Big River Industries Limited
Annual Report 2018

Plain-text annual report

Annual Report - 30 June 2018 * John Wardle Architects Big River Industries Limited ABN 72 609 901 377 2 Big River Industries Limited Contents 30 June 2018 Chairman & managing director’s report Corporate directory Directors’ report Auditor’s independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Director’s declaration Independent auditor’s report to the members if Big River Industries Limited Shareholder information Corporate details 4 6 7 18 19 20 21 22 23 55 56 60 62 3 Big River Industries Limited Chairman & Managing Director’s report 30 June 2018 Chairman and Managing Director’s Report Operating Highlights Your Company achieved growth in the 2018 financial year, with revenue advancing 19% to $211million and EBITDA before acquisition expenses increasing 7.2% to $11million. This flowed through to a statutory Net Profit after Tax of $5.2million, reflecting growth of 31.8%, assisted by the IPO costs being accounted for in the FY2017 comparison period. The diversified business model continued to provide stability across the operating divisions. Sales growth was achieved in every State, albeit that NSW saw minimal organic growth given the historic highs of 2017. However, NSW/ACT market exposure was strengthened by an acquisition. Particularly pleasing was an improvement in Western Australia and North Queensland markets where both have been cyclically weak in recent years. Revenue growth of 17% saw profit contribution from these two areas more than triple the prior year. Stronger commercial and civil markets drove this improvement. The Building Products category continued to grow strongly, as the Company expanded its product range and achieved further market share penetration. This category is large and typically services the detached housing, medium density and the alteration & additions markets. Formwork revenues were slightly below the previous year, as the high-density residential market eased a little. The strength of the civil and commercial construction markets however helped mitigate this impact. Specialty plywood and architectural products both achieved like for like growth, which exceeded 10%, as the Company refocused manufacturing assets onto these high value, customised product areas. Big River’s manufacturing facilities were restructured during the year as manufacturing focus was moved from lower-grade commodity plywood products towards more sustainable, higher value, specialised products. This initiative results in lower manufactured plywood volume however, particularly at the Wagga Wagga facility, where most of the restructure occurred. This supply chain re-focus allowed imports of formply from China to increase 150% over the previous year and positioned the Company as a major player in this imported product category. Whilst contribution from manufacturing facilities fell 37% on the prior period during this transitioning year, these changes position the Company well to grow the profit contribution from manufactured products from FY2019. The expansion of the distribution network continued during the year, with two further acquisitions of building products distribution businesses - one in the Gold Coast, Queensland in September 2017 and the other in Canberra, ACT in December 2017. These have made positive contributions to both revenue and EBITDA since they were acquired, and provide further growth opportunities in the future as revenue synergies are achieved by adding the specialty Big River product range to these well established businesses. Acquisition opportunities continue to be assessed, in a disciplined way. A target must be considered strategically important, be compatible with Big River’s core competencies and have sound financial impacts. At present, a number are being evaluated. Operating cash flow was solid during the year, with an 80% cash conversion achieved versus the excellent 86% achieved in FY2017. Some additional investments in inventory associated with the import supply chain, as well as additional inventory from the acquired businesses, led to this slightly lower conversion ratio. Trade working capital management remains a major focus for Big River and the trade working capital to sales ratio of 16.7% achieved for the year lies soundly within the Board’s target range. The balance sheet remains strong, with gearing (measured as net debt to net debt plus equity) of only 12.5%, giving the Company headroom to continue to execute the acquisition strategy and expand the distribution network further. 4 Big River Industries Limited Chairman & Managing Director’s report 30 June 2018 Dividends Consistent with the solid trading results, the Board declared a final dividend of 3.5 cents per share, fully franked, payable on 2 October 2018. This dividend followed the interim dividend declared in February 2018, which was also 3.5 cents per share. The full year dividend of 7.0 cents per share, fully franked, represents a payout ratio of some 72%. Corporate Governance During the year the strength of the Board was increased with the appointment of Vicky Papachristos as a Director on 4 October 2017. Vicky holds engineering and MBA degrees and brings diversity through her strong marketing background. The Board’s sub-committee structure developed well in FY2018 with the Audit & Risk Committee meeting four times and the Nomination and Remuneration Committee meeting three times. Areas relevant to these committees were also discussed during Board of Directors meetings from time to time. Vicky Papachristos was appointed Chair of the Audit & Risk Committee during the year, ensuring that the Committee is chaired by an independent non-executive director. Further information on the Company’s corporate governance policies can be found on Big River’s website at bigriverindustries.com.au/Investors/?page=Corporate-Governance. People Finally, on behalf of the Board we take this opportunity to thank Big River’s management team and all team members around the country, for their dedication and hard work. We also thank our shareholders, customers and suppliers, whose continuing support underpins the ongoing success of the Company. 5 5 Big River Industries Limited Corporate directory 30 June 2018 Directors Company secretaries Registered office Share register Auditor Solicitors Gregory Ray Laurie James Bernard Bindon Martin Kaplan Malcolm Geoffrey Jackman Vicky Papachristos Stephen Thomas Parks Julian Rockett Trenayr Road Junction Hill NSW 2460 Tel: 02 6644 0900 Link Market Services Limited Level 12 680 George Street Sydney NSW 2000 Tel: 1300 554 474 Deloitte Touche Tohmatsu Grosvenor Place 225 George Street Sydney NSW 2000 Thomson Geer Level 25 1 O'Connell Street Sydney NSW 2000 Stock exchange listing Big River Industries Limited shares are listed on the Australian Securities Exchange (ASX code: BRI) Website bigrivergroup.com.au Corporate Governance Statement bigriverindustries.com.au/Investors/?page=Corporate-Governance 6 Big River Industries Limited Directors' report 30 June 2018 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Big River Industries Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2018. Directors The following persons were directors of Big River Industries Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Gregory Ray Laurie James Bernard Bindon Martin Kaplan Malcolm Geoffrey Jackman Vicky Papachristos (appointed 4 October 2017) Principal activities During the financial year the principal continuing activities of the Group consisted of the manufacture of veneer, plywood and formply, and the distribution of building supplies. Dividends Dividends paid during the financial year were as follows: A class preference dividend for the period ended 30 June 2017, paid prior to the Group listing Final dividend of 3.5 cents per fully paid ordinary share paid on 29 September 2017 Interim dividend of 3.5 cents per fully paid ordinary share paid on 4 April 2018 Consolidated 2018 $ 2017 $ - 1,840,721 1,856,538 2,423,302 - - 3,697,259 2,423,302 On 27 August 2018, the directors declared a fully franked final dividend of 3.5 cents per fully paid ordinary share to be paid on 2 October 2018. Review of operations Overall revenue for the year ended 30 June 2018 of $210.9 million was up 19.1% from $177.1 million over the previous financial year. Revenue Same stores Acquisitions (not a full 12 months in both periods) Total revenue 2018 $'000 2017 $'000 Change % 169,204 41,706 167,341 9,748 1.1% 327.8% 210,910 177,089 19.1% Net profit after tax for the year was $5.2 million, up 31.8% from $3.9 million in the previous year. The two acquisitions made towards the end of FY2017, along with two further acquisitions made during the 2018 financial year made a positive contribution. EBITDA from these acquisitions was $2.7 million. On a same-stores basis, distribution activity EBITDA was $9.3 million, a rise of 3.2% over the previous year of $9.0 million. Contribution from the manufacturing facilities was down $1.3 million on the previous year, mainly due to lower volume, increased energy costs and a delay in the timing of a number of projects. Overall group EBITDA before acquisition costs for the 2018 financial year was $11.0 million, a rise of 7.2% over the corresponding period last year of $10.2 million before acquisition and initial public offering costs. 