Bubs Australia Limited
ACN 060 094 742
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
1800 2827 2878 (1800 BUBS AUST)
info@bubsaustralia.com
9 September 2019
BUBS AUSTRALIA FY19 ANNUAL REPORT POINTS TO THE FUTURE
Bubs Australia (ASX: BUB), producer of Australian premium infant nutrition and goat dairy
products, today lodged with the Australian Securities Exchange its audited Annual Report for
Financial Year 2019.
The Annual Report provides a detailed view the Company’s strategic progress, operational
and financial performance, and corporate governance responsibilities.
Releasing the Annual Report, Bubs Australia’s Chairman, Mr Dennis Lin said: “Bubs has
enjoyed a year of exceptional revenue trajectory across all business units and retail channels.
“During the year we progressed our vertical integration capabilities, extended our infant
nutritionals product portfolio, and deepened channel partnerships, including a significant
equity-linked alignment with Chemist Warehouse. In addition, we advanced our China strategy
with our Joint Venture in Shanghai with Beingmate, one of the largest Chinese owned
enterprises in the infant nutrition industry.
“Importantly we strengthened our financial capability with a significant investment in the
business by C2 Capital Partners, in which Alibaba Group is an anchor investor, enabling the
strategic acquisition of our infant formula canning facility.
“Meanwhile, Bubs Australia has just entered the ASX 300; another sign of our growing
maturity and investor support.
“The new financial year brings a line of sight toward scalable and profitable growth as we
leverage our brand equity and partnerships, continue to develop our innovation pipeline, look
to new markets, and optimise our end-to-end supply chain and production capabilities.
“We are enthusiastic about our future, confident in the knowledge that our strategies are
delivering sustainable growth for the Company, its shareholders and employees, whilst having a
positive impact for all parents and their bubs,” said Mr Lin.
All Company information, financial reports and media coverage will be available on the
Bubs Australia Investor Resource Centre: www.investor.bubsaustralia.com.
END
For personal use only
Bubs Australia Limited
ACN 060 094 742
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
1800 2827 2878 (1800 BUBS AUST)
info@bubsaustralia.com
Media and Investor Enquiries:
GRACosway
Deanne Curry
Ph. +61 2 8353 0401
investors@bubsaustralia.com
media@bubsaustralia.com
About Bubs Australia Limited (ASX: BUB)
Founded in 2006 in Sydney, Bubs Australia is engaged in the business of creating new generations
of happy, healthy bubs through its range of premium infant nutrition products. Bubs®
and organic grass-fed infant formula ranges, and organic baby food, cereals and toddler snacks
cater for all feeding occasions and stages of development from newborn to preschool.
goat milk
Bubs Australia is the leading producer of goat dairy products in Australia with exclusive milk
supply from the largest milking goat herds in the country. Bubs®
in the world to be based on 100% Australian goat milk.
is proudly the only infant formula
Products are widely sold in major supermarkets and pharmacies throughout Australia, as well as
exported to China, South East Asia, and the Middle East.
Consumer Website:
Investor Centre:
bubsaustralia.com
investor.bubsaustralia.com
For personal use only
FY19 ANNUAL REPORT
Bubs Australia Limited and Controlled Entities
ACN 060 094 742
SCALABLE
GROWTH
For personal use only TABLE OF
CONTENTS
01 | FY19 REVIEW
01 | FINANCIAL HIGHLIGHTS
01 | FROM OUR CHAIR
01 | FROM OUR CEO
02 | OUR BUSINESS
02 | STRATEGIC PROGRESS
02 | END-TO-END SUPPLY CHAIN
02 | PRODUCT EXPANSION
03 | CORPORATE GOVERNANCE
03 | CORPORATE DIRECTORY
03 | BOARD OF DIRECTORS
03 | EXECUTIVE LEADERSHIP
03 | DIRECTOR’S REPORT
03 | REMUNERATION REPORT
03 | AUDITOR’S REPORT
04 | FINANCIAL STATEMENTS
04 | PROFIT AND LOSS
04 | FINANCIAL POSITION
04 | CHANGES IN EQUITY
04 | CASH FLOWS
04 | NOTES
04 | DIRECTOR’S DECLARATION
04 | OTHER INFORMATION
4
6
8
10
12
14
16
18
20
22
24
26
28
34
44
52
54
56
58
60
62
110
112
GENERAL INFORMATION
The financial statements cover Bubs Australia Limited for the year ended
30 June 2019. The financial statements are presented in Australian dollars,
which is Bubs Australia® Limited’s functional and presentational currency.
Bubs Australia® Limited’s registered office and principal place of business is:
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
For personal use only 01
FY19
REVIEW
Financial Highlights
From our Chair
From our CEO
4
5
For personal use only FINANCIAL
HIGHLIGHTS
Record Growth Year
FY19 results are characterised by our exceptional revenue
trajectory. The company has continued to focus on building scale
through channel development, gross margin improvements and
further enhancing the integration of our supply chain.
$46.8m
FY19 Gross Revenue Up 154% pcp
+153%
Domestic Net Growth Up (pcp)
+209%
China Net Revenue Growth Up (pcp)
.
ASX 300
Bubs Australia was added to the ASX300 index, as part of S&P’s quarterly
rebalance on 23 September 2019.
Improved Margins
Significant uplift in revenue reflects market share gains in
the most profitable products across all regions resulting in
margin improvement.
$21.6m
Bubs® products net
revenue +223%
49%
21%
35%
Bubs® products share
of Group Revenue
Group Gross Margin*
vs. 14% FY18
Bubs® Gross Margin*
vs. 20% FY18
$23.3m
Strong cash reserves
adequate to support
FY20 operations
*Gross margin does not include the inventories written off.
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201901 FY19 REVIEW Financial HightlightsFor personal use only
FROM OUR CHAIR
Dear Shareholders
Last year in my report I highlighted the intermediate
strategic steps taken in our journey towards building the
foundation for long term scalable growth.
This year I am pleased to report that your
Company has now both strengthened and
embedded these foundations and delivered
phenomenal revenue growth. We have now
demonstrated our ability to rapidly scale
the business for further global expansion
that is both sustainable and profitable.
This high growth profile has been achieved through a
continuing focus on our four key drivers:
Increased domestic market penetration
Brand awareness and impact
Innovation and product development
Enhanced Asian focus
The investment in expanding our channel distribution
capacity and securing manufacturing capability over the year
has seen net revenues increase almost three-fold to $43.9
million from $16.9 million in 2018, delivering a significantly
improved gross margin1 of 21%, versus 14% in 2018.
Material growth was also achieved across all core product
offerings in both Bubs® and CapriLac® product ranges.
Our first half of the year was characterised by expanding
our domestic reach, product expansion of organic toddler
snacks, channel expansion into China, and activation of the
highly productive Corporate Daigou channel. Whilst the
second half saw the achievement of further fundamental
strategic developments, enabling us to advance our visibility
and influence throughout the supply chain and to command
a premium for provenance in our branded products, thereby
securing a growth trajectory far greater than our peers in the
market segment.
year, including the exclusive long-term supply agreement
with Central Dairy Goats Ltd., which secured an additional
6.2 million litres of fresh milk to be utilised in FY20. This
has brought a new depth of understanding in managing
the end-to-end supply chain, allowing us to consolidate
our vertical integration and optimise our milk flow in a
sustainable and flexible way.
In the back half of the financial year, a number of
important new manufacturing and supply partnerships
were established. The Company partnered with Tatura
Milk Industries, a subsidiary of Bega Cheese Limited, to
manufacture Bubs® goat milk infant formula using an
innovative one-step processing technique to utilise our
Australian fresh milk directly from farmgate, without the
need to first convert to milk powder. We also entered into a
long-term partnership with Fonterra Australia to facilitate
our extension into organic grass-fed cow milk infant formula,
offering the wider parenting community Australian quality
nutritional options for their children, regardless of their
dietary needs. This enables Bubs to now operate in the two
fastest growth segments of China’s super-premium infant
formula category.
Importantly, following a significant investment in the
company by C2 Capital Partners, in which Alibaba Group
is an anchor investor, in April we were able to bring
the canning of our infant formula in-house through the
acquisition of Australia Deloraine Dairy Group Limited,
one of the most modern and advanced CNCA accredited
infant formula facilities in Australia. This facility carries
the SAMR brand nominations for the application to directly
export both Bubs® goat and organic infant formula product
lines into China.
Through its investment and off market share purchases,
C2 Capital Partners now holds a 15% stake in Bubs
Australia, bringing invaluable access to unique China
market insights and know-how covering logistics,
branding, marketing, omni-channel sales and distribution,
and last-mile delivery. Following this transaction, we were
privileged to welcome Steve Lin, the Managing Partner of
C2 Capital Partners, to the Board.
We have continued to focus on goat dairy as the core driver
of our business strategy and have substantially grown
our milk pool via new farmer partnerships throughout the
Capping an enormously productive year, the C2 Capital
Partners investment was quickly followed in May by the
formalisation of a joint venture with Beingmate Baby
DENNIS LIN
Chairman
KRISTY CARR
Founder CEO
& Child Food Co., Ltd (‘Beingmate’), one of the largest
Chinese owned enterprises in the infant nutrition industry.
The joint venture company, in which Bubs Australia has
a 49% interest, is Bubs’ exclusive authorised distributor
in mainland China for all Bubs® branded products and
holds an in-depth knowledge of Chinese food standards
and evolving regulatory framework. Beingmate’s
retail network covers 30,000 Mother and Baby stores
throughout China, currently distributing seventeen of their
own registered infant formula brands.
During the fourth quarter, Bubs entered a strategic equity-
linked agreement with Chemist Warehouse, securing a
significant retail footprint and brand marketing support
for Bubs® products in our home market. We are confident
this powerful alignment with such a strong leader
in Australian retail will drive rapid sales growth and
contribute widely to building the Bubs® brand here and in
China, offering substantial long-term shareholder value.
1 Gross margin does not include the inventories written off.
By working with our committed partners, such as Beingmate,
Alibaba Tmall and Chemist Warehouse, together with the
strength of our vertical integration and control over our
supply chain, we will continue to build the business at pace,
with both agility and discipline, whilst making a positive
impact for all parents and their bubs.
Finally, on behalf of the board, I would like to take this
opportunity to thank all shareholders and partners for
your support. We also acknowledge the dedication of our
expanding team, without which we would not have advanced
so far on our journey to becoming a leading infant nutrition
brand in Australia and Asia.
DENNIS LIN
Chairman
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201901 FY19 REVIEW From Our ChairFor personal use only
FROM OUR CEO
Dear Shareholders
Throughout this year, we have continued
to focus on pursuing our four-pillar growth
strategy together with our investments in
supply chain and capabilities, investment in
building Bubs® brand, and the formation of
new strategic channel partnerships.
In FY19, this strategy has helped deliver exceptional
growth across all four sales channels covering the various
routes-to-market for Australian and Chinese consumers.
Australian domestic market
Consumer-to-Consumer outbound (Daigou)
Business-to-Consumer cross-border eCommerce
Mother and baby stores
This positive momentum generated by our strategic
focus saw continued sales momentum throughout the
year, delivering a near tripling of gross revenue2 to $46.8
million (net $43.9 million) for the full year. This included a
material uplift in sales across all core product offerings,
with the strongest growth coming from Bubs® goat milk
infant formula range.
Domestically a 153% uplift in sales to $35.7 million was
principally generated through marketing initiatives to
raise brand awareness and increased store count in Coles
and Woolworths, as well as deeper penetration in the
pharmacy channel towards the back end of the year.
In particular the company actively engaged Australian
based Daigous (personal shoppers), who play an integral
role in building brand awareness in China through
syndication of digital content. Bubs partnered with
hundreds of Key Opinion Leaders to participate in product
reviews, farm tours, and live-stream events. As a result,
Bubs® is now sold in approximately 250 Chinese souvenir
stores throughout Australia. An immediate surge in sales
was experienced across all channels.
China net sales increased 209% on FY18 to $7.9 million driven
by expanded marketing activity and sales platform contract
wins. In addition, following successful import registration,
Bubs Organic® baby food pouches, cereals and teething rusks
(Chinese label) are now being directly imported and distributed
into Mother and Baby stores throughout China.
This was followed in March 2019 with our entry into a
new segment: post-infant nutrition with the launch of
an innovative range of eight toddler snacks certified by
Australian Certified Organic (ACO). These products are now
ranged nationally in Coles and Chemist Warehouse.
After an extensive product development process, this year
also saw the creation of Australia’s first organic grass-
fed infant formula range, which will launch in Chemist
Warehouse nationally in September.
Meanwhile, manufacturing and supply initiatives, smarter
allocation of our milk pool, and the introduction of one-
step manufacturing directly from our Victorian farmers
to Tatura’s nutritional spray drying plant, has made our
production process more efficient and streamlined. This
change in product focus, channel mix, and the gaining
of scale led to the Group’s gross margin1 to 21% for the
full year. Within that, the Bubs® portfolio margin1 almost
doubled to 35% for the year. Further margin improvement
remains a key focus for the business in FY20.
Strategic partnering
In April this year Bubs entered a milestone agreement
with Chemist Warehouse, the clear leader in the pharmacy
channel with over $5 billion in retail sales, of which over
$200 million stem from infant formula.
The complete Bubs® portfolio of 28 products is now
available in Chemist Warehouse stores as well as an
increased presence on their Chinese online platform,
which has the largest gross merchandise value on Tmall
Global. The agreement is underpinned by a share incentive
linked to sales performance and marketing contribution
over the next three years.
In May we finalised a joint venture with Beingmate, providing
the underpinning for our go-forward China off-line business,
under which the Shanghai based company will undertake
all in-market services in China. The first material progress
from the joint venture was an agreement with China’s largest
mother and baby store chain, ‘Kidswant’ which now stocks
Bubs Organic® baby food products in all 275 stores.
In the fourth quarter we extended our partnership with
Alibaba’s Tmall marketplace to deepen penetration of both
our infant and adult nutritional brands throughout their
extensive ecosystem.
Transformed manufacturing capability
Over the third quarter, the Company took a major step
toward improving margins and adding manufacturing
capacity by signing a manufacturing agreement with Tatura
Milk Industries (‘Tatura’). As a result, the Company sold
its 49.9% interest in Uphamgo, the manufacturing assets
acquired from the NuLac Foods vendors, while retaining the
first call on the facilities to manage seasonal flows.
In the fourth quarter the Company took 100% ownership
of Australia Deloraine Dairy Group Limited (‘Deloraine
Dairy’) with which Bubs had a long-term agreement for
packing infant formula products. This delivered the pivotal
and final step in our vertical integration strategy. Bubs®
goat and organic cow milk infant formula products have
been nominated as two of the available three brand slots,
providing a pathway towards achieving SAMR registration
which we are actively pursuing.
The acquisition of Deloraine Dairy, coupled with our
new partnerships with Tatura and Fonterra, has now
deepened control over our manufacturing and supply
chain and underpinned our competitive advantage for
authentic provenance. With 100% Australian goat milk,
full traceability back to farmgate, and scalable capacity to
increase volume, the Company is now well placed to meet
the continued and growing future demand.
Financial performance
Our financial results for this year reflect the significant
and essential investment in brand marketing, channel
capacity, new product development, and our end-to-end
supply chain, as we continue to build momentum in our
core domestic business and progress our capabilities with
regard to penetrating the Chinese market through the
Beingmate joint venture and Alibaba Tmall partnership.
In addition, there were initial high costs associated with
establishing process integration relating to the NuLac
Foods and Deloraine Dairy acquisitions. Despite the
exponential sales growth, these investments resulted in a
normalised EBITDA3 $5.9 million operating loss.
It is important to note that the overall statutory net loss of
$35.5 million incorporates certain transactions outside of
the normal operations of the business, including corporate
transaction expenses of $0.9m associated with the Beingmate
Joint Venture, Uphamgo sale, Deloraine Dairy acquisition and
a $5.9 million employee benefit expense relating to the NuLac
Foods acquisition in FY18 and $1.3m share based payment
expense relating to options issued in FY18. Also incorporated
is a share based payment expense of $20.4 million relating to
the shares to be issued to Chemist Warehouse in the next three
years under the Chemist Warehouse agreement.
Outlook
The strategic foundation building milestones we passed in
FY19 with the investment in Bubs by C2 Capital Partners, the
equity-linked Chemist Warehouse partnership, the acquisition
of Australia Deloraine Dairy, the joint venture with Beingmate,
the imminent launch of Organic Grass-fed cow milk formula,
along with the new supply and sales agreements entered
into, means we are well placed to pursue our strategic goals
towards delivering profitable and sustainable growth. Whilst
we continue to scale the business at pace, we are confident
of achieving overall profitability in FY20.
The Company continues to maintain a robust balance sheet
with $23.3 million in cash reserves as at 30 June 2019.
Other than the committed working capital investment in
the Beingmate Joint Venture and the financial earn outs
from recent acquisitions, we are committed to using our
cash to continue to invest in building the Bubs® brand and
its end-to-end supply chain, including the infrastructure
and quality controls required to support our extremely high
growth profile. Our cashflow forecast is expected to meet
our operational needs throughout FY20.
