COSTA GROUP HOLDINGS LIMITED
Annual Report 2015
ABN 68 151 363 129
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 Contents
Chairman’s Report
Managing Director’s Review
Operating and Financial Review
Safety and Sustainability Report
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit & Loss &
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Report
Directors’ Declaration
Auditor’s Report
Shareholder Information
2
4
5
19
22
28
54
55
56
57
58
59
113
114
116
CHAIRMAN’S REPORT
“It has been a defining year for
Costa with substantial work
undertaken by the Board and
Executive team to prepare the
Company for a successful IPO, while
also delivering a strong result for
the 2015 financial year.”
OVERVIEW
Costa Group Holdings Ltd (Costa or the Group) delivered a pro forma net profit after tax result of $38.3 million for FY2015. This profit
was underpinned by significant revenue growth in our core produce categories of berries, glasshouse tomatoes, mushrooms and citrus.
Across these core categories Costa is a market leader in Australia.
A key focus of the Board has been to guide the Group’s growth strategy which has cemented our position as Australia’s leading grower,
packer and marketer of premium fresh horticultural produce.
Costa’s operations include approximately 3,000 planted hectares of farmland, 30 hectares of glasshouse facilities and seven mushroom
growing facilities across Australia. This scale allows us to achieve low cost production and build a solid platform for investment in
research and development to constantly improve our product offering and productive capacity.
Over the past year we have increased our protected cropping activity with the construction of an additional 10 hectares of tomato
glasshouse to begin operation in October 2015. Investment in our domestic berry category has seen expansion across four states and has
achieved the objective of supplying the Australian market with domestically grown fresh blueberries and raspberries across the full year.
Internationally a further 24 hectares of blueberries were planted at our African Blue joint venture in Morocco and work has commenced
on establishing a blueberry and raspberry farm in the Yunnan Province of China to supply the growing Asian middle class market.
With operations in a large number of regional and rural communities across all states of Australia, Costa has a talented team of people
dedicated to ensuring that we are not only successful as a business, but that we are also aware of the needs and aspirations of the com-
munities in which we operate.
Through our employees in particular, we play an ongoing and positive role in the economic and social sustainability of these commu-
nities. This included donating $17,000 to support The Rotary Club of Guyra’s efforts to build a helipad at the Guyra Hospital located in
northern New South Wales. Guyra is a town in which Costa is the major employer with more than 400 people working at our tomato
glasshouses. Both our employees and the local community stand to benefit from this crucial piece of infrastructure.
2 Costa Annual Report 2015
CHAIRMAN’S REPORT
THE RESULTS
Costa delivered a pleasing financial result in FY2015 with pro forma revenue, EBITDA before SGARA, NPAT and cash flow all exceeding
the Prospectus forecast.
A 1.1% increase in pro forma EBITDA before SGARA against FY2014 was driven by strong sales revenue growth in the Produce segment
and improved earnings from the International segment from both African Blue and royalty income, partially offset by the Costa Farms
& Logistics (CF&L) segment following the finalisation of the Coles Eastern Creek logistics contract. Furthermore, strong underlying cash
generation with a cash conversion ratio of 74% reflects the Group’s focus on creating shareholder value.
Costa reaffirms its FY2016 Prospectus forecast with the Board targeting a dividend of approximately 60% of pro forma NPAT in FY2016.
THE BOARD
I would like to thank my Board colleagues and in particular acknowledge the contributions of our immediate past Chairman Mr Frank
Costa AO and former directors Mr Robert Costa, Mr Angelos Dassios, Mr Bruno Ferrari Garcia de Alba and Mr Greg Hunt.
Since buying the business from their father more than half a century ago, both Frank and Robert have played a significant role in building
the Costa business into the success that it is today. In particular, Frank’s leadership as Chairman saw the Group undertake significant stra-
tegic investment and expansion, establishing Costa as a market leader. On behalf of the Board I wish Robert, Angelos, Bruno and Greg all
the very best and note that Frank will continue to serve on the Board as a non-executive director.
The Board also welcomes two new independent non-executive directors, Mr Peter Margin (appointed 24 July 2015) and Ms Tiffany Fuller
(appointed effective 1 October 2015). Peter brings to his role a wide breadth of experience in the food industry having previously served
as CEO of Goodman Fielder and the CEO and COO of National Foods. Tiffany brings to Costa a strong background in finance and ac-
counting as well as a deep understanding of the impact of technology on traditional business models.
OUTLOOK
Under the leadership of our CEO Harry Debney and his executive management team, I am confident that Costa is well placed to build
on our FY2015 results and to meet any challenges that may arise over the coming year. The Company continues to focus on executing
against its well progressed strategic growth plans which will underpin earnings growth in FY2016 and beyond.
Neil Chatfield
Chairman
Costa Annual Report 2015 3
MANAGING DIRECTOR’S REVIEW
Costa achieved its prospectus forecast for FY2015 and continues to focus
on delivering its FY2016 objectives
The Costa business model emphasises crop protection with 75%
of produce revenue in FY2015 derived from protected cropping.
This is forecast to increase to 80% in FY2016 as a result of further
growth in our tomato and berry categories.
We are dedicated to continuing to bring new varieties to
commercial fruition through our own blueberry breeding
program, and the joint work with other intellectual property
owners in other berries and in tomatoes. The goals here are to
improve flavour as well as yield and also to extend seasonal
availability. This quest is also enhanced through new agronomic
techniques such as hydroponics and substrate production.
The company has enjoyed significant growth over the past
few years and we plan to deliver shareholder value through
continued growth. The company’s immediate focus is to ensure
successful execution on four current major growth initiatives:
•
•
•
•
The first harvest of sweet snacking tomatoes from our new
10 hectare glasshouse located in Guyra, New South Wales;
Expansion of our Australian berry plantings which will
support continued market growth and further strengthen
our ability to achieve 52 week supply of blueberries to the
domestic market;
Continued growth of our African Blue joint venture in
Morocco from which we supply blueberries into the
European market; and
Establishing a farming presence in China with an initial 68
hectares of blueberry and raspberry plantings which will
place us in a prime position to target the ever expanding
Asian middle-class consumer market.
Finally, I wish to acknowledge our talented and well credentialed
team dedicated to future success with a real feeling of ownership
and sense of urgency. Costa has a values driven culture and one
of my chief areas of work is to continue to develop and support
our talent pool.
Harry Debney
Managing Director
OVERVIEW
Following the recent listing of Costa on the Australian Securities
Exchange, I am pleased to provide my first report to our new
shareholders.
Today, Costa is Australia’s largest horticultural company built
on strong sustainable foundations with a robust portfolio of
integrated farming, packing and marketing categories. Our
selected fresh categories represent highly attractive products
sought after by consumers for flavour, convenience and
perceived health benefits. This portfolio provides a platform for
growth as well as ensuring an enviable spread of production and
markets to mitigate agricultural risk.
The business has benefited from the transformational journey
undertaken over the past five years. We now service our
customers from large scale farming units with attributes of high
market share, national reach, strong focus on risk management,
and 52 week supply of some previously seasonal products.
4 Costa Annual Report 2015
OPERATING AND
FINANCIAL REVIEW
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 OPERATING AND FINANCIAL REVIEW
OPERATIONS
About Us
Operations
Costa is Australia’s largest horticulture company and is the larg-
est fresh produce supplier to the major Australian food retailers,
with revenues of $727.0 million in FY2015.
Business Model
Costa has a business model built on the optimisation of a
portfolio of integrated farming, packing and marketing activities.
Costa’s portfolio aims to be broad enough to mitigate agricultur-
al and market risks while maintaining a strategic focus on high-
growth and high-value fresh produce categories.
Costa consists of three reportable segments:
•
•
•
Produce – operates principally in four core categories;
berries, mushrooms, glasshouse-grown tomatoes and citrus;
International – comprises licensing of proprietary
blueberry varieties and expansion of berry farming in
attractive international markets, such as Morocco and
China; and
Costa Farms and Logistics (CF&L) – incorporates
interrelated logistics, wholesale, avocado marketing and
banana farming and banana marketing operations.
Figure 1: Costa’s operational structure
Produce
International
Costa Farms & Logistics (CF&L)
Berries
Mushrooms
Tomatoes
Citrus
Genetics
Licensing
Berry
Farming
Costa Farms
Logistics
Avocados
Bananas
Driscoll’s
Australia JV
(50%)1
African Blue
(Morocco JV)
(49%)1; China
JV (70%)1
Polar Fresh
JV
(50%)1
Figure 2: Costa’s pro forma business performance by segment for FY2015
Transacted Sales 2
EBITDA before SGARA 2
26%
2%
13%
9%
72%
78%
Produce
International
CF&L
Produce
International
CF&L
Notes:
1.
2.
Percentage ownership shown in brackets indicates Costa’s equity ownership of the joint venture. China JV is subject to formal contracts, which are currently being
finalised.
Transacted Sales and EBITDA before SGARA are non-IFRS financial measures. See Table 13 for details.
6 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
RESULTS SUMMARY
SUMMARY OF FINANCIAL PERFORMANCE: FY2013 TO FY2015
Figure 3: Summary of pro forma financial performance FY2013 to FY2015
Transacted Sales
$m
Pro forma revenue
$m
1 2 . 9 %
C A G R
847.9
922.0
1 2 . 3 %
C A G R
662.3
723.5
722.8
573.3
Pro forma EBITDA before
SGARA
$m
1 2 . 2 %
C A G R
70.2
71.0
56.4
FY13
FY14
FY15
FY13
FY14
FY15
FY13
FY14
FY15
Figure 4: Summary of statutory financial performance FY2013 to FY2015
Statutory revenue
$m
Statutory EBITDA before
SGARA
$m
Statutory net profit after tax
$m
699.1
727.0
592.7
64.5
59.9
38.7
4.6
(1.9)
FY13
FY14
FY15
FY13
FY14
FY15
(40.3)
FY13
FY14
FY15
Costa Annual Report 2015 7
OPERATING AND FINANCIAL REVIEW
RESULTS SUMMARY
PRO FORMA RESULTS
Pro forma results are provided for the financial year ended 28 June 2015 to allow shareholders to make a meaningful comparison with
the pro forma Prospectus forecast and to make an assessment of the Group’s performance as a listed company. Pro forma adjustments
have been made on a consistent basis with those made in the Prospectus. A reconciliation of the pro forma results to the statutory
results is provided in Tables 8 and 9 below.
vs FY2015
Forecast
vs FY2014
Actual
Pro forma revenue, EBITDA before SGARA and NPAT up on
Prospectus forecast.
Revenue
EBITDA BEFORE SGARA
NET PROFIT AFTER TAX
2.7%
0.6%
1.3%
9.2%
1.1%
Strong results in the Produce segment driven by revenue
growth across all core categories against FY2014.
Improved earnings in the International segment from both
African Blue and royalty income.
Table 1: Pro forma results for FY2015 actual compared to Prospectus forecast¹
Consolidated income statement
A$m
Revenue
Other revenue
Total Revenue
Operating expenses
Share of associates profit
EBITDA before SGARA
Fair value movements in biological assets
EBITDA
Depreciation & amortisation
Profit/(loss) on sale of assets
EBIT
Net interest expense
Net profit/(loss) before tax
Income tax expense
NPAT
Transacted Sales ²
Operating EBITDA ³
Pro forma
FY2015
Prospectus
Forecast
704.4
7.8
712.2
(652.0)
10.4
70.6
1.1
71.7
(18.4)
0.7
54.0
(5.5)
48.5
(10.7)
37.8
905.8
72.4
Actual
723.5
8.9
732.4
(670.9)
9.5
71.0
1.4
72.4
(18.0)
0.5
54.9
(5.5)
49.4
(11.1)
38.3
922.0
73.2
Change
19.1
1.1
20.2
(18.9)
(0.9)
0.4
0.3
0.7
0.4
(0.2)
0.9
-
0.9
(0.4)
0.5
16.2
0.8
Pro forma
FY2014
Actual
662.3
10.3
672.6
(611.6)
9.2
70.2
5.0
75.2
(14.7)
(0.8)
59.7
Change
61.2
(1.4)
59.8
(59.3)
0.3
0.8
(3.6)
(2.8)
(3.3)
1.3
(4.8)
847.9
71.1
74.1
2.1
Notes:
1.
2.
3.
FY2015 forecast as per Costa’s Prospectus dated 25 June 2015.
Transacted Sales is a non-IFRS operating measure. See Table 2 for a reconciliation of Transacted Sales to statutory revenue. Further details on Transacted Sales are
provided in Table 13.
Operating EBITDA is a non-IFRS operating measure. See Table 3 for a reconciliation of Operating EBITDA to Pro forma EBITDA before SGARA. Further details on
Operating EBITDA are provided in Table 13.
8 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
RESULTS SUMMARY
Pro forma results vs FY2014 actual
Pro forma revenue increased by $61.2 million from the prior year due primarily to stronger results in the Produce segment with solid
growth achieved across all categories. The CF&L segment achieved strong trading growth, offset by the finalisation of the Coles
logistics services contract at Eastern Creek.
Pro forma EBITDA before SGARA increased by $0.8 million from prior year due to strong underlying earnings growth across the
Produce and International segments. The International segment growth was driven by African Blue and increased royalty income
from licensing of Costa’s blueberry varieties. This increase was partially offset by the CF&L Eastern Creek impact.
Pro forma results vs FY2015 Prospectus forecast
Pro forma revenue was $19.1 million above Prospectus forecast with uplift across all Produce categories except tomatoes which was
impacted by weaker truss prices over the last quarter.
Pro forma EBITDA before SGARA was $0.4 million above Prospectus forecast, driven by solid performance in the last quarter, offset
by a bad debt expense against a significant grower for the Driscoll’s Australia Partnership joint venture (“Driscoll’s JV”).
Table 2: Reconciliation of Transacted Sales to statutory revenue
Reconciliation of Transacted Sales
A$m
Transacted Sales
Agency revenue adjustments
Joint venture adjustments
Driscoll’s JV
consolidation adjustments
Royalty income
Pro forma revenue
Site closures/exits
Statutory revenue
Note
1
2
3
4
5
FY2015
Actual
922.0
(31.1)
(16.9)
(148.3)
(2.2)
723.5
3.5
727.0
Notes:
1.
2.
3.
4.
5.
Under AAS, the invoiced value of agency sales is excluded from revenue with only the commission associated with the agency sales recognised.
Costa’s proportionate share of joint venture sales relating to the African Blue and Polar Fresh joint venture, of 49% and 50% respectively. Under AAS, joint ventures are
accounted for under the equity method, with only Costa’s share of joint venture NPAT recognised in profit or loss.
Costa owns 50% of the equity of Driscoll’s JV. Transacted Sales includes 100% of Driscoll’s JV sales, after eliminating Costa produce sales to the Driscoll’s JV.
Costa earns royalty income on the licensing of Costa blueberry varieties in Australia, the Americas and Africa. Royalty income is classified as other income in the statement
of profit or loss.
Refer Note 1 in Table 9.
Table 3: Reconciliation of Operating EBITDA to EBITDA before SGARA
Reconciliation of Operating EBITDA
A$m
Operating EBITDA
Adjustments for non-wholly owned
subsidiaries
Pro forma EBITDA before SGARA
Note
1
FY2015
Actual
73.2
(2.2)
71.0
Notes:
1.
Adjustment to reflect Costa’s proportionate share of joint venture EBITDA relating to the Driscoll’s, African Blue and Polar Fresh joint ventures, of 50%, 49% and 50%
respectively. Under AAS, joint ventures are accounted for under the equity method, with only Costa’s share of the joint venture NPAT recognised in the profit or loss.
Costa Annual Report 2015 9
OPERATING AND FINANCIAL REVIEW
RESULTS SUMMARY
STATUTORY RESULTS
Highlights of full year statutory results:
vs FY2015
Forecast
vs FY2014
Actual
Strong results in the Produce segment despite the
voluntary exit of the unprofitable grape farms.
Revenue
2.8%
4.0%
EBITDA BEFORE SGARA
2.1%
7.1%
NET PROFIT AFTER TAX
2.2%
342.1%
Reported result significantly impacted by $5.2 million of
costs associated with the Initial Public Offering and start-
up costs for Costa Asia of $1.3 million.
Table 4: Statutory results for FY2015 actual compared to Prospectus forecast
Consolidated income statement
A$m
Revenue
Other revenue
Total Revenue
Operating expenses
Share of associates profit
EBITDA before SGARA
Fair value movements in biological assets
EBITDA
Depreciation & amortisation
Profit/(loss) on sale of assets
Impairment losses
EBIT
Net interest expense
Net profit/(loss) before tax
Income tax expense
Net profit after tax
Statutory results vs FY2014 actual
Statutory
FY2015
Prospectus
Forecast
707.4
7.8
715.2
(664.4)
10.4
61.2
(0.6)
60.6
(18.7)
0.7
(15.7)
26.9
(21.8)
5.1
(0.6)
4.5
Actual
727.0
9.0
736.0
(685.6)
9.5
59.9
(0.3)
59.6
(18.5)
0.6
(15.7)
26.0
(20.6)
5.4
(0.8)
4.6
Change
19.6
1.2
20.8
(21.2)
(0.9)
(1.3)
0.3
(1.0)
0.2
(0.1)
-
(0.9)
1.2
0.3
(0.2)
0.1
Statutory
FY2014
Actual
699.1
11.8
710.9
(655.0)
8.6
64.5
5.0
69.5
(15.8)
(6.9)
(15.7)
31.1
(28.0)
3.1
(5.0)
(1.9)
Change
27.9
(2.8)
25.1
(30.6)
0.9
(4.6)
(5.3)
(9.9)
(2.7)
7.5
-
(5.1)
7.4
2.3
4.2
6.5
Statutory revenue increased by $27.9 million from the prior year, driven by the Produce segment. This was partially offset by a decline
in revenue in the CF&L segment with the exit of the Costa Farms Perth site in Q4 FY2014 and the finalisation of the Coles Eastern Creek
logistics services contract in July 2014.
Statutory EBITDA before SGARA decreased by $4.6 million compared to prior year. In addition to the pro forma drivers outlined above,
the decrease in statutory EBITDA before SGARA was due to transaction costs associated with the Initial Public Offering (IPO) incurred in
FY2015, and the downsizing of the grape category.
Statutory net profit after tax increased by $6.5 million compared to prior year. In addition to the revenue drivers outlined above, this
increase was also due to a reduction in finance costs as the Group refinanced its borrowings in FY2014 resulting in a write-off of prepaid
borrowing costs of $5.4 million.
10 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
SEGMENT INFORMATION
PRODUCE
Highlights of pro forma results:
vs FY2015
Forecast
vs FY2014
Actual
Transacted Sales and EBITDA before SGARA growth of
$60.4 million and $4.7 million on FY2014, respectively.
Transacted Sales
2.1%
9.5%
Revenue
3.2%
10.1%
EBITDA BEFORE SGARA
0.9%
9.2%
Revenue growth on FY2014 achieved across all four
categories.
Figure 5: Pro forma revenue, Transacted Sales and EBITDA before SGARA results Actual vs Prospectus forecast
FY2014 Actual
FY2015 Forecast
FY2015 Actual
50.9m
55.1m
55.6m
EBITDA before
SGARA
Revenue
Transacted Sales
482.9m
515.1m
531.7m
635.5m
681.7m
695.9m
Table 5: Selected pro forma financial information for the Produce segment
Produce
A$m
Revenue
EBITDA before SGARA
EBITDA before SGARA margin
Transacted Sales
Operating EBITDA
Notes
Pro forma
FY2015
Actual
531.7
55.6
10.5%
695.9
55.8
Prospectus
Forecast
515.1
55.1
10.7%
681.7
55.3
Change
16.6
0.5
(2 bps)
14.2
0.5
Pro forma
FY2014
Actual
482.9
50.9
10.5%
635.5
50.9
Change
48.8
4.7
(0 bps)
60.4
4.9
Produce pro forma revenue increased by $48.8 million on FY2014.
The drivers for the increase include:
•
overall sales volume growth across the berry category with
ongoing farm expansions;
sweet snacking and cocktail tomato volume growth with
new varieties launched in advance of the new glasshouse
being completed;
moderate mushroom production volume growth and
stronger wholesale market prices; and
strong start to the new citrus season with higher marketing
revenue and better than expected initial contribution
from the new Amaroo citrus farm. This was assisted by a
conversion of a strategic grower to a principal merchant
relationship.
•
•
•
Pro forma EBITDA before SGARA increased by $4.7 million against
FY2014. This was predominantly driven by the revenue uplift
outlined above, partially offset by:
new farm establishment costs;
•
weak tomato truss prices in the final quarter; and
•
bad debt provision on a grower for the Driscoll’s JV placed
•
in administration.
Figure 6: Produce pro forma revenue growth % on FY2014
24.1%
5.8%
10.4%
6.3%
Mushrooms
Berry
Tomato
Citrus
Costa Annual Report 2015 11
OPERATING AND FINANCIAL REVIEW
SEGMENT INFORMATION
INTERNATIONAL
Highlights of pro forma results:
vs FY2015
Forecast
vs FY2014
Actual
Strong Transacted Sales growth on FY2014 with increase in
both African Blue and royalty income.
Transacted Sales
2.5%
48.5%
EBITDA BEFORE SGARA
3.0%
28.6%
Operating EBITDA
-
44.8%
Operating EBITDA in line with Prospectus forecast, and up
$1.5 million on FY2014.
Figure 7: Pro forma revenue, Transacted Sales and EBITDA before SGARA results Actual vs Prospectus forecast
FY2014 Actual
FY2015 Forecast
FY2015 Actual
EBITDA before
SGARA
Operating
EBITDA
Transacted Sales
4.9m
6.6m
6.4m
5.8m
8.4m
8.4m
10.3m
15.7m
15.3m
Table 6: Selected pro forma financial information for the International segment
International
A$m
Revenue
EBITDA before SGARA
EBITDA before SGARA margin
Transacted Sales
Operating EBITDA
Pro forma
FY2015
Prospectus
Forecast
-
6.6
nm
15.7
8.4
Actual
-
6.4
nm
15.3
8.4
Change
-
(0.2)
nm
(0.4)
-
Pro forma
FY2014
Actual
-
4.9
nm
10.3
5.8
Change
-
1.5
nm
5.0
2.6
Pro forma International segment results are comprised of the
African Blue JV and royalty income from the licensing of Costa’s
blueberry genetics. African Blue is accounted for as an associate
and therefore no revenue is recognised. Royalty income is
recognised as other income in profit or loss, as opposed to
revenue.
Pro forma EBITDA before SGARA growth was $1.5 million, or
30.6%, against FY2014, reflective of the Transacted Sales drivers
outlined above.
Figure 8: International Transacted Sales growth % on FY2014
Transacted sales increased by $5.0 million on FY2014. This was
primarily driven by:
•
African Blue volume growth driven by crop expansion and
the continued maturation of crops; and
Royalty income through increased plant sales for plantings
in new regions and increase in fruit based royalties.
•
52.9%
47.8%
African Blue
Royalties
12 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
SEGMENT INFORMATION
COSTA FARMS & LOGISTICS
Highlights of pro forma results:
vs FY2015
Forecast
vs FY2014
Actual
Transacted Sales
0.5%
0.1%
Revenue
0.5%
1.9%
EBITDA BEFORE SGARA
1.1%
38.8%
Revenue up on previous year due to improved trading
performance across Costa Farms (encompassing wholesale
market, banana and avocado operations).
Offset by the finalisation of the Coles Eastern Creek
logistics services contract.
Figure 9: Pro forma revenue, Transacted Sales and EBITDA before SGARA results Actual vs Prospectus forecast
FY2014 Actual
FY2015 Forecast
FY2015 Actual
EBITDA before
SGARA
14.4m
8.9m
9.0m
Revenue
Transacted Sales
227.1m
230.3m
231.5m
250.3m
249.4m
250.6m
Table 7: Selected pro forma financial information for the CF&L segment
Costa Farms and Logistics
A$m
Revenue
EBITDA before SGARA
EBITDA before SGARA margin
Transacted Sales
Operating EBITDA
Pro forma
FY2015
Prospectus
Forecast
230.3
8.9
3.8%
249.4
8.7
Actual
231.5
9.0
3.9%
250.6
9.0
Change
1.2
0.1
1 bps
1.2
0.3
Pro forma
FY2014
Actual
227.1
14.4
6.4%
250.3
14.4
Change
4.4
(5.6)
(25 bps)
0.3
(5.6)
Pro forma revenue increased by $4.5 million against FY2014. This
was driven by improved trading performance across the Costa
Farms wholesale business and banana and avocado categories
as a result of significant marketing campaigns undertaken in
2H FY2015, and higher banana prices relative to FY2014. This
was offset by the finalisation of the Coles services contract at
Eastern Creek in July 2014.
