READY TO
REBUILD
FY21 Annual Report
Bubs Australia Limited and Controlled Entities ACN 060 094 7422021 TABLE OF
CONTENTS
04
08
10
12
14
20
22
23
24
26
28
30
32
34
36
38
44
56
61
62
64
66
68
70
72
119
120
01
02
03
04
FY21 REVIEW
FINANCIAL HIGHLIGHTS
FROM OUR CHAIR
FROM OUR CEO
CEO YEAR IN REVIEW
BOARD OF DIRECTORS
KEY MANAGEMENT PERSONNEL
EXECUTIVE LEADERSHIP
OUR BUSINESS
OUR CORE STRATEGIC PRIORITIES
OUR UNIQUE VALUE PROPOSITION
FY22 STRATEGIC FOCUS ON 4 SALES CHANNELS
BUILDING ON SOLID FOUNDATIONS
BUBS DAIRY NUTRITIONALS PRODUCTION FACILITY
DIRECTOR’S REPORT
DIRECTOR’S REPORT
REMUNERATION REPORT
INDEPENDENT AUDITORS REPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTOR’S DECLARATION
05
OTHER INFORMATION
GENERAL INFORMATION
The financial statements cover Bubs Australia Limited for the year ended
30 June 2021. The financial statements are presented in Australian dollars,
which is the Bubs Australia Limited functional and presentational currency.
Bubs Australia Limited registered office is:
23 Nina Link, Dandenong South
VIC 3175 Australia
Bubs Australia Limited principal place of business is:
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
01
FY21
REVIEW
Financial Highlights
From our Chair
From our CEO
CEO Year in Review
Board of Directors
Executive Leadership
4
5
KEY MILESTONE EVENTS
COVID-19 PANDEMIC
IMPACT & RESPONSE
Protecting employees, prioritising liquidity
and balance sheet. Managing supply chain
and inventory in the channel in response to
demand shocks.
ESTABLISHED
WHOLLY OWNED CHINA ENTITY
BUBS SHANGHAI COMPANY
Ability to directly manage sales
relationships and in-market customers to
optimise value chain and margin growth.
AUSSIE BUBS™ USA LAUNCH
FDA LABEL COMPLIANT
TODDLER FORMULA
First production shipped.
Launching on Walmart.com
and Amazon.com Sept 2021.
#1 ADULT GOAT DAIRY
CAPRILAC® BRAND RANKING
FOR TMALL GLOBAL 618¹
Amongst all imported adult
goat milk brands.
MORE THAN DOUBLED
DOMESTIC MARKET SHARE²
FASTEST GROWING INFANT
FORMULA MANUFACTURER2
Woolworths, Coles and Chemist Warehouse
50% GENDER EQUALITY4
BOARD REPRESENTATION
Supporting both Gender and Cultural
diversity future needs across the business.
TOP 3 IMPORTED GOAT INFANT
FORMULA BRAND
IN CHINA 618
#3 on Alibaba Tmall Global3
and #2 brand on JD Global.3
LAUNCHED BUBS RANGE
IN REDMART SINGAPORE
Received Malaysia
Parent’s Choice Award for
Bubs® Organic Formula
6
7
¹ Q4 FY21 official results in unit sales data CapriLac from Tmall Global2 IRI Scan Data, Dollars ($000’s) Market Share Growth % YA, Coles, Woolworths and AU My Chemist Group combined to MAT 04/07/2021.3 Bubs Goat Milk Formula GMV (Gross Merchandise Value) Q4 FY21 growth pcp from Tmall Global (TDI and Tmall Flagship Store) & JD Global (JDI) platform data.4 50:50 Gender Equality reached with the appointment of Katrina Rathie on 21 July 2021. Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202101 FY21 REVIEW Financial Hightlights FINANCIAL HIGHLIGHTS
Financial Performance
ASX 300
Bubs Australia
FY21 results impacted by
global pandemic with some
growth in core product
and focus channels.
$46.8m
Group Gross Revenue1
+26%
Goat Infant Formula China
CBEC gross revenue¹
growth pcp.
+12%
Total gross revenue1 exports growth
pcp to China CBEC channel.
+51.5%
Bubs Australia fastest growing
Infant Formula manufacturer² in
Woolworths, Coles and Chemist
Warehouse.
+57%
International gross revenue1
growth ex-China pcp,
(including ingredient sales).
+34%
2H FY21 Corporate Daigou gross
revenue1 growth on 1H FY21.
$27.9m
Robust balance sheet. Cash
reserves as at 30 June 2021.
8
9
7
¹ 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. ² IRI Scan Data, Dollars ($000’s) Growth 51.5% YA, Coles, Woolworths and AU My Chemist Group combined to MAT 04/07/2021.Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202101 FY21 REVIEW Financial Hightlights FROM OUR CHAIR
Agility and resilience —
the hallmark of
our response.
“
Our organisation’s strength
is now stronger than ever.
“
Dear Shareholders,
For the second consecutive year, the theme of disruption,
reset and resilience is once again a key feature of my
report for the Financial Year 2021. Over the past financial
year Bubs has been focused on sustainable strategic
responses to the disruption wrought by COVID-19 on our
business, and that of our industry.
Following the initial pantry stocking that peaked in March
2020 and producing to that demand, we were confronted
with significant and prolonged impacts of border
closures and demand disruption from which the financial
year commenced. This signalled a need to reconsider
our channel strategy, in order to sustain demand growth
that continues to exist in our key global markets.
We knew the year ahead would be difficult.
Despite the challenging circumstances from which
we commenced the year, our unique and resilient
business model, along with our collaborative strategic
partnerships, provided us with the agility to refine our
supply chain, including rightsizing our milk pool to match
demand and adopt new route to market strategies for
China, whilst building our momentum internationally.
Our vertically integrated business model provides us
with unrivalled proprietary insight into the supply chain
process. The lessons learned over the last year and
knowing what products work in the ‘new world’ have
placed the business in a position where we can become
less reliant on physical international border traffic and
more resilient to future expansion options across the
10
new digital eco-system and global export markets.
While the year’s total Domestic and China sales are
down compared to FY20, we have seen stabilisation over
the last three quarters with growth in some key areas,
since the initial demand shock impact and low point of
the first quarter sharp decline in revenues, following the
border closures and immediate contraction in the Daigou
personal shopper business.
Pleasingly, during the year, Bubs representation
expanded across the domestic grocery and pharmacy
channels and we now have coverage on par with leading
multinational Infant Formula brands. Bubs was the
fastest growing infant formula manufacturer2 in FY21
showing significant growth and increased share across
Coles, Woolworths and Chemist Warehouse, despite an
overall category decline.
At the same time, our China strategy has been
reinvigorated to deliver significant advances throughout
the year and we have been pleased to see the continued
deepening of our productive relationship with channel
partners such as Alibaba for the development, promotion,
and distribution of our infant and adult dairy products.
Direct sales to China, while down on last year, showed
quarter-on-quarter growth over the last three quarters,
partially offsetting the domestic contraction in Daigou sales.
Within our China channel, the Cross-Border e-Commerce
(CBEC) Channel gross revenue1 increased by 12 percent.
DENNIS LIN
Executive Chairman
With the rapid trend towards China channel merging
across omni-channel and digitalisation, we took the
strategic decision to establish our own operating
subsidiary in Shanghai to manage all China trade
with our e-commerce partners. This provides us
with operational oversight to drive growth across the
reimagined Daigou 2.0 omnichannel sales model and
growing our Online-to-Offline (O2O) sales via Mother &
Baby and community stores.
Daigou 2.0 has effectively merged with the cross-border
e-commerce channel (CBEC) and is no longer considered
a ‘grey channel’. Its legitimacy has been established via
participation in the Chinese government tax system.
Daigou 2.0 has now been reinvented as a digital social
selling channel, including live streaming e-commerce
with delivery ex-Australia or via cross-border
warehouses in China.
Despite the continued disruption and challenges we have
faced, we continue to sustain investment in marketing
resources for the future to build “new user”, customer
acquisition and brand equity in our key markets,
particularly China, redirecting and up-weighting our
marketing effort to accelerate the growth of our Cross-
Border e-Commerce business in China.
Our strategy of regional diversification in FY21,
whilst disrupted by the setbacks of the difficult Covid
conditions, has yielded solid results with a 57% increase
in gross revenue (including ingredient sales) to other
geographies beyond China. Over this year, we have
continued to nurture our partnerships across South
East Asia, covering Mother and Baby retail chains and
e-Commerce platforms.
Last year we flagged North America as our next target
and the lessons learned in responding to the pandemic
sharpened our focus on the most appropriate market
entry strategy. The creation of our USA entity, Aussie
Bubs Inc, and the successful development, production
and importation of two new toddler formula products
aligned to FDA label compliance, was another hallmark
achievement of this financial year. Our inaugural USA
launch is on track for September 2021, with Aussie
Bubs™ set to launch on Walmart.com and Amazon.com.
That we can consider these diverse options to grow
internationally is based on our agility, scale and
established supply chain security. Our approach will be
disciplined choosing new markets that have the highest
potential to leverage our unique advantage as a premium
dairy nutrition specialist and Australian leader in goat
dairy production.
With our unique supply chain and focus on products
developed to sustain competitive advantage, we are well
positioned re-establish growth momentum in FY22.
Our organisation strength is now stronger than ever,
with the deepening of our bench strength. The May
2021 appointment of Fabrizio Jorge as Chief Operating
Officer to drive Bubs global growth market diversification
strategy and Katrina Rathie, a global brand trademark
and consumer law specialist as Non-Executive Director,
have provided us with strong foundations to support
our global growth ambitions. Importantly, these
appointments have also resulted in approximately 50:50
gender and cultural diversity across our Board and
Executive Leadership team.
Fabrizio brings more than 24 years of experience in the
global dairy industry including nutritional and speciality
milk powders forged with Fonterra and Nestlé covering
Australia, Asia, Oceania and Africa. Appointed in July
2021, Katrina is an internationally recognised leading
Intellectual Property and consumer brands lawyer,
for the main part as an equity partner in King Wood
Mallesons for 27 years. Her skills will be invaluable
as we enter the next phase of our brand driven global
development.
Meanwhile, our COVID-19 mitigation continues to
keep the Bubs Family safe and ensures continuity of
production as an essential service to meet changing
demand patterns during this challenging period.
FY21 has been a particularly difficult year as the
pandemic and other macro factors challenged our
resolve and business model. At the same time, it
provided us with visibility that our brands do resonate
with consumers in key markets around the world, and
that our business model is one of strength that can stand
the test of these catastrophic events.
As we put a disappointing year behind us, our deliberate
strategic responses to the impact and reset of the past
financial year have placed us in a position of resilience
from which we can rebuild. As we enter this next phase
of our development, I am grateful for Kristy Carr’s
leadership particularly during these last 12 months, and
I looking forward to working with her, our Leadership
Team and Board of Directors and continuing to support
our long-term vision of becoming a major global dairy-
based business focused on infant and family nutrition.
11
1 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.2 IRI Scan Data, Dollars ($000’s) Growth YA, Coles, Woolworths and AU My Chemist Group combined to MAT 04/07/202.Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202101 FY21 REVIEW From Our Chair 01 FY21 REVIEW From Our CEO
FROM OUR CEO
Reset strategy built on
strong foundations
Dear Shareholders,
Throughout the year our Bubs Family and strategic
partners have risen to the challenge of the prolonged
impact of the pandemic. I have been incredibly proud of
their agility and resilience, as we continue to reset our
business in response to the COVID-19 induced changes in
the macro environment.
The continuing impact of the ongoing border closures,
from the onset of the pandemic up to this point, remains
the single most adverse disruption on the business
and our FY21 performance. With the lack of tourists
and international students, the domestic Daigou
channel trade was the most significantly impacted. We
saw a sharp decline in conventional Daigou channel
contribution to domestic sales and ongoing disruption
to outbound supply chain logistics with increased
international freight costs.
Considering that conventional domestic Daigou sales had
made up a significant proportion of the Australian infant
formula category sales, it is unsurprising that our gross
revenues1 were adversely impacted leading to a FY21
decrease of 24 percent year-on-year to $46.8 million.
The impact of this sudden disruption to demand signaled
the need for the conventional Daigou channel route,
previously dominated by inbound visitors and pack &
send parcels, to rapidly digitise their social commerce
platforms. Anticipating this need to pivot and adapt to
a new business model, we have executed a deliberate
strategy and worked in collaboration with our strategic
channel partners to reset both our supply chain and
China channel strategies. We now see the emergence
“
We are pleased to see the resulting
positive outcome of these reset
efforts, with momentum and
resilience demonstrated in our
second half.
“
of the Corporate Daigou channel reinvention, with
omni-channel sales offering centralised fulfilment from
Australia and via shipment to bonded warehouses in
China, providing us with more transparency and bringing
us closer to our end consumers.
We are pleased to see the resulting positive outcome
of these reset efforts, with momentum and resilience
demonstrated in our second half. We have experienced
half-on-half group gross revenue1 growth of 10 percent
and fourth quarter results being just 4 percent below
pcp as a result of increased domestic penetration and
channel shifts in our China and International trade.
In collaboration with our strategic channel partners,
we saw Corporate Daigou gross revenue1 increase 34
percent in the second half of FY21 compared to the first
half, which was up 17 percent on the same period last
year (2H FY20). Our Cross-Border e-Commerce business
also demonstrated solid growth, increasing 12 percent
year-on-year with Bubs® Goat Infant Formula up 26
percent.
KRISTY CARR
Chief Executive Officer
We see this as a very encouraging trend, aligning with
the work we have done to 1) prioritise cash conversion,
albeit at a loss, from bulk powder excess inventory, and
2) overhaul and right-size our supply chain to ensure a
more balanced supply and demand profile.
Having managed through this volatile period, we are
confident that our supply chain is fit for purpose in the
post-COVID paradigm – with a much clearer view of what
is in the inventory pipeline, particularly with our new
corporate structure in China.
The company is now well placed to go forward and we
expect to see growth momentum across all channels in
FY22.
We focused on ensuring the fundamentals of our
business and our ability to rebuild would be protected.
With this in mind, we took the decision to resist
pressures to push stock into our sales channels, and
instead sold excess bulk powder at a loss in order to
prioritise cashflow. These proactive steps have allowed
us to maintain a healthier inventory position which was
more closely aligned to demand as we move into FY22.
