Farm Pride Foods Ltd. ABN: 42 080 590 030 551 Chandler Rd Keysborough VIC 3173 Australia T: 1300 361 993 farmpride.com.au Farm Pride Foods Ltd. Annual Report 2018 Corporate Information Farm Pride Foods Ltd. ABN 42 080 590 030 Directors Peter Bell (Non-Executive Chairman) Bruce De Lacy (Executive Director / CEO) Malcolm Ward (Non-Executive Director) Company Secretary Bruce De Lacy Registered Office 551 Chandler Road Keysborough, Victoria 3173 (+61-3) 9798 7077 Solicitors Gadens Level 25 Bourke Place 600 Bourke Street Melbourne, Victoria 3000 Bankers Westpac Banking Corporation Level 7, 150 Collins Street Melbourne, Vic 3000 Share Register Computershare Registry Services Pty. Ltd. Yarra Falls, 452 Johnston Street Abbotsford, Victoria 3067 ASX: FRM Auditors Ernst & Young 8 Exhibition Street Melbourne, Victoria 3000 Internet Address www.farmpride.com.au 1 TABLE OF CONTENTS Chairman’s Report Directors’ Report Auditor’s Independence Declaration Financial Report for the year ended 30 June 2018 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information 3 4 14 15 16 17 18 19 54 55 61 2 Chairman’s Report The Company’s net revenue decreased by 12% to $86.116m (2017: $97.778m). Profit after tax was $0.503m (2017: $8.481m), a decrease of 94%. Underlying EBITDA of $5.386m was down from $15.713m in 2017. These results are reflective of the increased national egg supply throughout the year and the subsequent reduction in volumes and margins. The increase in non-current debt at 30 June 2018 to $10.053m (2017: $0.005m) was applied to the purchase of property, plant and equipment associated with our factory upgrade and new farms. On 6 August 2018 the Group entered into a new long-term financing facility arrangement with Westpac. Net cash used in investing activities totalled $20.040m in 2018 (2017: $2.267m). Inventory levels, although higher than ideal, have remained relatively stable over the last six months. As our results show, it has been a difficult year. The national increase in egg production has led to a surplus of egg with downward pressure on price and profitability. This downward cycle over the last twelve months is typical of what is seen in many agricultural industries and it will be followed by a period of recovery. To transition to cage free and free range the industry needs to generate sufficient returns to continue its investment in alternative egg production systems. The next twelve months will see a continuation of downward pressure on returns. The cyclic nature of the industry means returns should improve over the longer term. The timing of those expected improvements has been complicated by the recovery from the drought conditions on the east coast of Australia. The August 2018 Bureau of Meteorology climate outlook shows the first months of spring (September and October) are likely to be drier than average for most of northern, eastern and southern Australia. Feed prices over the last three months have increased significantly and it is expected it could take twelve months before we see a return to lower costs. From the Company’s perspective we have seen our ASW1 Wheat costs increase by 45% in the last three months. Our free range and barn farm projects have progressed well. During 2019 the Company will also be upgrading its product egg processing plant. As previously outlined, our longer-term strategy continues to focus on our brands, investment in alternative egg farming systems and the pursuit of growth opportunities. Despite a pessimistic short-term outlook and a continuation of unfavourable industry conditions our longer-term outlook remains positive with population and per capita egg consumption expected to increase year on year. Once again, the Board wishes to thank all our customers for their continued support and our employees who have worked hard to ensure that our business can continue to supply a product that we can all be proud of. Peter Bell Chairman 3 Directors’ Report The Directors present their report together with the financial report of the consolidated entity consisting of Farm Pride Foods Limited (‘the Company’) and the entities it controlled (‘Farm Pride Foods’, the ‘consolidated entity or the ‘Group’), for the financial year ended 30 June 2018 and auditor’s report thereon. Directors The names of directors in office at any time during or since the end of the year are: Peter Bell Non-executive Director – Appointed 30 May 2008, Appointed Chairman 30 September 2016 Malcolm Ward Non-executive Director – Appointed 30 May 2008 Bruce De Lacy Executive Director – Appointed 30 April 2014 The directors have been in office since the start of the year to the date of this report unless otherwise stated. Principal activities The principal activities of the consolidated entity during the financial year were the production, processing, manufacturing and sale of egg and egg products. There has been no significant change in the nature of these activities during the financial year. Results and review of operations Statutory consolidated net profit after tax attributable to the members of Farm Pride Foods Limited (“Statutory Profit”) for the year ended 30 June 2018 was a profit of $0.503 million (2017: $8.481 million profit). Underlying earnings before interest, tax, depreciation and amortisation (“Underlying EBITDA”) was $5.386 million (2017: $15.713 million). Underlying EBITDA represents statutory earnings before interest, tax, depreciation and amortisation adjusted for items that are material to revenue or expense that are unrelated to the underlying performance of the business (‘significant items’). Farm Pride believes that presenting Underlying EBITDA provides a better understanding of its financial performance by facilitating a more representative comparison of financial performance between financial periods. The results are presented with reference to the Australian Securities and Investment Commission Regulatory Guide 230 “Disclosing non-IFRS financial information”. The following table reconciles the Statutory Profit to Underlying EBITDA for the year ended 30 June 2018: Statutory profit Add back: - Interest (finance costs) - Income tax - Depreciation and amortisation EBITDA Significant items: Transaction costs on Darling Downs acquisition Underlying EBITDA 30 June 2018 $’000 30 June 2017 $’000 503 8,481 331 355 3,762 4,951 435 5,386 150 3,751 3,331 15,713 - 15,713 4 Directors’ Report (continued) Results and review of operations (continued) For further discussion of the review and results of operations of the Company reference should be made to the Chairman’s Report dated 24 August 2018. Significant changes in the state of affairs There have been no significant changes in the consolidated entity’s state of affairs during the financial year. Subsequent events On 6 August 2018 the Group entered into a new long term financing facility arrangement with its lender. Refer to Note 16 to the financial statements for further details. There are no other matters or circumstances which have arisen since 30 June 2018 that have significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial periods. Likely developments The Company will continue to pursue its operating strategy to create shareholder value. Environmental regulation The consolidated entity’s operations are not subject to any significant environmental, Commonwealth or State regulations or laws. The consolidated entity is not aware of any significant breaches of environmental regulations during the financial year. Dividend paid, recommended and declared No dividends were paid, declared or recommended since the start of the financial year. Share options No options over unissued shares or interests in the consolidated entity were granted during or since the end of the financial year and there were no options outstanding at the end of the financial year. Information on directors and company secretary The qualifications, experience and special responsibilities of each person who has been a director of Farm Pride Foods Limited at any time during or since 1 July 2016 is provided below, together with details of the company secretary as at the year end. Peter Bell (Non-executive Chairman - Appointed 30 May 2008, Member of the Audit Committee) Peter has been involved in the egg industry for more than 50 years and comes from a third generation poultry farming family. He continues to be directly involved in the management of commercial egg farms and has wide experience in all aspects of the egg industry. He is the Managing Director of AAA Egg Company Pty Ltd and its subsidiary West Coast Eggs Pty Ltd, a director of Novo Foods Pty Ltd, a director of Days Eggs Pty Ltd, a director of Hy-Line Australia Pty Ltd, a director of Specialised Breeders Australia Pty Ltd, Lohmann Layers Australia Pty Ltd and Pure Foods Eggs Pty Ltd. 5 Directors’ Report (continued) Malcolm Ward (Non-executive Director – Appointed 30 May 2008, Chairman of the Audit Committee) Malcolm has been in the egg industry for over 25 years having owned and operated cage and free range farms and has served on industry related boards in the area of farm management and feed supply. He is also a director of AAA Egg Company Pty Ltd and its subsidiary West Coast Eggs Pty Ltd as well as being a director on a number of other private companies. Malcolm is the Managing Director of his family’s independent supermarkets and also has commercial interests in property. He is also a director of Australian United Retailers Limited, appointed 17 November 2010. Bruce De Lacy (Company Secretary – Appointed 30 October 1997, Chief Financial Officer – Appointed 10 June 2013, Executive Director – Appointed 30 April 2014, Chief Executive Officer – Appointed 19 March 2015) Bruce has over 35 years’ experience in the egg industry and has previously been employed in a number of positions at the Company including General Manager and Chief Operating Officer. Bruce has a Bachelor of Business Studies from Swinburne University, majoring in Accounting, is a CPA and is a Fellow of the Governance Institute of Australia. Board of Directors Audit Committee Nomination & Remuneration Committee Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Malcolm Ward Peter Bell Bruce De Lacy 13 13 13 13 11 13 7 7 - 7 6 7* 1 1 - 1 1 1* * Mr. De Lacy attended by invitation. Directors’ interests in shares Directors’ relevant interests in shares of Farm Pride Foods Ltd or options over shares in the Company are detailed below: Directors’ relevant interests in: Ordinary shares of Farm Pride Foods Limited. Options over shares in Farm Pride Foods Limited. Peter Bell Malcolm Ward Bruce De Lacy 2,314,250 2,031,772 195,502 - - - 6 Directors’ Report (continued) Indemnification and Insurance of directors and officers During the financial year, the Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company. The contracts as held by the Company do not permit premiums to be disclosed. Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the contract. Auditor’s independence declaration A copy of the Auditor’s Independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Non audit services Non-audit services are approved by resolution of the audit committee and approval is provided in writing to the board of directors. Non-audit services were provided by the auditors of entities in the consolidated group during the year, namely Ernst & Young Melbourne, network firms of Ernst & Young, and other non-related audit firms, as detailed below. The directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Taxation services Ernst & Young Capital and debt advisory services – Ernst & Young 2018 $ 12,000 - 12,000 2017 $ 12,000 8,472 20,472 Remuneration report (Audited) The directors present the consolidated entity’s 2018 remuneration report which details the remuneration information for Farm Pride Foods’ executive directors and non-executive directors. This report outlines the remuneration arrangements for directors and executives of Farm Pride Foods and its controlled entities in accordance with the Corporations Act 2001 and its Regulations (‘Remuneration Report’). The Remuneration Report has been audited by Farm Pride Foods’ external auditors, Ernst & Young. Key management personnel Key management personnel (‘KMP’) comprises the directors and the Chief Executive Officer (‘CEO’), Chief Financial Officer (‘CFO’) and Company Secretary, Bruce De Lacy. The KMP are responsible for the implementation of Farm Pride Foods’ vision, values, corporate strategies and risk management systems, as well as the day-to-day management of the business. 