Farm Pride
Annual Report 2021

Plain-text annual report

Fa rm Pride F oods Lt d. A BN: 4 2 080 590 030 551 CH A NDL ER ROA D K E YSBOROUGH, V IC 3173 AUS T R A L I A T: 1300 693 3 47 farmpride.com.au Annual Report 2021 FPR0038 AR21 Cover Only_PFO.indd All Pages FPR0038 AR21 Cover Only_PFO.indd All Pages 16/8/21 10:56 am 16/8/21 10:56 am Farm Pride Foods Limited and Controlled Entities Corporate Information Farm Pride Foods Ltd. ABN 42 080 590 030 Directors Peter Bell (Non-Executive Chairman) Malcolm Ward (Non-Executive Director) Bruce De Lacy (Independent Non-Executive Director) Management Team Daryl Bird (Chief Executive Officer) Robin Donohue (Chief Financial Officer) Company Secretary Bruce De Lacy Registered office and principal place of business 551 Chandler Road Keysborough, Victoria 3173 +61 3 9798 7077 Solicitors Gadens Level 25 Bourke Place 600 Bourke Street Melbourne, Victoria 3000 Financiers MC FP Pty Ltd Level 18, 90 Collins Street Melbourne, Victoria 3000 Share Registry Computershare Registry Services Pty. Ltd. Yarra Falls, 452 Johnston Street Abbotsford, Victoria 3067 ASX: FRM Auditors Pitcher Partners Level 13, 664 Collins Street Docklands, Victoria 3008 Internet Address www.farmpride.com.au 1 Farm Pride Foods Limited and Controlled Entities Directors’ Report TABLE OF CONTENTS Chairman’s Report Directors’ Report Auditor’s Independence Declaration Financial Report for the year ended 30 June 2021  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 5 18 19 20 21 22 23 55 56 61 2 Farm Pride Foods Limited and Controlled Entities Directors’ Report Chairman’s Report The Company’s net revenue decreased by 14.8% to $76.991 million (2020: $90.327 million). The loss after tax was $11.971 million (2020: $2.169 million loss). Underlying EBITDA was a loss of $4.330 million down from $2.672 million in 2020. The results reflect the impact of the avian influenza (AI) event that the Company suffered early in FY21 and the disruption caused by COVID19. The more significant impact of AI was that retail customers placed volume the Company could not supply with our competitors. The company was not able to recover this lost volume in FY21. Management effort in FY21 continued to be focussed on the recovery of the AI affected farms. In February 2021, Agriculture Victoria issued Revocation of Quarantine Notices for the affected farms. Re-population of the flocks at the affected farms is now largely complete, delivering productive capacity in line with the requirements of the business. Following the AI outbreak, the Company with its advisors undertook a strategic review of the business to determine a pathway to facilitate a timely and sustainable financial recovery. This review determined that the cage free farm at Pittsworth in Queensland was surplus to its needs. As a result, the Company finalised the sale of this farm in March 2021 Settlement proceeds from the sale of the Pittsworth farm were $3.100 million excluding expenses. Funds from the sale were directed to working capital and the reduction of debt as at 30 June 2021 by $0.732 million. The Company also entered into an unconditional agreement to sell its Keysborough manufacturing facility. The reduction in property, plant and equipment to $31.627 million (2020: $45.020 million) reflects in large part the sale of the Pittsworth farm and the re-classification of the Keysborough manufacturing facility to an asset held for re-sale. The lower level of capital expenditure reflects our focus and effort to recover quickly from AI. On 9 July 2021, the Company completed the sale of its Keysborough manufacturing facility for $18.500m. Proceeds from the sale were used to reduce debt and provide working capital to drive the business recovery, further develop the Company’s cage free capacity and to support its innovation platform. The Company also entered into a long-term lease of the facility of fifteen years, with an additional five-year option, with the purchaser RF Corval, a specialist property fund manager and investment company. The 3-year plan “Managing for Value” continues to be relevant and a focus for the business. While COVID and AI stalled our progress during the past 12 months, work effort continues to develop the farm network and capacity to meet market needs which continue to evolve to focus on cage free eggs. Relationships in the supermarket channel continue to be strong as we seek additional growth opportunities around the cage free transition. The focus on organic and incremental sales growth in industrial ingredients continues to be a business priority. Internally, effort continues to focus on structuring our efforts to accelerate new product development. Innovation programs continue to be bolstered with additional technical resources. New product launches are planned for late H1 FY22. 3 Farm Pride Foods Limited and Controlled Entities Directors’ Report In summary, FY21 has contained the most challenges the Company has ever had to face. The new financial year continues to present challenges in managing the impact of the COVID pandemic in Australia. The Company remains on high vigilance and is making every effort to protect as far as is possible against any incursions that may impact health and safety of our staff or present any commercial impact to the business. Save for unavoidable impact from COVID in the new financial year, the Board and management believe the underlying business operational and structural fundamentals remain resilient and that the Company will recover from the challenges experienced in FY21 and return to an upward trajectory in the coming twelve months. The Board wishes to thank all our customers for their continued support and especially to every one of our employees who have worked so hard to ensure our business could meet the challenges of FY21 We look forward to continuing to supply a quality product to all our customers. Peter Bell Chairman Farm Pride Foods Ltd 27 August 2021 4 Farm Pride Foods Limited and Controlled Entities 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 (the ‘group’), for the financial year ended 30 June 2021 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 Malcolm Ward Bruce De Lacy Non-executive Director, Chair Non-executive Director Independent Non-executive Director 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 group during the financial year were the production, processing, manufacturing and sale of eggs and egg products. There has been no significant change in the nature of these activities during the financial year. Review of operations and financial results Statutory consolidated net profit after tax attributable to the members of Farm Pride Foods Ltd (“Statutory Profit”) for the year ended 30 June 2021 was a loss of $11.971 million (2020: $2.169 million loss). Underlying earnings before interest, tax, depreciation and amortisation (“Underlying EBITDA”) was a loss of $4.330 million (2020: $2.672 million profit). 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 2021: Statutory (loss) / profit Add back: - Interest (finance costs) - Income tax (benefit) / expense - Depreciation - Lease adjustment AASB16 EBITDA Significant items: AI Compensation \ recovery AI asset write off and stock losses Impairment of property, plant and equipment Underlying EBITDA 30 June 2021 $’000 30 June 2020 $’000 (11,971) (2,169) 2,376 (2,547) 9,090 (4,588) (7,640) (3,561) 3,652 3,219 (4,330) 2,291 (930) 8,069 (4,589) 2,672 - - - 2,672 5 Farm Pride Foods Limited and Controlled Entities Directors’ Report Operating and financial review (continued) The annual result reflects the impact of the Avian Influenza outbreak (AI) in July 2020 that centred on the Company’s two farm operations in the Lethbridge area South West of Melbourne. As detailed in the ASX market releases following the outbreak, approximately 33% of our productive hen flock was affected. The management of the AI outbreak was made more difficult and complex with the physical movement restrictions imposed by the Victorian Government due to COVID. While the visible net financial position of the AI outbreak was a net loss of $0.091 million (compensation for loss of stock and flock $3.414 million, cost recovery from other initiatives $0.147 million, stock and flock loss $3.652million) the event was a major disruption to sales from Q1 onwards. Our retailer customers were forced to replace volume from the Company via competitors. Management effort in FY21 continued to be focussed on the recovery of the AI affected farms. In February 2021, Agriculture Victoria has issued Revocation of Quarantine Notices for the effected farms. Re-population of the flocks was underway across Q4 of FY2021 to re-build productive capacity in line with the future strategic plan and direction of the business. The sale of the cage free farm at Pittsworth Qld was completed in March 2021 for $3.100 million excluding expenses. An impairment of $3.219 million was also recognised in the first half results for FY21 to reflect the realised sale value. As outlined below as a subsequent event, the Company also entered into a sale process for its Keysborough manufacturing facility. With the unconditional sales agreement and settlement of the transaction straddling year end, the capital gain on the sale is taxable in FY21 but the accounting profit on sale will only be accounted for in FY22. For further discussion of the review and results of operations of the group reference should be made to the Chairman’s Report dated 27 August 2021. Significant changes in the state of affairs There have been no significant changes in the group’s state of affairs during the financial year, other than as disclosed in this report. Subsequent events On 9 July 2021, the Company settled the sale of its Keysborough manufacturing facility. Proceeds of $18.500 million from the sale were used to reduce debt and provide working capital to drive the business recovery, develop the Company’s cage free capacity and to support its innovation platform. The Company has entered into a long-term lease of the facility of fifteen years with an additional five-year option with the purchaser RF Corval, a specialist property fund manager and investment company. Apart from the sale of the Keysborough manufacturing facility no other circumstance has arisen since 30 June 2021 that has significantly affected or may significantly affect: - - - the operations, in financial years subsequent to 30 June 2021, of the group, or the results of those operations, or the state of affairs, in financial years subsequent to 30 June 2021, of the group. Environmental regulation The group’s operations are not subject to any significant environmental, Commonwealth or State regulations or laws. The group 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. 