Thankyou for your ongoing support throughout the year. I
am proud of our talented team’s achievements and their
dedication in executing our expansion strategy to create
the next Australian success story in a dynamic category
with enormous potential globally.
KRISTY CARR
Chief Executive Officer
1 Gross margin does not include the inventories written off.
2 Gross revenue is a non-IFRS measure. Non-IFRS measures have not been subject to audit or review. Gross revenue represents the
revenue recognised without rebates and marketing contribution.
3 Normalised EBITDA is a non-IFRS measure. Non-IFRS measure have not been subject to audit or review.
10
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201901 FY19 REVIEW From Our CEOFor personal use only 02
OUR
BUSINESS
Strategic Progress
End-To-End Supply Chain
Product Expansion
12
13
For personal use only STRATEGIC
PROGRESS
Significant advancement on progressing our four Key Pillars critical to delivering growth.
INNOVATION
AND PRODUCT
DEVELOPMENT
INCREASED
DOMESTIC MARKET
PENETRATION
BRAND
AWARENESS AND
IMPACT
ENHANCED
ASIA FOCUS
+ Bubs Organic® Toddler
Snacks
+ Bubs Organic® Grass
Fed Infant Formula
+ Bubs® Goat Infant
Formula - enhanced
formulation with
Australian milk
+ National ranging for
all Bubs® products in
Chemist Warehouse
+ Increased Bubs® brand
digital reach and social
currency
+ Alibaba Tmall strategic
partnership
+ Beingmate Joint Venture in
+ Launched on Amazon
+ Growth in consumer
Shanghai
+ Maintained or increased
penetration in Coles,
Woolworths, Costco,
IGA and Big W and
Pharmacy4Less
engagement via events
and KOL endorsement
+ Launched Bubs® baby food
products in Kidswant
+ Increase in channel
marketing activity
+ Daigou Activation
+ Launching Bubs® baby food
on Alibaba’s Hema App
+ Secured ranging of Bubs®
infant formula and baby
food products in NTUC
FairPrice in Singapore.
INNOVATION
AND PRODUCT
DEVELOPMENT
INCREASED
DOMESTIC
MARKET
PENETRATION
BRAND
AWARENESS
AND IMPACT
ENHANCED
ASIA FOCUS
14
15
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201902 OUR BUSINESS Strategic ProgressFor personal use only END-TO-END
SUPPLY CHAIN
Providing secure, scalable vertical integration back to farm gate to
deliver both traceability and flexibility.
6.
7.
8.
2.
3.
5.
4.
10.
9.
1.
16
© Boxer & Co. 2019
Client: Bubs Australia Limited Project: BUAU1972.1_Annual_Report_Illustration_S1 Stage: Initial Concepts Date: 20 August 2019
1. Leading producer of >65%
Australian goat milk products
sourced from Australia’s
largest milking goat herds.
Ownership of our goat milk
pool, including 20 million litres
of fresh milk from >20,000
goats in Australia and
New Zealand.
2. One-step processing taking
fresh goat milk directly
from farm gate to Tatura’s
nutritional spray dryer.
3. Flexibility in redirecting our
seasonal milk flow into our
adult goat dairy brands.
4. 100% ownership of Australia
Deloraine Dariy, a state-of-
the-art CNCA certified infant
formula canning facility.
5. 10-year deep relationships
with organic food supply
chain and certifiers.
6. Strategic partnerships with
Chemist Warehouse, Alibaba
Tmall and Beingmate, covering
key retail routes-to-market.
7. Focus on increasing market
share in home market as
well as export to China and
emerging South-east Asian
markets.
8. Organic milk sourced from
Fonterra owned farms with
cows fed 365 days on pasture.
9. Supply partnership
with Fonterra to produce
Australia’s first organic
grass-fed infant formula
with advanced formulation
containing prebiotics
and probiotics.
10.
Bubs® brand is built on 13
years of Australian heritage
that also resonates with Asian
consumers seeking clean and
green nutritional products.
17
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201902 OUR BUSINESS End-To-End Supply ChainFor personal use only
PRODUCT
EXPANSION
Grown Bubs® portfolio from 18 to 29 SKU’s, now catering for all stages of development, feeding occasions
and dietary requirements. With opportunity for further expansion in Adult Goat Milk Products.
Organic Toddler Snacks
Snack range to extend consumer lifecycle
beyond first 1,000 days.
Infant Milk Formula Australian Goat Milk
Improved formulation - worlds only infant
formula sourced from Australian Goat Milk.
Infant Milk Formula Organic Grass Fed
Australia’s first Organic Grass Fed Formula
with Prebiotics and Probiotics.
Organic Baby Food, Cereals and Rusks
Adult Goat Milk Products
18
18
19
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201902 OUR BUSINESS Product PortfolioFor personal use only 03
CORPORATE
GOVERNANCE
Corporate Directory
Board of Directors
Executive Leadership
Director’s Report
Remuneration Report
Auditor’s Report
20
21
For personal use only CORPORATE
DIRECTORY
DIRECTORS
COMPANY SECRETARY
Dennis Lin (Chairman)
Jay Stephenson
Kristy-Lee Newland Carr
Matthew Reynolds
Johannes Gommans (resigned 18
April 2019)
Steve Lin (appointed 18 April 2019)
REGISTERED OFFICE
AND DOMICILE
Bubs Australia Limited is a
company limited by shares,
incorporated and domiciled
in Australia.
Its registered office is:
2 – 4/6 Tilley Lane,
Frenchs Forest,NSW
2086 Australia
SHARE REGISTRY
AUDITORS
Computershare Investor
Services Pty Limited
Level 2
Reserve Bank Buidling
45 St George’s Terrace
Perth WA 6000
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
AUSTRALIAN
SECURITIES EXHANGE
ASX Code: BUB
22
Bubs Australia Limited and Controlled Entities03 CORPORATE GOVERNANCE Corporate DirectoryFor personal use only BOARD OF
DIRECTORS
The directors present their report together with the consolidated
financial statements of Bubs Australia Limited as a consolidated
entity consisting of Bubs Australia Limited (the “Company”) and
the entities it controlled (“the Group”) for the financial year ended
30 June 2019 and the auditor’s report thereon.
The names of the directors in office at any time during or
since the end of the financial year are:
MATTHEW
REYNOLDS
STEVE
LIN
Non-Executive Director
Appointed 22 December 2016.
B.Sc (Hons), LLB (Hons), MQLS
Non-Executive Director
Appointed 18 April 2019
B.A. in Economics
DENNIS
LIN
Chairman
Appointed 22 December 2016.
GradDipAppFin, CA, Solicitor of the
Supreme Court of Queensland
KRISTY
CARR
Executive Director
Appointed 22 December 2016.
BBus (Bachelor Degree of Business)
Dennis Lin has been a Partner at BDO Australia
since 2009 and is the firm’s National Leader of China
Advisory Services. Having practiced as both a Chartered
Accountant and Solicitor in Australia, Dennis specialises
in commercial transactions, merger and acquisitions, and
capital market activities between Chinese and Australian
businesses, with a particular focus in agriculture and
consumer goods sectors.
Mr Lin was appointed as a non-executive director of
Buderim Group Limited on 3 November 2017, a non-
executive director of Ecargo Holdings Limited on 9 April
2018 and a non-executive director of Synertec Corporation
Limited on 20 August 2019.
Kristy Carr has an in-depth knowledge of the infant
nutrition category and retail sector, with a proven track
record of leading and building successful brands and
businesses over the past 20 years. Prior to Bubs®, Kristy
held international marketing and business development
roles based in Hong Kong. It is with this expertise that
Kristy founded Bubs® in 2006 and continues to lead a
talented team in delivering on her original vision to make
Bubs® a successful global brand.
Mrs Carr has not held any other Directorships in publically
listed companies in the past three years.
24
Matthew Reynolds is a Partner at
Thomson Geer lawyers who specialises
in capital markets and mergers and
acquisitions. He holds a Bachelor of
Political Science and Economics (Hons)
and a Bachelor of Laws (Hons) and is a
member of the Queensland Law Society.
Mr Reynolds was a non-executive
director on the ASX listed Axsesstoday
Limited (ASX: AXL), and was the non-
executive Chairman of P2P Transport
Limited (ASX: P2P), retiring from those
offices on 15th April 2019, Mr Reynolds
also held directorships in unlisted
companies including local subsidiaries
of Thai-listed Minor International PLC
and Ignite Energy Limited.
JONANNES GOMMANS
Non-Executive Director
Appointed 20 December 2017 and
resigned 18 April 2019
Mr Gommans comes from a dairy farming
family and pioneered the goat milk powder
industry in Australia. In 2005, Mr Gommans
purchased a dairy production facility and
farm in the Gippsland region. This was the
genesis of Nulac Foods Pty Ltd, which went
on to become the largest producer of goat
milk products in Australia and has now
been acquired by Bubs Australia Limited.
Mr Gommans is responsible for the
management of the company’s milk supply
and production facility.
Mr Gommans has not held any other
Directorships in publically listed
companies in the past three years.
JAY
STEPHENSON
Company Secretary
Appointed 1 September 2015.
MBA, FCPA, FGIA, MAICD, CPA
(Canada), CMA (Canada)
Jay Stephenson has been involved
in business development for over
30 years including approximately
24 years as Director, Chief Financial
Officer and Company Secretary for
various listed and unlisted entities
in resources, IT, manufacturing,
food, wine, hotels and property. Mr
Stephenson has been involved in
business acquisitions, mergers, initial
public offerings, capital raisings,
business restructuring as well
managing all areas of finance for
companies.
Mr Stephenson has not held any
other directorships in publicly listed
companies in the past three years.
Mr. Lin has over 25 years of
investment, operations and
management experience in Asia.
He started his career in investment
banking at Morgan Stanley in New
York. He then joined Goldman Sachs’
Merchant Banking Division in Hong
Kong and Tokyo and invested in
private equity, real estate and special
situations opportunities. Mr. Lin
became the President and CEO - Asia
of GMAC Commercial Holding Corp.,
managing a multi-billion dollar
portfolio of real estate investments
and loans. Mr. Lin has a B.A. in
Economics from Harvard College.
Mr Lin has not held any other
Directorships in publically listed
companies in Australia in the past
three years.
Other than Johannes Gommans and Steve Lin, directors have been in office since
the start of the financial year to the date of this report unless otherwise stated.
RECORD OF ATTENDANCE AT THE BOARD MEETINGS
Director attendance at Board meetings during the year is set out below.
Held
Attended
D Lin (Non- executive Chairman)
K Newland Carr (Executive Director)
M Reynolds (Non-executive Director)
J Gommans (Non-executive Director)
S Lin (Non-executive Director)
16
16
16
13
3
16
15
16
12
3
25
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Board Of DirectorsFor personal use only EXECUTIVE
LEADERSHIP
KRISTY
CARR
Founder CEO
IRIS
REN
Chief Financial Officer
ANTHONY
GUALDI
Co-Founder and Director
of Special Projects
DAVID
ORTON
VIVIAN
ZURLO
General Manager Commercial
General Manager Marketing
RICHARD
PAINE
General Manager Dairy
Operations
Kristy Carr has an in-depth
knowledge of the infant nutrition
category and retail sector, with
a proven track record of leading
and building successful brands
and businesses over the past
20 years. Prior to Bubs®, Kristy
held international marketing and
business development roles based
in Hong Kong. It is with this expertise
that Kristy founded Bubs® in 2006
and continues to lead a talented
team in delivering on her original
vision to make Bubs® a successful
global brand.
Iris Ren spent 3 years in KPMG’s
CFO Advisory division where she
specialised in providing IFRS
advisory services and transaction
support to public and private entities
to achieve positive accounting and
commercial outcomes. Prior to that,
Iris worked for 7 years in the audit
and assurance division of BDO and is
a current member of the Institute of
Chartered Accounts Australia.
Iris joined Bubs Australia in
February 2019.
Anthony has over 25 years
experience in the baby food business
with studies in Natural medicine and
Nutrition. Prior to Bubs, Anthony was
the founder of Shakespeares Pies,
which later merged with Jesters
where he held the position of CEO.
Anthony grew his business from one
pie shop in Manly to more than 80
stores throughout Australia, New
Zealand, and Canada, generating an
annual turnover in excess of over
$50 million. Anthony co-founded
Bubs Australia in October 2005.
David Orton has been in FMCG
sales and operations for the last
25 years where he held senior
roles with Henkel Beauty Care, SC
Johnson & Sons and several other
multinational firms responsible for
overseeing sales and the ultimate
profitability of the company. David
was appointed as Bubs General
Manager Commercial in January
2018 responsible for all domestic
sales, commercial planning and
operations. David joined Bubs
Australia in March 2017.
Vivian has over 20 years’ marketing
commercial experience in senior
marketing positions across various
consumer goods categories at FMCG
multinationals. Vivian is responsible
for marketing, brand development
and product innovation leadership
across all markets. Vivian brings
her extensive marketing strategy,
consumer insights, brand strategy
and product innovation experience.
Vivian joined Bubs Australia in
July 2019.
Richard Paine has over 25 years
manufacturing and management
experience in the Australian
dairy industry specialising in
the nutritional ingredient and
nutraceutical space. He also has
broader dairy expertise covering
commercial and operational
management from milk collection/
milk pool through to ‘whole of
manufacture’ in both medium size
private to larger listed entities.
Richard joined Bubs Australia
February 2019.
26
27
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Executive LeadershipFor personal use only DIRECTOR’S
REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 27 February 2019, the Group signed a manufacturing agreement with Tatura Milk Industries (‘Tatura’), a wholly owned
subsidiary of Bega Cheese Limited. This agreement enables a one step production process from farm gate fresh goat milk
into Infant Formula nutritional base. As the raw goat milk now goes directly to Tatura, there is no longer a need to convert
the bulk of the milk to powder for subsequent wet blending. As a result, on 28 February 2019, the Group entered into a sale
and purchase agreement to sell back its 49.9% interest in UphamGo Australia Pty Ltd, Cambria Management Company Pty
Ltd, Cambria Unit Trust and New Zealand Nutritional Goat Company Limited to the NuLac Foods vendors.
On 18 April 2019, the Group acquired 100% interest in Australia Deloraine Dairy Group Limited (‘Deloraine Dairy’). The
integration with Deloraine Dairy is a key foothold in Bubs’ vertical integration strategy to maximise control of Bub’s supply
chain. It underpins Bubs’ unique competitive advantages deriving from authentic provenance including 100% Australian
goat milk with full traceability back to farm gate, and scalable capacity to increase volume to meet growing future demand.
On 6 May 2019, the Group and Beingmate Baby & Child Food Co., Ltd (‘Beingmate’) established a joint venture company Bubs
Brand Management Shanghai Co. Ltd (‘Bubs Brand Management’). The Group and Beingmate has a 49% and 51% interest
respectively in the joint venture. The joint venture is to distribute and promote Bubs products throughout Beingmate’s
network covering 30,000 Mother and Baby stores throughout China.
On 30 June 2019, the Group completed the Coach House Dairy Assets sale which is not considered core to Bubs’ business
strategy. The assets include the business conducted under the ‘Coach House Dairy’ brand for the production and sale of
flavoured cow’s milk products, including the Australian registered trademarks, recipes, website and social URL’s.
REVIEW OF OPERATIONS AND FINANCIAL RESULTS
FINANCIAL PERFORMANCE
The Group achieved net revenue of $43,914,853 (2018: $16,906,256) and a loss after income tax of
$35,509,236 (2018: $64,658,942). The overall position includes certain transactions that are outside
of the normal operations of the Group:
corporate transaction expenses of $897,327 (2018: $1,061,847) associated with the acquisition
of Deloraine Dairy, disposal of the 49.9% interest in Uphamgo Australia Pty Ltd, New Zealand
Nutritional Goat Company Limited, Cambria Unit Trust and Cambria Management Company Pty
Ltd, establishment of Bubs Brand Management and the equity linked transaction with Chemist
Warehouse Group;
$5,897,633 (2018: $7,502,367) employee benefit expense relating to the $6.7 million payable to the
Nulac Foods Vendors for future satisfaction of certain performance targets, recorded in employee
costs given one of the KPIs relates to the continued employment of the Nulac Foods Vendors;
$20,425,504 expense relating to the equity linked transaction with Chemist Warehouse Group
(2018: $nil);
$1,346,954 share based payment expense (2018: $2,544,696) relating to options issued in
FY18;
$719,396 (2018: nil) movement of deferred consideration of Deloraine acquisition;
$404,441 (2018: nil) inventories written off relating to discontinued products; and
$235,616 (2018: nil) employee costs provision relating to the expected termination settlement
with the previous CEO.
The operating loss reflects the fact the business is still in the development phase including the
high costs of new product development, expenses relating to the expansion of the domestic and
China sales channels and systems and process integration costs for Nulac Foods Pty Ltd and
Deloraine Dairy.
REVENUE AND PROFITABILITY
At an operating level, net sales increased 160% compared to FY18. Domestic net sales account for
81% of net revenue, with 18% of net revenue generated from China cross border e-commerce sales,
and the remaining 1% from other international markets.