Figure 10: CF&L pro forma revenue growth % on FY2014
20%
(52)%
Costa Farms
Logistics
Costa Annual Report 2015 13
OPERATING AND FINANCIAL REVIEW
RECONCILIATION OF PRO FORMA RESULTS TO STATUTORY RESULTS
The pro forma financial information has been derived from the statutory financial information adjusted for certain items as detailed
below. Pro forma results are provided to allow shareholders to make a meaningful comparison with the pro forma Prospectus forecast
and to make an assessment of the group’s performance as a listed company.
The table below shows the reconciliation of Costa’s pro forma financial information to the statutory financial information as presented
in the Financial Statements.
Table 8: Reconciliation of pro forma EBITDA before SGARA to statutory EBITDA before SGARA
Consolidated EBITDA before SGARA
A$m
Statutory EBITDA before SGARA
Site closures/exits
Historical transaction costs
IPO transaction costs
Historical governance structure costs
Listed company costs
Costa Asia
Pro forma EBITDA before SGARA
FY2015
FY2014
Notes
1
2
3
4
5
6
Actual
59.9
3.7
0.3
5.2
2.6
(2.0)
1.3
71.0
Prospectus
Forecast
61.2
2.3
-
5.1
2.5
(2.0)
1.5
70.6
Actual
64.5
0.8
1.0
-
5.9
(2.0)
-
70.2
Table 9: Reconciliation of pro forma net profit after tax to statutory net profit after tax
Consolidated net profit after tax
A$m
Statutory net profit after tax
Site closures/exits
Historical transaction costs
IPO transaction costs
Historical governance structure costs
Listed company costs
Costa Asia
Interest expense adjustment
Pro forma NPAT
FY2015
Actual
4.6
17.2
0.2
3.8
2.0
(1.4)
1.3
10.6
38.3
Prospectus
Forecast
4.5
16.1
-
3.8
1.9
(1.4)
1.5
11.4
37.8
Notes
1
2
3
4
5
6
7
Notes:
1.
These adjustments represent the removal of results and impairment losses from closed sites and divested businesses, including:
-
-
-
-
Costa Farms Perth site, which was closed in Q4 FY2014;
two mushroom farms, which were closed in Q4 FY2014 at Mittagong and Huon Valley;
grape farms which were closed in FY2015 as part of the downsizing of the grape category; and
the Wadda joint venture which was divested in Q4 FY2014. The Wadda plantation was a joint venture between Costa and a Queensland banana grower.
The closures of these sites and divestment of businesses have not impacted the financial performance of the remaining Costa operations, positively or negatively, as
they operated substantially on a standalone basis.
Removal of transaction costs paid in relation to the acquisition of Adelaide Mushrooms.
An adjustment has been made to remove the costs associated with the IPO process, including adviser fees, break costs associated with the Existing Banking Facilities
and share-based payment expense relating to the exercise of share options held by Costa directors and management.
An adjustment has been made to remove Board related costs and management share-based payments under the pre-IPO governance structure.
An adjustment has been made for estimated costs associated with being a listed public company. Costs include estimated Board costs, management share-based
payments and incremental compliance related costs.
An adjustment has been made to remove the forecast results from the China operation. Due to the expected start-up of this operation in FY2015 and FY2016, the
China operation is forecast to report an operating loss in these years.
Pro forma interest expense has been adjusted to reflect the terms of the New Banking Facility post completion of the IPO.
2.
3.
4.
5.
6.
7.
14 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
BALANCE SHEET
Table 10: Selected consolidated balance sheet for the year ended 28 June 2015
Selected Balance Sheet
A$m
As at 28 June 2015
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
NET ASSETS
2015
2014
Change
130.5
397.4
527.9
94.4
235.8
330.2
197.7
146.1
352.2
498.3
87.5
219.0
306.5
191.8
(15.6)
45.2
29.6
6.9
16.8
23.7
5.9
Net assets increased by $5.9 million for the year ended 28 June 2015. This increase was primarily driven by an increase in property, plant
and equipment of $50.9 million as a result of the construction of the new tomato glasshouse and the berry expansion program. Offset-
ting this was an increase in borrowings of $23.1 million which partially funded the growth programs, and a reduction in receivables due
to settlement of the Wadda JV sold in FY2014, and better collections.
NET DEBT
Table 11: Consolidated net debt as at 28 June 2015
Net debt
A$m
As at 28 June 2015
Bank loans
Capitalised loan establishment fees included in borrowings
Finance leases
Total borrowings
Less: Cash and cash equivalents
Net debt
2015
2014
241.0
(8.1)
0.0
232.9
(9.5)
223.4
220.0
(10.2)
0.0
209.8
(26.2)
183.6
Net debt as at 28 June 2015 was $223.4m and consisted of $9.5 million in cash and $232.9 million of borrowings. Net debt increased by
$39.8 million during the year primarily due to capital expenditure on the growth projects.
Under the banking facilities in place during FY2015, the Group was required to meet set covenant compliance ratios which included:
total gearing ratio (TGR), interest cover ratio (ICR) and debt service cover ratio (DSCR). All covenants were met during the year.
On 24 July 2015, the Group refinanced its debt by extinguishing its existing banking facilities and drawing down $142.0 million under a
new banking facility (refer Note 27 of the Financial Statements).
Costa Annual Report 2015 15
OPERATING AND FINANCIAL REVIEW
CASH FLOW
Table 12: Pro forma cash flow before financing, tax and dividends
Pro forma
FY2015
Prospectus
Forecast
70.6
(10.4)
5.9
(4.1)
62.0
(10.1)
51.9
(77.5)
1.7
0.1
(23.8)
74%
Actual
71.0
(9.5)
6.1
(5.9)
61.7
(9.4)
52.3
(73.6)
-
0.3
(21.0)
74%
Change
0.4
0.9
0.2
(1.8)
(0.3)
0.7
0.4
3.9
(1.7)
0.2
2.8
Pro forma
FY2014
Actual
70.2
(9.2)
2.9
(1.1)
62.8
(9.2)
53.6
(17.7)
-
0.7
36.6
76%
Change
0.8
(0.3)
3.2
(4.8)
(1.1)
(0.2)
(1.3)
(55.9)
-
(0.4)
(57.6)
Consolidated cash flow
A$m
EBITDA before SGARA
Less: Share of profit of JVs
Dividends from JVs
Change in working capital
Net cash flow from operating activities before
interest and tax
Maintenance capital expenditure
Free cash flow
Productivity and growth capital expenditure
Repayment of loans from investments
Disposal of property, plant and equipment
Net cash flow before financing, tax and
dividends
Cash conversion ratio ¹
Notes:
1.
Defined as free cash flow divided by EBITDA before SGARA.
DIVIDENDS FROM JOINT VENTuRES
Dividends from JVs increased by $3.2 million on FY2014 resulting from strong financial performance by all three joint ventures.
WORKING CAPITAL
Working capital increased by $5.9 million in FY2015, primarily driven by the timing of insurance prepayments and inventory of $2.2 mil-
lion. This was partially offset by better collections as outlined above.
CAPITAL EXPENDITURE
Total capital expenditure increased by $56.1 million against FY2014 driven by the tomato and berry growth programs. Productivity and
growth capital expenditure was lower than prospectus forecast due to some timing into Q1 FY2016 (mainly tomato) and savings across
other projects (e.g. SAP software project capitalisation).
16 Costa Annual Report 2015
OPERATING AND FINANCIAL REVIEW
NON-IFRS MEASuRES
Throughout this report, Costa has included certain non-IFRS financial information, including EBITDA before SGARA, Transacted Sales
and Operating EBITDA. Costa believes that these non-IFRS measures provide useful information to recipients for measuring the underly-
ing operating performance of Costa’s business. Non-IFRS measures have not been subject to audit.
The table below provides details of the operating and financial Non-IFRS measures used in this report.
Table 13: Non-IFRS measures
NON-IFRS FINANCIAL mEASuRES
EBIT
EBITDA
EBITDA before SGARA
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
EBITDA adjusted for fair value movements in biological assets. For horticultural companies,
EBITDA is typically adjusted for fair value movements in biological assets due to the growing
and harvesting cycles for fruit and vegetables, and the accounting treatment of live produce and
picked produce. The fair value movement in self-generating or regenerating assets (SGARA) is
non-cash; therefore, EBITDA before SGARA is used in preference to EBITDA for Costa.
NON-IFRS OPERATING mEASuRES
Transacted Sales
Operating EBITDA
Transacted Sales are used by management as a key measure to assess Costa’s sales and marketing
performance and market share. Transacted Sales represent the aggregate volume of sales in
which Costa is involved in various capacities (including sales of third party-grown produce
marketed by Costa under agency arrangements), as well as royalty income. Transacted Sales are
not considered by Costa to be a revenue measure. There are material differences between the
calculation of Transacted Sales and the way in which revenue is determined under AAS.
Transacted Sales comprise:
• statutory revenue;
• gross invoiced value of agency sales of third party produce;
• Costa’s proportionate share of joint venture sales relating to the African Blue and Polar
•
•
Fresh joint ventures;
royalty income from the licensing of Costa blueberry varieties in Australia, the Americas and
Africa; and
100% of Driscoll’s JV sales after eliminating Costa produce sales to the Driscoll’s JV. Prior to
the formation of Driscoll’s JV in 2010, all of Costa’s domestic sales and marketing activities
for the berry category were managed by Costa.
Operating EBITDA is EBITDA before SGARA, adjusted to include Costa’s proportionate share
of EBITDA from non-wholly owned entities. This measure is used by management to evaluate
the operating performance of the overall business, inclusive of the performance of non-
wholly owned entities on a look-through basis, without the non-cash impacts of depreciation
and amortisation, fair value movements in SGARA and interest and tax charges, which are
significantly affected by the capital structure and historical tax position of Costa. Under AAS,
joint ventures are accounted for using the equity method, with only Costa’s proportionate share
of NPAT from joint ventures recognised in the statement of profit or loss. The inclusion of the
proportionate share of joint venture EBITDA in Operating EBITDA is not in accordance with AAS
Costa Annual Report 2015 17
OPERATING AND FINANCIAL REVIEW
MATERIAL BUSINESS RISKS AND FUTURE PROSPECTS
MATERIAL BUSINESS RISKS
The material business risks faced by the company that are likely to have an effect on the financial prospects of the company are:
•
•
•
•
•
Production risks: Changes in weather, climate or water availability can cause price and yield volatility for Costa. Prices can
also be negatively impacted by excess supply. Costa partially mitigates against weather risk by investing in weather protective
growing environments and equipment. Approximately 75% of Costa’s EBITDA before SGARA is derived from crops currently
grown under cover indoors or under permanent tunnels. While protected cropping reduces the risk of disease, this risk is still
apparent. If Costa’s existing water rights are reduced by regulatory changes or if Costa is unable to secure sufficient water for
the implementation of its growth projects, this could negatively impact on Costa’s operational and financial performance.
Brand risk: Quality issues, product recall, contamination, public health issues, disputes or adverse media coverage could
damage Costa’s brands or their image which could adversely impact Costa’s financial performance.
Customer risk: Costa’s top four customers comprised approximately 70% of FY2015 produce sales. Most customer
arrangements are uncontracted and supplied at market prices which are subject to fluctuation. Any contractual agreements
have supply periods typically for 1 season or 1 year.
Regulatory changes: Costa is a significant beneficiary of the import restrictions in place for fresh fruits and vegetables
including mushrooms, bananas, tomatoes and berries. Any changes to these import restrictions could have an adverse impact
on margins and volumes. However the perishable nature of certain produce also acts as a natural barrier against imports. As
Costa operates in the food sector, it is also required to comply with a wide range of other laws and regulations which include
food standards, labelling and packaging, fair trading and consumer protection, environment, quarantine rules, customs, etc.
Any change to the rules could adversely impact Costa’s operations in the form of higher costs and lower margins for the
business.
Competition from new market entrants: While Costa’s operations currently benefit from scale and access to superior
genetics, this competitive landscape may change over time. If one or more competitors or new market entrants obtained
access to favourable genetic varieties which compete in the same categories as those of Costa, or if they achieve greater
scale, this could have a material adverse impact on the financial performance and prospects of Costa.
STRATEGY AND FUTURE PROSPECTS
Costa’s current position, operating platform and world class practices provide it with multiple growth drivers in the Australian domestic
market and in highly attractive international markets.
Costa’s corporate strategy involves a number of initiatives aimed at sustaining long-term growth, which include:
•
•
•
•
Continuing to build Costa’s market position and expansion of farming footprints;
Expanding globally licensing of Costa’s blueberry varieties;
Continuing to invest in and expand research and development (R&D) capabilities; and
Developing new channels to market through product innovation, new customer development and expansion of export
markets.
Costa maintains a prudent and disciplined approach to capital deployment and continues to invest in growth opportunities in the
medium to long term that generate shareholder value.
FY2016 Outlook
Costa reaffirms its FY2016 Prospectus forecast which is underpinned by Costa’s growth initiatives including:
•
•
a significant expansion program in Costa’s berry produce category, designed to cover seasonal and geographical production
gaps as well as to meet increasing consumer demand for berries; and
investment in a new 10 hectare tomato glasshouse in Guyra, New South Wales, to provide increased flexibility in relation to
selecting and growing tomato varieties that provide unique offerings to the market.
Additionally, Costa continues to strategically grow its offshore exposure in highly attractive international markets with an expansion
program underway at Costa’s Moroccan joint venture, African Blue, and the establishment of a new berry farming operation in China
with Driscoll Strawberry Associates Inc.
The company intends to target a dividend payment of approximately 60% of pro forma net profit after tax for FY2016. This will be
subject to business performance, market condition and regulatory requirements. Dividends are expected to be fully franked.
18 Costa Annual Report 2015
SAFETY AND
SuSTAINABILITY REPORT
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 SAFETY AND SUSTAINABILITY REPORT
HEALTH AND SAFETY
Our Approach
Ensuring that our employees, contractors and visitors remain safe and healthy in our workplaces is our priority. Costa is committed to
promoting a zero tolerance culture, where the risk of harm to our people is unacceptable.
Our Focus
During FY2015, the following new health and safety measures either commenced or were implemented:
•
•
•
Implementation of the Group’s Workplace Health and Safety (WHS) Strategic Plan. This initiative will ensure an effective WHS
vision which supports Costa’s business strategy for future growth, delivers clarity to the business units on what is expected
from them from a WHS perspective, and empowers the WHS Team to align more closely with the business categories in the
delivery of the Group’s strategy. FY2015 was the first year of a three year plan.
Consolidation of the business unit WHS framework into a truly national system applied uniformly across the business. The
development of this new WHS system was mapped to Australian Standard (AS) 4801, covering the key elements of policy,
compliance, governance, risk management, incident investigation and workplace preparedness.
Further embedding a safety culture within the business through running an “Executive Roadshow”, where members of our
executive team visited every one of Costa’s sites to emphasise and reinforce senior management’s commitment. FY2015 was
the second year of the roadshow.
OUR SAFETY PERFORMANCE
Lost time injury frequency rate fell by 17 per cent during FY2015 and the number of active workers’ compensation claims decreased by
22 per cent. There were also no fatalities recorded at our operated sites reflecting our continued commitment to the health and safety
of our employees, contractors and visitors.
Lost Time Injury Frequency Rate
(12 month rolling average)*
9
8
7
6
5
4
3
2
1
0
8.17
5.83
5.6
5.52
4.6
1
1
0
2
Y
F
2
1
0
2
Y
F
3
1
0
2
Y
F
4
1
0
2
Y
F
5
1
0
2
Y
F
* Per million hours worked
20 Costa Annual Report 2015
SAFETY AND SUSTAINABILITY REPORT
ENVIRONMENT
Costa is committed to sustainable agriculture and it is one of the key means by which we maximise our profitability. Our sustainable
agricultural practices are productive, competitive and efficient, allowing Costa to produce products which are healthy, safe and of the
highest quality, while at the same time protecting and sustaining the natural environment.
An example of this commitment in action is our new 10 hectare glasshouse facility at Guyra in northern New South Wales which has
been designed for full water self-sufficiency:
•
•
•
•
All the glasshouse roofs, buildings and other structures (including 11 x 500,000 litre tanks) provide a total roof area of 11.71
hectares and capture 91 megalitres of water per annum based on 90% of Guyra’s average rainfall of 905mm per year.
The site is designed to capture all allowable surface water from hardstands which passes through an ultra-filtration system to
filter it for irrigation use. This represents 119 megalitres of water per annum.
All surface water flows that are permitted to be captured are done so in a series of swales to be planted with reeds to
naturally assist in the filtration and cleaning of the water.
All drain water from irrigation is captured and this represents 30% of total input, resulting in a significant water saving and in
fertiliser normally lost in field crops. The total fertilized water saved per year is approximately 80 megalitres per annum.
Costa complies with environmental licences for the production of mushroom compost at five sites located in Victoria, Queensland,
South Australia, Western Australia and Tasmania. A stormwater collection and usage licence applies to the mushroom farm at Monarto,
South Australia. Costa has policies and procedures in place to ensure compliance with these licences and these policies and procedures
are reviewed and updated on an ongoing basis, including a Company Environmental Policy.
Costa is required to report under The National Greenhouse and Energy Reporting Act 2007 (CW) (National Greenhouse Act) which
came into effect in July 2008. The Group/Company reports on greenhouse gas emissions, energy consumption and production under
the National Greenhouse Act for the period 1 July through 30 June each year.
COMMUNITY
As a Group with Australia wide and international operations, we interact with a diverse range of stakeholders.
Costa is the major employer in many of the regional and rural locations in which it operates, and we take this responsibility seriously.
We recognise our importance to the community and its importance to us.
Costa understands that our presence in these communities contributes significantly to their economic and social sustainability. We also
recognise that the most important connection we have with these communities is through our local workforce.
Whether it is sponsoring local Rotary or sporting clubs, providing fresh produce to community groups and charities or working with
educational institutions to promote careers in horticulture, Costa’s employees are the main link between our business and the local
communities.
In FY2015, the highlight of our involvement with community and charitable groups was our support for The Rotary Club of Guyra’s
efforts to build a helipad at the Guyra Hospital with a $17,000 donation. With a large number of our 400 employees living in the Guyra
community, Costa understands that they and their families rely on their local Guyra hospital. The ability to provide air ambulance
services to and from the hospital is vital and the helipad will ensure the local community has the best possible access to emergency
health services.
Costa also continued our association with Foodbank through donating nearly 400,000 kilograms of produce in FY2015. Foodbank is an
independent charity that aims to deliver nutritious, healthy food to individuals and families experiencing hardship.
Costa Annual Report 2015 21
CORPORATE
GOVERNANCE STATEmENT
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 CORPORATE GOVERNANCE STATEMENT
The Directors and management of the Company are committed to achieving high corporate governance standards and support the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Recommendations). In preparation for
listing on the ASX, the Board adopted corporate governance policies and practices which can be found in the Corporate Governance
section of the Investor Centre on our website at http://investors.costagroup.com.au/investor-centre.
The Group’s main corporate governance policies are summarised below under the eight principles that the ASX Corporate Governance
Council believes underlie good corporate governance. This corporate governance statement is current as at 24 September 2015 and has
been approved by the Board of the Company.
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
The Company has established a Board charter which sets out the responsibilities of the Board and the responsibilities of senior
management. The schedule of matters reserved for the Board for approval includes:
•
•
•
•
•
providing leadership and setting the strategic objectives of the Company;
overseeing management’s implementation of the Company’s strategic objectives and its performance generally;
approving operating budgets and major capital expenditure;
overseeing the integrity of the Company’s accounting and corporate reporting systems, including the external audit; and
ensuring that the Company has in place an appropriate risk management framework.
The Board delegates authority to the Managing Director and CEO for the day to day operations of the Company, its subsidiaries and
their respective operations.
From the date of the Company’s listing on the ASX, the Company has had written agreements in place with its directors setting out the
terms of their appointment.
Prior to the appointment of a new director, the Company undertakes appropriate checks and security holders are provided with all
material information in its possession relevant to a decision on whether or not to elect or re-elect a director.
The Company Secretary is accountable directly to the Board, through the chair, on all matters to do with the proper functioning of the
Board.
The Company has a diversity policy which includes a requirement that the Board set measurable objectives for achieving diversity,
including gender diversity, and to assess annually both the objectives and progress in achieving them. As this policy was newly adopted
shortly prior to the end of the reporting period, the Board did not set objectives for the balance of the reporting period. The Board
intends to adopt measurable objectives during FY2016 and to review and report on the progress against those objectives at the end of
FY2016.
As a ‘relevant employer’ under the Workplace Gender Equality Act 2012, the Company submitted an annual filing for the 12 month
period ending 31st March 2015 disclosing its Gender Equality Indicators. This report can be accessed through the Workplace Gender
Equality website.
The Board charter provides that the Board will periodically review and evaluate:
•
•
•
•
its own performance, including against the requirements of the charter;
the performance of its committees;
the performance of individual directors; and
the performance of its senior executives, against both measurable and qualitative indicators.
Each director’s and senior executive’s performance was evaluated during the reporting period (other than Peter Margin, who was only
appointed as a director several days prior to the end of the reporting period).
Costa Annual Report 2015 23
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
The role of Chairman and the role of Managing Director and CEO are exercised by different individuals, being Neil Chatfield and Harry
Debney, respectively.
As disclosed in the Board charter, the Company seeks to have directors with an appropriate range of skills, knowledge, experience,
independence and diversity, and an understanding of and competence to deal with current and emerging issues of the business.
During the course of the ASX listing process the Company established a skills matrix in order to recruit new directors. Key criteria
included the following:
•
•
•
•
•
•
•
ASX listed company non-executive experience;
financial and accounting experience;
senior executive listed company experience;
knowledge of technology and e-commerce;
background in dealing with the retail food sector and major retail organisations;
sound knowledge of risk management practices; and
understanding of developing and managing international operations.
The Board intends to further develop its skills matrix during the 2016 financial year.
The Company’s succession plans are designed to maintain an appropriate balance of skills, knowledge, experience, independence and
diversity on the Board.
The Board considers an independent director to be a non-executive director who is not a member of the Company’s management
and who is free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in
a material respect his or her capacity to bring an independent judgement to bear on issues before the Board and to act in the best
interests of the Company and its security holders. The Board will consider the materiality of any given interest, position, association or
relationship on a case-by-case basis. The Company’s Board charter sets out guidelines and thresholds of materiality for the purpose of
determining independence of directors in accordance with the ASX Recommendations, and has adopted a definition of independence
that is based on that set out in the ASX Recommendations. The Board reviews the independence of each director in light of interests
disclosed to the Board from time to time.
The Board considers that each of Neil Chatfield and Peter Margin (and Tiffany Fuller, appointed with effect from 1 October 2015) is
free from any business or any other relationship that could materially interfere with, or reasonably be perceived to interfere with, the
independent exercise of the director’s judgement and is able to fulfil the role of an independent director for the purposes of the ASX
Recommendations.
Frank Costa and Kevin Schwartz are not considered to be independent directors, due to their relationship with major shareholders Costa
AFR and P&P Cos Holdings BV, respectively. Accordingly, the Board does not consist of a majority of independent directors. The Board
acknowledges the ASX Recommendation that a majority of the Board should be independent non-executive directors. Nevertheless,
the Board believes that each of the non-executive directors brings objective and unbiased judgement to the Board’s deliberations and
that each of Frank Costa and Kevin Schwartz makes invaluable contributions to the Company through their deep understanding of the
Company’s business and the horticulture industry.
The Board has established a Nomination Committee which is comprised of all of the Company’s non-executive directors and
accordingly, will comprise a majority of independent directors from 1 October 2015. The Chairman of the Nomination Committee is the
Chairman of the Board, Neil Chatfield (who is an independent director).
The roles, responsibilities, composition and structure of the Nomination Committee are set out in the Nomination Committee
Charter, a copy of which can be found in the Corporate Governance section of the Investor Centre on our website at http://investors.
costagroup.com.au/investor-centre. The Nomination Committee will meet at least four times each year. As the Nomination Committee
was newly established for the purposes of the Company’s ASX listing, the Nomination Committee did not meet during the reporting
period.
The Company has a program for inducting new directors and provides appropriate professional development opportunities for directors
to develop and maintain the skills and knowledge needed to effectively perform their role as directors.
24 Costa Annual Report 2015
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
The Company is committed to and strives to act honestly and with integrity in all its dealings and to act ethically and responsibly.
It has adopted a Code of Conduct that sets out the Company’s values, commitments, ethical standards and policies and outlines
the standards of conduct expected of our business and people, taking into account the Company’s legal and other obligations to its
stakeholders.