This period of stabilised demand has come after what
was a challenging first quarter, with the knock-on effects
of the late FY20 sudden surge in demand caused by
pantry stocking. The subsequent demand shock following
on from the border closures and loss of the Daigou
personal shopper trade was the key contributor to the
excess inventory position.
Since then, we are encouraged to see Domestic retail
sales stabilise and increasing sales of cross-border
e-Commerce into China, offsetting some of the loss of
Daigou traffic, and the rebuilding of the Daigou omni-
channel sales model reactivated.
12
13
1 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.Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 2021 2
01 FY21 REVIEW CEO Year in Review
CEO YEAR IN REVIEW
6600..00
4400..00
2200..00
00..00
--2200..00
--4400..00
--6600..00
--8800..00
--110000..00
Consolidated domestic position:
growing volume and share outperforming
the category.
During the year we added over 1300 distribution points
for Bubs® products: Woolworths continued to carry our
entire range of eight infant formula products across
a targeted selection of its 700 stores; Bubs Organic®
Grass-fed Formula is now ranged in 720 Coles stores
while Bubs® Goat Formula increased to cover 760
stores. This strong grocery footprint is complemented
by national ranging of all 40 Bubs products in Chemist
Warehouse, our second largest shareholder and
strategic retail partner. In addition, our brand distribution
is supported by our national ranging in Good Price
Pharmacies, Baby Bunting and Big W.
Bubs Australia is now the fastest growing Infant Formula
manufacturer, more than doubling market share, with
scan sales increasing 51.5 percent year-on-year1, at a
time when the Total Category is in sharp decline, down
46 percent on prior year1.
Notwithstanding the strength of our Australian retail
sales, following the retraction of the Daigou trade,
year-on-year domestic gross revenues2 were down 38
percent. Overall, Domestic gross revenues2 represented
57 percent of our business.
China Cross-Border e-Commerce
momentum continued
throughout the year resulting in a 26 percent increase in
Bubs® Goat Infant Formula gross revenue2 over last year.
Bubs® Goat Infant Formula ranked #6 in Tmall Global &
JD Global combined, across all Chinese and Imported
Goat Formula brands3 . On a year-on-year basis,
gross revenue2 direct to China was down 11 percent
and represented 25 percent of group gross revenue2
for the year. Meanwhile, we continue to work closely
in partnership with Alibaba to maximise the China
eCommerce opportunity.
As recently announced, the Company established a
wholly owned subsidiary in China, Bubs (Shanghai)
Trading Co. Ltd., providing improved control of margins
and market focus. Our go-forward operation model for
China will continue to focus on integrated e-Commerce
channels with fulfilment delivery ex-Australia or via
bonded warehouses within China, including Online-to-
Offline (O2O) covering General Trade and Mother & Baby
stores, livestreaming e-Commerce and social selling
channels.
FY21 INFANT FORMULA CATEGORY RETAIL SCAN DOLLAR SALES (%) GROWTH1 BY MANUFACTURER (MAT)
FY21 INFANT FORMULA CATEGORY RETAIL SCAN DOLLAR SALES (%) GROWTH¹ BY MANUFACTURER (MAT)
COLES, WOOLWORTHS & CHEMIST WAREHOUSE
COLES, WOOLWORTHS & CHEMIST WAREHOUSE COMBINED
51.5%
ALL LEADING GLOBAL BRANDS
& MULTINATIONALS
-9.8
-11.0
#2 Manufacturer
#3 Manufacturer
#6 Bubs
AUSTRALIAN
MADE &
AUSTRALIAN
OWNED
-9.8
Other
Manufacturers
“
Bubs Australia is now the
fastest growing Infant Formula
manufacturer, more than
doubling market share, with
scan sales increasing 51.5
percent year-on-year1.
“
-46.2
Total
Category
-42.7
#1 Manufacturer
-56.6
#5 Manufacturer
-82.1
#4 Manufacturer
TOTAL INTERNATIONAL
+26% pcp
Solid growth +26% pcp
FY21 increase in infant
formula CBEC channel
gross revenue1.
Momentum building in International
markets for Bubs portfolio
Following expansion beyond Vietnam into Malaysia and
Singapore, total International gross revenue2 (including
ingredient sales) experienced significant revenue
growth of 57%, accounting for 18% of Group gross
revenue2.
Post balance date, the Company announced plans
to enter North America with confirmed distribution
on Walmart.com and Amazon.com from September
2021. This is an important milestone in the company’s
continued implementation of its market diversification
strategy to expand Bubs award-winning Clean Label
formulations across global markets.
gross revenue2
growth International
markets (including
ingredient sales)
14
Annual Report for the year ended 30 June 2021
15
1 IRI Scan Data, Dollars ($000’s) Growth YA, Coles, Woolworths and AU My Chemist Group combined to MAT 04/07/202.2 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 Bubs Goat Milk Formula GMV (Gross Merchandise Value) Q4 FY21 growth pcp from Tmall Global & JD Global platform data. 01 FY21 REVIEW CEO Year in Review
Financial Overview:
COVID-19 impacted gross margin
In line with previous reporting, the global pandemic
and subsequent adverse channel mix impacted gross
margins and our gross revenue1 to revenue ratio
resulting in our group gross margin2 for branded
products falling to 21 percent from 24 percent in FY20.
Bubs® Infant Formula sales continued to be the most
profitable element of the business and we were able to
maintain premium pricing on Bubs® Goat Infant Formula,
resulting in gross margin2 of 34 percent, approximately
the same as FY20.
Increased trade co-op investment increased the
difference between gross revenue1 and revenue. This
was partially offset by the corresponding reduction in
above the line brand marketing expense.
Taking into account COVID-19 driven inventory
adjustments, penalties for shortfalls in reserved
manufacturing capacity, and the decision to sell excess
bulk powder at a loss to preserve cash conversion, group
gross margin entered negative territory with a $7.3
million loss. This led to an underlying EBITDA loss for the
Group of $28.5 million.
Disciplined OPEX management
Over the year, notwithstanding significant increase in
international freight costs, our distribution cost / gross
revenue ratio stood at 4 percent, versus 3 percent in
FY20.
Marketing costs decreased 28 percent as we redirected
our investment to in-channel trade promotion and
in-store activation. As we built our team in Australia
and China to support the future needs of the business,
our employee cost3 increased by 8 percent, while
administration costs4 increased by $2.7 million to
cover bad debt provisions, increased costs for NPD, IP
protection in new International markets and donations.
Impairment
Combined with short term sharp demand contraction in
Daigou channel, a conservative growth rate adopted in
the sales forecast due to prolonged uncertainties caused
by ongoing pandemic and the longer than expected
SAMR approval time frame, this has reduced the
valuation of CGUs. As a result, a non-cash impairment of
$44.6m relating to Nulac Foods CGU and Deloraine Dairy
CGU was recognised.
Strong Balance Sheet
Group liquidity remains strong with $27.9 million in cash
reserves as at 30 June 2021. In addition, we are in the
process of renewing our $10 million working capacity
facility with the maturity date in September 2022 and are
confident that the facility will be renewed.
“
Bubs is well placed with strong foundations, brand share
growth, and a robust balance sheet to go forward with
a sustainable growth strategy as the Australian lead
challenger brand in infant nutrition.
“
34%
Bubs Goat Infant
Formula
product margin¹.
Outlook
Bubs is well placed with strong foundations, brand share growth, and a robust balance sheet to go forward with a
sustainable growth strategy as the Australian lead challenger brand in infant nutrition.
Continued focus on our core business and competencies, coupled with the operational changes we have executed
in response to the pandemic, mean Bubs is well positioned to rebuild from a strong foundational base with a
rebalanced inventory position to meet stabilised demand.
We remain confident in the unique strengths of Bubs business model and our organisational agility will enable us to
navigate the ongoing macro challenges posed by COVID-19, and we anticipate rebuilding towards a sustained growth
trajectory in FY22.
Since the initial COVID-led channel disruption impact occurred most heavily in the first quarter, our China strategy
has been re-engineered in collaboration with our strategic partners to deliver significant advances throughout the
year. We remain committed to continuing to build the Bubs® brand in China, and expect sales momentum to continue
across all Channels.
In addition to building our hero product lines in our established channels, we plan to stretch Bubs® brand awareness
to support new categories in line with our position as a specialist producer of dairy based nutritional products. We
will also pursue our global expansion strategy to consolidate our regional market penetration, and launch into North
America.
The Company remains confident that the Bubs® brand and business model, along with adapted route-to-market
strategies and sufficient cash reserves, will deliver sustained growth in FY22 and beyond.
Our ability to survive the worst of the pandemic was helped greatly by the support of our major shareholders,
strategic partners, suppliers and the extended Bubs Family whose ongoing commitment in Bubs journey to
becoming a global dairy company and category leader in infant nutrition is sincerely appreciated.
I look forward to the business returning to growth, as we continue to expand our global reach.
KRISTY CARR
Chief Executive Officer
16
Annual Report for the year ended 30 June 2021
17
1 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.2 Gross margin is calculated as (revenue – production costs) / revenue.3 Employee costs exclude share based payments.4 Administrative and other costs do not include depreciation and amortisation. 01 FY21 REVIEW COVID—19 Disruption
COVID-19 DISRUPTIONS
COVID-19 RESPONSE
Global macro forces impacting sales channels created a significant demand and supply shock.
FY21 focused on the immediate need to mitigate impact from excess inventory in channel.
Our response throughout FY21 focused on four pandemic phases to protect our base for rebuild.
Strengthening our foundations to mitigate future demand shocks.
IMMEDIATE
IMPACT
Urgent action
was required to
actively manage
supply and excess
inventory due
to unforeseen
demand
disruption.
Australian Border Closures
Infant Formula Total Category decline in
Australian Grocery and Pharmacy -46%1
Traditional Daigou shopping significantly
declined in domestic retail channel, and gift
stores.
China Channel Disruption
Channel shifting moved consumers
online. High cost of airfreight had
immediate impact.
Omni-channel sales approach emerged,
with O2O and social commerce becoming
more significant.
Export to SE Asia Disrupted
Prolonged lockdowns delayed ranging
reviews, limited retailer distribution, and
caused regulatory delays.
Significant impact due to retail shutdown
and economic stress.
2
2
Y
F
CHANNEL & PRODUCT REINVIGORATION
• Protect our core product base, key channels and strategic
partnerships.
• Identify growth opportunities within each of our sales channels
for new products and new markets.
• Improve capacity utilisation in Deloraine facility.
STOCK MANAGEMENT
• Redirected stock to China offshore warehouse in response to
border closures.
• Ensured excess inventory was largely retained in Bubs warehouse.
Despite significant demand disruption, resisted pressure to increase
stock in the channel.
CHANNEL & SUPPLY RESET
1
2
Y
F
• Supporting greater resilience. Resized the milk pool to reflect
volatility in demand forecasts.
• Redirected marketing investment to support domestic trade and
China inbound omni-channel marketing via social commerce.
• Made difficult decision to sell excess bulk powder at a loss in order
to prioritise cash flow and took proactive steps to provide for stock
in order to maintain a healthier inventory position in FY22.
• Restabilised price architecture in China market.
• Rapid growth in Domestic consumer demand providing strong
home base.
d
l
i
u
b
e
R
4
#
—
e
c
n
e
i
l
i
s
e
R
3
#
—
t
e
s
e
R
2
#
—
t
c
a
p
m
I
1
#
18
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
19
1 IRI Scan Data Dollars ($000’s) Growth YA, Coles, Woolworths and AU My Chemist Group combined at MAT 04/07/2021.
01 FY21 REVIEW Board Of Directors
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 2021 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:
DENNIS LIN
Executive Chairman
GradDipAppFin, CA, Solicitor of the
Supreme Court of Queensland – Executive
Chairman (appointed 22 October 2019),
Chairman and Non–Executive Director
(resigned 21 October, 2019)
Mr Lin focuses on high growth branded
businesses that are looking to expand
globally, and has been part of Bubs
Australia board since its listing. He
works closely with the team in creating,
setting and executing strategic
priorities for the business, especially
in relation to international markets
and vertical integration. He speaks
fluent Chinese Mandarin and Japanese.
In addition, Mr Lin is co-founder
and chairman of Cortina Capital, an
independent private equity fund that
focuses on investing in health and
wellness brands.
Mr Lin was appointed as a Non-
Executive Director of Buderim Group
Limited on 3 November 2017 Executive
Director from 1July 2020 and a
non-executive director of Synertec
Corporation Limited on 20 August
2019. Mr Lin was appointed as a Non-
Executive Director of Ecargo Holdings
Limited on 9 April 2019 and resigned
on 30 October 2019. Mr Lin completed
his contract with BDO on 30 June 2020.
KRISTY CARR
Managing Director
BBus (Bachelor Degree of Business)
– Managing Director (appointed 22
December 2016)
MS KATRINA RATHIE
Non-Executive Director
B Com (Accounting & Financial
Management)/LLB UNSW Sydney,
FAICD (appointed 21 July 2021)
Mrs Carr is the Chief Executive
Officer of Bubs Australia Limited
and holds a Bachelor of Business
Degree (Queensland University
of Technology). She has a proven
track record of leading and building
successful brands and businesses
spanning Australia and Asia Pacific
over the past 25 years. Kristy’s
passion is in creating and developing
new business opportunities that
not only make a difference in the
world we live in today, but also
closely identify with emerging global
consumer trends. Kristy has lived
and worked in Hong Kong for over
a decade and travelled extensively
throughout Asia for both business
and leisure. It is with this experience
that she founded Bubs when on
maternity leave with her first of three
daughters in 2006.
Mrs Carr has not held any other
Directorships in publicly listed
companies in the past three years.
Ms Rathie is an experienced Non-
Executive Director and lawyer. She
has strong business leadership
skills and was formerly Partner
in Charge, Sydney of King & Wood
Mallesons, a top tier global elite
law firm where she led the Sydney
office. With over 35 years working
as a trusted advisor to ASX and
Fortune 500 companies particularly
in the FMCG, brands, consumer and
retail sectors, Ms Rathie brings deep
sectorial, governance, regulatory and
international experience to the Bubs
board which she joined in July 2021.