7 Big River Industries Limited Directors' report 30 June 2018 Significant changes in the state of affairs On 24 August 2017, the Group executed a business purchase deed to acquire the business and assets of Midcoast Timbers, a business located in Burleigh West, Queensland. The purchase price was $2,710,732 which includes the acquisition of inventory and plant and equipment and was settled through the payment of $2,410,732 in cash and $300,000 in ordinary shares of Big River Industries Limited. On 3 November 2017, the Group executed a business purchase deed to acquire the business and assets of Ern Smith Timber & Hardware, a business located in Hume, Australian Capital Territory. The purchase price was $1,720,000 which includes the acquisition of inventory and plant and equipment and was settled through the payment of $1,120,000 in cash and $600,000 in ordinary shares of Big River Industries Limited. The values identified in relation to both acquisitions are final as at 30 June 2018. There were no other significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2018 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 building products market is closely linked to activity levels in the residential, commercial, civil and infrastructure construction industry (comprising both new builds and additions and alterations) in Australia. The industry is cyclical and is sensitive to a broad range of economic and other factors. The Company has a strong balance sheet and a healthy undrawn banking facility which will continue to support the Company with organic and acquisition growth opportunities. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Gregory Ray Laurie Independent Non-Executive Chairman Greg holds a Bachelor of Commerce from UNSW and has completed an Advanced Management Programme at the University of Pittsburgh. Greg is a Fellow of the Australian Institute of Company Directors. Greg has been the Non-Executive Chairman of the Company since March 2017, having formerly served as an independent non-executive director of Big River Group Pty Limited from September 2006 to February 2016. Greg was previously Finance Director of Crane Group Limited from 1989 to 2003. Independent non-executive director and Chairman of the Audit and Risk Committee of Nick Scali Limited and Shriro Holdings Limited Former directorships (last 3 years): Former non-executive director of Bradken Limited Special responsibilities: Interests in shares: Interests in options: Chairman of the Board 30,000 ordinary shares (indirectly) None 8 Big River Industries Limited Directors' report 30 June 2018 Experience and expertise: Name: Title: Qualifications: James Bernard Bindon Managing Director and Chief Executive Officer James ('Jim') holds a Bachelor of Agricultural Economics (Honours) from the University of New England and a Masters of Business Administration from the University of Queensland. Jim is a member of the Australian Institute of Company Directors. Jim joined Big River in January 2001 and has been Chief Executive Officer and Managing Director since 2005. He has been a director of Big River Group Pty Limited since July 2005 and a director of the Company since February 2016. Prior to his current role as Chief Executive Officer and Managing Director, Jim was the Chief Financial Officer and Company Secretary from 2001 to 2005. Since working for Big River, Jim has developed and led the Group's strategy to transform Big River from a manufacturing focused business to a diversified provider of timber and building products. Prior to working at Big River, Jim held the position of Business Manager of Sugar and Horticulture at Incitec, where he was responsible for segment profitability, strategy and marketing. None Other current directorships: Former directorships (last 3 years): None None Special responsibilities: 400,000 ordinary shares (indirectly) Interests in shares: 200,000 options (indirectly) Interests in options: Experience and expertise: Name: Title: Qualifications: Martin Kaplan Non-Executive Director Martin holds a Bachelor of Commerce degree from the University of Cape Town and is a Chartered Accountant (South Africa & Canada). Martin has been a Non-Executive Director of the Company since November 2015 and a director of Big River Group Pty Limited since February 2016. Martin is currently an Investment Director of Anacacia Capital Pty Ltd, the management company of the major shareholder Anacacia Partnership II, L.P.. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Interests in shares: Member of the Audit and Risk Committee Martin is an Investment Director of Anacacia Capital Pty Ltd which manages the interests of Anacacia Partnership II, L.P., a substantial shareholder of the Company. Martin does not have a relevant interest in those shares for the purposes of the Corporations Act 2001. None Interests in options: Name: Title: Qualifications: Experience and expertise: Malcolm Geoffrey Jackman Independent Non-Executive Director Malcolm has a Bachelor of Science in Pure Mathematics and a Bachelor of Commerce in Accounting from Auckland University. He is a fellow of the Australian Institute of Directors and a recipient of the Centenary of Federation Medal. Malcolm has been an independent Non-Executive Director of the Company since February 2016. Malcolm has also been a director of Big River Group Pty Limited since February 2016. Malcolm is a member of the Anacacia Capital Business Advisory Council. Malcolm is also currently the Chief Executive Officer of SAFECOM (South Australian Fire & Emergency Services Commission) where he is employed in a part-time capacity. Non-executive director of Force Fire Pty Limited (non-listed) Other current directorships: Former directorships (last 3 years): Non-executive director of Subzero Group Limited Special responsibilities: Interests in shares: Interests in options: Chairman of the Nomination and Remuneration Committee 68,493 ordinary shares (indirectly) None 9 Big River Industries Limited Directors' report 30 June 2018 Name: Title: Qualifications: Experience and expertise: Other current directorships: Vicky Papachristos Non-Executive Director Vicky holds an Engineering degree from Monash University, an MBA from the Australian Graduate School of Management and is a member of the Australian Institute of Company Directors. Vicky is an experienced non-executive director and has been involved across various operational, strategic and creative roles with organisations including Shell, Westpac, Coventry and Myer. Non-executive director and Chairman of the Risk Committee of GMHBA Limited and non-executive director of myOwn Health (GMHBA JV with AIA) Former directorships (last 3 years): Former non-executive director of Coventry Group Limited and former Chairman of Special responsibilities: Interests in shares: Interests in options: Mount Baw Baw Alpine Resort. Chairman of the Audit and Risk Committee 30,000 ordinary shares (indirectly) None '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 Secretaries Stephen Thomas Parks and Julian Rockett are co-Company Secretaries. Stephen Thomas Parks (BCom, FIPA) Steve joined Big River in July 2008 as Chief Financial Officer. Prior to working for Big River, Steve was the Chief Financial Officer and General Manager at WDS International, where he was responsible for controlling operating performance and leading finance and administration functions including forecasting, cash management, treasury, payroll, information technology, general administration and warehouse operations. Prior to this role, Steve worked as Financial Controller for a number of Australasian companies including Brazin, Strathfield Group, Sunshades Eyewear and Noel Leeming. Steve holds a Bachelor of Commerce from the University of Canterbury and is a member of the Australian Institute of Company Directors. Steve is a qualified accountant and is a Fellow of the Institute of Public Accountants. Julian Rockett (BA, LLB, GDLP) Julian is a qualified corporate lawyer and listed company secretary. His background in law has included corporate compliance, advising on initial public offerings, mergers and acquisitions, reverse take-overs and capital raising for ASX listed entities. His diverse ASX listed company experience includes supporting fintech, artificial intelligence, medical technology, logistics, equity, mining, energy, technology and commercial property companies. 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 2018, and the number of meetings attended by each director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held G Laurie J Bindon ** M Kaplan M Jackman V Papachristos * 11 11 11 11 9 11 11 11 11 9 3 2 3 3 1 3 2 3 3 1 4 4 4 4 3 4 4 4 4 3 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * ** Appointed 4 October 2017 J Bindon is not a member of the sub-committees but was invited to attend these meetings and his attendance was minuted. 10 Big River Industries Limited Directors' report 30 June 2018 Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The key management personnel of the Group are the directors of Big River Industries Limited and the following persons: ● ● ● Dean Henderson - General Manager - Marketing Stephen Parks - Chief Financial Officer (and co-Company Secretary) John Lorente - General Manager - Sales and Distribution (appointed 12 February 2018) 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 key management personnel 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 the market best practice for the delivery of reward. 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 transparency. The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The quality of the directors and executives is a major factor in the overall performance of the Group. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by: having economic profit as a core component; ● focusing on sustained growth in shareholder value and delivering constant or increasing return on assets as well as ● focusing the executive on key non-financial drivers of value; and attracting and retaining high calibre executives. ● Additionally, the reward framework should seek to enhance executives' interests by: ● ● ● rewarding capability and experience; reflecting competitive reward for contribution to growth in shareholder value; and providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. 