A Securities Trading Policy has been established to set out the Company’s trading policy on buying and selling securities of the
Company including shares, options, derivatives and other financial products of the Company that are able to be traded on a financial
market.
The Company has adopted a Diversity Policy that sets out our commitment to diversity and inclusion in the workplace at all levels and
provides a framework to achieve our diversity goals. The Company is committed to creating and ensuring a diverse work environment
in which everyone is treated fairly and with respect and where everyone feels responsible for the reputation and performance of
the company. The directors and management believe that the Company’s commitment to that policy contributes to achieving the
company’s corporate objectives and embeds the importance and value of diversity within the culture of the company.
Copies of the Securities Trading Policy and the Diversity Policy can be found in the Corporate Governance section of the Investor
Centre on our website at http://investors.costagroup.com.au/investor-centre.
PRINCIPLE 4 – SAFEGuARD INTEGRITY IN CORPORATE REPORTING
The Board has established an Audit & Risk Committee to assist the Board in carrying out its accounting, auditing and financial reporting
responsibilities, including oversight of:
•
•
•
•
•
the integrity of the Company’s external financial reporting and financial statements;
the appointment, remuneration, independence and competence of the Company’s external auditors;
the performance of the external audit functions and review of their audits;
the effectiveness of the Company’s system of risk management and internal controls; and
the Company’s systems and procedures for compliance with applicable legal and regulatory requirements.
During the reporting period, the Company was not listed on the ASX and all non-executive directors were nominees of the Company’s
shareholders. Accordingly, the Audit & Risk Committee, which comprised Robert Costa (chair of the Committee), Neil Chatfield, Angelos
Dassios and Greg Hunt, did not consist of a majority of independent directors. From 1 October 2015, the Audit & Risk Committee will be
comprised of 3 non-executive directors, all of whom are independent, being Tiffany Fuller (Chair), Neil Chatfield and Peter Margin.
The Company has adopted a charter for the Audit & Risk Committee, which can be found in the Corporate Governance section of the
Investor Centre on our website at http://investors.costagroup.com.au/investor-centre.
For the results for the reporting period, the CEO and CFO have provided a declaration that, in their opinion, the financial records of the
entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a
true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound
system of risk management and internal control which is operating effectively.
The Company was not required to hold an AGM during the reporting period. For future reporting periods, the Company will ensure that
its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
In anticipation of the Company’s listing on the ASX, the Company has established a Disclosure & Communication Policy for the
purposes of complying with its continuous disclosure obligations imposed by law and ensuring that the Company’s announcements are
presented in a factual, clear and balanced way.
Subject to limited exceptions, the Company is required to immediately disclose to the ASX any information concerning the Company
which is not generally available and which, if it was made available, a reasonable person would expect to have a material effect on the
price or value of the Company’s securities.
The Disclosure & Communication Policy outlines the processes that the Company implements to ensure compliance with its continuous
disclosure obligations, including the establishment of a Disclosure Committee which currently comprises the CEO, CFO and Company
Secretary.
The Disclosure & Communication Policy can be found in the Corporate Governance section of the Investor Centre on our website at
http://investors.costagroup.com.au/investor-centre.
Costa Annual Report 2015 25
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITYHOLDERS
The Company acknowledges that respecting shareholders’ rights is of fundamental importance and that communication with
shareholders is a key element of this. The Company is committed to ensuring that shareholders are informed of all major developments
affecting the Company through effective communication materials and processes. Shareholder communications include half yearly and
annual reports, market announcements and media releases, all of which are available in the investor section of the Company website in
addition to background information on the Group. Shareholders have the option to receive communications from, and communications
to, the Company and its security registry electronically, to ensure that information is received in a timely manner.
In addition to the above Shareholder communications, the Company’s investor relations program includes scheduled and ad hoc
interactions and briefings with institutional investors, analysts and the financial media. This activity also provides an opportunity
for two way communication, where the parties involved can provide their views and feedback on matters of particular interest to
them relating to the Company and its performance. In conjunction with the investor relations program the Company also operates a
broader stakeholder engagement program involving interactions with politicians, bureaucrats, regulators and community groups. This
activity is aimed at ensuing our stakeholders are sufficiently aware of the Company’s views and concerns relating to matters including
public policy, and for the Company to be proactively informed on matters relevant to our stakeholders involving the activities of the
Company.
Shareholders are encouraged to attend general meetings for the opportunity to meet the Board and senior management. Shareholders
who are unable to attend will be able to vote on the motions proposed by appointing a proxy or using any other means included in
the notice of meeting. The Company conducts its general meetings in accordance with the Company’s constitution, the Corporations
Act and the Listing Rules. The Board will consider the use of technology and other means to facilitate shareholder participation as
appropriate.
The Company’s policies on communicating with its shareholders can be found in the Disclosure & Communication Policy, which can be
found in the Corporate Governance section of the Investor Centre on our website at http://investors.costagroup.com.au/investor-
centre.
PRINCIPLE 7 – RECOGNISE AND MANAGE RISk
The Company’s Audit & Risk Committee is responsible for overseeing, implementing and periodically reviewing the Company’s risk
management system, including:
•
•
•
•
preparing a risk profile which describes the material risks facing the Company including financial and non-financial matters;
regularly reviewing and updating the risk profile;
ensuring that the Company has an effective risk management system and reviewing the risk management system at least
annually to ensure that it continues to be sound, to determine whether there have been any changes in the material business
risks the Company faces and to ensure those risks remain with the risk appetite set by the Board; and
assessing and ensuring that there are internal controls for determining and managing key risk areas.
The Audit & Risk Committee reviewed the risk management system during the reporting period.
The Company does not have an internal audit function. The Board and the Audit & Risk Committee monitor and evaluate internal risks
through a variety of existing systems, programs and policies including:
•
•
•
•
•
•
annual budgeting and monthly reporting systems to monitor performance against budget;
external financial audits;
an annual insurance program;
workplace health and safety reviews, including overseeing an annual cross-functional review of each site by the Company’s
executive team;
approval limits for matters requiring Board approval; and
annual identification and assessment of strategic risks facing the Company.
26 Costa Annual Report 2015
CORPORATE GOVERNANCE STATEMENT
The Company’s management is responsible for managing operational risk and implementing risk mitigation measures. As a result
management has incorporated risk management into strategic planning and decision making to understand and prioritise the
management of material business risks.
Comments on the Company’s exposure to economic, environmental and social sustainability risks are set out on page 18 of this
report. Further information on the Company‘s commitment to environmental and social responsibility are set out in the Safety and
Sustainability Report on page 19.
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
In preparation for its listing on the ASX, the Board established a Remuneration Committee which assists and advises the Board on
remuneration policies and practices for the Board, the CEO, the CFO, senior executives and other persons whose activities, individually
or collectively, affect the financial soundness of the Company.
During the reporting period, the Company was not listed on the ASX and all Non-Executive Directors were nominees of the Company’s
shareholders. Accordingly, the Remuneration Committee did not consist of a majority of independent directors during the reporting
period.
The Remuneration Committee is currently comprised of 3 non-executive directors, the majority of whom are independent including
the Chair. The directors currently serving on the Remuneration Committee are Peter Margin (Chair), Frank Costa and Neil Chatfield.
The roles, responsibilities, composition and structure of the Remuneration Committee are set out in the Remuneration Committee
Charter, a copy of which can be found in the Corporate Governance section of the Investor Centre on our website at http://investors.
costagroup.com.au/investor-centre.
The Remuneration Report sets out details of the Company’s policies and practices for remunerating directors and executives. The
Company distinguishes the remuneration of executive directors and executives from that of non-executive directors by offering the
Managing Director and CEO and other executives a mix of fixed and incentive remuneration in certain circumstances (e.g., under the
short term incentive plan and long term incentive plan). Remuneration of non-executive directors is fixed.
The Company does not currently have in place any schemes for retirement benefits, other than superannuation, for non-executive
directors.
The Company’s Securities Trading Policy provides that the CEO and other Company executives (each being ‘Designated Persons’ under
the policy) are prohibited from entering into transactions or arrangements with anyone which could have the effect of limiting their
exposure to risk relating to an element of their remuneration that has not vested or is held subject to escrow restrictions.
Costa Annual Report 2015 27
DIRECTORS’ REPORT
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 DIRECTORS’ REPORT
The directors of Costa Group Holdings Ltd and its controlled entities (“the Group”) present their report together with the financial
report of the Group for the financial year ended 28 June 2015.
1. DIRECTORS
The directors of the Group at any time during or since the end of the financial year are:
Neil Chatfield m.Bus, FCPA, FAICD
Chairman (Appointed 24th June 2015)
Independent Non-Executive Director
Mr. Chatfield is an established executive and non-executive director with extensive experience across all facets of company
management, and with specific expertise in financial management, capital markets, mergers and acquisitions, and risk management. Mr.
Chatfield holds non-executive roles across a range of industries including Transurban Group, Seek and Recall Holdings, all ASX listed
companies and was the Chairman of Virgin Australia Holdings Ltd. Mr. Chatfield was previously an executive director and Chief Financial
Officer of ASX listed Toll Holdings Ltd, Australia’s largest transport and logistics company; a position he held for over 10 years.
Mr. Chatfield has a Masters of Business in Finance and Accounting, and is a Fellow of CPA Australia (FCPA) and Fellow of the Australian
Institute of Company Directors (FAICD).
During the past three years, Mr. Chatfield has served as a director of the following listed companies:
•
•
•
•
•
Virgin Australia Holdings Ltd - Non-executive and Chairman until 2015;
Transurban Group* - Non-executive since 2009;
Seek Ltd* - Non-executive since 2005 and Chairman since 2012;
Recall Holdings Ltd* - Non-executive since 2013; and
Grange Resources Ltd - Non-executive until 2014.
*Denotes current directorship
Frank Costa AO
Chairman (Resigned 24th June 2015)
Non-Executive Director
Mr. Costa has been at the forefront of developing and building the Costa Group into a major horticultural and logistics company for
more than 50 years. Mr. Costa has previously served as President of the Geelong Football Club (1998 - 2010) and tirelessly promotes the
development of the City of Geelong and surrounding community. Frank has been honoured with an Order of Australia Medal for his
services to youth and the community.
During the past three years, Mr. Costa has not served as a director of any other listed company.
Harry Debney BAppSc (Hons)
Chief Executive Officer and Managing Director
Mr. Debney has previously served as Chief Executive Officer of Visy Industries Australia Pty Ltd and has worked as an Assistant General
Manager for Queensland Fruit and Vegetable Growers.
During the past three years, Mr. Debney has not served as a director of any other listed company.
Costa Annual Report 2015 29
DIRECTORS’ REPORT
Kevin Schwartz BSc (Accountancy)
Non-Executive Director
Mr. Schwartz is the President of Paine & Partners LLC which he cofounded in 2006. Mr. Schwartz was a Managing Director at the
predecessor firm, Fox Paine & Company, which he joined in 2002.
He serves as the Chairman on the Board of directors of Verdesian Life Sciences. He serves as a director of Advanta B.V., Icicle Seafoods
Inc., Sunrise Holdings Inc., Covanta ARC Holdings LLC and some entities of the Stable-Group including Stabilus GMBH. He is also a
member of the Rush Associates Board of the Rush University Medical Center. Mr. Schwartz has previously served as a director of
Seminis, Inc. and on the Board of United American Energy Corp.
During the past three years, Mr. Schwartz has not served as a director of any other listed company.
Peter margin BSc (Hons), mBA
Independent Non-Executive Director (Appointed 24th June 2015)
Mr. Margin joined the Board on 24 June 2015. Mr. Margin has many years of leadership experience in major Australian and international
food companies. Recent roles include Chief Executive of Goodman Fielder Ltd and before that Chief Executive and Chief Operating
Officer of National Foods Ltd. Mr. Margin has also held senior management roles in Simplot Australia Pty Ltd, Pacific Brands Ltd, East
Asiatic Company and HJ Heinz Company Australia Ltd.
During the past three years, Mr. Margin has served as a director of the following listed companies:
•
•
•
•
•
•
PACT Group Holdings Ltd* - Non-executive since 2013;
Huon Aquaculture Ltd* - Non-executive and Chairman since 2014;
Ricegrowers Ltd - Non-executive since 2012, resigned August 2015;
PMP Ltd* - Non-executive since 2012;
Nufarm Ltd* - Non-executive since 2011; and
Bega Cheese Ltd* - Non-executive since 2011.
*Denotes current directorship
Bruno Ferrari Garcia de Alba Ph.D., J.D.
Non-Executive Director (Resigned 24th June 2015)
Dr. Ferrari García de Alba has been an Operating Partner of Paine & Partners LLC since 2013 and was an Operating Director of the
predecessor firm.
Dr. Ferrari García de Alba serves as a director of Sunrise Holdings (Delaware) Inc., Instituto del Fondo Nacional de la Vivienda para los
Trabajadores (Infonavit), Nacional Financiera SNC Institucion de Banca de Desarrollo. Dr. Ferrari García de Alba has previously served
as Chief Executive Officer of Seminis, Inc. and as the Secretary of Economy in Mexico where he was responsible for a wide agenda,
including the domestic economic policy and the international trade policy of Mexico. Dr. Ferrari García de Alba founded the Mexican
Agency for trade and investment promotion, ProMexico, and was appointed CEO by President Felipe Calderon. He has also previously
served as a Director of Banco Nacional de Comercio Exterior SNC and Petroleos Mexicanos.
Dr. Ferrari García de Alba has a successful career in a variety of industries focused on agribusiness in different parts of the world and has
received numerous awards from governments including Denmark, Italy, the Netherlands, Colombia, Chile and the United States.
During the past three years, Dr. Ferrari García de Alba has not served as a director of any other listed company.
30 Costa Annual Report 2015
DIRECTORS’ REPORT
Robert Costa
Non-Executive Director (Resigned 24th June 2015)
Chairman of the Audit and Risk Management Committee (Resigned 24th June 2015)
Mr. Costa has extensive experience in all aspects of the horticultural industry and through the formative years of the business, had
responsibility for management at Group level of the company’s asset base and balance sheet, including working capital, liquidity and
cash flow.
During the past three years, Mr. Costa has not served as a director of any other listed company.
Greg Hunt
Non-Executive Director (Resigned 24th June 2015)
Mr. Hunt was a member of the Audit and Risk Management Committee until the 24th June 2015. Mr. Hunt has been the Chief Executive
Officer and Managing Director of Nufarm Ltd since May 2015and previously served as its Chief Operating Officer. Mr. Hunt has
previously served as Managing Director of Elders Australia Ltd and as Managing Director of BWK Ag (Germany), Australian Agricultural
Company Ltd., Killara Feedlot Pty Ltd., Webster Ltd., HiFert Pty Ltd., Walnuts Australia Pty Ltd., Elders Indonesia, Elders Rural Bank
Ltd and Elders Insurance Ltd. Mr. Hunt serves as the Chairman of Elementree Pty Ltd., Biocentral Laboratories, Kirribilli Pastoral and
Plumgrove Pty Ltd. Mr. Hunt previously served as Independent Non-Executive Director of Tandou Ltd., Webster Ltd. and Tassal Group
Ltd.
During the past three years, Mr. Hunt has served as a director of the following listed companies:
•
•
Nufarm Ltd* - Executive since 2015;
Tandou Ltd - Non-executive until 2012;
*Denotes current directorship
Angelos Dassios
Non-Executive Director (Appointed 7th October 2011; Resigned 24th June 2015)
Mr. Dassios was a member of the Audit and Risk Management Committee until the 24th June 2015. Mr. Dassios serves as a Partner of
Paine & Partners LLC since 2010 and was previously with the predecessor firm. In 2002, he joined Fox Paine & Company and after leaving
in 2004 to pursue outside interests, he returned to Fox Paine & Company in 2006 as director.
Mr. Dassios serves as a director of some entities of the Stable-Group including Stabilus GMBH, Icicle Seafoods, and Verdesian Life
Sciences. He serves as a director of TriQuint WJ Inc., Wind River Insurance Company (Barbados) Ltd, Wind River Insurance Company
(Bermuda) Ltd and Wind River Services Ltd. He previously served as a director of United America Indemnity Ltd. and its predecessor
companies and also at Global Indemnity Plc.
During the past three years, Mr. Dassios has not served as a director of any other listed company.
2. COMPANY SECRETARY
David Thomas LLB, BSc (Hons)
Mr. Thomas joined the Company as General Counsel in July 2012 and was appointed to the position of Company Secretary in October
2012. In addition to being the Company Secretary, Mr. Thomas oversees the Group’s legal department and advises the Group on legal,
risk and compliance matters. Prior to joining the Company, Mr. Thomas was a Partner of Middletons (now K&L Gates), practising in
corporate and commercial law. He has over 22 years’ experience in legal practice.
Costa Annual Report 2015 31
DIRECTORS’ REPORT
3. OFFICERS WHO WERE PREVIOuSLY PARTNERS OF THE AuDIT FIRM
There are no officers of the Company during the financial year that were previously partners of the current audit firm, KPMG, at a time
when KPMG undertook an audit of the Group.
4. DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the
directors of the Company during the financial year are:
BOARD mEETINGS
AuDIT AND RISK COmmITTEE mEETINGS
Held
Attended
Held
Attended
6
6
6
6
1
5
5
5
5
6
6
6
5
1
-
5
4
5
1
1
1
1
-
1
1
1
1
1
-
1
-
-
-
1
1
1
Director
Neil Chatfield
Frank Costa
Harry Debney
Kevin Schwartz
Peter Margin
Bruno Ferrari Garcia de Alba
Robert Costa
Greg Hunt
Angelos Dassios
5. PRINCIPAL ACTIVITIES
Costa Group is Australia’s largest horticulture group and is the largest fresh produce supplier to the major Australian food retailers. The
Group’s principal activities during the year were:
•
•
•
the growing of mushrooms, blueberries, raspberries, glasshouse grown tomatoes, citrus and other selected fruits within
Australia;
the packing, marketing and distribution of fruit and vegetables within Australia and to export markets; and
provision of chilled logistics warehousing and services within Australia.
No significant change in the nature of these activities occurred during the year.
6. DIVIDENDS
Costa Group Holdings Ltd did not declare a dividend during the current or the prior year. There was no dividend reinvestment plan in
operation during the years ended 28 June 2015 and 29 June 2014.
32 Costa Annual Report 2015
DIRECTORS’ REPORT
7. EVENTS SuBSEQuENT TO REPORTING DATE
On 24 July 2015, the Group undertook an Initial Public Offering (IPO) on the Australian Securities Exchange. The purpose of the IPO was
to:
•
•
•
provide Costa with access to capital markets to pursue further growth opportunities;
pay down the Group’s existing debt; and
allow existing shareholders to realise part of their investment.
As a result of the IPO, the Group:
•
•
•
•
•
Issued new shares for $173.3 million;
Repaid the existing debt facility of $238.0 million and drew down $142.0 million under a new banking facility;
Disposed of existing options issued to management and Directors under the legacy LTI plan, which resulted in a cash payment
of $11.9 million and acceleration of share-based payments expense $0.7 million;
Paid a dividend of $9.4 million in relation to the Redeemable Preference Shares (RPS). The RPS were subsequently converted to
ordinary shares; and
Write-off of capitalised borrowing costs of $7.9 million.
8. LIkELY DEVELOPMENTS
The Group will continue to explore opportunities that meet the Group’s long term growth and development goals. The goal is to
provide a superior sustainable increase in profits. Further information about likely developments in the operations of the Group
and the expected results of those operations in future financial years has not been included in this report because disclosure of the
information would be likely to result in unreasonable prejudice to the Group. Other information on likely developments are contained
in the Operating and Financial Review on pages 5-18.
9. ENVIRONMENTAL REGuLATION
The Group is committed to conducting business activities and having due respect for the environment while continuing to meet
expectations of shareholders, employees, customers and suppliers.
The Group is subject to environmental regulations under various federal, state and local laws relating predominately to air, noise and
water emission levels.
The Group is committed to achieving a level of environmental performance that meets or exceeds Federal, State and local
requirements, and improves its use of natural resources and minimises waste.
Costa Annual Report 2015 33
DIRECTORS’ REPORT
10. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares and options issued by Costa Group Holdings Ltd, as notified by the directors to the
ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Neil Chatfield
Frank Costa ¹
Harry Debney
Kevin Schwartz ²
Peter Margin
Bruno Ferrari Garcia de Alba
Robert Costa
Greg Hunt
Angelos Dassios
Ordinary shares
22,222
10,432,099
1,032,078
38,990
7,620
-
-
-
-
Options over
ordinary shares
400,000
-
1,891,944
-
-
-
-
50,000
-
Notes:
1.
2.
Frank Costa has an indirect interest in 10,432,099 ordinary shares in Costa as a result of his shareholdings in a series of other entities.
Kevin Schwartz has an indirect interest in 38,990 ordinary shares in Costa as a result of his shareholdings in a series of other entities.
11. SHARE OPTIONS
unissued ordinary shares under options
Unissued ordinary shares of Costa Group Holdings Ltd under option at the date of this report are as follows:
Number of unissued ordinary
shares under option
Issue price of shares
Expiry date of the options
400,000
50,000
1,891,944
$1.45
$1.45
$2.81
October 2024
October 2019
August 2019
All unissued shares are ordinary shares in the Company.
No option holder has any right under the options to participate in any other share issue of the group.
Shares issued on exercise of options
During the financial year, the Group did not issue any ordinary shares as a result of the exercise of options. Since the end of the financial
year, the Company issued 2,263,649 fully paid ordinary shares in consideration for the disposal of 6,366,531 options.
34 Costa Annual Report 2015
DIRECTORS’ REPORT
12. INDEMNIFICATION AND INSuRANCE OF DIRECTORS AND OFFICERS
Pursuant to its constitution, the Company may indemnify directors and officers, past and present, against liabilities that arise from
their position as a director or officer allowed under law. The Company has entered into deeds of indemnity, insurance and access with
its existing and past directors, its company secretary and the directors of the Company’s subsidiaries. Under the deeds of indemnity,
insurance and access, the Company indemnifies each director or officer against all liabilities to another person that may arise from
their position as a director or officer of the Company or its subsidiaries, to the extent permitted by law. The deed stipulates that the
Company will meet the full amount of any such liabilities, including reasonable legal costs and expenses.
During the financial year, the Group paid premiums to insure all directors and officers against certain liabilities as contemplated under
the Company’s constitution. Disclosure of the total amount of the premiums paid under this renewed insurance policy is not permitted
under the provisions of the insurance contract.
Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the contract.
13. INDEMNIFICATION AND INSuRANCE OF AuDITORS
No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been an
auditor of the group.
14. NON-AuDIT SERVICES
During the year KPMG, the Group’s auditors, has performed certain other services in addition to the audit and review of the financial
statements.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those
non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
•
•
All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed
by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting
in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and
rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services provided during
the year are set out below.
Other services provided by KPmG
Taxation compliance and other taxation advisory services (including R&D)
Other assurance services (including IPO services)
Other services (including IPO services)
2015
2014
277,030
109,160
785,000
60,000
575,230
14,500
1,637,260
183,660
Costa Annual Report 2015 35
DIRECTORS’ REPORT
15. ROuNDING OFF
The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1988 and in accordance with that Class Order, amounts in
the financial report and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
16. LEAD AuDITOR’S INDEPENDENCE DECLARATION
The Lead auditor’s independence declaration is set out on page 54 and forms part of the directors’ report for the financial year ended
28 June 2015.
36 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
1. INTRODuCTION (AuDITED)
The directors are pleased to present the FY2015 Remuneration Report, outlining the Board’s approach to the remuneration for key man-
agement personnel (KMP).
KMP are individuals who have authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, and comprise the directors and the senior executives of the Group, as listed below.
Director
Neil Chatfield
Frank Costa
Kevin Schwartz
Peter Margin
Position Held
Chairman, Non-executive director (Appointed Chairman on 24th June 2015)
Chairman, Non-executive director (Resigned as Chairman on 24th June 2015)
Non-executive director
Non-executive director (Appointed 24th June 2015)
Bruno Ferrari Garcia de Alba
Non-executive director (Resigned 24th June 2015)
Robert Costa
Greg Hunt
Angelos Dassios
Harry Debney
Executive
Linda Kow
Non-executive director (Resigned 24th June 2015)
Non-executive director (Resigned 24th June 2015)
Non-executive director (Resigned 24th June 2015)
Chief Executive Officer, Managing Director
Chief Financial Officer
George Haggar
Chief Operating Officer
The information in this report has been audited as required by section 308(3C) of the Corporations Act 2001 (Cth).
