34)
-
-
-
-
22,114
(451)
21,663
604
-
-
604
604
22,114
(451)
22,267
-
2,669
-
-
2,669
Balance at 30 June 2019
120,870
14,687
97,210
(472)
232,295
The above statement of changes in equity should be read in conjunction with the accompanying notes
57
Bellamy's Australia Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Profit before income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Foreign exchange differences
Inventory provision movements
Bad debt provision movement
Finance income
Finance costs paid
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Decrease in income tax refund due
Increase in prepayments
Increase in trade and other payables
Decrease in derivative liabilities
Increase in employee benefits
Increase/(decrease) in other provisions
Finance income
Finance costs paid
Income taxes paid
Note
Consolidated
2019
$'000
2018
$'000
31,357
61,196
5,317
2,669
478
(3,441)
-
(1,758)
9
4,298
5,340
949
4,499
16
(861)
-
34,631
75,437
5,561
(2,124)
-
(1,993)
3,841
(21)
194
330
40,419
1,617
(9)
(10,343)
(12,275)
(1,455)
274
(697)
24,560
-
250
(900)
85,194
861
-
(17,080)
Net cash from operating activities
31,684
68,975
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Payments for property, plant and equipment
Payments for intangibles
30
11
12
-
(3,340)
(3,626)
(10,453)
(2,028)
(6,234)
Net cash used in investing activities
(6,966)
(18,715)
Cash flows from financing activities
Proceeds from issue of shares
Movements in borrowings
Repayment of borrowings
Net cash from financing activities
18
-
3
-
3
45,097
-
(25,202)
19,895
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
24,721
87,634
70,155
17,479
Cash and cash equivalents at the end of the financial year
7
112,355
87,634
The above statement of cash flows should be read in conjunction with the accompanying notes
58
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 1. General information
The financial statements cover Bellamy's Australia Limited as a Group consisting of Bellamy's Australia
Limited ('Company' or 'parent entity') and the entities it controlled at the end of, or during, the year (together
are referred to in these financial statements as the 'Group'). The financial statements are presented in
Australian dollars, which is Bellamy's Australia Limited's functional and presentation currency.
Bellamy's Australia Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place of business is:
115 Cimitiere Street
Launceston TAS 7250
A description of the nature of the Group's operations and its principal activities are included in the Directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 27 August
2019. The Directors have the power to amend and reissue the financial statements.
Note 2. Operating segments
Identification of reportable operating segments
The Group is organised into three operating segments: Australia Sales, Overseas Sales and Australia
Manufacturing. These operating segments are based on the internal reports that are reviewed and used by
the Executive and Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM'))
in assessing performance and in determining the allocation of resources. There is no aggregation of operating
segments.
The CODM reviews normalised EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) and
one-off items. The one-off item for 2019 and 2018 relates to the write-off of legacy inventory required to
transition to Country of Origin (CoOL) laws in Australia and as a result of changes in Chinese regulations.
The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the
financial statements.
The information reported to the CODM is on a monthly basis.
Types of products and services
The principal products and services of each of these operating segments are as follows:
Australia Sales
Overseas Sales
Revenues derived from sales to retailers and other resellers within Australia;
Revenue derived from sales to distributors and online customers overseas; and
Australia Manufacturing
Manufacturing of formula and other powders.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans are eliminated
on consolidation.
Major customers
In the Australia Sales segment one customer purchased $86,997,000, representing 33% of total revenue (30
June 2018: $68,949,000, 21%). No other single customers represent greater than 10% of revenue (30 June
2018: one customer in the Overseas Sales segment $82,003,000 25%).
59
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 2. Operating segments (continued)
Operating segment information
Australia Sales
Overseas Sales
Australia Manufacturing*
Segment EBITDA
Corporate costs
Normalised EBITDA
One-off write-off of legacy inventory
EBITDA
Depreciation and amortisation
Net finance income
Profit before income tax expense
Income tax expense
Profit after income tax expense
Consolidated
2019
Consolidated
2018
Revenue EBITDA
Revenue EBITDA
$'000
$'000
$'000
$'000
182,564
68,409
15,265
30,738
22,160
32
224,118
95,887
8,699
48,211
31,315
(1,408)
266,238
52,930
328,704
78,118
52,930
(6,005)
46,925
(12,000)
34,925
(5,317)
1,749
31,357
(9,694)
21,663
78,118
(7,578)
70,540
(5,973)
64,567
(4,298)
927
61,196
(18,380)
42,816
*
FY18 total Australia Manufacturing segment costs were adjusted to reflect only costs that related to
external sales of $10,107,000. The opposite side of the cost adjustment is recognised in the Australia
Sales segment.
Operating segment information
Consolidated - 2019
Assets
Segment assets
Unallocated assets:
Cash and cash equivalents
Deferred tax asset
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Borrowings
Derivative financial instruments
Current tax liabilities
Employee benefits
Total liabilities
Australia
Sales
$'000
Overseas
Sales
$'000
Australia
Manu-
facturing
$'000
Eliminations
$'000
Total
$'000
132,516
8,967
48,685
-
190,168
112,355
7,141
309,664
49,465
7,690
17,239
-
74,394
65
108
2,000
802
77,369
60
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 2. Operating segments (continued)
Consolidated - 2018
Assets
Segment assets
Unallocated assets:
Cash and cash equivalents
Deferred tax asset
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Borrowings
Derivative financial instruments
Current tax liabilities
Employee benefits
Total liabilities
Australia
Sales
$'000
Overseas
Sales
$'000
Australia
Manu-
facturing
$'000
Eliminations
$'000
Total
$'000
138,527
7,738
40,116
-
186,381
87,634
6,798
280,813
56,966
4,842
8,400
-
70,208
Note 3. Revenue from contracts with customers
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major product lines
Formula and Food
Manufacturing
Geographical regions
Australia
Overseas
Timing of revenue recognition
Goods transferred at a point in time
Disaggregation of revenue disclosures are required by AASB 15. As AASB 15 was adopted using the modified
retrospective approach, comparatives have not been provided.
61
62
232
2,344
608
73,454
Consolid-
ated
2019
$'000
250,973
15,265
266,238
197,829
68,409
266,238
266,238
Note 3. Revenue from contracts with customers (continued)
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Accounting policy for revenue
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the
Group: identifies the contract with a customer; identifies the performance obligations in the contract; and
determines the transaction price and recognises revenue when or as each performance obligation is satisfied
in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other
contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount'
method. The measurement of variable consideration is subject to a constraining principle whereby revenue
will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty
associated with the variable consideration is subsequently resolved. Amounts received that are subject to the
constraining principle are recognised as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the
goods, which is generally at the time of delivery or when the Group has satisfied its performance obligations,
including clearance at China Inspection and Quarantine ('CIQ') or customs.