Domestic net sales increased 153% compared to FY18 which is driven by Bubs’ strong domestic
presence, along with the marketing initiatives the Group has undertaken and the activation of the
Corporate Daigou distribution channel.
China net sales increased 209% on FY18 which represents the strong traction the Bubs product range
continues to gain in the Chinese market following the deployment of marketing resources and sales
channel contract wins in cross border e-commerce distribution channel and China Mother and Baby
stores distribution channel.
Gross margin1 has improved to 21% in FY19 compared to 14% in FY18 due to the optimisation in
product and channel mix, engaging new suppliers and improvements in allocating the milk pool from
Australia and New Zealand. Bubs product’s has achieved a gross margin1 of 36% in FY19 compared
to 20% in FY18. The positive blended margin combined with the strong exponential growth in sales is
continuing to erode the high operating and administrative costs indicative of a business in the growth
phase. As the foundation of the business has been laid out in FY19 and sales continue to grow with
strong gross margin, the Group forecasts a significant improved profit or loss position in FY20.
FINANCIAL POSITION
The Group currently holds $23,291,058 in cash and cash equivalents at 30 June 2019 (2018:
$38,642,902). The strong cash position is due to the successful capital raising from C2 Capital Partners
during the year and improved cash management of the supply chain. External debt at 30 June 2019 is
$2,000,000 (2018: $2,000,000) which arose from the acquisition of Nulac Foods Pty Ltd. The directors
are confident of the Group’s ability to continue as a going concern and meet its debts and future
commitments as and when they fall due and payable.
1 Gross margin does not include the inventories written off.
28
29
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Director’s ReportFor personal use only PRINCIPAL ACTIVITIES
The Group offers a great range of organic baby food, goat milk infant formula products, the adult goat milk powder products
and fresh dairy products. With the acquisition of Deloraine Dairy, the Group now also provides canning services of nutritional
dairy products.
LIKELY DEVELOPMENTS
The Group expects to experience continued strong growth in the key domestic retail space as a result of its partnership with
Chemist Warehouse group and the activation of its corporate Daigou partnership. The strong growth in China retail space
will be further strengthened by the partnership with BeingMate and the support from C2 Capital.
The gross margin is expected to be further improved as the Group continues working on reducing product costs and
optimising the product and channel mix.
Operationally, the Deloraine Dairy acquisition enables the Group to have the capacity to support the strong domestic and
China demand of baby infant formula and further enhances the vertical integration and security of the Group’s supply chain.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS AND AUDITORS
The Group has paid insurance premiums in respect of Directors’ and Officers’ liability insurance for current and past directors
and officers. Insurance does not indemnify the Directors and Offices where there is conduct involving lack of good faith.
During the financial year, the Group paid a premium in respect of a contract insuring the Directors’ and Officers’ against a
liability incurred as such a Director or executive officer to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium. To the extent permitted by law,
Bubs has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against
claims by third parties arising from the audit.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer or auditor of the Group against a liability incurred as such an officer or auditor.
PROCEEDINGS ON BEHALF OF THE GROUP
No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceedings to
which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
ENVIRONMENTAL REGULATIONS
The Group was not a party to any such proceedings during the year.
The Group is not aware of any matter which requires disclosure with respect to any significant environmental regulation
in respect of its operating activities.
ROUNDING
CORPORATE GOVERNANCE
The Group’s corporate governance statement sets out the key features of the Group’s governance framework and
practices. The Group has adopted corporate governance policies and practices which are designed to support and promote
the responsible management and conduct of the Group. The Group’s corporate governance statement can be found at
https://www.asx.com.au/asxpdf/20180606/pdf/43vldgzjlb5bg7.pdf.
EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD
On 29 August 2019, Bubs issued 2,974,272 fully ordinary paid shares to Chemist Warehouse Retail Group.
Other than the events noted above, no item, transaction or event of a material or unusual nature has arisen in the interval between
the end of the financial year and the date of this report, in the opinion of the directors of the Group, that would significantly affect
the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
DIVIDENDS
No dividends have been paid or declared since the start of the financial year (2018: Nil).
The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise
stated under the option available to the Group under ASIC Corporations Instrument 2016/191.
GENDER DIVERSITY
The Group has a strong commitment to diversity and recognises the value of attracting and retaining employees with
different backgrounds, gender, culture, knowledge, experience and abilities. Diversity contributes to the Group’s business
success and benefits individuals, clients, teams, shareholders and stakeholders. The Group’s business policies, practices
and behaviours promote diversity and equal opportunity and creates an environment where individual differences are
valued and all employees have the opportunity to realise their potential and contribute to the Group’s success.
As at 30 June 2019
As at 30 June 2018
Male
Percentage
Male (%)
Female
Percentage
Female (%)
Male
Percentage
Male (%)
Female
Percentage
Female (%)
Board
Senior
management
Employees
Total
3
3
15
21
75%
75%
54%
58%
1
1
13
15
25%
25%
46%
42%
3
3
7
13
75%
75%
58%
65%
1
1
5
7
25%
25%
42%
35%
30
31
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Director’s ReportFor personal use only UNISSUED SHARES UNDER OPTIONS
At the date of this report, unissued shares of the Group under option are:
Expiry Date
Exercise Price
Number of Shares
20 December 2019
19 January 2021
0.10
0.10
268,848
4,770,810
All unissued shares are ordinary shares of the Group.
NON-AUDIT SERVICES
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Group are important. During the year ended 30 June 2019, other assurances services of
$41,434 were performed relating to the completion audit in relation to Australia Deloraine Dairy Group Limited at 18 April
2019. No other non-audit services were provided by Ernst & Young during the year ended 30 June 2019.
Details of amounts paid or payable to the auditor for other assurances services provided during the year are outlined in
Note I3 to the financial statements.
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is attached
to this financial report.
32
33
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Director’s ReportFor personal use only REMUNERATION
REPORT (AUDITED)
KEY MANAGEMENT PERSONNEL
The term key management personnel (KMP) refers to those persons having the authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly and includes any director of the Group. The
disclosures in this report have been audited.
The KMP of the Group for the year ended 30 June 2019 were:
Dennis Lin (Chairman)
Matthew Reynolds (Non-executive Director)
Steve Lin (Non-executive Director, appointed 18 April 2019)
John Gommans (Non-executive Director, resigned 18 April 2019)
Kristy-Lee Newland Carr (Chief Executive Officer and Managing Director)
Iris Ren2 (Chief Financial Officer)
David Orton2 (General Manager Commercial)
Richard Paine2 (General Manager Dairy)
Anthony Gualdi (Operations Director)
Vivian Zurlo2 (General Manager Marketing)
REMUNERATION STRUCTURE
The Board seeks to set aggregate compensation at a level that provides the Group with the ability to attract and retain
directors and KMP of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The amount of aggregate
compensation sought to be approved by shareholders and the manner in which it is apportioned amongst the directors
and KMP is reviewed annually. The overall level of executive reward takes into account the performance of the Group over
a number of years.
FIXED REMUNERATION
Employee’s fixed remuneration is based on a matrix of an individual’s skills and experience,
their individual performance and their current level of remuneration relative to the market.
Fixed remuneration is reviewed on an annual basis, and where appropriate, is adjusted based on
consideration of individual performance and market remuneration movement. The overall level of key
management personnel reward takes into account the performance of the Group over a number of
years. This ensures that the Group attracts, motivates, and retains top talent executives so they can
deliver on the Group’s business strategy and contribute to the Group’s ongoing financial performance.
Total fixed remuneration (TFR) comprises of base salary, superannuation in accordance with the
statutory rates and allowances. The Board reviews and approves all changes to fixed remuneration.
VARIABLE REMUNERATION
SHORT TERM INCENTIVE (STI)
The STI is focussed on performance goals which align with the Group’s direction, driving outcomes,
differentiating high performance and rewarding delivery over the financial year. STI values are generally
calculated as a percentage of fixed remuneration. STI values and performance targets are approved by
the Board. For the year ended 30 June 2019, participants may achieve a maximum STI of between 10%
and 50% of TFR, with the STI payable up to the maximum subject to achievement of financial targets and
specific agreed personal objectives, aligning with the strategic objectives of the Group.
Performance against financial targets is compared with the Group’s budget, and achievement of
personal objectives is tracked and discussed through the performance period as part of the Group’s
management process.
STI payments are determined and paid annually following the finalisation of audited Group results and
are contingent on achievement of Group financial targets and specific agreed personal objectives.
LONG TERM INCENTIVES (LTI)
The LTI programs provide the potential for executives to receive payment over and above fixed
remuneration and short term incentive. These programs are discretionary, appropriate to the results
delivered by the Group, and based on the principle of reward for performance.
The purpose of the LTI is to focus the executives’ efforts on the achievement of sustainable long-term
shareholder value creation and the long-term financial success of the Group.
The provision of LTI plan awards via options for ordinary shares encourages long-term share
exposure for the executives and, therefore, drives behaviours which align with the interests of our
shareholders.
The Board believes a three-year performance period provides a reasonable period to align reward
with shareholder return and also acts as a vehicle to help retain the KMP, align the business planning
cycle, and provide sufficient time for the longer-term performance to be achieved.
34
35
2 Due to the changes in the corporate structure during the year, Iris Ren and David Orton were appointed as KMP on 9 October 2018.
Richard Paine was appointed as KMP on 21 February 2019. Vivian Zurlo was appointed as KMP on 1 July 2019.
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Renumeration Report (Audited)For personal use only
REMUNERATION REPORT (AUDITED)
TOTAL FIXED REMUNERATION
KMP EXECUTIVES
During the year, the KMP executives of TFR were as follows:
Title
Name
Annual Base Salary
Allowance
Chief Executive Officer and
Managing Director
Kristy Carr
Chief Financial Officer
Iris Ren
General Manager
Commercial
David Orton
General Manager Dairy
Richard Paine
Operations Director
Anthony Gualdi
GROUP’S FINANCIAL PERFORMANCE
$300,000
$200,000
$200,000
$250,000
$200,000
$6,000
Nil
Nil
Nil
$6,000
The following table provides details of the relationship between KMP’s TFR and the Group’s overall financial performance:
Net Revenue
43,914,853
16,906,256
2019
2018
EBIT
Share price
at year end
Basic loss per
share
Total dividend
(cents per share)
-35,144,011
-66,025,718
1.13
0.08
-
0.78
0.20
-
2017
3,932,298
-5,078,230
2016
3,659,328
-1,308,057
2015
1,818,770
-248,391
0.25
0.02
-
-
-
-
-
-
-
The following table provides details of the maximum STI that each KMP is entitled to receive:
KMP
Kristy Carr
Iris Ren
STI $
$150,000
$20,000
David Orton
$100,000
Richard Paine
Anthony Gualdi
-
-
STI % of TFR
Performance Measurement
50%
10%
50%
-
-
100% is measured against Business Strategy
50% is measured against Business Management
and 50% is measured against Financial
100% is measured against Financial
-
-
LONG-TERM INCENTIVE PLANS
Each option granted represents a right to receive one fully paid share in the Group once the option vests and is exercised.
The number of options and the vesting conditions issued under the LTI Plans are determined by and at the sole discretion
of the Board.
CEO’S FY18 GRANT OF OPTIONS
The FY18 LTI plan awards were divided in 3 tranches and vest subject to the gross revenue or EBIT performance hurdle
calculation over a three-year performance period and continuing employment:
Tranche 1 (3,578,108 options) will vest on the achievement of $15,000,000 in gross sales or
achievement of $500,000 in EBIT.
Tranche 2 (2,385,405 options) will vest on the achievement of $30,000,000 in gross sales and
$2,000,000 in EBIT
Tranche 3 (2,385,405 options) will vest on the achievement of $50,000,000 in gross sales and
$4,000,000 in EBIT.
SHORT TERM INCENTIVE PLANS
The FY19 STI awards are set based on achievement against a combination of financial and non-financial KPIs. These are
used to ensure a balance between short term financial measures and more strategic non-financial measures which in the
medium to longer term will support the growth of the Group.
Performance is measured against the following KPIs:
Performance hurdles must be achieved in a 12 month period and are not cumulative in nature.
Options in respect of Tranche 1 do not have an explicit service condition and Tranches 2 and 3 have a three-month explicit
service condition from the grant date. The expiry date of the options is 19 January 2021.
The gross revenue or EBIT performance hurdle was chosen as being a performance measure appropriate to current
circumstances of the Group, with progress easily tracked against agreed performance targets, encouraging CEO
engagement and aligning with shareholder objectives.
Financial – actual results compared to budgeted results for items including net sales, gross margin and
normalised EBITDA.
Tranche 1 was granted to the Group’s previous CEO Nicholas Simms. The options vested in FY18 and were subsequently
cancelled in FY19.
Business Management – cash generation, capital management, working capital management.
Business Strategy – development, approval, implementation and achievement.
Tranche 2 and 3 options were offered to and accepted by the current CEO Kristy Carr on 29th June 2018 with the value of
$0.71 for each option and an exercise price of $0.10. These tranches have not yet vested.
36
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Renumeration Report (Audited)For personal use only REMUNERATION REPORT (AUDITED)
For FY19, non-executive directors’ remuneration was as follows:
EXECUTIVE CONTRACTS
The remuneration and other terms of employment for KMP executives are covered in formal employment contracts. The
Group may terminate an executive immediately for cause, in which case the executive is not entitled to any payment other
than the value of total fixed remuneration (and accrued entitlements) up to the termination date.
KMP executive
Kristy Carr (Chief Executive Officer
and Managing Director)
Notice period by
the Group
Notice period by
Executive
Payment in lieu of notice
3 months
3 months
Iris Ren (Chief Financial Officer)
3 months
David Orton (General Manager Commercial)
3 months
Richard Paine (General Manager Dairy)
Anthony Gualdi (Operations Director)
3 months
3 months
3 months
3 months
3 months
3 months
Yes
Yes
Yes
Yes
Yes
Title
Name
Remuneration
Non-Executive Chairman
Dennis Lin
Non-Executive Director
Matthew Reynolds
Non-Executive Director
Non-Executive Director
Johannes Gommans
(resigned on 18 April 2019)
Steve Lin
(appointed on 18 April 2019)
$150,000
$40,000
$40,000
$40,000*
* Steve Lin’s services were remunerated by C2 Capital Partners.
Directors are also reimbursed for travel and other expenses incurred in attending to Board meetings and the Group’s affairs.
COMPANY SECRETARY
Jay Stephenson is contracted on a monthly basis as Company Secretary at a rate of $30,000
per annum.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
OTHER RELATED PARTY TRANSACTIONS WITH KMP
The Group’s remuneration policy for non-executive directors aims to ensure that the Group can attract and retain suitably
qualified and experienced directors having regard to:
the level of fees paid to non-executive directors of other comparable Australian listed companies;
the growing size and complexity of the Group’s operations;
the responsibilities and work requirements of Board members; and
the skills and diversity of Board members.
Under the ASX Listing Rules, the total amount paid to all non-executive directors in any financial year must not exceed the
amount fixed in a general meeting of the Group. This amount is currently $300,000 as determined by Shareholders at the
AGM held on 18 November 2009. The Board’s present policy is that all non-executive directors, other than the chairman, be
paid $40,000, per annum, exclusive of superannuation in accordance with statutory rates as remuneration for their services
as directors.
Dennis Lin, a Non-Executive Chairman is a strategic advisor in an accounting firm. The Group contracted professional
service from the accounting firm to the amount of $181,794 in FY2019 (2018: $461,256), with an outstanding balance at 30
June 2019 of $64,538 (2018: $53,480).
Johannes Gommans, resigned as a Non-Executive Director on 18 April 2019, however he remains a director of Cibus Goats
(Australia) Pty Ltd, Uphamgo Australia Pty Ltd and New Zealand Nutritional Goat Company Limited. As a result, the related
party transactions from 1 July 2018 to 18 April 2019 are set out below:
Sales to
related
parties $
Purchases
from related
parties $
Amounts
owed to
related
parties $
Loan to
related
parties $
Amounts
owed by
related
parties $
Cibus Goats (Australia)
Pty Ltd*
New Zealand
Nutritional Company
Uphamgo Australia
Pty Ltd
2019
2018
2019
2018
2019
2018
-
-
6,838
-
110,535
-
5,648,592
29,037
2,894,258
629,748
9,335,643
1,575,013
7,722,603
4,771,541
-
441,999
-
-
-
-
-
-
-
-
-
-
-
1,337,677
600,000
600,000
38
39
*Bubs Australia is committed to purchase a minimum of 3,140,000 Litres of milk from Cibus Goats (Australia) Pty Ltd each
year during the term of the contract. J. Gommans is a director of Cibus Goats (Australia) Pty Ltd.
Apart from the details disclosed above, no director or any other related party has entered into any other material contracts
with the Group since the end of the previous financial year. All of the above transactions were considered to be on an arms’
length basis.