Costa Annual Report 2015 37
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
2. CORPORATE GOVERNANCE (AuDITED)
2.1 Remuneration Committee
The Group has established a Remuneration Committee that is comprised of non-executive directors, the majority of whom are
independent in accordance with the Remuneration Committee Charter.
The Remuneration Committee are responsible for assisting and advising the Board on:
•
•
•
Remuneration policies and practices for Executives, and employees of the Group;
Incentive schemes and equity-based remuneration plans; and
Shareholder and other stakeholder engagement in relation to the Group’s remuneration policies and practices.
A full charter outlining the Remuneration Committee’s responsibilities is available at: http://investors.costagroup.com.au/investor-
centre/?page=corporate-governance.
2.2 use of Remuneration Consultants
The Remuneration Committee can engage remuneration consultants to provide it with information on current market practice, and
other matters to assist the Committee in the performance of its duties. During FY2015, the Board obtained various data in respect of
the remuneration practices of companies listed on the ASX to assist it in forming the remuneration framework that would apply post
completion of the IPO. The Board did not receive any remuneration recommendations for the purposes of the Corporations Act.
2.3 Associated Policies
The Group has established a number of policies to support a strong governance framework, including a Diversity Policy, Disclosure
Policy and Security Trading Policy. These policies and procedures have been implemented to uphold ethical behaviour and
responsible decision making. Further information on the Group’s policies is available at: http://investors.costagroup.com.au/investor-
centre/?page=corporate-governance.
38 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
3. ExECuTIVE REMuNERATION (AuDITED)
3.1 Remuneration Framework
The remuneration framework is designed to attract and retain key talent, reward the achievement of strategic objectives and align
reward with the creation of shareholder wealth. The key principles supporting the Group’s remuneration framework are:
Principle
Competitive Remuneration
Performance Driven
Objective
Reward employees fairly and competitively for their
contributions to the Group’s success.
Executives are rewarded for achieving strategic goals
that create sustainable growth in shareholder wealth.
Application
• Total remuneration is set having regard to the
• Significant ‘at risk’ reward ensures executive’s
individual’s capabilities and experience.
interests remain aligned with shareholder values.
• Remuneration is set with regard to the median of
an appropriate comparator group of companies
within the consumer discretionary sector of the
ASX300.
• The Board obtains independent advice on the
appropriateness of total remuneration package.
• Equity is used as a key element of the variable
remuneration to align executives and shareholders.
• At risk reward is driven by the Group’s long-term
performance with LTI outcomes for the CEO
driven by increase in shareholder value, and the
LTI plan for other KMP taking into account the
growth in the Group’s earnings per share and
relative Total Shareholder Return.
3.1.1 Remuneration overview for FY2015 and outlook for FY2016
Prior to the Company’s ASX Listing on 24 July 2015, the Executives had been engaged under a combination of fixed remuneration and
short-term inventive cash bonuses. The Executives’ remuneration also included long-term incentives in the form of options over shares
that would vest on the completion of a change in ownership, either through an IPO or a trade sale.
Following Listing, the Board reviewed the remuneration framework to ensure it is appropriate for a listed environment and supports
the Group’s long-term business strategy. As part of this review, the Board intends to establish new short and long term incentive plans,
consistent to what had been proposed in the Company Prospectus dated 25 June 2015. Details of these plans are provided on pages
40-45 of this report.
Costa Annual Report 2015 39
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
3.1.2 Remuneration mix for FY2015
Total remuneration for KMP includes both fixed and ‘at risk’ reward components. ‘At risk’ reward includes short and long term incentives,
which are based on individual and group performance outcomes. In FY2015, the CEO, COO and CFO received fixed remuneration, as
outlined in Section 7 Statutory Information, together with the following ‘at risk’ components:
•
•
short term incentives, as outlined in section 3.2.2; and
long term incentives, as outlined in section 3.3.1.
The mix of fixed versus variable remuneration in FY2015 for the Executives was as follows:
CEO
CFO
COO
71%
75%
75%
29%
25%
25%
0%
20%
40%
60%
80%
100%
3.2 Remuneration Components
3.2.1 Fixed remuneration
Fixed reward includes cash salary, superannuation contributions, and other non-monetary benefits such as car leasing arrangements,
additional superannuation contributions, etc. Fixed reward is reviewed annually by the Remuneration Committee with regard to the
individual and Group performance. The Committee’s review of fixed reward has consideration for the Executive’s total remuneration
package.
3.2.2 Short Term Incentive Plan (STI Plan)
FY2015 Legacy STI Plan
The legacy STI plan was in place prior to the Company’s Listing and applied during the financial year ended 28 June 2015. The legacy
STI Plan enabled Executives to receive an incentive payment calculated as a percentage of total fixed remuneration (“TFR”) conditional
on achieving qualifying EBITDA hurdles. The STI is triggered on achieving 90% of budget EBITDA for the year, with target STI reached at
100% of budget EBITDA and stretch at 110%. The EBITDA hurdle was selected on the basis that it has a direct correlation to the financial
performance of the Group.
The performance against the key targets identified under the legacy STI plan resulted in each KMP receiving a cash bonus as follows:
KmP
CEO
CFO
COO
Target STI
$237,500
$85,000
$127,000
40 Costa Annual Report 2015
% achieved in the year
168%
168%
168%
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
2016 Short Term Incentive Plan
The table below outlines the key features of the FY2016 STI Plan, as it will apply to the CEO, CFO and COO:
Objective
Participants
To reward executives for achieving goals directly linked with the Group’s business strategy
All Executives and selected senior management
Performance Period
Financial year ending 26 June 2016
Opportunity
• CEO – Target STI is 40% of TFR, with a maximum opportunity of 60% TFR for exceeding
stretch targets.
• CFO, COO – Target STI is 30% of TFR, with a maximum opportunity of 50% TFR for
exceeding stretch targets.
Performance measures
STI will be assessed against both financial and non-financial measures, and will be weighted as
follows:
measure
EBIT
Cash Flow
Individual Performance
Weighting
50%
30%
20%
Individual Performance will be measured against KPIs appropriate for the Executive’s role and will
include key business measures such as market share, innovation, safety, quality and people.
Payment method
• Cash - Two thirds will be paid in cash following the end of the performance year; and
• Deferred - One third will be deferred for 12 months and settled in equity.
Since the FY2016 STI Plan had not yet been approved by the Board prior to approval of this report, this information is unaudited.
Costa Annual Report 2015 41
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
3.3 Long Term Incentive (LTI) Plan – Legacy arrangements implemented prior to Listing
3.3.1 FY2015 Legacy Arrangements
Whilst the group was privately owned, it had a remuneration framework in place that included long-term incentives that would vest
on the completion of a change in ownership. Details of the pre-IPO arrangements were disclosed in the Prospectus. While the Group
was privately owned for the entire FY2015, an outline of the key pre-IPO LTI arrangements that vested upon Listing in FY2016 have been
included below for transparency.
Legacy arrangements for Executives
Term
Instrument
Description
Option to acquire ordinary shares
Consideration at grant
Nil
Quantum
Exercise price
Vesting period
CEO: 9,459,722 options
CFO: 2,000,667 options
COO: 3,068,778 options
$1.45 per option
The period commencing on the date of grant and ending on the expected date of completion of a
change in ownership
All legacy options vested in full on the date of Listing. The Legacy options were settled in FY2016 as follows:
•
•
70% cash settled, resulting in a cash payment shortly after the date of Listing; and
30% equity settled – with the Executives receiving fully vested shares in the Group at the date of Listing. To ensure continued
alignment with shareholder values, these fully vested shares are subject to escrow arrangements as follows:
o
o
For the CEO - 50% released from escrow following release of the Group’s FY2016 financial results, with the remaining
50% released from escrow following release of the Group’s FY2017 financial results.
For the CFO and COO - 100% released from escrow following release of the Group’s FY2016 financial results.
42 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
Options issued to CEO
In July 2015, the CEO was granted 1,891,944 options as part of his LTI Plan. The Options included an exercise price that was set at a 25%
premium to the Listing Price. The key terms of this grant are outlined below.
Term
Description
Consideration for grant
Nil
Instrument
Option to acquire ordinary shares
Number of options granted
1,891,944
Exercise price
$2.81
This is a 25% premium to the share price on Listing
Performance period
July 2015 to August 2017
Options will vest following the announcement of the Group’s FY2017 results.
Vesting condition
Successful Listing of the Group’s shares on the ASX within a specified time period and the CEO’s
continued employment at the date of vesting.
Additional sale restrictions
50% of the Options (or shares acquired by exercising the Options) will remain in escrow until the
announcement of the Group’s FY2018 results.
Service conditions
The options will be subject to tenure conditions and will be forfeited where the CEO resigns or is
dismissed prior to the vesting date. The options will not be forfeited where the CEO is deemed a
good leaver, unless otherwise determined by the Board.
It is not intended that the CEO will participate in the post-Listing LTI Plan disclosed in section 3.4 in FY2016. The CEO’s participation in
future LTI plans beyond FY2016 will be determined by the Board at the time.
Costa Annual Report 2015 43
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
3.4 Long Term Incentive (proposed LTI for FY2016)
The Board intends to introduce a LTI in FY2016 for the KMP (other than the CEO) and other senior executives. These LTI arrangements
were not in effect during FY2015, however for transparency, details of the proposed LTI plan to be implemented in FY2016 have been
disclosed below.
Since the FY2016 LTI Plan had not yet been approved by the Board prior to the approval of this report, this information is unaudited.
Term
Eligibility
Instrument
Quantum
Issue price
Description
CFO, COO and selected members of the senior management team
The CEO will not be entitled to participate in the LTI Plan due to the options that were issued to the
CEO in FY2016 prior to the Company’s Listing as described above.
Options to acquire ordinary shares in Costa Group Holdings Limited
This will be determined as a percentage of the participant’s TFR
Nil consideration
Exercise price
$2.25 per share
This was the market value of Costa Holdings Group shares at date of Listing
Performance Period
The FY2016 LTI performance period will be from the date of Listing to June 2017. 50% of options (or
shares acquired by exercising options) will be subject to an additional sale restriction until August
2018 (following release of the FY2018 results). For all future grants, it is intended that the performance
period will be a minimum of 3 years.
Performance Measure
50% - Earnings Per Share (basic) compound annual growth rate (“CAGR”) over the performance period.
50% - Relative total shareholder return (“TSR”) measure
44 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
Performance Assessment
The LTI will be tested at the end of the vesting period, and will vest in line with the below schedule:
50% Earnings Per Share (basic) (“EPS”)
Less than threshold CAGR
Threshold CAGR
% of options that vest
Nil
50%
Between threshold and stretch CAGR
50% - 100% on a straight line sliding scale
Stretch CAGR
50% Relative TSR
Less than 50th percentile
50th percentile
100%
% of options that vest
Nil
50%
Between 50th percentile and 75th percentile
50% - 100% on a straight line sliding scale
75th percentile and above
100%
The comparator group for relative TSR includes companies in the consumer discretionary and consum-
er staples sectors of the S&P/ASX Small Ordinaries Index. Each company’s share price will be measured
using the average closing price over 60 days up to (but excluding) the first day of the performance
period, and the average closing price over 60 days up to and including the last day of the performance
period.
Entitlements
Options will not carry rights to dividends or voting rights prior to vesting.
Restrictions on Dealing
Participants must not sell, transfer, encumber, hedge or otherwise deal their options granted under the
LTI Plan.
Participants will be free to deal with the Shares allocated on exercise of the options, following pay-
ment of the exercise price, subject to the requirements of the Company’s securities trading policy and
the escrow on the FY2016 options until August 2018 (as previously outlined).
Cessation of employment
Any unvested options granted under the LTI Plan will be forfeited where the participant resigns or
is dismissed during the performance period. Where the participant is considered a good leaver, the
unvested options and/or performance rights will remain on foot subject to Board discretion.
Costa Annual Report 2015 45
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
4. ExECuTIVE REMuNERATION DISCLOSuRE (AuDITED)
4.1 Executives’ Contract Terms
A summary of the key terms of employment for executives as at 28 June 2015 is presented in the below table:
Executive
Harry Debney
Linda Kow
George Haggar
Role
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Notice by the Group
Notice on Resignation
6 Months
3 Months
3 Months
6 Months
3 Months
3 Months
5. NON-ExECuTIVE DIRECTORS (AuDITED)
The details of fees paid to non-executive directors in FY2015 are included in Section 7 of this report.
The table below outlines the fees that will be paid to non-executive directors in FY2016. The aggregate fee pool for non-executive
directors from the date of Listing is $1,200,000. Board and committee fees, together with statutory superannuation fees, are included in
this aggregate fee pool. The FY2016 annual Board and Committee fees are as follows:
Board/Committee
Board base fee
Audit and Risk Committee
Remuneration Committee
Nominations Committee
Chairman Fee ($)
member Fee ($)
230,000
20,000
15,000
-
100,000
10,000
7,500
-
Following Listing, no non-executive director will be entitled to receive a grant under any incentive plan. All fees will be paid in cash and
will not be subject to performance conditions. Section 8.2 includes details of any legacy arrangements.
46 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
6. RELATIONSHIP BETWEEN REMuNERATION POLICY AND GROuP PERFORMANCE (AuDITED)
Since the Company was not a disclosing entity during or prior to financial year ended 28 June 2015, the relationship between
remuneration policy and Group performance is only assessed for the current financial year and the prior comparative period.
Key performance indicator
$‘000
Revenue
EBITDA before SGARA
EBIT
Dividend paid
Notes
1.
Pro forma information is unaudited.
FY2015
Actual
727,029
59,894
25,958
Nil
FY2015
Pro forma1
723,500
71,000
54,900
Nil
FY2014
Actual
699,075
64,536
31,142
Nil
FY2014
Pro forma1
662,300
70,200
59,700
Nil
Costa Annual Report 2015 47
POST-
EmPLOYmENT
LONG-TERm
BENEFITS
TERmINATION
SHARE-BASED
PAYmENTS
TOTAL
PERFORmANCE
RELATED
Superannuation
benefits
service leave
Long
$
Termination
benefits
$
$
Options
$
$
%
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
7. DIRECTORS’ AND ExECuTIVE OFFICER’S REMuNERATION (AuDITED)
Details of the nature and amount of each major element of remuneration of each director of the Company, and other KMP of the
consolidated entity are:
Non-executive Directors
Neil Chatfield ¹
Frank Costa ¹
Kevin Schwartz ²
Peter margin ³
Bruno Ferrari Garcia de Alba ²
Robert Costa ¹
Greg Hunt ²
Angelos Dassios ²
Executive Directors
Harry Debney
Executives
Linda Kow
George Haggar
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
SHORT-TERm
Salary & fees
STI
cash bonus
Non-monetary
benefits
$
$
$
Total
$
-
-
-
-
-
-
-
68,800
68,800
-
-
-
-
-
-
-
-
-
-
-
-
-
201,063
-
-
205,555
201,063
205,555
-
-
-
-
-
-
-
-
201,063
205,555
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
100,000
-
-
-
-
100,000
-
50,000
-
-
-
-
-
-
152,245
142,695
91,536
-
-
45,767
-
-
-
-
-
-
-
-
50,000
152,245
142,695
91,536
45,767
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,700
4,233
-
-
-
-
8,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
931,217
782,225
399,691
221,960
7,592
26,075
1,338,500
1,030,260
18,783
24,939
-
357,194
17,775
13,648
-
192,237
1,739,416
1,253,920
23%
18%
406,217
382,225
616,217
143,047
100,784
212,047
-
-
-
582,225
121,176
-
549,264
483,009
828,264
703,401
18,783
17,775
18,783
17,775
8,154
-
134,759
9,197
-
32,955
13,044
-
173,060
12,989
-
54,925
15%
20%
19%
21%
50,000
152,245
142,695
108,836
50,000
-
-
710,960
542,936
1,033,151
789,090
Notes in relation to the table of directors’ and Executive officers’ remuneration (audited):
1.
In FY2015, a provision of directors’ fee of $600,000 was paid to State Logistics Pty Ltd (2014: $600,000 to State Logistics Pty Ltd and $1,500,000 to Table Grape
Growers Association Pty Ltd), a related party of Frank Costa, Robert Costa and Neil Chatfield. The Group is unable to confirm the individual amounts paid to the
directors of State Logistics Pty Ltd.
In FY2015, a provision of Directors’ fee of $400,000 (2014: $2,150,000) was paid to Paine & Partners LLC, a related party of Kevin Schwartz, Bruno Ferrari Garcia de Alba,
Greg Hunt and Angelos Dassios. The Group is unable to confirm the individual amounts paid to the Directors of Paine & Partners LLC.
Peter Margin was appointed as non-executive Director on 24th June 2015. No remuneration was paid to him in FY2015.
2.
3.
48 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
SHORT-TERm
Salary & fees
cash bonus
benefits
STI
Non-monetary
$
$
$
POST-
EmPLOYmENT
LONG-TERm
BENEFITS
TERmINATION
SHARE-BASED
PAYmENTS
TOTAL
PERFORmANCE
RELATED
Superannuation
benefits
Long
service leave
Termination
benefits
$
$
$
Options
$
$
%
-
-
-
-
-
-
-
68,800
68,800
-
-
-
-
-
-
-
-
-
-
-
-
-
201,063
-
-
205,555
-
-
-
-
-
-
-
-
201,063
205,555
-
-
Kevin Schwartz ²
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Peter margin ³
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bruno Ferrari Garcia de Alba ²
100,000
-
-
100,000
-
-
-
-
100,000
-
50,000
-
-
-
-
-
-
152,245
142,695
91,536
-
-
45,767
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,700
4,233
-
-
-
-
8,600
-
-
-
-
-
-
-
-
-
50,000
152,245
142,695
108,836
50,000
-
-
-
-
-
-
-
-
-
Total
$
201,063
205,555
50,000
152,245
142,695
91,536
45,767
-
-
931,217
782,225
399,691
221,960
7,592
26,075
1,338,500
1,030,260
18,783
24,939
-
357,194
17,775
13,648
-
192,237
1,739,416
1,253,920
23%
18%
406,217
382,225
616,217
143,047
100,784
212,047
-
-
-
582,225
121,176
-
549,264
483,009
828,264
703,401
18,783
17,775
18,783
17,775
8,154
-
134,759
9,197
-
32,955
13,044
-
173,060
12,989
-
54,925
710,960
542,936
1,033,151
789,090
20%
19%
21%
15%
Non-executive Directors
Neil Chatfield ¹
Frank Costa ¹
Robert Costa ¹
Greg Hunt ²
Angelos Dassios ²
Executive Directors
Harry Debney
Executives
Linda Kow
George Haggar
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Notes in relation to the table of directors’ and Executive officers’ remuneration (audited):
1.
In FY2015, a provision of directors’ fee of $600,000 was paid to State Logistics Pty Ltd (2014: $600,000 to State Logistics Pty Ltd and $1,500,000 to Table Grape
Growers Association Pty Ltd), a related party of Frank Costa, Robert Costa and Neil Chatfield. The Group is unable to confirm the individual amounts paid to the
directors of State Logistics Pty Ltd.
2.
3.
In FY2015, a provision of Directors’ fee of $400,000 (2014: $2,150,000) was paid to Paine & Partners LLC, a related party of Kevin Schwartz, Bruno Ferrari Garcia de Alba,
Greg Hunt and Angelos Dassios. The Group is unable to confirm the individual amounts paid to the Directors of Paine & Partners LLC.
Peter Margin was appointed as non-executive Director on 24th June 2015. No remuneration was paid to him in FY2015.
Costa Annual Report 2015 49
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
8. EQuITY INSTRuMENTS (AuDITED)
8.1 movements in shares
There was no movement during the reporting period in the number of ordinary shares in Costa Group Holdings Ltd held, directly,
indirectly or beneficially, by each key management person, including their related parties.
8.2 Legacy Entitlements
Under the Legacy LTI plan, share options were granted to eligible employees representing up to 10% of the ordinary share capital of the
Group. Participants, who did not exercise their share options before Listing, remain entitled to exercise their options granted under the
Legacy LTI plan. Any shares issued upon exercise of options under the Legacy LTI plan will be ordinary shares.
During the financial year, 1,195,000 (2014: NIL) options were granted to KMP under the legacy LTI Plan. In addition, 1,891,944 options have
been granted to the CEO following the end of the financial year, as outlined at section 3.3.1 above.
8.3 Options over equity instruments granted as compensation
The movement during the reporting period, in the number of options over ordinary shares granted as compensation, and options that
vested are as follows:
Number of
options granted
during 2015
Grant date
Fair Value
per option $
Exercise price
per option $
Neil Chatfield
400,000
31 October 2014
Greg Hunt
Linda Kow
George Haggar
50,000
31 October 2014
379,000
366,000
1 July 2014
1 July 2014
0.172
0.172
0.194
0.194
1.45
1.45
1.45
1.45
Expiry date
31 October 2019
30 October 2024
24 July 2015
24 July 2015
Number of
options vested
during 2015
-
-
-
-
All options expire on the earlier of their expiry date or termination of the individual’s employment. As outlined in section 3.3.1 and
section 3.2.2, options granted under the Legacy LTI plan vest following successful listing of the Group on the ASX and the employee’s
continued employment.
During the reporting period, no shares were issued on the exercise of options previously granted as compensation. Any shares granted
under the Legacy LTI plan will become exercisable in FY2016, following listing of the Group on the ASX.
8.4 Details of equity incentives affecting current and future remuneration
The table below outlines each KMP’s unvested options at the end of the reporting period. Details of vesting profiles of the options held
by each KMP are detailed below:
Neil Chatfield
Greg Hunt ¹
Harry Debney
Linda Kow
Instrument
Number
Grant date
Options
Options
Options
Options
400,000
31 October 2014
50,000
31 October 2014
9,459,722
1,621,667
4 March 2013
4 March 2013
% vested
in year
% forfeited
in year
Financial
year in which
grant vests
-
-
-
-
-
-
-
-
2016
2016
2016
2016
50 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
Linda Kow
George Haggar
George Haggar
Instrument
Number
Grant date
Options
Options
Options
379,000
1 July 2014
2,702,778
4 March 2013
366,000
1 July 2014
% vested
in year
% forfeited
in year
Financial
year in which
grant vests
-
-
-
-
-
-
2016
2016
2016
Notes
1.
On 24 June 2015, the Company resolved to amend the legacy option plan, including to permit former directors of the Company to continue to hold existing options
(subject to certain conditions). Greg Hunt elected to retain his existing options following resignation from the Company. The Board resolved to ratify Greg Hunt’s
status as a “good leaver” for the purposes of the legacy LTI Plan.
8.5 LTI grants and movement during the year
The movement during the reporting period, of options over ordinary shares held, directly, indirectly or beneficially, by each KMP,
including their related parties, is as follows:
Held at
30 June 2014
Granted as
compensation
Exercised
Other
changes*
Held at
28 June 2015
Vested
during the
year
Vested and
exercised at
28 June 2015
Neil Chatfield
Greg Hunt
Harry Debney
Linda Kow
George Haggar
-
-
9,459,722
1,621,667
2,702,778
400,000
50,000
-
379,000
366,000
-
-
-
-
-
-
-
-
-
-
400,000
50,000
9,459,722
2,000,677
3,068,778
-
-
-
-
-
-
-
-
-
-
*Other changes represent options that expired or were forfeited during the year.
8.6 Key management personnel transactions
Mr Neil Chatfield (Director) ¹
•
A consultant for Costa Asset Management Pty Ltd (formerly Six Oaks Pty Ltd), a company associated with Costa Group
Holdings Ltd. No fees or costs have been paid directly to Neil Chatfield by Costa Group Holdings Ltd.
Mr Frank Costa (Director) ¹
•
Ownership interest of State Logistics Pty Ltd which provided management services to the Group totalling $600,000 (2014:
$600,000).
• Ownership interest of Table Grape Growers Australia which provided advisory services² of AUD $Nil (2014: $1,500,000).
•
Indirect ownership interest in Vitalharvest Ltd which is the landlord for the three citrus and four berry farms managed by
the Group. Fixed rental payments totalled $7,961,239 (2014: $7,368,797) and variable rent payments totalled $9,086,680 (2014:
$8,204,743). The Group also has a receivable of $755,214 in relation to capital expenditure to be reimbursed (2014: $59,957).
Costs incurred by Costa Group on behalf of related parties associated with the Costa family for travel, telecommunications,
salaries and sponsorship for the year ended 28 June 2015 of AUD $433,041 (2014: AUD $426,127).
•
Mr Harry Debney (Director) ¹
•
•
•
Director of Polar Fresh Cold Chain Services Pty Ltd (Polar Fresh Partnership) which is an associate of the Group (refer to Note
23 for details). No payments were made in connection with this position.
Director of Driscoll’s Australia Pty Ltd (Driscoll’s Australia Partnership) which is a joint venture of the Group (refer to Note 23
for details). No payments were made in connection with this position.