Note 4. Other income
Net foreign exchange gain
Sundry income
Other income
Consolidated
2019
$'000
2018
$'000
79
928
1,007
44
538
582
62
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 5. Expenses
Profit before income tax includes the following specific expenses:
Cost of sales
Shortfall payments
Depreciation
Leasehold improvements
Plant and equipment
Total depreciation
Amortisation
Licences and customer contracts
Other intangibles
Total amortisation
Total depreciation and amortisation
Finance costs
Finance costs paid/payable
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Consolidated
2019
$'000
2018
$'000
2,900
3,289
157
1,159
1,316
85
613
698
2,880
1,121
2,900
700
4,001
3,600
5,317
4,298
9
230
924
644
2,669
4,053
63
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 6. Income tax expense
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets (note 13)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable
income:
Entertainment expenses
Share-based payments
Non-deductible expenditure
Sundry items
Current tax for prior periods
Difference in overseas tax rates
Impact of controlled foreign company rules
Income tax expense
Amounts charged/(credited) directly to equity
Deferred tax assets (note 13)
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable
to:
Tax losses - capital
Total deferred tax assets not recognised
Consolidated
2019
$'000
2018
$'000
10,074
(380)
19,634
(1,254)
9,694
18,380
(380)
(1,254)
31,357
61,196
9,407
18,359
4
758
1
(86)
10,084
208
(488)
(110)
3
(191)
90
(21)
18,240
291
(711)
560
9,694
18,380
Consolidated
2019
$'000
2018
$'000
37
(1,838)
Consolidated
2019
$'000
2018
$'000
201
201
201
201
The above potential tax benefit, which excludes tax losses for deductible temporary differences, has not been
recognised in the statement of financial position as the recovery of this benefit is uncertain.
64
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 6. Income tax expense (continued)
Accounting policy for income tax
The income tax expense for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods,
where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable
profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets
are recognised to the extent that it is probable that there are future taxable profits available to recover the
asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current
tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate
to the same taxable authority on either the same taxable entity or different taxable entities which intend to
settle simultaneously.
Bellamy's Australia Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in
the tax consolidated group continue to account for their own current and deferred tax amounts. The tax
consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate
amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the tax consolidated group. The tax funding
arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax
consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a
distribution by the subsidiaries to the head entity.
Critical accounting judgements, estimates and assumptions
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises
liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where
the final tax outcome of these matters is different from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which such determination is made.
65
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 6. Income tax expense (continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Note 7. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Consolidated
2019
$'000
2018
$'000
45,126
67,229
40,632
47,002
112,355
87,634
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Note 8. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Goods and services tax recoverable
Consolidated
2019
$'000
2018
$'000
41,514
(116)
41,398
43,856
(116)
43,740
1,737
554
4,417
1,068
43,689
49,225
Allowance for expected credit losses
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
1 to 30 days overdue
31 to 60 days overdue
61 to 120 days overdue
Over 120 days overdue*
Expected credit loss
rate
2019
%
2018
%
Carrying amount
2018
2019
$'000
$'000
Allowance for expected
credit losses
2019
$'000
2018
$'000
0.460%
-
-
-
-
0.265%
-
-
-
-
25,214
14,159
-
43
2,098
43,789
-
71
(4)
-
41,514
43,856
116
-
-
-
-
116
116
-
-
-
-
116
*
Subsequently received in July 2019 in full.
66
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 8. Current assets - trade and other receivables (continued)
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Closing balance
Consolidated
2019
$'000
2018
$'000
116
-
116
100
16
116
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method less any allowance for expected credit losses. Trade receivables are generally
due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped
based on days overdue.
Other receivables are recognised at amortised cost less any allowance for expected credit losses.
A default on a financial asset is when the counterparty fails to make contracted payments within 60 days of
when they fall due.
Financial assets are written off when there is no reasonable expectation of recovery. Where loans or
receivables have been written off, the Company continues to engage in enforcement activity to attempt to
recover the receivable due. Where recoveries are made, they are recognised in profit or loss.
Note 9. Current assets - inventories
Raw materials - at cost
Work in progress - at cost
Finished goods - at cost
Stock in transit - at cost
Less: Inventory provision
Consolidated
2019
$'000
2018
$'000
47,059
8
47,975
7,539
(6,563)
20,142
167
66,952
13,196
(10,004)
96,018
90,453
Accounting policy for inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value
on a 'weighted average' basis. Cost comprises of direct materials and delivery costs, direct labour, import
duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal
operating capacity, and where applicable, transfers from cash flow hedging reserves in equity. Costs of
purchased inventory are determined after deducting rebates and discounts received or receivable.
Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale.
67
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 9. Current assets - inventories (continued)
Critical accounting judgements, estimates and assumptions
Provision for impairment of inventories
Inventory values are stated net of provision of $6,563,000 (30 June 2018: $10,004,000). The provision for
inventory write-down resulted 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 2019 may be impacted.
Note 10. Current assets - other
Prepayments
Security deposits
Note 11. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$'000
2018
$'000
4,741
208
2,748
92
4,949
2,840
Consolidated
2019
$'000
2018
$'000
679
(351)
328
8,586
(3,106)
5,480
541
(194)
347
5,384
(1,947)
3,437
5,808
3,784
68
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 11. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2017
Additions through business combinations (note 30)
Additions - purchased
Disposals
Depreciation expense
Balance at 30 June 2018
Additions - purchased
Depreciation expense
Balance at 30 June 2019
Leasehold
improve-
ments
$'000
Plant and
equipment
$'000
Total
$'000
261
-
171
-
(85)
347
138
(157)
746
1,527
1,857
(80)
(613)
3,437
3,202
(1,159)
1,007
1,527
2,028
(80)
(698)
3,784
3,340
(1,316)
328
5,480
5,808
Accounting policy for property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Life of lease
3-10 years
The residual values, useful lives and depreciation methods are reviewed and adjusted if appropriate at each
reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss.
Note 12. Non-current assets - intangibles
Goodwill - at valuation
Production access rights - at cost
Licences and customer contracts - at cost
Less: Accumulated amortisation
Other intangibles - at cost
Less: Accumulated amortisation
69
Consolidated
2019
$'000
2018
$'000
28,239
28,239
5,500
5,500
8,800
(5,780)
3,020
5,323
(2,378)
2,945
6,800
(2,900)
3,900
3,140
(700)
2,440
39,704
40,079
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 12. Non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Production
access
rights
$'000
Licences
and
customer
contracts
$'000
Goodwill
$'000
Other
intangibles
$'000
Total
$'000
Balance at 1 July 2017
Additions through business combinations
(note 30)
Additions
Amortisation expense
Balance at 30 June 2018
Additions
Amortisation expense
-
-
-
1,740
1,740
28,239
-
-
28,239
-
-
-
5,500
-
6,800
-
(2,900)
5,500
-
-
3,900
2,000
(2,880)
-
1,400
(700)
2,440
1,626
(1,121)
35,039
6,900
(3,600)
40,079
3,626
(4,001)
Balance at 30 June 2019
28,239
5,500
3,020
2,945
39,704
Impairment testing
Goodwill and some intangibles have been allocated to the Camperdown CGU for the purpose of impairment
testing. The allocation of intangibles for Camperdown at 30 June 2019 include the following:
Camperdown
Goodwill
Intangibles - licences
Intangibles - customer contracts
2019
$'000
2018
$'000
28,239
-
1,020
28,239
1,800
2,200
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at
their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at
cost. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment.