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Renumeration Report (Audited)For personal use only
REMUNERATION REPORT (AUDITED)
Table A(2): Remuneration for Non-executive Directors for the year ended 30 June 2019
DETAILS OF THE NATURE AND AMOUNT OF EACH ELEMENT OF THE REMUNERATION
Table A(1): Remuneration for KMP for the year ended 30 June 2019
Short Term
Post-
Employ-
ment
Other
Long
Term
Salary &
fees
$
Annual
leave $
Cash
bonus $
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Share
based
payment
- options
Total
$
Perform-
ance
related
%
Short Term
Post-
Employment
Other
Long
Term
Salary &
fees
$
Non-
monetary
$
Superannuation
$
Long
service
leave
$
Share based
payments –
options
$
Total
$
Performance
related
%
Kristy
Carr (1)
Nicholas
Simms (3)
Anthony
Gualdi (1)
Iris Ren (2)
David
Orton (2)
Richard
Paine (2)
2019
285,000
23,077
2018
225,833
5,385
2019
-
-
2018
228,525
5,385
2019
190,769
15,385
2018
181,154
6,154
-
-
-
-
-
-
2019
137,513
11,170
20,000
2018
-
-
-
2019
138,282
11,170 100,000
2018
-
-
2019
89,041
6,849
2018
-
-
-
-
-
6,000
27,075
18,768 1,346,954
1,706,874
79%
6,000
21,454
19,549
2,092 280,313
-
-
-
-
1%
0%
-
-
2019
150,000
-
14,250
2018
30,000
-
-
2019
40,000
-
3,800
Dennis Lin (1)
Matthew
Reynolds
21,710
2,295 2,542,604 2,800,519
91%
2018
27,397
-
2,603
6,000
18,123
4,674
6,000
17,210
7,793
-
-
-
-
-
-
13,064
824
-
-
13,137
892
-
8,459
-
-
98
-
-
-
-
-
-
-
-
-
234,951
0%
218,311
0%
182,571
11%
-
0%
263,481
38%
-
0%
104,447
0%
-
0%
John
Gommans (2)
2019
31,969
-
3,037
2018
15,904
-
1,511
Steve Lin (3)
2019
8,000
-
2018
-
-
-
-
2019
229,969
-
21,087
Total
2018
73,301
-
4,114
-
-
-
-
-
-
-
-
-
-
-
164,250
-
-
30,000
-
-
43,800
-
-
30,000
-
-
35,006
-
-
17,415
-
-
-
-
8,000
-
-
-
-
251,056
77,415
2019
840,605
67,649
120,000
12,000
79,858
25,256 1,346,954 2,492,322
2018
635,512
16,924
-
12,000
60,374
29,637 2,544,696 3,299,143
-
-
Non-monetary benefits include motor vehicle and travel allowances.
Due to changes in the corporate structure during the year, Iris Ren and David Orton were deemed to be KMP
from 9 October 2018. Richard Paine was deemed to be a KMP from 21 February 2019.
Nicholas Simms resigned on 28 September 2018.
(1)
(2)
(3)
Non-executive director fee was payable to BDO Australia Ltd in FY2018.
John Gomman’s services were paid by Uphamgo Australia Pty Ltd in FY18.
Steve Lin’s services were remunerated by C2 Capital Partners in FY19.
Total
(1)
(2)
(3)
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Renumeration Report (Audited)For personal use only
REMUNERATION REPORT (AUDITED)
SHARE BASED PAYMENTS
FULLY PAID ORDINARY SHARES OF BUBS AUSTRALIA LIMITED
Table C: Share-based payments granted as remuneration to KMP
Table B: Movement in the shares of Bubs held, directly, indirectly or beneficially, by each KMP, including their related parties.
Purchase of
shares
Other
change
Shares
disposed
At the end of
the year
Grant
date
Number
of
options
granted
Fair
Value of
options
granted
Exercise
price
per
option
Expiry
date
Number
vested
Number
exercised
Number
forfeited
Number
cancelled
At the
beginning of
the year
20,761,600
20,761,600
17,676,600
21,011,600
-
-
-
-
-
-
19,200,671
-
-
-
-
-
600
-
Kristy Carr (2)
Anthony
Gualdi (3)
Steve Lin (4)
Dennis Lin
Matthew
Reynolds
John
Gommans (5)
Iris Ren (6)
David Orton (6)
Richard
Paine (6)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,200,671(1)
-
-
-
-
-
-
(4,000,000)
16,761,600
-
20,761,600
(5,676,600)
12,000,000
(3,335,000)
17,676,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,200,671
19,200,671
-
-
-
-
600
-
Number
of
options
held at
the end
of the
period
4,770,810
4,770,810
Kristy
Carr
Nicholas
Simms
2019
-
-
-
-
-
2018 29/06/2018
4,770,810
(1)
$0.6836
$0.10
19/01/2021
2019
-
-
-
-
-
-
-
-
2018 14/12/2017 8,348,918
$0.7106
$0.10
19/01/2021
3,578,108
(2)
-
-
-
-
-
-
-
-
-
3,578,108
(2)
-
4,770,810
(1)
-
3,578,108
(1)
(2)
As a result of her appointment to the position of CEO, tranche 2 and tranche 3 options were offered to and accepted
by Kristy Carr in FY18. The tranche 2 and tranche 3 options issued to Nicholas Simms were considered forfeited.
3,578,108 options vested in FY18 and were subsequently cancelled in FY19. As such, these options are unable to
be exercised.
END OF REMUNERATION REPORT (AUDITED)
This directors’ report is signed in accordance with a resolution of the board of directors:
Dated: 6 September 2019
DENNIS LIN
CHAIRMAN
SYDNEY
FY18 Other change relates to shares in Bubs Australia Limited received by as part of the acquisition of
Nulac Foods Pty Ltd on 20 December 2017.
Shares are held under Carr Family Pty Limited.
Shares are held under Infant Food Business Pty Limited.
At 30 June 2019, 76,288,510 shares were held by C2 Capital Partners, of which Steve Lin is the Managing Director.
19,200,671 shares were held by J Gommans on resignation date. At resignation date, J Gommans close family
member held 19,200,671 shares as part of the acquisition of Nulac Foods Pty Ltd on 20 December 2017.
Due to the changes in the corporate structure during the year, Iris Ren and David Orton were appointed as KMP
on 9 October 2018. Richard Paine was appointed as KMP on 21 February 2019.
(1)
(2)
(3)
(4)
(5)
(6)
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201903 CORPORATE GOVERNANCE Auditor’s ReportFor personal use only 04
FINANCIAL
STATEMENTS
Profit and Loss
Financial Position
Changes in Equity
Cash Flows
Notes
Director’s Declaration
Other Information
52
53
For personal use only PROFIT AND
LOSS
Revenue
Cost of sales
Other Income
Distribution and selling costs
Employee costs
Marketing and promotion costs
Occupancy costs
Administrative and other costs
Goodwill impairment
Share based payment expense – Corporate transaction
Other expenses
Interest income
Finance cost
Loss before tax
Income tax benefit
Loss for the year after tax
Total comprehensive loss for the year
Loss per share
Basic (loss) per share (dollars)
Diluted (loss) per share (dollars)
Note
B2
B3
B5
B3
B3
C5
B4
B3
B3
B7
B6
B6
2019 $
43,914,853
(35,301,918)
1,238,845
(1,468,069)
(12,005,639)
(4,056,514)
(383,122)
(5,759,616)
-
(20,425,504)
(897,327)
455,554
(893,576)
(35,582,033)
72,797
(35,509,236)
(35,509,236)
(0.08)
(0.08)
2018 $
16,906,256
(15,232,562)
193,847
(859,956)
(12,527,112)
(855,004)
(373,458)
(3,981,122)
(48,234,760)
-
(1,061,847)
59,955
(255,422)
(66,221,185)
1,562,243
(64,658,942)
(64,658,942)
(0.20)
(0.20)
54
55
The accompanying notes form part of these financial statements.
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Profit and LossFor personal use only
FINANCIAL POSITION
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
GST receivable
Inventories
Total Current Assets
Non-Current Assets
GST receivable
Plant and equipment
Intangible assets
Investment in joint ventures
Investment in associates
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Contract liabilities
Borrowings
Provisions
Share based payment liability
Employee benefit liability - Nulac acquisition
Deferred consideration payables
Consideration payable
Total Current Liabilities
Non-Current Liabilities
Provisions
Share based payment liability
Employee benefit liability - Nulac acquisition
Deferred consideration payables
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Share based payments reserve
Foreign currency translation reserve
Accumulated losses
Total Equity
56
Note
D3
C1
C3
C12
C2
C12
C4
C5
F
G
C6
C7
C8
C9
C12
C11
E
C10
C9
C12
C11
E
B7
D5
D6
2019 $
23,291,058
15,552,802
1,636,563
1,946,169
14,552,400
56,978,992
593,477
4,213,775
91,782,992
-
1,030,470
97,620,714
154,599,706
8,931,497
926,382
2,000,000
2,357,410
1,946,169
6,700,000
5,000,000
238,095
28,099,553
553,949
593,477
-
7,347,062
12,354,026
20,848,514
48,948,067
105,651,639
189,059,150
24,878,923
1,967
(108,288,401)
105,651,639
2018 $
38,642,902
4,012,822
4,887,537
-
6,018,518
53,561,779
-
47,305
32,991,646
2,368,351
-
35,407,302
88,969,081
5,304,475
-
2,000,000
151,694
-
3,350,000
-
1,488,327
12,294,496
5,654
-
4,152,367
-
-
4,158,021
16,452,517
72,516,564
142,189,264
3,106,465
-
(72,779,165)
72,516,564
The accompanying notes form part of these financial statements.
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Financial PositionFor personal use only
CHANGES IN
EQUITY
2019
Issued
Capital $
Share Based
Payments
Reserve $
Foreign
Currency
Translation
Reserve $
Retained
Earnings $
Total equity $
2018
Issued Capital $
Share Based
Payments Reserve
$
Retained
Earnings $
Total equity $
Balance at 1 July 2018
142,189,264
3,106,465
(72,779,165)
72,516,564
Balance at 1 July 2017
15,082,928
561,769
(8,120,223)
7,524,474
-
-
-
-
-
-
-
-
(35,509,236)
(35,509,236)
1,967
-
1,967
1,967
(35,509,236)
(35,507,269)
Comprehensive income
Loss for the year
Other comprehensive
income
Total comprehensive
income
Transactions with
owners in their
capacity as owners:
Shares issued at
acquisition
D5, E
13,384,615
-
-
13,384,615
-
-
-
Issue of shares
D5, E
32,738,477
Exercise of options
D5
791,081
Capital raising costs,
net of tax
Share based payment
expense
Share based payment
expense – Corporate
transaction
D5
(44,287)
D6
D6
-
-
1,346,954
20,425,504
-
-
-
-
-
-
-
-
-
-
32,738,477
791,081
(44,287)
1,346,954
20,425,504
Balance at 30 June 2019
189,059,150
24,878,923
1,967
(108,288,401)
105,651,639
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in
their capacity as owners:
-
-
-
Shares issued at acquisition
54,529,906
Issue of shares
74,784,419
Exercise of options
500
Capital raising costs, net of tax
(2,208,489)
-
-
-
-
-
-
Issue of options
-
2,544,696
(64,658,942)
(64,658,942)
-
-
(64,658,942)
(64,658,942)
-
-
-
-
54,529,906
74,784,419
500
(2,208,489)
2,544,696
Balance at 30 June 2018
142,189,264
3,106,465
(72,779,165)
72,516,564
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
58
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Changes In EquityFor personal use only
CASH
FLOWS
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Note
Payments to Nulac vendors relating to Nulac Foods acquisition
C10, C11
Interest received
Interest paid
Net cash used in operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for subsidiaries net of cash acquired
Payments for interests in joint ventures
Proceeds from disposal of Coach House Dairy assets
(Loan)/Repayment to / from a related party
Net cash (used in) / from investing activities
Cash flows from financing activities
Proceeds from share issue
Exercise of options
Capital raising costs
Repayment of the shareholder loan from the Deloraine Dairy
vendors (pre-acquisition shareholders)
Net cash from / (used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
D4
D5
D5
D5
2019 $
40,061,416
(57,415,513)
(7,950,232)
369,910
(174,180)
(25,108,599)
(82,730)
1,709
(15,956,865)
-
500,000
600,000
(14,937,886)
32,738,477
791,081
(44,287)
(8,790,630)
24,694,641
(15,351,844)
38,642,902
23,291,058
2018 $
17,528,164
(30,271,765)
-
59,955
(90,906)
(12,774,552)
(29,025)
-
(22,763,687)
(2,235,914)
-
(600,000)
(25,628,626)
74,784,419
-
(3,045,085)
-
71,739,334
33,336,156
5,306,746
38,642,902
60
61
The accompanying notes form part of these financial statements.
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Cash FlowsFor personal use only
NOTES
A.
BASIS OF PREPARATION
CORPORATE INFORMATION
The financial statements cover Bubs Australia Limited as a consolidated entity consisting of Bubs
Australia Limited and the entities it controlled (“the Group”) for the year ended 30 June 2019. The
financial report is presented in Australian dollars, which is Bubs Australia Limited’s functional and
presentational currency.
The Group is a for-profit entity that is a listed public company limited by shares, incorporated and
domiciled in Australia. A description of the nature of the Group’s operations and its principal activities
is included in the directors’ report, which is not part of the financial report. The annual report was
authorised for issue, in accordance with a resolution of directors, on 30 August 2019. The directors
have the power to amend and reissue the financial report.
BASIS OF PREPARATION
The financial report is a general purpose financial report, which has been prepared in accordance with
Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards
Board (‘AASB’) and the Corporations Act 2001. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).
When required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial year.
The financial statements, apart from the cash flow information, have been prepared on an accruals
basis and are based on historical costs.
The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless
otherwise stated under the option available to the Group under ASIC Corporations Instrument 2016/191.
The Group applied AASB 15 Revenue from Contracts with Customer and AASB 9 Financial Instruments
for the first time. The nature and effect of the changes as a result of adoption of these new accounting
standards are described below.
There were no changes to the Group’s revenue recognition or measurement identified upon adoption
of AASB 15 Revenue from Contracts with Customer and no material impact on adoption of AASB 15
Revenue from Contracts with Customer. In addition, there would have been no material impact to the
Group’s revenue in the current period should the recognition and measurement principles of AASB 118
Revenue have been applied. Further details of accounting policies are disclosed in Note B2 Revenue.
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement
for annual periods beginning 1 July 2018 for the Group, bringing together all three aspects of the accounting
for financial instruments: classification and measurement; impairment; and hedge accounting.
The Group has applied AASB 9 Financial Instruments retrospectively, with the initial application date
of 1 July 2018.
The effect of adopting AASB 9 Financial Instruments is, as follows:
(A) CLASSIFICATION AND MEASUREMENT
Under AASB 9 Financial Instruments, the Group initially measures a financial asset at its fair value plus, in
the case of a financial asset not at fair value through profit or loss, transaction costs. Financial instruments
are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through
other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s business
model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely
payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’).
The new classification and measurement of the Group’s financial assets is, as follows:
Measured at amortised cost for financial assets that are held within a business model with the
objective to hold the financial assets in order to collect contractual cash flows that meet the SPPI
criterion. This category includes the Group’s Trade and other receivables and financial assets.
The assessment of the Group’s business models was made as of the date of initial application, 1 July
2018, and then applied retrospectively to those financial assets that were not derecognised before
1 July 2018. The assessment of whether contractual cash flows on financial assets are solely
comprised of principal and interest was made based on the facts and circumstances as at the initial
recognition of the financial assets.
There is no impact on the accounting for the Group’s financial liabilities under AASB 9 Financial
Instruments. Trade and other payables and borrowings continue to be subsequently measured at
amortised cost. AASB 9 Financial Instruments requires contingent consideration liabilities to be
treated as financial instruments measured at fair value, with the changes in fair value recognised in
the consolidated statement of profit or loss. This is consistent with how the contingent payable was
accounted for prior to adoption of AASB 9 Financial Instruments.
(B) IMPAIRMENT
The adoption of AASB 9 Financial Instruments has changed the Group’s accounting for impairment
losses for financial assets by replacing AASB 139 Financial Instruments: Recognition and
Measurement’s incurred loss approach with a forward-looking expected credit loss (ECL) approach.
AASB 9 Financial Instruments requires the Group to record an allowance for ECLs for all loans and
other debt financial assets not held at FVPL.
The adoption of the ECL requirements of AASB 9 Financial Instruments did not result in any material
changes to the Group’s impairment allowances.
Further details of accounting policies are disclosed in Note C1 Trade and other receivables.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the
financial statements requires
management to make
judgements, estimates
and assumptions. The most
significant use of judgements
and estimates has been applied
to the following areas. Refer
to the respective notes for
additional details.
Reference
Recoverability of trade and other receivables
Note C1
Valuation of inventory
Recoverability of intangibles
Recognition of deferred tax assets
Share based payments
Note C2
Note C5
Note B7
Note 12
Share based payments - Corporate transaction Note B4
Investment in associates
Acquisition of Deloraine Dairy
Note G
Note E
62
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only B.
GROUP PERFORMANCE
This section explains the results and performance of the Group for the year,
including segment information, earnings per share and taxation.