Ms Rathie was named overall winner
of the Board & Management category
in the AFR 100 Women of Influence
Awards 2019. She is a member
of Chief Executive Women and a
Fellow of the Australian Institute of
Company Directors.
Ms Rathie has not held any other
Directorships in publicly listed
companies in the past three years.
MATTHEW REYNOLDS
Non-Executive Director
B.Sc (Hons), LLB (Hons), MQLS -
Non-Executive Director (appointed 22
December 2016). (retired 21 July, 2021)
STEVE LIN
Non-Executive Director
M.B.A. in Economics from
Harvard College (appointed 18
April 2019)
MR JAY STEPHENSON
Company Secretary
MBA, FCPA, FGIA, MAICD, CPA (Canada),
CMA (Canada) – Company Secretary
(appointed 1 September 2015)
Mr Reynolds is a Partner at Thomson
Geer Lawyers who specialises
in capital markets (retail and
wholesale), debt capital markets
(wholesale) and mergers and
acquisitions (public and private)
including private equity. He holds
a Bachelor of Political Science &
Economics (Hons) and a Bachelor of
Laws (Hons) and is a member of the
Queensland Law Society.
Mr Reynolds was a director in
publicly listed G8 Education Limited
(ASX: GEM) retiring from the board
on the 31st of August 2017.
Mr Lin has over 25 years of
investment, operations and
management experience in Asia
across Morgan Stanley in New
York and later in Goldman Sachs’
Merchant Banking Division in Hong
Kong and Tokyo. As President and
CEO – Asia of GMAC Commercial
Holding Corp., Mr Lin managed a
multi-billion dollar portfolio of real
estate investments. A co-founder
of non-profit company, Hands On
Tokyo, and board member of two
universities in China, with a M.B.A.
in Economics from Harvard College.
Mr Lin has not held any other
Directorships in publicly listed
companies in Australia in the past
three years.
Mr Stephenson has been involved
in business development for over
30 years including approximately
26 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.
All 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.
D Lin (Executive Chairman)
K Newland Carr (Executive Director)
M Reynolds (Non-executive Director)
S Lin (Non-executive Director)
Held
14
14
14
14
Attended
14
14
14
14
20
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
21
01 FY21 REVIEW Executive Leadership
KEY MANAGEMENT
PERSONNEL
EXECUTIVE
LEADERSHIP
KRISTY
CARR
Founder
CEO
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
Chief Financial
Officer
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
2018.
FABRIZIO
JORGE
Chief Operating
Officer
Born in Brazil, Fabrizio Jorge
brings 24 years of experience in
the global consumer goods and
dairy industry, including nutritional
and specialty milk powders.
Fabrizio was the General Manager
for Fonterra Brands for Thailand,
Laos and Myanmar and held full
P&L responsibility for Fonterra
Australia’s Ingredients business with
sales to over 50 export markets.
Fabrizio’s extensive experience with
Fonterra included responsibility for
South East Asia sales, South America
Ingredients operations, and Product
General Manager for nutrtional and
specialty formulated milk powders
Fabrizio joined Bubs Australia in
May 2021.
DAVID
ORTON
VIVIAN
ZURLO
RICHARD
PAINE
General Manager
Commercial
Chief Marketing &
Innovation Officer
Chief Manufacturing
Officer
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
joined Bubs Australia in
March 2017.
Vivian has over 20 years’ marketing
and 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 has broad
dairy expertise covering commercial
and operational management from
milk collection through to ‘whole
of manufacture’ in both medium
size private to larger listed entities.
Richard joined Bubs Australia in
February 2019.
22
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
23
02
OUR
BUSINESS
Our Core Strategic Priorities
Our Unique Value Proposition
FY22 Strategic Focus On 4 Sales Channels
Building On Solid Foundations
Bubs Dairy Nutritionals Production Facility
24
25
02 OUR BUSINESS Building on Solid Foundations
OUR CORE STRATEGIC PRIORITIES
Since listing, our core strategic focus remains unwavering and has been successfully strengthened in
both our core business as well as via extensions into new markets and category growth opportunities.
E
R
U
T
U
F
I
S
U
C
O
F
C
G
E
T
A
R
T
S
MAXIMISE BRAND
EQUITY GROWTH
Building brand
equity and
awareness to
increase market
share in all key
markets.
OPTIMISE
GOAT DAIRY
LEADERSHIP
Optimise supply
chain integration
and capability to
drive efficiencies
and improve
margins.
DRIVE
INNOVATION
Drive consumer
led innovation
in emerging and
adjacent
categories.
LEVERAGE
STRATEGIC
PARTNERSHIPS
Accelerate
market coverage
and growth via
distribution,
marketing and
production partners.
ACCELERATING
GLOBAL REACH
Rapid growth of
global expansion
driving brand equity
across all key
markets.
I
L
A
N
O
T
A
D
N
U
O
F
S
K
C
O
L
B
G
N
D
L
U
B
I
I
Bubs is an authentic
trusted brand with
unique proposition
operating in an attractive
high growth market.
Clear market leader in
goat dairy production
with supply chain
security and scalability.
Ownership of registered
manufacturing facility
with impeccable R&D,
QA and manufacturing
capabilities.
Strategic collaborative
partners in
key markets.
Domestic retail
distribution strength
across all major
retailers.
26
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
27
02 OUR BUSINESS Building on Solid Foundations
OUR UNIQUE VALUE PROPOSITION
360º integrated business model, combining the best of an ingredient and manufacturing
business, together with a brand-led and consumer focused portfolio driven business.
HIGH MARGIN
DAIRY SPECIALIST
Infant Formula as the Crown
Jewel of dairy porfolio with
exclusive Australian goat
dairy farmer milk supply and
vertical supply chain
know how.
ASX: BUB
Bubs Australia
BRAND-LED
Most comprehensive
infant nutrition
portfolio.
SUPPLY CHAIN
SECURITY
VALUABLE ASSETS
100% owned and controlled
Infant grade dairy facility with
China certification.
R&D TECHNICAL
EXPERTISE
28
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
29
02 OUR BUSINESS Building on Solid Foundations
FY22 STRATEGIC FOCUS ON
4 SALES CHANNELS
We have identified 4 strategic sales channels that are complementary to unlock value.
Each business unit has distinctive features and different opportunities for sustained profitable growth.
1.
Australia &
New Zealand
2. China
3.
Other International
4.
B2B Dairy
Solutions
CCuussttoommeerr && CCoonnssuummeerr CCeennttrriicc –– EExxcceelllleennccee iinn QQuuaalliittyy
• Opportunity for a
significant local
challenger brand
with strong
home market
engagement
with domestic
consumers.
• China routes to market
now omni-channel with
CBEC, Daigou, O2O and
General Trade merging
into one via online
sales, live-streaming
and social selling.
• Consolidate
• Grow specialist
growth in existing
SEA penetration
with opportunity to
enter new
markets: USA and
South Korea.
dairy solution co-
manufacture and
end-to-end new
product
development for
global customers.
:
S
U
C
O
F
:
I
I
S
C
T
S
R
E
T
C
A
R
A
H
C
Y
E
K
:
I
S
E
C
N
E
T
E
P
M
O
C
S
B
U
B
BBUUBBSS EEXXPPEERRTTIISSEE
INGREDIENT &
VERTICAL SUPPLY
CHAIN EXPERTS
CUSTOMER &
CONSUMER
INSIGHT FOCUS
R&D FUNCTIONAL
WELLNESS
EXPERTISE
SPECIALIST
DAIRY
MANUFACTURING
30
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
31
02 OUR BUSINESS Our Brands
BUILDING ON SOLID FOUNDATIONS TO
ACCELERATE GLOBAL GROWTH
Our strong brand portfolio is spearheaded by Bubs®, our hero brand driving value creation across the business and into new markets.
Our goat dairy specialist brand CapriLac® supports optimisation of brand equity value conversion from our milk pool.
32
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
33
02 OUR BUSINESS Optimised Supply Chain
BUBS DAIRY NUTRITIONALS PRODUCTION FACILITY
Australia’s
leading
goat dairy
producer
UNIQUE SUPPLY
CHAIN MODEL
Our secure supply chain
integrating
farm to production, provides traceability,
scalability and flexibility.
SCALABLE
MANUFACTURING
Flexible manufacturing capability
across multiple packaging formats with
potential for expansion.
UNDERPINNED BY GOAT
DAIRY DOMINANCE
Bubs is the market leader in goat dairy
products across Australia and owns
exclusive access to its goat milk pool.
34
Bubs Australia Limited and Controlled Entities
Annual Report for the year ended 30 June 2021
35
100% ownership of Australia Deloraine Dairy, based in Dandenong South and purpose built with advanced infrastructure and capacity to process up to 10 million tins per annum. 03
DIRECTORS
REPORT
Director’s Report
Remuneration Report
Independent Auditors Report
Lead Auditor’s Independence Declaration
36
37
DIRECTOR’S
REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There was no significant change in the state of affairs of the Group during the financial year.
REVIEW OF OPERATIONS AND FINANCIAL RESULTS
The Group achieved gross revenue1 of $46.8 million (24% down on FY20) and revenue $39.3
million (28% down on FY20). The decrease in gross revenue is mainly due to the sharp decline in
demand the Group has experienced in the Corporate Daigou channel under the challenging COVID
environment. The shortfall in the Corporate Daigou channel was partially offset by the strong
performance in domestic retail sales and cross border e-commerce distribution channel. Bubs
Infant Formula is the fastest infant manufacturer across Woolworths, Coles and Chemist Warehouse
with combined retail scan sales growth of 51.5%2.
Due to the impact from COVID, the Group redirected short term domestic brand marketing
investments towards greater emphasis on domestic in store trade spend investments. These
investments focused on in store activation to support the new product range Vita Bubs and national
ranging of Bubs Organic Grass Fed Formula. This had an adverse impact on Group’s revenue, as a
result the costs are recognised as a deduction of gross revenue.
Despite the contraction of the Corporate Daigou channel, we have seen continuing strong Chinese
consumer demand for Bubs Goat Infant Formula. Bubs Goat Infant Formula revenue in cross border
e-commerce distribution channel increased 26% compared to FY20.
Group gross margin decreased to $7.3 million loss. This was primarily driven by industrial bulk
powder sales at a loss and $12.6 million in inventory written down/ write off. Other factors
contributing to the decreased gross margin includes the redirection of domestic marketing
investment in the short term towards trade spend, as well as the adverse change in channel mix
due to the contraction of the more profitable Corporate Daigou channel. Bubs Goat Infant Formula
product margin was 34%3 in FY21 which is consistent with FY20. The Group’s gross margin
excluding inventory provision was 14%3 compared to 22% in FY20. The Group’s gross margin for
branded products (excluding bulk powder and raw material sales) was 21%5 in FY21.
Distribution costs to gross revenue ratio increased from 3% to 4%. Employee costs4 increased 8% due to the new
resources to support the ability of our organisational capability to sustain the long term growth. We now have Fabrizio
Jorge as Chief Operating Officer to spearhead global expansion and our on the ground China team executing the Group’s
new China Strategy. Increased administrative and other costs1 is mainly due to bad debts provision and increased costs
for NPD and IP protection in international markets and donations.
The brand marketing investment decreased 28% compared to FY20. This is mainly due to the short term domestic brand
marketing investment redirecting to in-store trade spend investment. We continued to make significant and essential
investment in brand marketing with a focus on building brand awareness, new customer acquisition and channel capacity
in China and other international markets.
It is important to note that the overall statutory net loss of $74.7 million for FY21 includes a total $44.6 million (FY20: Nil)
non-cash impairment relating to the Nulac Foods cash generating unit and Deloraine Dairy cash generating unit driven
by the conservative outlook the Group has adopted over next 5 years due to the prolonged uncertainties. This does not
detract from the strategic value of the Nulac Foods and Deloraine Dairy acquisition which delivered a provenance market
advantage and vertical integrated supply chain security to the Group, essential to a sustainable future.
On a statutory basis, loss after tax was $74.7 million (FY20: $7.8 million). EBITDA loss was $73.1 million (FY20: $11.3
million) and underlying EBITDA loss was $28.5 million (FY20: $11.3 million). EBITDA Loss and underlying EBITDA loss for
FY21 compared to FY20 is set out in the table below.
Loss before tax
Interest income
Finance cost
EBIT Loss
Depreciation and amortisation
EBITDA Loss
Impairment
Underlying EBITDA Loss
FY21
FY20
(77,878,500)
(16,100,700)
144,774
317,504
(1,507,582)
(1,380,255)
(76,515,692)
(15,037,949)
(3,405,018)
(3,730,852)
(73,110,674)
(11,307,097)
(44,640,260)
-
(28,470,414)
(11,307,097)
The Group continues to maintain a strong balance sheet position with $27.9 million cash and cash equivalents at 30 June
2021 (30 June 2020: $26.0 million) and minimal external debt at balance date. Inventory has returned to a healthier
position of $20.5 million as at 30 June 2021. In FY20, the Group made a conscious decision to carry a higher level of
inventory to protect potential supply chain disruption in the challenging conditions under COVID. Subsequently, the Group
experienced the sharp disruption to the Corporate Daigou channel as well as fluctuations in demand caused by pantry
stocking in multiple markets. Given the Group has taken on the position not to over stock the distribution channels, this
has resulted in a $12.6 million in inventory write down/ write off against the finished goods on hand and raw materials
(including bulk powder). The inventory write off expense also includes $850,000 take or pay penalty payments to the
third-party manufacturers due to the shortfall of the annual commitment volume as a result of COVID. While the Group’s
finished goods position has improved since 30 June 2020, the raw materials position is expected to further improve in
FY22. 31% of inventory is in finished goods as at 30 June 2021 (30 June 2020: 53%).
1 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.