Representative of Blueberry Investments Morocco Pty Ltd (a member of the Group) on the Board of African Blue SA which is
an associate of the Group.
Costa Annual Report 2015 51
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
Mr Kevin Schwartz (Director) ¹
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD $400,000
(2014: AUD $500,000), advisory fees² of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS Holdings B.V
for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630).
Mr Bruno Ferrari Garcia de Alba (Director, resigned 24 June 2015)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD $400,000
(2014: AUD $500,000), advisory fees² of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS Holdings B.V
for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630). Salary paid directly to Bruno Ferrari Garcia de Alba of
AUD $100,000 (2014: AUD $50,000).
Mr Robert Costa (Director, resigned 24 June 2015)
•
•
•
•
•
•
•
Director and ownership interest of State Logistics Pty Ltd which provided management services to the Group totalling
$600,000 (2014: $600,000).
Director and ownership interest of Table Grape Growers Australia which provided advisory services² of AUD $Nil (2014:
$1,500,000).
Director and ownership interest in Vitalharvest Ltd which is the landlord for the three citrus and four berry farms managed by
the Group. Fixed rental payments totalled $7,961,239 (2014: $7,368,797) and variable rent payments totalled $9,086,680 (2014:
$8,204,743). The Group also has a receivable of $755,214 in relation to capital expenditure to be reimbursed (2014: $59,957).
Director of Polar Fresh Cold Chain Services Pty Ltd (Polar Fresh Partnership) which is an associate of the Group.
Director and ownership interest of Costa Asset Management Pty Ltd (formerly Baxter Hill Pty Ltd) whereby occupancy
expenditure for the Group totalling $5,966,443 (2014: $6,175,321) was incurred.
Director and ownership interest in STG Nominees. STG Nominees received no income (2014: $4,642,793) from entities within
the Group for equipment rental.
Costs incurred by Costa Group on behalf of related parties associated with the Costa family for travel, telecommunications,
salaries and sponsorship for the year ended 28 June 2015 of AUD $433,041 (2014: AUD $426,127).
Mr Greg Hunt (Director, resigned 24 June 2015)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD $400,000
(2014: AUD $500,000), advisory fees² of AUD $Nil (2014: AUD $1,650,000). Salary paid directly to Greg Hunt of AUD $100,000
(2014: AUD $50,000).
Mr Angelos Dassios (Director, resigned 24 June 2015)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD $400,000
(2014: AUD $500,000), advisory fees² of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS Holdings B.V
for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630).
Notes in relation to KMP transactions:
1. Following the completion of the IPO in July 2015, new arrangements will be entered into with these KMP.
2. Paine & Partners had a right to act as investment advisor to the Group pursuant to the Shareholder Deed in effect prior to Listing. The fee paid in FY2014 was for advisory
services provided in relation to the refinancing of the banking facilities. The fee was divided between existing shareholders in proportion to their respective shareholdings
in the Company. The rights to this advisory mandate ceases following the completion of the IPO.
52 Costa Annual Report 2015
DIRECTORS’ REPORT
REMuNERATION REPORT (AuDITED)
This directors’ report is made out in accordance with a resolution of the directors:
______________________________
Neil Chatfield
Chairman
Dated at Melbourne 24 September 2015.
Costa Annual Report 2015 53
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of Costa Group Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 28 June 2015 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPMG
Paul J McDonald
Partner
Melbourne
24 September 2015
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International, a Swiss cooperative.
Liability limited by a scheme approved under
Professional Standards Legislation.
54
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of Costa Group Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 28 June 2015 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the
audit.
ABCD
KPMG
Paul J McDonald
Partner
Melbourne
24 September 2015
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 JuNE 2015
Notes
2015
$ ‘000
2014
$ ‘000
Revenue
Sales revenue
Other revenue
Less: expenses
Raw materials, consumables and third party purchases
Depreciation and amortisation expenses
Employee benefits expenses
Occupancy expenses
Finance costs
Profit / (loss) on sale of assets
Impairment losses
Equipment leasing expenses
Loss on sale of investment
(Loss) / gain on fair value adjustments - biological assets
Gain on fair value of derivatives
Other expenses
Share of net profits of associates and joint ventures accounted for using
the equity method
Profit before income tax expense
Income tax expense
Profit / (loss) for the year
Other comprehensive income
Items that will not be reclassified to profit and loss
Forgiveness of debt
Other comprehensive income for the year
Total comprehensive income for the year
Profit / (loss) attributable to owners of Costa Group Holdings Ltd
Total comprehensive income attributable to owners of Costa Group Holdings Ltd
Earnings per share for profit attributable to owners of
Costa Group Holdings Ltd:
Basic earnings per share
Diluted earnings per share
3
3
3
4
4
4
4
23(b)
5
7
7
727,029
9,192
736,221
(258,790)
(18,481)
(243,160)
(61,910)
(20,895)
500
(15,703)
(8,996)
-
(252)
58
(112,777)
(740,406)
9,515
5,330
(753)
4,577
-
-
4,577
4,577
4,577
2015
Cents
2.35
1.86
699,075
12,044
711,119
(237,028)
(15,850)
(249,759)
(55,178)
(28,471)
(1,202)
(15,709)
(7,525)
(5,605)
4,972
211
(105,411)
(716,555)
8,566
3,130
(5,020)
(1,890)
4,606
4,606
2,716
(1,890)
2,716
2014
Cents
(0.97)
(0.77)
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
Liability limited by a scheme approved under
International, a Swiss cooperative.
Professional Standards Legislation.
54
The above Consolidated Statement of Profit and Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
Costa Annual Report 2015 55
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 28 JuNE 2015
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Receivables
Other financial assets
Biological assets
Equity accounted investments
Intangible assets
Deferred tax assets
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Provisions
Derivative financial liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Redeemable Preference Shares
Provisions
Derivative financial liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
EQuITY
Contributed equity
Profit reserve
Share based payment reserve
Accumulated losses
Total equity
56 Costa Annual Report 2015
Notes
2015
$ ‘000
2014
$ ‘000
8
9
10
12
13
29
9
11
12
23(b)
15
5
14
16
17
18
19
5
17
17
18
19
20
21
22
9,504
62,551
16,124
31,571
6,517
126,267
4,242
130,509
125
2,036
4,305
27,587
141,865
5,391
216,059
397,368
527,877
26,231
70,732
13,947
28,054
2,898
141,862
4,204
146,066
225
2,172
6,009
24,171
149,809
4,618
165,202
352,206
498,272
74,495
4,885
13,483
-
1,563
94,426
72,128
6
12,917
315
2,101
87,467
228,004
1,119
3,290
3,337
235,750
330,176
209,771
1,036
4,964
3,220
218,991
306,458
197,701
191,814
238,564
4,577
1,759
(47,199)
197,701
238,564
-
449
(47,199)
191,814
CONSOLIDATED STATEMENT OF CHANGES IN EQuITY
FOR THE YEAR ENDED 28 JuNE 2015
Consolidated
Balance as at 1 July 2013
Loss for the year
Forgiveness of debt
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Options granted / vested during the year
Extinguishment of financial liability
Balance as at 29 June 2014
Contributed
equity
Share based
payment
reserve
Accumulated
losses
Profit
reserve
Total
equity
$ '000
$ '000
$ '000
$ '000
$ '000
194,600
-
-
-
-
43,964
238,564
38
-
-
-
411
-
449
(49,915)
(1,890)
4,606
2,716
-
-
-
-
-
-
-
-
(47,199)
-
144,723
(1,890)
4,606
2,716
411
43,964
191,814
Balance as at 30 June 2014
238,564
449
(47,199)
-
191,814
Profit for the year
Transfer to profit reserve
Total comprehensive income for the year
-
-
-
-
-
-
4,577
(4,577)
-
4,577
4,577
-
-
4,577
4,577
Transactions with owners in their capacity as
owners:
Options granted / vested during the year
Balance as at 28 June 2015
-
238,564
1,310
1,759
-
(47,199)
-
4,577
1,310
197,701
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Costa Annual Report 2015 57
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 28 JuNE 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Dividends received
Income taxes (paid) / refunded
Net cash from operating activities
Cash flows used in investing activities
Payments for property, plant and equipment
Dividends from equity accounted investments
Dividends from investments in shares of other corporations
Acquisition of investment
Payment for intangible assets
Proceeds from sale of investments
Proceeds from sale of intangible assets
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Payment for derivative
Repayments from associates
Net proceeds from borrowings
Net cash from financing activities
Reconciliation of cash
Cash at beginning of the financial year
Net (decrease) / increase in cash held
Notes
2015
$ ‘000
2014
$ ‘000
8(a)
746,337
(698,330)
209
(18,218)
42
(2,064)
27,976
(80,762)
6,099
-
(4)
(2,217)
4,034
4,855
298
710,864
(655,635)
248
(16,971)
70
765
39,341
(24,830)
2,910
108
(3,420)
(2,146)
-
2,111
648
(67,697)
(24,619)
-
-
22,994
22,994
26,231
(16,727)
(269)
65
2,201
1,997
9,512
16,719
Cash at end of financial year
8
9,504
26,231
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
58 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
INDEX
1.
2.
3.
4.
5.
6.
7.
8.
9.
Significant accounting policies
Critical accounting estimates and judgements
Revenue
Expenses
Income Tax
Segment Information
Earnings Per Share
Cash and cash equivalents
Receivables
10.
Inventories
11.
12.
13.
14.
15.
16.
17.
18.
19.
Other financial assets
Biological assets
Other assets
Property, plant and equipment
Intangible assets
Payables
Borrowings and Redeemable Preference Shares
Provisions
Derivative financial instruments
20.
Share capital
21.
Profit reserve
22.
Share-based payments
23.
Equity accounted investments
24.
Related parties
25.
Capital and lease commitments
26.
Contingent liabilities
Pages
60
73
75
75
76
78
80
81
82
82
82
83
85
85
87
89
90
92
93
94
94
95
97
98
101
101
27.
28.
Events subsequent to reporting date
Assets classified as held for sale
29.
Deed of cross guarantee
30.
Parent entity disclosures
31.
32.
33.
List of subsidiaries
Auditors’ remuneration
Financial instruments – Fair values and risk
management
34.
Dividends paid and proposed
Pages
101
102
102
104
105
106
107
112
Costa Annual Report 2015 59
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
The financial report is for Costa Group Holdings Ltd and its controlled entities (the “Group”). Costa Group Holdings Ltd (the “Company”)
is a company limited by shares, incorporated and domiciled in Australia. Costa Group Holdings Ltd is a for profit entity for the purpose
of preparing the financial statements.
The Group’s registered office is Unit 1, 275 Robinsons Road, Ravenhall, VIC, Australia, 3023.
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report complies
with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB).
The financial report was authorised for issue by the directors as at 24 September 2015.
The following is a summary of the material accounting policies adopted by the Group in the preparation and presentation of the
financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a) Basis of preparation of the financial report
Historical Cost Convention
The financial report has been prepared under the historical cost convention, except for revaluations to fair value for certain classes of
assets and liabilities as described in the accounting policies.
Rounding
The financial report is presented in Australian dollars with all values rounded to the nearest thousand unless otherwise stated, in
accordance with ASIC Class Order 98/100.
(b) Going concern
The financial report has been prepared on a going concern basis.
(c) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 over the entity. The financial
statements of subsidiaries are included in the financial report from the date that control commences until the date that control ceases.
Investments in associates and joint ventures (equity accounted investments)
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of
another entity. Joint ventures are those entities over whose activities the Group has joint control established by contractual agreement
and requiring unanimous consent for strategic financial and operating activities.
Investments in associates and joint ventures are accounted for under the equity method and are initially recognised at cost. The cost of
the investment includes transaction costs. The financial report includes the Group’s share of the profit or loss and other comprehensive
income of equity accounted investments after adjustments to align the accounting policies with those of the Group, from the date that
significant influence commences until the date that significant influence ceases.
60 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(c) Basis of consolidation (Continued)
Transactions eliminated on consolidation
Intercompany balances and transactions, and any unrealised income and expenses arising from intercompany transactions, are
eliminated in preparing the financial report. Unrealised gains arising from transactions with equity accounted investments are eliminated
against the investment to the extent of the Group’s interest in the investments. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
(d) Foreign currency translations and balances
Functional and presentation currency
The financial statements of each entity within the Group are measured using the currency of the primary economic environment
in which that entity operates (the functional currency). The financial report is presented in Australian dollars which is the Group’s
functional and presentation currency.
Transactions and Balances
Transactions in foreign currencies of entities within the consolidated Group are translated into functional currency at the applicable
exchange rate at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency
contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the
reporting period.
All resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the reporting
period.
Entities that have a functional currency different from the presentation currency are translated as follows:
•
•
•
Assets and liabilities are translated at reporting period end exchange rates prevailing at that reporting date;
Income and expenses are translated at actual exchange rates or average exchange rates for the reporting period, where
appropriate; and
All resulting exchange differences are recognised as a separate component of equity.
(e) Revenue
Sale of goods
Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue is usually recognised when
goods are despatched or at the time of delivery of the goods to the customer when the title is transferred.
Rendering of services
Revenue from the rendering of services is recognised upon the delivery of the service to the customers.
Dividends
Dividend income is recognised when the right to receive a dividend has been established. Dividends received from associates and joint
ventures are accounted for in accordance with the equity method of accounting.
Costa Annual Report 2015 61
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(e) Revenue (Continued)
Interest income
Interest income is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to
the financial assets.
Rental income
Rental income is recognised on a straight line basis over the rental term.
Royalty income
Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreements. Royalty income is
recognised in relation to rights provided to entities external to the Group to sell plants and produce that arise from the Group’s
operations.
Commission income
Commission income is recognised by the Group for sale of goods undertaken by the Group in its capacity as an agent of the transaction.
In respect of commissions, management considers that the following factor indicates that the Group acts as an agent:
•
the Group neither takes title to nor is exposed to inventory risk related to the goods, and has no significant responsibility in
respect of the goods sold;
All revenue is stated net of the amount of goods and services tax (GST).
(f) Income tax
Current income tax expense or benefit is the tax payable or receivable on the current period’s taxable income based on the applicable
income tax rate adjusted by changes in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to
be recovered or liabilities are settled. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in
a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable
profit or loss.
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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax Consolidation
The parent entity Costa Group Holdings Ltd and its subsidiaries have implemented the tax consolidation legislation and have formed
a tax consolidated Group. The parent entity and subsidiaries in the tax consolidated Group have entered into a tax funding agreement
such that each entity in the tax consolidated Group recognises the assets, liabilities, expenses and revenues in relation to its own
transactions, events and balances only. This means that:
•
•
•
the parent entity recognises all current and deferred tax amounts relating to its own transactions, events and balances only;
the subsidiaries recognise current or deferred tax amounts arising in respect of their own transactions, events and balances;
and
current tax liabilities and deferred tax assets arising in respect of tax losses are transferred from the subsidiary to the head
entity as inter-company payables or receivables.
62 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(f) Income tax (Continued)
The tax consolidated Group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax consolidated Group
arising under the joint and several liability requirements of the tax consolidation system, in the event of default by the parent entity to
meet its payment obligations.
(g) Borrowing costs
Borrowing costs can include interest, amortisation of discounts or premiums relating to borrowings, ancillary costs incurred in
connection with arrangement of borrowings and foreign exchange losses net of hedged amounts on borrowings.
Borrowing costs are expensed as incurred, except for borrowing costs incurred as part of the cost of the construction of a qualifying
asset which are capitalised until the asset is ready for its intended use or sale.
Loan establishment costs have been capitalised and amortised over the life of the loan facility. Borrowing costs relating to loans
extinguished during the reporting period have been expensed.
(h) Research and development expenditure
Expenditure on research activities is recognised as an expense when incurred.
Expenditure on development activities is capitalised only when technical feasibility studies demonstrate that the project will deliver
future economic benefits and these benefits can be measured reliably. Capitalised development expenditure is stated at cost less
accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of its estimated useful life
commencing when the intangible asset is available for use.
Other development expenditure is recognised as an expense when incurred.
(i) Inventories
Inventories are measured at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
•
•
Raw materials and consumables: purchase cost on a first in, first out basis and weighted average; and
Finished goods and work in progress: cost of direct material and labour and a proportion of manufacturing overheads based
on normal operating capacity.
Raw materials and consumables include packaging, supplies and other materials not consumed in the production or growing processes.
Finished goods include purchased agricultural produce and own farm fruit held for sale and other stock held for sale.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of production and the
estimated costs necessary to complete the sale.
Costa Annual Report 2015 63
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(j) Biological assets
Biological assets are measured at their fair value less costs to sell at each reporting date. The fair value is determined as the net present
value of cash flows expected to be generated by these crops (including a risk adjustment factor). Where fair value cannot be measured
reliably, biological assets are measured at cost.
Net increments and decrements in the fair value of the growing assets are recognised as income or expense in the statement of
comprehensive income, determined as:
•
•
•
The difference between the total fair value of the biological assets recognised at the beginning of the reporting period and
the total fair value of the biological assets recognised at reporting date.
Costs incurred in maintaining or enhancing the biological assets recognised at the beginning of the reporting period and the
total fair value of the biological assets recognised at the reporting date.
The market value of the produce picked during the reporting period is measured at their fair value less estimated point of sale
costs at the time of picking. Market price is determined based on underlying market prices of the product.
Short lived biological assets such as harvested produce are measured at their fair value less incremental costs to sell whilst mushrooms
are measured at cost. These are disclosed as current biological assets.
Non-current biological assets, which are bearer plants, have been determined in accordance with Directors’ valuation at each reporting
date for mature bearer plants. For immature bearer plants, the Directors’ have determined that these assets should be measured at cost.
In determining the fair value, the following factors have been taken into account:
The productive life of the asset
The period over which the asset will mature
(i)
(ii)
(iii) The expected future sales price
(iv)
(v)
The cost expected to arise throughout the life of the asset
Net cash flows are discounted at a pre-tax average real rate of 15% to 30% per annum (depending on agricultural risk) and it is
assumed that inflation will continue at the current rate.
Expected future sale prices for all biological assets, are based on average current prices increased for inflation. Costs expected to arise
throughout the life of the biological assets, are based on average costs throughout the period, increased for inflation.
(k) Financial instruments
Classification
The Group classifies its financial assets into the following categories: financial assets at fair value through profit and loss, loans and
receivables and available for sale financial assets. The classification depends on the purpose for which the instruments were acquired.
Management determines the classification of its financial instruments at initial recognition.
Derivative financial instruments
Derivatives are recognised initially at fair value; any directly attributable transaction costs are recognised in statement of comprehensive
income as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally
recognised in the statement of comprehensive income.
(i) Interest rate swaps
The Group holds derivative interest rate swaps as part of its compliance with certain covenants attached to its borrowings.
64 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(k) Financial instruments (continued)
(ii) Foreign exchange contracts
The Group enters into foreign exchange contracts to hedge its exposure against foreign currency risk in line with the Group’s risk
management strategy.
Non-derivative financial instruments
Non-derivative financial instruments consist of investments in equity securities, trade and other receivables, cash and cash equivalents,
borrowings, and trade and other payables.
Non-derivative financial instruments are initially recognised at fair value, plus directly attributable transaction costs (if any). After initial
recognition, non-derivative financial instruments are measured as described below.
Loans and receivables
Loans and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate
method. Loan and receivables include trade receivables.
Available-for-sale
Available-for-sale financial assets include any financial assets not included in the above categories and are measured at fair value.
Unrealised gains and losses arising from changes in fair value, other than impairment losses, are recognised in other comprehensive
income and presented in equity. The cumulative gain or loss is held in equity until the financial asset is de-recognised, at which time the
cumulative gain or loss held in equity is recognised in profit and loss.
Financial liabilities
Financial liabilities include trade payables, other creditors and loans from third parties and loans from or other amounts due to director
related entities.
Non derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least twelve months after the reporting period.
Costa Annual Report 2015 65
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(l) Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and any
accumulated impairment losses.
Depreciation
The depreciable amount of all fixed assets is depreciated over their estimated useful lives commencing from the time the asset is held
ready for use. Land owned by the Group is freehold land and accordingly is not depreciated.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of
the improvements.
Class of fixed asset
Depreciation rates
Depreciation basis
Land and buildings at cost
Plant and equipment at cost
3% - 10%
5% - 33%
Straight line
Straight line
Leased plant and equipment at cost
10% - 20%
Straight line
Assets under construction are measured at cost and not depreciated until the assets are ready for use.
(m) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale or held-for-distribution if it is
highly probable that they will be recovered primarily through sale rather than through continuing use. This condition is regarded as met
when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from date of
classification.
Immediately before classification as held-for-sale, the assets, or components of a disposal group, are remeasured in accordance with
the Group’s accounting policies. Thereafter, the assets, or disposal group, are measured at the lower of their carrying amount and fair
value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains or losses on remeasurement are
recognised in the statement of comprehensive income. Gains are not recognised in excess of any cumulative impairment loss.
Once classified as held-for-sale or held-for-distribution, intangible assets and property, plant and equipment are no longer amortised or
depreciated, and any equity accounted investments are no longer equity accounted.
(n) Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, is the
Chief Executive Officer.
66 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(o) Impairment
Non-derivative financial assets
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial assets measured at amortised cost (loans and receivables) at both a specific
asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically
impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually
significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount
of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual
losses are likely to be greater or lesser than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are
recognised in the statement of comprehensive income and reflected in an allowance account against loans and receivables. Interest on
the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causing the amount of
the impairment loss to decrease, the decrease in impairment loss is reversed through the statement of comprehensive income.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value
reserve in equity to the statement of comprehensive income. The cumulative loss that is reclassified from equity to the statement of
comprehensive income is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current
fair value, less any impairment loss recognised previously in the statement of comprehensive income. Changes in cumulative impairment
losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent
period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event
occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised
in the statement of comprehensive income. However, any subsequent recovery in the fair value of an impaired available-for-sale equity
security is recognised in other comprehensive income.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than biological assets, equity accounted investments, inventories and
deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite life intangible assets are tested annually for impairment.
An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. 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 or CGU. For impairment testing, assets are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows
or other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so
that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting
purposes.
Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying
amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if
no impairment loss has been recognised.
Costa Annual Report 2015 67
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(p) Intangibles
Goodwill
Goodwill is recognised initially at the excess over the aggregate of the consideration transferred, the fair value of the non-controlling
interest, and the acquisition date fair value of the acquirer’s previously held equity interest (in case of step acquisition), less the fair
value of the identifiable assets acquired and liabilities assumed.
Goodwill is not amortised, but is tested for impairment annually or more frequently if events or changes in circumstances indicate that
it might be impaired, and is carried at cost less accumulated impairment losses.
Brand names
Brand names are measured initially at their cost of acquisition. Brand names are an indefinite useful life intangible asset as there is no
expiry date associated with the underlying assets in terms of its generation of future economic benefits to the Group, and are therefore
tested for impairment annually. The carrying amount of brand names is supported by a value in use calculation.
Lease premiums
The value of market lease premiums is recorded in the financial report at cost. Market lease premiums are an indefinite life intangible
asset as there is no expiry date associated with the underlying assets in terms of its generation of future economic benefits to the
Group, and are therefore tested for impairment annually. The carrying amount of market lease premiums is supported by a value in use
calculation.
Water rights
Water rights are measured initially at their cost of acquisition. Water rights are an indefinite life intangible asset as there is no expiry
date associated with the underlying assets in terms of its generation of future economic benefits to the Group, and are therefore tested
for impairment annually. The carrying amount of water rights is supported by a value in use calculation.
68 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(p) Intangibles (Continued)
Software
Software is measured initially at the cost of acquisition and amortised over the useful life of the software. Expenditure on software
development activities is capitalised only when it is expected that future benefits will exceed the deferred costs, and these benefits can
be reliably measured. Capitalised development expenditure is stated at cost less accumulated amortisation. Amortisation is calculated
using the straight line method to allocate the cost of the intangible asset over its estimated useful life (not exceeding seven years)
commencing when the intangible asset is available for use. Other development expenditure is recognised as an expense when incurred.
Acquired both separately and from a business combination
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, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses.
Internally generated intangible assets are capitalised when the Group is certain that there are future economic benefits that will arise
from these assets. Other internally generated intangible assets that do not fit this recognition criteria are charged against the statement
of comprehensive income in the reporting period in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over
the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset
are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The
amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense
category consistent with the nature of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level.
Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to
determine whether indefinite life assessment continues to be supportable. If not, the change in useful life assessment from indefinite to
finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
(q) Provisions
Provisions are recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented
in the statement of comprehensive income net of any reimbursement.