B.1
OPERATING SEGMENTS
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker (the Board) in order to allocate resources to the segment and assess its performance.
In FY18 and FY19, the Group had identified a single operating segment being the sale of nutritional food, fresh products, adult
powder and providing canning services of nutritional dairy products. Accordingly, the financial information presented in the
consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position
was the same as that presented to the chief operating decision maker.
GEOGRAPHIC INFORMATION
Net revenue (by region)
Australia
China
Other International
Total
2019 $
2018 $
35,669,345
14,077,135
7,879,277
2,552,797
366,231
276,324
43,914,853
16,906,256
The revenue information above is based on the locations of the customers.
The Group had three external customers who generated greater than 10 percent of the Group’s revenue. For the year
ended 30 June 2019, the revenue for these customers amounted to $21,183,309 (2018: $3,898,576).
B.2
REVENUE
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Type of goods and services
Sale of Infant Formula
Sale of Baby Organic Food
Sale of Adult Powder
Sale of Fresh Dairy Products
Sale of Raw Materials
Canning services
2019 $
18,936,215
2,708,393
15,611,244
5,939,231
337,304
382,466
2018 $
5,009,026
1,698,287
6,686,748
3,394,984
117,211
-
Total revenue from contracts with customers
43,914,853
16,906,256
RECOGNITION AND MEASUREMENT
AASB 15 Revenue from Contracts with Customer supersedes AASB 118 Revenue and related
Interpretations and it applies to all revenue arising from contracts with customers, unless those
contracts are in the scope of other standards. The new standard establishes a five-step model to account
for revenue arising from contracts with customers. Under AASB 15 Revenue from Contracts with
Customer, revenue is recognised at an amount that reflects the consideration to which an entity expects
to be entitled in exchange for transferring goods or services to a customer. The standard requires
entities to exercise judgement, taking into consideration all of the relevant facts and circumstances
when applying each step of the model to contracts with their customers. The standard also specifies the
accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a
contract and comparatives were not restated.
The Group elected to apply the modified retrospective method of adoption for AASB 15 Revenue from
Contracts with Customer.
Sale of products
The Group has identified the following revenue streams by product type:
Infant Formula
Baby Organic Food
Adult Powder
Fresh Dairy Products
Raw materials
For all revenue streams, the Group’s contracts with customers for the sale of products include one
performance obligation. The Group has concluded that revenue from sale of products should be
recognised at the point in time when the products are transferred to the customer, generally on delivery
of the products or when the goods are picked up at the Group’s warehouse. The Group recognises
revenue from the sale of goods measured at the fair value of the consideration received or receivable,
net of returns, volume rebates and marketing contribution.
Rebates and marketing contribution
Rebates and marketing contribution with customers are recognised as a reduction of revenue. Under
AASB 15 Revenue from Contracts with Customer, retrospective volume rebates and marketing
contribution give rise to variable consideration. To estimate the variable consideration to which it is
entitled, the Group applies the ‘most likely amount method’ for both contracts with a single volume
threshold and those with marketing contribution. The selected method that best predicts the amount of
variable consideration is primarily driven by the number of volume thresholds contained the contract
and the marketing contribution agreed with the customers. The Group then applies the requirements
on constraining estimates of variable consideration and recognises as refund liability for the expected
future rebates.
64
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
Bill and hold arrangement
A bill and hold arrangement is a contract under which the Group bills a customer for a product but the
Group retains physical possession of the product until it is transferred to the customer at a point in time
in the future. The Group identifies multiple performance obligations for its bill and hold arrangements,
including sales of products, custodial service and transportation service.
Sales of products are recognized as revenue when the products are placed into warehouse and
the customer has accepted the products because the control of the products has transferred to the
customer.
Canning services
The Group provides the canning services for nutritional dairy products. The Group recognises revenue
from the canning services measured at the fair value of the consideration received or receivable. The
revenue represents the Group’s right to an amount of consideration that is unconditional. Where the
Group controls the promised goods before transferring them to the customers, the Group is a principal
and recognises the full amount of goods and canning services as revenue when the production is
complete. Where the Group does not control the promised goods and solely provides canning services
to the customers, the Group is an agent and recognises the revenue for the canning services when the
production is complete.
Where the contracts with customers have minimum volume commitments over the term of the
agreement and the customer is not able to fulfil minimum volume commitment, the Group is entitled to
charge a penalty fee of the shortfall volume. This gives rise to variable consideration. To estimate the
variable consideration to which it is entitled, the Group applies the ‘expected value method’.
KEY ESTIMATE AND JUDGEMENT
The Group estimates variable
considerations to be included in
the transaction price for the sale of
products with volume rebates. The
Group’s expected volume rebates are
analysed on a per customer basis.
Determining whether a customer
will be likely entitled to a rebate will
depend on the customer’s historical
rebates entitlement and accumulated
purchases to date.
The Group estimates variable
considerations to be included in
the transaction price of the canning
service with minimum volume
commitments. The Group estimates
the expected volume based on
customer forecasts and accumulated
purchases to date.
66
B.3
EXPENSES
Cost of sales
Production costs
Net realisable value adjustments
Inventories written off
Total
Included in administrative and other costs are the following:
Listing and registry fees
Accountancy and legal fees
Insurance
Travel costs
Consultancy fee
Bad and doubtful debts
Depreciation and amortisation
Retainer fee with UphamGo Australia
Employee costs
Wages and salaries
Superannuation
Shared based payments
2019 $
2018 $
34,520,080
14,621,935
36,993
744,845
351,825
258,802
35,301,918
15,232,562
313,136
493,372
408,667
672,754
764,843
42,150
286,609
286,590
231,158
510,283
506,293
12,135
1,178,954
309,007
429,265
228,736
4,461,758
2,365,386
299,294
114,663
1,346,954
2,544,696
Employee benefit expense – Nulac acquisition
5,897,633
7,502,367
Total
Other expenses
12,005,639
12,527,112
Corporate transaction accounting and legal expense
897,327
1,061,847
Total
Finance costs
Interest expense
Unwinding of deferred consideration payable
Total
897,327
1,061,847
174,180
719,396
893,576
90,975
164,447
255,422
67
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
B.4
SHARE BASED PAYMENT EXPENSE – CORPORATE TRANSACTION
The Group entered into a four year agreement on 18 April 2019 with Chemist Warehouse Retail Group relating to the sale
and promotion of Bubs products in Chemist Warehouse stores, with a commencement date of 1 June 2019. Bubs has an
obligation to pay a fee to Chemist Warehouse for marketing support and promotional services. This fee will be payable by
the issuance of ordinary shares in Bubs, being a maximum of 49,426,508 fully paid ordinary shares.
An initial issue of 2,974,272 fully paid ordinary shares in Bubs to Chemist Warehouse Retail Group will be issued at the later
of the commencement date being 1 June 2019 and Chemist Warehouse stocking the products in accordance with the Heads
of Agreement. The issue of the second tranche of 9,382,355 fully paid ordinary shares will be at the earlier of the approval
at Bubs’ 2019 AGM, the Group’s capacity placement under ASX Listing Rule 7.1 or 30 April 2020.
The remaining 37,069,881 fully paid ordinary shares will be issued in three annual tranches, each of 12,356,627 shares
upon the future satisfaction of sales performance targets by Chemist Warehouse relating to the actual sales of Bubs
products in Chemist Warehouse stores over a three-year period. Tranches three to five relate to sales performance targets
for the years ending 30 June 2020, 30 June 2021 and 30 June 2022.
If the sales performance target is not achieved in any contract year but is achieved for any subsequent contract year,
fully paid ordinary shares will be issued for the subsequent contract year as well as a pro rata number of fully paid
ordinary shares for any prior contract year in which the fully paid ordinary shares were not issued based on the percentage
of the sales target that was reached for the prior contract year. In addition, if Chemist Warehouse meets the total sale
performance targets between commencement date and 30 June 2022, Bubs will issue the maximum number of shares,
less any shares already issued.
The transaction is accounted in accordance with AASB 2 Share-based Payment. The details of the fair value of the shares
to be issued are as follows:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Total $
Grant Date
18-Apr-19
18-Apr-19
18-Apr-19
18-Apr-19
18-Apr-19
Share price at grant date ($)
0.87
0.87
0.87
0.87
0.87
Time to maturity
2 months
Expected dividend
Value per share ($)
Nil
0.87
5 months -
10 months
Nil
0.87
1.1 years
2.1 years
3.1 years
Nil
0.35
Nil
0.26
Nil
0.17
KEY ESTIMATE AND JUDGEMENT
In respect of the fee payable by
Bubs to Chemist Warehouse, this is
to be offset against the subscription
price payable in respect of the issue
of shares to Chemist Warehouse.
Generally, payments to a customer
for a distinct good or service are
accounted for under AASB 15 Revenue
from Contracts with Customers. The
fee payable to Chemist Warehouse
does not represent a payment for
distinct goods or services. In addition,
given that Bubs will issue shares, this
is considered not to be consideration
payable to a customer within the
scope of AASB 15.
As a result, AASB 2 Share-based
Payments has been applied. The
Group has measured the services
received by reference to the fair value
of the equity instruments granted. In
respect of tranches three to five, this
relates to an unidentifiable good or
service and is therefore a non-vesting
conditions.
fair
ordinary
methodology,
value
shares
of
the
Estimating
fully
requires
determination of the most appropriate
valuation
which
depends on the terms and conditions
of the grant. This estimate also
requires determination of the most
appropriate inputs to the valuation
including the probability of meeting
the sales performance targets, grant
date and share price and making
assumptions about
them.
B.5
OTHER INCOME
Other income
2019 $
2018 $
98,895
61,410
Number of shares
2,974,272
9,382,355
12,356,627
12,356,627
12,356,627
49,426,508
Gain on disposal of joint ventures
937,185
-
Total value of shares ($)
2,587,616
8,162,649
4,300,106
3,225,080
2,150,053
20,425,504
Share of net profits of joint ventures accounted for using the equity method
187,464
132,437
RECOGNITION AND MEASUREMENT
Total
1,238,845
193,847
Gain on disposal of Coach House Dairy assets
15,301
-
The fair value of fully ordinary shares is recognised as a share based payment expense at grant date with a
corresponding increase in the share based payments reserve. The fair value is measured at grant date with
the Black-Scholes pricing model, taking into account the terms and conditions upon which the shares were
granted. The sales performance targets are considered to be non-vesting conditions.
When the fully ordinary shares are issued, the value of the shares will be transferred to the issued capital
with a reduction in the share based payments reserve.
Further details of the share of net profits of joint ventures accounted for using the equity method and carrying value of joint
ventures at disposal date are disclosed in Note F Joint Ventures.
Further details of the carrying value of Coach House Dairy assets at disposal date are disclosed in Note C5 Intangible Assets.
68
69
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only B.6
LOSS PER SHARE (LPS)
B.7
INCOME TAXES
2019
2018
Loss attributable to the Group used in calculating basic and diluted EPS
(35,509,236)
(64,658,942)
Consolidated profit or loss
Weighted average number of ordinary shares for basic EPS
455,620,266
325,899,681
Income tax benefit
Basic LPS (dollars)
Diluted LPS (dollars)*
(0.08)
(0.08)
(0.20)
(0.20)
Current tax
Deferred tax
2019 $
2018 $
-
-
72,797
1,562,243
* The Group has granted 6,277,355 options to employees that could potentially dilute basic earnings per share in the
future but were not included in the calculation above because they are anti-dilutive for the period(s) presented.
Income tax benefit reported in the statement of profit or loss
72,797
1,562,243
RECOGNITION AND MEASUREMENT
Income tax benefit calculated at 27.5% (2018: 27.5%)
(9,785,059)
(18,210,826)
Numerical reconciliation of income tax benefit and tax at the statutory rate
Accounting loss before income tax benefit
(35,582,033)
(66,221,185)
Basic EPS is calculated as net loss attributable to the group divided by the weighted average number of
ordinary shares outstanding during the financial year.
Diluted EPS 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.
70
Tax effect of amounts not taxable in calculating income tax benefit:
Prior year adjustment
-
(132,456)
Share profit of joint ventures
(51,552)
(36,390)
Goodwill impairment
Share based payments
-
13,264,559
370,412
699,791
Share based payment - Corporate transaction
5,617,014
-
Non-deductible acquisition cost
31,407
292,008
Employee benefit liability - Nulac acquisition
1,621,849
2,069,879
Consideration payable fair value movement
-
45,223
Deferred consideration payable fair value movement
197,834
-
Income tax losses not recognised
1,865,952
431,576
Other
Income tax benefits
59,346
14,393
(72,797)
(1,562,243)
71
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
DTL
DTA
KEY ESTIMATE AND JUDGEMENT
Movement in temporary differences
Provisions
At 30 June 2017
Deferred income tax (expense) / benefit
Acquired through business combination
Allowable tax deduction recognised in
owner equity
At 30 June 2018
Deferred income tax (expense) / benefit
Acquired through business combination
Allowable tax deduction recognised in
owner equity
At 30 June 2019
-
-
-
-
-
-
-
-
-
Intangible
assets
Capital
raising costs
Other
Tax
losses*
Total
(199,338)
78,135
(2,200,000)
-
-
-
-
837,095
-
-
(199,338)
57,448
1,426,660
1,562,243
-
-
-
-
(2,200,000)
837,095
(2,321,203)
837,095
57,448
1,426,660
-
(22,000)
(12,426,823)
-
-
-
-
103,427
(8,630)
72,797
-
-
-
-
(12,426,823)
-
(12,522,749)
837,095
160,875 1,418,030
(12,354,026)
*As at 30 June 2019, deferred tax assets of $1,418,030 (FY18: $1,426,660) relating to recognised tax losses were recognised
and offset against the deferred tax liability from taxable temporary differences.
RECOGNITION AND MEASUREMENT
The income tax expense or benefit for the year is the tax payable on that year’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 years, 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.
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.
Bubs Australia Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group
(‘TCG’) and Bubs Australia Limited is the head entity of the tax consolidated group. Current and deferred tax
amounts and assumes those from subsidiaries in the TCG are recognised within the head entity.
Delaine Dairy is not part of the TCG, the current and deferred tax amounts have been recognised at its own
entity level.
RECOVERY OF DEFERRED TAX ASSETS
Judgement is required to be made
by the group in assessing whether
deferred
tax assets and certain
deferred tax liabilities are recognised
on the consolidated statement of
financial position. As detailed above,
in the year ended 30 June 2019, Bubs
has recognised deferred tax assets of
$94,797 (2018: $1,484,108) primarily
relating to temporary differences
impacting the profit or loss. Deferred
tax assets are recognised for unused
tax losses, unused tax credits and
temporary differences,
deductible
to the extent that it is probable that
future taxable profits will be available
against which they can be used.
Probable is considered more likely
than not.
Judgement is required when deferred
tax assets are reviewed at each
reporting date. Deferred tax assets
may be reduced to the extent that it is
no longer probable that future taxable
profits will be available.
future
Assumptions about the generation
taxable profits depend
of
on management’s estimates of
future cash flows. These depend on
estimates of future sales, operating
costs, capital expenditure, dividends
and other
capital management
transactions. Judgements are also
required about the application of
legislation.
income tax
Changes in expectations for the future
performance of the business may
impact the amount of deferred tax
assets recoverable and recognised
on the statement of financial position
and the amount of other tax losses
and temporary differences not yet
recognised. At 30 June 2019, the Group
had $8,988,100 (2018: $6,100,064) of
unrecognised tax losses. The Group is
currently undergoing an assessment
of the availability of these losses
to
tax
the Group. The potential
benefit relating to future tax losses,
in addition to that detailed above,
has not being recognised due to the
history of recent losses incurred by
the Group.
72
73
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only C.
OPERATING ASSETS AND LIABILITIES
This section provides details of the Group’s operating assets, and liabilities incurred as
a result of trading activities, used to generate the Group’s performance.
C.1
TRADE AND OTHER RECEIVABLES
Trade debtors
2019 $
2018 $
8,311,802
2,855,303
Allowance for doubtful debt
(3,755)
(1,266)
Loan to Uphamgo Australia Pty Ltd
-
600,000
Deferred consideration receivable
3,493,000
-
Other receivables
956,828
466,286
Working capital adjustment
2,794,927
92,499
RECOGNITION AND MEASUREMENT
The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. Trade receivables are measured at the transaction price determined
under AASB15 Revenue from Contracts with Customers. Further details are disclosed in Note B2 Revenue.
Financial instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or
fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s
business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely
payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’).
The Group’s trade and other receivables and financial assets are measured at amortised cost that are held
within a business model with the objective to hold the financial assets in order to collect contractual cash flows
that meet the SPPI criterion.
The Group adopted a forward-looking expected credit loss (ECL) approach for impairment losses for ECLs for
financial assets not held at FVPL.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the
asset’s original effective interest rate.
15,552,802
4,012,822
KEY ESTIMATE AND JUDGEMENT
Working capital adjustment relates to the acquisition of
Deloraine Dairy. Further details of the business combination
are disclosed in Note E Acquisition of subsidiary. In FY18,
the working capital adjustment relates to the acquisition of
Nulac Foods Pty Ltd. The balance was received in full in FY19.