6 Farm Pride Foods Limited and Controlled Entities Directors’ Report 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 the year and up to the date of this report 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 until 22 November 2018 Peter has been involved at all levels of the egg industry for more than 50 years. He continues to be directly involved in the management of commercial egg farms as well as a contributor to industry and regulatory agencies. He is a director of AAA Egg Company Pty Ltd and its subsidiary West Coast Eggs Pty Ltd, Days Eggs Pty Ltd and Pure Foods Eggs Pty Ltd. These companies are egg producers and marketers in Western Australia, South Australia and Tasmania. Malcolm Ward Non-executive Director – Appointed 30 May 2008, Member of the Audit Committee Malcolm has been in the egg industry for over 30 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 Independent Non-executive director – Appointed 30 November 2018, Chair of the Audit Committee – Appointed 22 November 2018 Bruce has over 35 years’ experience in the egg industry and has previously been employed in a number of positions at the Company including Chief Executive Office, General Manager and Chief Operating Officer. Directors’ meetings Board of Directors Audit Committee Eligible to attend Attended Eligible to attend Attended Peter Bell Malcolm Ward Bruce De Lacy 26 26 26 * Peter Bell attended meetings by invitation. 23 26 26 7 - 10 10 10* 10 10 Farm Pride Foods Limited and Controlled Entities Directors’ Report Directors’ interests in shares Directors’ relevant interests in shares of Farm Pride Foods Limited 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 2,064,250 2,031,772 195,502 - - - Peter Bell and Malcolm Ward have an indirect interest in the 27,486,302 shares held by West Coast Eggs Pty Ltd (2020: 27,486,302 shares) and the 1,000 shares held by Southern Egg Pty Ltd (2020: 1,000). Indemnification and Insurance of directors and officers During the financial year, the Company has paid premiums to insure each of the Directors and Officers 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 or Officer of the Company. Under the Directors and Officers Liability Insurance Policy the company shall not release to any third party or otherwise publish details of the nature of the liabilities insured by the policy or the amount of the premium. Accordingly, the Company relies on section 300 (9) of the Corporations Act 2001 to exempt it from the requirement to disclose the nature of the liability insured against and the premium amount of the policy Proceedings on behalf of the company No person has applied for leave of Court to bring proceedings on behalf of Farm Pride Foods Limited or any of its subsidiaries. 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 within this report. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors as part of the terms of its engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify the auditors during or since the financial year. 8 Farm Pride Foods Limited and Controlled Entities Directors’ Report Non-audit services Non-audit services are approved by resolution of the Audit and Risk 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 Pitcher Partners (Melbourne), network firms of Pitcher Partners, 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 for the following reasons:  all non-audit services were subject to the corporate governance procedures adopted by Farm Pride Foods Ltd and have been reviewed and approved by the Audit and Risk Committee to ensure they do not impact on the integrity and objectivity of the auditor; and  the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for Farm Pride Foods Ltd or any of its related entities, acting as an advocate for Farm Pride Foods Ltd or any of its related entities, or jointly sharing risks and rewards in relation to the operations or activities of Farm Pride Foods Ltd or any of its related entities. Amounts paid and payable to Pitcher Partners (Melbourne) for non-audit services: Taxation services 23,737 14,000 2021 $ 2020 $ 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). Remuneration Report (Audited) The directors present the group’s 2021 remuneration report which details the remuneration information for Farm Pride Foods Limited’s key management personnel (‘KMP’) in accordance with the Corporations Act 2001 and its Regulations (‘Remuneration Report’). The Remuneration Report has been audited by Farm Pride Foods Ltd external auditors, Pitcher Partners. 9 Farm Pride Foods Limited and Controlled Entities Directors’ Report (a) Key management personnel The Remuneration Report discloses the remuneration arrangements and outcomes for people listed in the table below who are those individuals who have been determined as KMP as defined by AASB 124 Related Party Disclosures. Name Position Term as KMP Non-Executive Directors Peter Bell Malcolm Ward Bruce De Lacy Senior Executives Daryl Bird Geeta Kulkarni Robin Donohue Non-executive Chairman Non-executive Director Non-executive Director, Company Secretary Full financial year Full financial year Full financial year Group Chief Executive Officer Group Chief Financial Officer, Resigned 21 May 2021 Group Chief Financial Officer, Appointed 31 May 2021 Full financial year Part of financial year Part of financial year (b) Remuneration policy 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 caliber 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. (c) 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 board of directors. In selecting remuneration consultants, the Board of directors 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 2021, the group did not engage external remuneration consultants. 10 Farm Pride Foods Limited and Controlled Entities Directors’ Report Remuneration Report (continued) (d) 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 director’s 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. Non-executive directors receive fees and do not receive share-based remuneration or bonus payments. 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 year ended 30 June 2021 is detailed in the table titled KMP Remuneration on page 14 (the ‘Remuneration Table’). (e) 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 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 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 short-term cash bonus which is performance- based and is disclosed separately in the Remuneration Table. The board of directors also considers current market conventions with regards to the splits between fixed, short-term and long-term incentive elements. 11 Farm Pride Foods Limited and Controlled Entities Directors’ Report Remuneration 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 Total fixed remuneration (‘TFR’) 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. 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 designed to increase shareholders value. 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. Structure Variable remuneration is expressed as a percentage of a participant’s TFR comprising base salary, superannuation contributions and may include other non-cash benefits, and are based on the achievement of group-wide budgeted revenue and profit targets each financial year and individual performance targets at the board’s discretion. For executives, the group provides a remuneration package that incorporates annual cash bonuses, payable at the discretion of the board of directors. 12 t r o p e R ’ s r o t c e r i D s e i t i t n E d e l l o r t n o C d n a d e t i i m L s d o o F e d i r P m r a F l a t o T e c n a m r o f r e P n o i t a r e n u m e r d e s a B n o i t a u n n a r e p u S 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 e c n a m r o f r e P t n e m y a P d e s a B - 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 s t i f e n e B m r e T t r o h S $ % $ 0 0 0 , 0 5 0 0 0 , 0 5 0 5 7 , 4 5 0 5 7 , 4 5 1 3 2 9 , 1 5 3 2 9 , 1 5 6 5 8 , 6 5 2 0 7 , 0 6 1 - - - - - - - - 8 3 3 , 4 8 3 3 , 4 0 5 7 , 4 6 2 4 , 3 1 5 0 5 , 4 5 0 5 , 4 3 3 9 , 4 3 4 9 , 3 1 $ - - - - - - - - $ - - - - - - - - 3 1 $ - - - - - - - - d n a y r a l a S s e e f $ 2 6 6 , 5 4 2 6 6 , 5 4 0 0 0 , 0 5 4 2 3 , 1 4 1 8 1 4 , 7 4 8 1 4 , 7 4 3 2 9 , 1 5 9 5 7 , 6 4 1 ) d e u n i t n o c ( t r o p e R n o i t a r e n u m e R n o i t a r e n u m e r ’ s r o t c e r i D ) f ( d r a W m o c l a M l y c a L e D e c u r B l l e B r e t e P 1 2 0 2 l l e B r e t e P 0 2 0 2 d r a W m o c a M l l y c a L e D e c u r B $ 6 6 9 , 8 6 3 7 0 4 , 5 1 2 1 3 5 , 8 1 4 0 9 , 2 0 6 0 9 7 , 1 8 3 3 4 9 , 8 9 1 3 3 7 , 0 8 5 % 6 1 - - - 4 1 - - $ 4 9 6 , 1 2 5 6 8 , 6 1 8 0 6 , 1 7 6 1 , 0 4 0 2 8 , 1 2 0 6 2 , 7 1 0 8 0 , 9 3 $ - - - - - - - $ - - - - - - - 4 1 t r o p e R ’ s r o t c e r i D s e i t i t n E d e l l o r t n o C d n a d e t i i m L s d o o F e d i r P m r a F l a t o T e c n a m r o f r e P n o i t a r e n u m e r d e s a B n o i t a u n n a r e p u S 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 e c n a m r o f r e P t n e m y a P d e s a B - 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 s t i f e n e B m r e T t r o h S $ 0 0 0 , 0 6 - - 0 0 0 , 0 6 0 0 0 , 4 5 - 0 0 0 , 4 5 d n a y r a l a S s e e f $ 2 7 2 , 7 8 2 2 4 5 , 8 9 1 3 2 9 , 6 1 7 3 7 , 2 0 5 0 7 9 , 5 0 3 3 8 6 , 1 8 1 3 5 6 , 7 8 4 2 i n r a k l u K a t e e G 3 e u h o n o D n b o R i d r i B l y r a D 1 2 0 2 i n r a k l u K a t e e G d r i B l y r a D 0 2 0 2 n o i t a r e n u m e r ’ s e v i t u c e x E ) g ( 1 2 0 2 y a M 1 2 d e n g s e R i , 9 1 0 2 y r a u r b e F 5 n o r e c i f f O 1 2 0 2 y a M 1 3 n o r e c i f f O l i a c n a n F i l i a c n a n F i i f e h C s a d e t n o p p A i i f e h C s a d e t n o p p A i 2 3 Farm Pride Foods Limited and Controlled Entities Directors’ Report Remuneration Report (continued) (h) Shareholdings of KMP Peter Bell Malcolm Ward Bruce De Lacy Balance 1 July 2020 Received as remuneration Options exercised 2,314,250 2,031,772 195,502 4,541,524 - - - - - - - - Other On market purchases/ (sales) (250,000) - - (250,000) Balance 30 June 2021 2,064,250 2,031,772 195,502 4,291,524 Peter Bell and Malcolm Ward have an indirect interest in the 27,486,302 shares held by West Coast Eggs Pty Ltd (2020: 27,486,302 shares) and the 1,000 shares held by Southern Egg Pty Ltd (2020: 1,000). (i) Other transactions with KMP The value of transactions (inclusive of GST) and amounts receivable/(payable) between directors and their related entities and Farm Pride Foods Limited and its controlled entities. Director related entities1 Transaction Revenue Expenditure AAA Egg Company Pty Ltd (P. Bell / M. Ward) Specialised Breeders Australia Pty Ltd 2 (P. Bell) Days Eggs Pty Ltd (P. Bell) Hy-Line Australia Pty Ltd 2 (P. Bell) Pure Foods Eggs Pty Ltd (P. Bell) West Coast Eggs Pty Ltd (P. Bell / M. Ward) Purchases Purchases Egg supply / Purchases Purchases Egg sales Egg sales / Purchases 2021 $’000 2020 $’000 2021 $’000 - - - - - - 27 195 151 - 41 - 27 - - 2020 $’000 10 107 420 5,319 - 854 776 164 154 Balance Receivable / (Payable) 2021 $’000 2020 $’000 - - - (83) (10) (4) - 3 77 (850) 3 71 1 Peter Bell and Malcolm 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. These transactions are on normal trading terms and conditions. Director’s administrative expenses are reimbursed at cost. 2 Peter Bell resigned as director of Specialised Breeders Australia Pty Ltd and Hy-Line Australia Pty Ltd effective 31 Oct 2019. Transactions in the above table represent related party transactions for the full financial year from July ‘20 – June ’21 and comparatives for July ’19 - June ’20. 