7 Directors’ Report (continued) Details of key management personnel Directors Non-executive Peter Bell Period of Responsibility Position Appointed 30 May 2008 Appointed 30 September 2016 Non-executive Director Non-executive Chairman Malcolm Ward Appointed 30 May 2008 Non-executive Director Chairman of the Audit Committee Executive Bruce De Lacy Remuneration policy Appointed 30 October 1997 Appointed 10 June 2013 Appointed 30 April 2014 Appointed 19 March 2015 Company Secretary Chief Financial Officer Executive Director Chief Executive Officer The performance of the Group depends upon the quality of its directors and executives. To be successful, the Group must attract, motivate and retain highly skilled directors and executives. To this end, the Group adopts the following principles in its remuneration framework: • • • • • • Provide competitive rewards to attract high calibre executives; Link executive rewards to the performance of the Group and the creation of shareholder value; Establish appropriate performance hurdles for variable executive remuneration; Meet the Company’s commitment to a diverse and inclusive workplace; Promote the Company as an employer of choice; Comply with relevant legislation and corporate governance principles. In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. The board of directors are responsible for determining and reviewing compensation arrangements for directors and executives. The board of directors assess the appropriateness of the nature and amount of remuneration of directors and executives on a periodic basis by reference to relevant market conditions, as well as whether performance targets have been met, with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality board and executives. Use of Remuneration Consultants To ensure the board of directors are fully informed when making remuneration decisions, the Group seeks external remuneration advice. Remuneration consultants are engaged by, and report directly to, the Nominations & Remuneration Committee. In selecting remuneration consultants, the Nominations & Remuneration Committee considers potential conflicts of interest and requires independence from the Group’s key management personnel and other executives as part of their terms of engagement. During the year ended 30 June 2018, the Group did not engage external remuneration consultants. 8 Directors’ Report (continued) Non-Executive Director Remuneration Objective The board aims to set aggregate remuneration at a level which provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Group’s Constitution and the ASX Listing Rules specify the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The cap on aggregate non-executive directors remuneration (which requires shareholder approval), and the manner in which it is apportioned amongst non-executive directors, is reviewed annually. The board will consider advice from external consultants as well as fees paid to non-executive directors of comparable companies when undertaking the annual review process. Superannuation contributions are made by the Group on behalf of non-executive directors in line with statutory requirements and are included in the remuneration package amount allocated to individual directors. The remuneration of non-executive directors for the period ended 30 June 2018 is detailed in the table titled Remuneration of key management personnel on page 12 (the ‘Remuneration Table’). Executive Remuneration Objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group. This involves: • Rewarding executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks; Aligning the interest of executives with those of shareholders; Linking reward with the strategic goals and performance of the Group; and Ensuring total remuneration is competitive by market standards. • • • Structure In determining the level and make-up of executive remuneration, the board of directors engage external consultants on market levels of remuneration for comparable roles. Remuneration consists of the following key elements: • • Fixed remuneration; and Variable remuneration. The proportion of fixed remuneration and variable remuneration is established for each executive by the board of directors. The variable portion consists of a cash bonus which is performance-based and is disclosed separately in the Remuneration Tables. The board of directors also considers current market conventions with regards to the splits between fixed, short-term and long-term incentive elements. Executive Director Remuneration Executive directors are paid for their services as part of their employment contracts. Each executive director appointment to the board is conditional on them being employed by the Group. 9 Directors’ Report (continued) Fixed Remuneration Objective The level of fixed remuneration is set to provide an appropriate and market-competitive base level of remuneration. Fixed remuneration is reviewed annually by the board of directors consisting of a review of Group, business and individual performance, relevant comparative remuneration in the market and internal and external advice on policies and practices where necessary. Structure Fixed remuneration is the non-variable component of an executive’s annual remuneration. It consists of the base salary plus any superannuation contributions paid to a complying super fund on the executive’s behalf, and the cost (including any component for fringe benefits tax) for other items such as novated vehicle lease payments. The amount of fixed remuneration is established based on relevant market analysis, and having regard to the scope and nature of the role and the individual executive’s performance, expertise, skills and experience. Linking remuneration to performance - variable remuneration Remuneration is linked to performance to retain high calibre executives by motivating them to achieve performance goals which are aligned to Farm Pride Foods’ interests. Variable remuneration Objective The objective of executive variable remuneration is to link executive remuneration to the achievement of the Group’s annual operational and financial targets through a combination of both company and individual performance targets. Scheme Structure Variable remuneration is expressed as a percentage of a participant’s total fixed remuneration (‘TFR’) comprising base salary, superannuation contributions and any other non-cash benefits, and are based on the achievement of budgeted revenue and profit targets each financial year. The board policy for determining the nature and amount of remuneration of KMP is agreed by the board of directors as a whole. For executives, the Company provides a remuneration package that incorporates cash bonuses and may include share-based remuneration. The contracts for service between the Company and executives are on a continuing basis the terms of which are not expected to change in the immediate future. The remuneration policy is directly related to Company performance at the discretion of the board of directors. Bonuses are payable at the discretion of the board of directors. Non-executive directors receive fees and do not receive share-based remuneration or bonus payments. The Company determines the maximum amount of remuneration for directors by resolution. Employment Arrangements Chief Executive Officer, Chief Financial Officer and Company Secretary Bruce De Lacy is the Chief Executive Officer of the Company. Bruce is employed under a standard employment contract with no defined length of tenure. Under the terms of his employment contract: Bruce may resign from his position by providing the Group with four weeks written notice The Group may terminate this agreement by providing four weeks written notice or provide payment in lieu of the notice period, or the unexpired part of any notice period, based on Bruce’s total remuneration The Group may terminate at any time without notice if serious misconduct has occurred Details of Bruce De Lacy’s salary are detailed in the Remuneration Table. Details of all executive remuneration for KMPs are disclosed in the Remuneration Table. 10 Directors’ Report (continued) Group Performance The relation of rewards to performance of directors and executives is discussed above. The Group’s revenue, profit before tax and earnings per share for the last five financial years is presented in the table below: Revenue Net profit before tax Net profit after tax Share price at end of year Basic earnings per share Diluted earnings per share 2018 $’000 86,116 858 503 0.88 0.91 0.91 2017 $’000 97,778 12,232 8,481 1.16 15.37 15.37 2016 $’000 93,765 11,485 8,127 2.45 14.73 14.73 2015 $’000 2014 $’000 91,341 96,558 7,218 5,053 2,529 2,169 0.30 9.16 9.16 0.10 3.93 3.93 11 2 8 0 , 0 5 2 8 0 , 0 5 9 4 1 , 1 6 4 % 1 2 $ % e c n a m r o f r e P d e s a B 0 2 4 , 4 0 2 4 , 4 9 4 0 , 0 2 r e p u S $ t s o P t n e m y o p m E l m r e T g n o L s t i f e n e B e c i v r e S g n o L e v a e L h s a c - n o N s t i f e n e B $ - - $ - - $ - - s t i f e n e B m r e T t r o h S e c n a m r o f r e P d e s a B t n e m y a P 8 5 1 , 7 6 2 8 3 , 5 4 5 5 9 , , 1 7 5 4 3 3 y r a a S l $ - - - 2 6 6 , 5 4 2 6 6 , 5 4 s e e F $ 3 1 3 , 1 6 5 % 7 1 9 8 8 , 8 2 8 5 1 , 7 6 2 8 3 , 5 4 5 5 9 , , 1 7 5 4 3 3 4 2 3 , 1 9 1 4 7 , 4 1 6 3 7 , 9 4 6 3 7 , 9 4 5 0 6 , 3 5 4 8 1 8 , 7 6 5 $ % - - - 9 7 2 , 1 5 1 3 , 4 5 1 3 , 4 $ % 1 2 7 3 6 , 8 2 % 6 1 6 4 5 , 8 3 $ - - - ) 7 6 6 4 ( , ) 7 6 6 4 ( , $ - - - 5 6 7 3 , 5 6 7 3 , $ - - - $ - - - 6 3 6 , 3 9 , 4 3 2 2 3 3 - 2 6 4 , 3 1 1 2 4 , 5 4 1 2 4 , 5 4 6 3 6 3 9 , , 4 3 2 2 3 3 4 0 3 , 4 0 1 ) i i ( y c a L e D e c u r B l a t o T 7 1 0 2 d r a W m o c a M l l l l e B t r e e P 8 1 0 2 ) i ( l l e b p m a C p i l l i h P ) i i ( y c a L e D e c u r B d r a W m o c a M l l l l e B t r e e P l a t o T ) i ( ) i i ( 2 1 ) 6 0 5 , 4 $ : 7 1 0 2 ( 5 6 1 $ f o t n e m e v o m t n e m e l t i t n e e v a e l l a u n n a l s u p ) 8 2 7 7 2 3 $ , : 7 1 0 2 ( , 6 0 4 4 3 3 $ y r a a s h s a c l f o p u e d a m s i y c a L e D e c u r B r o f s e e f d n a y r a a S l . 6 1 0 2 r e b m e t p e S 0 3 d e n g s e r i , t 5 1 0 2 r e b m e p e S 4 n o n a m r i a h C d n a r o t c e r i d s a d e t n o p p A i n o i t a r e n u m e r l e n n o s r e p t n e m e g a n a m y e k f o s l i a t e D e l b a T n o i t a r e n u m e R . A ) a ( ) d e u n i t n o c ( t r o p e R ’ s r o t c e r i D Directors’ Report (continued) (b) Directors’ shareholding 2018 Bruce De Lacy Malcolm Ward Peter Bell Balance 1 July 2017 Received as remuneration Options exercised Other On market purchases/(sales) Balance 30 June 2018 195,502 2,031,772 2,246,250 4,473,524 - - - - - - - - - - 195,502 2,031,772 68,000 2,314,250 68,000 4,541,524 Messrs. Peter Bell and Malcolm Ward have an indirect interest in the 27,486,302 shares held by West Coast Eggs Pty Ltd (2017: 27,486,302 shares) and the 1,000 shares held by Southern Egg Pty Ltd (2017: 1,000). Voting and comments made at the company's 2017 Annual General Meeting (AGM) At the company’s 2017 AGM, a resolution to adopt the prior year remuneration report was put to the vote and at least 75% of “yes” votes were cast for the adoption of that report. No comments were made on the remuneration report that was conducted at the AGM. This is the end of the audited remuneration report. Rounding of amounts In accordance with ASIC Corporations (Rounding in Financial/Director’s Reports) Instrument 2016/191, the amounts in the directors’ report and in the financial report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar (where indicated). Signed in accordance with a resolution of the Directors. Bruce De Lacy Director 24 August 2018 13 Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Audit or’s Independence Declarat ion t o t he Dir ect ors of Far m Pride Foods Limit ed As lead auditor for the audit of Farm Pride Foods Limited for the financial year ended 30 June 2018, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporat ions Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Farm Pride Foods Limited and the entities it controlled during the financial year. Ernst & Young BJ Pollock Partner 24 August 2018 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional St andards Legislat