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 Nomination and Remuneration Committee. The Nomination and Remuneration 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. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors do not receive share options or other incentives. 11 Big River Industries Limited Directors' report 30 June 2018 ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. Unless otherwise determined by a resolution of Shareholders, the maximum aggregate remuneration payable by the Company to all Non-Executive Directors of the Company for their services as Directors, including their services on a Board Committee or Sub-Committee and including superannuation is limited to $500,000 per annum (in total). Executive 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 remuneration and reward framework currently has two components: ● ● fixed base salary, including superannuation and non-monetary benefits; and short-term performance incentives. The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group. The short-term incentives ('STI') program is designed to align the targets of the business with the performance hurdles of executives. STI payments granted to executives are at the discretion of the Board and are based on the achievement of certain financial hurdles, principally relating to earnings before interest, tax, depreciation and amortisation ('EBITDA') performance, and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, cash management, customer satisfaction, safety performance, leadership contribution and product management. The Company has no long term incentive (LTI) plan in place at present. However, the Directors consider that the long-term interests of the senior executives are presently aligned with those of shareholders as these executives, including the Chief Executive Officer and the Chief Financial Officer, are, and will remain, existing shareholders and option holders either directly or through persons or entities nominated by them. Furthermore, the shares and options held by those executives or their nominees are subject to escrow arrangements. In conjunction with remuneration consultants, the Directors have agreed the implementation of an LTI plan to be proposed for the FY2019 year which will be put to the shareholders for approval at the Annual General Meeting. Consolidated entity performance and link to remuneration Remuneration for the senior executives is directly linked to the performance of the Group. A portion of their STI is dependent on defined EBITDA targets being met. The remaining portion of the STI is at the discretion of the Nomination and Remuneration Committee based on performance against personal objectives. Refer to the section 'Additional information' below for details of the earnings for the last three years. Use of remuneration consultants During the financial year ended 30 June 2018, the Group engaged Godfrey Remuneration Group Pty Limited ('GRG'), remuneration consultants, to independently prepare a report on the market competitiveness of total remuneration packages for selected senior executive roles. GRG were engaged by non-executive directors and report to the Nomination and Remuneration Committee. In addition, GRG assisted with the preparation of the long-term incentive plan which will be put to the shareholders for approval at the Annual General Meeting to be held on 24 October 2018. GRG were paid a fee of $38,000 for their assistance in these matters. Voting and comments made at the Company's 2017 Annual General Meeting ('AGM') At the 21 November 2017 AGM, 99.75% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2017. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. 12 Big River Industries Limited Directors' report 30 June 2018 Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. Short-term benefits Post- employment benefits Accrued long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- Leave Super- monetary annuation benefits $ $ $ Equity- settled $ Total $ 91,324 - 59,361 47,804 339,266 - - - - - - - - - 8,676 - 5,639 4,541 - - - - - - - - 100,000 - 65,000 52,345 - 32,230 18,178 - 389,674 257,383 251,388 117,918 1,164,444 - - 47,000 47,000 - - - - 24,451 23,882 11,202 110,621 5,101 10,730 - 34,009 286,935 - 286,000 - - 176,120 - 1,356,074 2018 Non-Executive Directors: G Laurie M Kaplan* M Jackman V Papachristos** Executive Directors: J Bindon Other Key Management Personnel: D Henderson S Parks J Lorente*** M Kaplan waived his Director's fees (including any committee fee to which he is entitled) until 31 March 2019. Remuneration is for the period from date of appointment, 4 October 2017, to 30 June 2018. * ** *** Remuneration is for the period from date of appointment, 12 February 2018, to 30 June 2018. The cash bonus included a sign-on bonus of $32,000 paid on commencement of employment. Short-term benefits Post- employment benefits Accrued long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- Leave Super- monetary annuation benefits $ $ $ Equity- settled $ Total $ 30,207 - 46,404 - - - - - - - - - 2,870 - 1,193 - - - - - - - - - 33,077 - 47,597 - 326,342 40,000 - 29,417 9,406 - 405,165 251,617 241,555 896,125 22,527 40,000 102,527 - - - 26,363 25,297 85,140 6,125 7,061 22,592 306,632 - - 313,913 - 1,106,384 2017 Non-Executive Directors: G Laurie*** M Kaplan* M Jackman J Samuel** Executive Directors: J Bindon Other Key Management Personnel: D Henderson S Parks M Kaplan waived his Director's fees (including any committee fee to which he is entitled) until 31 March 2019. * ** Remuneration is for the period from 1 July 2016 to date of resignation, 24 March 2017. *** Remuneration is for the period from date of appointment, 1 March 2017, to 30 June 2017. 13 Big River Industries Limited Directors' report 30 June 2018 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Executive Directors: J Bindon Other Key Management Personnel: D Henderson S Parks J Lorente Fixed remuneration 2018 2017 At risk - STI 2018 2017 At risk - LTI 2018 2017 100% 90% - 10% 100% 100% 91% 93% 87% n/a - - 9% 7% 13% n/a - - - - - - - n/a The proportion of the cash bonus paid/payable or forfeited is as follows: Name Executive Directors: J Bindon Other Key Management Personnel: D Henderson S Parks J Lorente Cash bonus paid/payable Cash bonus forfeited 2018 2017 2018 2017 - 32% 100% 68% - - 30% 39% 72% n/a 100% 100% 70% 61% 28% n/a Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: J Bindon Managing Director and Chief Executive Officer January 2001 No fixed term Either Jim or the Company may terminate the employment contract by giving 6 months' written notice to the other party. D Henderson General Manager – Marketing July 2005 No fixed term Either Dean or the Company may terminate the employment contract by giving 1 months' written notice to the other party. S Parks Chief Financial Officer and co-Company Secretary July 2008 No fixed term Steve may terminate his employment contract by giving 1 months' written notice to the Company and the Company may terminate the employment contract by giving 4 months' written notice to Steve. J Lorente General Manager - Sales and Distribution February 2018 No fixed term Either John or the Company may terminate the employment contract by giving 3 months' written notice to the other party. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. 14 Big River Industries Limited Directors' report 30 June 2018 Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2018. Options There were no options over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2018. There were no options over ordinary shares granted to or vested in directors and other key management personnel as part of compensation during the year ended 30 June 2018. Additional information The earnings of the Group for the three years to 30 June 2018 are summarised below: Sales revenue EBITDA EBIT Profit/(loss) after income tax 2018 $ 2017 $ 2016 $ 210,756,310 176,891,981 71,536,530 (1,085,537) 10,676,690 (1,854,145) 8,180,084 (1,949,368) 5,176,270 8,144,377 6,175,247 3,927,681 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at Received as part of the start of the year remuneration Additions Disposals/ other Balance at the end of the year Ordinary shares G Laurie M Jackman V Papachristos J Bindon D Henderson S Parks J Lorente 30,000 68,493 - 400,000 250,000 220,000 - 968,493 - - - - - - - - - - 30,000 - - - 8,017 38,017 - - - - - - - - 30,000 68,493 30,000 400,000 250,000 220,000 8,017 1,006,510 Option holding The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Options over ordinary shares J Bindon D Henderson S Parks Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 200,000 125,000 100,000 425,000 - - - - - - - - - - - - 200,000 125,000 100,000 425,000 15 Big River Industries Limited Directors' report 30 June 2018 Options over ordinary shares J Bindon D Henderson S Parks Vested and Vested and exercisable unexercisable Balance at the end of the year 200,000 125,000 100,000 425,000 - - - - 200,000 125,000 100,000 425,000 This concludes the remuneration report, which has been audited. Shares under option Unissued ordinary shares of Big River Industries Limited under option at the date of this report are as follows: Grant date 19 February 2016 13 February 2017 Expiry date 19 February 2021 13 February 2022 Exercise price Number under option $2.00 $2.20 1,370,000 45,455 1,415,455 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 There were no ordinary shares of Big River Industries Limited issued on the exercise of options during the year ended 30 June 2018 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. 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 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. 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 25 to the financial statements. 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 2001. 