15 Farm Pride Foods Limited and Controlled Entities Directors’ Report Remuneration Report (continued) (j) Service Agreements The contracts for service between the group and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Remuneration and other terms of employment for key management personnel are formalised in service agreements as follows: Chief Executive Officer Daryl Bird is the Chief Executive Officer of the Company appointed on 1 December 2018. Daryl is employed under a standard employment contract with no defined length of tenure. Under the terms of his employment contract:  Daryl may resign from his position by providing the group with three months written notice,  The group may terminate this agreement by providing three months written notice or provide payment in lieu of the notice period, or the unexpired part of any notice period,  The group may terminate at any time without notice if serious misconduct has occurred,  Daryl’s total remuneration includes $20,000 car allowance per annum,  For the financial years commencing 1 July 2019 onwards, Daryl will participate in the group’s Short-Term Incentive and Long-Term Incentive programs. Details of Daryl Bird’s salary are detailed in the Remuneration Table. Chief Financial Officer Robin Donohue is the Chief Financial Officer of the Company appointed 31 May 2021. Robin is employed under a standard employment contract with no defined length of tenure.  Robin may resign from his position by providing the group with three months written notice,  The group may terminate this agreement by providing three months written notice or provide payment in lieu of the notice period, or the unexpired part of any notice period,  The group may terminate at any time without notice if serious misconduct has occurred,  For the financial years commencing 1 July 2021 onwards, Robin participates in the group’s Short-Term Incentive program and is entitled to a performance bonus of up to 15% of the cash salary at the time of payment of the bonus. Details of Robin Donohue’s salary are detailed in the Remuneration Table. (k) Revenue and Other Income 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 (loss)/profit before tax Net (loss)/profit after tax Share price at end of year in dollars Basic (loss)/earnings cents per share Diluted (loss)/earnings cents per share 2021 $’000 76,991 (14,518) (11,971) 0.42 (21.69) (21.69) 2020 $’000 90,327 (3,099) (2,169) 0.27 (3.93) (3.93) 2019 $’000 86,641 (5,324) (3,858) 0.21 (6.99) (6.99) 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 16 Farm Pride Foods Limited and Controlled Entities Directors’ Report Remuneration Report (continued) Voting and comments made at the company’s 2020 Annual General Meeting (AGM) At the company’s most recent AGM, a resolution to adopt the prior year remuneration report was put to the vote and at least 75% of votes were cast as ‘yes’ for adoption of that report. No comments were made on the remuneration report that was considered at the AGM. This is the end of the audited remuneration report. Signed in accordance with a resolution of the directors. Peter Bell Director Melbourne 27 August 2021 17 FARM PRIDE FOODS LIMITED AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF FARM PRIDE FOODS LIMITED In relation to the independent audit for the year ended 30 June 2021, to the best of my knowledge and belief there have been: (i) (ii) No contraventions of the auditor independence requirements of the Corporations Act 2001; and No contraventions of APES 110 Code of Ethics for Professional Accountants (including Independence Standards). This declaration is in respect of Farm Pride Foods Limited and its controlled entities during the year. STEPHEN SCHONBERG Partner Date: 27 August 2021 PITCHER PARTNERS Melbourne 18 Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au Farm Pride Foods Limited and Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue and other income Revenue from contracts with customers Interest revenue and other income Less: Expenses Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation Impairment of property, plant and equipment Loss on disposal of biological assets Finance costs Other expenses (Loss)/Profit before income tax Income tax benefit / (expense) (Loss)/Profit from continuing operations (Loss)/Profit for the year Notes 4 4 5 5 5 5 5 5 5 6 2021 $’000 73,316 3,675 76,991 (1,470) (52,537) (15,305) (9,090) (3,219) (3,652) (2,376) (3,860) 2020 $’000 90,234 93 90,327 1,153 (66,543) (15,811) (8,069) - - (2,291) (1,865) (14,518) (3,099) 2,547 (11,971) (11,971) 930 (2,169) (2,169) Total comprehensive (loss) / income for the period (11,971) (2,169) Basic (loss)/earnings per share (cents per share) Diluted (loss)/earnings per share (cents per share) 19 19 (21.69) (21.69) (3.93) (3.93) The above statement should be read in conjunction with the accompanying notes. 19 Farm Pride Foods Limited and Controlled Entities Consolidated Statement of Financial Position Notes 20 8 9 10 11 12 10 6 14 13 15 14 17 16 14 17 18 2021 $’000 1,285 6,105 4,541 7,603 778 2,868 2020 $’000 4,412 7,439 6,011 6,382 812 - 23,180 25,056 414 5,827 10,966 31,627 48,834 3,146 3,280 15,581 45,020 67,027 72,014 92,083 10,610 13,303 3,959 1,928 4,380 1,983 16,497 19,666 18,709 7,462 201 26,372 42,869 29,145 29,578 (433) 29,145 19,441 11,648 212 31,301 50,967 41,116 29,578 11,538 41,116 Current Assets Cash and short-term deposits Trade and other receivables Inventories Biological assets Other current assets Assets held for re-sale Total current assets Non-current assets Biological assets Deferred tax assets Lease assets Property, plant and equipment Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Lease liabilities Provisions Total current liabilities Non-current liabilities Borrowings Lease liabilities Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Retained earnings / (losses) The above statement should be read in conjunction with the accompanying notes. 20 Farm Pride Foods Limited and Controlled Entities Consolidated Statement of Changes in Equity Contributed equity Retained earnings / (losses) Total $’000 $’000 $’000 29,578 - - - 29,578 29,578 - - - 29,578 11,538 (11,971) - (11,971) (433) 13,707 (2,169) - (2,169) 11,538 41,116 (11,971) - (11,971) 29,145 43,285 (2,169) - (2,169) 41,116 Balance as at 1 July 2020 (Loss)/Profit for the year Other comprehensive income Total comprehensive income Balance as at 30 June 2021 Balance as at 1 July 2019 (Loss)/Profit for the year Other comprehensive income Total comprehensive income Balance as at 30 June 2020 The above statement should be read in conjunction with the accompanying notes. 21 Farm Pride Foods Limited and Controlled Entities Consolidated Statement of Cash Flows Notes 2021 $’000 2020 $’000 Cash flow from operating activities Receipts from customers Payments to suppliers and employees Finance costs paid Interest received Net cash provided by / (used in) operating activities 20 Cash flow from investing activities Proceeds from sale of property, plant and equipment Payment for property, plant and equipment Net cash provided by / (used in) investing activities Cash flow from financing activities Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Net cash provided by / (used in) financing activities 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 78,731 (77,186) (1,760) - (215) 3,115 (400) 2,715 - (1,348) (4,279) (5,627) (3,127) 4,412 1,285 91,240 (82,069) (2,291) 2 6,882 - (3,664) (3,664) 19,441 (13,500) (3,963) 1,978 5,196 (784) 4,412 The above statement should be read in conjunction with the accompanying notes. 22             Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary 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 (AASB). 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 27 August 2021. 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) New and revised accounting standards effective at 30 June 2021 AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material AASB 2018-7 principally amends AASB 101 Presentation of Financial Statements and AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendments refine the definition of material in AASB 101. The amendments clarify the definition of material and its application by improving the wording and aligning the definition across AASB Standards and other publications. The amendment also includes some supporting requirements in AASB 101 in the definition to give it more prominence and clarifies the explanation accompanying the definition of material. The application of AASB 2018-7 has not materially impacted the financial statements of the group. AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform AASB 2019-3 has been issued to respond to the effects of Interbank Offered Rates (IBOR) reform on financial reporting. The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate. The reliefs apply to all hedging relationships that are directly affected by the interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument. The application of AASB 2019-3 has not materially impacted the financial statements of the group. 