ion 14 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2018 Revenue and other income Sales revenue Other income Less: Expenses Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation & amortisation Finance costs Other expenses Profit before income tax Income tax expense Profit from continuing operations Profit for the year Notes 5 5 6 6 6 6 6 7 2018 $’000 85,577 539 86,116 2,347 (62,816) (13,780) (3,762) (331) (6,916) 2017 $’000 97,576 202 97,778 1,150 (63,555) (13,008) (3,331) (150) (6,652) 858 12,232 (355) 503 503 (3,751) 8,481 8,481 Other Comprehensive Income Items that may be reclassified subsequently to profit and loss Cash flow hedge net of tax Other comprehensive income for the period, net of income tax - - - - Total comprehensive income for the period 503 8,481 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 0.91 0.91 15.37 15.37 The accompanying notes form part of these financial statements 15 Consolidated Statement of Financial Position As at year ended 30 June 2018 Current Assets Cash and short term deposits Trade and other receivables Inventories Biological assets Current tax receivable Other current assets Total current assets Non-current assets Biological assets Deferred tax assets Property, plant and equipment Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Borrowings Provisions Current tax payable Total current liabilities Non-current liabilities Borrowings Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed capital Retained earnings Notes 9 10 11 13 7 12 13 7 14 15 16 17 7 16 17 19 19 2018 $’000 7 8,355 6,919 8,565 805 1,359 26,010 416 884 46,649 47,949 73,959 12,626 1,970 1,937 - 16,533 10,053 230 10,283 26,816 47,143 29,578 17,565 47,143 2017 $’000 8,038 9,335 4,572 7,730 - 1,045 30,720 422 859 30,282 31,563 62,283 11,996 327 2,057 1,115 15,495 5 143 148 15,643 46,640 29,578 17,062 46,640 The accompanying notes form part of these financial statements 16 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2018 Contributed Capital Retained earnings Cash Flow hedge reserve $’000 $’000 $’000 Total $’000 Balance as at 1 July 2017 29,578 17,062 Profit for the year Other comprehensive income Total comprehensive income - - - 503 - 503 Balance as at 30 June 2018 29,578 17,565 Balance as at 1 July 2016 29,578 Profit for the year Other comprehensive income Total comprehensive income - - - 8,581 8,481 - 8,481 Balance as at 30 June 2017 29,578 17,062 The accompanying notes form part of these financial statements 46,640 503 - 503 47,143 38,159 8,481 - 8,481 46,640 - - - - - - - - 17 Consolidated Statement of Cash Flows For the Year Ended 30 June 2018 Notes 2018 $’000 2017 $’000 Cash flow from operating activities Receipts from customers Payments to suppliers and employees Finance costs Income tax paid Interest received Net cash provided by operating activities Cash flow from investing activities Proceeds from sale of property, plant and equipment Payment for property, plant and equipment Payment for business combination 27 Net cash used in investing activities Cash flow from financing activities Proceeds from borrowings Repayment of finance leases Net cash used in financing activities 20(c) Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 20(b) 87,276 (84,140) (331) (2,343) 43 505 - (13,424) (6,616) (20,040) 10,000 (322) 9,678 (9,857) 8,038 (1,819) 96,925 (84,348) (150) (4,839) 73 7,661 21 (2,288) - (2,267) - (794) (794) 4,600 3,438 8,038 The accompanying notes form part of these financial statements 18 Notes to the Consolidated Financial Statements Note 1: Statement of significant accounting policies The following is a summary of significant accounting policies adopted by the consolidated entity in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Farm Pride Foods Limited (the Company or parent entity) is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. (a) Basis of preparation of the financial report This financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($000), except when otherwise indicated. The financial report was authorised for issue by the directors as at 24 August 2018. Compliance with International Financial Reporting Standards (IFRS) The consolidated financial statements of Farm Pride Foods Ltd also comply with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Significant accounting estimates The preparation of the financial report requires the use of certain estimates and judgements in applying the consolidated entity’s accounting policies. Those estimates and judgements significant to the financial report are disclosed in Note 2. (b) Going concern The financial report has been prepared on a going concern basis. (c) Basis of consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and of all entities, which the parent entity controls. The parent entity controls an entity when it is exposed, 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 prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is established and are derecognised from the date that control ceases. 19 Note 1: Summary of Significant Accounting Policies (continued) (d) Revenue Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and revenue can be measured reliably. Risks and rewards of ownership are considered to have passed to the buyer at time of delivery of the goods to the customer. Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of promotional expenditure and rebates. Interest revenue is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GST). (e) Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks short term deposits with an original maturity of three months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position. (f) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct material, direct labour and a proportion of manufacturing overheads based on normal operating capacity, but excluding borrowing costs. Costs are assigned on a standard cost basis which approximates actual cost. The standard cost basis is reviewed by management regularly and adjusted to reflect current conditions, where necessary. Net realisable value is an estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale. (g) Property, plant and equipment Cost and valuation Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Repairs and maintenance are recognised in profit or loss as incurred. Depreciation Land is not depreciated. The depreciable amounts of all other property, plant and equipment are calculated using the straight-line method over their estimated useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The useful lives for each class of assets are: Freehold land and land improvements Buildings on freehold land and building improvements Plant and equipment Leased plant and equipment 2018 2017 Up to 40 years Up to 40 years 1 to 20 years 5 to 20 years Up to 40 years Up to 40 years 1 to 20 years 5 to 20 years 20 Note 1: Summary of Significant Accounting Policies (continued) (h) Impairment of non-financial assets For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash flows (‘cash generating units’). Accordingly, most assets are tested for impairment at the cash-generating unit level. Because it does not generate cash flows independently of other assets or groups of assets, any goodwill recognised by the entity is allocated to the cash generating unit or units that are expected to benefit from the synergies arising from the business combination that gave rise to the goodwill. An impairment loss is recognised where the carrying amount of the asset or cash generating unit exceeds the asset’s or cash generating unit’s recoverable amount. The recoverable amount of an asset or cash generating unit is defined as the higher of its fair value less costs to sell and value in use. Refer to Note 2 for a description of how management determines value in use. Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued amount such as property, plant and equipment, in which case the impairment loss is treated as a revaluation decrease in accordance with applicable Standard. Impairment losses in respect of cash generating units are allocated first against the carrying amount of any goodwill attributed to the cash generating unit with any remaining impairment loss allocated on a pro rate basis to the other assets comprising the relevant cash generating unit. (i) 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. Finance leases Leases of fixed assets, where substantially all of the risks and benefits incidental to ownership of the asset, but not the legal ownership, are transferred to the consolidated entity are classified as finance leases. Finance leases are capitalised, recording an asset and 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 financial costs in the statement of comprehensive income. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely the consolidated entity 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 Operating lease payments are recognised as an operating 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 term of the lease. (j) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic 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 the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets. 21 Note 1: Summary of Significant Accounting Policies (continued) (k) Taxes Current income tax Current income tax expenses or revenue is the tax payable 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 balances 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. Deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit nor 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 Farm Pride Foods Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation and have formed a tax-consolidated group from 1 July 2005. The head entity, Farm Pride Foods Limited and its controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The consolidated group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, Farm Pride Foods Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST. Revenues, expenses and purchased assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the taxation authority. 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. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Cash flows are presented in the consolidated statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. 22 Note 1: Summary of Significant Accounting Policies (continued) (l) Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, 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. (m) Employee benefits (i) Short term employee benefit obligations Liabilities arising in respect of wages and salaries, annual leave, accumulated sick leave and any other employee benefits (other than termination benefits) expected to be settled wholly before twelve months after the end of the annual reporting period are measured at the (undiscounted) 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 and accumulated sick leave is recognised in the provision for employee benefits. All other short term employee benefit obligations are presented as payables in the consolidated statement of financial position. (ii) Other long term employee benefit obligations The provision for other long term employee benefits, including obligations for long service leave and annual leave, which are not expected to be settled wholly before twelve months after the end of the reporting period, are measured at the present value of the estimated future cash outflow to be made in respect of the services provided by employees up to the reporting. Expected future payments incorporate anticipated future wage and salary levels, duration of service and employee turnover, and are discounted at rates determined by reference to market yields as the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for other long term employee benefits are recognised in profit or loss in the period in which the change occurs. Other long term employee benefit obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. All other long term employee benefit obligations are presented as non-current liabilities in the statement of financial position. (iii) Superannuation The consolidated entity makes contributions to superannuation plans in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period as when the employee services are received. (n) Borrowing costs Borrowing costs are expensed as incurred, except for borrowings directly incurred as part of the cost of the construction of a qualifying asset, in which case the costs are capitalised until the asset is ready for its intended use or sale. Borrowing costs can include interest expense calculated using the effective interest method, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs and other costs that an entity incurs in connection with its borrowing of funds. 