(r) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to
reflect the risks and benefits incidental to ownership.
Costa Annual Report 2015 69
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(r) Leases (Continued)
Finance leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal
ownership, are transferred to the Group are classified as finance leases. Finance leases are capitalised, recording an asset and a liability
equal to the present value of the minimum lease payments, including any guaranteed residual values. The interest expense is calculated
using the interest rate implicit in the lease and is included in finance costs in the statement of profit and loss and other comprehensive
income. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the group will
obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability
and the lease interest expense for the period.
Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as an expense
on a straight line basis over the term of the lease.
Lease incentives received under operating leases are recognised as a liability and amortised on a straight line basis over the life of the
lease term.
(s) Employee benefits
Short-term employee benefit obligations
Liabilities arising in respect of wages and salaries, annual leave, long service leave and any other employee benefits expected to be
settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are
expected to be paid when the liability is settled. The expected cost of short term employee benefits in the form of compensated
absences such as annual leave is recognised in the provision for employee benefits. All other short term employee benefit obligations
are presented as payables.
Long-term employee benefit obligations
Liabilities arising in respect of long service leave and annual leave which is not expected to be settled within twelve months of the
reporting date are measured at the present value of the estimated future cash outflow to be made in respect of services provided by
employees up to the reporting date.
Bonus plan
The Group recognises a provision when a bonus is payable in accordance with the employee’s contract of employment, and the amount
can be reliably measured.
Termination benefits
Termination benefits are payable when employment of an employee or group of employees is terminated before the normal retirement
date, or when the Group provides termination benefits as a result of an offer made and accepted in order to encourage voluntary
redundancy. The Group recognises a provision for termination benefits when the entity can no longer withdraw the offer of those
benefits, or if earlier, when the termination benefits are included in a formal restructuring plan that has been announced to those
affected by it.
70 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(t) Goods and services tax (GST)
Revenues, expenses, liabilities and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of
an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis.
(u) Contributed equity
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
Redeemable Preference Shares
Redeemable Preference Shares are classified as equity if it is non-redeemable, or redeemable only at the Group’s option, and any
dividends are discretionary. Discretionary dividends thereon are recognised as distributions within equity upon approval by the Group’s
shareholders.
Redeemable Convertible Preference Shares are classified as a financial liability if it is redeemable on a specific date or at the option of
the shareholders, or if dividend payments are not discretionary. Non-discretionary dividends thereon are recognised as interest expense
in the statement of comprehensive income as accrued.
(v) Share based payments
The Group provides benefits to its employees and Directors in the form of share-based payment transactions, whereby services are
rendered in exchange for shares or options (“equity-settled transactions”).
The fair value of options and performance rights is recognised as an expense with the corresponding increase in equity (share-
based payments reserve). The fair value is measured at grant date and recognised over the period during which the holder becomes
unconditionally entitled to the options.
(w) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents comprise short-term and highly liquid cash deposits that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. For the purposes of the
Statement of Cash Flows, cash includes cash on hand, demand deposits and cash equivalents.
(x) Government grants
Government grants are initially recognised as deferred income at fair value when there is recoverable assurance that they will be
received and that the Group will comply with the conditions associated with the grant. Subsequently, they are recognised in the
statement of comprehensive income to offset the applicable expenses incurred by the Group as stated in the provisions of the
government grants.
Costa Annual Report 2015 71
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: SIGNIFICANT ACCOuNTING POLICIES (CONTINuED)
(y) New Accounting Standards and Interpretations
Since 29 June 2014, the Group has adopted the following new and revised Accounting Standards issued by the Australian Accounting
Standards Board (AASB) that are relevant to the Group’s operations:
•
•
•
•
•
AASB 2014-1 Amendments to Australian Standards – Part A: Annual Improvements 2010-2012and 2011-2013 Cycles.
AASB 2014-1 Amendments to Australian Accounting Standards – Part C: Materiality.
AASB 2014-1 Amendments to Australian Accounting Standards – Part E: Financial Instruments
AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities.
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-financial Assets.
The adoption of these standards did not have a significant impact on the Group’s financial position or performance.
(z) Recently issued or amended Accounting Standards
The following relevant Australian Accounting Standards and Interpretations have been issued or amended but are not yet effective and
the Group has not yet adopted them:
•
•
•
•
•
•
•
•
•
AASB 15 Revenue from Contracts with Customers.
IFRS 9 Financial Instruments
AASB 2014-5 Amendments to Australian Accounting Standards – Revenue from Contracts with Customers.
AASB 2014-6 Amendments to Australian Accounting Standards – Agriculture: Bearer Plants.
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and
Amortisation.
AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations.
AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards
2012-2014 Cycle.
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101.
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality.
The Group is currently assessing the impact of these standards to its financial position and performance.
72 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 2: CRITICAL ACCOuNTING ESTIMATES AND JuDGEMENTS
The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimates are revised and in any future periods affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the
next financial year include:
(a) Recoverability of goodwill
Goodwill is allocated to cash generating units (CGU’s) according to applicable business operations. The recoverable amount of a CGU is
based on value in use calculations. These calculations are based on projected cash flows approved by the Board covering a period of 3
years. Management’s determination of cash flow projections and gross margins are based on past performance and its expectation for
the future. The present value of future cash flows has been calculated using an average growth rate of 2.5% (2014: 3.0%) for cash flows
post financial year 2018, a terminal value growth rate of 3.0% (2014: 3.0%) to determine value in use. A post-tax discount rate to post-tax
cash flows has been applied as the valuation calculated using this method closely approximates applying pre-tax discount rates to pre-
tax cash flows. The Group used a pre-tax discount rate of 12.8% to 13.4% for financial year 2015 (2014: 14.6% to 15.2%).
(b) Recoverability of non-financial assets other than goodwill
All assets are assessed for impairment at each reporting date by evaluating whether indicators of impairment exist in relation to the
continued use of the asset by the consolidated entity. Impairment triggers include declining product or manufacturing performance,
technology changes, adverse changes in the economic or political environment or future product expectations. If an indicator of
impairment exists the recoverable amount of the asset is determined.
(c) Income tax
Income tax benefits are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation
that the group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable
profits will be available to utilise those temporary differences.
(d) Valuation of biological assets
The valuation takes into account expected sales prices, yields, growth profile, picked fruit quality and expected incremental-cost
related to the sale of the assets and management must make a judgement as to the trend in these factors. Please refer to Note 12 for
further information.
(e) Revenue recognition (agency commission)
Certain sales undertaken by the Group are performed in their capacity as an agent, and not merchant relationship. The Group identifies
these agency relationships when the Group pays the grower any proceeds that are received for the sale of the produce, after deduction
of the commission and expenses applicable to the produce sold (and, if elected by the Group, after deducting any amounts owing by
the grower under any other agreement.) The Group acknowledges that the deduction of commission or expenses constitutes payment
of these amounts by the grower.
Costa Annual Report 2015 73
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 2: CRITICAL ACCOuNTING ESTIMATES AND JuDGEMENTS (CONTINuED)
(f) Valuation of assets held-for-sale
Assets held-for-sale are valued at the lower of cost and fair value less costs to sell upon classification. There are no indicators that
assets held-for-sale are impaired. Based on recent market transactions entered into by the Group, the sales price of these assets are
higher than the carrying value.
(g) Fair value measurement
The Group measures certain financial instruments, including derivatives, and certain non-financial assets such as agricultural assets, at
fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants in its principal or most advantageous market at the measurement date. It is measured using the assumptions that market
participants would use when pricing the asset of liability, assuming that market participants act in their economic best interest. A fair
value measurement of a non-financial item assumes it is put to its highest and best use.
The Group utilises valuations techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Accounting standards prescribe a fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
•
•
•
Level 1: Quoted (unadjusted) market prices in active markets for identical assets of liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly (i.e.
as prices) or indirectly (i.e. derived by prices) observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
74 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 3: REVENUE
Sales revenue
Sale of goods and commissions received
Rebates and discounts provided
Rendering of services
Total Sales Revenue
Other Revenue
Total Revenue
NOTE 4: ExPENSES
Finance costs
Bank charges
Interest expense on borrowings
Borrowing costs expensed
Interest expense on Redeemable Preference Shares
Impairment losses
Property, plant and equipment
Goodwill
Lease premiums
2015
$ ‘000
709,572
(12,380)
29,837
727,029
9,192
736,221
2014
$ ‘000
649,862
(12,303)
61,516
699,075
12,044
711,119
2015
$ ‘000
2014
$ ‘000
89
18,275
2,448
83
20,895
8,754
6,949
-
15,703
67
17,004
7,849
3,551
28,471
4,530
10,899
280
15,709
(a)
(b)
(a) Impairment of property, plant and equipment
The above impairment loss for the financial year 2015 is attributed to the Produce segment and relates to the downsizing of the grape
category and the optimisation of the supply network in the mushroom category in financial year 2014. Refer to Note 14.
(b) Impairment of goodwill
There has been a write-off of the remaining carrying value of grape category goodwill during the financial year 2015 relating to the
downsizing of the business. Refer to Note 15.
Employee expenses
Salaries, contractors and wages (including on costs)
Superannuation contribution
Annual leave, sick leave, rostered day off and long service leave expense
Share-based payments expense
Other employee expenses
2015
$ ‘000
217,740
12,399
7,569
1,310
4,142
243,160
2014
$ ‘000
223,745
11,743
7,850
411
6,010
249,759
Costa Annual Report 2015 75
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 4: ExPENSES (CONTINuED)
Other expenses
Repair and maintenance expenses
Freight expenses
Legals and consulting expenditure
Insurance
Other
2015
$ ‘000
2014
$ ‘000
13,656
33,252
9,797
5,136
50,936
112,777
12,029
31,096
8,504
6,597
47,185
105,411
Other expenses includes telecommunications, marketing, packing and handling charges and general administration expenditure.
*Over provision relates to research and development tax credits for historical periods claimed in financial year 2015.
(b) Prima facie tax payable
The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows:
NOTE 5: INCOME TAX
(a) Components of tax expense
Current tax
Deferred tax
Over provision in prior years*
Profit before income tax
Prima facie income tax expense on profit before income tax at 30.0%
Add tax effect of:
- non-deductible entertainment
- goodwill impairment loss
- share-based payments expense
- other non-deductible items
Less tax effect of:
- deferred tax assets not previously recognised
- research and development tax credits
- non-assessable foreign income
- over provision in prior years
Income tax expense attributable to profit / (loss)
76 Costa Annual Report 2015
2015
$ ‘000
2014
$ ‘000
3,296
(773)
(1,770)
753
5,330
1,599
35
2,085
394
25
2,539
2,101
3,196
(277)
5,020
3,130
939
64
3,354
123
2,747
6,288
-
750
865
1,770
3,385
747
-
1,183
277
2,207
753
5,020
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 5: INCOME TAx (CONTINuED)
(c) Current tax
Current tax liability relates to the following:
Current tax liabilities / (assets)
Opening balance
Current year tax expense
Tax (payments) / refunds
Over provisions
Closing balance
(d) Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Property, plant and equipment
Provisions
Trade and other payables
Black hole deductions (section 40 880)
Borrowings
Other
Derivative financial liabilities
Deferred tax liabilities
The balance comprises:
Trade and other receivables
Biological assets
Intangible assets
Derivative financial assets
Net deferred tax assets
(e) Deferred tax expense included in income tax comprises
Decrease in deferred tax assets
(Decrease) / increase in deferred tax liabilities
The Group’s franking account balance as at 28 June 2015 is $17,292,964 (2014: $15,203,001).
2015
$ ‘000
2014
$ ‘000
2,101
3,296
(2,064)
(1,770)
1,563
1,550
5,357
3,167
2,574
725
60
1,043
14,476
68
6,667
2,306
44
9,085
5,391
(2,188)
1,416
(773)
(489)
2,101
766
(277)
2,101
(1,077)
5,689
2,781
2,856
914
64
1,060
12,287
46
5,612
1,967
44
7,669
4,618
177
3,018
3,195
Costa Annual Report 2015 77
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 6: SEGMENT INFORMATION
(a) Basis for segmentation
The Group has three reportable segments, as described below, based on the internal reports that are reviewed and used by the Chief
Executive Officer (the chief operating decision maker) in assessing performance and in determining the allocation of resources. The
following summary describes the operations in each of the Group’s reportable segments:
Produce
The Produce segment operates in four core categories: berries, mushrooms, glasshouse grown tomatoes and citrus. These operations
are vertically integrated in terms of farming, packing and marketing, with the primary domestic sales channel being the major Australian
food retailers.
Costa Farms & Logistics (“CF&L”)
The CF&L segment incorporates interrelated logistics, wholesale avocado marketing and banana farming and marketing operations
within Australia. These categories share common infrastructure, such as warehousing and ripening facilities, and are predominantly
trading and services focused.
International
The International segment comprises royalty income from licensing of Costa’s blueberry varietals in Australia, the Americas and Africa,
and international berry farming operations in Morocco and China.
(b) Information about reportable segments
Performance is measured based on segment EBITDA before SGARA, as included in the internal management reports that are reviewed
by the Group’s Chief Executive Officer (CEO). Group financing costs and income taxes are managed at the Group level and are not
allocated to operating segments. The information presented to the CEO does not report on segment assets and liabilities and as such is
not presented in this report. It is the Group’s policy that business support costs that are not directly attributable to a specific segment
are allocated to the Produce segment, which is the Group’s largest reportable segment, on the basis that it utilises the majority of these
resources. Inter-segment revenue is eliminated on consolidation, however, is shown within the segment revenue to reflect segment
level performance. Inter-segment transactions are on commercial terms. Information regarding the results of each reportable segment is
included on the next page.
78 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 6: SEGMENT INFORMATION (CONTINuED)
2015
Revenue
External customers
Inter-segment
Segment revenue
Produce
CF&L
International
Adjustments
and
eliminations
498,155
228,874
-
-
37,129
535,284
2,651
-
231,525
-
(39,780)
(39,780)
Total
727,029
-
727,029
EBITDA before SGARA
51,247
9,034
5,060
-
65,341
2014
Revenue
External customers
Inter-segment
Segment revenue
Produce
CF&L
International
Adjustments
and
eliminations
Total
451,857
247,218
-
-
699,075
45,672
497,529
2,050
-
249,268
-
(47,722)
(47,722)
-
699,075
EBITDA before SGARA
47,039
12,582
4,915
-
64,536
The Group principally supplies fresh produce to the major supermarkets in Australia, including Coles, Woolworths, ALDI and IGA,
which collectively comprise approximately 70% of the Group’s produce sales in the 2015 financial year (2014: 67%).
(c) Reconciliation of segment EBITDA before SGARA to profit before tax
EBITDA before SGARA for reportable segments
IPO and other transaction costs
(Loss) / gain on fair value of biological assets
Depreciation and amortisation
Impairment losses
Profit/(loss) on sale of assets
Loss on sale on investments
Interest income
Finance costs
Gain on fair value of derivatives
Income tax expense
Profit/(loss) for the year
Notes:
(i) IPO transaction costs have not been allocated to reportable segments.
(ii) Fair value movements on derivatives relating to the existing finance facility.
Notes
2015
$ ‘000
2014
$ ‘000
(i)
(ii)
65,341
(5,447)
(252)
(18,481)
(15,703)
500
-
209
(20,895)
58
(753)
4,577
64,536
-
4,972
(15,850)
(15,709)
(1,202)
(5,605)
248
(28,471)
211
(5,020)
(1,890)
Costa Annual Report 2015 79
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 7: EARNINGS PER SHARE
2015
Cents per share
2014
Cents per share
Basic EPS
Basic EPS (cents) based on net profit / (loss) attributable to ordinary shareholders of Costa
Group Holdings Limited
2.35
(0.97)
Diluted EPS
Diluted EPS (cents) based on net profit / (loss) attributable to ordinary shareholders of
Costa Group Holdings Limited
Weighted average number of shares (in thousands)
Weighted average number of ordinary shares on issue used in the calculation of basic EPS
Effect of potentially dilutive securities
Redeemable Preference Shares
Equity-settled share options*
Weighted average number of ordinary shares on issue used in the calculation of diluted EPS
1.86
(0.77)
Number
Number
194,600
194,600
45,000
7,649
247,249
45,000
6,430
246,030
* The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options was based on
the Final Price of the IPO.
Earnings reconciliation
Basic EPS
Net profit/(loss) attributable to owners of Costa Group Holdings Ltd
4,577
(1,890)
Diluted EPS
Earnings used in calculating basic EPS
Interest expense on redeemable preference shares (net of tax)
Net profit/(loss) attributable to owners of Costa Group Holdings Ltd (diluted)
4,577
58
4,635
(1,890)
54
(1,836)
Earnings per share
Under AASB 133 – Earnings per Share, basic earnings per share is computed using the weighted average number of shares outstanding
during the period. Diluted earnings per share is computed using the weighted average number of shares outstanding during the period
plus the dilutive effect of redeemable preference shares and share options outstanding during the period.
80 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 8: CASH AND CASH EQuIVALENTS
Cash at bank
Cash on deposit
Cash at hand
All cash on deposit has maturity of less than 90 days.
(a) Reconciliation of profit after tax to net cash flows from operating activities
Profit/(loss) for the year
Non-cash adjustments to reconcile profit before tax to net cash flows:
Depreciation and amortisation
(Profit)/loss on sale of assets
Impairment losses
Loss / (gain) on fair value adjustments - biological assets
Gain on fair value of derivatives
Share-based payments expense
Loss / (gain) on fair value of assets
Loss on sale of investments
Share of profit of equity-accounted investees
Change in working capital and tax balances:
Decrease in interest payable
(Increase) / decrease in inventories
Decrease / (increase) in receivables
(Increase) / decrease in other assets
Decrease in payables
(Decrease) / increase in provisions
(Increase) / decrease in deferred taxes
(Decrease) / increase in current tax payables
Net cash generated from operating activities
2015
$ ‘000
2014
$ ‘000
9,435
43
26
9,504
21,150
5,055
26
26,231
2015
$ ‘000
2014
$ ‘000
4,577
(1,890)
18,481
(500)
15,703
252
(58)
1,310
2
-
(9,515)
30,252
83
(1,430)
4,687
(3,620)
423
(1,108)
(773)
(538)
27,976
15,850
1,202
15,709
(4,972)
(211)
411
(8)
5,605
(8,566)
23,130
11,499
95
(13,080)
127
9,493
2,291
3,196
2,590
39,341
Costa Annual Report 2015 81
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 9: RECEIVABLES
CURRENT
Trade debtors
Less: Allowance for impairment losses on trade receivables
Other receivables
NON CURRENT
Other receivables
(i) Other receivables comprises GST receivable across the Group and accrued income.
33c
(i)
2015
$ ‘000
2014
$ ‘000
51,248
(1,009)
50,239
12,312
62,551
125
125
56,360
(1,083)
55,277
15,455
70,732
225
225
NOTE 10: INVENTORIES
CURRENT
At cost
Raw materials
Finished goods
NOTE 11: OTHER FINANCIAL ASSETS
NON CURRENT
Loans to related party associates
Interest rate swap-option*
Available for sale financial assets
Shares in other corporations
* Refer to Note 19 for disclosure on fair valuation technique of this asset.
82 Costa Annual Report 2015
2015
$ ‘000
2014
$ ‘000
10,706
5,418
16,124
7,212
6,735
13,947
2015
$ ‘000
2014
$ ‘000
1,631
8
397
2,036
1,631
147
394
2,172
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 12: BIOLOGICAL ASSETS
CURRENT
Fruit and vegetables - at fair value
Vegetables - at cost
NON CURRENT
Bearer plants - at fair value
Total biological assets
(a) Reconciliation of charges in carrying amount of biological assets
Opening balance
(Loss) / gain arising from changes in fair value
Increases due to purchases
Decreases due to harvest
Closing balance
2015
$ ‘000
2014
$ ‘000
25,512
6,059
31,571
21,242
6,812
28,054
4,305
6,009
35,876
34,063
34,063
(252)
146,152
(144,087)
35,876
28,873
4,972
126,136
(125,918)
34,063
(b) measurement of fair values
Fair value hierarchy
The fair value measurements for the Group’s hanging crop and long term biological assets have been categorised as Level 3 fair values
based on the inputs to the valuation techniques used, which are not based on observable market data.
Valuation techniques and significant unobservable inputs
The following table provides a description of the various biological asset types, shows the valuation techniques used in measuring
Level 3 fair values, as well as the significant unobservable inputs used.
Costa Annual Report 2015 83
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 12: BIOLOGICAL ASSETS (CONTINuED)
Type
Description
Valuation technique
Hanging crop
- citrus
- grapes,
- avocados
- tomatoes
- blueberries
- raspberries
- bananas
These are crops from
trees and bushes that
have an annual crop
production cycle
(9 months for banana
crops) and a reasonably
stable development
cycle.
Discounted cash flows:
The valuation model
considers the present
value of the net cash flows
expected to be generated by
the plantation. The cash flow
projections include specific
estimates for one year. The
expected net cash flows are
discounted using a risk-
adjustment factor to factor
in volatility for weather,
production and pricing.
Trees and vines
- bananas
- grapes
- blueberries
These comprise the
trees and vines planted
for the following:
- Blueberry bushes at
Rosewood (NSW),
Atherton (Qld) and
Gingin (WA).
- Banana trees at Tully
and Walkamin (Qld)
- Grape vines at
Mundubbera (Qld)
Discounted cash flows:
The valuation model
considers the present
value of the net cash flows
expected to be generated by
the plantation. The cash flow
projections include specific
estimates for one year. The
expected net cash flows are
discounted using a risk-
adjusted discount rate.
Inter-relationship
between key
unobservable inputs and
fair value measurement
The estimated fair value would
increase (decrease) if:
- the estimated fruit prices
were higher (lower);
- the estimated yields per
hectare were higher (lower);
- the estimated harvest and
transportation costs were
lower (higher); or
- the risk-adjusted discount
rates were lower (higher).
The estimated fair value would
increase (decrease) if:
- the estimated fruit prices
were higher (lower);
- the estimated yields per
hectare were higher (lower);
- the estimated harvest and
transportation costs were
lower (higher); or
- the risk-adjusted discount
rates were lower (higher).
Significant unobservable
inputs
Inclusive of:
- Estimated future crop
prices.
- Estimated cash inflows
based on forecasted
sales.
- Estimated yields per
hectare.
- Estimated harvest and
transportation costs.
- Risk adjustment factor.
- Growth rate of 2% to 3%.
Inclusive of:
- Estimated future crop
prices.
- Estimated cash inflows
based on forecasted
sales.
- Estimated yields per
hectare.
- Estimated harvest and
transportation costs.
- Risk-adjusted discount
rate (19% to 30% applied).
- Growth rate of 2% to 3%.
(c) measurement of biological assets at cost
Short lived crops (mushrooms) are measured at cost. These crops typically have a short term development cycle of less than three
months for mushrooms. The calculation of market value for these crops is based on total cost due to the inherent difficulty in
accurately determining the biological advancement percentage of the crop with such a short development cycle. As such, the cost
approach takes into account actual costs for preparation and cultivation.
(d) Risk management strategy related to biological activities
Regulatory and environmental risks
The Group is subject to laws and regulations in the various locations in which it operates. The Group has established environmental
policies and procedures aimed at compliance with local environmental and other laws.
Supply and demand risk
The Group is exposed to risks arising from fluctuations in the price and sales volume of all its fruit and vegetables. Management
performs regular industry trend analyses to project harvest volumes and pricing. Where possible, the Group manages this risk by
aligning its harvest volume to market supply and demand.
Climate and other risks
The Group’s biological assets are exposed to the risk of damage from climatic changes, diseases and other natural forces. The Group
has extensive processes in placed aimed at monitoring and mitigating these risks, including protected cropping techniques across most
crops and geographical diversification.
84 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 13: OTHER ASSETS
CURRENT
Prepayments
Other current assets
NOTE 14: PROPERTY, PLANT AND EQuIPMENT
Land and buildings at cost
Accumulated depreciation and impairment losses
2015
$ ‘000
2014
$ ‘000
6,517
-
6,517
2,743
155
2,898
2015
$ ‘000
113,791
(42,043)
71,748
2014
$ ‘000
116,844
(33,744)
83,100
Assets under Construction at cost
58,959
13,008
Plant and equipment at cost
Accumulated depreciation and impairment losses
Leased plant and equipment at cost
Accumulated depreciation and impairment losses
Improvements at cost
Accumulated depreciation and impairment losses
166,164
(90,072)
76,092
1,728
(1,714)
14
13,394
(4,148)
9,246
143,924
(80,317)
63,607
1,728
(1,591)
137
8,563
(3,213)
5,350
Total property, plant and equipment
216,059
165,202
Costa Annual Report 2015 85
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 14: PROPERTY, PLANT AND EQuIPMENT (CONTINuED)
(a) Reconciliations
Reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.