2 IRI Scan value scan sales data, Coles, Woolworths and Chemist Warehouse combined MAT to 4.07.2021.
3 Gross margin is calculated as (revenue – production costs) / revenue.
4 Employee costs exclude share based payments.
5 Administrative and other costs do not include depreciation and amortisation
38
39
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT
GOING CONCERN
As part of the directors’ consideration of the appropriateness of adopting the going concern basis in preparing the
financial statements, a range of scenarios have been reviewed. Management have sensitised the revenue, operating
costs and cashflow impacts to take consideration of potential reduced trading activities caused by challenging macro
dynamics. Under each scenario, mitigating actions are all within management control and can be initiated as they relate
to discretionary spend, and do not impact the ability to meet demand. These actions include reduced administration and
marketing costs and ceasing all non-essential and non-committed capex in the next 12 months. As at 30 June 2021, the
Group balance sheet reflects a net current asset position of $41 million and net asset position of $87 million. The liquidity
of the Group remains strong. In addition, we are in the process of renewing the NAB working capital facility of $10 million
with the maturity date in September 2022 and are confident that the facility will be renewed. As at 30 June 2021, the
undrawn balance remains at $8 million which is consistent with prior periods. In all scenarios modelled, our liquidity
requirements are within the $10 million working capital facility and we will be able to repay the drawdown balance in full
before the expiry date. On the basis of these reviews, the directors consider it is appropriate for the going concern basis
to be adopted in preparing the financial statements.
INDEMNIFICATION AND INSURANCE OF DIRECTORS & 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 Officers 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, Deloitte, 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.
PRINCIPAL ACTIVITIES
PROCEEDINGS ON BEHALF OF THE GROUP
The Group offers high quality range of organic baby food, goat milk and organic cow’s milk infant formula products,
adult goat milk powder products and fresh dairy products. The Group also provides canning services of nutritional dairy
products.
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 is not aware of any matter which requires disclosure with respect to any significant environmental regulation
in respect of its operating activities.
ROUNDING
The Group was not a party to any such proceedings during the year.
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
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 (2020: Nil).
40
The financial report is presented in Australian dollars and all values are rounded to the nearest dollar.
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 2021
As at 30 June 2020
Male
Percentage
Male (%)
Female
Percentage
Female (%)
Male
Percentage
Male (%)
Female
Percentage
Female (%)
Board
Senior
management
Employees
Total
3
1
21
25
75%
50%
60%
61%
1
1
14
16
25%
50%
40%
39%
3
2
20
25
75%
50%
61%
61%
1
2
13
16
25%
50%
39%
39%
41
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT 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
19 January 2021
29 November 2022
10 June 2024
0.10
0.10
0.65
All unissued shares are ordinary shares of the Group.
4,770,810
4,770,810
2,000,000
NON-AUDIT SERVICES
No non-audit services were provided by Deloitte during the year ended 30 June 2021.
Details of amounts paid or payable to the auditor during the year are outlined in Note G3 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.
42
43
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT 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 2021 were:
• Dennis Lin (Executive Chairman)
• Matthew Reynolds (Non-executive Director)
• Steve Lin (Non-executive Director)
• Kristy-Lee Newland Carr (Chief Executive Officer and Managing Director)
• Iris Ren (Chief Financial Officer)
• Fabrizio Jorge1 (Chief Operating Officer)
• David Orton1 (General Manager Commercial)
• Richard Paine1 (Chief Manufacturing Officer)
• Vivian Zurlo1 (Chief Marketing and Inventory Officer)
REMUNERATION STRUCTURE
In consultation with external remuneration consultants, 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.
1 Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021.
Fabrizio Jorge became a KMP on 3 May 2021.
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 focuses 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 2021, participants may achieve a
maximum STI of between 6% and 33% 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 KMPs 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.
44
45
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited) TOTAL FIXED REMUNERATION (TFR)
SHORT-TERM INCENTIVE PLANS
KMP EXECUTIVES
During the year, the KMP executives of TFR were as follows:
The FY21 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:
Title
Name
Annual Base Salary
Allowance
• Financial – actual results compared to budgeted results for items including revenue, gross margin and normalised
Executive Chairman
Dennis Lin
$250,000
Nil
Chief Executive Officer and
Managing Director
Kristy Carr
$450,000
$6,000
Chief Financial Officer
Iris Ren
$250,000
Chief Operating Officer2
Fabrizio Jorge
$400,000
General Manager Commercial2
David Orton
$240,000
Chief Manufacturing Officer2
Richard Paine
$250,000
Chief Marketing & Innovation Officer2
Vivian Zurlo
$235,000
Nil
Nil
Nil
Nil
Nil
GROUP’S FINANCIAL PERFORMANCE
The following table provides details of the relationship between KMP’s TFR and the summary of Group’s financial performance:
2021
2020
2019
2018
2017
Revenue
39,312,738
54,644,952
43,914,853
16,906,256
3,932,298
EBITDA.
• Business Management – cash generation, capital management, working capital management.
• Business Strategy – development, approval, implementation and achievement.
The following table provides details of the maximum STI that each KMP is entitled to receive:
KMP
Dennis Lin
Kristy Carr
Iris Ren
Fabrizio Jorge3
David Orton3
Richard Paine3
STI
-
$150,000
$15,000
-
$60,000
$15,000
STI
% of TFR
-
33%
6%
-
25%
6%
-
Performance
measurement
-
100% is measured against
delivery of Business Strategy
50% is measured against
Business Management and
50% is measured against
Financial
-
100% is measured against
Financial
100% is measured against
Business measurement
-
EBIT Loss
(76,515,692)
(15,037,949)
(35,144,011)
(66,025,718)
(5,078,230)
Vivian Zurlo3
-
Share price at year
end
Basic loss per
share
Total dividend
(cents per share)
0.435
0.925
0.12
-
0.01
-
1.13
0.08
-
0.78
0.20
-
0.25
0.02
-
2 Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021. Fabrizio Jorge
3 Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021. Fabrizio Jorge
became a KMP on 3 May 2021.
became a KMP on 3 May 2021.
46
47
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited) LONG-TERM INCENTIVE PLANS
CEO’S FY18 GRANT OF OPTIONS
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.
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:
EXECUTIVE CHAIRMAN’S FY20 GRANT OF OPTIONS
The FY20 LTI plan awards were divided in 2 tranches and vest subject to the gross revenue and normalised EBITDA
performance hurdle calculation in any of a three-year performance period and continuing employment:
• Tranche 1 (2,385,405 options) will vest 3 months after issue and on the achievement of
$50,000,000 in gross revenue and $2,000,000 in normalised EBITDA as at the Company’s full
year results; and
• Tranche 2 (2,385,405 options) will vest 3 months after issue and on the achievement of
$60,000,000 in gross revenue and $4,000,000 in normalised EBITDA as at the Company’s full
year results.
The expiry date of the options is 29 November 2022.
The gross revenue and normalised EBITDA performance hurdle was chosen as being a performance measure
appropriate to current circumstances of the Group given the Group’s short term objective is to continue to build strong
sales momentum and deliver profitable growth.
• Tranche 1 (3,578,108 options) will vest on the achievement of $15,000,000 in gross revenue or
achievement of $500,000 in EBIT.
• Tranche 2 (2,385,405 options) will vest on the achievement of $30,000,000 in gross revenue
and $2,000,000 in EBIT
• Tranche 3 (2,385,405 options) will vest on the achievement of $50,000,000 in gross revenue
and $4,000,000 in EBIT.
Performance hurdles must be achieved in any consecutive 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 service
condition after the issue date and the continuing employment. These options expired on 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.
Tranche 1 was granted to the Group’s previous CEO Nicholas Simms. The options vested in FY18 and were subsequently
cancelled in FY19.
Tranche 2 and 3 options were offered to and accepted by the current CEO Kristy Carr on 29th June 2018 with the value of
$0.68 for each option and an exercise price of $0.10. These tranches didn’t meet the vesting condition before the expiry date.
CEO’S FY21 GRANT OF OPTIONS
KMP’S FY21 GRANT OF OPTIONS
The FY21 LTI plan awards were divided in 2 tranches and vest subject to the gross revenue and normalised EBITDA
performance hurdle calculation in any of a three-year performance period and continuing employment:
The FY21 LTI plan awards were divided in 2 tranches and vest subject to the gross revenue and normalised EBITDA
performance hurdle calculation in any of a three-year performance period and continuing employment:
• Tranche 1 (2,385,405 options) will vest 3 months after issue and on the achievement of
$50,000,000 in gross revenue and $2,000,000 in normalised EBITDA as at the Company’s full
year results; and
• Tranche 2 (2,385,405 options) will vest 3 months after issue and on the achievement of
$60,000,000 in gross revenue and $4,000,000 in normalised EBITDA as at the Company’s full
year results.
• Tranche 1 (200,000 options) will vest 3 months after issue and on the achievement of
$50,000,000 in gross revenue and $2,000,000 in normalised EBITDA as at the Company’s full
year results; and
• Tranche 2 (200,000 options) will vest 3 months after issue and on the achievement of
$60,000,000 in gross revenue and $4,000,000 in normalised EBITDA as at the Company’s full
year results.
The expiry date of the options is 23 November 2023.
The expiry date of the options is 10 June 2024.
The gross revenue and normalised EBITDA performance hurdle was chosen as being a performance measure
appropriate to current circumstances of the Group given the Group’s short term objective is to continue to build strong
sales momentum and deliver profitable growth.
The gross revenue and normalised EBITDA performance hurdle was chosen to be consistent with the Executive Chairman
and CEO’s options vesting conditions and considered appropriate to current circumstances of the Group given the Group’s
short term objective is to continue to build strong sales momentum and deliver profitable growth.
48
49
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited)
EXECUTIVE CONTRACTS
Directors are also reimbursed for travel and other expenses incurred in attending to Board meetings and the Group’s affairs.
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.
COMPANY SECRETARY
KMP executive
Notice period by
the Group
Notice period by
Executive
Payment in lieu
of notice
Dennis Lin (Executive Chairman)
3 months
3 months
Kristy Carr (Chief Executive Officer
and Managing Director)
3 months
3 months
Iris Ren (Chief Financial Officer)
3 months
3 months
Fabrizio Jorge (Chief Operating Officer)4
3 months
3 months
David Orton (General Manager Commercial)4
3 months
3 months
Richard Paine (Chief Manufacturing Officer)4
3 months
3 months
Vivian Zurlo (Chief Marketing and Innovation Officer)4
3 months
3 months
Yes
Yes
Yes
Yes
Yes
Yes
Yes
4 Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021. Fabrizio Jorge
became a KMP on 3 May 2021.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
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.
For FY21, non-executive chairman and directors’ remuneration was as follows:
Title
Non-Executive Director
Non-Executive Director
*Steve Lin’s services were remunerated by C2 Capital Partners.
50
Name
Annual remuneration
Matthew Reynolds
Steve Lin
$40,000
$40,000*
Jay Stephenson is contracted on a monthly basis as Company Secretary at a rate of $30,000 per annum.
OTHER RELATED PARTY TRANSACTIONS WITH KMP
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.
51
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited)
DETAILS OF THE NATURE AND AMOUNT OF EACH ELEMENT OF THE REMUNERATION
Table A(2): Remuneration for Non-executive Directors for the year ended 30 June 2021
Short Term
Post-
Employment
Other Long
Term
Salary & fees
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Share based
payments –
options
$
Matthew
Reynolds
Steve Lin (2)
Dennis Lin (1)
Total
2021
40,000
2020
40,000
2021
40,000
2020
40,000
2021
-
2020
46,027
2021
80,000
2020
126,027
-
-
-
-
-
-
-
-
3,800
3,800
-
-
-
4,373
3,800
8,173
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
43,800
43,800
40,000
40,000
-
50,400
83,800
134,200
Perfor-
mance
related
%
-
-
-
-
-
-
-
-
(1) Dennis Lin resigned as a Non-executive Director on 21 October 2019 and was appointed as an executive chairman on 22 October 2019.
(2) Steve Lin’s services were remunerated by C2 Capital Partners in FY20 and FY21.
Table A(1): Remuneration for KMP for the year ended 30 June 2021
Short Term
Post-
Employment
Other Long
Term
Salary &
fees
$
Annual
leave $
Cash
bonus
$
Non-
monetary
$ (1)
Super-
annuation
$
Long service
leave
$
Share based
payments –
options
$
Total
$
Perfor-
mance
related
%
2021
243,269 19,231
23,111
1,973
(1,207,997)
(920,413)
131%
2020
99,934
7,998
-
-
9,494
252
1,207,997
1,325,678
91%
2021
427,500 34,615
75,000
6,000
40,613
49,330
-
633,058
12%
2020
270,000 23,077 150,000
6,000
25,650
5,251
(1,349,046)
(869,068)
138%
2021
-
-
-
-
-
-
2020
68,031
6,407
-
2,500
6,463
45,212
2021
238,942 19,231
15,000
2020
212,385 16,923
15,000
2021
167,905 15,579
-
2020
211,538 16,923
10,000
2021
201,343 16,228
12,658
2020
238,462 19,231
2021
189,263 15,254
2020
194,615 5,385
2021
64,658
4,974
2020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,700
4,504
20,177
2,985
15,951
2,913
20,096
3,140
19,128
2,004
22,654
1,475
17,980
1,752
18,488
695
6,143
-
31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0%
128,613
0%
300,377
5%
267,470
6%
202,348
0%
261,697
4%
251,360
6%
281,822
0%
224,249
0%
219,183
0%
75,806
0%
-
-
2021 1,532,880 125,112 102,658
6,000
145,624
62,507
(1,207,997) 766,783
2020 1,294,965 95,944 175,000
8,500
123,022
59,010
(141,049)
1,615,392
Dennis Lin (2)
Kristy Carr
Anthony
Gualdi (3)
Iris Ren
David Orton
(4)
Richard Paine
(4)
Vivian Zurlo
(4)
Fabrizio Jorge
(4)
Total
(1) Non-monetary benefits include motor vehicle and travel allowances.
(2) Dennis Lin was appointed as an executive chairman on 22 October 2019.
(3) Anthony Gualdi resigned on 30 November 2019.
(4) Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021. Fabrizio Jorge
became a KMP on 3 May 2021.
52
53
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited)
FULLY PAID ORDINARY SHARES OF BUBS AUSTRALIA LIMITED
SHARE BASED PAYMENTS
Table B: Movement in the shares of Bubs held, directly, indirectly or beneficially, by each KMP, including their related parties.