The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds and the carrying amount of the intangible asset.
The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected
pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or
period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, 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 losses on goodwill are taken to profit
or loss and are not subsequently reversed.
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with
the accounting policy stated in note 35. The recoverable amounts of cash-generating units have been
determined based on fair value less costs to dispose calculations. These calculations require the use of
assumptions, including estimated discount rates based on the current cost of capital and growth rates of the
estimated future cash flows.
70
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 12. Non-current assets - intangibles (continued)
Impairment of non-financial assets other than goodwill
The Group assesses impairment of non-financial assets other than goodwill and other intangible assets at
each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead
to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This
involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key
estimates and assumptions.
Production access rights
Production access rights acquired under contract provides the Group 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.
Licences and customer contracts
Licences and customer contracts acquired in a business combination are amortised on a straight-line basis
over the period of their expected benefit, being their finite useful life of:
Licences - 2 years; and
Customer contracts - duration of contract.
Other intangibles consist of software, trademarks and product development costs.
Other intangibles
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 capitalised when it is probable that the project will be a success considering its
commercial and technical feasibility; the consolidated entity is able to use or sell the asset; the consolidated
entity has sufficient resources; and intent to complete the development and its costs can be measured
reliably. Capitalised software costs are amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 3 years.
Trademarks
Separately registered trademarks are amortised on the straight-line basis over 10 years.
Product research and development
Research costs are expensed in the period in which they are incurred. Project development costs are
capitalised when it is probable that the project will be successful considering its commercial and technical
feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity has sufficient
resources; and intent to complete the development and its costs can be measured reliably. Capitalised project
development costs are amortised on a straight-line basis over the period of their expected benefit, being their
finite life of 3 years.
Critical accounting judgements, estimates and assumptions
The Camperdown CGU manufacturing facility holds a GACC licence which will require renewal in December
2019. The facility also has a SAMR licence for the manufacture of third party product. The SAMR application
for the Bellamy’s Chinese-label Organic product was submitted in December 2017 and the Group is awaiting
approval.
The recoverable amount of the CGU is determined based on fair value less costs to dispose ('FVLCD'). In
evaluating the fair value, the Group has considered other recent market transactions for comparable canning
facilities with a GACC licence.
In addition to this, the Group has also prepared a fair value model based on cash flow projections over a 10
year period, 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. Cashflows in the
model relate to current manufacturing contracts and assumed future volumes of Bellamy’s Chinese-label
Organic product.
71
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 12. Non-current assets - intangibles (continued)
The fair value model assumes the following key judgements and estimates:
●
risk adjusted cash flows for estimated production volumes for Bellamy’s Chinese-label organic product,
assuming successful SAMR registration. The cash flows are based on the Group’s assessment of timing
of SAMR registration and estimated sales based on a premium price in comparison to Australian-label
production; and
●
current licences and registrations are maintained over a period of 10 years.
The Group remains confident that the application for SAMR registration for Bellamy’s Chinese-label organic
product will be successful. However, if the assessment of risk associated with the cash flows for Bellamy’s
Chinese-label product changes or the application is rejected this will trigger the requirement for the Group to
assess the carrying value of the CGU.
Note 13. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Employee benefits
Foreign exchange losses
Inventories
Other liabilities
Overseas operating losses
Share-based payments
Other assets and liabilities
Capital raising costs
Amounts recognised in equity:
Capital raising costs
Deferred tax asset
Movements:
Opening balance
Closing balance
Credited to profit or loss (note 6)
Credited/(charged) to equity (note 6)
Additions through business combinations (note 30)
Note 14. Current liabilities - trade and other payables
Trade payables
Accruals
Other payables
72
Consolidated
2019
$'000
2018
$'000
4,298
242
34
1,461
(2,402)
213
1,707
1,127
498
3,284
195
26
2,197
(3,279)
270
1,820
1,509
-
7,178
6,022
(37)
776
7,141
6,798
6,798
380
(37)
-
3,537
1,254
1,838
169
7,141
6,798
Consolidated
2019
$'000
2018
$'000
55,684
17,154
126
52,870
16,212
26
72,964
69,108
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 14. Current liabilities – trade and other payables (continued)
Refer to note 21 for further information on financial instruments.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and
are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Note 15. Current liabilities - borrowings
Credit card facility
Refer to note 21 for further information on financial instruments.
Total secured liabilities
The total secured current liabilities are as follows:
Credit card facility
Consolidated
2019
$'000
2018
$'000
65
62
Consolidated
2019
$'000
2018
$'000
65
62
Assets pledged as security
HSBC provides a working capital facility to the Group in an aggregate amount of $40,000,000, together with
a credit card facility of $350,000 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 2019,
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
2019, the facility was extended for a further 2 years.
73
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 15. Current liabilities - borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Working capital facility
Credit card facility
Bank guarantee facility
Used at the reporting date
Working capital facility
Credit card facility
Bank guarantee facility
Unused at the reporting date
Working capital facility
Credit card facility
Bank guarantee facility
Consolidated
2019
$'000
2018
$'000
40,000
350
200
40,550
40,000
250
200
40,450
-
65
-
65
-
62
-
62
40,000
285
200
40,485
40,000
188
200
40,388
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date, the loans or borrowings are classified as non-current.
Note 16. Current liabilities - derivative financial instruments
Consolidated
2019
$'000
2018
$'000
Forward foreign exchange contracts - cash flow hedges
108
232
Refer to note 21 for further information on financial instruments.
Refer to note 22 for further information on fair value measurement.
Accounting policy for derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes
in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
74
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 16. Current liabilities - derivative financial instruments (continued)
Cash flow hedges
Cash flow hedges are used to cover the Group's exposure to variability in cash flows that is attributable to
particular risks associated with a recognised asset or liability or a firm commitment which could affect profit
or loss. The effective portion of the gain or loss on the hedging instrument is recognised in other
comprehensive income through the cash flow hedges reserve in equity, whilst the ineffective portion is
recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the
measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to
ensure that each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast
transaction is no longer expected to occur, the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the
hedge becomes ineffective and is no longer a designated hedge, the amounts previously recognised in equity
remain in equity until the forecast transaction occurs.