2015
$ ‘000
2014
$ ‘000
Land and buildings
Opening carrying amount
Additions
Disposals
Depreciation expense
Impairment losses
Transfers, reclassifications and adjustments
Closing carrying amount
Assets Under Construction
Opening carrying amount
Additions
Transfers, reclassifications and adjustments
Closing carrying amount
Plant and equipment
Opening carrying amount
Additions
Disposals
Depreciation expense
Impairment losses
Transfers, reclassifications and adjustments
Closing carrying amount
Leased plant and equipment
Opening carrying amount
Depreciation expense
Closing carrying amount
Leasehold Improvements
Opening carrying amount
Additions
Disposals
Depreciation expense
Transfers, reclassifications and adjustments
Closing carrying amount
86 Costa Annual Report 2015
83,100
922
(16)
(4,835)
(5,800)
(1,623)
71,748
13,008
60,893
(14,942)
58,959
63,607
17,827
(518)
(12,296)
(2,954)
10,426
76,092
137
(123)
14
5,350
1,121
(3)
(346)
3,124
9,246
86,829
572
-
(5,047)
(2,634)
3,380
83,100
6,650
13,779
(7,421)
13,008
71,410
10,470
(10,274)
(9,759)
(1,897)
3,657
63,607
315
(178)
137
5,373
7
-
(308)
278
5,350
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 14: PROPERTY, PLANT AND EQuIPMENT (CONTINuED)
Total property, plant and equipment
Opening carrying amount
Additions
Disposals
Depreciation expense
Impairment losses
Transfers, reclassifications and adjustments
Closing carrying amount
2015
$ ‘000
2014
$ ‘000
165,202
80,763
(537)
(17,600)
(8,754)
(3,015)
216,059
170,577
24,828
(10,274)
(15,292)
(4,531)
(106)
165,202
(b) Property, plant and equipment pledged as security
All property, plant and equipment (excluding property in Innisfail Holdings Pty Ltd) across Costa Group Holdings Ltd has been pledged
as security under a fixed and floating agreement with the Group’s financiers.
(c) Impairment loss
Impairment losses in relation to property, plant and equipment are recorded in impairment losses within the statement of profit or
loss and other comprehensive income. The recoverable amount of these assets was determined based on their fair value less costs of
disposal (“FVLCOD”). Both the Grape sites, St. George and Menindee were closed as part of the downsizing of the Grape category, while
the Mushroom sites, Mittagong and Huon Valley were closed as part of the optimisation of the Mushroom category’s supply network.
Each of the abovementioned sites have been written down to their FVLCOD and are included within the Produce segment. Accordingly,
St. George, Menindee and Huon Valley have been written down to a nil carrying value, and Mittagong to its FVLCOD of $1.95m.
(d) Capital commitments
As at 28 June 2015, the Group has capital commitments amounting to $16,636,525 (2014: Nil) in relation to the purchase of property,
plant and equipment, which are contracted for but not provided for.
NOTE 15: INTANGIBLE ASSETS
Goodwill at cost less impairment losses
Capitalised software costs
Accumulated amortisation and impairment losses
Brandnames at cost
Lease premiums at cost
Accumulated amortisation and impairment losses
Water rights at cost
Total intangible assets
2015
$ ‘000
2014
$ ‘000
131,285
138,258
8,457
(1,636)
6,821
1,730
1,665
(643)
1,022
1,007
7,947
(2,324)
5,623
1,730
1,665
(643)
1,022
3,176
141,865
149,809
Costa Annual Report 2015 87
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 15: INTANGIBLE ASSETS (CONTINuED)
(a) Reconciliation
Reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.
Goodwill
Opening balance
Impairment losses
Transfers, reclassifications and adjustments
Closing balance
Capitalised software costs
Opening balance
Additions
Amortisation expense
Disposals
Transfers, reclassifications and adjustments
Closing balance
Brandnames
2015
$ ‘000
2014
$ ‘000
138,258
(6,949)
(24)
131,285
5,623
2,071
(881)
-
8
6,821
149,157
(10,899)
-
138,258
4,311
2,091
(558)
(249)
28
5,623
Opening balance / closing balance
1,730
1,730
Lease premiums
Opening balance
Impairment losses
Closing balance
Water Rights
Opening balance
Additions
Revaluation of water rights
Transfers, reclassifications and adjustments
Closing balance
1,022
-
1,022
3,176
146
-
(2,315)
1,007
1,302
(280)
1,022
5,374
-
-
(2,198)
3,176
Amortisation expense in relation to intangible assets is included within depreciation and amortisation expenses in the statement of
profit or loss and other comprehensive income. Impairment losses in relation to intangible assets are included within impairment losses
in the statement of profit or loss and other comprehensive income.
88 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 15: INTANGIBLE ASSETS (CONTINuED)
(b) Allocation of goodwill
The allocation of goodwill across the Group’s reportable segments is provided below:
Goodwill
Carrying amount at start of year
Impairment losses for the year
Reclassification
Produce
2015
$ ‘000
CF&L
2015
$ ‘000
International
2015
$ ‘000
134,417
(6,949)
(24)
3,841
-
-
-
-
-
Total
2015
$ ‘000
138,258
(6,949)
(24)
Carrying amount at end of year
127,444
3,841
-
131,285
Goodwill
Carrying amount at start of year
Impairment losses for the year
Carrying amount at end of year
Produce
2014
$ ‘000
CF&L
2014
$ ‘000
International
2014
$ ‘000
135,337
(920)
134,417
13,820
(9,979)
3,841
-
-
-
Total
2014
$ ‘000
149,157
(10,899)
138,258
Impairment Loss
Impairment loss of $6,949,027 for the financial year 2015 recognised in the Produce segment relates to the downsizing of the grape
category.
(c) Sensitivity Analysis
Management believe that no reasonably possible changes to key assumptions, including pre-tax discount rates and terminal growth
rates, used in the determination of the recoverable amount would result in an impairment to the Group.
NOTE 16: PAYABLES
CURRENT
Unsecured liabilities
Trade creditors
Sundry creditors and accruals
2015
$ ‘000
2014
$ ‘000
29,909
44,586
74,495
34,677
37,451
72,128
Costa Annual Report 2015 89
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 17: BORROWINGS AND REDEEMABLE PREFERENCE SHARES
CURRENT
Secured liabilities
Bank loans
Hire purchase liability
NON CURRENT
Secured liabilities
Bank loans
Redeemable Preference Shares
2015
$ ‘000
2014
$ ‘000
4,884
1
4,885
-
6
6
228,004
1,119
229,123
209,771
1,036
210,807
(a)
(a)
(b)
(a) Terms and conditions and assets pledging as security relating to the above financial instruments
1) Secured lease and hire purchase liabilities are secured by a charge over the assets.
2) Details of the key terms and conditions of the bank facilities are as follows:
•
•
•
•
The term of the bank facility is five years from 30 April 2014.
The nominal rate for the facility is a floating cash rate plus a margin dependant on the level of leverage.
Lending covenants include Interest Cover Ratio, Total Gearing Ratio, Debt Service Cover Ratio and maximum limit for capital
expenditure.
A requirement to hold interest rate swap facilities to fix interest rates on a minimum of 75% of drawn-down debt (Facility A
and B) at each reporting period until 30 April 2017 and 50% for the remainder of the facility. Total bank facilities with interest
rate swaps at 28 June 2015 are $163,500,000.
3) The facility stipulates minimum loan repayments in each financial year, with a minimum debt repayment of $7 million for the 12
months ending 26 June 2016.
4) The bank facilities are secured by cross deeds of covenant between mortgage debentures over all assets of the Group.
The Group refinanced its borrowings under a new banking facility post year-end. Refer to Note 27 for further details.
90 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 17: BORROWINGS AND REDEEMABLE PREFERENCE SHARES (CONTINuED)
(b) Redeemable Preference Shares
Redeemable Preference Shares are subject to the conditions described in Note 20.
Redemption terms are as follows:
Prior to the maturity date, a holder of Redeemable Preference Shares (“RPS”) may elect for the Group to redeem some or all of its
RPS by providing notice to the Group where an exit event is reasonably anticipated. On and from the redemption date, all rights and
restrictions attaching to the RPS redeemed will no longer have effect, upon payment in full of the redemption amount. The redemption
amount for each RPS is the sum of:
(a)
(b)
the greater of the outstanding amount for that RPS and the notional conversion amount for that RPS as at the redemption
date; and
the unpaid dividend amount for that RPS, as at (and excluding) the redemption date.
Conversion terms are as follows:
A holder of RPS may convert any of its RPS ordinary shares at any time, including on an exit event or insolvency event, or maturity by
providing notice to the Group at least 5 business days before the conversion date. Upon conversion, each RPS will automatically cease
to have the rights attaching to a RPS and will have the rights and entitlements of an ordinary share of the relevant class for that holder.
RPS ordinary shares will be converted at a 1:1 ratio with the Group’s ordinary shares.
The RPS were converted to ordinary shares post year-end. Refer to Note 27 for further details.
Costa Annual Report 2015 91
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 18: PROVISIONS
CURRENT
Employee benefits
Onerous leases
Restructuring and other
NON CURRENT
Employee benefits
(a) Aggregate employee benefits liability
These consist of provisions for annual leave and long service leave.
2015
$ ‘000
2014
$ ‘000
(a)
(c)
(d)
12,452
908
123
13,483
10,840
-
2,077
12,917
(a)
3,290
4,964
15,742
15,804
(b) Reconciliations
Reconciliation of the carrying amounts of provisions at the beginning and end of the current financial year:
Employee benefits
Opening balance
Amounts used
Additional amounts recognised
Closing balance
Restructuring and other
Opening balance
Amounts used
Additional amounts recognised
Closing balance
15,804
(7,299)
7,237
15,742
2,077
(1,968)
14
123
15,589
(6,597)
6,812
15,804
-
-
2,077
2,077
(c) Onerous leases
As part of the Group’s decision to downsize its growing exposure in the grape category, Costa ceased farming operations on a leased
property adjacent to its Mundubbera grape farm in January 2015. The expected payout costs associated with the lease have now been
provided for. Additionally, the Group provided for onerous leases for equipment associated with this farm.
(d) Restructuring
Estimated restructuring cost mainly include employee termination benefits.
(e) Change in discount rates
For the current year ended 28 June 2015; the Group has adopted a high quality corporate bond rate as the discount rate for the
measurement of employee benefits. This has reduced the provision for employee entitlement liabilities by $0.2m.
92 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 19: DERIVATIVE FINANCIAL INSTRUMENTS
CURRENT
Forward foreign currency contracts
NON CURRENT
Interest rate swaps
measurement of fair values
2015
$ ‘000
2014
$ ‘000
-
315
3,337
3,337
3,220
3,535
The fair value of the financial assets and financial liabilities is the amount at which the asset could be sold or the liability transferred
in a current transaction between market participants, other than in a forced or liquidation sale. The financial liabilities above and the
interest rate swap option disclosed in Note 11 are the only financials assets and liabilities of the Group that are measured at fair value.
The carrying amounts of financial assets and financial liabilities not measured at fair value are a reasonable approximation of fair value.
Fair value hierarchy
When measuring the fair values of financial assets and financial liabilities, the Group uses market observable data for identical assets or
liabilities, which are Level 2 with reference to the AASB 13 Fair Value Hierarchy. The fair values of the derivative financial instruments are
based on mark-to-market valuations.
Costa Annual Report 2015 93
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 20: SHARE CAPITAL
Issued and paid up capital
194,600,012 $1 ordinary shares
Redeemable Preference Shares
(a) Ordinary shares
Opening balance
Shares issued
At reporting date
(b) Redeemable Preference Shares
2015
$ ‘000
2014
$ ‘000
(a)
(b)
194,600
43,964
238,564
194,600
43,964
238,564
2015
2014
Number ‘000
$ ‘000 Number ‘000
$ ‘000
194,600
-
194,600
194,600
194,600
-
-
194,600
194,600
194,600
-
194,600
Opening balance
45,000
43,964
-
-
Extinguishment of financial liability
-
-
45,000
43,964
At reporting date
45,000
43,964
45,000
43,964
Rights of each type of share
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares
held.
At shareholders meetings, each ordinary share is entitled to one vote when a poll is called; otherwise each shareholder has one vote on
a show of hands.
Redeemable Preference Shares are subject to the conditions described below:
•
•
•
•
Redeemable Preference Shares do not entitle the holder to vote at a general meeting of the Company. Voting rights on
conversion to ordinary shares are restricted until an insolvency event occurs.
Redeemable Preference Shares allow the holder to receive cumulate fixed dividends, where the fixed dividend rate is 8.0%
per annum, accruing daily and compounding quarterly. They are also entitled to non-fixed dividends that rank equally with
ordinary shares with reference to the equivalent dividends declared with respect to ordinary shares.
Payment of any dividend is subject to the directors’ declaring or resolving to pay a dividend, so long as the payment does
not breach the Corporations Act provision, the payment is permitted by the Group’s finance facilities and the Group is not
insolvent immediately before or after the payment.
The Redeemable Preference Shares rank junior to all secured and unsecured debt of the Company but have priority over
ordinary shares.
NOTE 21: PROFIT RESERVE
The profit reserve comprises the transfer of net profit for the year and characterises profits available for distribution as dividends in
future years. The profit reserve balance as at balance sheet date in thousands is $4,577 (2014: Nil).
94 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 22: SHARE-BASED PAYMENTS
Share-based payments reserve
2015
$ ‘000
2014
$ ‘000
1,759
449
The share-based payments reserve is used to record the fair value of shares or equity-settled share-based payment options issued to
employees.
Share-Based Payment Plan - Share Option Plan
The Group continued to offer equity settled share based payments via employee participation in long term incentive schemes as part
of the remuneration packages for the key management personnel and executives of the Company through the establishment of a Share
Option Plan (“Option Plan”).
A Shareholders Deed entered into by the shareholders of Costa Group Holdings Ltd allow the issuance of options under the Option
Plan representing up to 10% of the ordinary share capital of Costa Group Holdings Ltd. Eligibility for the Option Plan is determined at
the discretion of the Board. Any shares issued pursuant to the Option Plan have no voting rights.
During the financial year 2015, 2,455,000 (2014: 864,889) options have been granted under this Option Plan. All options granted under
this Option Plan can only be exercised when the Company undertakes an Initial Public Offering. The vesting period for these options is
calculated to be from grant date to when the Initial Public Offering is expected to occur.
measurement of Fair Values
The fair value of the options issued under this Option Plan was measured on using a Black-Scholes pricing model. The inputs used in the
measurement of the fair values at grant date of the options were as follows:
Number of options issued
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividend yield
Risk-free rate (based on the Australian bank bill swap rate)
Senior management
Non-executive
Directors
2015
2014
2015
2,005,000
$0.194
$ 1.29
$ 1.45
28.43%
2.3 years
0%
2.67%
864,889
$ 0.218
$ 1.20
$ 1.45
32.56%
2.9 years
0%
2.99%
450,000
$ 0.172
$ 1.29
$ 1.45
28.43%
2.0 years
0%
2.58%
Since the Company was not listed at the time of granting the above share options, the share prices are reflective of the expected
intrinsic value of the Company calculated by management at grant dates. The expected volatility has been based on an evaluation of
the historical volatility using comparable companies to the Group. The Group has accounted for the options as equity settled share
based payments.
Costa Annual Report 2015 95
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 22: SHARE-BASED PAYMENTS (CONTINuED)
Reconciliation of outstanding share options
The number and weighted average exercise prices of options under the employee share option program are as follows:
Number of
options 2015
Weighted
average exercise
price 2015
Number of
options 2014
Weighted
average exercise
price 2014
Opening balance
Granted during the year
Forfeited during the year
Closing balance
Exercisable at year end
19,216,752
2,455,000
-
21,671,752
1.45
1.45
1.45
1.45
19,027,557
864,889
(675,694)
19,216,752
1.45
1.45
1.45
1.45
-
-
-
-
The options outstanding as at 28 June 2015 had an exercise price of $1.45 (2014: $1.45). All outstanding options vested as part of the Initial
Public Offering undertaken on 24 July 2015 (refer Note 27).
96 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 23: EQuITY ACCOuNTED INVESTMENTS
(a) Details of Associates and Joint Ventures
Equity
instrument
Ownership
interest
2015
%
Ownership
interest
2014
%
Principal place
of business
and country of
incorporation
measurement
basis
Joint ventures and associates
Driscoll’s Australia Partnership
Ordinary shares
Polar Fresh Partnership
Ordinary shares
African Blue SARL
Ordinary shares
50
50
49
b) Summarised financial information for associates and joint ventures
50
50
49
Equity
Accounted
Equity
Accounted
Equity
Accounted
Victoria, Australia
Victoria, Australia
Moulay-
Bousselham,
Morocco
Reconciliation of carrying amount in joint ventures and associates:
Opening balance at 30 June 2014
Total share of profit
Dividends received by the Group
Closing balance at 28 June 2015
African
Blue SARL
$ ‘000
Polar Fresh
Partnership
$ ‘000
Driscoll’s
Australia
Partnership
$ ‘000
9,415
4,183
(1,354)
12,244
8,288
2,991
(2,745)
8,534
6,468
2,341
(2,000)
6,809
Total
$ ‘000
24,171
9,515
(6,099)
27,587
(a) African Blue SARL
In 2007, the Group entered into a joint venture to establish African Blue, a Moroccan-based grower and marketer of blueberries. The
African Blue joint venture holds an exclusive licence to grow Costa blueberry varieties in Morocco for sale worldwide (excluding
Americas). In financial year 2015, sales revenue for African Blue was $26,813,125 (2014: $18,381,685), and net assets were $19,375,918 (2014:
$13,682,019).
(b) Polar Fresh Partnership
The Polar Fresh Partnership is a provider of cold storage, warehousing and distribution solutions. Polar Fresh Partnership operates
three cold storage sites throughout Australia. In financial year 2015, sales revenue for the Polar Fresh Partnership was $7,175,041 (2014:
$6,717,835), and net assets were $2,270,072 (2014: $1,778,456).
(c) Driscoll’s Australia Partnership
In 2010, the Group entered into a partnership with Driscoll’s Strawberry Associates Inc. to form Driscoll’s Australia Partnership, which
is an Australian berry marketing business. The majority of the Groups’ berries grown are marketed in Australia through the Driscoll’s
brand. In financial year 2015, sales revenue for the Driscoll’s Australia Partnership was $80,416,042 (2014: $59,544,398), and net assets were
$13,850,964 (2014: $13,167,328).
Costa Annual Report 2015 97
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 24: RELATED PARTY TRANSACTIONS
(a) Transactions with associates and joint ventures
The group transacted with jointly controlled entities during the 2015 financial period as follows:
•
•
•
•
•
•
•
•
African Blue SARL - Accrual of royalty income on blueberry sales of $764,000 (2014: $538,000).
African Blue SARL - Dividends received amounting to $1,353,810 (2014: $425,000).
African Blue SARL - Other costs charged of $130,986 (2014: $100,000).
Polar Fresh Partnership - Dividends received amounting to $2,745,143 (2014: $2,484,556) and $125,000 (2014: $117,361) for
transactional and management services provided.
Polar Fresh Partnership - Receivable of $3,819 for management fees (2014: $7,639).
Driscoll’s Australia Partnership - Commission paid on sale of berries $6,340,080 (2014: $10,754,285).
Driscoll’s Australia Partnership - Sales of produce $109,126,476 (2014: $85,249,202).
Driscoll’s Australia Partnership - Receivable of $4,471,199 for sale of produce (2014: $2,047,806).
The Group has a loan to African Blue (Joint Venture). This is to fund working capital and was incurred in prior years. The balance as at 28
June 2015 is AUD $1,630,585 (2014: AUD $1,630,585).
(b) Transactions with key management personnel of the entity or its parent and their personally related entities
Mr Neil Chatfield (Director)*
•
A consultant for Costa Asset Management Pty Ltd, a company associated with Costa Group Holdings Ltd. No fees or costs
have been paid directly to Neil Chatfield by Costa Group Holdings Ltd.
Mr Frank Costa (Director)*
•
•
•
•
Ownership interest of State Logistics Pty Ltd which provided management services to the Group totalling $600,000 (2014:
$600,000).
Ownership interest of Table Grape Growers Australia which provided advisory services of AUD $Nil (2014: $1,500,000).
Following completion of the IPO, no payments will be made going forward.
Indirect ownership interest in Vitalharvest Ltd which is the landlord for the three citrus and four berry farms managed by the
Group. Refer to Note 24(c) for transactions with this entity.
Costs incurred by Costa Group on behalf of related parties associated with the Costa family for travel, telecommunications,
salaries and sponsorship for the year ended 28 June 2015 of AUD $433,041 (2014: AUD $426,127).
Mr Harry Debney (Director)*
•
•
•
Director of Polar Fresh Cold Chain Services Pty Ltd (Polar Fresh Partnership) which is an associate of the Group (refer to Note
23 for details). No payments were made in connection with this position.
Director of Driscoll’s Australia Pty Ltd (Driscolls Australia Partnership) which is a joint venture of the Group (refer to Note 23
for details). No payments were made in connection with this position.
Representative of Blueberry Investments Morocco Pty Ltd (a member of the Group) on the Board of African Blue SA which is
an associate of the Group (refer to Note 23 for details).
98 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 24: RELATED PARTY TRANSACTIONS (CONTINuED)
(b) Transactions with key management personnel of the entity or its parent and their personally related entities (continued)
Mr Kevin Schwartz (Director)*
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD
$400,000 (2014: AUD $500,000), advisory fees of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS
Holdings B.V for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630).
Mr Bruno Ferrari Garcia de Alba (Director)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD
$400,000 (2014: AUD $500,000), advisory fees of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS
Holdings B.V for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630). Salary paid directly to Bruno Ferrari Garcia
de Alba of AUD $100,000 (2014: AUD $50,000).
Mr Robert Costa (Director)
•
•
•
•
•
•
•
Director and ownership interest of State Logistics Pty Ltd which provided management services to the Group totalling
$600,000 (2014: $600,000).
Director and ownership interest of Table Grape Growers Australia which provided advisory services of AUD $Nil (2014:
$1,500,000).
Director and ownership interest in Vitalharvest Ltd which is the landlord for the three citrus and four berry farms managed by
the Group. Refer to Note 24(c) for transactions with this entity.
Director of Polar Fresh Cold Chain Services Pty Ltd (Polar Fresh Partnership) which is an associate of the Group (refer to Note
23 for details).
Director and ownership interest of Costa Asset Management Pty Ltd (formerly Baxter Hill Pty Ltd) whereby occupancy
expenditure for the Group totalling $5,966,443 (2014: $6,175,321) was incurred.
Director and ownership interest in STG Nominees. STG Nominees received no income (2014: $4,642,793) from entities within
the Group for equipment rental.
Costs incurred by Costa Group on behalf of related parties associated with the Costa family for travel, telecommunications,
salaries and sponsorship for the year ended 28 June 2015 of AUD $433,041 (2014: AUD $426,127).
Mr Greg Hunt (Director)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD
$400,000 (2014: AUD $500,000), advisory fees of AUD $Nil (2014: AUD $1,650,000). Salary paid directly to Greg Hunt of AUD
$100,000 (2014: AUD $50,000).
Mr Angelos Dassios (Director)
•
An employee for a company associated with P&P COS Holdings B.V. P&P COS Holdings B.V. is a 50% shareholder in Costa
Group Holdings Ltd. Payment includes provision of management services on behalf of P&P COS Holdings B.V of AUD
$400,000 (2014: AUD $500,000), advisory fees of AUD $Nil (2014: AUD $1,650,000) and travel costs reimbursed to P&P COS
Holdings B.V for the year ended 28 June 2015 of AUD $180,849 (2014: AUD $354,630).
* Following the completion of the IPO in July 2015, new arrangements will be entered into with these related parties.
Costa Annual Report 2015 99
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 24: RELATED PARTY TRANSACTIONS (CONTINuED)
(b) Transactions with key management personnel of the entity or its parent and their personally related entities (continued)
Compensation received by key management personnel of the group:
- Short-term employee benefits
- Post-employment benefits
- Long-term employee benefits
- Share-based payment benefits
2015
$ ‘000
2014
$ ‘000
3,341
65
46
742
2,739
58
36
280
4,194
3,113
(c) Transactions with other related parties
Vitalharvest Limited - Property rent expense
During the year Costa Group Holdings leased citrus and berry farms across Australia from Vitalharvest Limited. Fixed rental payments
totalled $7,961,239 (2014: $7,368,797) and variable rent payments totalled $9,086,680 (2014: $8,204,743). Refer to below for key terms and
conditions on these property leases.