16 Big River Industries Limited Directors' report 30 June 2018 The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 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 advocate for the Company or jointly sharing economic risks and rewards. ● Officers of the Company who are former partners of Deloitte Touche Tohmatsu There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Auditor Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Gregory Laurie Chairman 27 August 2018 Sydney ___________________________ James Bindon Managing Director 17 18 Big River Industries Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2018 Revenue Other income Expenses Raw materials and consumables used Selling and distribution expense Employee benefits expense Occupancy expense General and administration expense Acquisition costs Depreciation and amortisation expense IPO transaction costs Finance costs Profit before income tax expense Consolidated Note 2018 $ 2017 $ 5 6 7 7 210,910,160 177,089,181 62,075 57,451 (151,046,253) (121,574,190) (7,155,079) (25,957,380) (6,941,724) (5,276,761) (192,440) (1,969,130) (1,904,681) (923,545) (6,862,377) (28,214,355) (8,226,698) (5,642,004) (303,858) (2,496,606) - (791,761) 7,388,323 5,251,702 Income tax expense 8 (2,212,053) (1,324,021) Profit after income tax expense for the year attributable to the owners of Big River Industries Limited 21 5,176,270 3,927,681 Other comprehensive income for the year, net of tax - - Total comprehensive income for the year attributable to the owners of Big River Industries Limited Basic earnings per share Diluted earnings per share 5,176,270 3,927,681 Cents Cents 35 35 9.79 9.79 13.77 13.77 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 19 Big River Industries Limited Statement of financial position As at 30 June 2018 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 Income tax Provisions Total current liabilities Non-current liabilities Borrowings Deferred tax Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Total equity Consolidated Note 2018 $ 2017 $ 9 10 11 12 1,971,251 3,551,708 39,080,600 36,845,446 29,374,599 24,441,759 905,224 71,357,453 65,744,137 931,003 13 14 8 25,270,255 24,563,327 7,420,632 2,333,461 36,761,313 34,317,420 9,183,189 2,307,869 108,118,766 100,061,557 15 16 8 17 34,188,549 30,926,342 1,330,804 1,186,213 2,933,597 41,193,989 36,376,956 2,986,719 726,187 3,292,534 18 8 19 7,441,472 264,000 322,825 8,028,297 6,239,245 422,400 498,357 7,160,002 49,222,286 43,536,958 58,896,480 56,524,599 20 21 59,522,743 58,629,873 (2,105,274) (626,263) 58,896,480 56,524,599 The above statement of financial position should be read in conjunction with the accompanying notes 20 Big River Industries Limited Statement of changes in equity For the year ended 30 June 2018 Consolidated Balance at 1 July 2016 Profit 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: Contributions of equity, net of transaction costs (note 20) Dividends paid (note 22) Issued capital $ Accumulated losses $ Total equity $ 38,460,001 (3,609,653) 34,850,348 - - - 3,927,681 - 3,927,681 - 3,927,681 3,927,681 20,169,872 - (2,423,302) - 20,169,872 (2,423,302) Balance at 30 June 2017 58,629,873 (2,105,274) 56,524,599 Consolidated Balance at 1 July 2017 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Issued capital $ Accumulated losses $ Total equity $ 58,629,873 (2,105,274) 56,524,599 - - - 5,176,270 - 5,176,270 - 5,176,270 5,176,270 Transactions with owners in their capacity as owners: Issue of ordinary shares as consideration for business combinations, net of transaction costs (note 20) Dividends paid (note 22) 892,870 - - (3,697,259) 892,870 (3,697,259) Balance at 30 June 2018 59,522,743 (626,263) 58,896,480 The above statement of changes in equity should be read in conjunction with the accompanying notes 21 Big River Industries Limited Statement of cash flows For the year ended 30 June 2018 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Other revenue Interest and other finance costs paid Income taxes paid Consolidated Note 2018 $ 2017 $ 229,596,787 189,775,476 (221,193,291) (182,955,997) 8,403,496 153,850 (791,761) (2,804,887) 6,819,479 197,200 (923,545) (1,351,701) Net cash from operating activities 33 4,960,698 4,741,433 Cash flows from investing activities Payment for purchase of businesses, net of cash acquired Final payments for prior period's business acquisition Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Proceeds from borrowings Repayment of borrowings Net lease repayments Dividends paid Net cash from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 30 13 (3,530,732) (200,000) (2,058,001) 93,825 (5,084,192) - (1,339,718) 132,727 (5,694,908) (6,291,183) 20 20 22 (7,130) 3,400,000 (500,000) (41,858) (3,697,259) - 17,100,001 (614,470) 5,020,000 (12,000,000) (418,487) (2,423,302) (846,247) 6,663,742 (1,580,457) 3,551,708 5,113,992 (1,562,284) Cash and cash equivalents at the end of the financial year 9 1,971,251 3,551,708 The above statement of cash flows should be read in conjunction with the accompanying notes 22 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 1. General information The financial statements cover Big River Industries Limited as a Group consisting of Big River Industries Limited ('Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ('Group'). The financial statements are presented in Australian dollars, which is Big River Industries Limited's functional and presentation currency. Big River Industries Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Trenayr Road Junction Hill NSW 2460 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 2018. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out 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. 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, 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, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 29. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Big River Industries Limited as at 30 June 2018 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. 23 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) 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. 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. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Sale of goods Sale of goods revenue is recognised when the goods are delivered, at which time the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net of sales returns. Interest 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. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit 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. 24 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) 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. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. 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. 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. 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 provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. 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. Costs of purchased inventory are determined after deducting 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. Property, plant and equipment Property, 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. The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overhead. 25 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings Plant and equipment 25 to 40 years 5 to 25 years Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter. 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. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability. Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. 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. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. 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. Customer relationships Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life of up to 5 years. 26 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) 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. 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. 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. 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. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high-quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. 27 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) 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. 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. 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. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Company. 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. 28 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (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 acquirer. 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. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Big River Industries 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. 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. 29 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) 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 2018. 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 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities at fair value, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The Group will adopt this standard from 1 July 2018 but the impact of its adoption is not expected to have any material impact on the amounts recognised in the Group's financial statements. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand- alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be 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. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will adopt this standard from 1 July 2018 but the impact of its adoption is not expected to have any material impact on the amounts recognised in the Group's financial statements. 