Further details are disclosed in the FY18 annual report.
Deferred consideration receivable relates to the cash
consideration of the disposal of Bubs’ 49.9% interest in
UphamGo Australia Pty Ltd, Cambria Management Company
Pty Ltd, Cambria Unit Trust and New Zealand Nutritional Goat
Company Limited. The cash consideration is deferred to 20
February 2020.
The Group’s exposure to credit risks related to trade and
other receivables are disclosed in Note D2 Financial risk
management.
and
For trade and other receivables, the
Group has applied the standard’s
simplified
has
approach
calculated ECLs based on lifetime
expected credit losses. The Group has
established a provision matrix that is
based on the Group’s historical credit
loss experience, adjusted for forward-
looking factors specific to the debtors
and the economic environment.
The Group considers a financial asset
in default when internal or external
information indicates that the Group
is unlikely to receive the outstanding
contractual amounts in full before
taking
into account any credit
enhancements held by the Group.
74
75
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
C.2
INVENTORIES
Raw materials
2,624,457
499,388
2019 $
2018$
Finished goods at cost
11,927,943
5,519,130
14,552,400
6,018,518
The amount of inventory that was written off during the period was $744,845 (2018: $258,802).
An adjustment of $36,993 (2018: $351,825) was made on inventories carried at net realisable value.
$30,668,221 (2018: $13,237,933) inventories were recognised as an expense during the year.
RECOGNITION AND MEASUREMENT
Inventories are valued at the lower of cost and net realisable value. Cost is calculated using weighted average
methods. Net realisable value represents the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale.
C.3
OTHER ASSETS
Prepayments and other assets
Deposits paid
Inventories paid in advance
Security bond
2019 $
239,219
596,939
426,717
373,688
2018 $
703,595
-
4,183,942
-
1,636,563
4,887,537
RECOGNITION AND MEASUREMENT
Inventories paid in advance
Inventories paid in advance represent payments for purchases of finished goods prior to ownership passing
to the Group.
Deposits paid
Deposits paid represent payments to suppliers in relation to goods received or services rendered. These
deposits are refundable to the Group.
Security bond
Security bond represents payments to the landlord securing the obligations of the Group under the lease
contract of Deloraine Dairy site.
KEY ESTIMATES AND JUDGEMENTS
RECOVERY OF INVENTORY
Estimation of net realisable value
includes assessment of expected
future turnover of inventory held for
sale and the expected future selling
price of such inventory. Changes in
trading and economic conditions,
in country specific
and changes
these
regulations, may
estimations
in future periods.
impact
76
77
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
C.4
PLANT AND EQUIPMENT
C.5
INTANGIBLE ASSETS
Building and
improvements $
Production
equipment $
Motor Vehicle $
Office
equipment $
Total $
Cost
As at 1 July 2017
Additions
Disposals
As at 30 June 2018
Additions
Acquisition of a
subsidiary
Disposal
-
-
-
-
-
108,494
14,263
(49,027)
73,730
45,777
-
-
-
-
-
1,371,300
2,707,170
25,000
-
-
-
32,001
13,308
-
45,309
36,950
70,730
(9,320)
140,495
27,571
(49,027)
119,039
82,727
4,174,200
(9,320)
As at 30 June 2019
1,371,300
2,826,677
25,000
143,669
4,366,646
Accumulated
Depreciation
As at 1 July 2017
Depreciation
Disposal
As at 30 June 2018
-
-
-
-
Depreciation
(16,170)
Disposal
-
(66,201)
(33,370)
47,509
(52,062)
(50,102)
-
As at 30 June 2019
(16,170)
(102,165)
Net book value
As at 30 June 2018
-
-
-
21,668
-
-
-
-
(416)
-
(416)
-
-
As at 30 June 2019
1,355,130
2,724,512
24,584
(8,268)
(11,404)
-
(19,672)
(22,483)
8,035
(34,120)
-
25,637
109,549
(74,469)
(44,774)
47,509
(71,734)
(89,172)
8,035
(152,871)
-
47,305
4,213,775
RECOGNITION AND MEASUREMENT
Plant and equipment are stated at historical cost less
accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the
acquisition of the items.
Depreciation is calculated on a straight-line basis to write
off the net cost of each item of plant and equipment over
their expected useful lives as follows:
Building and improvements
17-19 years
Production equipment
12-19 years
Motor Vehicle
Office equipment
12 years
2-13 years
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.
An item of 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.
Plant and equipment acquired in the Deloraine Dairy
acquisition was initially recognised at cost, being the fair
value at the acquisition date. Further details are disclosed
in Note E Acquisition of subsidiary.
Goodwill
$
Brand
name $
Licence
$
Priority
right $
Customer
contract/
list $
Recipes
$
Patents,
trademarks
and
software $
Total $
Cost
As at 1 July 2017
1,478,251
591,634
Acquisition of
a subsidiary
72,212,166 4,500,000
As at 30 June 2018 73,690,417
5,091,634
-
-
-
265,731
47,740
52,188
2,434,554
3,500,000
-
-
80,212,166
3,765,731
47,740
52,188
82,647,710
-
-
-
-
Acquisition of
a subsidiary
16,924,256
Addition
Disposal
-
-
-
-
(400,000)
38,489,095
3,094,033
-
-
1,800,000
-
-
(100,000)
-
-
-
58,444
58,565,828
-
-
1,800,000
(500,000)
As at 30 June 2019 90,614,673 4,691,634
38,489,095 1,800,000 6,759,764
47,740
110,632
142,513,538
Amortisation and impairment
As at 1 July 2017
(904,180)
Amortisation
-
Impairment
(48,234,760)
As at 30 June 2018
(49,138,940)
Amortisation
Disposal
-
-
As at 30 June 2019 (49,138,940)
Net book value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(204,048)
(36,649)
(15,220)
(1,160,097)
(238,639)
(9,547)
(13,021)
(261,207)
-
-
-
(48,234,760)
(442,687)
(46,196)
(28,241)
(49,656,064)
(349,901)
(300,000)
(420,466)
(1,544)
(17,872)
(1,089,783)
-
-
15,301
-
-
15,301
(349,901)
(300,000)
(847,852)
(47,740)
(46,113)
(50,730,546)
At 30 June 2018
24,551,477 5,091,634
-
-
3,323,044
1,544
23,947
32,991,646
At 30 June 2019
41,475,733
4,691,634
38,139,194
1,500,000
5,911,912
-
64,519
91,782,992
On 30 June 2019, the Group disposed of Coach House Dairy
related assets with a total carrying amount of $484,699 for
cash consideration of $500,000. The gain on the disposal
was recognised as part of other income in the statement of
profit or loss and disclosed in Note B5 Other Income.
Brand name, customer contract/list, licence, priority right
and goodwill are allocated to the following cash generating
units (CGUs) for the purposes of impairment testing: Infant
Food Co $1,165,712 (2018: $1,174,297); Nulac Foods
$32,457,159 (2018: $31,791,858) and Deloraine Dairy
$58,095,603 (2018: Nil).
78
79
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
RECOGNITION AND MEASUREMENT
Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised
at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class
of intangible assets.
GOODWILL
Goodwill is recognised on business acquisitions, representing the excess of the fair value of the consideration
transferred over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities of the business recognised at the date of acquisition. Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any accumulated impairment losses. For the purposes of
impairment testing, goodwill acquired in a business combination is, from the date of acquisition, allocated to
the Group’s cash-generating units that are expected to benefit from the synergies of the combination.
BRAND NAMES
IMPAIRMENT TESTING FOR CASH-GENERATING UNITS (CGUS) INCLUDING GOODWILL
GOODWILL AND BRAND NAMES ALLOCATION
For the purposes of impairment testing, goodwill and brand names are allocated to the Group’s CGUs which represent the
lowest level within the Group at which goodwill and brand names are monitored by internal management and are no higher
than an operating segment as follows:
Infant Food Co
Nulac Foods 4
Deloraine Dairy
2019
2018
1,165,705
1,165,705
28,077,406
28,477,406
16,924,256
-
46,167,367
29,643,111
Brand names are considered to have an indefinite life and are not amortised. As at 30 June 2019, these assets
were tested for impairment.
4 Goodwill and brand names allocated to Nulac Foods in FY18 were $76,712,166. An impairment of $48,234,760 was recognised in FY18.
LICENCE
The licence represents the CNCA (Certification and Accreditation Administration of the People’s Republic of
China) licence that Deloraine Dairy currently holds. The licence is amortised on a straight-line basis over the
period of the expected benefit, being the definite life of 22 years.
CUSTOMER CONTRACT LIST
Customer contract/lists acquired in a business combination are amortised on a straight-line basis over the
period of their expected benefit, being the definite life of 10 years.
PRIORITY RIGHT
Priority right represents the priority right of processing and manufacturing goat milk at Uphamgo Australia.
The amount is amortised on a straight-line basis over the two year agreement with the commencement date
of 28 February 2018.
Further details on goodwill, customer list and licence recognition arising from Deloraine Dairy acquisition are
disclosed in Note E Acquisition of subsidiary.
RECOGNITION AND MEASUREMENT
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less
costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs of disposal, recent market transactions are taken into account.
If no such transactions can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair
value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied
to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised on the consolidated statement of profit or loss and
other comprehensive income.
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KEY ESTIMATES AND JUDGEMENTS
SENSITIVITY TO CHANGE IN ASSUMPTIONS
GOODWILL AND INTANGIBLES
Judgements are made with respect
to identifying and valuing intangible
assets on acquisitions of new
businesses. The Group assesses
intangibles
whether goodwill and
lives are
indefinite useful
with
impaired at least annually. These
calculations involve judgements to
estimate the recoverable amount of
the cash-generating units to which
the goodwill and intangibles with
indefinite useful lives are allocated.
ANNUAL IMPAIRMENT TESTING AT 30 JUNE 2019
The recoverable amount of the CGUs
to which goodwill and indefinite life
brand names were allocated has
been determined on a value in use
basis using a discounted cash flow
approach, and projections based
on financial budgets and five-year
forward plans approved by the Board.
KEY ASSUMPTIONS
2019
2018
Infant Food
Co
Nulac
Foods
Deloraine
Dairy
Infant Food
Co
Nulac
Foods
Deloraine
Dairy
Discount rate
(post tax)
Discount rate
(pre tax)
Terminal
growth
12.90%
11.90%
11.91%
12.90%
11.90%
18.50%
16.40%
17.01%
18.50%
16.40%
2.50%
2.50%
2.50%
2.50%
2.50%
-
-
-
The calculation of value in use for the above CGUs is most
sensitive to the following assumptions:
Gross margins
Discount rates
Revenue growth during the forecast period
Growth rates used to extrapolate cash flows beyond
the forecast period (terminal growth rate)
Gross margins – Gross margins are based on budgeted
margins for FY20, and conservative estimates for future
years, which have been adjusted where appropriate
to account
trading conditions.
Consideration has been given to the growth profile of each
CGU when forecasting future margin returns.
for expected
future
Discount rates – Discount rates represent the risks specific
to each CGU, taking into consideration the time value of
money and individual risks of the underlying cash flows
expected from the CGU being assessed. CGU specific
risk is incorporated by applying individual beta factors.
The discount rate calculation is based on the specific
circumstances of each CGU and its operating segments and
is derived from its weighted average cost of capital (WACC).
The WACC takes into account both debt and equity. The cost
of equity is derived from the expected return on investment
by the CGU’s investors. The cost of debt is derived from the
interest rate of the CGU’s working capital facility.
Revenue growth – Revenue projections have been
constructed with reference to the FY19 results and five-
year forward-looking plans with the earlier years being
estimated through specific volume assumptions based on
known opportunities, while years thereafter are adjusted
for performance trends across the particular regions.
A conservative approach has been adopted by the Group
to reduce the risk of inflating estimated recoverable
values. Management assesses the reasonableness of the
growth assumptions by reviewing the achieved growth of
comparable entities in the nutritional products industry.
Terminal growth rate – A terminal growth rate of 2.5%
(2018: 2.5%) has been used for future cash flow growth
beyond the five-year forecast period for all CGUs. This is a
conservative rate when compared to annual growth rates
during the forecast period.
The terminal value (being the total value of expected cash
flows beyond the forecast period) is discounted to present
values using the discount rate specific to each CGU.
As a result of this testing, the recoverable amount of each
CGU exceeded its carrying amount and no impairment
loss has been recognised on intangible assets that are
subject to goodwill impairment testing. (2018: $48,234,760
goodwill impairment on Nulac Foods CGU).
Management has identified that a reasonably possible
change in three key assumptions could have an impact
on the recoverable amount of each CGU. The following
table shows the impact on the recoverable amount. No
reasonably possible change as described below would
result in an impairment to any CGU:
Impact on recoverable amount
% change
Infant Food Co
Nulac Foods
Deloraine Dairy
Discount rate
Budgeted gross revenue growth
Budgeted gross margin
0.5%
-5%
-1%
(8,572,078)
(3,356,174)
(4,572,656)
(21,908,924)
(20,937,740)
(5,701,309)
(11,986,290)
(2,991,830)
(3,251,692)
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TRADE AND OTHER PAYABLES
Trade payables
Other payables
Customer deposit
Priority right payable
Payable to associates
2019 $
2018 $
4,152,617
4,231,394
1,345,667
1,073,081
602,743
1,800,000
1,030,470
-
-
-
C.7
CONTRACT LIABILITIES
Contract liabilities
2019 $
926,382
926,382
2018 $
-
-
$125,013 included in contract liabilities at the Deloraine Dairy acquisition date was recognised as revenue during the year.
Further details of payable to associates relating to Bubs Brand Management is disclosed in Note G Associates.
Contract liabilities are obligations to transfer goods or services to a customer for which the Group has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration
before the Group transfers goods or services to the customer, contract liabilities are recognised when the
payment is made or the payment is due (whichever is earlier). Income received in advance are recognised as
revenue when the Group satisfies the performance obligations under the contract.
8,931,497
5,304,475
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost
due to their short-term nature, and they are not discounted. They represent liabilities recognised when the
Group becomes obligated to make future payments resulting from the purchase of goods and services. The
amounts are unsecured.
The carrying value of trade and other payables approximates their fair value.
Customer deposit
Customer deposits are cash considerations received from customers in relation to the packaging service to
be provided by the Group after obtaining the approval from the People’s Republic of China on its brand slot
application (“SAMR registration”). Deposits are refundable to the customer.
Priority right payable
Priority right payable represents the amount payable to Uphamgo Australia to secure the priority of processing
and manufacturing goat milk at Uphamgo Australia during the term of the agreement.
C.8
BORROWINGS
Borrowings
2019 $
2018 $
2,000,000
2,000,000
2,000,000
2,000,000
Nulac Foods Pty Ltd has a working capital facility with National Australia Bank. The aggregate amount of $2 million was
fully drawn at 30 June 2019. Bubs Australia Limited is the guarantor of the facility.
There is no impact on the accounting for the Group’s financial liabilities under AASB 9 Financial Instruments.
RECOGNITION AND MEASUREMENT
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.
The carrying value of borrowings approximates their fair value.
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C.9
PROVISION
Current
Annual leave and long service leave
Lease liability
Supplier contract liability
Other provision
Non - Current
Long service leave
Lease liability
Make good provision
2019 $
2018 $
291,870
29,924
1,800,000
235,616
2,357,410
25,505
441,198
87,246
553,949
151,694
-
-
-
151,694
5,654
-
-
5,654
RECOGNITION AND MEASUREMENT
Annual leave and long service leave
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their
nominal values using the remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are
measured as the present value of the estimated future cash outflows to be made by the Group in respect of
services provided by employees up to the reporting date.
Supplier contract liability
Deloraine Dairy entered into a manufacturing agreement which has minimum volume commitments over the
term of the agreement. Where Deloraine Dairy is not able to fulfil minimum volume commitments, it is required
to make production shortfall payments. A provision is raised when production thresholds have not been met.
Lease liability
The Group records the lease incentives as a liability that are expensed over the lease term as a reduction of rental
expense. The liability has been calculated based on the difference between the market rate and the rate paid.
Other provision
An employee costs provision relating to the expected termination settlement with the previous CEO.
C.10
CONSIDERATION PAYABLE
As part of the acquisition of Nulac Foods in FY18, a deferred consideration of up to $1,488,327 is payable in cash in the
event that any of the 9,417,350 options outstanding as at 20 December 2017 are exercised, to adjust for the dilution of the
consideration shares issued to Nulac vendors. Payments are due to be made within 30 days of the relevant option exercise
date. During the year, 7,910,805 options were exercised. As at 30 June 2019, a deferred consideration of up to $238,095 is
payable in cash in the event that the remaining 1,506,545 options are exercised.