23 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of significant accounting policies (c) Accounting standards issued but not yet effective AASB 2020-1: Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current AASB 2020-1 amends AASB 101 Presentation of Financial Statements to clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current. AASB 2020-1 mandatorily applies to annual reporting periods commencing on or after 1 January 2022 and will be first applied by the Group in the financial year commencing 1 July 2022. AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018 – 2020 and Other Amendments AASB 2020-3 amends AASB 1 First-time Adoption of Australian Accounting Standards, AASB 3 Business Combinations, AASB 9 Financial Instruments, AASB 116 Property, Plant and Equipment, AASB 137 Provisions, Contingent Liabilities and Contingent Assets and AASB 141 Agriculture as a consequence of the recent issuance by IASB of the following IFRS: Annual Improvements to IFRS Standards 2018-2020, Reference to the Conceptual Framework, Property, Plant and Equipment: Proceeds before Intended Use and Onerous Contracts – Cost of Fulfilling a Contract. AASB 2020-3 mandatorily applies to annual reporting periods commencing on or after 1 January 2022 and will be first applied by the Group in the financial year commencing 1 July 2022. (d) Going concern The financial report has been prepared on the basis that the Group is a going concern, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. During the year ended 30 June 2021 the Group incurred a net loss after tax of $11.971 million (2020: loss $2.169 million). Net cash flow from operating activities was an outflow of $0.215 million (2020: cash inflow $6.882 million). As at 30 June 2021 current assets of $23.180 million exceed current liabilities of $16.497 million by $6.683 million. (2020: current assets of $25.056 million exceed current liabilities of $19.666 million by $5.390 million). Borrowings of $18.709 million (2020 $19.441 million) are classified as non-current. As described in Note 16 the Group has debt facilities at 30 June 2021 providing funding of up to $22.152 million. This facility was drawn to $18.932 million as at 30 June 2021. The facility agreement expires on 16 August 2022. With the completion of the sale of the Keysborough manufacturing facility for $18.500 million on 9 July 2021, $7.500 million of the debt facility was repaid, reducing the Group’s borrowings to $11.432 million. The repayment of a principal component of the borrowing reduced the facility limit by $7.081 million to $15.071 million. The remainder of the proceeds from the sale of Keysborough were retained by the Group to fund future growth and innovation initiatives. The Group continues to actively manage its cash flows through management of inventory levels, debtors and creditors within strict terms and limits. The Group continues to refine its internal controls and governance. This includes targeted capital expenditure to improve asset life, quality and safety with a view to support the Group’s focus on diversified revenue sources to adapt to changing market conditions. The directors in their consideration of the appropriateness of the going concern basis for the preparation of the financial report have reviewed the Group’s cash flow forecasts and revenue projections based on current market conditions and business plans. On this basis, no adjustments have been made to the financial report relating to the recoverability and classification of the carrying amount of assets or the amount and classification of liabilities that might be necessary should the Group not continue as a going concern. 24 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of significant accounting policies (e) Biological assets Biological assets comprise flocks of hens. As there is no active market for flocks of hens, the biological assets are recorded based upon the capitalised cost of the flock less accumulated amortisation. The cost is amortised over the productive life of the flock. This is between 50 and 60 weeks. The flocks are held for the purposes of producing eggs. (f) 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 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. (g) 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. (h) Employee benefits 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 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. 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 date. 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. 25 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of significant accounting policies (i) Events after the reporting period Events after the reporting period are those events, favourable or unfavourable, that occur between the end of the reporting period and the date when the financial report is authorised for issue. The amounts recognised in the financial statements reflect events after the reporting period that provide evidence of conditions that existed at the reporting date. Whereas events after the reporting period that are indicative of conditions that arose after the reporting period (i.e. which did not exist at the reporting date) are excluded from the determination of the amounts recognised in the financial statements. (j) Financial instruments   Initial recognition and measurement  Financial assets and financial liabilities are recognised when the group becomes party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value adjusted for transaction costs, except where the instrument is classified as fair value through profit or loss, in which case transaction costs are immediately recognised as expenses in profit or loss. Classification of financial assets Financial assets recognised by the group are subsequently measured in their entirety at either amortised cost or fair value, subject to their classification and whether the group irrevocably designates the financial asset on initial recognition at fair value through other comprehensive income (FVtOCI) in accordance with the relevant criteria in AASB 9. Financial assets not irrevocably designated on initial recognition at FVtOCI are classified as subsequently measured at amortised cost, FVtOCI or fair value through profit or loss (FVtPL) on the basis of: (a) (b) The group’s business model for managing the financial assets; and The contractual cash flow characteristics of the financial asset. Classification of financial liabilities Financial liabilities classified as held-for-trading, contingent consideration payable by the group for the acquisition of a business, and financial liabilities designated at FVtPL, are subsequently measured at fair value. All other financial liabilities recognised by the group are subsequently measured at amortised cost. Trade and other receivables Trade and other receivables arise from the group’s transactions with its customers and are normally settled within 30 days. Consistent with both the group’s business model for managing the financial assets and the contractual cash flow characteristics of these assets, trade and other receivables are subsequently measured at amortised cost. Impairment of financial assets The following financial assets are tested for impairment by applying the ‘expected credit loss’ impairment model: (a) debt instruments measured at amortised cost; (b) debt instruments classified at fair value through other comprehensive income; and receivables from contracts with customers, contract assets and lease receivables. 26 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of significant accounting policies The group applies the simplified approach under AASB 9 to measuring the allowance for credit losses for receivables from contracts with customers, contract assets and lease receivables. Under the AASB 9 simplified approach, the group determines the allowance for credit losses for receivables from contracts with customers, contract assets and lease receivables on the basis of the lifetime expected credit losses of the financial asset. Lifetime expected credit losses represent the expected credit losses that are expected to result from default events over the expected life of the financial asset. The group determines expected credit losses based on the group’s historical credit loss experience, adjusted for factors that are specific to the financial asset as well as current and future expected economic conditions relevant to the financial asset. When material, the time value of money is incorporated into the measurement of expected credit losses. There has been no change in the estimation techniques or significant assumptions made during the reporting period. The group has identified contractual payments more than 365 days past due as default events for the purpose of measuring expected credit losses. These default events have been selected based on the group’s historical experience. Because contract assets are directly related to unbilled work in progress, contract assets have a similar credit risk profile to receivables from contracts with customers. Accordingly, the group applies the same approach to measuring expected credit losses of receivables from contracts with customers as it does to measuring impairment losses on contract assets. The measurement of expected credit losses reflects the group’s ‘expected rate of loss’, which is a product of the probability of default and the loss given default, and its ‘exposure at default’, which is typically the carrying amount of the relevant asset. Expected credit losses are measured as the difference between all contractual cash flows due and all contractual cash flows expected based on the group’s exposure at default, discounted at the financial asset’s original effective interest rate. Financial assets are regarded as ‘credit-impaired’ when one or more events have occurred that have a detrimental impact on the estimated future cash flows of the financial asset. Indicators that a financial asset is ‘credit-impaired’ include observable data about the following: (a) (b) (c) (d) significant financial difficulty of the issuer or the borrower; breach of contract; the lender, for economic or contractual reasons relating to the borrower’s financial difficulty, has granted concessions to the borrower that the lender would not otherwise consider; or it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation. The gross carrying amount of a financial asset is written off (i.e. reduced directly) when the counterparty is in severe financial difficulty and the group has no realistic expectation of recovery of the financial asset. Financial assets written off remain subject to enforcement action by the group. Recoveries, if any, are recognised in profit or loss. (k) Foreign currency translations and balances Functional and presentation currency The financial statements are presented in Australian dollars which is the group’s functional and presentation currency. Transactions and balances Transactions undertaken in foreign currencies are recognised in the group’s functional currency, using the spot rate at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are restated to the spot rate at the reporting date. Except for certain foreign currency hedges, all resulting exchange gains or losses are recognised in profit or loss for the period in which they arise. 27 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of Significant Accounting Policies (continued) (l) 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. 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. (m) 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. Impairment losses in respect of individual assets are recognised immediately in profit or loss. 