Hedges of a net investment
Hedges of a net investment in a foreign operation include monetary items that are considered part of the net
investment. Gains or losses on the hedging instrument relating to the effective portion of the hedge are
recognised directly in equity whilst gains or losses relating to the ineffective portion are recognised in profit
or loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recognised
directly in equity is transferred to profit or loss.
Note 17. Current liabilities - provisions
Minimum annual volume provision
Consolidated
2019
$'000
2018
$'000
1,430
1,100
Minimum annual volume provision
The Group has two material manufacturing agreements that guarantee long-term access to the highest quality
production facilities in Australia. The Group 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.
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.
The Group has also entered ingredient supply contracts with minimum volume commitments which are
accounted for in the same way as manufacturing volume commitments.
75
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 17. Current liabilities - provisions (continued)
Movements in provisions
Movements in the provision during the current financial year are set out below:
Consolidated - 2019
Carrying amount at the start of the year
Additional provisions recognised
Amounts used
Carrying amount at the end of the year
Note 18. Equity - issued capital
Minimum
annual
volume
provision
$'000
1,100
2,800
(2,470)
1,430
Consolidated
2019
2018
Shares
Shares
2019
$'000
2018
$'000
Ordinary shares - fully paid
113,368,297 113,316,104
120,870
120,870
Movements in ordinary share capital
Details
Date
Shares
$'000
Balance
Issue of shares to retail investors
Issue of shares on purchase of subsidiary, Camperdown
Issue of shares on employee options exercised
Issue of shares on institutional investment offer
1 July 2017
6 July 2017
11 October 2017
99,679,345
9,738,250
3,190,042
708,467
-
53,795
46,257
21,612
366
(1,160)
Balance
Issue of shares on employee options exercised
30 June 2018
113,316,104
52,193
120,870
-
Balance
30 June 2019
113,368,297
120,870
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Share buy-back
There is no current on-market share buy-back.
76
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 19. Equity - reserves
Foreign currency translation reserve
Hedging reserve - cash flow hedges
Share-based payments reserve
Consolidated
2019
$'000
2018
$'000
74
124
14,489
(427)
21
11,820
14,687
11,414
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements
of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net
investments in foreign operations.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that
is determined to be an effective hedge.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of
their remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Foreign currency translation
Net investment hedge
Share-based payments
Balance at 30 June 2018
Foreign currency translation
Net investment hedge
Share-based payments
Foreign
currency
translation
reserve
$'000
Cash flow
hedge
reserve
$'000
Share-
based
payments
reserve
$'000
(819)
392
-
-
(427)
501
-
-
(24)
-
45
-
21
-
103
-
6,480
-
-
5,340
11,820
-
-
2,669
Total
$'000
5,637
392
45
5,340
11,414
501
103
2,669
Balance at 30 June 2019
74
124
14,489
14,687
Note 20. Equity - dividends
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
77
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 20. Equity - dividends (continued)
Franking credits
Consolidated
2019
$'000
2018
$'000
44,851,118
35,100,144
Franking credits available for subsequent financial years based on a tax rate of
30%
for:
reporting date;
and
date.
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted
●
franking credits that will arise from the payment of the amount of the provision for income tax at the
●
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
●
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting
Note 21. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The Group uses derivative financial instruments such as forward foreign exchange
contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as
trading or other speculative instruments. The Group uses different methods to measure different types of risk
to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign
exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment
portfolios to determine market risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board.
These policies include identification and analysis of the risk exposure of the Group and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's
operating units. Finance reports to the Board on a regular basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured
using sensitivity analysis and cash flow forecasting.
In order to protect against exchange rate movements, the Group has entered into forward foreign exchange
contracts. These contracts are hedging highly probable forecasted cash flows for the ensuing financial year.
Management has a risk management policy to hedge up to 100% of anticipated foreign currency transactions
for the subsequent 6 months.
78
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 21. Financial instruments (continued)
The maturity, settlement amounts and the average contractual exchange rates of the Group's outstanding
forward foreign exchange contracts at the reporting date were as follows:
Buy US dollars
Maturity:
0 - 12 months
Buy Euros
Maturity:
0 - 12 months
Buy Pound Sterling
Maturity:
0 - 3 months
Buy Chinese Yuan
Maturity:
0 - 12 months
Sell Australian dollars
2019
$'000
2018
$'000
Average exchange
rates
2019
2018
4,045
1,300
0.6962
0.7385
-
10,921
-
0.6238
911
-
0.5452
-
-
7,100
-
4.9006
Derivative financial instruments – foreign exchange forward contracts
Change in
fair value
of out-
standing
hedging
instru-
ments
since
1 July
Change in
value of
hedged
item used
to
determine
hedge
effective-
ness
$
Maturity
date
Carrying
Notional
amount amount
Hedge
ratio*
$
$
$
Weighted
average
hedged
rate for
the
year
2019
USD
GBP
2018
Jul 19 - Dec 19
Jul 19 - Sep 19
(58)
(25)
5,827
1,671
1:1
1:1
(76)
(43)
76
43
0.6943
0.5451
Change in
fair value
of out-
standing
hedging
instru-
ments
since
1 July
Change in
value of
hedged
item used
to
determine
hedge
effective-
ness
$
Maturity
date
Carrying
Notional
amount amount
Hedge
ratio*
$
$
$
Weighted
average
hedged
rate for
the
year
USD
Euros
Chinese Yuan
Aug 18
Jul 18 - Aug 18
Sep 18
1
230
1
1,760
17,454
425
1:1
1:1
1:1
(11)
(3)
(7)
11
3
7
0.7464
0.6251
4.8445
79
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 21. Financial instruments (continued)
*
The foreign exchange forward contracts are denominated in the same currency as the highly probable
future inventory purchases (e.g. EUR), therefore the hedge ratio is 1:1.
Foreign currency exposures arising on translation of net investments in foreign subsidiaries are predominantly
unhedged.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates
expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value
interest rate risk.
The Group is not exposed to any significant interest rate risk.