30 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The Group will adopt this standard from 1 July 2019. Whilst the directors are yet to finalise the assessment of the impact of AASB 16, it is noted that operating leases will be capitalised on the balance sheet by recognising a 'right-of-use' asset and a lease liability for the present value of the obligation and the rental expense will be replaced with depreciation of the right- of-use asset and interest on the lease liability. IASB revised Conceptual Framework for Financial Reporting The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards 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 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtor's financial position. Goodwill The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash- generating units have been determined based on value-in-use 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. 31 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 3. Critical accounting judgements, estimates and assumptions (continued) Impairment of non-financial assets other than goodwill The Group assesses impairment of non-financial assets other than goodwill 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. Note 4. Operating segments Identification of reportable operating segments The Group is organised into one operating segment as the Group operated predominantly in Australia and in one industry being the supply of building products. This assessment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. Accordingly the information provided in this Annual Report reflects the one operating segment. Note 5. Revenue Sales revenue Sale of goods Other revenue Other revenue Revenue Note 6. Other income Consolidated 2018 $ 2017 $ 210,756,310 176,891,981 153,850 197,200 210,910,160 177,089,181 Consolidated 2018 $ 2017 $ Net gain on disposal of property, plant and equipment 62,075 57,451 32 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 7. Expenses Profit before income tax includes the following specific expenses: Cost of sales Cost of sales Depreciation Buildings Plant and equipment Total depreciation Amortisation Customer relationships Total depreciation and amortisation Finance costs Interest and finance charges paid/payable Rental expense relating to operating leases Minimum lease payments Superannuation expense Defined contribution superannuation expense Expenses associated with business combinations Transaction costs Consolidated 2018 $ 2017 $ 151,046,253 121,574,190 171,544 1,797,062 179,044 1,614,086 1,968,606 1,793,130 528,000 176,000 2,496,606 1,969,130 791,761 923,545 2,940,619 2,083,376 1,761,026 1,576,758 303,858 192,439 33 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 8. Income tax Income tax expense Current tax Deferred tax - origination and reversal of temporary differences Adjustment recognised for prior periods Aggregate income tax expense Deferred tax included in income tax expense comprises: Decrease/(increase) in deferred tax assets Decrease in deferred tax liabilities Deferred tax - origination and reversal of temporary differences 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: Non-allowable items Research and development Sundry items Overprovision from prior period Income tax expense Amounts credited directly to equity Deferred tax assets Consolidated 2018 $ 2017 $ 2,362,222 (132,808) (17,361) 2,256,754 (784,679) (148,054) 2,212,053 1,324,021 25,592 (158,400) (731,879) (52,800) (132,808) (784,679) 7,388,323 5,251,702 2,216,497 1,575,511 12,917 - - 7,602 (90,482) 30,946 2,229,414 (17,361) 1,523,577 (199,556) 2,212,053 1,324,021 Consolidated 2018 $ 2017 $ - (184,341) 34 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 8. Income tax (continued) Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Impairment of receivables Property, plant and equipment Employee benefits IPO capitalised expenses Lease provisions Other provisions and accruals Deferred tax asset Movements: Opening balance Credited/(charged) to profit or loss Credited to equity Additions through business combinations (note 30) Closing balance Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Customer relationships Deferred tax liability Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months Movements: Opening balance Credited to profit or loss Additions through business combinations (note 30) Closing balance Provision for income tax Provision for income tax 35 Consolidated 2018 $ 2017 $ 397,666 67,331 1,039,570 437,375 104,265 261,662 349,901 66,941 939,562 583,166 148,799 245,092 2,307,869 2,333,461 2,333,461 (25,592) - - 1,386,295 731,879 184,341 30,946 2,307,869 2,333,461 Consolidated 2018 $ 2017 $ 264,000 422,400 264,000 422,400 158,400 105,600 158,400 264,000 264,000 422,400 422,400 (158,400) - - (52,800) 475,200 264,000 422,400 Consolidated 2018 $ 2017 $ 726,187 1,186,213 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 9. Current assets - cash and cash equivalents Cash on hand Cash at bank Note 10. Current assets - trade and other receivables Trade receivables Less: Provision for impairment of receivables Other receivables Impairment of receivables The ageing of the impaired receivables provided for above are as follows: 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Movements in the provision for impairment of receivables are as follows: Opening balance Additional provisions recognised Receivables written off during the year as uncollectable Closing balance Consolidated 2018 $ 2017 $ 133,276 1,837,975 11,226 3,540,482 1,971,251 3,551,708 Consolidated 2018 $ 2017 $ 38,627,107 36,077,732 (1,166,338) 37,301,553 34,911,394 (1,325,554) 1,779,047 1,934,052 39,080,600 36,845,446 Consolidated 2018 $ 2017 $ 110,216 231,202 984,136 277,225 368,748 520,365 1,325,554 1,166,338 Consolidated 2018 $ 2017 $ 1,166,338 607,302 (448,086) 608,728 732,132 (174,522) 1,325,554 1,166,338 Past due but not impaired Customers with balances past due but without provision for impairment of receivables amount to $18,618,388 as at 30 June 2018 ($15,092,726 as at 30 June 2017). The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on recent collection practices. 36 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 10. Current assets - trade and other receivables (continued) The ageing of the past due but not impaired receivables are as follows: 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Note 11. Current assets - inventories Raw materials and work in progress - at cost Finished goods - at cost Note 12. Current assets - other Prepayments Deferred expenses Other deposits Note 13. Non-current assets - property, plant and equipment Freehold land - at cost Buildings - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation 37 Consolidated 2018 $ 2017 $ 15,692,563 12,012,160 1,323,958 1,756,608 973,174 1,952,651 18,618,388 15,092,726 Consolidated 2018 $ 2017 $ 3,080,195 2,744,897 26,294,404 21,696,862 29,374,599 24,441,759 Consolidated 2018 $ 2017 $ 408,471 386,388 136,144 518,115 250,965 136,144 931,003 905,224 Consolidated 2018 $ 2017 $ 855,701 855,701 6,025,131 (434,591) 5,590,540 5,832,741 (263,047) 5,569,694 21,726,030 19,458,023 (1,320,091) 18,824,014 18,137,932 (2,902,016) 25,270,255 24,563,327 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 13. 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 2016 Additions Additions through business combinations (note 30) Disposals Depreciation expense Balance at 30 June 2017 Additions Additions through business combinations (note 30) Disposals Depreciation expense Freehold land $ Buildings Plant and equipment $ $ Total $ 855,701 - - - - 855,701 - - - - 5,547,699 18,457,107 24,860,507 1,339,718 1,138,679 231,508 231,508 (75,276) (75,276) (1,793,130) (1,614,086) 201,039 - - (179,044) 5,569,694 18,137,932 24,563,327 2,058,001 1,865,611 649,283 649,283 (31,750) (31,750) (1,968,606) (1,797,062) 192,390 - - (171,544) Balance at 30 June 2018 855,701 5,590,540 18,824,014 25,270,255 Property, plant and equipment secured under finance leases Refer to note 27 for further information on property, plant and equipment secured under finance leases. Note 14. Non-current assets - intangibles Goodwill - at cost Customer relationships - at cost Less: Accumulated amortisation Consolidated 2018 $ 2017 $ 8,303,189 6,012,632 1,584,000 (704,000) 880,000 1,584,000 (176,000) 1,408,000 9,183,189 7,420,632 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 2016 Additions through business combinations (note 30) Amortisation expense Balance at 30 June 2017 Additions through business combinations (note 30) Amortisation expense Balance at 30 June 2018 38 Goodwill $ Customer relationships $ Total $ 942,699 5,069,933 - - 1,584,000 (176,000) 942,699 6,653,933 (176,000) 6,012,632 2,290,557 - 1,408,000 - (528,000) 7,420,632 2,290,557 (528,000) 8,303,189 880,000 9,183,189 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 14. Non-current assets - intangibles (continued) Impairment testing Goodwill is allocated to the Group’s one operating segment (refer Note 4). The recoverable amount is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Key assumptions used for value-in-use calculations: Growth rate Discount rate 2018 % 2017 % 3.0% 10.5% 3.0% 11.0% The weighted average growth rates used are consistent with forecasts included in industry reports. In addition, management have used gross margins based on past performance and its expectations for the future. Management has considered possible changes in the key assumptions used in the value-in-use calculations and has not identified any reasonably possible change that would cause a material impact in the carrying amount of the Group’s cash generating unit. Note 15. Current liabilities - trade and other payables Trade payables Goods and services tax payable Other payables and accrued expenses Refer to note 23 for further information on financial instruments. Note 16. Current liabilities - borrowings Bank bills Lease liability Consolidated 2018 $ 2017 $ 29,939,728 27,133,222 584,786 3,208,334 577,006 3,671,815 34,188,549 30,926,342 Consolidated 2018 $ 2017 $ 2,000,000 986,719 500,000 830,804 2,986,719 1,330,804 Refer to note 18 for further information on assets pledged as security and financing arrangements. Refer to note 23 for further information on financial instruments. 