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 rata basis to the other assets comprising the relevant cash generating unit. (n) Income tax Current income tax expense 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 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. 28 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of Significant Accounting Policies (continued) (o) 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. (p) Leases At the commencement date of a lease (other than leases of 12-months or less and leases of low value assets), the group recognises a lease asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. Lease assets Lease assets are initially recognised at cost, comprising the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date of the lease, less any lease incentives received, any initial direct costs incurred by the group, and an estimate of costs to be incurred by the group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Subsequent to initial recognition, lease assets are measured at cost (adjusted for any remeasurement of the associated lease liability), less accumulated depreciation and any accumulated impairment loss. Lease assets are depreciated over the shorter of the lease term and the estimated useful life of the underlying asset, consistent with the estimated consumption of the economic benefits embodied in the underlying asset. Lease liabilities Lease liabilities are initially recognised at the present value of the future lease payments (i.e. the lease payments that are unpaid at the commencement date of the lease). These lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the group’s incremental borrowing rate. Subsequent to initial recognition, lease liabilities are measured at the present value of the remaining lease payments (i.e. the lease payments that are unpaid at the reporting date). Interest expense on lease liabilities is recognised in profit or loss (presented as a component of finance costs). Lease liabilities are remeasured to reflect changes to lease terms, changes to lease payments and any lease modifications not accounted for as separate leases. Variable lease payments not included in the measurement of lease liabilities are recognised as an expense when incurred. Leases of 12-months or less and leases of low value assets Lease payments made in relation to leases of 12-months or less and leases of low value assets (for which a lease asset and a lease liability has not been recognised) are recognised as an expense on a straight-line basis over the lease term. 29 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of Significant Accounting Policies (continued) (q) Other revenue Interest revenue is recognised using the effective interest method. Other revenue is recognised when the right to receive income or other distribution has been established. (r) Principles 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. (s) Property held for development and sale Property held for development and sale is measured at the lower of cost and net realisable value. Cost includes the cost of acquisition, development, borrowing costs and holding costs until completion of development. Borrowing costs and holding costs incurred after the completion of development are expensed as incurred. (t) 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: – – – Buildings Plant and equipment Leased plant and equipment 2021 Up to 40 years 1 to 20 years 5 to 20 years 2020 Up to 40 years 1 to 20 years 5 to 20 years 30 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of Significant Accounting Policies (continued) (u) Research and development expenditure Expenditure on research activities is recognised as an expense when incurred. Development costs are capitalised when the group can demonstrate all of the following: the technical feasibility of completing the asset so that it will be available for use or sale; the intention to complete the asset and use or sell it; the ability to use or sell the asset; how the asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and the ability to measure reliably the expenditure attributable to the asset during its development. Capitalised development costs are amortised over their estimated useful lives commencing from the time the asset is available for use. The amortisation method applied to capitalised development costs is consistent with the estimated consumption of economic benefits of the asset. Subsequent to initial recognition, capitalised development costs are measured at cost, less accumulated amortisation and any accumulated impairment losses. (v) Revenue from contracts with customers Sales The Group’s contracts with customers for the sale of egg products include one performance obligation. The Group recognises revenue from sale of products at the point in time when control of the asset is transferred to the customer on delivery of the goods. The normal credit terms are 30 to 60 days. Variable consideration Some contracts for the sale of products provide customers with rebates and promotional discounts which give rise to variable consideration. The variable consideration is estimated at contract inception using the expected value method based on forecast, timing of settlement and/or volumes and is constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty is subsequently resolved. The amount of revenue reflects the consideration to which the Group expects to be entitled to in exchange for those goods. Trade receivables A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring products to a customer before payment is due, a contract asset is recognised for the right to the earned consideration that is conditional. Contract liabilities A contract liability is the obligation to transfer products to customers for which the Group has received consideration from the customer in advance. If a customer pays consideration before the Group transfers products to the customer, a contract liability is recognised when the payment is made or the payment is due. Contract liabilities are recognised as revenue when the Group provides the product under the contract. 31 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 1: Summary of Significant Accounting Policies (continued) (w) 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. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. (x) Segment reporting Management has determined the operating segments based on the reports reviewed by the board of directors (the chief operating decision maker as defined under AASB 8) that are used to make strategic and operating decisions. The board of directors considers the business primarily from a geographic perspective. On this basis the Group has identified one reportable segment, Australia. The Group does not operate in any other geographic segment. (y) Comparatives Where necessary the comparative information has been reclassified and repositioned for consistency with current year disclosures. (z) Rounding of amounts The group have applied the relief under ASIC Corporates (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and accordingly, the amounts in the Financial Reports and in the Directors’ Report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar (where indicated). 32 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 2: Significant accounting estimates and judgements Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Impairment of non-current 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 Group. 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. Refer to Note 13(b) for further details. (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 Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Deferred tax assets are recognised for deductible temporary differences and tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. (c) Fair value measurements 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 3(d): Fair Value Measurements for the details of the fair value measure key assumptions and inputs. (d) Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation charges for its property, plant and equipment. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation charge will increase where the useful lives are less than previously estimated lives, and technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. (e) Biological assets The cost of flocks of hens are amortised over the productive life of the flock, which is between 50 and 60 weeks. This is based on the characteristics of the flock and the Group’s historical operating experience. (f) Provision for expected credit losses of trade receivables and contract assets The Group uses a provision matrix to calculate expected credit losses (ECLs) for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns. The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. 33 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 2: Significant accounting estimates and judgements (continued) (g) Rebates and promotional discounts liabilities Rebates and promotional discounts are either settled monthly on settlement of invoice or accrued at balance sheet date depending on the exact timing of the customer claim. The Group estimates the rebate and promotional discount based on the percentage specified in the customer contract and the timing of settlement and/or volumes sold taking into account previous claims made. (h) Inventory provisions Management's judgement is applied in determining the inventory provisions for obsolescence and net realisable value, where the estimated selling price of inventory is lower than the cost to sell based on historical observations and management expectations. 