Table C: Share-based payments granted as remuneration to KMP
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
expired
Number
forfeited
Number
cancelled
At the
beginning of
the year
13,620,600
16,761,600
-
12,000,000
-
-
-
-
-
-
-
-
-
-
1,500
1,500
-
-
-
-
Kristy Carr (1)
Anthony Gualdi
(2)
Steve Lin(3)
Dennis Lin
Matthew
Reynolds
Iris Ren
David Orton (4)
Richard Paine (4)
Vivian Zurlo (4)
Fabrizio Jorge (4)
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,620,600
(3,141,000)
13,620,600
-
-
(2,000,000)
10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500
1,500
-
-
-
-
Number of
options held
at the end of
the period
4,770,810
4,770,810
4,770,810
4,770,810
400,000
-
400,000
-
400,000
-
400,000
-
400,000
-
Dennis
Lin
Kristy
Carr
Iris Ren
Fabrizio
Jorge(1)
David
Orton(1)
Richard
Paine(1)
Vivian
Zurlo(1)
2021
-
-
-
-
-
2020
29/11/2019 4,770,810 $0.9838
$0.10
29/11/2022
2021
23/11/2020 4,770,810 $0.6132
$0.10
23/11/2023
2020
-
-
-
-
-
2021
10/06/2021 400,000
$0.1541
$0.65
10/06/2024
2020
-
-
-
-
-
2021
10/06/2021 400,000
$0.1088
$0.65
10/06/2024
2020
-
-
-
-
-
2021
10/06/2021 400,000
$0.1541
$0.65
10/06/2024
2020
-
-
-
-
-
2021
10/06/2021 400,000
$0.1541
$0.65
10/06/2024
2020
-
-
-
-
-
2021
10/06/2021 400,000
$0.1541
$0.65
10/06/2024
2020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,770,810
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo stopped being a KMP on 3 May 2021. Fabrizio Jorge
became a KMP on 3 May 2021
END OF REMUNERATION REPORT (AUDITED)
This directors’ report is signed in accordance with a resolution of the board of directors:
[1] Shares are held under Carr Family Pty Limited.
[2] Shares are held under Infant Food Business Pty Limited. Anthony Gualdi resigned on 30 November 2019.
[3] At 30 June 2019 and 30 June 2020, 76,288,510 shares were held by C2 Capital Partners, of which Steve Lin is the Managing Director.
[4] Due to the changes in corporate structure during the year, Richard Paine, David Orton and Vivian Zurlo ceased being a KMP on 3 May 2021. Fabrizio Jorge
became a KMP on 3 May 2021.
Dated: 31 August 2021
DENNIS LIN
EXECUTIVE CHAIRMAN
SYDNEY
54
55
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 DIRECTOR’S REPORT Remuneration Report (Audited) 56
57
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 Independent Auditor’s Report 58
59
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 Independent Auditor’s Report Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
31 August 2021
The Board of Directors
Bubs Australia Limited
23-29 Nina Link Road
Dandenong South VIC 3175
Dear Board Members
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo BBuubbss AAuussttrraalliiaa LLiimmiitteedd
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration
of independence to the directors of Bubs Australia Limited..
As lead audit partner for the audit of the financial report of Bubs Australia Limited for the year ended 30 June
2021, I declare that to the best of my knowledge and belief, there have been no contraventions of:
• The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• Any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Andrew Lian Sun
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
60
61
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202103 Independent Auditor’s Report
04
FINANCIAL
STATEMENTS
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial
Position
Consolidated Statement of Changes in
Equity
Consolidated Statement of
Cash Flows
Notes to Financial Statements
Director’s Declaration
Other Information
62
63
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Revenue
Cost of sales
Gross profit/ (loss)
Other Income
Share of net profits/ (loss) of associate accounted for using the
equity method
Distribution and selling costs
Marketing and promotion costs
Administrative and other costs
Impairment
Other expenses
Interest income
Finance cost
Loss before tax
Income tax benefit
Loss for the year after tax
Other comprehensive income
Other comprehensive income that may be reclassified to profit or
loss in subsequent periods (net of tax)
Exchange difference on translation of foreign operations
Other comprehensive income, net of tax
Total comprehensive loss for the year
Loss per share
Basic (loss) per share (dollars)
Diluted (loss) per share (dollars)
The accompanying notes form part of these financial statements.
64
Note
B2
B3
B3
C5
B3
B3
B5
B4
B4
2021
$
39,312,738
(46,587,926)
(7,275,188)
523,764
(687,323)
(1,992,844)
(7,175,341)
(15,182,292)
(44,640,260)
(86,208)
144,774
(1,507,582)
(77,878,500)
3,140,580
(74,737,920)
(10,204)
(10,204)
(74,748,124)
(0.12)
(0.12)
2020
$
54,644,952
(44,276,408)
10,368,544
377,697
(272,496)
(1,885,185)
(9,907,735)
(13,369,565)
-
(349,209)
317,504
(1,380,255)
(16,100,700)
8,329,562
(7,771,138)
(14,177)
(14,177)
(7,785,315)
(0.01)
(0.01)
65
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss and Other Comprehensive Income
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
GST receivable
Inventories
Total Current Assets
Non-Current Assets
Other assets
GST receivable
Plant and equipment
Right of use assets
Intangible assets
Investment in associates
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Borrowings
Provisions
Share based payment liability
Deferred consideration payables
Total Current Liabilities
Non-Current Liabilities
Lease liabilities
Provisions
Share based payment liability
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
Note
D3
C1
C3
C11
C2
C3
C11
C4
C8
C5
E
C6
C7
C8
C9
C10
C11
C12
C8
C10
C11
C12
B5
D5
D6
30/06/2021
$
27,883,202
8,643,277
686,435
417,036
20,546,605
58,176,555
391,545
267,691
4,146,761
1,622,575
41,267,323
45,883
47,741,778
105,918,333
8,010,503
28,297
426,667
2,000,000
1,326,911
417,036
4,510,181
16,719,595
1,738,076
173,180
267,691
-
-
2,178,947
18,898,542
87,019,791
274,851,116
2,988,548
(22,414)
(190,797,459)
87,019,791
30/06/2020
$
26,025,575
6,619,072
1,271,122
956,045
30,602,156
65,473,969
382,985
255,768
4,067,769
2,081,000
88,504,687
743,542
96,035,751
161,509,720
11,003,580
67,234
422,805
2,000,000
601,269
956,045
4,510,181
19,561,114
2,166,131
148,841
255,768
3,873,573
3,605,635
10,049,948
29,611,062
131,898,658
236,965,360
11,005,047
(12,210)
(116,059,539)
131,898,658
The accompanying notes form part of these financial statements.
66
67
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
2021
Issued Capital
$
Share Based
Payments
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total equity
$
Balance at 1 July 2020
236,965,360
11,005,047
(12,210)
(116,059,539)
131,898,658
Comprehensive income
Loss for the year
Other comprehensive loss
Total comprehensive loss
Transactions with owners in
their capacity as owners:
-
-
-
Issue of shares
D5
38,907,402
Capital raising costs, net of tax
D5
(1,021,646)
-
-
-
-
-
Share based payment expense/
(benefit)
D6
Share based payment expense/
(benefit) – Corporate transaction
D6
-
-
(1,207,998)
(6,808,501)
-
(74,737,920)
(74,737,920)
(10,204)
-
(10,204)
(10,204)
(74,737,920)
(74,748,124)
-
-
-
-
-
-
-
-
38,907,402
(1,021,646)
(1,207,998)
(6,808,501)
Balance at 30 June 2021
274,851,116
2,988,548
(22,414)
(190,797,459)
87,019,791
2020
Issued Capital
$
Share Based
Payments
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total Equity
$
Balance at 1 July 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:
-
-
-
Issue of shares
D5
48,732,827
Exercise of options
D5
150,655
Capital raising costs, net of tax
D5
(977,272)
-
-
-
-
-
-
Share based payment expense/
(benefit)
D6
Share based payment expense /
(benefit) – Corporate transaction
D6
-
-
(141,049)
(13,732,827)
-
(7,771,138)
(7,771,138)
(14,177)
-
(14,177)
(14,177)
(7,771,138)
(7,785,315)
-
-
-
-
-
-
-
-
-
-
48,732,827
150,655
(977,272)
(141,049)
(13,732,827)
Balance at 30 June 2020
236,965,360
11,005,047
(12,210)
(116,059,539)
131,898,658
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
68
69
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity
CONSOLIDATED STATEMENT OF
CASH FLOWS
Note
D4
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
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
Net payments to Deloraine vendors relating to Deloraine acquisition
Purchases of intangible assets
Payments for interests in associates
Net payments to Nulac vendors relating to Nulac Foods acquisition and disposal of joint ventures
Net cash used in investing activities
Cash flows from financing activities
Proceeds from share issue
Exercise of options
Capital raising costs
Repayment of lease liabilities
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Total cash and cash equivalents at the end of the year
The accompanying notes form part of these financial statements.
2021
$
43,560,575
(66,098,975)
155,720
(247,578)
(22,630,258)
(602,145)
7,653
(5,000,000)
(7,800)
-
-
(5,602,292)
32,098,901
-
(1,459,495)
(549,229)
30,090,177
1,857,627
26,025,575
27,883,202
2020
$
65,487,490
(87,444,781)
383,665
(343,452)
(21,917,078)
(166,861)
864
(2,205,073)
(52,550)
(1,030,470)
(5,245,095)
(8,699,185)
35,000,000
150,655
(1,396,102)
(403,773)
33,350,780
2,734,517
23,291,058
26,025,575
70
71
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Consolidated Statement of Cash Flows
NOTES TO THE FINANCIAL
STATEMENTS
A.
BASIS OF PREPARATION
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 31 August 2021. The
directors have the power to amend
and reissue the financial report.
The financial statements, apart from
the cash flow information, have been
prepared on an accruals basis and
are based on historical costs.
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 2021. 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
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
International
also
Financial Reporting Standards as
issued by the International Accounting
Standards Board
comply with
(‘IASB’).
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of
the financial
statements requires management to
judgements, estimates
make
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 and recoverability of deferred
tax assets
Share based payments
Note C2
Note C5
Note B5
Note G2
72
73
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements 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.
Geographic information
Australia
China
Other International
Total
In FY20 and FY21, the Group had identified a single
operating segment being the sale of nutritional food, 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.
2021
$
2020
$
20,436,532
36,540,584
10,465,477
12,692,522
8,410,729
5,411,846
39,312,738
54,644,952
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 Food and Vitamins
Sale of Adult Goat Dairy Products
Sale of Raw Materials
Canning services
2021
$
19,290,709
1,459,480
14,265,575
3,344,601
952,373
Total revenue from contracts with customers
39,312,738
2020
$
29,845,732
2,604,513
17,827,278
2,340,973
2,026,456
54,644,952
RECOGNITION AND MEASUREMENT
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 revenue information above is based on the locations of the customers.
The Group had 1 external customers who generated greater than 10 percent of the Group’s revenue at 30 June 2021
amounting to $6,163,200. The Group had 2 external customers who generated greater than 10 percent of the Group’s
revenue at 30 June 2020 amounting to $17,220,404.
SALE OF PRODUCTS
The Group has identified the following revenue streams by product type:
•
Infant Formula
• Baby Food and Vitamins
• Adult Goat Dairy Products
• Raw materials
74
75
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements 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, marketing contributions give rise to variable consideration. To estimate the variable
consideration to which it is entitled, the Group applies the ‘most likely amount method’ for contracts with marketing
contribution. The selected method that best predicts the amount of variable consideration is primarily driven by the
marketing contribution agreed with the customers. The Group then applies the requirements on constraining estimates of
variable consideration and recognises a refund liability for the expected future rebates.
Provision of 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 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 consideration to be included in the transaction price for the sale of products with rebates
and market contribution.
The Group estimates variable consideration 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.
B.3
EXPENSES
Cost of sales
Production costs
Inventories written off / provision
Total
Included in administrative and other expenses are the following:
Listing and registry fees
Accountancy and legal fees
Insurance
Travel costs
Consultancy fee
Occupancy costs
Credit losses
2021
$
33,976,039
12,611,887
46,587,926
437,320
1,295,996
666,094
219,193
548,344
144,187
718,782
2020
$
42,639,299
1,637,109
44,276,408
397,964
673,298
485,233
421,412
214,317
127,698
17,788
Depreciation and amortisation
3,405,018
3,730,852
Employee costs
Wages and salaries
Superannuation
Share based payments
Total
Other expenses
Corporate transaction accounting expense
Total
Finance costs
Interest expense
Interest expense on lease liabilities
Unwinding of consideration payable
Total
5,762,627
492,955
(1,207,998)
5,047,584
86,208
86,208
255,168
125,987
1,126,427
1,507,582
5,334,823
443,096
(141,049)
5,636,870
349,209
349,209
193,703
149,860
1,036,692
1,380,255
76
77
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
B.4
LOSS PER SHARE (LPS)
B.5
INCOME TAXES
Loss attributable to the Group used in calculating basic and diluted EPS
(74,737,920)
(7,771,138)
Consolidated profit or loss
2021
2020
Weighted average number of ordinary shares for basic EPS
603,627,471
538,114,198
Basic LPS (dollars)
Diluted LPS (dollars)*
(0.12)
(0.12)
(0.01)
(0.01)
* The Group has granted 11,541,620 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.
RECOGNITION AND MEASUREMENT
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.