39 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 17. Current liabilities - provisions Annual leave Long service leave Onerous lease Consolidated 2018 $ 2017 $ 1,412,297 1,597,824 282,413 1,233,933 1,442,976 256,688 3,292,534 2,933,597 Onerous lease The provision represents the present value of the estimated costs, net of any sub-lease revenue, that will be incurred until the end of the lease terms where the obligation is expected to exceed the economic benefit to be received. Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: Consolidated - 2018 Carrying amount at the start of the year Amounts transferred from non-current Amounts used Carrying amount at the end of the year Note 18. Non-current liabilities - borrowings Bank bills Lease liability Refer to note 23 for further information on financial instruments. Total secured liabilities The total secured liabilities (current and non-current) are as follows: Bank bills Lease liability Onerous lease $ 256,688 174,172 (148,447) 282,413 Consolidated 2018 $ 2017 $ 5,920,000 1,521,472 4,520,000 1,719,245 7,441,472 6,239,245 Consolidated 2018 $ 2017 $ 7,920,000 2,508,191 5,020,000 2,550,049 10,428,191 7,570,049 Assets pledged as security The bank bills are secured by first mortgages over the Group's assets. The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial position, revert to the lessor in the event of default. 40 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 18. Non-current liabilities - borrowings (continued) Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Consolidated 2018 $ 2017 $ Total facilities Bank overdraft and trade finance Bank bills Asset finance Used at the reporting date Bank overdraft and trade finance Bank bills Asset finance Unused at the reporting date Bank overdraft and trade finance Bank bills Asset finance Note 19. Non-current liabilities - provisions Long service leave Onerous lease 6,200,000 6,200,000 22,500,000 23,000,000 4,000,000 32,700,000 33,200,000 4,000,000 - 7,920,000 2,508,191 10,428,191 - 5,020,000 2,550,049 7,570,049 6,200,000 6,200,000 14,580,000 17,980,000 1,449,951 22,271,809 25,629,951 1,491,809 Consolidated 2018 $ 2017 $ 257,689 65,136 259,049 239,308 322,825 498,357 Onerous lease The provision represents the present value of the estimated costs, net of any sub-lease revenue, that will be incurred until the end of the lease terms where the obligation is expected to exceed the economic benefit to be received. Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: Consolidated - 2018 Carrying amount at the start of the year Amounts transferred to current Carrying amount at the end of the year Onerous lease $ 239,308 (174,172) 65,136 41 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 20. Equity - issued capital Consolidated 2018 Shares 2017 Shares 2018 $ 2017 $ Ordinary shares - fully paid 53,043,949 52,592,007 59,522,743 58,629,873 Movements in ordinary share capital Details Date Shares Issue price $ Balance Issue of shares Conversion of preference shares to ordinary shares on Initial Public Offering 1:1 Issue of shares as purchase consideration for Adelaide Timber and Building Supplies Share capital raised Transaction costs arising on share issue, net of tax Balance Issue of shares as purchase consideration for Midcoast Timbers Issue of shares as purchase consideration for Ern Smith Timber & Hardware Transaction costs arising on share issue, net of tax 1 July 2016 13 February 2017 1,370,001 45,455 $1.10 1,370,001 50,000 24 April 2017 37,135,455 37,140,000 24 April 2017 24 April 2017 2,397,260 11,643,836 $1.46 3,500,000 $1.46 17,000,001 (430,129) 30 June 2017 52,592,007 58,629,873 5 September 2017 153,059 $1.96 300,000 4 December 2017 298,883 $2.01 600,000 (7,130) Balance 30 June 2018 53,043,949 59,522,743 Movements in A class preference shares Details Date Shares Issue price $ Balance Issue of shares Conversion of shares on Initial Public Offering 1 July 2016 13 February 2017 24 April 2017 37,090,000 45,455 (37,135,455) $1.10 37,090,000 50,000 (37,140,000) Balance Balance 30 June 2017 30 June 2018 - - - - 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. A class preference shares The Company's preference shares were converted into ordinary shares on a 1:1 basis on 24 April 2017. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. 42 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 20. Equity - issued capital (continued) Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment. The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2017 Annual Report. Note 21. Equity - accumulated losses Accumulated losses at the beginning of the financial year Profit after income tax expense for the year Dividends paid (note 22) Accumulated losses at the end of the financial year Note 22. Equity - dividends Dividends Dividends paid during the financial year were as follows: A class preference dividend for the period ended 30 June 2017, paid prior to the Group listing Final dividend of 3.5 cents per fully paid ordinary share paid on 29 September 2017 Interim dividend of 3.5 cents per fully paid ordinary share paid on 4 April 2018 Consolidated 2018 $ 2017 $ (2,105,274) 5,176,270 (3,697,259) (3,609,653) 3,927,681 (2,423,302) (626,263) (2,105,274) Consolidated 2018 $ 2017 $ - 1,840,721 1,856,538 2,423,302 - - 3,697,259 2,423,302 On 27 August 2018, the directors declared a fully franked final dividend of 3.5 cents per fully paid ordinary share to be paid on 2 October 2018. Franking credits Franking credits available at the reporting date based on a tax rate of 30% Franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date based on a tax rate of 30% 19,507,313 18,286,966 726,187 1,186,213 Franking credits available for subsequent financial years based on a tax rate of 30% 20,233,500 19,473,179 Consolidated 2018 $ 2017 $ 43 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 23. 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 which are not significant. 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 of Directors ('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 monthly basis. Market risk Foreign currency risk The Group is not exposed to any significant foreign currency risk. 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 policy is to regularly monitor interest rates and utilise fixed rates for a portion of long-term borrowings when deemed appropriate by the Board. As at the reporting date, the Group had the following variable rate borrowings outstanding: Consolidated Bank bills 2018 2017 Weighted average interest rate % Weighted average interest rate % Balance $ Balance $ 4.92% 7,920,000 4.67% 5,020,000 Net exposure to cash flow interest rate risk 7,920,000 5,020,000 An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below. For the Group the bank bills outstanding, totalling $7,920,000 (2017: $5,020,000), are principal and interest payment loans. Monthly cash outlays of approximately $32,472 (2017: $19,536) per month are required to service the interest payments. An official increase/decrease in interest rates of 100 (2017: 100) basis points would have an adverse/favourable effect on profit before tax of the following: Consolidated - 2018 Basis points change profit before tax Effect on equity Basis points change profit before tax Effect on equity Basis points increase Effect on Basis points decrease Effect on Bank bills (100) (79,200) (55,440) 100 79,200 55,440 44 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 23. Financial instruments (continued) Consolidated - 2017 Basis points change profit before tax Effect on equity Basis points change profit before tax Effect on equity Basis points increase Effect on Basis points decrease Effect on Bank bills (100) (50,200) (35,140) 100 50,200 35,140 The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. In addition, minimum principal repayments of $2,000,000 (2017: $500,000) are due during the year ending 30 June 2019 (2017: 30 June 2018). Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. The Group has no significant credit risk to any individual customer. 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: Consolidated 2018 $ 2017 $ Bank overdraft and trade finance Bank bills Asset finance 6,200,000 6,200,000 14,580,000 17,980,000 1,449,951 22,271,809 25,629,951 1,491,809 The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. 45 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 23. 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 - 2018 Non-derivatives Non-interest bearing Trade payables Other payables Interest-bearing - variable Bank bills Interest-bearing - fixed rate Lease liability Total non-derivatives Consolidated - 2017 Non-derivatives Non-interest bearing Trade payables Other payables Interest-bearing - variable Bank bills Interest-bearing - fixed rate Lease liability Total non-derivatives Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ - - 29,939,728 2,510,069 - - - - - 29,939,728 2,510,069 - 4.92% 2,000,000 2,000,000 3,920,000 - 7,920,000 5.25% 1,107,566 35,557,363 822,444 2,822,444 785,749 4,705,749 - 2,715,759 - 43,085,556 Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ - - 27,133,322 1,762,072 - - - - - 27,133,322 1,762,072 - 4.67% 500,000 2,000,000 2,731,084 - 5,231,084 5.02% 941,808 30,337,202 940,005 2,940,005 873,692 3,604,776 - 2,755,505 - 36,881,983 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Note 24. 