Credit risk
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.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due
and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities
by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial
assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Working capital facility
Credit card facility
Bank guarantee facility
Consolidated
2019
$'000
2018
$'000
40,000
285
200
40,485
40,000
188
200
40,388
80
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 21. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the financial liabilities are required to be paid. The tables include both interest and
principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from
their carrying amount in the statement of financial position.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Credit card
Total non-derivatives
Derivatives
Forward foreign exchange
contracts net settled
Total derivatives
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Credit card
Total non-derivatives
Derivatives
Forward foreign exchange
contracts net settled
Total derivatives
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5
years
$'000
-
-
-
-
55,684
126
65
55,875
108
108
-
-
-
-
-
-
-
-
-
-
-
-
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5
years
$'000
-
-
-
-
52,870
26
62
52,958
232
232
-
-
-
-
-
-
-
-
-
-
-
-
Remaining
contractual
maturities
$'000
-
-
-
-
-
-
55,684
126
65
55,875
108
108
Remaining
contractual
maturities
$'000
-
-
-
-
-
-
52,870
26
62
52,958
232
232
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
81
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 22. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement,
being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2019
Liabilities
Foreign exchange contracts
Total liabilities
Consolidated - 2018
Liabilities
Foreign exchange contracts
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
108
108
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
232
232
-
-
-
-
108
108
Total
$'000
232
232
There were no transfers between levels during the financial year.
Accounting policy for fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that
the transaction will take place either: in the principal market; or in the absence of a principal market, in the
most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the use
of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level of
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal
expertise is either not available or when the valuation is deemed to be significant. External valuers are
selected based on market knowledge and reputation. Where there is a significant change in fair value of an
asset or liability from one period to another, an analysis is undertaken, which includes a verification of the
major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.
82
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 23. Remuneration of auditors
During
PricewaterhouseCoopers, the auditor of the Company, and its network firms:
fees were paid or payable
financial year
following
the
the
Audit services - PricewaterhouseCoopers
Audit or review of the financial statements
Other services - PricewaterhouseCoopers
Other audit, tax and compliance related services
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Other tax and compliance services
for services provided by
Consolidated
2019
$
2018
$
337,000
345,000
7,140
-
344,140
345,000
73,000
70,000
1,024
7,531
74,024
77,531
Note 24. Contingent assets
As at the date of this report the Group is not aware of any reportable contingent assets.
Note 25. Contingent liabilities
Shareholder class action
On 23 February 2017 and 8 March 2017 Slater & Gordon Limited and Maurice Blackburn (respectively) each
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 continuous disclosure obligations and misleading or deceptive conduct.
The proceedings have, to date, mostly been consumed with procedural issues including the discovery
process. The Group will continue to vigorously defend the proceedings. It is too early in the process to assess
these claims to provide a reliable assessment of the quantum of any damages that may become payable if
its defence is unsuccessful in whole or in part.
Note 26. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
83
Consolidated
2019
$'000
2018
$'000
309
382
1,237
1,756
902
881
1,640
-
3,895
2,521
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 26. Commitments (continued)
Operating lease commitments includes contracted amounts for various premises under non-cancellable
operating leases expiring within 1 to 10 years with, in some cases, options to extend. The leases have various
escalation clauses. On renewal, the terms of the leases are renegotiated.
Shortfall payments
As detailed in note 17, the Group has two material manufacturing agreements that guarantee long-term
access to the highest quality production facilities in Australia, which have minimum volume commitments.
Where the Group is not able to fulfil minimum volume commitments, it is required to make production shortfall
payments.
The Group has also entered ingredient supply contracts with minimum volume commitments which are
accounted for in the same way as manufacturing volume commitments.
In FY19, an expense of $2,900,000 (FY18: $3,289,000) has been recognised in cost of goods sold as a
shortfall expense, for which there is a provision of $1,430,000 (FY18: $1,100,000) in relation to contract year
2019 of a manufacturing agreement. In FY20 if production levels drop when compared to FY19, a higher
expense may be incurred. Beyond FY20 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.
Note 27. Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the
Group is set out below:
Consolidated
2019
$
2018
$
2,926,041 3,259,227
131,977
7,101
2,530,071 2,870,148
137,710
12,203
5,606,025 6,268,453
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 28. Related party transactions
Parent entity
Bellamy's Australia Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 31.
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.
Key management personnel
Disclosures relating to key management personnel are set out in note 27 and the remuneration report
included in the Directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting
date.
84
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 28. Related party transactions (continued)
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Retained profits
Total equity
Parent
2019
$'000
2018
$'000
5,833
23,841
5,833
23,841
Parent
2019
$'000
2018
$'000
168,851
160,420
171,097
163,046
1,421
1,872
1,421
1,872
120,870
14,489
34,317
120,870
11,820
28,484
169,676
161,174
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has entered into a deed of cross guarantee with a subsidiary in relation to the debts of its
subsidiary. Further details are in note 32.
Contingent liabilities
The parent entity had a contingent liability as detailed in note 25.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30
June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 35,
except for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity.
85
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 30. Business combinations
2018
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 acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Plant and equipment
Production access rights
Deferred tax asset
Trade and other payables
Deferred tax liability
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Bellamy's Australia Limited shares issued to vendor
Non-controlling interest
Details of the net cash used for cash flow purposes are as follows:
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: shares issued by Company as part of consideration
Less: non-controlling interest
Net cash used
Fair value
$'000
47
567
454
56
1,527
6,800
2,269
(5,256)
(2,100)
(61)
4,303
28,239
32,542
10,500
21,612
430
32,542
Consolidated
2019
$'000
2018
$'000
-
-
-
-
-
32,542
(47)
(21,612)
(430)
10,453
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in
the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net
assets. All acquisition costs are expensed as incurred to profit or loss.
86
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 30. Business combinations (continued)
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms, economic conditions,
the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-
date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the
previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase
to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and measurement of the net assets acquired, the
non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held
equity interest in the acquiree.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises additional assets or liabilities during the
measurement period, based on new information obtained about the facts and circumstances that existed at
the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the
acquisition or (ii) when the acquirer receives all the information possible to determine fair value.
Critical accounting judgements, estimates and assumptions
Business combinations
As previously discussed, business combinations are initially accounted for on a provisional basis. The fair
value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the Group
taking into consideration all available information at the reporting date. Fair value adjustments on the
finalisation of the business combination accounting is retrospective, where applicable, to the period the
combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation
reported.