2021
$
2020
$
-
(27,207)
-
-
Income tax benefit
Current tax
Adjustments in respect of prior years
Deferred tax
3,167,787
8,329,562
Income tax benefit reported in the statement of profit or loss
3,140,580
8,329,562
Numerical reconciliation of income tax benefit and tax at the statutory rate
Accounting loss before income tax benefit
77,878,500
16,100,700
Income tax benefit calculated at 30% (2020: 30%)
23,363,550
4,830,210
Effect of different tax rates of subsidiary operating in other jurisdiction
(73,560)
-
Tax effect of amounts not taxable in calculating income tax benefit:
Allocable cost amount relating to Deloraine acquisition
-
(531,743)
Share based payments
Non-deductible costs
Impairment
362,399
42,315
(338,007)
(174,108)
(13,392,078)
-
Deferred consideration payable fair value movement
(337,928)
(311,008)
Income tax losses not recognised
Temporary difference not recognised
Other
(5,415,204)
(1,081,414)
-
-
79,849
(347,897)
Adjustments in respect of prior years
(27,027)
-
Income tax losses recognised
Income tax benefits
-
4,821,793
3,140,580
8,329,562
78
79
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
Deferred tax assets/(liabilities) arise from the following
2021
Opening Balance
Recognised in
Profit or Loss
Recognised in
equity
Closing Balance
Trade and other receivables
104,828
394,223
Inventories
294,986
1,884,012
Intangible assets
(14,112,908)
912,054
Plant and equipment
(421,721)
110,016
Right of use assets
(624,300)
126,544
Lease Liabilities
776,681
(127,258)
Trade and other payables
Provisions
69,433
154,348
2,637
58,695
Carried forward tax losses
9,381,711
226,496
-
-
-
-
-
-
-
-
-
499,051
2,178,998
(13,200,854)
(311,711)
(497,756)
649,423
72,070
213,043
9,608,207
Capital raising costs
771,313
(419,631)
437,848
789,530
(3,605,635)
3,167,787
437,848
-
2020
Opening Balance
Recognised in
Profit or Loss
Recognised in
equity
Closing Balance
Trade and other receivables
-
104,828
Inventories
112,392
182,594
Intangible assets
(14,770,024)
657,116
Plant and equipment
48,481
(470,208)
Right of use assets
Lease Liabilities
Trade and other payables
Provisions
-
-
-
-
(624,300)
776,681
69,433
154,348
-
-
-
-
-
-
-
-
104,828
294,986
(14,112,908)
(421,727)
(624,300)
776,681
69,433
154,348
Carried forward tax losses
1,418,030
7,479,070
484,611
9,381,711
Capital raising costs
837,095
-
(65,782)
771,313
(12,354,026)
8,329,562
418,829
(3,605,635)
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.
KEY ESTIMATE AND JUDGEMENT
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 2021, Bubs
has recognised deferred tax assets of $14,010,321
(2020: $11,553,301) primarily relating to carried
forward tax losses and temporary differences
impacting the profit or loss. Deferred tax assets
are recognised for unused tax losses, unused tax
credits and deductible temporary differences, 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.
Assumptions about the generation of future
taxable profits depend 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 income
tax legislation.
for
the
in expectations
Changes
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 2021, the Group had $6,774,353 (2020:
Nil) of unrecognised tax losses and $1,081,414
temporary
(2020; Nil) of unrecognised
differences.
80
81
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
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
Allowance for credit losses
Other receivables
Receivable from associates
30/06/2021
$
30/06/2020
$
8,410,194
4,451,294
(717,691)
296,213
654,561
(10,525)
360,515
1,817,788
8,643,277
6,619,072
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.
The following table details the risk profile of trade receivables based on the Group’s provision matrix.
TRADE RECEIVABLES - DAYS PAST DUE
30/06/2021
Not past due <30 days
31-60 days 61-90 days 91-120 days >120 days
Total
KEY ESTIMATE AND JUDGEMENT
Estimated total
gross carrying
amount at default
Lifetime ECL
15,709
4,865
755
-
-
696,362
717,691
717,691
TRADE RECEIVABLES - DAYS PAST DUE
30/06/2020
Not past due <30 days
31-60 days 61-90 days 91-120 days >120 days
Total
Estimated total
gross carrying
amount at default
Lifetime ECL
5,723
98
4,704
-
-
-
10,525
10,525
The Group’s exposure to credit risks related to trade and other receivables are disclosed in Note D2 Financial risk management.
For trade receivables, the Group has applied
the standard’s simplified approach and has
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
is unlikely to receive the
that the Group
outstanding contractual amounts in full before
taking into account any credit enhancements
held by the Group.
82
83
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
C.2
INVENTORIES
Raw materials
Finished goods
30/06/2021
$
30/06/2020
$
14,278,685
14,266,867
6,267,920
16,335,289
20,546,605
30,602,156
The amount of inventory that was written off during the year was $2,173,988 (2020: $547,873). An inventory obsolescence
provision $9,587,899 (2020: $983,290) was recognised as an expense during the year. A take or pay penalty $850,000 (2020:
Nil) was recognised as an expense during the year, disclosed as part of inventory write off expense. The cost of inventories
recognised as an expense during the year in respect of continuing operations was $32,164,537 (2020: $38,849,052).
RECOGNITION AND MEASUREMENT
C.3
OTHER ASSETS
Current
Prepayments and other assets
Deposits paid
Inventories paid in advance
Non-current
Security bond
30/06/2021
$
30/06/2020
$
256,972
385,773
43,690
686,435
497,175
586,286
187,661
1,271,122
391,545
382,985
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.
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.
DEPOSITS PAID
KEY ESTIMATES AND JUDGEMENTS
RECOVERY OF INVENTORY
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 the Deloraine Dairy site.
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. Management
assessed
of
inventories based on the estimated
recoverability
the
ongoing impact from COVID-19 on
distribution channels and estimated
in FY22.
end consumer demand
Changes in trading and economic
conditions, and changes in country
specific regulations, may
impact
these estimations in future periods.
84
85
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
C.4
PLANT AND EQUIPMENT
RECOGNITION AND MEASUREMENT
Building and
improvements
$
Production
equipment
$
Motor Vehicle
$
Office
equipment
$
Total
$
As at 1 July 2019
1,371,300
2,826,677
25,000
143,669
4,366,646
Additions
Disposals
17,570
-
124,452
(28,652)
-
-
24,842
(10,194)
166,864
(38,846)
As at 30 June 2020
1,388,870
2,922,477
25,000
158,317
4,494,664
Additions
Disposals
118,767
(4,830)
646,123
-
-
-
46,442
(13,464)
811,332
(18,294)
As at 30 June 2021
1,502,807
3,568,600
25,000
191,295
5,287,702
Accumulated Depreciation and impairment
As at 1 July 2019
Depreciation
Disposals
As at 30 June 2020
Depreciation
Impairment
Disposals
(16,170)
(81,320)
-
(97,490)
(83,758)
(102,165)
(416)
(175,276)
(2,083)
12,143
-
(265,298)
(209,260)
(116,587)
(269,167)
413
-
(2,499)
(2,083)
(1,801)
-
(34,120)
(34,250)
6,762
(61,608)
(35,704)
(4,829)
8,730
(152,870)
(292,929)
18,905
(426,895)
(330,805)
(392,384)
9,143
As at 30 June 2021
(297,422)
(743,725)
(6,383)
(93,411)
(1,140,941)
Net book value
As at 30 June 2020
1,291,380
2,657,179
As at 30 June 2021
1,205,385
2,824,875
22,501
18,617
96,709
97,884
4,067,769
4,146,761
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:
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.
Building and improvements
Production equipment
Motor Vehicle
Office equipment
15-20 years
12-19 years
10 years
2-13 years
86
C.5
INTANGIBLE ASSETS
Goodwill
$
Brand
name
$
Licence $
Priority
right
$
Customer
contract/
list
$
Recipes
$
Patents,
trademarks
and
software
$
Total
$
90,614,673
4,691,634
38,489,095
1,800,000
6,759,764
47,740
110,632
142,513,538
-
-
-
-
-
-
-
-
-
-
-
-
52,550
52,550
-
-
90,614,673
4,691,634
38,489,095
1,800,000
6,759,764
47,740
163,182
142,566,088
-
-
-
-
-
-
-
-
-
-
-
-
7,800
7,800
(66,722)
(66,722)
90,614,673
4,691,634
38,489,095
1,800,000
6,759,764
47,740
104,260
142,507,166
As at 1 July
2019
Additions
Disposals
As at 30 June
2020
Additions
Disposals
As at 30 June
2021
Accumulated amortisation and impairment
(49,138,940)
(349,901)
(300,000)
(847,852)
(47,740)
(46,113)
(50,730,546)
As at 1 July
2019
Amortisation
Disposal
-
-
As at 30 June
2020
(49,138,940)
Amortisation
-
Impairment
(40,901,662)
Disposals
-
-
-
-
-
-
(1,749,504)
(900,000)
(648,199)
-
-
-
-
-
(33,152)
(3,330,855)
-
-
(2,099,405)
(1,200,000)
(1,496,051)
(47,740)
(79,265)
(54,061,401)
(1,749,504)
(600,000)
(648,199)
(3,093,031)
-
-
-
(215,488)
-
-
-
-
(23,853)
(3,021,556)
(1,083)
(44,211,264)
54,379
54,379
As at 30 June
2021
Net book value
At 30 June
2020
As at 30 June
2021
(90,040,602)
(6,941,940)
(1,800,000)
(2,359,738)
(47,740)
(49,822)
(101,239,842)
41,475,733
4,691,634
36,389,690
600,000
5,263,713
574,071
4,691,634
31,547,155
-
4,400,026
-
-
83,917
88,504,687
54,437
41,267,323
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 (2020: $1,165,712); Nulac Foods $6,302,161
(2020: $31,218,363) and Deloraine Dairy $33,745,013 (2020:
$56,036,695).
87
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
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
Brand names are considered to have an indefinite life and are not amortised. As at 30 June 2021, these assets
were tested for impairment.
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 finite life of 22 years.
CUSTOMER CONTRACT/LIST
Customer lists acquired in a business combination are amortised on a straight-line basis over the period of
their expected benefit, being their finite 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.
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
Deloraine Dairy
2021
2020
1,165,712
1,165,712
4,100,000
28,077,406
-
16,924,256
5,265,712
46,167,374
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.
88
89
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
KEY ESTIMATES AND JUDGEMENTS
GOODWILL AND INTANGIBLES
Judgements are made with respect
to identifying and valuing intangible
assets on acquisitions of new
businesses. The Group assesses
whether goodwill and intangibles with
indefinite useful lives are impaired
at least annually and whenever an
indicator of impairment exists. 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 2021
Infant Food Co CGU and Nulac CGU
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
prepared by the management.
In light of the current
impact of
COVID-19 on the Group’s performance
in FY21, management has reviewed the
assumptions applied to the value in use
models for goodwill impairment testing
and made additional adjustments
to the five-year forward plans used
in the Group’s impairment testing in
order to reflect the estimated impact
from COVID-19 based on information
available as at 30 June 2021. The
value in use models are considered to
reflect a base case of cashflows and
appropriate discount rate.
KEY ASSUMPTIONS
2021
2020
CGUs
Infant Food Co
Nulac Foods
Infant Food Co
Nulac Foods
Discount rate (post tax)
12.93%
11.90%
12.93%
11.90%
Discount rate (pre tax)
18.50%
17.00%
18.50%
17.00%
Terminal growth
2.00%
2.00%
2.00%
2.00%
90
SENSITIVITY TO CHANGE IN ASSUMPTIONS
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 FY21, and estimates for future years, which
have been adjusted where appropriate to account for
expected future trading conditions. Consideration has been
given to the growth profile of each CGU when forecasting
future margin returns.
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 FY21 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. 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 2.0%
(2020: 2.0%) 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 impairment testing, management
determined the carrying amount of Nulac CGU exceeded its
recoverable amount, resulting in a goodwill impairment of
$23,977,406. The recoverable amount for the Infant Food
Co CGU exceeded its carrying amount and therefore no
impairment loss has been recognised.
There is $3.4 million headroom for Infant Food Co CGU. Any
adverse changes in the assumption will possibly result in
an impairment.
The Group has not adjusted the discount rates in light of the
current impact of COVID-19 as the Group has incorporated
the risk into five-year forward plans and reflected in the
value in use models for goodwill impairment testing.
Management has identified that a reasonably possible
change in three key assumptions could result an impairment
in Infant Food Co CGU and a further impairment for Nulac
Foods as shown in the following table.
Discount rate
Budgeted gross revenue growth
Budgeted gross margin
Deloraine Dairy CGU
Management engaged an independent external valuation
specialist to perform a valuation on Deloraine Dairy CGU.
The valuation was determined on a value in use basis using
a discounted cash flow approach based on financial budgets
and five-year forward plans prepared by management.
The predominant driver of the valuation is the application
of the SAMR accreditation and CNCA license renewal. As
Impact on recoverable amount
% change
Infant Food Co
Nulac Foods
1.5%
-5%
-1%
(6,118,543)
(29,659,407)
(8,843,387)
(2,286,385)
(6,327,996)
(1,328,969)
a result, eight broad scenarios were developed to capture
a range of expected future possibilities based on the
projections prepared by the management. A pre-tax discount
rate of 17.86% (2020: 17.01%) and post-tax discount rate
of 12.5% (2020; 11.91%) and terminal growth rate of 2.0%
(2020: 2.0%) were adopted in the valuation model. Based on
the outcome of each scenario, the CGU value adopted in the
external valuation report is between $30 million and $45
million. Management has adopted a mid- point valuation
of $37.5m which resulted in a goodwill impairment of
$16,924,256 and an impairment of $3,738,597 in other
assets within the CGU.
91
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements C.6
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Customer deposits
Payable to associates
C.7
CONTRACT LIABILITIES
30/06/2021
$
30/06/2020
$
5,383,123
7,559,124
Contract liabilities
1,927,930
2,773,565
684,545
14,905
609,884
61,007
8,010,503
11,003,580
2021
$
28,297
28,297
2020
$
67,234
67,234
$64,807 included in contract liabilities at 30 June 2020 was
recognised as revenue during the year. No revenue was
recognised in the current year that related to performance
obligations that were satisfied in the prior year.
As at 30 June 2021, a total of $113,182 Payroll tax payable were deferred to FY22 as part of the benefits received by the
Group during the COVID-19 period.
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.
C.6
The carrying value of trade and other payables approximates their fair value.
C.6
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.
There is no impact on the accounting for the Group’s financial liabilities under AASB 9 Financial Instruments.
RECOGNITION AND MEASUREMENT
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.
92
93
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
C.8
LEASES
RIGHT OF USE ASSETS
LEASE LIABILITIES
Cost
At 1 July 2020
Additions
At 30 June 2021
Accumulated Depreciation and Impairment
At 1 July 2020
Depreciation
Impairment
At 30 June 2021
Carrying amount
At 30 June 2020
At 30 June 2021
Buildings
$
Equipment
$
Total
$
2,444,996
76,042
2,521,038
-
-
-
2,444,996
76,042
2,521,038
(421,805)
(403,721)
(36,612)
(18,233)
(18,092)
(440,038)
(421,813)
(36,612)
(862,138)
(36,325)
(898,463)
2,023,191
1,582,858
57,809
39,718
2,081,000
1,622,575
The Group leases several assets including buildings and IT equipment. The lease terms range from 1.2 – 10 years
(2020: 1.2 - 10 years).