34 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 3: Financial instruments risk management objectives and policies The Group’s activities expose it to a variety of financial risks, including market risk (commodity prices, foreign currency and interest rate risk), liquidity risk and credit risk. The Group’s senior management oversees the management of these risks by using various financial instruments, including derivative financial instruments. It is the Group’s policy that no trading in derivatives for speculative purposes may be undertaken. The use of financial derivatives is subject to approval by the Board of Directors. The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings, and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade receivables, and cash and short-term deposits that derive directly from its operations. The Group is exposed to some foreign currency risk as the purchase of plant and equipment from time to time is denominated in foreign currencies. The Group holds the following financial assets and financial liabilities at reporting date: Financial assets Cash and cash equivalents Receivables Financial liabilities Payables Lease liabilities Borrowings (a) Market risk (i) Commodity price risk 2021 $’000 1,285 6,105 7,390 10,610 11,421 18,709 40,740 2020 $’000 4,412 7,439 11,851 13,303 16,028 19,441 48,772 The Group is affected by the price variability of certain commodities. The Group’s main sales product is shell eggs which is a commodity that is subject to market conditions. Where possible the Group enters longer term relationships with key customers that create more certainty around volumes and price. The Group’s activities also require the ongoing purchase of grain and/or feed stock and is therefore affected by fluctuations in the price of feed ingredients, primarily wheat and soy. The Group manages this exposure utilising forward grain and/or feed stock purchase commitments through its key suppliers, within certain price parameters agreed by the Board of Directors. (ii) Foreign exchange risk The majority of the Group’s operations are denominated in Australian dollars, therefore minimising the impact of foreign currency risk. The Group undertakes some transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed utilising forward foreign exchange contracts, subject to approval by the Board of Directors. 35 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 3: Financial instruments risk management objectives and policies (continued) Forward foreign exchange contracts It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments (normally Euro) for future purchases of plant and equipment. (iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s external debt facilities and cash at bank held at variable rates. The Group’s 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 shown in the table below. Sensitivity The following sensitivity analysis is assessed on the interest rate risk exposures in existence at reporting date. At 30 June 2021, if interest rates had moved as illustrated in the table below, with all other variables held constant, the post-tax profit and equity would have been impacted as follows: Interest rates – increase by 100 basis points Interest rates – decrease by 100 basis points (b) Liquidity risk Impact on post-tax profit and equity 2021 $’000 (121) 121 2020 $’000 (149) 149 Ultimate responsibility for liquidity risk management rests with the Board of Directors, who assess the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows. Refer to the Group’s funding arrangements disclosed in Note 16. 36 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 3: Financial instruments risk management objectives and policies (continued) Maturities of financial liabilities The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both principal and estimated interest cash flows. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at reporting date. <6 months $’000 6-12 months $’000 1-5 years $’000 Over 5 years $’000 Total $’000 Fixed/ Floating 2021 Financial liabilities Trade and other payables 2020 Financial liabilities Trade and other payables (10,610) - - Loans - - (18,709) Lease liability (1,995) (1,964) (7,462) (12,605) (1,964) (26,171) <6 months $’000 6-12 months $’000 1-5 years $’000 Over 5 years $’000 (13,303) - - Loans - - (19,441) Lease liability (2,250) (2,130) (10,884) (15,553) (2,130) (30,325) (c) Credit risk - - - - (10,610) - (18,709) Fixed at 9% (11,421) Fixed at 3% (40,740) Total $’000 Fixed/ Floating - - (764) (764) (13,303) - (19,441) Fixed at 9% (16,028) Fixed at 3% (48,772) Credit risk refers to the risk that a counterparty will default on its contractual obligations under a financial instrument or customer contract, resulting in financial loss to the Group. The Group manages its credit risk by dealing with creditworthy counterparties. The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded is spread amongst approved counterparties. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The aging analysis of trade and other receivables is provided in Note 8(b). As the Group 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. The carrying amount of financial assets recorded in the financial statements, net of any allowance for impairment, represents the Group’s maximum exposure to credit risk. 37 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 3: Financial instruments risk management objectives and policies (continued) (d) Fair value of financial instruments The only financial assets or financial liabilities carried at fair value are forward foreign currency contracts from time to time. These instruments are considered to be Level 2 financial instruments as their measurement is derived from inputs other than quoted prices that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived from prices). The fair value of forward foreign currency is obtained from third party valuations derived from discounted cash flow forecasts of forward exchange rates at the end of the reporting period and contract exchange rates. There were no transfers between levels 1, 2 and 3 for recurring fair value measurements during the financial year. The carrying amount of other financial assets and financial liabilities recorded in the financial statements approximate their fair values. Note 4: Revenue Disaggregation of revenue In the following table, revenue is disaggregated by major product. Type of product1 Shell egg Egg product Other Total revenue from contracts with customers Interest revenue and other income Total revenue Consolidated 2021 $’000 2020 $’000 52,420 20,020 876 73,316 3,675 76,991 69,264 20,025 945 90,234 93 90,327 1 The majority of sales (99.5%) are made in Australia. Revenue is recognised at a point in time, upon satisfaction of the Group’s performance obligation, being delivery of the products to the customer. 38 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 5: Loss from continuing operations Loss from continuing operations before income tax has been determined after the following specific expenses: Cost of goods sold Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expenses Salaries and wages Employee superannuation contributions Total employee benefits expenses Depreciation of non-current assets and leased assets Land and buildings Plant & equipment Right of use asset Total depreciation of non-current assets Foreign exchange translation loss Flock amortisation (note 10) Finance costs – interest expense Impairment of property, plant and equipment Loss on disposal of biological assets Consolidated 2021 $’000 2020 $’000 1,470 52,537 54,007 14,097 1,208 15,305 1,636 3,076 4,378 9,090 1 9,456 2,376 3,219 3,652 (1,153) 66,543 65,390 14,555 1,256 15,811 1,205 2,438 4,426 8,069 4 12,449 2,291 - - 39 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 6: Income tax (a) Components of tax expense: Current tax (benefit) / expense Deferred tax (benefit) / expense Under/(over) provision in prior years Income tax expense (b) Income tax reconciliation (Loss) / profit before income tax At the statutory income tax rate of 30% (2020: 30%) Derecognition of carry forward losses Under/(over) provision in prior years Income tax (benefit) / expense (c) Deferred tax assets and (liabilities) relate to the following: Employee benefits Provisions and accruals Fixed assets and leases Carry forward tax losses Gross deferred tax assets (d) Movement in deferred tax assets and (liabilities) Balance at beginning of year Recognised in profit or loss Current year losses Balance at the end of the year Consolidated 2021 $’000 - (2,786) 239 (2,547) (14,518) (4,355) 1,569 239 2020 $’000 - (930) - (930) (3,099) (930) - - (2,547) (930) 639 201 4, 987 - 5,827 3,280 2,547 - 5,827 659 208 280 2,133 3,280 2,350 930 - 3,280 40 Note 7: Dividends Farm Pride Foods Limited and Controlled Entities Notes to the financial statements (a) Dividends proposed and recognised as a liability Consolidated 2021 $’000 Nil 2020 $’000 Nil (b) Franking credit balance Balance of franking account at year end 11,485 11,485 Note 8: Receivables Trade receivables Allowance for expected credit losses Other receivables Consolidated 2021 $’000 5,657 (6) 5,651 454 6,105 2020 $’000 7,115 (6) 7,109 330 7,439 (a) Terms and conditions Trade receivables are non-interest bearing and generally on 30 to 60 day terms. Other receivables are non-interest bearing and have repayment terms between 30 and 60 days. (b) Allowance for expected credit losses Movements in the allowance for expected credit losses were: Opening balance as at 1 July Decrease in allowance for expected credit losses Consolidated 2021 $’000 2020 $’000 6 - 6 6 - 6 41 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 8: Receivables (continued) Trade and other receivables ageing analysis as at 30 June is: Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days Gross 2021 $’000 6,083 17 2 9 6,111 Loss Allowance 2021 $’000 - - - 6 6 Gross 2020 $’000 7,247 101 65 32 7,445 Loss Allowance 2020 $’000 - - - 6 6 Due to the short-term nature of these receivables, their carrying value approximates their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security. Note 9: Inventories CURRENT Raw materials Finished goods Total inventories Consolidated 2021 $’000 3,137 1,404 4,541 2020 $’000 3,622 2,389 6,011 42 Note 10: Biological assets Current Non-current Total Flocks Cost Less: Accumulated amortisation Opening written down value Additions Amortisation Disposal Closing written down value Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Consolidated 2021 $’000 2020 $’000 7,603 414 8,017 6,382 3,146 9,528 17,473 (9,456) 8,017 9,528 11,597 (9,456) (3,652) 8,017 16,809 (7,281) 9,528 9,087 12,890 (12,449) - 9,528 The number of birds held by the Company as at 30 June 2021 was 1,212,953 (2020: 1,427,375). The average output per bird is approximately 5 eggs per week during their productive period. Note 11: Other current assets Prepayments and deposits Note 12: Assets held for re-sale Assets held for re-sale Consolidated 2021 $’000 778 2020 $’000 812 Consolidated 2021 $’000 2020 $’000 2,868 - Assets held for re-sale The Group announced on 29 June that after completing an open market Expression of Interest (EOI) sale process conducted by CBRE Melbourne it has entered into an unconditional agreement to sell its Keysborough manufacturing site. The settlement process was completed on the 9th July, 2021. 