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: Short-term employee benefits Post-employment benefits Long-term benefits 46 Consolidated 2018 $ 2017 $ 1,211,444 110,621 34,009 998,652 85,140 22,592 1,356,074 1,106,384 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 25. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of the Company: Audit services - Deloitte Touche Tohmatsu Audit or review of the financial statements Other services - Deloitte Touche Tohmatsu Due diligence Taxation Consolidated 2018 $ 2017 $ 174,027 183,253 - 38,352 392,294 40,585 38,352 432,879 212,379 616,132 Note 26. Contingent liabilities The Group has given bank guarantees as at 30 June 2018 of $742,975 (2017: $629,262) to various landlords. Note 27. Commitments 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 Lease commitments - finance Committed at the reporting date and recognised as liabilities, payable: Within one year One to five years Total commitment Less: Future finance charges Net commitment recognised as liabilities Representing: Lease liability - current (note 16) Lease liability - non-current (note 18) Consolidated 2018 $ 2017 $ 3,344,346 6,389,206 276,323 2,230,739 4,300,494 383,333 10,009,875 6,914,566 1,107,566 1,608,193 941,808 1,813,697 2,715,759 (207,568) 2,755,505 (205,456) 2,508,191 2,550,049 986,719 1,521,472 830,804 1,719,245 2,508,191 2,550,049 Operating lease commitments includes contracted amounts for various distribution outlets 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. 47 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 27. Commitments (continued) Finance lease commitments includes contracted amounts for various plant and equipment under finance leases expiring within 5 years. Under the terms of the leases, the Group has the option to acquire the leased assets for predetermined residual values on the expiry of the leases. Note 28. Related party transactions Parent entity Big River Industries Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 31. Key management personnel Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the directors' report. Transactions with related parties There were no transactions with related parties during this financial year. During 2017, the Company paid a management fee to Anacacia Capital Pty Ltd, a director related entity and substantial shareholder of $480,000 for the provision of ongoing services and assistance, and a fee of $960,000 for the provision of support services to Big River Industries Limited to assist the Company with its Initial Public Offering and listing on the ASX. During 2017, M Jackman, a director, was paid a fee of $25,000 for management consultancy services provided in conjunction with the acquisition of Adelaide Timber and Building Supplies. 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. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 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 Other comprehensive income for the year, net of tax Total comprehensive income Parent 2018 $ 2017 $ 3,697,259 1,090,021 - - 3,697,259 1,090,021 48 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 29. Parent entity information (continued) Statement of financial position Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Total equity Parent 2018 $ 2017 $ 23,212,913 19,274,252 41,412,541 41,558,332 64,625,454 60,832,584 2,000,000 500,000 5,920,000 4,520,000 7,920,000 5,020,000 56,705,454 55,812,584 59,522,743 58,629,873 (2,817,289) (2,817,289) 56,705,454 55,812,584 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity is a party to a deed of cross guarantee (refer Note 32) under which it guarantees the debts of its subsidiaries as at 30 June 2018 and 30 June 2017. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Note 30. Business combinations 2018 Midcoast Timbers On 24 August 2017, the Group executed a business purchase deed to acquire the business and assets of Midcoast Timbers, a business located in Burleigh West, Queensland. The purchase price was $2,710,732 which includes the acquisition of inventory and plant and equipment and was settled through the payment of $2,410,732 in cash and $300,000 in ordinary shares of Big River Industries Limited. Ern Smith Timber & Hardware On 3 November 2017, the Group executed a business purchase deed to acquire the business and assets of Ern Smith Timber & Hardware, a business located in Hume, Australian Capital Territory. The purchase price was $1,720,000 which includes the acquisition of inventory and plant and equipment and was settled through the payment of $1,120,000 in cash and $600,000 in ordinary shares of Big River Industries Limited. The values identified in relation to the acquisitions are final as at 30 June 2018. 49 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 30. Business combinations (continued) Details of the acquisitions are as follows: Inventories Plant and equipment Employee benefits Net assets acquired Goodwill Midcoast Timbers Fair value Ern Smith Timber & Hardware Fair value Total Fair value $ $ $ 506,075 143,383 (24,715) 1,037,936 505,900 (28,404) 1,544,011 649,283 (53,119) 624,743 2,085,989 1,515,432 204,568 2,140,175 2,290,557 Acquisition-date fair value of the total consideration transferred 2,710,732 1,720,000 4,430,732 Representing: Cash paid or payable to vendor Big River Industries Limited shares issued to vendor 2,410,732 300,000 1,120,000 600,000 3,530,732 900,000 2,710,732 1,720,000 4,430,732 Acquisition costs expensed to profit or loss 195,100 108,758 303,858 Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: shares issued by Company as part of consideration Net cash used 2,710,732 (300,000) 1,720,000 (600,000) 4,430,732 (900,000) 2,410,732 1,120,000 3,530,732 2017 Adelaide Timber and Building Supplies On 1 March 2017, the subsidiary Big River Group Pty Limited, executed a business purchase deed to acquire the business assets of Adelaide Timber and Building Supplies, a business located in Adelaide, South Australia. The purchase price was $7,534,192 which includes inventory and plant and equipment and was settled through the payment of $3,834,192 in cash and the issue of ordinary shares to a value of $3,500,000. A contingent amount of $200,000 is payable upon achieving an agreed EBITDA target. Sabdia Mitre 10 On 8 March 2017, the subsidiary Big River Group Pty Limited, executed a business purchase deed to acquire the business assets of Sabdia Mitre 10, a business located in Brisbane, Queensland. The purchase price was $1,250,000 which includes inventory and plant and equipment and is settled through the payment of $1,250,000 in cash. The values identified in relation to the acquisitions are final as at 30 June 2018. 50 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 30. Business combinations (continued) Details of the acquisitions are as follows: Inventories Prepayments Plant and equipment Customer relationships Deferred tax asset Trade payables Deferred tax liability Employee benefits Accrued expenses Net assets acquired Goodwill Adelaide Timber and Building Supplies Fair value Sabdia Mitre 10 Fair value Total Fair value $ $ $ 1,787,143 161,447 121,267 1,584,000 30,946 (587,142) (475,200) (103,154) (55,048) 1,139,759 - 110,241 - - - - - - 2,926,902 161,447 231,508 1,584,000 30,946 (587,142) (475,200) (103,154) (55,048) 2,464,259 5,069,933 1,250,000 - 3,714,259 5,069,933 Acquisition-date fair value of the total consideration transferred 7,534,192 1,250,000 8,784,192 Representing: Cash paid or payable to vendor Big River Industries Limited shares issued to vendor Contingent consideration 3,834,192 3,500,000 200,000 1,250,000 - - 5,084,192 3,500,000 200,000 7,534,192 1,250,000 8,784,192 Acquisition costs expensed to profit or loss 150,279 42,160 192,439 Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: contingent consideration Less: shares issued by Company as part of consideration Net cash used Note 31. Interests in subsidiaries 7,534,192 (200,000) (3,500,000) 1,250,000 - - 8,784,192 (200,000) (3,500,000) 3,834,192 1,250,000 5,084,192 The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Principal place of business / Country of incorporation Ownership interest 2017 2018 % % ACN 609 939 139 Pty Ltd (formerly known as Big River Group Holdings Pty Limited) Big River Group Pty Limited Australia Australia 100.00% 100.00% 100.00% 100.00% 51 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 32. Deed of cross guarantee The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: Big River Industries Limited Big River Group Pty Ltd 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 Big River Industries Limited, they also represent the 'Extended Closed Group'. The statement of profit or loss and other comprehensive income and statement of financial position are substantially the same as the Group and therefore have not been separately disclosed. Note 33. Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year 5,176,270 3,927,681 Consolidated 2018 $ 2017 $ Adjustments for: Depreciation and amortisation Net gain on disposal of property, plant and equipment Change in operating assets and liabilities: Increase in trade and other receivables Increase in inventories Decrease/(increase) in deferred tax assets Decrease/(increase) in other operating assets Increase in trade and other payables Increase/(decrease) in provision for income tax Decrease in deferred tax liabilities Increase in other provisions Increase/(decrease) in other operating liabilities Net cash from operating activities Note 34. Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2016 Net cash used in financing activities Balance at 30 June 2017 Net cash from/(used in) financing activities Balance at 30 June 2018 52 2,496,606 (62,075) 1,969,130 (57,451) (2,235,154) (3,388,829) 25,592 (25,779) 3,662,207 (460,026) (158,400) 130,286 (200,000) (4,805,703) (2,739,013) (731,878) 98,642 6,080,281 756,998 (52,800) 95,546 200,000 4,960,698 4,741,433 Bank bills $ Lease liability $ Total $ 12,000,000 (6,980,000) 2,968,536 14,968,536 (7,398,487) (418,487) 5,020,000 2,900,000 2,550,049 (41,858) 7,570,049 2,858,142 7,920,000 2,508,191 10,428,191 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 35. Earnings per share Earnings per share Consolidated 2018 $ 2017 $ Profit after income tax attributable to the owners of Big River Industries Limited Preference dividends 5,176,270 - 3,927,681 (2,423,302) Profit after income tax attributable to the owners of Big River Industries Limited used in calculating basic earnings per share 5,176,270 1,504,379 Weighted average number of ordinary shares used in calculating basic earnings per share 52,888,531 10,921,448 Weighted average number of ordinary shares used in calculating diluted earnings per share 52,888,531 10,921,448 Number Number Basic earnings per share Diluted earnings per share Options over ordinary shares were excluded from the above calculations as they are not dilutive. Adjusted earnings per share Cents Cents 9.79 9.79 13.77 13.77 Consolidated 2018 $ 2017 $ Profit after income tax attributable to the owners of Big River Industries Limited used in calculating adjusted earnings per share 5,176,270 3,927,681 Weighted average number of ordinary shares Weighted average number of preference shares Number Number 52,888,531 10,921,448 - 30,188,800 Weighted average number of shares used in calculating adjusted earnings per share 52,888,531 41,110,248 Adjusted basic earnings per share Adjusted diluted earnings per share Cents Cents 9.79 9.79 9.55 9.55 Options over ordinary shares were excluded from the above calculations as they are not dilutive. Note 36. Share-based payments Unlisted options The Company has granted options to senior managers of the Company, through persons or entities nominated by them. The options will not be listed. The options are governed by the terms of option deeds (as amended pursuant to deeds of amendment to comply with the ASX Listing Rules) that are on the same or substantially similar terms. The terms of issue of the options are summarised below. 53 Big River Industries Limited Notes to the financial statements 30 June 2018 Note 36. Share-based payments (continued) Exercise Under the option deeds, the options may be exercised for the exercise price specified on grant of the option (as set out in the table below). The options may only be exercised before the expiry date (as set out in the table below). The options may be exercised by delivering a signed exercise notice and an amount equal to the exercise price multiplied by the number of options being exercised to the address of the Company’s solicitors. On exercise, the holder will be issued one ordinary share for each option exercised. Lapse The options lapse automatically: ● ● ● ● if the senior management executive who nominated the optionholder ceases to be employed by the Company; or at the end of the designated exercise period for the options, unless extended in accordance with the option deeds; or if the optionholder ceases to be a holder of ordinary shares in the Company; or in the event that a drag along notice or a tag along notice is issued, each option will terminate and lapse with immediate effect upon issue of the drag along notice or the tag along notice and the Company must upon completion of the transaction contemplated, pay an amount to the optionholder equal to the price per share specified in the drag along notice less the exercise price multiplied by the number of options. Transfer/Dealing The optionholder cannot dispose, encumber or otherwise deal with their options without the prior written approval of the Board. Set out below are summaries of options granted under the plan: 2018 Grant date Expiry date price Exercise Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 19/02/2016 13/02/2017 19/02/2021 13/02/2022 $2.00 $2.20 1,370,000 45,455 1,415,455 - - - 2017 Grant date Expiry date price Exercise Balance at the start of the year Granted Exercised 19/02/2016 13/02/2017 19/02/2021 13/02/2022 $2.00 $2.20 1,370,000 - 1,370,000 - 45,455 45,455 The weighted average share price during the financial year was $2.082 (2017: $1.649). - - - - - - - - - 1,370,000 45,455 1,415,455 Expired/ forfeited/ other Balance at the end of the year - - - 1,370,000 45,455 1,415,455 The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.64 years (2017: 3.64 years). Note 37. Events after the reporting period Apart from the dividend declared as disclosed in note 22, no other matter or circumstance has arisen since 30 June 2018 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. 54 Big River Industries Limited Directors' declaration 30 June 2018 In the directors' opinion: ● ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, 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 2 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 2018 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 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Gregory Laurie Chairman 27 August 2018 Sydney ___________________________ James Bindon Managing Director 55 56 57 58 59 Big River Industries Limited Shareholder information 30 June 2018 The shareholder information set out below was applicable as at 3 August 2018. In accordance with ASX listing rule 4.10.19 the Company confirms that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission to the ASX in a way consistent with its business objectives. 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 Number of holders of ordinary shares 26 75 41 56 19 217 - Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares % of total shares issued Number held ANACACIA PARTNERSHIP II LP NATIONAL NOMINEES LIMITED PANTHEON GLOBAL CO-INVESTMENT OPPORTUNITIES FUND I I LP PANTHEON INTERNATIONAL PLC PANTHEON GLOBAL CO-INVESTMENT OPPORTUNITIES FUND III LP SAID BUILDING PRODUCTS GROUP PTY LTD ANACACIA PTY LIMITED (WATTLE FUND) HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PANTHEON MULTI STRATEGY CO-INVESTMENT PROGRAM 2014 PANTHEON ASIA FUND VI LP ERN SMITH PTY LTD DEAN JOSEPH HENDERSON & TERESA YOLANDA HENDERSON (THE HENDERSON SUPER FUND) MEGAN ANNE BINDON (THE BINDON FAMILY A/C) VESKAY PTY LTD (VESKAY SUPER FUND A/C) BINDON SUPER PTY LTD (BINDON SUPER FUND A/C) JAMES HIATT & BREE HIATT (THE J&B HIATT SUPER FUND A/C) MICHELLE MARGARET GLANCY (GLANCY FAMILY) CRAIG ANDREW DORWARD & KATRINA LOUISE DORWARD (DORWARD FAM SUPER FUND) DAVID MCFEETER & MARY N BAKER (MCFEETER SUPER FUND A/C) SIXTEENONINE HOLDINGS PTY LTD (SIXTEENONINE INVEST SUPER FUND A/C) 15,850,001 10,750,819 7,062,056 3,892,055 3,539,834 2,397,260 1,999,644 1,356,365 854,139 501,916 298,883 250,000 200,000 200,000 200,000 160,000 153,059 150,000 140,000 100,000 29.88 20.27 13.31 7.34 6.67 4.52 3.77 2.56 1.61 0.95 0.56 0.47 0.38 0.38 0.38 0.30 0.29 0.28 0.26 0.19 50,056,031 94.37 60 Big River Industries Limited Shareholder information 30 June 2018 Unquoted equity securities Options over ordinary shares issued Substantial holders Substantial holders in the Company are set out below: Anacacia Partnership II, LP NAOS Asset Management Limited Voting rights The voting rights attached to ordinary shares are set out below: Number on issue Number of holders 1,415,455 15 Ordinary shares % of total shares issued Number held 31,700,001 10,400,819 59.76 19.61 Ordinary shares 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. There are no other classes of equity securities. On-market buy-backs There is no current on-market buy-back in relation to the Company's securities. Securities subject to voluntary escrow Class Ordinary shares Ordinary shares Ordinary shares Ordinary shares Expiry date Upon close of market on 28 August 2018 30 September 2018 4 December 2018 31 December 2018 Number of shares 18,000,001 153,059 298,883 4,948,170 23,400,113 61 Big River Industries Limited Corporate details 30 June 2018 QLD: Townsville Sunshine Coast Brisbane (Meadowbrook) Brisbane (Hillcrest) Gold Coast NSW: Sydney Kiama Grafton (Factory) Wagga Wagga (Factory) Head Office ACT: Canberra VIC: Melbourne SA: Adelaide WA: Perth 57 Bolam Street, Garbutt QLD 4814 Phone: (07) 4431 2500 Fax: (07) 4779 6024 Postal: PO Box 7296 Garbutt QLD 4814 10 Main Drive, Warana QLD 4575 Phone: (07) 5439 1000 Fax: (07) 5493 8018 Postal: PO Box 260 Buddina QLD 4575 45 Ellerslie Road, Meadowbrook QLD 4131 Phone: (07) 3451 8300 Fax: (07) 3200 8339 Postal: PO Box 1858 Springwood QLD 4127 Sabdia 22-24 Johnson Road, Hillcrest QLD 4118 Phone: (07) 3800 2255 Fax: (07) 3800 6936 Postal: 22-24 Johnson Road, Hillcrest QLD 4118 Midcoast Timbers 11 Central Drive, Burleigh Heads QLD 4220 Phone: (07) 5522 0624 Fax: (07) 5522 0614 Postal: PO Box 3189 Burleigh Town QLD 4220 89 Kurrajong Avenue, Mt Druitt NSW 2770 Phone: (02) 8822 5555 Fax: (02) 8822 5500 Postal: PO Box 1049 St Marys NSW 2760 113 Shoalhaven Street, Kiama NSW 2533 Phone: (02) 4232 6600 Fax: (02) 4232 6605 Postal: PO Box 430 Kiama NSW 2533 61 Trenayr Road, Junction Hill NSW 2460 Phone: (02) 6644 0900 Fax: (02) 6643 3328 Postal: PO Box 281 Grafton 2460 128 Elizabeth Avenue, Forest Hill NSW 2651 Phone: (02) 6926 7300 Fax: (02) 6922 7824 Postal: PO Box 205 Forest Hill NSW 2651 61 Trenayr Road, Junction Hill NSW 2460 Phone: (02) 6644 0900 Fax: (02) 6643 3328 Postal: PO Box 281 Grafton 2460 Ern Smith Building Supplies 13 Sheppard Street, Hume ACT 2620 Phone: (02) 6260 1366 Fax: (02) 6260 1399 Postal: PO BOX 305 Jerrabomberra NSW 2619 24-32 Discovery Road, Dandenong South VIC 3175 Phone: (03) 9586 6900 Fax: (03) 9587 4501 Postal: PO Box 4388 Dandenong South VIC 3164 Adelaide Timber & Building Supplies 10 Kingstag Crescent, Edinburgh North SA 5113 Phone: (08) 8255 5577 Fax: (08) 8252 2552 Postal: PO Box 18 Edinburgh North SA 5113 255 Treasure Road, Welshpool WA 6106 Phone: (08) 9256 7400 Fax: (08) 9256 7477 Postal: PO Box 183 Welshpool DC WA 6986 62 63 64 

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