Extension options are included in a number of leases across the group. These are used to maximise operational flexibility
in terms of managing the assets used in the group’s operations. The majority of extension options held are exercisable
only by the group and not by the respective lessor.
AMOUNTS RECOGNISED IN PROFIT AND LOSS
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Impairment
Expense relating to short-term leases
The total cash outflow for leases amount to $549,229 (2020: $553,633).
30/06/2021
$
30/06/2020
$
421,813
125,987
36,612
104,393
440,038
149,860
-
19,812
Current
Non-current
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
30/06/2021
$
30/06/2020
$
426,667
422,805
1,738,076
2,166,131
2,164,743
2,588,936
531,663
550,557
499,199
532,824
502,266
499,444
512,266
502,267
393,347
512,266
-
393,347
2,438,741
2,990,705
Less unearned interest
273,998
401,769
Total
2,164,743
2,588,936
The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations are
denominated in Australian dollars.
94
95
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements RECOGNITION AND MEASUREMENT
Applying AASB 16, for all leases, the Group:
Recognises right-of-use assets and lease liabilities in the consolidated statement of financial
position, initially measured at the present value of the future lease payments, with the right-of-use
asset adjusted by the amount of any prepaid or accrued lease payments.
Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated
statement of profit or loss.
Separates the total amount of cash paid into a principal portion (presented within financing activities)
and interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent free period) are recognised as part of the measurement of the right-of-
use assets and lease liabilities whereas under AASB 117 they resulted in the recognition of a lease
incentive, amortised as a reduction of rental expenses on a straight line basis.
Under AASB 16, right-of-use assets are tested for impairment in accordance with AASB 136 Impairment of
Assets.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes
tablets and personal computers, small items of office furniture and telephones), the Group has opted to
recognise a lease expense on a straight-line basis as permitted by AASB 16. This expense is presented
within ‘Administrative and other costs’ in profit or loss.
The Group has used the following practical expedients when applying the cumulative catch-up approach to
leases previously classified as operating leases applying AASB 16:
The Group has applied a single discount rate to a portfolio of leases with reasonably similar
characteristics.
The Group has elected not to recognise right-of-use assets and lease liabilities to leases for which
the lease term ends within 12 months of the date of initial application.
C.9
BORROWINGS
Current
2021
$
2020
$
2,000,000
2,000,000
2,000,000
2,000,000
The Group has a working capital facility with National
Australia Bank. Total limit of the facility is $10 million
(2020: $10 million) with $2 million drawn at 30 June 2021
(2020: $2 million). Bubs Australia Limited is the guarantor
of the facility.
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 due to relatively short term maturity.
96
97
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
C.10
PROVISION
Current
Annual leave and long service leave
Other provision
Non - Current
Long service leave
Make good provision
30/06/2021
$
30/06/2020
$
536,963
789,948
1,326,911
82,105
91,075
173,180
365,653
235,616
601,269
59,520
89,321
148,841
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.
OTHER PROVISION
An employee costs provision relating to the expected termination settlement with the previous CEO.
A provision was raised for associated costs to settle a claim in relation to the price difference on milk supplied
by Central Dairy Goats Limited (‘CDG’) from 1 October 2020 to 30 June 2021. Further details are disclosed in
Note D7 Contingent Liabilities.
C.11
SHARE BASED PAYMENT LIABILITY
Current
Non-Current
2021
$
2020
$
417,036
956,045
267,691
255,768
As part of the Chemist Warehouse transaction the Group
engaged in FY19, 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.
C.12
DEFERRED CONSIDERATION
As part of the acquisition of Deloraine Dairy in FY19, a deferred consideration of $15 million is payable in cash over the
three year period. The fair value of the deferred consideration is estimated by calculating the present value of future
expected cashflow.
A reconciliation of fair value measurement of the deferred consideration payable is provided below:
Balance at 30 June 2020
$8,383,754
Unwinding of the deferred consideration payable recognised in profit or loss in the current period
$1,126,427
Deferred consideration paid in the current period
Balance at 30 June 2021
($5,000,000)
$4,510,181
98
99
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
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.
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.
CREDIT RISK MANAGEMENT
COUNTERPARTY RISK
At balance date, the Group’s bank
accounts were held with National
Australia Bank Limited, Australia
and New Zealand Bank Limited,
Commonwealth Bank of Australia
and Bank of the West. 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.
are
customers
for
analysed
New
individually
creditworthiness,
taking into account credit ratings where
available, financial position, previous
trading experience and other factors.
There is significant concentration of
credit risk within the Group. In FY21,
16% of sales were to one customer
(2020: 19% 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.
As at 30 June 2021 there were no derivative financial
instruments in place. Specific risk management objectives
and policies are set out below.
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 monitoring customer credit risk,
customers are assessed individually
by
their debtor ageing profile.
Monitoring of receivable balances
on an ongoing basis minimises the
exposure to bad debts.
OTHER CREDIT RISK
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.
Ageing of trade receivables at the reporting date:
Maximum exposures to credit risk at balance date:
Cash and cash equivalent (counterparty risk)
Trade receivables (customer credit risk)
Other receivables
GST receivable
Deposits paid
100
2021
$
2020
$
27,883,202
26,025,575
8,347,064
6,258,557
296,213
684,727
385,773
360,515
1,211,813
586,286
37,596,979
34,442,746
Neither past due nor default
Past due but not impaired
Past due up to 30 days
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 90 days
2021
$
2020
$
6,036,129
4,995,348
1,782,376
1,203,758
528,560
-
-
56,241
3,210
-
8,347,064
6,258,557
101
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
Movement in allowance for doubtful debts
Allowance of doubtful debts
Balance at beginning of the year
2021
$
2020
$
10,525
3,755
Amount charged to the statement of profit or loss and other comprehensive income
730,009
17,788
Provision utilised
Balance at the end of year
(22,843)
(11,018)
717,691
10,525
MARKET RISK
Market risk is the risk that changes in
market prices will affect the Group’s
income or the value of its holdings
in financial instruments. The Group’s
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 transactions in Australia, New
Zealand, China, USA and Europe and is exposed to currency
risk arising from movements in the currencies of those
countries against the AUD dollar.
Expressed in AUD dollars, the table below indicates
in
material exposure and sensitivity to movements
exchange rates 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.
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.
2020
Movement on exchange rate
NZD
USD
RMB
Euro
Net exposure
Net exposure on reporting
date (Payable)/Receivable
Impact on pre-tax profit / (loss)
$
(800,571)
253,428
98,332
179,782
(269,029)
+10%
$
72,779
(23,039)
(8,939)
(23,039)
17,762
-10%
$
(88,952)
28,159
10,926
19,976
(29,891)
INTEREST RISK MANAGEMENT
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.
Contractual undiscounted maturities of financial liabilities
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
(2020: $2,000,000) drawn at 30 June 2021. Total limit of
facility is $10,000,000.
2021
Contractual cashflows
Carrying
amount
Total
2 months
or less
2-12
months
1-2 years
3-5 years
More than
5 years
2021
Movement on exchange rate
NZD
USD
RMB
Euro
Net exposure
102
Net exposure on reporting
date (Payable)/Receivable
Impact on pre-tax profit / (loss)
Non-derivative financial liabilities
$
(93,641)
258,680
(39,417)
(13,960)
111,662
+10%
$
8,513
(23,516)
3,583
1,269
(10,151)
-10%
$
(10,405)
28,742
(4,380)
(1,551)
12,406
Lease liability
2,164,743
2,438,741
88,610
443,053
499,199
1,407,879
Deferred consideration
payable
Trade and other
payables
4,510,181
5,000,000
-
5,000,000
7,995,598
7,995,598
7,995,598
Borrowings
2,000,000
2,000,000
2,000,000
Payable to associates
14,905
14,905
14,905
-
-
-
-
-
-
-
-
-
-
-
16,685,427 17,449,244 10,099,113
5,443,053
499,199
1,407,879
-
-
-
-
-
-
103
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements 2020
Contractual cashflows
Carrying
amount
Total
2 months
or less
2-12
months
1-2 years
2-5 years
More than
5 years
Non-derivative financial liabilities
Lease liability
2,588,936
2,990,705
91,759
458,798
532,824
1,513,977
393,347
8,383,754
10,000,000
-
5,000,000
5,000,000
Deferred consideration
payable
Trade and other
payables
11,003,580 11,003,580 11,003,580
Borrowings
2,000,000
2,000,000
2,000,000
Payable to associates
61,007
61,007
61,007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,037,277 26,055,292 13,156,346
5,458,798
5,532,824
1,513,977
393,347
D.3
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2021
$
27,883,202
27,883,202
2020
$
26,025,575
26,025,575
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.
D.4
CASH FLOW INFORMATION
Reconciliation of after tax profit with net cash flows from operating activities
2021
$
2020
$
(Loss) after income tax expense for the year
(74,737,920)
(7,771,138)
Income tax benefit
Share-based payments
(3,140,580)
(8,329,562)
(1,207,998)
(141,049)
Unwinding of deferred consideration payable
1,126,427
1,036,692
Impairment loss
44,640,260
-
Depreciation and amortisation
3,774,182
4,063,818
Equity accounting profit
Foreign currency reserve
697,659
286,929
(10,204)
(14,177)
Loss on disposal of intangible assets
12,344
-
Loss on disposal of plant and equipment
1,498
19,079
Decrease / (increase) in trade and other receivables
(2,122,970)
2,124,832
Decrease / (increase) in inventories
10,055,551
(16,049,756)
Decrease / (increase) in other assets
576,126
(17,545)
Increase / (decrease) in trade and other payables
(3,044,614)
2,764,925
Increase/ (decrease) in provisions
749,981
109,872
Net cash outflow from operating activities
(22,630,258)
(21,917,078)
104
105
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
D.5
SHARE CAPITAL
D.6
SHARE BASED PAYMENTS RESERVE
30/06/2021
30/06/2020
Shares
$
Shares
$
Balance at the beginning of the year
11,005,047
24,878,923
Share based payment
(1,207,998)
(141,049)
30/06/2021
$
30/06/2020
$
Movement in share capital
Share based payment – Corporate transaction
(6,808,501)
(13,732,827)
Balance at beginning of the year
560,295,334
236,965,360
509,590,057
189,059,150
Balance at the end of the year
2,988,548
11,005,047
Share based payment expense – Corporate
transaction
12,356,627
6,808,501
12,356,627
13,732,827
Exercise of options
-
-
1,506,545
150,655
Placement of shares
35,371,844
28,297,475
31,578,947
30,000,000
Share purchase plan
4,751,775
3,801,426
5,263,158
5,000,000
Share issue transactions costs (net of tax)
-
(1,021,646)
-
(977,272)
Balance at end of year
612,775,580
274,851,116
560,295,334
236,965,360
Fully paid ordinary shares carry one vote per share and carry right to dividends. Fully paid ordinary shares have no par
value.
The equity settled payments reserve is used to record
the value of share-based payments. Further details are
disclosed in Note G2 Share based payments.Share based
payment – Corporate transaction represents the value of
shares that the Group has issued to Chemist Warehouse
Retail Group during the period. The value of the shares was
transferred to the issued capital with a reduction in the
share based payments reserve.
An initial tranche of 2,974,272 fully paid ordinary shares
was issued to Chemist Warehouse Retail Group on 2
September 2019 upon Chemist Warehouse stocking the
products in accordance with the Heads of Agreement. The
second tranche of 9,382,355 fully paid ordinary shares was
issued on 23 December 2019 upon the approval at Bubs’
2019 AGM.
The third tranche of 12,356,627 fully paid ordinary shares
were issued on 24 July 2020 upon satisfying its sales
performance condition of meeting minimum sales target
for the year ending 30 June 2020.
Due to the economic interruptions caused by COVID-19,
Chemist Warehouse was not able to meet its sales
performance targets for the year ending 30 June 2021. As
a result, the fourth tranche of 12,356,627 ordinary shares
were not issued.
The remaining 12,365,627 ordinary shares will be issued
upon the future satisfaction of sales performance targets
by Chemist Warehouse relating to the actual sales of Bubs
products in Chemist Warehouse stores for the year ending
30 June 2022.
D.7
CONTINGENT LIABILITIES
On 18 December 2020, Central Dairy Goats Limited (‘CDG’)
commenced proceedings in the High Court of New Zealand
for breach of contract, alleging that Bubs New Zealand Pty
Ltd (‘Bubs’) had incorrectly interpreted the price review
mechanism in the Milk Supply Agreement between the
parties dated 21 December 2018.
Registry of the High Court of New Zealand and defended
the summary judgement application. Judgement was
handed down on 28 May 2021 in favour of Bubs. Despite
the circumstances, CDG have indicated that they are
prepared to continue the litigation beyond summary
judgement to a full trial.
On 21 December 2020, CDG filed in the High Court for
declaratory relief in the form of a summary judgement
to affirm their interpretation of the contract and recover
back payment for the period from 1 October 2020 to
present. On 18 May 2021, Bubs appeared in the Wellington
In the event that the matter does progress to a full trial,
the Group continues to monitor the potential exposure and
seek legal advice.
106
107
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
E.
ASSOCIATES
Summarised financial information of the associate is set out below:
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 contributed 49% of registered capital
RMB 4,900,000 in FY20. In April 2021, the Group and the Beingmate reached an agreement to unwind Bubs Brand
Management. As at 30 June 2021, the liquidation process of Bubs Brand Management was yet to be finalised.