23 Note 1: Summary of Significant Accounting Policies (continued) (o) Financial instruments Classification The consolidated entity classifies its financial instruments, at initial recognition, in the following categories: financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, available for sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The classification depends on the purpose for which the investments were acquired. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and financial liabilities when the fair value is negative. Non-derivative financial instruments Non-derivative financial instruments consist of investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are initially recognised at fair value, plus directly attributable transaction costs (if any), except for instruments recorded at fair value through profit or loss. After initial recognition, non- derivative financial instruments are measured as described below. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method. Financial Liabilities Financial liabilities include trade payables, other creditors, loans from third parties, loans or other amounts due to director-related entities. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Subsequent to initial recognition non-derivative financial liabilities, comprising of interest bearing loans and borrowings, are recognised at amortised cost, comprising original debt less principal payments and effective interest rate amortisation. The effective interest rate amortisation is included as finance costs in the statement of profit or loss. Financial liabilities are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. De-recognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 24 Note 1: Summary of Significant Accounting Policies (continued) (p) Financial instruments (continued) Hedge accounting Certain derivatives are designated as hedging instruments and are further classified as either fair value hedges or cash flow hedges. At the inception of each hedging transaction, the consolidated entity documents the relationship between the hedging instruments and hedged items, its risk management objective and its strategy for undertaking the hedge transaction. The consolidated entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. Fair value hedge (i) Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in profit and loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedge To qualify as a cash flow hedge the underlying transactions generating the cash flows must be highly probable. Changes in the fair value of derivatives that are designated and qualified as cash flow hedges are recognised in equity in the cash flow hedging reserve. Any hedge ineffectiveness is recognised in profit or loss. This gain or loss is recorded in the cashflow hedging reserve and released to profit or loss in the same period as when the hedged transactions affects profit or loss. Impairment of financial assets Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence for impairment as a result of one or more events (‘loss events’) having occurred and which have an impact on the estimated future cash flows of the financial assets. For loans and receivables or held-to-maturity investments carried at amortised cost, impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The amount of the loss reduces the carrying amount of the asset and is recognised in profit or loss. The impairment loss is reversed through profit or loss if the amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event occurring after the impairment was recognised. (q) Foreign currency translations and balances The financial statements of each entity within the consolidated entity are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars which is the consolidated entity’s functional and presentation currency. Transactions and balances Transactions in foreign currencies of entities within the consolidated entity are translated into functional currency at the rate of exchange ruling 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 financial year. Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the financial year. 25 Note 1: Summary of Significant Accounting Policies (continued) (r) Biological assets Biological assets comprise of flocks of hens and are valued at fair value. Fair value is not adjusted for costs to sell because disposal of the asset does not occur by sale. As there is no active market for flocks of hens, the fair value is based upon capitalised cost of poultry and is amortised over the productive life of the flock, which is between 50 and 60 weeks. The poultry flock is held for the purposes of producing eggs. Given the short productive life of the flock, an amortised cost approach has been adopted. The directors consider amortised cost to be an appropriate measure of fair value of the biological asset at the reporting date. Refer to Note 4 for the details of the fair value measure key assumptions and inputs. (s) Comparatives Where necessary the comparative information has been reclassified and repositioned for consistency with current year disclosures. (t) Rounding amounts The parent entity and consolidated entity have applied for relief available under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and accordingly, the amounts in the financial statements and in the directors’ report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar (where indicated). (u) New and amended standards and interpretations The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the consolidated entity financial statements for the year ended 30 June 2017, except as follows: (i) AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 The amendments to AASB 107 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and help users of financial statements better understand changes in an entity’s debt. The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The requirements of this amendment are disclosed in Note 20(c). 26 Note 1: Summary of Significant Accounting Policies (continued) (v) Accounting standards issued but not yet effective at 30 June 2018 There are a number of Standards and Interpretations that will be mandatory in future reporting periods. We have not elected to early adopt these standards and interpretations. The Standards and Interpretations that are most relevant to the consolidated entity are set out below: (i) AASB 9 Financial Instruments – Effective date 1 January 2018 (application date 1 July 2018) The standard includes a single approach for the classification and measurement of financial assets, based on cash flow characteristics and the business model used for the management of the financial instruments. It introduces the expected credit loss model for impairment of financial assets which replaces the incurred loss model used in AASB 139. The standard also amends the rules on hedge accounting to align the accounting treatment with the risk management practices of the business. The consolidated entity is currently assessing the impact of the application of the new standard. The consolidated entity does not currently expect the impact of these changes to be material. (ii) AASB 15 Revenue from Contracts with Customers – Effective date 1 January 2018 (application date 1 July 2018) AASB 15 Revenue from contracts with customers and the related subsequent amendments replaces all existing requirements (AASB 111 Construction Contracts, AASB 118 Revenue and related interpretations) and applies to all revenue from contracts with customers. The new requirements provide a single, contract-based revenue recognition model. AASB 15 establishes principles for reporting the nature, amount and timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of AASB 15 is that an entity recognises revenue when a customer obtains control of promised goods or services and is recognised in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires new and expanded disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers and the key judgements made. The consolidated entity has undertaken an impact assessment of the implementation of the standard. This included a detailed review of the performance obligations contained within a number of contracts from all material revenue streams. The assessment performed to date indicates that the standard is not expected to have a significant impact on the recognition and measurement of revenue by the consolidated entity. The new standard will result in increased financial report disclosures in respect of the Group’s revenue streams. The consolidated entity will establish the transition approach ahead of reporting the 31 December 2018 interim financial statements. (iii) AASB 16 Leases – Effective date 1 January 2019 (application date: 1 July 2019) AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under AASB 117 Leases. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right-to-use the underlying asset during the lease term (i.e., the right- of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re- measurement of the lease liability as an adjustment to the right-of-use asset. 27 Note 1: Summary of Significant Accounting Policies (continued) (v) Accounting standards issued but not yet effective at 30 June 2018 (continued) (ii) AASB 16 Leases –Effective date 1 January 2019 (application date: 1 July 2019) This standard will have an impact on the consolidated entity’s earnings and shareholders’ funds at transition and in future years. It must be implemented retrospectively, either with the restatement of comparatives or with the cumulative impact of application recognised as at 1 July 2019 under the modified retrospective approach. AASB 16 contains a number of practical expedients, one of which permits the classification of existing contracts as leases under current accounting standards to be carried over to AASB 16. Under the modified retrospective approach, on a lease-by-lease basis, the right of use of an asset may be deemed to be equivalent to the liability at transition or calculated retrospectively at inception of the lease. Under AASB 16 the present value of the consolidated entity’s operating lease commitments as defined under the new standard, excluding low value leases and short term leases, will be shown as right of use assets and as lease liabilities on the balance sheet. The changes in lease recognition requirements in AASB 16 may cause changes to the amount of interest and operating expenses, leased assets and lease liabilities recorded in the financial statements as well as additional disclosures. The impact of AASB 16 has not yet been quantified. A detailed assessment will be performed during the year ended 30 June 2019. (iii) AASB Interpretation 23 Uncertainty over Income Tax Treatments – Effective date: 1 January 2019 (application date: 1 July 2019) The Interpretation clarifies the application of the recognition and measurement criteria in AASB 112 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following: Whether an entity considers uncertain tax treatments separately. The assumptions an entity makes about the examination of tax treatments by taxation authorities. How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. How an entity considers changes in facts and circumstances. The impact of the interpretation has not yet been quantified. A detailed assessment will be performed during the year ended 30 June 2019. (iv) Conceptual Framework for Financial Reporting The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows. Chapter 1 – The objective of financial reporting Chapter 2 – Qualitative characteristics of useful financial information Chapter 3 – Financial statements and the reporting entity Chapter 4 – The elements of financial statements Chapter 5 – Recognition and derecognition Chapter 6 – Measurement Chapter 7 – Presentation and disclosure Chapter 8 – Concepts of capital and capital maintenance Amendments to References to the Conceptual Framework in IFRS Standards has also been issued, which sets out the amendments to affected standards in order to update references to the revised Conceptual Framework. The changes to the Conceptual Framework may affect the application of IFRS in situations where no standard applies to a particular transaction or event. In addition, relief has been provided in applying IFRS 3 and developing accounting policies for regulatory account balances using IAS 8, such that entities must continue to apply the definitions of an asset and a liability (and supporting concepts) in the 2010 Conceptual Framework, and not the definitions in the revised Conceptual Framework. The AASB are yet to issue the equivalent pronouncement to IASB’s Conceptual Framework for Financial Reporting. 