87
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 31. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiaries with non-controlling interests in accordance with the accounting policy described in note 35:
Name
Company
number
Principal place
of business /
Country of
incorporation
Ownership
interest
2019
%
Ownership
interest
2018
%
Parent
Non-controlling interest
Ownership
Ownership
interest
interest
2018
2019
%
%
Bellamy’s
Organic Pty Ltd
(a)
Bellamy’s
Kitchen Pty Ltd
Yum Mum Pty
Ltd (d)
Bellamy’s
Organic (South
East Asia) Pte
Ltd (a)
A.C.N. 619 661
611 Pty Ltd (b)
Camperdown
Powder Pty Ltd
(c)
Little Treasure
(Aust) Pty Ltd (e)
Camperdown
Leura Star
Brands Pty Ltd
(e)
Duri Brands Pty
Ltd
Bellamy’s
Organic (Hong
Kong) Company
Ltd (a)
Bellamy’s Food
Trading
(Shanghai) Co
Ltd (a)
125 461 903
Australia
100%
100%
*
Australia
-
100%
148 896 280
Australia
100%
100%
201205554M
Singapore
100%
100%
-
-
-
-
-
100%
-
-
619 661 611
Australia
90%
90%
10%
10%
168 982 250
Australia
100%
100%
-
-
103 217 232
Australia
50%
50%
50%
50%
610 595 803
Australia
51%
51%
49%
49%
**
Australia
-
51%
CRN 1795740
Hong Kong
100%
100%
31000040070933
5
China
100%
100%
-
-
-
49%
-
-
Bellamy’s Kitchen Pty Ltd was deregistered with ASIC on 30 January 2019
*
** Duri Brands Pty Ltd was deregistered with ASIC on 20 March 2019
Principal activities:
(a) Sale and distribution of organic food and formula products for babies and toddlers
(b) Investment vehicle
(c) Manufacturing powdered milk products
(d) Non-operating
(e) Brand and trademark ownership entity
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:
88
Reporting year end
31 December
31 December
31 March
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 31. Interests in subsidiaries (continued)
Name
Bellamy’s Organic (Hong Kong) Company Ltd
Bellamy’s Food Trading (Shanghai) Co Ltd
Bellamy’s Organic (South East Asia) Pte Ltd
Note 32. Deed of cross guarantee
debts of the others:
Bellamy’s Australia Limited
Bellamy’s Organic Pty Ltd
The following entities are party to a deed of cross guarantee under which each company guarantees the
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare
financial statements and Directors' report under Corporations Instrument 2016/785 issued by the Australian
Securities and Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, 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'.
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement
of financial position of the 'Closed Group'.
Statement of profit or loss and other comprehensive income
Earnings before interest and tax, depreciation and amortisation (EBITDA)
32,321
86,834
Revenue
Cost of goods sold
Intercompany dividend
Distribution and other direct costs
Employee benefits expense
Marketing and innovation costs
Administrative and other costs
International service fee
Finance revenue
Depreciation and amortisation expense
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
89
2019
$'000
2018
$'000
240,426
(145,434)
311,629
(196,773)
-
(24,141)
(12,888)
(5,031)
(8,649)
(11,962)
25,648
(17,757)
(14,839)
(7,396)
(8,270)
(5,408)
4,346
(1,411)
2,627
(963)
35,256
(11,438)
88,498
(19,700)
23,818
68,798
-
-
23,818
68,798
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 32. Deed of cross guarantee (continued)
Equity - retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense
Retained profits at the end of the financial year
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Loans to related entities
Other
Non-current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Deferred tax
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Income tax
Provisions
Non-current liabilities
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
90
2019
$'000
2018
$'000
72,653
23,818
3,855
68,798
96,471
72,653
2019
$'000
2018
$'000
97,122
42,124
84,067
12,700
2,845
238,858
35,518
2
1,025
10,110
2,093
48,748
82,517
48,505
82,889
7,358
2,346
223,615
33,520
2
935
7,888
4,005
46,350
287,606
269,965
52,173
65
108
1,214
2,025
55,585
67
67
61,065
63
232
1,639
1,556
64,555
46
46
55,652
64,601
231,954
205,364
120,870
14,613
96,471
120,870
11,841
72,653
231,954
205,364
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 33. Earnings per share
Profit after income tax
Non-controlling interest
Consolidated
2019
$'000
2018
$'000
21,663
451
42,816
451
Profit after income tax attributable to the owners of Bellamy's Australia Limited
22,114
43,267
Weighted average number of ordinary shares used in calculating basic earnings
per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
113,357,858
109,230,834
5,917,196
5,883,159
Number
Number
Weighted average number of ordinary shares used in calculating diluted
earnings per share
Basic earnings per share
Diluted earnings per share
119,275,054
115,113,993
Cents
Cents
19.51
18.54
39.61
37.59
The calculation does not include 300,000 ordinary shares to be issued to the vendors of Camperdown Powder
Pty Ltd when conditions subsequent have been achieved.
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Bellamy's Australia
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares
issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
Note 34. Share-based payments
Employee Option Plan
The Chief Executive Officer and other senior management held, as part of their remuneration, conditional
vesting options over 5,917,196 (2018: 5,883,159) ordinary shares of the Group comprising the:
●
●
●
●
2016 year grants made on 23 December 2015, and 30 June 2016;
2017 year grants made on 3 October 2016, and 13 June 2017;
2018 grants made on 2 October 2017 and 20 April 2018; and
2019 grants made on 28 August 2018, 24 October 2018 and 2 January 2019.
FY16 grant
The exercise price for the FY16 grant of options is $4.87 (adjusted). The options vested in full in September
2018. These options expire five years after the grant date, which should be no later than 23 December 2020.
91
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 34. Share-based payments (continued)
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.
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.
FY18 grant
The exercise price for the FY18 grant of options are as follows:
●
●
2 October 2017 grant - $7.82
20 April 2018 grant - $20.56
The options can only be exercised if specific performance hurdles are met.
FY19 grant
The exercise price for the FY19 grant of options are as follows:
●
●
●
28 August 2018 grant - $9.67
24 October 2018 grant - $11.19
2 January 2019 grant - $7.38
The options can only be exercised if specific performance hurdles are met.
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees and directors. Equity-settled
transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the
option, together with non-vesting conditions that do not determine whether the Group receives the services
that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair
value of the award, the best estimate of the number of awards that are likely to vest and the expired portion
of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount
calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to
market conditions are considered to vest irrespective of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised over the remaining vesting period for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition
is treated as a cancellation. If the condition is not within the control of the Group or employee and is not
satisfied during the vesting period, any remaining expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
92
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 34. Share-based payments (continued)
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled
award, the cancelled and new award is treated as if they were a modification.
Note 35. Other significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in
the respective notes or below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The
adoption of these Accounting Standards and Interpretations did not have any significant impact on the
financial performance or position of the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted. The Group early adopted AASB 9 'Financial Instruments' at 30 June 2017 as detailed in the 2017
Annual Report.
The following Accounting Standards and Interpretations adopted during the year are most relevant to the
Group:
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model
for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict
the transfer of promised goods or services to customers at an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The standard introduced a new
contract-based revenue recognition model with a measurement approach that is based on an allocation of
the transaction price. This is described further in the accounting policies below. Credit risk is presented
separately as an expense rather than adjusted against revenue. Contracts with customers are presented in
an entity's statement of financial position as a contract liability, a contract asset, or a receivable depending
on the relationship between the entity's performance and the customer's payment. Customer acquisition costs
and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the
contract period.