Summarised financial information of the associate is set out below:
30/06/2021
30/06/2020
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Loss for the year
Revenue
Loss before tax
Income tax expense
Loss for the year
Other comprehensive income
1,313,080
-
(1,216,902)
(2,539)
(93,639)
3,470,506
(1,402,659)
-
(1,402,659)
-
3,218,647
224,674
(1,842,764)
(83,124)
(1,517,433)
6,580,963
(547,628)
(8,487)
(556,115)
-
Total comprehensive loss for the year
(1,402,659)
(556,115)
Reconciliation of the above summarised financial information to the carrying amount of the investment in Associate
recognised in the consolidated financial statements
Net assets of associate (49%)
Proportion of the Groups ownership interest in the associate (49%)
Carrying amount of the investment in the associate
93,639
45,883
45,883
1,517,433
743,542
743,542
On 19 June 2020, Capela Dairy Nutrition Co. Pty Ltd (‘Capela Dairy’) was established and was a wholly owned subsidiary
of the Group. On 1 March 2021, 80% interest in Capela Dairy was transferred to Grand Products Investment Pty Ltd
(‘Grand Products’) at a price of $80. No trading activities incurred up to 1 March 2021. The Group is not required to
contribute any working capital.
The Group has determined that it does not have joint control of Capela Dairy and is therefore outside the scope of AASB
11 Joint Arrangements. As such, The Group’s investment in Capela Dairy will be accounted for as an associate under
AASB 128 Investments in Associates and Joint Ventures.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Loss for the year 30 June 2021
Revenue
Loss before tax
Income tax expense
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
30/06/2021
2,941
-
(44,795)
-
(41,854)
-
(41,954)
-
(41,954)
-
(41,954)
Reconciliation of the above summarised financial information to the carrying amount of the investment in Associate
recognised in the consolidated financial statements
Net assets of associate (20%)
Proportion of the Groups ownership interest in the associate (20%)
Carrying amount of the investment in the associate
(41,854)
(8,371)
-
RECOGNITION AND MEASUREMENT
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.
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.
108
109
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
F.
GROUP STRUCTURE
F.1
PARENT ENTITY
Bubs Australia Limited is the ultimate parent of the Group.
F.2
SUBSIDIARIES
Country of
incorporation
Principal
Activity
Class or
Shares
% Owned
2021
% Owned
2020
The Infant Food Holding
Co. Pty Limited
Australia
Non-trading
Ordinary
100%
100%
The Infant Food Co. Pty Limited
Australia
Trading
Company
Ordinary
100%
100%
Bubs IP Pty Ltd (formerly Bubs
Australia Pty Limited)
Australia
Holder of IP and
trademarks
Ordinary
100%
100%
Nulac Foods Pty Ltd
Australia
Bubs New Zealand Pty Limited
New Zealand
Australia Deloraine Dairy Group
Limited
British Virgin
Island
Australia Deloraine Dairy Pty Ltd
Australia
Trading
Company
Trading
Company
Non-trading
Holding
Company
Trading
Company
Ordinary
100%
100%
Ordinary
100%
100%
Ordinary
-
100%
Ordinary
100%
100%
Aussie Bubs Inc
USA
Trading
Company
Ordinary
100%
-
F.3
PARENT ENTITY INFORMATION
Set out below is the supplementary information of the legal parent entity.
Result of parent entity
Loss for the year
2021
$
2020
$
(Restated)
(78,759,315)
(50,175,353)
Other comprehensive income
-
-
Total comprehensive loss for the year
(78,759,315)
(50,175,353)
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Issued share capital
Reserves
Accumulated losses
Total Equity
827,357
981,810
69,644,362
123,796,982
5,340,186
1,262,482
4,649,797
9,902,003
302,849,909
264,964,153
2,963,760
10,990,615
(240,819,104)
(162,059,789)
64,994,565
113,894,979
As a result of completing the annual review of the parent entity’s financial information, management have identified a
number of insignificant corporate expenses and equity accounted investment entries recorded in the group consolidation
but not posted in the previously reported parent entity numbers and as a result the comparatives have been restated.
110
111
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
G.
OTHER DISCLOSURES
G.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:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments1
Key management personnel disclosures
2021
$
2020
$
1,846,650
1,694,436
149,424
62,507
131,195
59,010
(1,207,997)
(141,049)
850,583
1,743,592
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
Amounts owed by
related parties
2021
$
2020
$
2021
$
2020
$
2021
$
2020
$
2021
$
2020
$
KMP of the group
Professional
services fee to BDO
Australia Ltd
-
-
-
39,488
-
14,148
-
-
Joint venture in which the parent is a venturer:
Capela Dairy
Nutrition Co Pty Ltd
Bubs Brand
Management
Shanghai
Co. Ltd
41,681
-
-
-
-
-
41,681
-
3,111,752 6,734,364
14,905
185,296
14,905
61,007
-
1,817,788
1
In FY20, a higher probability was applied to vesting conditions of Executive Chairman’s options. Due to the impact of COVID-19, the probability of satisfying
those conditions has been significantly reduced which has resulted in a negative balance.
Total
3,153,433 6,734,364
14,905
224,784
14,905
75,155
41,681
1,817,788
All of the above transactions were considered to be on an arms’ length basis.
112
113
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
G.2
SHARE BASED PAYMENTS
The fair value of the options granted was measured during the year using the Black-Scholes pricing model, taking into
account the terms and conditions upon which the options were granted.
The details of the fair value of the options offered to Kristy Carr and other employees during the period is as follows:
Share based payments expense in relation to options exercisable is as follows:
Employee options
Employee options
Employee options
Employee options issued to the current CEO
Employee options issued to the Executive Chairman
The movements in the options are as follows:
Balance at 1 July 2019
Options exercised during the year (Exercisable at $0.10)
Options granted to the Executive Chairman during the year (Exercisable at $0.10)
Balance at 30 June 2020
Options expired during the year (Exercisable at $0.10)
Options granted to the current CEO during the year (Exercisable at $0.10)
Options granted to the KMP during the year (Exercisable at $0.65)
Balance at 30 June 2021
Options on issue at 30 June 2021 are as follows:
2021
$
2020
$
-
(1,349,046)
(1,207,998)
1,207,997
(1,207,998)
(141,049)
Options #
6,277,355
(1,506,545)
4,770,810
9,541,620
(4,770,810)
4,770,810
2,000,000
11,541,620
Options
Chairman
issued
to
in FY20:
the Executive
Options issued to the CEO in FY21:
Options issued to the Employees in
FY21:
2,385,405: vest 3 months after
issue and on the achievement
of $50m in gross revenue and
$2m in normalised EBITDA as at
the Company’s full year results
and expire on termination of
employment.
2,385,405: vest 3 months after issue
and on the achievement of $60m in
gross revenue and $4m in normalised
EBITDA as at the Company’s full year
results and expire on termination of
employment.
2,385,405: vest 3 months after
issue and on the achievement
of $50m in gross revenue and
$2m in normalised EBITDA as at
the Company’s full year results
and expire on termination of
employment.
2,385,405: vest 3 months after
issue and on the achievement
of $60m in gross revenue and
$4m in normalised EBITDA as at
the Company’s full year results
and expire on termination of
employment.
The options issued in FY20 expire on
29 November 2022.
The options issued in FY21 expire on
23 November 2023.
1,000,000: vest 3 months after
issue and on the achievement
of $50m in gross revenue and
$2m in normalised EBITDA as at
the Company’s full year results
and expire on termination of
employment.
1,000,000: vest 3 months after
issue and on the achievement
of $60m in gross revenue and
$4m in normalised EBITDA as at
the Company’s full year results
and expire on termination of
employment.
The options issued in FY21 expire on
10 June 2024.
Exercise price ($)
Share price at date of issue ($)
Grant date
Expected volatility (%)
Expiry date
Expected dividends
Risk free interest rate
Value per option ($)
Number of options
Total value of options
0.1
0.71
23-Nov-20
60%
23-Dec-23
Nil
0.11%
$0.61
2,385,405
$1,462,730
0.65
0.49
14-Apr-21
60%
10-Jun-24
Nil
0.11%
$0.1541
1,600,000
$246,560
0.65
0.41
27-Apr-21
60%
10-Jun-24
Nil
0.11%
$0.1088
400,000
$43,520
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
Estimating fair value for share-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
the expected life of the share option, volatility and dividend
yield and making assumptions about them.
114
115
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
G.3
AUDITORS REMUNERATION
G.5
ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS
During the financial year the following fees were paid or payable for services provided by the auditor of the Group:
PRINCIPLES OF CONSOLIDATION
Audit services
Audit or review of the financial statements – Deloitte
296,760
245,000
2021
$
2020
$
Non audit services
Agreed upon procedures
G.4
SUBSEQUENT EVENTS
-
-
296,760
245,000
No matter or circumstance has arisen since 30 June 2021 that has significantly affected or could significantly affect the
reported results from operations or financial position for the year then ended.
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 consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Bubs Australia
Limited (‘company’ or ‘parent entity’) as at 30 June 2021
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.
transactions, balances and unrealised
Intercompany
gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with
the policies adopted by the Group.
116
117
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements GOING CONCERN
the directors’ consideration of
As part of
the
appropriateness of adopting the going concern basis in
preparing the financial statements, a range of scenarios
have been reviewed. Management have sensitised the
revenue, operating costs and cashflow impacts to take
consideration of potential reduced trading activities caused
by challenging macro dynamics. Under each scenario,
mitigating actions are all within management control and
can be initiated as they relate to discretionary spend, and
do not impact the ability to meet demand. These actions
include reduced administration and marketing costs and
ceasing all non-essential and non-committed capex in the
next 12 months. As at 30 June 2021, the Group balance
sheet reflects a net current asset position of $41 million
and net asset position of $87 million. The liquidity of the
Group remains strong. In addition, we are in the process
of renewing the NAB working capital facility of $10 million
with the maturity date in September 2022 and are confident
that the facility will be renewed. As at 30 June 2021, the
undrawn balance remains at $8 million which is consistent
with prior periods. In all scenarios modelled, our liquidity
requirements are within the $10 million working capital
facility and we will be able to repay the drawdown balance
in full before the expiry date. On the basis of these reviews,
the directors consider it is appropriate for the going concern
basis to be adopted in preparing the financial statements.
FINANCIAL STATEMENTS Director’s Declaration
DIRECTOR’S DECLARATION
1. In the opinion of the directors of Bubs Australia Limited (the ‘Company’):
a.) The consolidated financial statements and notes that are set out on pages 64 to 118 and the Remuneration report on
pages 44 to 55 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
i.
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for
the financial year ended on that date; and
ii.
Complying with Australian Accounting Standards and the Corporations Regulations 2001; and
NEW, REVISED OR AMENDING ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
b.) There are reasonable grounds to believe that the Company will be able to pay its debts as and when
Several other amendments and
interpretations were
applied for the first time in the 2021 financial period, but
do not have a material impact on the 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.
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 2021.
The impact of these new or amended Accounting Standards
to the Group’s consolidated financial statements are not
expected to be significant.
they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Chief Executive Officer for the financial year ended 30 June 2021.
3. The directors draw attention to Note A to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
118
119
Signed in accordance with a resolution of the directors:
Dated at Sydney this 31st day of August 2021
DENNIS LIN
EXECUTIVE CHAIRMAN
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202104 FINANCIAL STATEMENTS Notes to the Financial Statements
05
OTHER
INFORMATION
120
OTHER INFORMATION
The following additional information is required by the Australian Securities Exchange in respect of listed public companies.
1.
SHAREHOLDING AS AT 19 AUGUST 2021
A
Distribution of shareholders
Range
1 - 10,000
10,001 - 20,000
20,001 - 30,000
30,001 - 40,000
40,001 - 50,000
50,001 Over
Total
Total holders
22,712
3,058
1,227
638
457
1,421
29,493
Units
71,912,855
45,860,678
31,283,853
23,131,494
21,356,702
419,229,998
612,229,998
% Units
11.74
7.48
5.11
3.77
3.49
68.41
100.00
B
Unmarketable parcels
Minimum Parcel Size
Holders
Minimum $ 500.00 parcel at
$ 0.4200 per unit
1,191
7,451
Units
5,602,017
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.
C2 CAPITAL GLOBAL EXPORT-TO-CHINA FUND
CW RETAIL SERVICES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
CARR FAMILY PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
WROXBY PTY LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
INFANT FOOD BUSINESS PTY LIMITED
STABLE CHARTER LIMITED
A Z GLOBAL CORPORATION PTY LTD
MR BENJAMIN PAUL LANDON
MS CATHERINE JANE TAYLOR
MR RUPERT ROBIN SOAR
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
CUSTODIAL SERVICES LIMITED
MR JUN HUA CHEN
19. WAIRAHI INVESTMENTS LIMITED
20.
BNP PARIBAS NOMINEES PTY LTD
Units
% of Units
76,288,510
12.45
24,713,254
18,990,448
18,376,480
13,620,600
11,511,022
6,383,333
5,153,333
5,0000,000
4,615,385
4,097,911
4,000,270
3,000,000
2,772,039
2,492.162
2,433,022
2,326,111
2,000,000
2,000,000
1,861,345
4.03
3.10
3.00
2.22
1.88
1.04
0.84
0.82
0.75
0.67
0.65
0.49
0.45
0.41
0.40
0.38
0.33
0.33
0.30
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)
211,635,225
34.54
2.
CORPORATE DIRECTORY
A
B
C
D
E
F
The name of the Company Secretary is Jay Richard Stephenson
Registered office
23 Nina Link, Dandenong South, VIC 3175 Australia
Principal 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 11,541,620 options on issue.
122
123
Bubs Australia Limited and Controlled EntitiesAnnual Report for the year ended 30 June 202105 OTHER INFORMATION CORPORATE
DIRECTORY
ASX: BUB
Bubs Australia
DIRECTORS
COMPANY SECRETARY
Dennis Lin
Jay Stephenson
Kristy-Lee Newland Carr
Matthew Reynolds (Retired on
21 July 2021)
Steve Lin
Katrina Rathie (Appointed on
21 July 2021)
REGISTERED OFFICE
AND DOMICILE
Bubs Australia Limited is a
company limited by shares,
incorporated and domiciled
in Australia.
Its registered office is:
23 Nina Link
Dandenong South
VIC 3175 Australia
SHARE REGISTRY
AUDITORS
Computershare Investor
Services Pty Limited
Level 2
Reserve Bank Buidling
45 St George’s Terrace
Perth WA 6000
Deloitte Touche Tohmatsu
477 Collins Street
Melbourne VIC 3000
AUSTRALIAN
SECURITIES EXCHANGE
ASX Code: BUB
124
INVESTOR RESOURCE CENTRE
www.investor.bubsaustralia.com
Bubs Australia Limited and Controlled Entities05 OTHER INFORMATION