28 Note 2: Significant accounting judgements, estimates and assumptions Certain accounting estimates include assumptions concerning the future, which, by definition, will seldom represent actual results. Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there would be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Impairment 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. (b) Income tax Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation that the consolidated entity 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 and tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. (c) Biological assets Biological assets comprise of flocks of hens and are valued at fair value. Fair value is not adjusted for costs to sell because disposal of the asset does not occur by sale. As there is no active market for flocks of hens, the fair value is based upon capitalised cost of poultry and is amortised over the productive life of the flock, which is between 50 and 60 weeks. The poultry flock is held for the purposes of producing eggs. Given the short productive life of the flock, an amortised cost approach has been adopted. The directors consider amortised cost to be an appropriate measure of fair value of the biological asset at the reporting date. Certain financial assets and liabilities are measured at fair value. Fair values have been determined in accordance with fair value measurement hierarchy. Refer to Note 4 for the details of the fair value measure key assumptions and inputs. (d) Trade and other receivables Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the consolidated entity will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. (e) Promotional expenditure and rebates Promotional expenditure and rebates are costs incurred by the consolidated entity when dealing with certain customers. These costs are recorded as a reduction to revenue and are either settled monthly in connection with the invoice of the customer or accrued at balance sheet date depending on the exact timing of the customer claim. The accrual is based on previous claims made and current trends. 29 Note 3: Financial risk management The consolidated entity is exposed to a variety of financial risks comprising: Interest rate risk Currency risk Credit risk Liquidity risk The board of directors has overall responsibility for identifying and managing operational and financial risks. The consolidated entity holds the following financial instruments: Financial assets Cash and cash equivalents Receivables Financial liabilities Payables Borrowings 2018 $’000 7 8,355 8,362 12,626 12,023 24,649 2017 $’000 8,038 9,335 17,373 11,996 332 12,328 (a) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Forward exchange contracts are entered into in order to buy and sell specified amounts of foreign currency in the future at stipulated exchange rates. The objective in entering into the forward exchange contracts is to protect against unfavourable exchange rate movements for both the contracted and anticipated transactions undertaken in foreign currencies. The accounting policy for forward exchange contacts is detailed in Note 1(p). As at 30 June 2018 there were outstanding forward exchange contacts with a notional value of $832,000 (2017: Nil). 30 Note 3: Financial risk management (continued) Interest rate risk (b) Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. The exposure to interest rate risks in relation to future cash flows and the weighted average effective interest rates on classes of financial assets and financial liabilities is as follows: Financial instruments Financial assets 2018 (i) Cash Receivables Total financial assets (ii) Financial liabilities Payables Bank overdraft Lease liability Bank loans Total financial liabilities 2017 (iii) Financial assets Cash Receivables Total financial assets (iv) Financial liabilities Payables Lease liability Total financial liabilities Interest bearing Non-interest bearing Total carrying amount $’000 $’000 $’000 Fixed / variable rate Weighted average effective interest rate % 7 7 - 1,826 197 10,000 12,023 8,038 - 8,038 - 332 332 - 8,355 8,355 12,626 - - - 12,626 - 9,335 9,335 11,996 - 11,996 7 8,355 8,362 12,626 1,826 197 10,000 24,649 8,038 9,335 17,373 11,996 332 12,328 Variable - - - 3.19% 3.91% 3.13% Variable Fixed Variable Variable - - - 6.00% Fixed No other financial assets or financial liabilities are expected to be exposed to interest rate risk. 31 Note 3: Financial risk management (continued) (c) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in consolidated statement of financial position and notes to the consolidated financial statements. Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations. The credit risk exposure to forward exchange contracts is the net fair value of these contracts. The consolidated entity does not have any material risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity. The consolidated entity minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. i) Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks. Cash deposits Trade receivables ii) Credit risk for trade receivables is managed by setting credit limits and completing credit checks for customers. Outstanding receivables are regularly monitored for payment in accordance with credit terms. The aging analysis of trade and other receivables is provided in Note 10(b). As the consolidated entity undertakes transactions with a large number of customers and regularly monitors payment in accordance with credit terms, the financial assets that are neither past due nor impaired, are expected to be received in accordance with credit terms. Other financial instruments iii) The consolidated entity does not have any other material credit risk exposure for other receivables or other financial instruments. 32 Note 3: Financial risk management (continued) (d) Liquidity risk Maturity analysis The tables below represents the undiscounted contractual settlement terms for financial instruments and managements expectation for settlement of undiscounted maturities. <6months 6 – 12 months 1-5 years $’000 $’000 $’000 Total contractual cash flows $’000 Year ended 30 June 2018 Cash and cash equivalents Receivables Payables Borrowings Net maturities Year ended 30 June 2017 Cash and cash equivalents Receivables Payables Borrowings Net maturities 7 8,355 (12,626) (1,960) (6,224) 8,038 9,335 (11,996) (320) 5,057 - - - (10) (10) - - - (10) (10) Carrying amount $’000 7 8,355 (12,626) (11,992) (16,256) - - - (10,053) (10,053) 7 8,355 (12,626) (12,023) (16,287) - - - (5) (5) 8,038 9,335 (11,996) (335) 5,042 8,038 9,335 (11,996) (332) 5,045 The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that at all times it has sufficient liquidity to meet its liabilities. The consolidated entity currently has cash reserves, maintains undrawn bank facilities and has reported positive cash flow from operations for the year ended 30 June 2018. (e) Fair value compared with carrying amounts The fair value of financial assets and financial liabilities approximates their carrying amounts as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. (f) Working Capital Policy Management and the Board monitor the consolidated entity’s working capital and liquidity on the basis of expected cash flow. The information that is prepared by management and reviewed by the Board includes annual profit and loss, cash flow and balance sheet forecasts as well as forecast revisions to accommodate potential new projects. Forecasts take account of significant items such as capital expenditure projects. (g) Other price risk The consolidated entity does not currently have any direct exposure to other price risks, whilst exposure to commodity price risk relates to egg, grain and feed stock purchases. The consolidated entity’s main sales product is shell eggs which is a commodity that is subject to market conditions. The consolidated entity manages its exposure to surpluses and shortages of shell egg though appropriate management of its flock assets as well as sourcing from external suppliers. Where appropriate, the consolidated entity forward buys grain and/or feed stock through its key suppliers for the purposes of providing an economic hedge against feed costs, subject to Board approval. 33 Note 4: Fair Value Measurements (a) Fair value hierarchy Assets and liabilities measured and recognised at fair value have been determined by the following fair value measurement hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs for the asset or liability that are not based on observable market data. The following table provides the fair value classification of those assets and liabilities held by the consolidated entity that are measured either on a recurring or non-recurring basis at fair value. 30 June 2018 Recurring Fair Value Measurements Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 Financial assets Foreign exchange derivatives Total financial assets Non-financial assets Biological assets at fair value less cost to sell Total non-financial assets Financial liabilities Foreign exchange derivatives Total financial liabilities - - - - - - - - - - - - - - - - 8,981 8,981 8,981 8,981 - - - - 30 June 2017 Recurring fair value measurements Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 Financial assets Foreign exchange derivatives Total financial assets Non-financial assets Biological assets at fair value less cost to sell Total non-financial assets Financial liabilities Foreign exchange derivatives Total financial liabilities - - - - - - - - - - - - - - - - 8,152 8,152 8,152 8,152 - - - - 34 Note 4: Fair Value Measurements (continued) (b) Valuation techniques and inputs used for level 3 fair value measurement (i) Biological assets Biological assets held by the consolidated entity comprise flocks of hens. The directors consider the amortised cost value of closing flock stock at balance date to be fair value. The capitalised cost of poultry is amortised over the productive life of the flock. The flock is held for the purposes of producing eggs. (c) Significant unobservable inputs used in level 3 fair value measurements The fair value of biological assets are based upon amortised cost over their productive life which is between 50-60 weeks. (d) Reconciliation of recurring level 3 fair value movements Biological assets at fair value less cost to sell Opening balance Purchases Amortisation (fair value adjustment) Closing balance Consolidated Entity 2018 $’000 8,152 11,923 2017 $’000 7,601 11,186 (11,094) (10,635) 8,981 8,152 (e) Sensitivity analysis for recurring level 3 fair value measurements At balance date if the amount amortised (fair value adjustment) for the year had varied as illustrated below, post-tax profit and other comprehensive income would have been affected as follows: +5% variation -5% variation Note 5: Revenue and other income Revenues and other income from continuing operations Sales revenue Sale of goods Other income Other income 388 (388) 372 (372) Consolidated Entity 2018 $’000 2017 $’000 85,577 97,576 539 539 202 202 35 Note 6: Profit from continuing operations Profit from continuing operations before income tax has been determined after the following specific expenses: Consolidated Entity Cost of goods sold Changes in inventories of finished goods and work in process Raw materials and consumables used Employee benefits expenses Salaries and wages Employee superannuation contributions Total employee benefits expenses Depreciation of non-current assets Land improvements Buildings Plant & equipment Total depreciation of non-current assets Foreign exchange translation loss Fair value movement in poultry Finance costs – interest expense Operating lease rentals