C.11
EMPLOYEE BENEFIT LIABILITY – NULAC ACQUISITION
Current
Non - Current
2019 $
2018 $
6,700,000
3,350,000
-
4,152,367
As part of Nulac Foods acquisition in FY18, a total amount of up to $13.4 million was payable by the Group in relation to
Uphamgo Australia Pty Ltd upon the future satisfaction of certain performance targets, including production, specification,
quality assurance and continuous employment related targets. This amount includes up to $6.7 million payable following
the achievement of the performance targets in the period ending 20 December 2018, and up to $6.7 million payable
following the achievement of the performance targets in the period ending 20 December 2019. These payments are not
contingent consideration as defined in the Australian Accounting Standards, and instead are accounted for in accordance
with AASB119 – Employee Benefits, as expenses relating to future activities including continuing services of employees of
Uphamgo Australia Pty Ltd.
$7,502,367 representing the employee benefit liability at 30 June 2018 was recognised in FY18. During the year, the Group
paid $6,700,000 to Nulac vendors following the achievement of the performance targets in the period ending 20 December
2018. The remaining $6,700,000 is payable following the achievement of the performance targets in the period ending 20
December 2019.
C.12
SHARE BASED PAYMENT LIABILITY
Current
Non - Current
2019 $
1,946,169
593,477
2018 $
-
-
As part of the Chemist Warehouse transaction, the Group is required to pay cash for the GST component relating to the
shares to be issued to Chemist Warehouse. This has been presented as a share based payment liability. This amount is
expected to be fully recoverable and a corresponding GST receivable has been recorded.
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D.
CAPITAL AND FINANCIAL RISK MANAGEMENT
This section outlines how the Group manages its capital structure and its exposure to financial risk, and provides details of its
balance sheet liquidity and access to financing facilities.
D.1
CAPITAL MANAGEMENT
The Group’s objectives when managing capital is to safeguard
its ability to continue as a going concern so that in due course it
can provide returns for stakeholders and maintain an optimum
capital structure.
In order to maintain or adjust the capital structure, the Group
manages the level of debt such that it remains prudent and
facilitates the execution of the operational plan and provides
flexibility for growth.
D.2
FINANCIAL RISK MANAGEMENT
Exposure to credit risk, foreign currency risk and liquidity risk
arises in the normal course of the Group’s business.
As at 30 June 2019 there were no derivative financial
instruments in place. Specific risk management objectives and
policies are set out below.
The Group’s financial risk management processes and
procedures seek to minimise the potential adverse impacts
that may arise from the unpredictability of financial markets.
Policies and procedures are reviewed periodically to reflect
both changes in market conditions and changes in the nature
and volume of Group activities.
The Group uses various methods to measure different types
of risk exposures. These methods include ageing analysis
for credit risk, and sensitivity analysis in the case of foreign
exchange risks and equity price risk.
In 2019, as part of Deloraine Dairy acquisition, a loan with
the previous shareholders of $8,790,630 was repaid in full
by the Group.
CREDIT RISK MANAGEMENT
Credit risk is the risk of financial loss to the Group if a customer or the counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers.
Maximum exposures to credit risk at balance date:
2019 $
2018 $
Cash and cash equivalent (counterparty risk)
23,291,058
38,642,902
Trade receivables (customer credit risk)
8,308,047
2,854,037
Deferred consideration receivable
Working capital adjustment
Loan to Uphamgo Australia Ltd
Other receivables
88
3,493,000
2,794,927
-
956,828
-
-
600,000
558,785
38,843,060
42,655,724
COUNTERPARTY RISK
At balance date, the Group’s bank
accounts were held with National
Australia Bank Limited, Australia and
New Zealand Bank Limited and
Commonwealth Bank of Australia.
The Group does not have any
other concentrations of counterparty
credit risk.
CUSTOMER CREDIT RISK
The Group’s exposure to customer
credit risk is influenced mainly by
the individual characteristics of each
customer. The majority of sales are
to major retailers with established
creditworthiness and minimum levels
of default. Other sales are made cash
on delivery.
are
customers
for
analysed
New
individually
creditworthiness,
taking into account credit ratings where
available, financial position, previous
trading experience and other factors.
In monitoring customer credit risk,
customers are assessed individually
OTHER CREDIT RISK
by their debtor ageing profile. Monitoring of receivable
balances on an ongoing basis minimises the exposure to
bad debts.
There is significant concentration of credit risk within the
Group. In FY19, 24% of sales were to one customer (2018:
23% sales to one customer). There is no history of default
for this customer.
For trade receivables and contract assets, the Group
has applied the standard’s simplified approach and has
calculated ECLs based on lifetime expected credit losses.
The Group considers a financial asset in default when
internal or external information indicates that the Group
is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements
held by the Group.
The Group is exposed to related party
credit risk and other credit risk. In
monitoring related party credit risk and
other credit risk, the related parties and
counterparties are analysed individually
for creditworthiness, taking into account
credit ratings where available, financial
position and other factors.
Ageing of trade receivables at the reporting date:
Neither past due nor default
Past due:
Past due up to 30 days
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 90 days
2019 $
2018 $
3,447,415
1,642,546
4,747,038
1,048,085
99,502
1,039
13,053
81,418
46,304
35,684
8,308,047
2,854,037
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
Movement in allowance for doubtful debts
INTEREST RISK MANAGEMENT
Allowance of doubtful debts
Balance at beginning of the year
Amount charged to the statement of comprehensive income
Provision utilised
Balance at the end of year
MARKET RISK
2019 $
2018 $
1,266
42,150
(39,661)
3,755
5,000
12,135
(15,869)
1,266
Market risk is the risk that changes in
market prices will affect the Group’s
income or the value of its holdings in
instruments. The Group’s
financial
activities expose
it primarily to the
financial risks of changes in foreign
currency exchange rates to the AUD dollar.
Market risk exposures are monitored
by management on an ongoing basis
and there has been no change during
the year to the Group’s exposure to
market risks or the manner in which
it manages and measures risk.
FOREIGN CURRENCY RISK MANAGEMENT
The Group enters into the transaction in Australia, New
Zealand, China and Europe and is exposed to currency
risk arising from movements in the currencies of those
countries against the AUD dollar.
on the profit or loss of the Group based on closing exchange
rates as at 30 June, applied to the Group’s financial assets/
(liabilities) at 30 June.
Expressed in AUD dollars, the table below indicates material
exposure and sensitivity to movements in exchange rates
Exchange rates and assets and liabilities held in foreign
currencies will fluctuate over the course of normal operations.
The analysis is performed consistently from year to year.
2019
Movement on exchange rate
NZ Dollar
USD
RMB
Euro
Net exposure
2018
Movement on exchange rate
NZ Dollar
USD
RMB
Net exposure
90
Net exposure on
reporting date
(Payable)/Receivable
Impact on pre-tax profit / (loss)
$
(271,771)
14,761
59,414
196,045
1,551
+10% $
24,706
(1,342)
(5,401)
(17,822)
(141)
-10% $
(30,197)
1,640
6,602
21,783
(172)
Net exposure on
reporting date
Impact on pre-tax profit / (loss)
$
510,189
23,424
139,624
673,237
+10% $
(49,785)
(2,876)
(12,693)
(65,354)
-10% $
52,527
3,515
15,514
71,556
The Group’s main interest rate risk arises from borrowings, which expose the Group to cash flow interest rate risk. The risk is
considered immaterial.
LIQUIDITY RISK MANAGEMENT
Liquidity risk is the risk that the Group will be unable to
meet its obligations as they fall due. This risk is managed by
establishing a target minimum liquidity level, ensuring that
ongoing commitments are managed with respect to forecast
available cash inflows.
The Group holds significant cash reserves which enable it to
meet its obligations as they fall due, and to support operations
in the event of unanticipated external events.
The Group has one working capital facility with $2,000,000
(2018: $2,000,000) fully drawn at 30 June 2019.
Contractual undiscounted maturities of financial liabilities:
2019
Carrying
amount
Total
2 months
or less
2-12
months
1-2 years
2-5 years
More than
5 years
Contractual cashflows
Non-derivative financial liabilities
Consideration
payable
Employee benefit
liability - Nulac
acquisition
238,095
238,095
6,700,000
6,700,000
Deferred
consideration payable
12,347,062
12,347,062
Priority right payable
1,800,000
1,800,000
-
-
-
-
Trade and other
payables
5,498,284
5,498,284
5,498,284
Borrowings
2,000,000
2,000,000
2,000,000
Payable to associates
1,030,470
1,030,470
1,030,470
238,095
6,700,000
-
-
-
-
5,000,000
3,912,251
3,434,811
1,800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Supplier contract
liability
1,800,000
1,800,000
1,000,000
800,000
31,413,911 31,413,911
9,528,754 14,538,095
3,912,251
3,434,812
2018
Carrying
amount
Total
2 months
or less
2-12
months
1-2 years
2-5 years
More than
5 years
Non-derivative financial liabilities
Contractual cashflows
Consideration
payable
Trade and other
payables
1,488,327
1,488,327
-
1,488,327
5,304,475
5,304,475
5,304,475
Borrowings
2,000,000
2,000,000
2,000,000
-
-
8,792,802
8,792,802
7,304,475
1,488,327
-
-
-
-
-
-
-
-
-
-
-
-
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CASH AND CASH EQUIVALENTS
D.4
CASH FLOW INFORMATION
2019 $
2018 $
Reconciliation of after tax profit with net cash flows from operating activities.
Cash at bank and on hand
23,291,058
38,642,902
23,291,058
38,642,902
Interest is earned at floating rates based on daily bank deposit rates.
RECOGNITION AND MEASUREMENT
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and
short-term deposits with an original maturity 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.
The carrying value of cash and cash equivalents approximates their fair value.
2019 $
2018 $
(Loss) after income tax benefits for the year
(35,509,236)
(64,658,942)
Income tax benefits
Share-based payments
(72,797)
(1,562,242)
1,346,954
2,544,696
Share-based payments - Corporate transaction
20,425,504
-
Unwinding of deferred consideration payable
719,396
164,447
Employee benefit expense – Nulac acquisition
5,897,633
-
Depreciation and amortisation
1,178,954
309,007
Goodwill impairment
Equity accounting profit
Foreign currency reserve
Gain on disposal of JVs
Gain on disposal of Coach House Dairy assets
Gain on disposal of plant and equipment
-
48,234,760
(187,464)
(132,437)
1,967
(937,185)
(15,301)
(424)
-
-
-
-
Decrease / (increase) in trade and other receivables
(5,578,137)
(911,915)
Decrease / (increase) in inventories
(7,423,338)
(1,137,101)
Decrease / (increase) in other assets
4,272,024
(4,413,480)
Increase / (decrease) in trade and other payables
(9,613,288)
8,809,137
Increase/ (decrease) in provisions
386,139
(20,482)
Net cash outflow from operating activities
(25,108,599)
(14,336,794)
92
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only D.5
SHARE CAPITAL
D.7
OPERATING LEASE COMMITMENTS
2019
2018
Shares
$
Shares
$
The Group has entered into operating leases for office and industrial premises. All lease contracts contain market review
clauses in the event that the Group exercises its option to renew.
Movement in share capital
NON-CANCELLABLE OPERATING LEASE PAYMENTS
At the end of the reporting period, the future minimum lease payments under non- cancellable operating leases are payable
as follows:
Balance at beginning of the year
436,194,415
142,189,264
238,820,888
15,082,928
Issue of shares as part
of acquisition
15,384,615
13,384,615
76,802,684
54,529,906
Exercise of options
7,910,805
7,910,805
5,000
500
Placement of shares
-
-
8,331,933
4,999,160
Share purchase plan
50,100,222
32,738,477
112,233,910
69,785,259
Less than one year
Share issue transactions costs
-
(44,287)
-
(2,208,489)
Balance at end of year
509,590,057
189,059,150
436,194,415
142,189,264
Between one and five years
More than five years*
Fully paid ordinary shares carry one vote per share and carry right to dividends.
Fully paid ordinary shares have no par value.
Further details on corporate transaction equity expense are disclosed in Note B3 Expenses.
*Balance disclosed does not include the exercising of lease extension options.
2019 $
536,019
1,992,140
1,270,878
2018 $
117,603
137,209
-
3,799,037
254,812
D.6
RESERVE
Balance at the beginning of the year
Share based payment
2019 $
2018 $
3,106,465
561,769
1,346,954
2,544,696
Share based payment – Corporate transaction
20,425,504
-
Balance at the end of the year
24,878,923
3,106,465
SHARE BASED PAYMENTS RESERVE
The equity settled payments reserve
is used to record the value of share-
based payments. Further details
I2 Share
are disclosed
in Note
based payments and Note B4 Share
based payment expense – Corporate
transaction.
RECOGNITION AND MEASUREMENT
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement at inception date, whether 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, even if that right is not explicitly
specified in an arrangement.
GROUP AS A LESSEE
Leases under which a significant proportion of the risks and
rewards remain with the lessor are classified as operating
leases. Operating lease payments are recognised as an
operating expense in the statement of profit or loss and
other comprehensive income on a straight line basis over
the lease term. Operating lease incentives are recognised
as a liability when received and subsequently reduced by
allocating lease payments between rental expense and
reduction of the liability.
D.8
CONTINGENT LIABILITIES
As at 30 June 2019, there were no material contingent liabilities (2018: $nil).
94
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
E.
ACQUISITION OF SUBSIDIARY
E.1
ACQUISITION OF SUBSIDIARY
On 18 April 2019, the Group acquired 100% of the issued shares in Australia Deloraine Dairy Group Limited, one of 15
licenced canning facility in Australia authorised by the Certification and Accreditation of China (CNCA) for physical
importation into China under regulatory requirements administered by State Administration for Market Regulation (SAMR),
with the following purchase consideration:
As at 1 July 2018
Liability arising on acquisition
Unwinding of the deferred consideration payable recognised in profit or loss
$
16,209,370
11,627,666
(2,794,927)
13,384,615
38,426,724
At 30 June 2019, the deferred consideration has been
recorded as a current liability of $5,000,000 and a
non-current liability of $7,347,062 on the consolidated
statement of financial position. The difference of $719,396
has been recorded as a finance cost in the consolidated
statement of profit or loss and other comprehensive
income. A reconciliation of fair value measurement of the
deferred consideration payable is provided below:
Cash
Deferred consideration
Working capital adjustment
Ordinary shares issued
Total Purchase Consideration
In addition to the above, the loan owing to the Deloraine
Dairy vendors (pre-acquisition shareholders) was repaid in
full being an amount of $8,790,630.
The terms of payment of the deferred consideration in
relation to Deloraine Dairy acquisition have been updated
since the acquisition date of 18 April 2019. As announced
on 1 April 2019, $15 million of the consideration would be
payable to the Deloraine vendors in equal instalments over
a three year period was subject to certain performance
targets being met. The performance targets related to the
ongoing employment of Jason (Yulin) Qi by Deloraine and
the consultancy agreement between Bubs and Weiwen Zhu.
Bubs subsequently confirmed with the Deloraine vendors
that these performance targets have been removed with
effect from 29 March 2019, being the date of the Sale
and Purchase Agreement. As a result, the $15 million of
deferred consideration will be automatically payable to
the Deloraine vendors over the three year period. The
value of the deferred consideration payable of $11,627,666
was estimated by calculating the present value of future
expected cash flows.
-
$11,627,666
$719,396
$12,347,062
As at 30 June 2019
In addition, a cash adjustment is expected to be made in May
2020 relating to a net asset adjustment based on the values
of certain accounts on the balance sheet of Deloraine Dairy
as at the acquisition date, including inventories, receivables
and trade and other payables. The adjustment has been
estimated as a cash payment to the Group of $2,794,927.
ANALYSIS OF CASHFLOWS ON ACQUISITION
Cash consideration
Cash balances acquired
Net outflows of cash
15,384,615 shares were issued at $0.87 per share as part
of the consideration ($13,384,615).
$
16,209,370
(252,505)
15,956,865
A total amount of $221,799 transaction costs in relation to the acquisition are included in cash flows from operating activities.
96
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only ASSETS ACQUIRED AND LIABILITIES ASSUMED
REVENUE AND PROFIT CONTRIBUTION
The fair value of the assets and liabilities recognised as a result of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Inventories
Other assets
Security bond
Deposits paid
Plant and equipment
Intangible assets - software and trademarks
Intangible assets - licence
Intangible assets – customer contract
Trade and other payables
Customer deposit
Proforma invoice
Provisions
Supplier contract liability
Shareholder loan
Deferred tax liability
Net assets
Total Purchase Consideration
Goodwill
$
252,505
265,056
1,110,546
557,140
371,402
101,365
4,174,200
58,444
38,489,095
3,094,033
236,055
1,874,458
1,275,479
567,873
1,800,000
8,790,630
12,426,823
21,502,468
38,426,724
16,924,256
The fair value and gross amount of the trade receivables
is $265,056 and it is expected that the full contractual
amounts will be collected.
The goodwill of $16,924,256 comprises the value of
expected synergies arising from the acquisition and a
pre-existing customer relationship with Bubs, which is not
separately recognised. Goodwill is allocated entirely to the
Deloraine Dairy CGU. None of the goodwill recognised is
expected to be deductible for income tax purposes.
Deloraine Dairy acquisition was accounted for on a
provisional basis at 30 June 2019.