Impact of adoption
AASB 15 was adopted using the modified retrospective approach and as such comparatives have not been
restated. There was no impact of the adoption on opening retained earnings as at 1 July 2018.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001 (Cth) ('Corporations Act'), as appropriate for for-profit oriented entities. These financial
statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative
financial instruments.
Statement of cash flows
The statement of cash flows has been prepared using the indirect method allowed by AASB 107, and prior
year comparatives have been represented to ensure consistent accounting treatment.
93
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 35. Other significant accounting policies (continued)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bellamy's
Australia Limited as at 30 June 2019 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of
profit or loss and other comprehensive income, statement of financial position and statement of changes in
equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if
that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
The financial statements are presented in Australian dollars which is Bellamy's Australia Limited's functional
Foreign currency translation
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates
at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars
using the average exchange rates, which approximate the rates at the dates of the transactions, for the period.
All resulting foreign exchange differences are recognised in other comprehensive income through the foreign
currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
disposed of.
classification.
94
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 35. Other significant accounting policies (continued)
An asset is classified as current when it is either expected to be realised or intended to be sold or consumed
in the Group's normal operating cycle, it is held primarily for the purpose of trading, it is expected to be realised
within 12 months after the reporting period, or the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets
are classified as non-current.
A liability is classified as current when it is either expected to be settled in the Group's normal operating cycle,
it is held primarily for the purpose of trading, it is due to be settled within 12 months after the reporting period,
or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as
part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are
subsequently measured at either amortised cost or fair value depending on their classification. Classification
is determined based on both the business model within which such assets are held and the contractual cash
flow characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership. When there
is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the loss
allowance depends upon the Group's assessment at the end of each reporting period as to whether the
financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss
recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls
over the life of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is
recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit
or loss.
Impairment of non-financial assets
Goodwill and other 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 non-financial 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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-
in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount
rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have
independent cash flows are grouped together to form a cash-generating unit.
95
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 35. Other significant accounting policies (continued)
Interest revenue
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in
the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the tax authority.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors' Reports)
Instrument 2016/191 ('ASIC Instrument'), relating to 'rounding-off'. Amounts in this report have been rounded
off in accordance with that ASIC Instrument to the nearest thousand dollars, or in certain cases, the nearest
dollar.
Comparative information
Comparative information is reclassified where appropriate to enhance comparability and provide more
appropriate information to users.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June
2019. The Group's assessment of the impact of these new or amended Accounting Standards and
Interpretations, most relevant to the Group, are set out below.
AASB 16 Leases
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance
sheet by lessees, 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 Group has set up a project team which has reviewed all of the Group’s leasing arrangements in light of
the new lease accounting rules in AASB 16. 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 $3,895,000, see
note 26. Of these commitments, nil relates to short-term or low value leases which will both be recognised
on a straight-line basis as expense in profit or loss.
For the remaining lease commitments the Group expects to recognise on 1 July 2019, right-of-use assets of
approximately $3,390,000, lease liabilities of $3,523,000 and deferred tax assets of nil.
96
Bellamy's Australia Limited
Notes to the financial statements
30 June 2019
Note 35. Other significant accounting policies (continued)
The Group expects that net profit after tax will decrease by approximately $25,166 for 2020 as a result of
adopting the new rules. Operating EBITDA used to measure the results is expected to increase by
approximately $1,102,000 as the operating lease payments were included in EBITDA, but the amortisation
of the right-of-use assets and interest on the lease liability are excluded from this measure.
Operating cash flows will increase and financing cash flows decrease by approximately $1,054,000 as
repayment of the principal portion of the lease liabilities will be classified as cash flows from financing
activities.
The Group will apply the standard from its mandatory adoption date of 1 July 2019. The Group intends to
apply the simplified transition approach and will not restate comparative amounts for the year prior to first
adoption. Right-of-use assets for property leases will be measured on transition as if the new rules had always
been applied. All other right-of-use assets will be measured at the amount of the lease liability on adoption
(adjusted for any prepaid or accrued lease expenses).
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for
annual reporting periods beginning on or after 1 January 2020. This release impacts for-profit private sector
entities that have public accountability that are required by legislation to comply with Australian Accounting
Standards and other for-profit entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of
the framework is yet to be released which will impact for-profit private sector entities. The application of new
definition and recognition criteria as well as new guidance on measurement will result in amendments to
several accounting standards. The issue of AASB 2019-1 Amendments to Australian Accounting Standards
– References to the Conceptual Framework, also applicable from 1 January 2020, includes such
amendments. Where the Group has relied on the conceptual framework in determining its accounting policies
for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards,
the Group may need to revisit such policies.
The Group will apply the revised conceptual framework from 1 July 2020 and is yet to assess its impact.
Note 36. Events after the reporting period
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial
years.
97
Bellamy's Australia Limited
Directors' declaration
30 June 2019
In the Directors' opinion:
●
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001 (Cth) ('Corporations
Act'), the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as described in note 35 to the financial
statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as
at 30 June 2019 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended
Closed Group 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 32 to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations
Act.
On behalf of the Directors
___________________________
John Ho
Chairman
___________________________
John Murphy
Deputy Chairman
27 August 2019
Melbourne
98
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 2019 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 statement of financial position as at 30 June 2019
the statement of profit or loss and other comprehensive income for the year then ended
the statement of changes in equity for the year then ended
the statement of cash flows for the year then ended
the notes to the 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.
99
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
For the purpose of our audit
Our audit focused on where
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
Valuation of goodwill
Valuation of inventory
Accounting for shortfall
provisions
These are further described in
the Key audit matters section of
our report.
we used overall Group
materiality of $1.6 million,
which represents
approximately 5% of the
Group’s profit before tax.
We applied this threshold,
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
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
The scope of our audit
procedures included an audit
of the financial information of
the Group’s Australian Sales
operating segment, given its
financial significance to the
misstatements on the financial
Group.
report as a whole.
We also performed specific
risk- based procedures over the
operations in Singapore, China
and Camperdown.
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 thresholds.
100
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
Valuation of goodwill
Refer to note 12
At 30 June 2019, the Group held intangible assets,
including goodwill of $28.2 million.
Under Australian Accounting Standards, the Group is
required to assess indefinite life intangible assets for
impairment annually.
In FY19 the Group identified Camperdown as a cash
generating unit (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,
using both external and internal sources. The Group
considered recent external market transactions for
comparable canning facilities.
In addition, the Group considered cash flow projections
for a 10 year period. The cash flow forecasts include 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 volumes
● sales value per tin attributed to the canning
process.
We performed the following procedures amongst
others:
We assessed the allocation of assets and liabilities
for the CGUs and were satisfied they were directly
attributable to the Camperdown CGU.