Net loss on disposal of property, plant and equipment 2018 $’000 (2,347) 62,816 60,469 12,756 1,024 13,780 51 904 2,807 3,762 11 11,094 331 3,492 3 2017 $’000 (1,150) 63,555 62,405 12,035 973 13,008 60 482 2,789 3,331 2 10,635 150 3,500 4 36 Note 7: Income Tax (a) Components of tax expense: Current tax expense Deferred tax benefit Under/(over) provision in prior years Income tax expense Consolidated Entity 2018 $’000 424 (68) (1) 355 2017 $’000 3,774 (82) 59 3,751 (b) Numerical reconciliation between income tax expense in the income statement and that calculated Profit before income tax 858 12,232 At the statutory income tax rate of 30% (2017: 30%) Amounts which are not deductible in calculating taxable income Under/(over) provision in prior years Income tax expense (c) Deferred tax assets and (liabilities relate to the following: Employee benefits Provisions and accruals Fixed assets Gross deferred tax assets (d) Movement in deferred tax assets and (liabilities) Balance at beginning of year Recognised in profit or loss Deferred taxes acquired in business combinations Balance at the end of the year (e) Movement in current tax liability or (receivable): Balance at beginning of year Current tax expense Tax paid Under/(over) provision in prior years Balance at the end of the year 258 98 (1) 355 650 148 86 884 859 68 (43) 884 3,670 22 59 3,751 660 177 22 859 777 82 - 859 1,115 424 2,121 3,774 (2,343) (4,839) (1) (805) 59 1,115 37 Note 8: Dividends (a) Dividends proposed and recognised as a liability Consolidated Entity 2018 $’000 Nil 2017 $’000 Nil (b) Franking credit balance Balance of franking account at year end 12,290 9,945 Note 9: Cash and cash equivalents Cash at bank Short term deposit Note 10: Receivables Trade receivables Allowance for impairment loss Other receivables (a) Terms and conditions 7 - 7 7,855 (17) 7,838 517 8,355 607 7,431 8,038 8,856 (50) 8,806 529 9,335 (i) Trade receivables are non-interest bearing and generally on 30 to 60 day terms. (ii) Other receivables are non-interest bearing and have repayment terms between 30 and 60 days. 38 Note 10: Receivables (continued) (b) Provision for impairment loss Movements in the provision for impairment were: Opening balance at 1 July Decrease in provision for impairment of trade receivables Trade and other receivables ageing analysis at 30 June is: Consolidated Entity 2018 $’000 50 (33) 17 2017 $’000 50 - 50 Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days Gross 2018 $’000 Impairment 2018 $’000 Gross 2017 $’000 Impairment 2017 $’000 8,198 17 9,292 - 112 62 - - - 11 82 - 8,372 17 9,385 - 11 39 - 50 Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security. Note 11: Inventories Raw materials at cost Finished goods Total inventories Consolidated Entity 2018 $’000 3,530 3,389 6,919 2017 $’000 2,275 2,297 4,572 Of the total inventories $643,000 is held at net realizable value (2017: $341,000). Note 12: Other current assets Prepayments 1,359 1,045 39 Note 13: Biological assets Current Non-current Total (a) Poultry Flock stock at fair value as at 30 June Less: Accumulated amortisation Opening flock stock written down value Additions Amortisation Closing flock stock Consolidated Entity 2018 $’000 8,565 416 8,981 2017 $’000 7,730 422 8,152 16,443 (7,462) 8,981 8,152 11,923 (11,094) 8,981 14,802 (6,650) 8,152 7,601 11,186 (10,635) 8,152 The number of birds held by the Company as at 30 June 2018 was 1,563,656 (2017: 1,697,046). The average output per hen is approximately 5 eggs per week during their productive period. The flock stock at fair value for 2017 have been restated to reflect the current flocks not fully depreciated as at 30 June 2017. 40 Note 14: Property, plant and equipment Freehold land and land improvements At cost Accumulated depreciation Total freehold land Buildings and building improvements At cost Accumulated depreciation Total buildings and building improvements Total land and buildings Plant and equipment At cost Accumulated depreciation Total plant and equipment Consolidated Entity 2018 $’000 11,220 (598) 10,622 21,587 (5,979) 15,608 2017 $’000 7,834 (547) 7,287 14,013 (5,076) 8,937 26,230 16,224 43,100 (28,794) 14,306 39,349 (26,001) 13,348 Projects under construction 6,113 710 Total property, plant and equipment Cost Total accumulated depreciation Total written down amount 82,020 (35,371) 46,649 61,906 (31,624) 30,282 41 Note 14: Property, plant and equipment (continued) (a) Assets pledged as security Included in the balances of freehold land and buildings and plant and equipment are assets over which first mortgages have been granted as security over bank loans (see note 16). The terms of the first mortgage preclude the assets from being sold or being used as security for further mortgages without the permission of the first mortgage holder. The mortgage also requires buildings that form part of the security to be fully insured at all times. (b) Reconciliations Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year. Freehold Land and Land Improvements Carrying amount at beginning Additions (including transfers from projects under construction) Depreciation Expense Buildings on Freehold Land and Building Improvements Carrying amount at beginning Additions (including transfers from projects under construction) Depreciation Expense Plant and equipment Carrying amount at beginning Additions (including transfers from projects under construction) Depreciation expense Disposals Projects under construction Carrying amount at beginning Additions Amounts acquired in a business combination (Note 27) Transfers Total property, plant and equipment Carrying amount at beginning Additions Amounts acquired in a business combination (Note 27) Transfers Depreciation expense Disposals Total Consolidated Entity 2018 $’000 2017 $’000 7,287 3,386 (51) 10,622 8,937 7,575 (904) 15,608 13,348 3,767 (2,807) (2) 14,306 710 13,423 6,708 (14,728) 6,113 30,282 28,151 6,708 (14,728) (3,762) (2) 46,649 6,715 632 (60) 7,287 4,554 4,865 (482) 8,937 13,823 2,339 (2,789) (25) 13,348 6,261 2,253 - (7,804) 710 31,353 10,089 - (7,804) (3,331) (25) 30,282 The carrying value of plant and equipment held under finance leases and hire purchase contracts as 30 June 2018 was $234,000 (2017: $1,837,000). 42 Note 15: Payables Trade creditors Other payables and accruals (a) Fair value Consolidated Entity 2018 $’000 10,080 2,546 2017 $’000 8,742 3,254 12,626 11,996 Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. Terms are 30 days from end of month. (b) Related party payables For terms and conditions relating to related party payables refer Note 26. Note 16: Interest bearing liabilities Interest Rate Maturity Consolidated Entity 2018 $’000 2017 $’000 CURRENT Secured Borrowings NON- CURRENT Secured Borrowings Lease liability Various Various Bank overdraft BBOR+3.30% On demand Lease liability Bank loans Various BBSY+1.30% Various 31 Jan 2020 144 1,826 1,970 53 10,000 10,053 327 - 327 5 - 5 The carrying amounts of the consolidated entity’s current and non-current borrowings approximate their fair value. The consolidated entity’s interest bearing borrowings consist of variable interest rate loans. 43 Note 16: Interest bearing liabilities (continued) (a) At the reporting date, the consolidated entity’s financing are as follows. (i) Bank overdraft Facilities available Facilities used Facilities unused (ii) Bank loan (multi-option) Facilities available Facilities used Facilities unused (iii) Equipment finance Facilities available Facilities used Facilities unused Consolidated Entity 2018 $’000 2,500 1,826 2017 $’000 1,250 - 674 1,250 20,000 10,000 10,000 - 10,000 10,000 1,000 1,000 - - 1,000 1,000 (b) Details of assets pledged as security The consolidated entity’s borrowings are secured by a fixed and floating charge (mortgage debenture) over all assets and uncalled capital. (c) Financial covenants The consolidated entity’s banking facility is subject to various specific covenants that are related to the consolidated entity’s financial performance and position. These covenants are monitored closely by management and the Board. During the year ended 30 June 2018, certain covenants were renegotiated. As at 30 June 2018 and during the year ended 30 June 2018, the consolidated entity was in compliance with financial covenants. (d) New financing facilities On 6 August 2018 the consolidated entity entered a new long term borrowing facility arrangement with its financiers. The new facilities comprise of $2.5 million bank overdraft, $16 million multi-option long-term loan facility comprising a cash advance and equipment finance facility and $0.3 million equipment finance facility for specified capital expenditure items. From September 2019 the facility limit of the multi-option long-term loan facility is permanently reduced by $0.75 million per quarter until the maturity date of the facility on 31 January 2020. 44 Note 17: Provisions CURRENT Employee benefits Annual leave Long service leave NON-CURRENT Employee benefits Long service leave benefits Total employee benefits provisions Note 18: Contributed Equity Consolidated Entity 2018 $’000 2017 $’000 1,147 790 1,937 1,158 899 2,057 230 143 2,167 2,200 Consolidated Entity 2018 $’000 2017 $’000 (a) Issued and paid up capital 55,180,175 (2017 : 55,180,175) Ordinary shares fully paid 29,578 29,578 Each share is entitled to 1 vote per share. 29,578 29,578 (b) Capital management When managing capital, management’s objective is to ensure the consolidated entity continues to maintain optimal returns to shareholders and benefits for other stakeholders. This is achieved through the monitoring of historical and forecast performance and cash flows. During the year ended 30 June 2018 no dividends were paid (2017: Nil) Note 19: Reserves and Retained Earnings Consolidated Entity 2018 $’000 2017 $’000 (a) Retained earnings 17,565 17,062 (a) Retained earnings Balance at beginning of year Net profit after tax for the year Balance at end of year 17,062 503 17,565 8,581 8,481 17,062 45 Note 20: Cash Flow Information (a) Reconciliation of cash flow from operations with profit after tax: Profit from ordinary activities after tax 503 8,481 Consolidated Entity 2018 $’000 2017 $’000 Non-cash items Depreciation Flock amortisation Inventory revaluation adjustment Net loss on foreign exchange Loss on disposal of property, plant and equipment Non-cash movement on loan Changes in assets and liabilities (Increase) / decrease in trade and other receivables (Increase) / decrease in inventory (Increase) / decrease in biological asset (Increase) / decrease in current tax receivable (Increase) / decrease in deferred tax asset (Increase) / decrease in other assets Increase / (decrease) in trade and other creditors Increase / (decrease) in employee entitlements Increase / (decrease) in current tax liability Net cash flow from operating activities (b) Reconciliation of cash and cash equivalents for the purposes of the Consolidated Statement of Cash Flows Cash at bank Short term deposit Bank overdraft 3,762 11,094 - - 3 22 980 (2,231) (11,923) (805) (68) (314) 630 (33) (1,115) 505 7 - (1,826) (1,819) 3,331 10,635 2 2 4 (13) (993) (1,151) (11,186) - 3,751 (742) 208 171 (4,839) 7,661 607 7,431 - 8,038 46 Note 20: Cash Flow Information (continued) (e) Reconciliation of liabilities arising from financing activities Year ended 30 June 2018 As at 1 July 2017 Financing cash flows Operating cash flows - interest paid As at 30 June 2018 Non-Cash Changes New leases- arising from business combination New leases- other Bank loans - 10,000 Finance leases Total liabilities from financing activities 332 332 (322) 9,678 - (5) (5) - 165 165 - 27 27 10,000 197 10,197 Year ended 30 June 2017 As at 1 July 2016 Financing cash flows Operating cash flows – interest paid As at 30 June 2017 Non-Cash Changes New leases- arising from business combination New leases- other Bank loans - - Finance leases 1,139 (794) Total liabilities from financing activities 1,139 (794) - (13) (13) - - - - - - - 332 332 47 Note 21: Commitments Lease expenditure commitments (i) Operating leases (non-cancellable) Minimum lease payments Not later than one year Later than one year and not later than five years Later than five years Aggregate lease expenditure contracted for at reporting date Consolidated Entity 2018 $’000 2017 $’000 4,050 12,339 3,404 19,793 3,443 6,262 4,815 14,520 The property leases are non-cancellable