The acquired business of Deloraine
Dairy contributed revenues of $490,825
and net loss of $131,799 to the Group
for the period from 19 April to 30 June
2019. If the acquisition had taken place
at 1 July 2018, Deloraine Dairy would
have contributed revenue of $1,194,037
and the net loss before tax of $3,963,695.
RECOGNITION AND MEASUREMENT
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.
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.
Deferred consideration to be transferred by the acquirer is recognised at the acquisition date fair value.
Subsequent unwinding of the deferred consideration is recongised in profit or loss as finance costs.
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.
98
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only F.
JOINT VENTURES
G.
ASSOCIATES
On 28 February 2019, the Group disposed of its holdings, 49.9% of the issued shares in Uphamgo Australia Pty Ltd, New
Zealand Nutritional Goat Company Limited, Cambria Management Company Pty Ltd and Cambria Unit Trust with a total
carrying amount of $2,555,815 for cash consideration of $3,493,000. The cash consideration is deferred to 20 February
2020. The gain on these disposals was recognised as part of other income in the statement of profit or loss. Further details
are disclosed in Note B4 Other income.
RECOGNITION AND MEASUREMENT
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
The Group’s investments in its joint venture are accounted for using the equity method. Under the equity
method, the investment in a joint venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the
acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment
and is not tested for impairment separately.
An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable
amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss and is
reversed if there has been a favourable change in the estimates used to determine the recoverable amount.
Upon loss of joint control over the joint venture, the Group measures and recognises any retained investment
at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control
and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
On 6 May 2019, the Group and Beingmate Baby & Child Food Co., Ltd (‘Beingmate’) established a joint venture company Bubs
Brand Management Shanghai Co. Ltd (‘Bubs Brand Management’). The Group is required to contribute 49% of registered
capital (RMB 4,900,000, equivalent AUD of $1,030,470). A corresponding payable has been recorded at 30 June 2019.
The Group has determined that it does not have joint control of Bubs Brand Management and is therefore outside the scope
of AASB 11 Joint Arrangements. As such, The Group’s investment in Bubs Brand Management will be accounted for as an
associate under AASB 128 Investments in Associates and Joint Ventures.
No transactions incurred in the associate in FY19.
The associate has no contingent liabilities or capital commitments as at 30 June 2019.
RECOGNITION AND MEASUREMENT
The financial results of the associate are used by the Group to apply the equity method. Where associates
apply different accounting policies to the Group, adjustment are made upon application of the equity method.
Investments in associates are carried in the consolidated Statement of Financial Position at cost plus post-
acquisition changes in the Group’s share of net assets of the associates, less impairment in value. The
consolidated Statement of Profit or Loss reflects the Group’s share of the results of operations of the associate.
Where there has been a change in the associates OCI or equity, the Group recognises its share of any changes
and discloses this, when applicable in the consolidated Statement of Other Comprehensive Income.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including
any unsecured long term receivables and loans, the Group does not recognise further losses unless it has
incurred obligations or made payments on behalf of the associate.
100
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only H.
GROUP STRUCTURE
H.1
PARENT ENTITY
Bubs Australia Limited is the ultimate parent of the Group.
H.2
SUBSIDIARIES
Bubs Australia
Limited (formerly
Hillcrest Litigation
Services Limited)
The Infant Food Co.
Pty Limited
Bubs IP Pty Ltd
(formerly Bubs
Australia Pty
Limited)
Country of
incorporation
Principal
Activity
Class or Shares % Owned 2019 % Owned 2018
Australia
Non-trading
Holding Company
Ordinary
-
-
Australia
Trading Company
Ordinary
100%
100%
Australia
Holder of IP and
trademarks
Ordinary
100%
100%
Nulac Foods Pty Ltd
Australia
Trading Company
Ordinary
100%
100%
New Zealand
Trading Company
Ordinary
100%
British Virgin
Island
Non-trading
Holding Company
Ordinary
100%
Australia
Trading Company
Ordinary
100%
-
-
-
Bubs New Zealand
Pty Limited (newly
incorporated on 30
November 2018)
Australia Deloraine
Dairy Group Limited
(acquired in business
combination. Further
details are disclosed
in Note E Acquisition
of subsidiary)
Australia Deloraine
Dairy Pty Ltd
(acquired in business
combination. Further
details are disclosed
in Note E Acquisition
of subsidiary)
102
H.3
PARENT ENTITY INFORMATION
Set out below is the supplementary information of the legal parent entity.
2019 $
2018 $
Result of parent entity
Loss for the year
(29,036,379)
(60,274,364)
Other comprehensive income
-
-
Total comprehensive loss for the year
(29,036,379)
(60,274,364)
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
8,340,374
50,757,799
152,318,984
98,572,983
3,225,016
4,805,059
23,103,651
8,963,614
Issued share capital
216,220,846
169,350,961
Reserves
24,878,923
3,106,465
Accumulated losses
(111,884,436)
(82,848,057)
Total Equity
129,251,333
89,609,369
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only I.
OTHER DISCLOSURES
I.1
RELATED PARTY TRANSACTIONS
KEY MANAGEMENT PERSONNEL
Key management personnel are defined as those persons having significant authority and responsibility for planning,
directing and controlling the activities of the Group.
Key management personnel compensation:
2019 $
2018 $
Short-term employee benefits
1,270,224
737,737
Post-employment benefits
100,944
64,488
Long-term benefits
25,256
29,637
Share-based payments
1,346,954
2,544,696
Key management personnel disclosures
2,743,378
3,376,558
TRANSACTIONS WITH RELATED PARTIES
The following table provides details of transactions that were entered into for the relevant financial year.
Sales to related
parties
Purchases from
related parties
Amounts owed
to related
parties
Loan to related
parties
Amounts owed
by related
parties
2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $
-
-
181,794 461,256 64,538
53,480
-
-
-
-
-
-
5,648,592 2,894,258 29,037 629,748
-
6,838
-
9,335,643
1,575,013
-
441,999
UphamGo
Australia Pty Ltd
110,535
-
7,722,603 4,771,541
-
1,337,677
Total
117,373
-
22,888,632 9,702,068
93,575 2,462,904
-
-
600,000
600,000
-
-
-
-
-
-
600,000
600,000
-
-
-
Director of the
Group:
Professional
services fee to
BDO Australia
Ltd
Joint venture in
which the parent
is a venturer:
Cibus Goats
(Australia)
Pty Ltd*
New Zealand
Nutritional
Company
* J. Gommans is a director in Cibus Goats (Australia) Pty Ltd, New Zealand Nutritional Company and Uphamgo Australia Pty Ltd. As J.
Gommans resigned from the Board on 18 April 2019, Cibus Goats (Australia) Pty Ltd, New Zealand Nutritional Company and Uphamgo
Australia Pty Ltd are not considered related parties from 19 April 2019.
Bubs Australia is committed to purchase a minimum of 3,140,000 Litres of milk from Cibus Goats (Australia) Pty Ltd each year during the
term of the contract. J. Gommans is a director in Cibus Goats (Australia) Pty Ltd.
All of the above transactions were considered to be on an arms’ length basis.
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I.2
SHARE BASED PAYMENTS
Share based payments expense in relation to options exercisable is as follows:
Employee options issued to the previous CEO
-
2,542,604
Employee options issued to the current CEO
1,346,954
2,092
1,346,954
2,544,696
2019 $
2018 $
The movements in the options are as follows:
Balance at 1 July 2017 (Exercisable at $0.10)
Options granted to the previous CEO during the year (Exercisable at $0.10)
Options forfeited during the year (Exercisable at $0.10)
Options granted to the current CEO during the year (Exercisable at $0.10)
Balance at 1 July 2018
Options cancelled during the year (Exercisable at $0.10 )
Options exercised during the year (Exercisable at $0.10)
Balance at 30 June 2019
Options on issue at 30 June 2019 are as follows:
Options #
9,417,350
8,348,918
(4,770,810)
4,770,810
17,766,268
(3,578,108)
(7,910,805)
6,277,355
Options on issue at 30 June 2017:
Options issued to the current CEO in FY18:
Consultant options of 1,506,545: These options were
granted prior to 30 June 2017 and the related share
based payment expense was recorded in the year
ended 30 June 2017. These options have a vesting
condition that the share price of Bubs Australia Limited
must be at least 12.5 cents before they are exercisable.
There is no required service period for the consultant
options. The options expire on 20 December 2019.
2,385,405: vest 3 months after issue and on the
achievement of $30m in gross sales, or $2m in EBIT
and expire on termination of employment; and
2,385,405: vest 3 months after issue and on the
achievement of $50m in gross sales and $4m in EBIT
and expire on termination of employment.
The options issued in FY18 expire on 19 January 2021.
106
RECOGNITION AND MEASUREMENT
The fair value of options granted is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value of the options granted is measured using the
Black-Scholes pricing model, taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted over the period to reflect the number of awards
for which the related service and non-market vesting conditions are expected to be met but is not adjusted
when market performance conditions are not met.
Expected volatility has been based on an evaluation of the historical volatility of the Group’s share price,
particularly over the historical period commensurate with the expected term. The expected term of the
instruments has been based on historical experience and general option holder behaviour.
KEY ESTIMATE AND JUDGEMENT
the expected life of the share option,
volatility and dividend yield and
making assumptions about them.
for share-
fair value
Estimating
based payment transactions requires
determination of the most appropriate
valuation model, which depends
on the terms and conditions of the
grant. This estimate also requires
determination of the most appropriate
inputs to the valuation model including
I.3
AUDITORS REMUNERATION
During the financial year the following fees were paid or payable for services provided by the auditor of the Group:
Audit services
2019 $
2018 $
Audit or review of the financial statements – Ernst & Young
Completion audit of Australia Deloraine Dairy Group at acquisition date
Non audit service
Agreed upon procedures
434,436
200,994
41,434
-
-
-
475,870
214,810
107
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only
I.4
SUBSEQUENT EVENTS
On 29 August 2019, Bubs issued 2,974,272 fully ordinary paid shares to Chemist Warehouse Retail Group.
Other than the events stated above, no matter or circumstance has arisen since 30 June 2019 that has significantly affected
or could significantly affect the reported results from operations or financial position for the year then ended.
I.5
ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Bubs Australia
Limited (‘company’ or ‘parent entity’) as at 30 June 2019
and the results of all subsidiaries for the year then ended.
Bubs Australia Limited and its subsidiaries together are
referred to in these financial statements as the ‘Group’.
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
deconsolidated from the date that control ceases.
Intercompany
transactions, balances and unrealised
gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
GOING CONCERN
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.
The accounts have been prepared on the going concern basis. This assumes that the Group will be able to pay its debts as
they fall due in the normal course of business.
NEW, REVISED OR AMENDING ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
Other than the first time adoption of AASB 15 Revenue from
Contracts with Customer and AASB 9 Financial Instruments,
several other amendments and interpretations applied for
the first time in the 2019 financial period, but do not have
a material impact on the interim consolidated financial
statements of the Group.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.
108
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 year ended 30 June 2019.
The Group’s assessment of the impact of these new or
amended Accounting Standards, most relevant to the
Group, are set out below.
AASB 16: LEASES (APPLICABLE TO THE GROUP FOR THE YEAR BEGINNING 1 JULY 2019).
When effective, this Standard will replace the current
accounting requirements applicable to leases in AASB 117:
Leases and related Interpretations. AASB 16 introduces
a single lessee accounting model that eliminates the
requirement for leases to be classified as operating or
finance leases.
The main changes introduced by the new Standard include:
recognition of a right-of-use asset and liability for all
leases (excluding short-term leases with less than 12
months of tenure and leases relating to low-value assets);
depreciation of right-of-use assets in line with AASB 16
Leases in profit or loss and unwinding of the liability in
principal and interest components;
variable lease payments that depend on an index or a
rate are included in the initial measurement of the lease
liability using the index or rate at the commencement date;
by applying a practical expedient, a lessee is permitted to
elect not to separate non-lease components and instead
account for all components as a lease; and
additional disclosure requirements.
The transitional provisions of AASB 16 Leases allow a
lessee to either retrospectively apply the Standard to
comparatives in line with AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors or recognise
the cumulative effect of retrospective application as an
adjustment to opening equity on the date of initial application.
The Group has not yet quantified the impact on its reported
assets and liabilities on adoption of AASB 16 Leases. The
quantitative effect will depend on, inter alia, the transition
method chosen, the extent to which the Group uses the
practical expedients and recognition exemptions, and any
additional leases that the Group enters into.
OTHER AMENDMENTS
The following new or amended standards are not expected to have a significant impact on the Group’s consolidated
financial statements.
AASB 2014-10 Amendments
to Australian Accounting
Standards – Sale or
Contribution of Assets
between an Investor and its
Associate or Joint Venture
AASB 2018 -1 Amendments
to Australian Accounting
Standards – Annual
Improvements 2015–
2017 Cycle
AASB Interpretation 23
Uncertainty over Income Tax
Treatment – The Interpretation
addresses the accounting
for income taxes when tax
treatments involve uncertainty
that affects the application
of AASB 112 Income Taxes
and does not apply to taxes
or levies outside the scope of
AASB 112 Income Taxes, nor
does it specifically include
requirements relating to interest
and penalties associated with
uncertain tax treatments.
109
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS NotesFor personal use only DIRECTOR’S DECLARATION
IN THE OPINION OF THE DIRECTORS OF BUBS AUSTRALIA
LIMITED (THE ‘COMPANY’):
The consolidated financial statements and notes that are set out on pages 38 to
88 and the Remuneration report on pages 28 to 43 in the Directors’ report, are in
accordance with the Corporations Act 2001, including:
Giving a true and fair view of the Group’s financial position as at 30 June
2019 and of its performance for the financial year ended on that date; and
Complying with Australian Accounting Standards and the Corporations
Regulations 2001; and
There are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
THE DIRECTORS HAVE BEEN GIVEN THE DECLARATIONS
REQUIRED BY SECTION 295A THE CORPORATIONS ACT 2001
FROM THE CHIEF EXECUTIVE OFFICER FOR THE FINANCIAL
YEAR ENDED 30 JUNE 2019.
THE DIRECTORS DRAW ATTENTION TO NOTE A TO THE
CONSOLIDATED FINANCIAL STATEMENTS, WHICH INCLUDES
A STATEMENT OF COMPLIANCE WITH INTERNATIONAL
FINANCIAL REPORTING STANDARDS.
Signed in accordance with a resolution of the directors:
Dated at Sydney this 6th day of September 2019
DENNIS LIN
CHAIRMAN
110
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Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Director’s DeclarationFor personal use only OTHER INFORMATION
The following additional information is required by the Australian Securities Exchange in respect of listed public companies.
1.
SHAREHOLDING AS AT 28 AUGUST 2019
A
Distribution of shareholders
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Rounding
Total
Total holders
4,457
8,130
3,395
4,282
414
Units
2,935,875
22,801,388
27,071,142
125,073,184
331,708,468
20,678
509,590,057
% Units
0.58
4.47
5.31
24.54
65.09
0.01
100
B
Unmarketable parcels
Minimum $ 500.00 parcel
at $1.2800 per unit
Minimum Parcel Size
Holders
391
690
Units
131,027
C
Voting rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares: each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a
meeting or by proxy has one vote on a show of hands
D
Top 20 shareholders – Ordinary Shares
Rank Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
C2 Capital Global Export-To-China Fund
Carr Family Pty Limited
Ms Catherine Jane Taylor
Mr Rupert Robin Soar
WF Investment Holdings Pty Ltd
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
Dynamic Best Group Limited
Infant Food Business Pty Limited
Penelope Anne Gandar
Johannes Theodorus Maria Gommans
HSBC Custody Nominees (Australia) Limited
CA Investment Corp Pty Ltd
Stable Charter Limited
A Z Global Corporation Pty Ltd
RHB Securities Singapore PTE LTD
Mr Hongtao Zhang
BNP Paribas Noms Pty Ltd
National Nominees Limited
BNP Pribas Nominees Pty Ltd
Units
% of Units
76,288,510
14.97
16,761,600
12,220,266
12,220,265
11,789,440
11,495,001
10,836,423
10,769,230
10,575,000
9,600,335
9,600,335
8,173,873
5,050,000
4,615,385
4,512,911
3,231,800
2,840,910
2,571,979
2,009,962
1,898,022
3.29
2.40
2.40
2.31
2.26
2.13
2.11
2.08
1.88
1.88
1.60
0.99
0.91
0.89
0.63
0.56
0.50
0.39
0.37
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
227,061,247
44.56
2.
CORPORATE DIRECTORY
A|
B|
C|
D|
E|
The name of the Company Secretary is Jay Richard Stephenson
Principal registered office
2-4/6 Tilley Lane, Frenchs Forest, NSW, Australia, 2086
Registers of securities
Computer Investor Services Pty Ltd
Stock exchange listing
Quotation has been granted for all the ordinary shares of the Company on all member
exchanges of the Australian Securities Exchange Limited
Unquoted securities
Options over unissued shares
The Group has 5,039,658 options on issue.
112
113
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 201904 FINANCIAL STATEMENTS Other InformationFor personal use only ASX: BUB
Bubs Australia
INVESTOR RESOURCE CENTRE
www.investor.bubsaustralia.com
For personal use only