(i) Vitalharvest Limited - receivables
As at 28 June 2015, the Group has a receivable of $755,214 in relation to capital expenditure to be reimbursed (2014: $59,957).
(ii) Property leases - key terms and conditions
The Group has leases on four berry and three citrus properties throughout Australia. The lease payments consist of a fixed and variable
component. The fixed component is based on 8% of Vitalharvest’s invested cost in each property, inclusive of initial acquisition cost
and subsequent capital investment. Any capital spent on expanding farms will result in an increase in the fixed rental. The variable
rental is predominantly based on 25% of earnings before interest, tax and variable rent. This includes earnings from farming, packing and
marketing profits earned through these leased farms. Under the terms of the lease, the Group is responsible for the replanting of any
existing planted areas and provides all non-fixed equipment to maintain the farms. The leases are generally 15 years in length and expire
in 2026 with an option for the Group to extend for a further 10 year period.
100 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 25: CAPITAL AND LEASE COMMITMENTS
(a) Hire purchase commitments Payable
- not later than one year
Total hire purchase liability
The above liability relates to the hire purchase of operating plant and equipment.
(b) Operating lease commitments
Non cancellable operating leases contracted for but not capitalised in the financial statements:
Payable
- not later than one year
- later than one year and not later than five years
- later than five years
2015
$ ‘000
2014
$ ‘000
17
1
1
6
6
29,343
107,233
116,016
252,592
27,262
100,287
140,629
268,178
(c) Bank guarantees
The Group maintains bank guarantees of $8,481,174 (2014: $8,195,489).
In addition to above, bank guarantees of $2.5 million are committed in relation to a Driscoll’s overdraft facility.
NOTE 26: CONTINGENT LIABILITIES
The Group is not aware of any contingent liabilities as at 28 June 2015.
NOTE 27: EVENTS SuBSEQuENT TO REPORTING DATE
On 24 July 2015, the Group undertook an Initial Public Offering (IPO) on the Australian Securities Exchange. The purpose of the IPO was
to:
-
-
-
provide Costa with access to capital markets to pursue further growth opportunities;
pay down the Group’s existing debt; and
allow existing shareholders to realise part of their investment.
As a result of the IPO, the Group:
-
-
-
-
Issued new shares of $173.3 million;
Repaid the existing debt facility of $238.0 million and drew down $142.0 million under a new banking facility;
Disposed of existing options issued to management and directors under the legacy LTI plan, which resulted in a cash payment
of $11.9 million and acceleration of share-based payments expense $0.7 million;
Paid a dividend of $9.4 million in relation to the Redeemable Preference Shares (RPS). The RPS were subsequently converted to
ordinary shares; and
- Write-off of capitalised borrowing costs of $7.9 million.
Costa Annual Report 2015 101
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 28: ASSETS CLASSIFIED AS HELD FOR SALE
Water Licences
Property, plant and equipment
2015
$ ‘000
2014
$ ‘000
(a)
(b)
2,315
1,927
4,242
4,204
-
4,204
(a) The Group holds Water access licenses (water rights) across various locations in Australia, in which the following two are classified as
assets held for sale:
-
-
St George (Western Queensland)
Darling River, Menindee (New South Wales)
Management intends to sell all of these rights to external parties and are actively marketing the assets in accordance with the closure of
these farms during the financial period.
(b) The Group also has property, plant and equipment held for sale from Mushroom sites which are no longer operational.
NOTE 29: DEED OF CROSS GUARANTEE
The wholly owned subsidiaries listed in Note 31 (excluding Hillston Investments Pty Ltd and Innisfail Holdings Pty Ltd) are parties to a
deed of cross guarantee under which each company guarantees the debts of the others.
Pursuant to ASIC Class Order 98/1418 (as amended), these wholly owned subsidiaries listed in Note 31 (excluding Hillston Investments
Pty Ltd and Innisfail Holdings Pty Ltd) are relieved from the Corporations Act requirements to prepare a financial report and director’s
report.
A consolidated statement of profit or loss and other comprehensive income and a consolidated statement of financial position for the
year ended 28 June 2015, comprising the above listed parties to the deed which represent the “closed group”, are set out below:
(a) Consolidated Statement of Profit or Loss and Other Comprehensive Income of the closed group
2015
$ ‘000
2014
$ ‘000
736,221
(740,376)
(4,155)
711,119
(708,989)
2,130
(753)
(5,020)
(4,908)
(2,890)
Revenue
Less: Expense
(Loss) / Profit before income tax expense
Income tax expense
Total loss / total comprehensive loss for the year
102 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 29: DEED OF CROSS GuARANTEE (CONTINuED)
(b) Consolidated Statement of Financial Position of the closed group
Notes
2015
$ ‘000
2014
$ ‘000
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Receivables
Other financial assets
Biological assets
Equity accounted investments
Intangible assets
Deferred tax assets
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Provisions
Derivative financial liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Redeemable convertible preference shares
Provisions
Derivative financial liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
9,504
62,201
16,124
31,571
6,517
4,242
130,159
125
2,036
4,305
27,587
141,865
5,391
216,059
397,368
527,527
74,495
4,885
13,483
-
26,231
70,412
13,947
28,054
2,898
4,204
145,746
225
2,172
6,009
24,171
149,809
4,618
165,202
352,206
497,952
72,128
6
12,917
315
1,563
2,101
94,426
87,467
228,004
209,771
1,119
3,290
3,337
235,750
330,176
197,351
1,036
4,964
3,220
218,991
306,458
191,494
Costa Annual Report 2015 103
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 29: DEED OF CROSS GuARANTEE (CONTINuED)
Notes
2015
$ ‘000
2014
$ ‘000
EQuITY
Contributed equity
Share based payment reserve
Accumulated losses
Total equity
NOTE 30: PARENT ENTITY DISCLOSURES
(a) Summarised presentation of the parent entity, Costa Group Holdings Ltd financial statements
Assets
Current Assets
Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Reserves
Accumulated losses
Total Equity
(b) Summarised statement of comprehensive income
Loss for the period
Total comprehensive loss for the year
226,975
226,975
1,759
449
(31,383)
197,351
(35,930)
191,494
2015
$ ‘000
2014
$ ‘000
211
264,944
265,155
2,017
39,803
41,820
124
294,691
294,815
2,266
68,372
70,638
223,335
224,177
238,564
1,759
(16,988)
223,335
238,564
449
(14,836)
224,177
(2,152)
(2,152)
(3,217)
(3,217)
(c) Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of certain
subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the Deed are disclosed in Note 29.
104 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 31: LIST OF SUBSIDIARIES
The following are the Group’s significant subsidiaries:
Subsidiaries of Costa Group Holdings Ltd:
Costa Group Holdings (Finance) Pty Ltd
Costa's Pty Ltd
ACN 151 702 251 Pty Ltd
Costa Exchange Holdings Pty Ltd
Costa Asia Pty Ltd (formerly ACN 125 158 741 Pty Ltd)
Grape Exchange Management Euston Pty Ltd
North Fresh Pty Ltd
Vinefresh Pty Ltd
Southern Cross Overseas Pty Ltd
CostaExchange Pty Ltd (formerly CostaExchange Ltd)
Costa Berry Holdings Pty Ltd
Costa Berry Pty Ltd
Blueberry Investments Morocco Pty Ltd
Raspberry Fresh Pty Ltd
CBSP Pty Ltd
FruitExpress Pty Ltd
ACN 057 689 246 Pty Ltd
Exchange Innisfail Pty Ltd
Freshexchange Pty Ltd
Yandilla Park Pty Ltd
East Africa Coffee Plantations Pty Ltd
AgriExchange Pty Ltd
Vitor Marketing Pty Ltd
AgriExchange Farm Management Pty Ltd
Mushroom Holdings Exchange Pty Ltd
Mushroom Exchange Pty Ltd
Costa Fresh Logistics Pty Ltd
Tomato Exchange Pty Ltd
Grape Exchange Farming Pty Ltd
Grape Exchange Pty Ltd
Grape Exchange Farming Mundubbera Pty Ltd
Costa Group Finance Pty Ltd
Costa Farms Pty Ltd
Costa Logistics Pty Ltd
Polford Nominees Pty Ltd
AgriExchange Murtho Pty Ltd
Hillston Investments Pty Ltd
Banana Exchange Pty Ltd
Innisfail Holdings Pty Ltd
Exchange Brisbane Pty Ltd
Costa Asia Ltd
Costa China (Hong Kong) Ltd
Country of
incorporation
Ownership interest
held by the group
2015
%
2014
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Hong Kong
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
Costa Annual Report 2015 105
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 32: AUDITOR’S REMUNERATION
Audit and review services provided by KPmG
Audit and review of financial reports
Other services provided by KPmG
Taxation compliance and other taxation advisory services (including R&D)
Other assurance services (including IPO services)
Other services (including IPO services)
2015
$
2014
$
245,700
203,000
277,030
109,160
785,000
60,000
575,230
14,500
1,637,260
183,660
Total Remuneration of KPmG Australia
1,882,960
386,660
Other services provided by Pitcher Partners
Taxation compliance and other taxation advisory services
-
129,589
106 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the
fair value hierarchy. It does not include fair value information for financial assets and liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
Financial assets
Loans and receivables
Current receivables
Cash and cash equivalents
Loans to related party associates
Available for sale
Shares in other corporations
Designated at fair value
Interest rate swap-option
Financial liabilities
Designated at fair value
Interest rate swaps
Forward exchange contracts
Other financial liabilities not measured at fair value
Payables
Bank loans
Hire purchase liabilities
Redeemable preference shares (liability component)
Fair value
hierarchy
2015
$ ‘000
2014
$ ‘000
-
-
-
Level 2
Level 2
62,551
9,504
1,631
73,686
397
397
8
8
Level 2
Level 2
3,337
-
-
Level 2
Level 2
Level 2
3,337
74,495
232,888
1
1,119
308,503
70,732
26,231
1,631
98,594
394
394
147
147
3,220
315
3,535
72,128
209,771
6
1,036
282,941
The Group’s financial risk management objective is to minimise the potential adverse effects of financial performance arising from
changes in financial risk. Financial risks are managed centrally by the Group’s finance team under the direction of the directors and the
Board’s Audit and Risk Management Committee. Management regularly monitors the Group’s exposure to any of these financial risks
and reports to the Board.
The Group’s activities expose it to a number of financial risks, including market risk (interest rate risk and foreign currency risk), liquidity
risk and credit risk.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Costa Annual Report 2015 107
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRuMENTS – FAIR VALuES AND RISk MANAGEMENT (CONTINuED)
(a) market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial asset or financial liability will change as a result of
changes in market interest rates. The Group’s exposure to market interest rate risk relates primarily to its borrowings. The Group
has historically managed its cash flow interest rate risk by using floating to fixed interest rate swaps for a portion of variable rate
borrowings. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.
As at reporting date, the Group had the following financial assets and liabilities exposed to variable interest rate risk:
Variable rate instruments
Assets
Cash and cash equivalents
Derivative financial assets
Liabilities
Bank loans
Derivative financial liabilities
2015
$ ‘000
2014
$ ‘000
9,504
8
9,512
54,500
3,337
57,837
26,231
147
26,378
55,000
3,535
58,535
Net financial liabilities
48,325
32,157
Sensitivity analysis for variable rate instruments
At 28 June 2015, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant,
profit or loss would have increased/(decreased) by:
Increase of 100 basis points in interest rate
Decrease of 100 basis points in interest rate
2015
$ ‘000
2014
$ ‘000
483
(483)
322
(322)
108 Costa Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRuMENTS – FAIR VALuES AND RISk MANAGEMENT (CONTINuED)
(a) market risk (continued)
Foreign currency risk
The Group’s exposure to the risk of changes in foreign exchanges rates relates to the Group’s operating activities and investments
in foreign joint ventures. The Group imports and exports produce and is exposed to foreign exchange risk, primarily movements in
exchange rates of US dollar and Japanese Yen, and Moroccan Dirhams (“MAD”) through its investment in the African Blue joint venture.
The Group also makes purchases and capital expenditure that expose it to movements in exchange rates of US dollar and Euro. The
Group enters into forward contracts to hedge some of its exposure against foreign currency risk.
The Group’s exposure to foreign exchange risk at the end of the reporting period, expressed in Australian dollars, was as follows:
2015
Cash
Trade and other receivables
Trade and other payables
Net exposure
2014
Cash
Trade and other receivables
Trade and other payables
Net exposure
Sensitivity analysis
uSD
$ ‘000
1,720
3,417
(4)
5,133
uSD
$ ‘000
2,052
2,208
(4)
4,256
JPY
$ ‘000
7
EuR
$ ‘000
-
322
-
-
329
JPY
$ ‘000
4
(100)
(100)
EuR
$ ‘000
1
142
875
-
146
(1,108)
(232)
At 28 June 2015, had the Australian dollar weakened/strengthened by 10% against the MAD, the US dollar, the Euro and Japanese Yen,
with all other variables held constant, the impact to profit or loss and equity would be an increase/(decrease) of:
2015
mAD
$ ‘000
uSD
$ ‘000
JPY
$ ‘000
Australian Dollar Weakened by 10%
418
513
33
Australian Dollar Strengthened 10%
(418)
(513)
(33)
EuR
$ ‘000
(10)
10
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Group’s approach to managing liquidity risk is to ensure it always has sufficient
liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages its liquidity risk using a recurring planning tool, and maintaining, at all times, an appropriate minimum level of
liquidity, comprising committed, unused bank facilities and cash resources, to meet the Group’s financial obligations as and when they
fall due.
The Group manages liquidity risk by maintaining sufficient cash reserves, banking facilities and standby borrowing facilities and by
monitoring forecast and actual cash flows. As at reporting date, unused credit facilities net of bank guarantees of the Group were $75.5
million. In addition, the Group maintains an overdraft facility of $3 million.
The Group is in compliance with all undertakings under its various financial arrangements.
Costa Annual Report 2015 109
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRuMENTS – FAIR VALuES AND RISk MANAGEMENT (CONTINuED)
(b) Liquidity risk (Continued)
The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements.
Less than 6
months 6 - 12 months
1 - 5 years Over 5 years
Total
Redeemable Preference Shares
-
-
-
45,000
9,931
10,464
266,660
-
1
-
-
-
74,495
-
-
-
84,427
10,464
266,660
45,000
Forward exchange contracts
-
-
-
-
-
-
-
3,337
-
3,337
-
-
3,337
-
3,337
2015
Non-derivative financial liabilities
Bank loans
Finance lease liabilities
Trade payables
Derivative financial liabilities
Interest rate swaps
2014
Non-derivative financial liabilities
Bank loans
Less than 6
months 6 - 12 months
1 - 5 years Over 5 years
Total
9,689
9,227
267,002
-
Redeemable Preference Shares
-
-
-
45,000
Finance lease liabilities
Trade payables
Derivative financial liabilities
Interest rate swaps
Forward exchange contracts
3
3
-
-
72,128
-
-
-
81,820
9,230
267,002
45,000
-
-
3,220
-
315
315
-
-
-
-
3,220
-
110 Costa Annual Report 2015
287,055
45,000
1
74,495
406,551
285,918
45,000
6
72,128
403,052
3,220
315
3,535
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRuMENTS – FAIR VALuES AND RISk MANAGEMENT (CONTINuED)
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group.
The Group is exposed to counterparty credit risk arising from its operating activities, primarily from trade receivables. Trade receivable
balances are monitored on a weekly basis. The finance function assesses the credit quality of the customer, taking into account its
financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings and regularly
monitored by management.
The maximum exposure to credit risk is as follows:
Cash and cash equivalents
Receivables
2015
$ ‘000
2014
$ ‘000
9,504
62,676
72,180
26,231
70,957
97,188
The ageing analysis of trade receivables is set out in the table below. The credit quality of financial assets that are neither past due nor
impaired is assessed based on the application of the credit risk policies described above.
Neither past due nor impaired
Past due 1 - 30 days
Past due 31 - 60 days
Past due over 60 days
2015
$ ‘000
2014
$ ‘000
39,784
11,045
269
150
51,248
33,295
16,501
3,391
3,173
56,360
Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on
historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they
are available. Major Australian supermarkets, including Coles, Woolworths, Aldi and IGA comprise approximately 48% of the Group’s
customers at 28 June 2015.
Impairment losses on trade receivables
Trade receivables are non-interest bearing with credit terms generally settled within 14 to 60 days depending on the nature of the sales
transaction, e.g. exports settled within 60 days. An impairment loss is recognised when there is objective evidence that an individual
trade receivable is impaired. The impairment losses have been included within other expenses in the statement of profit or loss and
other comprehensive income. All trade receivables that are not impaired are expected to be received within credit terms.
Movements in the accumulated impairment losses were:
Opening balance at 30 June 2014
Impairment loss recognised
Amounts written off
Closing balance at 28 June 2015
2015
$ ‘000
2014
$ ‘000
(1,083)
(665)
739
(1,009)
(774)
(806)
497
(1,083)
9
Costa Annual Report 2015 111
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 33: FINANCIAL INSTRuMENTS – FAIR VALuES AND RISk MANAGEMENT (CONTINuED)
(d) Capital management
The primary objective of the Group’s capital management is to maintain investor, creditor and market confidence and a strong credit
rating and healthy capital ratios to support its business and maximise shareholder value. Capital includes equity attributable to the
equity holders of the parent and Redeemable Preference Shares.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
Various financial ratios and internal targets are assessed and reported to the Board on a regular basis by management to monitor and
support the key objectives as set out above. These ratios and targets include;
•
•
•
An earnings to net interest expense ratio;
A total net indebtedness to earnings ratio; and
Adjusted earnings to interest expense ratio.
NOTE 34: DIVIDENDS PAID AND PROPOSED
No dividends on ordinary shares were paid or proposed during the year (2014: NIL).
112 Costa Annual Report 2015
DIRECTORS’ DECLARATION
1.
In the opinion of the directors of Costa Group Holdings Ltd (“the Company”):
(a)
the consolidated financial report and notes 1 to 34 and the Remuneration Report 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 28 June 2015 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
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
There are reasonable grounds to believe that the Company and the Group entities identified in Note 29 will be able to meet
any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
Company and the Group entities pursuant to ASIC Class Order 98/1418.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer for the financial year ended 28 June 2015.
The directors draw attention to Note 1 to the consolidated financial report, which includes a statement of compliance with
International Financial Reporting Standards.
2.
3.
4.
Signed in accordance with a resolution of the directors:
Dated at Melbourne 24 day of September 2015.
________________________________________________
Harry Debney
Managing Director
________________________________________________
Neil Chatfield
Chairman
Costa Annual Report 2015 113
ABCD
Independent auditor’s report to the members of Costa Group Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Costa Group Holdings Limited (the
Company), which comprises the consolidated statement of financial position as at 28 June 2015,
and the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 34 comprising a summary of significant accounting policies and other
explanatory information and the Directors’ Declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the Directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether due
to fraud or error. In note 1, the Directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International, a Swiss cooperative.
Liability limited by a scheme approved under
Professional Standards Legislation.
114
ABCD
Independent auditor’s report to the members of Costa Group Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Costa Group Holdings Limited (the
Company), which comprises the consolidated statement of financial position as at 28 June 2015,
and the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 34 comprising a summary of significant accounting policies and other
explanatory information and the Directors’ Declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the Directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether due
to fraud or error. In note 1, the Directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Independence
Corporations Act 2001.
In conducting our audit, we have complied with the independence requirements of the
ABCD
Auditor’s opinion
In our opinion:
(a) the financial report of Costa Group Holdings Limited is in accordance with the Corporations
Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 28 June 2015 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 1.
Report on the remuneration report
We have audited the remuneration report included in pages 37 to 53 of the Directors’ report for
the year ended 28 June 2015. The Directors of the Company are responsible for the preparation
and presentation of the remuneration report
in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Costa Group Holdings Limited for the year ended 28
June 2015, complies with Section 300A of the Corporations Act 2001.
KPMG
Paul J McDonald
Partner
Melbourne
24 September 2015
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
Liability limited by a scheme approved under
International, a Swiss cooperative.
Professional Standards Legislation.
114
115
SHAREHOLDER
INFORmATION
Costa Group Holdings Limited Annual Report 2015 ABN 68 151 363 129 SHAREHOLDER INFORMATION
TWENTY LARGEST REGISTERED SHAREHOLDERS (AS AT 7 SEPTEMBER 2015)
Rank Name of shareholder
No. of shares
% of issued capital
1.
2.
3.
4.
5.
6.
7.
8.
9.
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
COSTA AFR PTY LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
10.
BNP PARIBAS NOMINEES PTY LTD
BRISPOT NOMINEES PTY PTD
AMP LIFE LIMITED
11.
12.
13.
14.
15.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
16.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
17.
18.
19.
MR HARRY DEBNEY
MORGAN STANLEY AUSTRALIA SECURITES (NOMINEE) PTY LIMITED
DR KUI LIM CHONG + MRS JOCELYN ELIZABETH CHONG
20.
BOND STREET CUSTODIANS LTD
48,499,619
38,940,002
36,829,160
33,389,035
33,237,848
32,940,002
14,178,374
5,722,429
5,348,502
4,191,562
3,322,448
2,116,449
1,417,476
1,312,443
1,110,089
1,009,037
992,736
973,231
944,445
CITICORP NOMINEES PTY LIMITED
2,087,486
15.21%
12.21%
11.55%
10.47%
10.42%
10.33%
4.45%
1.79%
1.68%
1.31%
1.04%
0.66%
0.65%
0.44%
0.41%
0.34%
0.32%
0.31%
0.31%
0.30%
Costa Annual Report 2015 117
SHAREHOLDER INFORMATION
DISTRIBuTION OF HOLDINGS (AS AT 7 SEPTEMBER 2015)
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
No. of holders
No. of shares
% of issued capital
401
1,601
558
1,157
68
3,785
314,200
4,640,417
4,386,796
30,302,143
279,236,881
318,880,437
0.10%
1.46%
1.38%
9.50%
87.57%
100.00%
SuBSTANTIAL SHAREHOLDERS (AS NOTIFIED TO THE COMPANY AT 7 SEPTEMBER 2015)
Shareholder
P&P COS Holdings B.V.
Costa AFR Pty Ltd as trustee for the Costa AFR Unit Trust
Mondrian Investment Partners Limited (as fund manager)
Challenger Limited
No. of shares
% of issued capital
38,940,002
32,940,002
32,284,458
23,089,747
12.21%
10.33%
10.12%
7.24%
Number of shares
Escrow end date
Early release date and conditions (if applicable)
71,880,004
Subject to early release conditions, 4:15pm on the
first trading day in the Company’s shares on the
ASX following the public announcement of the
Company’s financial results for the year ending 26
June 2016
17,997,001 shares will be released at 4:15pm on the
first date on which both the conditions below have
been satisfied:
(a) the Company’s 1H FY2016 financial results are
announced to ASX; and
(b) the volume weighted average price of the
Company’s shares in any 10 consecutive trading
days following announcement of those
financial results exceeds $2.25 by more than
20%.
1,045,258
504,519
4:15pm on the first trading day in the Company’s
shares on the ASX following the public
announcement of the Company’s financial results
for the year ending 26 June 2016
4:15pm on the first trading day in the Company’s
shares on the ASX following the public
announcement of the Company’s financial results
for the year ending 25 June 2017
Nil
Nil
118 Costa Annual Report 2015
SHAREHOLDER INFORMATION
SHARES AND VOTING RIGHTS
All issued shares in the Company are ordinary shares. Voting rights for ordinary shares are:
•
•
on a show of hands, one vote for each shareholder; and
on a poll, one vote for each fully paid ordinary share.
There is no current on-market buy-back.
CORPORATE INFORMATION
Directors
Neil Chatfield (Chairman)
Harry Debney (CEO and Managing Director)
Frank Costa
Kevin Schwartz
Peter Margin
Company Secretary
David Thomas
Registered Office
Unit 1, 275 Robinsons Road, Ravenhall, Victoria 3023, Australia
Telephone: +613 8363 9000
Email: investors@costagroup.com.au
Share Registry
Link Market Services Limited
Level 12, 680 George Street, Sydney, NSW 2000
Locked Bag A14, Sydney South NSW 1235
Phone: +61 1300 554 474 (toll free within Australia)
Fax: +61 2 9287 0303
Fax: +61 2 9287 0309 (for proxy voting)
Email: registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
Auditor
KPMG
147 Collins Street
Melbourne Victoria 3000 Australia
Stock Exchange
Costa Group Holdings Limited shares are quoted on the Australian Securities Exchange (ASX code: CGC)
Costa Annual Report 2015 119