leases with terms varying from one to eleven years, with rent payable monthly in advance. Contingent rental provisions within the lease agreements require the minimum lease payments shall be increased with reference to the CPI or market. (ii) Finance leases (manufacturing equipment) The Group has finance leases and hire purchase contracts for various items of plant and machinery. The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets. Future minimum lease payments under finance leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows: Consolidated Entity 2018 $’000 2017 $’000 Minimum payment Present value of payments Minimum payments Present value of payments 144 53 - 197 (31) 166 119 47 - 166 - 166 330 5 - 335 (3) 332 327 5 - 332 - 332 Within one year After one year but not more than five years More than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Current liability Non-current liability Total (iii) Other commitments Farm cost commitments Farm commitments relate to commitments for flock replenishment and other farm operating expenditure commitments. Consolidated Entity 2018 $’000 119 47 166 2017 $’000 327 5 332 3,054 2,854 48 Note 22: Earnings per share The following reflects the income and share data used in calculations of basic and diluted loss/earnings per share computations: Net profit from continuing operations Weighted average Consolidated Entity 2018 $’000 503 2017 $’000 8,481 2018 No. of shares 2017 No. of shares Weighted average number of ordinary shares used in calculating basic loss/earnings per share 55,180,175 55,180,175 Weighted average number of shares used to calculate diluted earnings per share 55,180,175 55,180,175 Note 23: Key Management Personnel Compensations Compensation by category Short-term employment benefits Superannuation Long-term employment benefits Note 24: Controlled Entities Consolidated Entity 2018 $’000 525 29 7 561 2017 $’000 534 39 (5) 568 (a) The consolidated financial statements include the financial statements of Farm Pride Foods Limited and its controlled entities listed below: List of companies in the group Parent entity: Farm Pride Foods Limited Controlled entities of Farm Pride Foods Limited Big Country Products Pty Ltd Farm Pride Property Pty Ltd Mooroopna Farm Trading Pty Ltd Farm Pride North Pty Ltd Carton Packaging Pty Ltd Country of incorporation Percentage owned 2018 2017 Australia 100% 100% Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 49 Note 25: Parent Entity Information Information relating to Farm Pride Foods Limited: Summarised statement of financial position Current assets Total assets Current liabilities Total liabilities Total equity of the Parent comprises of the following: Share capital Retained earnings Cash flow hedge reserve Total shareholder’s equity Summarised statement of comprehensive income Profit of the parent entity Total comprehensive profit of the parent entity 2018 $’000 26,003 73,952 16,083 26,249 29,578 18,125 - 47,703 556 556 2017 $’000 30,727 62,289 15,052 15,142 29,578 17,569 - 47,147 8,511 8,511 Farm Pride Foods Limited as parent has provided security over the loans of its subsidiaries by a fixed and floating charge (see note 16). 50 Note 26: Related party Disclosures Directors and related entities 2017 and 2018 The value of transactions (inclusive of GST) and amounts receivable/(payable) between Directors and their related entities and Farm Pride Foods Ltd and its controlled entities. Directors and related entities 2017/2018 AAA Egg Company Pty Ltd (P. Bell / M. Ward) Specialised Breeders Australia Pty Ltd (P. Bell) Days Eggs Pty Ltd (P. Bell) Hy-line Australia Pty Ltd (P. Bell) Pure Foods Eggs Pty Ltd (P. Bell) West Coast Eggs Pty Ltd (P. Bell / M. Ward) Lohmann Layers Australia Pty Ltd (P.Bell) Note Transaction Revenue Expenditure Balance Receivable / (Payable) (a) Purchases 2018 $’000 - (a) Purchases 234 2017 $’000 - - 2018 $’000 46 2017 $’000 15 2018 $’000 (2) 2017 $’000 - 643 1,116 (43) (94) (a) (a) (a) (a) Egg supply / Purchases Purchases / Packaging sales Egg sales / Purchases Egg sales / Purchases 180 217 365 612 (2) (34) - - 3,486 4,260 (402) (160) 30 26 296 285 (10) (109) 1,116 1,167 245 175 366 353 (a) Purchases - - 162 1,368 - - (a) Messrs. Bell and Ward through their related entities provide birds, eggs and egg products to and acquire eggs, egg product and packaging from Farm Pride Foods Limited and its controlled entities. Director’s administrative expenses are reimbursed at cost. 51 Note 27: Business Combinations (a) Acquisition of Darling Downs Fresh Eggs On 6 November 2017, the Company acquired the business and associated assets of Darling Downs Fresh Eggs from Clearmedal Pty Ltd (Administrators Appointed) (‘Darling Downs Fresh Eggs’). Darling Downs Fresh Eggs is based in Queensland. Identifiable assets acquired and liabilities assumed The fair value of the identifiable assets and liabilities of Darling Downs Fresh Eggs at the date of acquisition were: Assets Inventories Property, Plant and equipment Total assets Liabilities Borrowings Deferred tax liability Total liabilities Total identifiable net assets at fair value (i) Purchase consideration transferred Net cash outflow on acquisition of businesses Purchase consideration paid in cash $’000 116 6,708 6,824 165 43 208 6,616 6,616 6,616 6,616 (i) The initial accounting has only been provisionally determined at 30 June 2018. The valuation of property, plant and equipment is to be finalised. Any changes to the fair value of the identifiable assets and liabilities will result in any residual amount being recognised as goodwill or a gain on acquisition. In accordance with the requirements of AASB 3 Business Combinations the consolidated entity has 12 months to finalise its acquisition accounting, and therefore the information presented should be considered provisional. From the date of acquisition, Darling Downs Fresh Eggs contributed nil revenue and nil to profit before tax of the Group. From the date of acquisition, the Group has undertaken various activities including the upgrade of the site to meet the Group’s production standards. It is impractical to measure the contribution of Darling Downs Fresh Eggs to the revenue and profit before tax of the Group if the acquisition had taken place at the beginning of the year (1 July 2017) as the business was not operational. Transaction costs of $0.435m have been recognised within other expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income and recognised within operating cash flows in Consolidated Statement of Cash Flows. 52 Note 28: Auditor’s remuneration An audit or review of the financial report of the entity and any other entity in the consolidated entity Taxation services Other services Consolidated Entity 2018 $ 2017 $ 124,500 122,000 12,000 12,000 - 136,500 8,472 142,472 Note 29: Subsequent Events On 6 August 2018 the Group entered into a new long term financing facility arrangement with this lender. Refer to Note 16 to the financial statements for further details. There are no other matters or circumstances which have arisen since 30 June 2018 that have significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial periods. Note 30: Company details The registered office of the Company is: Farm Pride Foods Ltd 551 Chandler Road Keysborough, Victoria 3173 Australia 53 Directors’ Declaration The Directors declare that the financial statements and notes set out on pages 17 to 53 in accordance with the Corporations Act 2001: (a) (b) (c) Comply with Australian Accounting Standards and the Corporations Regulation 2001, and other mandatory professional reporting requirements; As stated in Note 1(a) the consolidated financial statements also comply with International Financial Reporting Standards and; Give a true and fair view of the financial position of the consolidated entity as at 30 June 2018 and of its performance for the year ended on that date. In the Directors’ opinion there are reasonable grounds to believe that Farm Pride Foods Limited will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer / Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending 30 June 2018. This declaration is made in accordance with a resolution of the Directors. Bruce De Lacy Director 24 August 2018 Melbourne 54 Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent Audit or's Report t o t he Members of Farm Pride Foods Limit ed Report on t he Audit of t he Financial Report Opinion We have audited the financial report of Farm Pride Foods Limited (the Company) and its subsidiaries (collect ively the Group), which comprises t he consolidated stat ement of financial posit ion as at 30 June 2018, t he consolidat ed statement of comprehensive income, consolidated stat ement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statement s, including a summary of significant account ing policies, and the direct ors' declaration. In our opinion, the accompanying financial report of the Group is in accordance wit h t he Corporations Act 2001, including: a) giving a t rue and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b) complying wit h Aust ralian Account ing Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Aust ralian Auditing Standards. Our responsibilities under t hose st andards are furt her described in t he Auditor’s Responsibilit ies for t he Audit of t he Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirement s of t he Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Account ant s (t he Code) t hat are relevant t o our audit of the financial report in Aust ralia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Mat t ers Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matt er is provided in that cont ext . We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included t he performance of procedures designed t o respond t o our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address t he matters below, provide t he basis for our audit opinion on t he accompanying financial report . A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 55 Going concern Why significant The Group’s financial performance for the year ended 30 June 2018 has been significantly impacted by t he surplus shell egg in t he Aust ralian market result ing in a reduct ion in revenues, profitability and cash flows from operat ions. The Group has access to various borrowing facilities to fund ongoing working capital and capit al expendit ure requirements as disclosed in Note 16 t o t he financial statement s. The Group’s earnings and cash flow forecasts indicat e t hat t he Group requires access to the available financing facilities disclosed in Note 16 to the financial statements to pay its debts as and when they all due. How our audit addressed t he key audit mat t er In assessing management’s cash flow forecasts prepared for the purpose of the going concern assessment our audit procedures included the following: • Analysed the key assumptions in the Group’s cash flow forecasts, such as expect ed cash inflows from t he sale of shell egg and egg product and cash out flows from purchases of hens, feed costs and ot her operat ing and capit al expendit ure. • Considered t he Group’s access t o long term funding facilit ies having regard to t he limits of the facilities disclosed in Note 16 and compliance wit h t he relevant financial covenants in the forecast period. • Compared t he input s and assumptions in t he cash flow forecast s t o other informat ion used t o prepare the financial statement s for the year ended 30 June 2018. • Assessed the possible mit igating actions identified by the Group in the event that actual cash flows are below forecast . Valuat ion of flock asset s Why significant How our audit addressed t he key audit mat t er The carrying value of flock assets at 30 June 2018 was $8.9 million in accordance with Aust ralian Accounting St andards, as disclosed in Note 13. We focused on this area because flock assets is significant relative to total assets and the valuation of flock assets involved judgement by t he Group in relation t o t he est imat ed productive life of the flock and capitalisation of direct ly att ributable costs of establishing t he flock. Our audit procedures in respect of the valuation of flock assets included the following: • Selected a sample of costs capit alised in flock costs during the year and agreed costs to supporting documentation such as supplier invoices. We also assessed the appropriat eness of t he capitalisat ion of t hese costs. • Assessed the Group’s assumpt ions in respect of the productive life of the flock by considering the age of the specific flock, the Group’s prior experience and indust ry st udies. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 56 Net realisable value of invent ories Why significant How our audit addressed t he key audit mat t er As at 30 June 2018, the Group held $6.9 million in inventories representing 9.4% of total asset s of t he Group. As detailed in Note 1(f) of the financial report, inventories are valued at the lower of cost and net realisable value. Judgement was required to be exercised by the Group t o determine t he net realisable value for items which may be ultimat ely sold below cost . These judgements include consideration of expectations for future sales based on historical experience. Our audit procedures in respect of the valuation of inventories included the following: • Select ed a sample of invent ory items and agreed the cost price of inventory recorded to supporting documentation such as supplier invoices. • Assessed the basis for invent ory provisions recorded by the Group for slow moving and surplus invent ories. In doing so, we assessed the Group’s judgements in identifying slow moving and surplus inventories. • Considered the impact of sales subsequent to year end on the value of inventories at balance date by comparing the actual selling price to the carrying value of the relevant product line. Wast e and markdown rebat es Why significant How our audit addressed t he key audit mat t er Cert ain customer sales agreements require the Group t o rebat e t he cust omer in respect of waste as well as price markdowns t he customer records in store. The rebate is recorded as a reduction to revenue and is either settled monthly in connection with the invoicing of the cust omer or t he obligat ion accrued at balance sheet date depending on the exact timing of the cust omer claim. This was considered a key audit mat ter as t he calculation of the rebate accrual involves judgement and estimation by the Group. Our audit procedures in respect of wast e and markdown rebat es included t he following: • Select ed a sample of rebat e t ransact ions during the year and agreed t he rebate amount to cust omer claim documentation. • Assessed the rebat e accrual by considering key assumptions having regard to past claims experience and customer claim document at ion received after balance date. Where possible, we agreed t he accrual t o t he amount sett led post year end. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 57 Informat ion Ot her t han t he Financial Report and Audit or’s Report Thereon The directors are responsible for t he ot her informat ion. The ot her information comprises t he information included in the Company’s 2018 Annual Report, but does not include the financial report and our auditor’s report thereon. Our opinion on t he financial report does not cover t he ot her information and accordingly we do not express any form of assurance conclusion t hereon, wit h t he exception of t he Remuneration Report and our relat ed assurance opinion. In connection wit h our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whet her the other information is mat erially inconsist ent wit h t he financial report or our knowledge obtained in the audit or ot herwise appears t o be materially misst at ed. If, based on t he work we have performed, we conclude t hat there is a mat erial misst at ement of t his other information, we are required to report that fact. We have nothing to report in this regard. Responsibilit ies of t he Direct or s for t he Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a t rue and fair view in accordance wit h Aust ralian Accounting St andards and t he Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing t he financial report , t he direct ors are responsible for assessing t he Group’s abilit y to continue as a going concern, disclosing, as applicable, mat ters relating t o going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Audit or 's Responsibilit ies for t he Audit of t he Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from mat erial misst at ement , whether due t o fraud or error, and t o issue an audit or’s report t hat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarant ee t hat an audit conduct ed in accordance with the Aust ralian Audit ing Standards will always det ect a mat erial misst at ement when it exist s. Misst at ements can arise from fraud or error and are considered mat erial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance wit h the Aust ralian Audit ing Standards, we exercise professional judgment and maint ain professional scepticism t hroughout the audit . We also: • • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal cont rol. Obt ain an understanding of int ernal cont rol relevant to t he audit in order to design audit procedures t hat are appropriat e in t he circumstances, but not for t he purpose of expressing an opinion on t he effectiveness of t he Group’s int ernal cont rol. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 58 • • • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting est imat es and relat ed disclosures made by t he directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obt ained, whet her a mat erial uncertaint y exists related t o events or conditions t hat may cast significant doubt on t he Group’s abilit y to cont inue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether t he financial report represent s t he underlying t ransactions and events in a manner t hat achieves fair present at ion. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit . We remain solely responsible for our audit opinion. We communicate wit h the directors regarding, among other matters, the planned scope and timing of t he audit and significant audit findings, including any significant deficiencies in int ernal cont rol that we identify during our audit . We also provide t he direct ors wit h a statement that we have complied wit h relevant et hical requirement s regarding independence, and to communicate wit h t hem all relationships and other mat ters t hat may reasonably be t hought t o bear on our independence, and where applicable, related safeguards. From t he mat ters communicated to t he direct ors, we det ermine t hose mat ters t hat were of most significance in the audit of the financial report of t he current year and are t herefore t he key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about t he mat ter or when, in ext remely rare circumstances, we det ermine t hat a mat ter should not be communicat ed in our report because t he adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on t he Audit of t he Remunerat ion Report Opinion on t he Remunerat ion Report We have audited the Remuneration Report included in pages 7 to 13 of the directors' report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Farm Pride Foods Limited for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 59 • • • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting est imat es and relat ed disclosures made by t he directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obt ained, whet her a mat erial uncertaint y exists related t o events or conditions t hat may cast significant doubt on t he Group’s abilit y to cont inue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether t he financial report represent s t he underlying t ransactions and events in a manner t hat achieves fair present at ion. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit . We remain solely responsible for our audit opinion. We communicate wit h the directors regarding, among other matters, the planned scope and timing of t he audit and significant audit findings, including any significant deficiencies in int ernal cont rol that we identify during our audit . We also provide t he direct ors wit h a statement that we have complied wit h relevant et hical requirement s regarding independence, and to communicate wit h t hem all relationships and other mat ters t hat may reasonably be t hought t o bear on our independence, and where applicable, related safeguards. From t he mat ters communicated to t he direct ors, we det ermine t hose mat ters t hat were of most significance in the audit of the financial report of t he current year and are t herefore t he key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about t he mat ter or when, in ext remely rare circumstances, we det ermine t hat a mat ter should not be communicat ed in our report because t he adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Responsibilit ies Report on t he Audit of t he Remunerat ion Report The directors of t he Company are responsible for the preparat ion and present at ion of t he Opinion on t he Remunerat ion Report Remuneration Report in accordance wit h section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in We have audited the Remuneration Report included in pages 7 to 13 of the directors' report for the accordance wit h Aust ralian Auditing St andards. year ended 30 June 2018. In our opinion, the Remuneration Report of Farm Pride Foods Limited for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001. Responsibilit ies Ernst & Young The directors of t he Company are responsible for the preparat ion and present at ion of t he Remuneration Report in accordance wit h 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 wit h Aust ralian Auditing St andards. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation BJ Pollock Partner Melbourne 24 August 2018 59 Ernst & Young BJ Pollock Partner Melbourne 24 August 2018 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 60 60 ASX Additional Information Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 22 August 2018. (a) Distribution of equity security The number of shareholders, by size of holding, in each class of share are: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 + The number of shareholders holding less than a marketable parcel of shares are: (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: 1 West Coast Eggs Pty Ltd JP Morgan Nominees Australia Limited 2 Normpat Pty Ltd 3 Oakmeadow Pty Ltd 4 Markcamp No2 Pty Ltd 5 Glenmon No2 Pty Ltd 6 Merrill Lynch (Australia) Nominees Pty Limited 7 Zero Nominees Pty Ltd 8 9 Debuscey Pty Ltd 10 Mr Clinton James Quay 11 12 13 Mr Tomasso Montalto + Estate Late Mauro Montalto 14 15 16 Mrs Trisha Marie Verran 17 Mrs Francesca D’Alberto 18 19 Miss Jean Shiong Li Ho Nealart No.2 Pty Limited 20 Zenith Business Pty Ltd Dr Harry Hirschowitz + Mrs Fariba Yeroshalmi Brazil Farming Pty Ltd Citicorp Nominees Pty Limited Neweconomy Com Au Nominees Pty Limited No. of shareholders No. of shares 567 1,096 364 261 34 379,767 3,158,479 2,720,553 6,116,043 42,805,333 219 71,754 Listed ordinary shares held Percentage of ordinary shares 27,486,302 2,074,568 2,064,250 2,011,772 1,551,335 1,003,057 600,000 530,000 503,710 500,000 449,919 417,537 316,861 313,737 255,295 250,000 241,994 239,631 224,000 200,000 41,233,968 49.81 3.76 3.74 3.65 2.81 1.82 1.09 0.96 0.91 0.91 0.82 0.76 0.57 0.57 0.46 0.45 0.44 0.43 0.41 0.36 74.73 61 ASX Additional Information (continued) (c) Substantial shareholders The names of substantial shareholders listed in the Company’s register. West Coast Eggs Pty Ltd 27,486,302 49.81 No. held Percentage of ordinary shares (d) Voting rights The voting rights are set out in Article Number 10 of the Company’s Articles of Association. In summary, voting by or on behalf of members at a meeting shall be by show of hands or upon poll exercised by one vote for each fully paid ordinary share held or proportionate to the amount paid on each partly paid ordinary share held. (e) Unquoted securities Nil share options are on issue (2017: Nil). (f) Stock Exchange listing Quotation has been granted for all the ordinary shares of the Company on all members Exchanges of the Australian Stock Exchange Limited. Publically accessible information For information on corporate governance policies adopted by Farm Pride Foods Ltd refer to our website: www.farmpride.com.au 62 Farm Pride Foods Ltd. ABN: 42 080 590 030 551 Chandler Rd Keysborough VIC 3173 Australia T: 1300 361 993 farmpride.com.au Farm Pride Foods Ltd. Annual Report 2018