43 Note 13: Property, plant and equipment Farm Pride Foods Limited and Controlled Entities Notes to the financial statements 2021 Cost Accumulated depreciation Net book value Opening net book value as at 1 July 2020 Reclassifications to ‘lease assets’ Additions Impairment losses Disposal Transfers Depreciation Transfer to assets held for re- sale Net book value as at 30 June 2021 2020 Cost Accumulated depreciation Net book value Opening net book value as at 1 July 2019 Reclassifications to ‘lease assets’1 Additions Transfers Depreciation Net book value as at 30 June 2020 Land and buildings Plant and equipment $’000 25,780 (7,148) 18,632 $’000 45,789 (33,778) 12,011 Capital works in progress $’000 984 - 984 Total $’000  72,553 (40,926) 31,627 24,926 14,834 5,260 45,020 - - (94) (2,453) 488 (1,636) (2,599) (78) 19 (69) (431) 1,081 (3,076) (269) - (78) 514 (3,056) (165) (1,569) - - 533 (3,219) (3,049) - (4,712) (2,868) 18,632 12,011 984 31,627 35,457 (10,531) 24,926 48,995 (34,161) 14,834 5,260 - 5,260 89,712 (44,692) 45,020 25,551 16,177 3,485 45,213 - - 580 (1,205) 24,926 (214) - 1,309 (2,438) 14,834 - (214) 3,664 (1,889) - 5,260 3,664 - (3,643) 45,020 1On the initial application of AASB 16 Leases, as at 1 July 2019, the carrying amount of equipment under finance lease arrangements was reclassified from ‘property, plant and equipment’ to ‘lease assets’. 44 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 13: 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 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. Impairment testing of non-current assets (b) The Group performed an impairment test in June 2021. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 30 June 2021, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of the Group’s non-current assets. In addition, the unfavourable trading conditions and drought impacted grain prices have unfavourably impacted the Group. As a result of the analysis, management did not identify an impairment other than specific impairments identified and taken up throughout the year. 45 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 14: Lease assets and liabilities Lease assets 2021 Cost Accumulated depreciation Net book value Land and buildings $’000 Plant and equipment $’000 18,094 (7,891) 10,203 1,408 (645) 763 Total $’000 19,502 (8,536) 10,966 Opening net book value as at 1 July 2020 14,603 978 15,581 Reclassification from PPE Recognition of leased assets - additions Re-assessment of lease liability Depreciation Net book value as at 30 June 2021 - - (368) (4,032) 10,203 78 53 - (346) 763 78 53 (368) (4,378) 10,966 Lease assets 2020 Cost Accumulated depreciation Net book value Opening net book value as at 1 July 2019 Reclassifications from PPE1 Recognition of leased assets as at 1 July 2020 Recognition of leased assets – additions Depreciation Net book value as at 30 June 2020 Land and buildings $’000 Plant and equipment $’000 Total $’000 18,684 (4,081) 14,603 - - 18,684 - (4,081) 14,603 1,323 (345) 978 - 214 795 314 (345) 978 20,007 (4,426) 15,581 - 214 19,479 314 (4,426) 15,581 1 On the initial application of AASB 16 Leases, as at 1 July 2019, the carrying amount of equipment under finance lease arrangements was reclassified from ‘property, plant and equipment’ to ’lease assets’. 46 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 14: Lease assets and liabilities (continued) Lease liabilities Lease liabilities Current lease liabilities Non-current lease liabilities Total carrying amount of lease liabilities Lease expenses and cashflows Depreciation expense on lease assets Interest expense on lease liabilities Repayment of lease liability Total cash outflow relating to leases Note 15: Payables Trade creditors Other payables and accruals (i) Terms and conditions Our standard terms are 30 days from the end of month. 2021 $’000 3,959 7,462 11,421 4,378 400 4,279 4,679 2020 $’000 4,380 11,648 16,028 4,426 537 3,963 4,500 Consolidated 2021 $’000 8,822 1,788 2020 $’000 11,519 1,784 10,610 13,303 47 Note 16: Borrowings Non-current Secured Borrowings: Long term loan2 – Tranche A Working capital loan – Tranche B1 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Interest Rate Maturity Consolidated 2021 $’000 2020 $’000 15,000 3,709 15,000 4,441 18,709 19,441 1 In line with AASB 9, Working capital loan – Tranche B is measured net of transaction costs of $223k. 2 Secured by fixed charge over selected property and company assets. At the reporting date, the consolidated entity’s financing are as follows. (i) Long Term Loan – Tranche A Facilities available Facilities used Facilities unused (ii) Working capital loan – Tranche B Facilities available Facilities used Facilities unused Consolidated 2021 $’000 15,000 15,000 - 7,152 3,709 3,443 2020 $’000 15,000 15,000 - 8,500 4,861 3,639 Tranche B includes $3.5 million limit exclusively for capitalised interest, if any. The term of the facility is for three years from the date of the first drawdown, 16 August 2019. Note 17: Provisions Current Employee benefits Annual leave Long service leave Non-current Employee benefits Long service leave benefits Total employee benefits provisions 48 Consolidated 2021 $’000 1,008 920 1,928 2020 $’000 1,031 952 1,983 201 212 2,129 2,195 Note 18: Contributed Equity Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Issued and paid up capital 55,180,175 (2019: 55,180,175) Ordinary shares fully paid Each share is entitled to 1 vote per share. (a) Capital management Consolidated 2021 $’000 29,578 29,578 2020 $’000 29,578 29,578 The Board reviews the capital structure on an ongoing basis. The Group’s objective is to maintain an optimal capital structure which seeks to reduce the cost of capital and safeguard the Group’s ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. (b) Dividends During the year ended 30 June 2021 no dividends were paid, declared or recommended (2020: Nil). Note 19 (Loss)/Earnings per share The following reflects the income and share data used in calculations of basic and diluted (loss)/earnings per share computations: Net (loss) / profit from continuing operations Weighted average Weighted average number of ordinary shares used in calculating basic (loss)/earnings per share Weighted average number of shares used to calculate diluted (loss)/earnings per share Consolidated 2021 $’000 2020 $’000 (11,971) (2,169) 2021 No. of shares 2020 No. of shares 55,180,175 55,180,175 55,180,175 55,180,175 49 Note 20: Cash Flow Information Farm Pride Foods Limited and Controlled Entities Notes to the financial statements (a) Reconciliation of cash flow from operations with profit after tax: (Loss)/profit from ordinary activities after tax (11,971) (2,169) Consolidated 2021 $’000 2020 $’000 Non-cash items Depreciation Impairment of property, plant and equipment Loss on disposal of biological assets Flock amortisation Non-cash movement on loan Non-cash movement on property, plant and equipment and leases Changes in operating assets and liabilities net of effects from acquisition of businesses: (Increase) / decrease in trade and other receivables (Increase) / decrease in inventory (Increase) / decrease in biological assets (Increase) / decrease in deferred tax asset (Increase) / decrease in other assets Increase / (decrease) in trade and other creditors Increase / (decrease) in employee entitlements 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 9,090 3,219 3,652 9,456 616 (212) 1,334 1,470 (11,597) (2,547) 34 (2,693) (66) (215) 8,069 - 12,449 - - 764 (1,153) (12,890) (930) (406) 3,092 56 6,882 1,285 1,285 4,412 4,412 50 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 20: Cash Flow Information (continued) (c) Reconciliation of liabilities arising from financing activities As at 1 July Financing cash flows Operating cash flows - interest paid $’000 19,441 16,028 $’000 (1,348) (4,279) 35,469 (5,627) 13,500 198 5,941 (3,963) 13,698 1,978 $’000 - (400) (400) - (537) (537) Non-Cash Changes Other $’000  616 72 688 As at 30 June $’000 18,709 11,421 30,130 - 20,330 19,441 16,028 20,330 35,469 2021 Bank loans Lease liabilities Total liabilities from financing activities 2020 Bank loans Lease liabilities Total liabilities from financing activities Note 21: Commitments Farm cost commitments Farm commitments relate to commitments for flock replenishment and other farm operating expenditure commitments: Farm cost commitments Note 22: Controlled Entities Consolidated 2021 $’000 2020 $’000 1,156 10,063 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 2021 2020 Australia 100% 100% Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 23: Related party disclosures (a) Parent entity and equity interests in related parties The parent entity of the Group is Farm Pride Foods Limited, a listed public company, incorporated in Australia. Details of the percentage of ordinary share held in subsidiaries are disclosed in Note 22. (b) Ultimate parent entity The ultimate parent entity of the Group is AAA Egg Company Pty Limited, a private company, incorporated in Australia. (c) Key management personnel Disclosures relating to key management personnel are set out in the Directors’ report. (d) Key management personnel compensation The aggregate compensation of the key management personnel of the Group is set out below: Short-term employee benefits Long term employee benefits Post-employment benefits Consolidated 2021 $’000 704 - 54 758 2020 $’000 688 - 53 741 Detailed remuneration disclosures are provided in the Remuneration Report on page 13 and 14. 52 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 23: Related party disclosures (continued) (e) Transactions with directors and director-related entities The value of transactions (inclusive of GST) and amounts receivable / (payable) between Directors and their related entities and Farm Pride Foods Limited and its controlled entities. Director related entities1 Transaction Revenue Expenditure AAA Egg Company Pty Ltd Purchases (P. Bell / M. Ward) Specialised Breeders Australia Pty Ltd 2 (P. Bell) Purchases 2021 $’000 2020 $’000 2021 $’000 - - - - Balance Receivable / (Payable) 2021 $’000 2020 $’000 - - 2020 $’000 10 107 (83) Days Eggs Pty Ltd (P. Bell) Hy-Line Australia Pty Ltd 2 (P. Bell) Egg supply / Purchases 27 195 151 420 (10) (4) Purchases - - 5,319 (850) Pure Foods Eggs Pty Ltd Egg sales 41 27 - - 3 3 (P. Bell) West Coast Eggs Pty Ltd (P. Bell / M. Ward) Egg sales / Purchases 854 776 164 154 77 71 1Peter Bell and Malcolm 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. These transactions are on normal trading terms and conditions. 2 Peter Bell resigned as director of Specialised Breeders Australia Pty Ltd and Hy-Line Australia Pty Ltd effective 31 Oct 2019. Transactions in the above table represent related party transactions for the full financial year from July ‘20 – June ’21 and comparatives for July ’19 - June ‘20. 