We assessed external market transactions for
canning facilities within the last year and
compared the production capacity of the facilities
and the sales value for the market transactions
with the production capacity and carrying value of
the Camperdown CGU.
To evaluate the cash flows included in the fair
value model (the model) we performed the
following procedures, amongst others:
Tested the mathematical accuracy of the
calculations in the model.
-
-
-
-
-
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 production volumes and 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.
We performed a sensitivity analysis by reducing
the production volumes and sales value within a
reasonably foreseeable range.
101
Key audit matter
How our audit addressed the key audit matter
Valuation of inventory
Refer to note 9
As part of our audit procedures to assess the valuation
of inventory we performed the following procedures
amongst others;
The Group’s inventories at 30 June 2019 amounted to
$96 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, China and Singapore.
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.
In the year-end 30 June 2019, the Group rebranded
infant milk formula products due to changes to laws
governing Country of Origin Labelling in Australia and
regulation for the import of products in China. The
Group recorded a write-down of $12 million of
inventory that was produced prior to the rebranding
(legacy inventory).
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
•
•
•
•
•
•
•
Examined the Group’s report that provides a
Compared the costing of a sample of raw
materials and finished products to relevant
supplier invoices
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 production
plan or to the list of raw materials contained
in the inventory provision.
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.
Compared the value of legacy inventory
disposed of to the value of the inventory write-
down.
Compared the total value of any remaining
legacy inventory on hand to the year-end
inventory provision.
Accounting for shortfall provisions
Refer to note 17
To assess the recognition of supplier provisions we,
amongst other things:
The Group has two key contractual arrangements for
the manufacture of finished goods and a raw material
purchase arrangement. These three 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.
•
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
102
Key audit matter
How our audit addressed the key audit matter
The minimum volume commitments are based on each
Group’s internal records.
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
We considered the accounting for shortfall provisions a
key audit matter given the judgement required by the
terms.
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 2019.
•
Considered the Group’s ability under the three
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 the three
contracts to the Group’s minimum annual
volume calculation.
•
Tested the mathematical accuracy of 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 2019, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
103
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 26 to 37 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Bellamy's Australia Limited for the year ended
30 June 2019 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
Melbourne
27 August 2019
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Bellamy's Australia Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 13 August 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number
of holders
of ordinary
shares
13,154
5,649
804
559
34
20,200
970
Black Prince Private Foundation
J P Morgan Nominees Australia Pty Ltd
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
HSBC Custody Nominees (Australia) Ltd-GSCO ECA
HSBC Custody Nominees (Australia) Ltd-GSI EDA
Quality Life Pty Ltd
BNP Paribas Nominees Pty Ltd
National Nominees Ltd
BNP Paribas Noms Pty Ltd
Monex Boom Securities (HK) Ltd
CS Third Nominees Pty Ltd
Invia Custodian Pty Ltd
Bicheno Investments Pty Ltd
Victoria Kirin Pty Ltd
Woodross Nominees Pty Ltd
JBWere (NZ) Nominees Ltd
Mr Benjamin Paul Landon
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd - A/C 2
Unquoted equity securities
Options over ordinary shares issued
105
Ordinary shares
% of total
shares
Number
held
issued
13,317,106
11,371,193
9,614,156
8,287,707
8,051,135
8,021,336
6,590,810
1,742,593
1,297,807
1,278,314
1,117,634
1,017,268
585,000
490,000
374,234
320,460
274,635
269,378
205,150
200,296
11.75
10.03
8.48
7.31
7.10
7.08
5.81
1.54
1.14
1.13
0.99
0.90
0.52
0.43
0.33
0.28
0.24
0.24
0.18
0.18
74,426,212
65.66
Number
on issue of holders
Number
5,917,196
22
Bellamy's Australia Limited
Shareholder information
30 June 2019
Substantial holders
Substantial holders in the Company are set out below:
Black Prince Private Foundation
J P Morgan Nominees Australia Pty Ltd
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
HSBC Custody Nominees (Australia) Ltd-GSCO ECA
HSBC Custody Nominees (Australia) Ltd-GSI EDA
Quality Life Pty Ltd
Ordinary shares
% of total
shares
Number
held
issued
13,317,106
11,371,193
9,614,156
8,287,707
8,051,135
8,021,336
6,590,810
11.75
10.03
8.48
7.31
7.10
7.08
5.81
Voting rights
Where voting at a meeting of shareholders is by voice or show of hands, every shareholder present in person,
or by representative, has one vote. On a poll, every shareholder present in person, or by representative, has
one vote for each fully paid ordinary share in Bellamy's.
106
Bellamy's Australia Limited
Definitions
30 June 2019
Definitions
107
Bellamy's Australia Limited
Definitions
30 June 2019
Group
The Group, Company or Bellamy’s consolidated entity consisting of Bellamy’s Australia
Limited and its controlled entities
AASB
Australian Accounting Standards Board
ACCC
Australian Competition and Consumer Commission
A.C.N
Australian Company Number
AGM
Annual General Meeting
ASX
APC
B2C
BAL
C2C
Australian Securities Exchange
Australia Packaging Covenant
Business-to-Consumer
Bellamy's Australia Limited
Consumer-to-Consumer
CBEC
Cross-Border e-commerce
CNCA
Certification and Accreditation Administration of the People’s Republic of China (refer
GACC)
CEO
CFO
CIQ
Chief Executive Officer
Chief Financial Officer
China Inspection and Quarantine
CODM
Chief Operating Decision Makers
CoOL
Country-of-Origin labelling
DAWR
Department of Agriculture and Water Resources
DFSV
Dairy Food Safety Victoria
DHA
EEO
Docosahexaenoic Acid
Equal Employment Opportunity
EBITDA
Earnings Before Interest, Tax, Depreciation and Amortisation
ESG
FTE
FY19
Environmental, Social and Governance
Full Time Equivalent
Financial Year Ended 30 June 2019
FMCG
Fast-Moving Consumer Goods
FSANZ
Food Standards Australia New Zealand
FVLCD
Fair Value Less Costs to Dispose
GACC
General Administration of Customs of the People’s Republic of China (formerly CNCA)
GRI
Global Reporting Initiatives
108
Bellamy's Australia Limited
Definitions
30 June 2019
GST
IASB
KMP
KPI
Goods and Services Tax
International Accounting Standards Board
Key Management Personnel
Key Performance Indicator
LTIFR
Long-term Injury Frequency Rate
NASAA
National Association for Sustainable Agriculture Australia
OCI
OFR
O2O
Other Comprehensive Income
Operating and Financial Review
Online-to-Offline
SAMR
State Administration for Market Regulation
STI
Short-term Incentive
TCFD
Task Force on Climate-Related Financial Disclosures
TSR
LTI
Total Shareholder Return
Long-term Incentive
WHO
World Health Organisation
109