53 Farm Pride Foods Limited and Controlled Entities Notes to the financial statements Note 24: 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 Total shareholder’s equity Summarised statement of comprehensive income (Loss) of the parent entity Total comprehensive (loss) of the parent entity 2021 $’000 23,180 70,641 15,172 40,966 29,578 97 29,675 (11,441) 872) (11,441) 2020 $’000 25,476 89,557 18,293 48,441 29,578 11,538 41,116 (3,268) (3,268) Farm Pride Foods Limited as parent has provided security over the loans of its subsidiaries by a fixed and floating charge (see note 16). Note 25: Auditor’s remuneration Audit and other assurance services Audit and review of the financial report of the entity and any other entity in the consolidated entity Additional Audit procedures required due to the AI outbreak Other services Taxation services Note 26: Subsequent Events Consolidated Entity 2021 $ 2020 $ 131,000 129,000 44,175 - 23,737 198,912 14,000 143,000 On 9 July 2021, the Company settled the sale of its Keysborough manufacturing facility. Proceeds of $18.500 million from the sale were be used to reduce debt and provide working capital to drive the business recovery, develop the Company’s cage free capacity and to support its innovation platform. The Company has entered into a long-term lease of the facility of fifteen years with an additional five-year option with the purchaser RF Corval, a specialist property fund manager and investment company. Apart from the sale of the Keysborough manufacturing facility no other circumstance, has arisen since 30 June 2021 that has significantly affected or may significantly affect: - - - the operations, in financial years subsequent to 30 June 2021, of the group, or the results of those operations, or the state of affairs, in financial years subsequent to 30 June 2021, of the group. 54 Farm Pride Foods Limited and Controlled Entities Directors’ Declaration Directors’ Declaration The Directors declare that the financial statements and notes set out on pages 19 to 54 in accordance with the Corporations Act 2001: (a) Comply with Australian Accounting Standards and the Corporations Regulation 2001, and other mandatory professional reporting requirements; (b) As stated in Note 1(a) the consolidated financial statements also comply with International Financial Reporting Standards; and (c) Give a true and fair view of the financial position of the consolidated entity as at 30 June 2021 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 and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending 30 June 2021. This declaration is made in accordance with a resolution of the Directors. Director 27 August 2021 Melbourne 55 FARM PRIDE FOODS LIMITED ABN 42 080 590 030 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARM PRIDE FOODS LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Farm Pride Foods Limited “the Company” and its controlled entities “the Group”, which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au 56 FARM PRIDE FOODS LIMITED ABN 42 080 590 030 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARM PRIDE FOODS LIMITED Key Audit Matter Valuation of flock assets Valuation of flock assets - $8,016,567 Refer to Note 10: Biological Assets The Group has $8.02 million ($9.53 million as at 30 June 2020) of biological assets, “the flock assets”. The flock assets should be valued at market value consistent with AASB 141 Agricultural assets, however, the lack of an active or liquid market for flock assets means the flock assets are measured at cost less accumulated amortisation and impairment losses. The amortisation rate is based on the estimated life of an individual flock within the flock assets, and consequently the valuation of the flock assets as a whole is subject to judgement. We have focused on this balance given it is based on significant estimates involving subjective judgements and uncertainties over the estimated flock assets life due to the impact of factors such as disease and productive capacity of the individual flocks. How our audit addressed the key audit matter Our testing of the flock assets valuation focused on assessing the appropriateness of management’s estimates and judgements when determining the flock assets’ estimated life. Our procedures included, amongst others: • Obtained an understanding of processes and evaluated the design and implementation of key controls in respect of the valuation of the flock assets; • Obtained schedule of total flock assets as at 30 June 2021 and agreed to the general ledger; • Assessed the underlying mathematical accuracy of the flock asset schedule by performing a recalculation of the written down value of the flock assets as at 30 June 2021 based on the total capitalised cost, age and productive life of each flock asset as at 30 June 2021; • Tested the appropriateness and accuracy of costs capitalised to flock assets by verifying a sample of costs back to supporting invoices/documentation; • Held discussions with management and assessed the key assumptions used to determine productive life for each flock asset as at 30 June 2021; • Assessed the adequacy of the presentation and disclosure of the flock assets in the financial report as at 30 June 2021. Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au 57 FARM PRIDE FOODS LIMITED ABN 42 080 590 030 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARM PRIDE FOODS LIMITED Valuation of Property, plant and equipment Valuation of property, plant and equipment and asset held for resale- $34,495,545 Refer to Note 13 and 12: Property, plant and equipment and asset held for resale. The Group has $35.4 million ($45.0 million as at 30 June 2020) of property, plant and equipment, which represents approximately 47% of total assets. Australian Accounting Standards require the Group to assess, at the end of each reporting period, whether there is any indication of impairment to assets. We have focused on this balance due to the significance of the balance and in light of the market capitalisation of the company being less than its net asset value, which is a potential indicator of impairment. The key assumptions and methodologies used in the discounted cash-flow forecast for value-in-use impairment assessment are complex judgements made by management. Our testing of property, plant and equipment valuation focused on assessing the appropriateness of management’s judgements in relation to its determination of cash-generating unit and the associated value in use calculation. Our procedures included, amongst others: • Obtained an understanding of processes • • • and evaluated the design and implementation of key controls in respect of the valuation of property, plant and equipment; Evaluated the determination of cash- generating units; Evaluated the assumptions and methodologies utilised in the discounted cash flow prepared by management, including discount rate, growth rates and other key assumptions such as egg prices and costings for feed; Assessed the Group’s results in comparison to historical actuals and forecasts to determine the reasonableness of the discounted cash flow; • Compared forecast future cash flows to • • • Board approved budgets; Tested the mathematical accuracy of the discounted cash flow model; Assessed the impact of sensitivities to sales, feed prices and WACC rates. Assessed the adequacy of the presentation and disclosure of property, plant and equipment in the financial report as at 30 June 2021. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 58 Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au FARM PRIDE FOODS LIMITED ABN 42 080 590 030 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARM PRIDE FOODS LIMITED Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to 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. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material 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 with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout 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 control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue 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 the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • 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. 59 Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au FARM PRIDE FOODS LIMITED ABN 42 080 590 030 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FARM PRIDE FOODS LIMITED Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth pitcher.com.au We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 10 to 17 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Farm Pride Foods Limited and controlled entities, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. STEPHEN SCHONBERG PITCHER PARTNERS Partner Melbourne Date: 27 August 2021 60Farm Pride Foods Limited and Controlled Entities 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 30 July 2021. (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 2 3 4 5 6 7 8 9 10 11 MR TOMASSON MONTALTO + ESTATE LATE MAURO J P MORGAN NOMINEES AUSTRALIA PTY LTD NORMPAT PTY LTD OAKMEADOW PTY LTD MARKCAMP NO 2 PTY LTD GLENMON NO2 PTY LTD MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED DAVID RICARDO ASSET MANAGEMENT PTY LTD MR CLINTON JAMES QUAY ZERO NOMINEES PTY LTD MONTALTO DR HARRY HIRSCHOWITZ + MRS FARIBA YEROSHALMI NEWECONOMY COM AU NOMINEES PTY LIMITED 12 13 MR DION DEREK MARTINUS 14 15 MRS FRANCESCA D’ALBERTO 16 MISS JEAN SHIONG LI HO 17 MR PETER SCARF + MRS IDA SCARF 18 19 MR GAVIN BRUCE DE LACY 20 MR DONG RONG LUN CITICORP NOMINEES PTY LIMITED No. of shareholders No. of shares 431 809 286 285 35 263,194 2,264,339 2,097,957 7,525,763 43,028,922 549 398,888 Listed ordinary shares held Percentage of ordinary shares 27,486,302 3,431,330 2,064,250 2,011,772 1,071,716 1,003,057 620,249 514,495 500,000 464,244 316,861 255,295 254,244 253,206 241,994 224,000 200,000 196,520 195,502 182,000 49.81 6.22 3.74 3.65 1.94 1.82 1.12 0.93 0.91 0.84 0.57 0.46 0.46 0.46 0.44 0.41 0.36 0.36 0.35 0.33 41,487,037 75.18 61   Farm Pride Foods Limited and Controlled Entities ASX Additional Information ASX Additional Information (continued) (c) Substantial shareholders The names of substantial shareholders listed in the Company’s register. West Coast Eggs Pty Ltd No. of shares held 27,486,302 J P Morgan Nominees Australia Pty Ltd 3,431,330 Percentage of ordinary shares 49.81 6.22 (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 (2020: 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. Publicly accessible information For information on corporate governance policies adopted by Farm Pride Foods Ltd refer to our website: www.farmpride.com.au 62 Fa rm Pride F oods Lt d. A BN: 4 2 080 590 030 551 CH A NDL ER ROA D K E YSBOROUGH, V IC 3173 AUS T R A L I A T: 1300 693 3 47 farmpride.com.au Annual Report 2021 FPR0038 AR21 Cover Only_PFO.indd All Pages FPR0038 AR21 Cover Only_PFO.indd All Pages 16/8/21 10:56 am 16/8/21 10:56 am 

Continue reading text version or see original annual report in PDF format above