Freedom Foods Group Limited
Annual Report 2011
Contents
Financial Highlights and Five Year Summary ..........................................................................................................................1
Chairman’s Letter ......................................................................................................................................................................................2
Executive Director’s Review of Operations ...............................................................................................................................3
Director’s Report .......................................................................................................................................................................................9
Lead Auditor’s Independence Declaration............................................................................................................................17
Corporate Governance Statement .............................................................................................................................................18
Consolidated Statement of Comprehensive Income .....................................................................................................26
Consolidated Statement of Financial Position ....................................................................................................................27
Consolidated Statement of Cash Flows ..................................................................................................................................28
Consolidated Statement of Changes in Equity ...................................................................................................................29
Notes to the Financial Statements ..............................................................................................................................................30
Director’s Declaration .........................................................................................................................................................................75
Independent Auditor’s Report ......................................................................................................................................................76
Shareholder Statistics ..........................................................................................................................................................................78
Corporate Directory .............................................................................................................................................................................81
Annual General Meeting
Date
27 October, 2011
Time
11.30 am
Venue
Deloitte Touche Tohmatsu
Level 9. Grosvenor Place,
225 George Street,
Sydney, NSW, 2000
FREEDOM FOODS GROUP LIMITED
ABN 41 002 814 235
Annual Report for the year ended 30 June 2011
Financial Highlights and Five Year Summary
n Financial Highlights and Five Year Summary
Sales Revenue ($000's)
OPERATING EBDITA ($000's)*
Net Profit after Tax ($000's)
Basic Earnings per Share (cents)
Number of Ordinary Shares Issued (000's)
Number of Convertible Redeemable Preference Shares Issued (000's)
Ordinary Dividend per Share (cents)
Convertible Redeemable Preference Dividend per Share (cents)
Dividend Paid ($000's)
Total Assets ($000's)
Shareholders Equity ($000's)
Net Assets Per Share (cents)
Net Tangible Asset Backing (cents)
* Earnings before depreciation, interest, tax and amortisation
2011
45,256
4,041
4,387
5.7
77,497
19,415
0.5
0.1
405
76,716
49,983
52
29
2010
44,071
3,816
3,357
5.0
77,435
-
-
-
-
71,090
40,263
52
22
2009
48,596
3,494
1,320
2.4
54,660
-
1.0
-
545
63,659
30,161
55
13
2008
54,082
3,203
956
2.0
54,607
-
2.0
-
891
56,295
29,239
54
13
2007
48,683
3,173
1,174
2.6
44,527
-
1.0
-
445
47,428
23,654
53
14
Freedom Foods Group Limited
1
Chairman’s Letter
n Chairman’s Letter
Dear Shareholder
In the 2011 financial year, Freedom Foods Group Limited (“FFG”) achieved a Net Profit of $4.39m for
the 12 months ended 30th June 2011, reflecting a 30.7% increase on the previous corresponding
period.
The result is after including non operating items that contributed $1,780k to Net Profit. These non
operating items included the profit on sale of the Company’s 50% interest in A2 Dairy Products
Australia Pty Ltd (A2DPA), write off of expenses relating to an unrecoverable claim against a former
contract manufacturer, make good costs relating to the closure of Hornsby baking site and the write-
down in the carrying value of the Thorpedo Foods investment. In addition, the results included an
overall income tax benefit of $138k ($263k prior period) largely resulting from a prior year tax
adjustment for increased allowances for research and development.
The result reflected operating EBITDA above the prior corresponding period, with improving sales
and margins from Freedom Foods Cereal operations offset by planned higher investment in marketing
expenditure and lower sales of biscuits.
Specialty Seafood achieved improved profitability from growth in share of the red salmon segment
and increased retail distribution.
Equity Associates contributions reflected increased profitability from the Contract Beverage Packers
joint venture, (renamed Pactum Australia) and share of profits from A2 Corporation.
While the Board is pleased with these results, we are focussed on achieving continued improvement
in Freedom Foods’ to deliver an improved business contribution in FY 12 and meeting our benchmark
15% return on funds employed in the medium term.
The Executive Director’s report provides further commentary on operations.
In July 2010 the company exchanged its 50% interest in A2 Dairy Products Australia Pty Limited for an
issue of shares representing 25% of the enlarged capital of A2C. Additional subscriptions for shares
has resulted in FFG increasing its shareholding in A2C to 27.5% of A2C (26.4% fully diluted), with FFG
now the largest single shareholder in A2C. The transaction will enable FFG and its shareholders to
share in A2C’s growth opportunities in Australia and international markets.
In December 2010, the company invited shareholders to participate in a non-renounceable
entitlement offer of converting preference shares which successfully raised $5.8m through the issue
of 19,414,800 converting redeemable preference shares. The capital raised was utilised in working
capital for the business and for growth initiatives.
With improving profitability, the Board has recommended a final fully franked dividend of $0.005 per
ordinary share in November 2011, consistent with the interim dividend paid in June 2011. Dividend
priority remains with the converting preference shareholders, with a further dividend to be paid in
accordance with the terms of the converting preference shares in October 2011.
The Board thanks the group management team and everyone involved with our Company for the
contribution they have made and we look forward to the year ahead.
Perry Gunner
Chairman
2
Annual Report 2011
n Executive Director’s Review of Operations
Executive Director’s Review of Operations
Group Summary Result
Year ended 30th June
Gross Sales Revenues (1)
Net Sales Revenues
EBITDA (Operating) (2)
EBITA (Operating) (2)
Equity Associates Share of Profit
Pre Tax Profit
Net Profit (Reported)
Ordinary Dividend – Interim (cps) fully franked (3)
Ordinary Dividend – Final (cps) fully franked
Total Ordinary Dividend (cps)
CRPS Dividend – April (cps) fully franked (3)
CRPS Dividend – October (cps) fully franked
Total CRPS Dividend (cps)
Net Debt / Equity
EPS (cents per share)( Fully Diluted for CRPS)
Net Assets per Share
Net Tangible Assets per Share
Notes:
2011
$’000
57,664
45,353
4,041
2,949
1,136
4,249
4,387
$0.005
$0.005
$0.010
$0.001
$0.020
$0.021
36.4%
$0.050
$0.516
$0.294
2010
$’000
56,612
44,443
3,816
2,812
1,308
3,094
3,357
-
-
-
-
-
-
52.9%
$0.050
$0.520
$0.219
% Change
1.9%
2.0%
5.8%
4.9%
-13.1%
37.3%
30.7%
-
-
-
-
-
-
-31.3%
-
-0.8%
34.2%
(1) Gross Sales Revenues excludes Royalty income received from Yakult and does not include revenues from group
associate entities, A2 Dairy Products, A2 Corporation and Pactum.
(2) Operating EBITDA and EBITA, excludes abnormal or non-operating charges includes add back of non cash
employee share option expense.
(3) Interim dividend of $0.005 per ordinary share paid in June 2011 and CRPS dividend for initial December 10
period of $0.001 paid in April 2011.
The Company achieved a Net Profit of $4.39m for the 12 months ended 30th June 2011, reflecting
a 30.7% increase on the previous corresponding period.
The result is after including non operating items that contributed $1,780k to Net Profit. These non
operating items included the profit on sale of the Company’s 50% interest in A2 Dairy Products
Australia Pty Ltd (A2DPA), write off of expenses relating to an unrecoverable claim against a former
contract manufacturer, make good costs relating to the closure of Hornsby baking site and the
write-down in the carrying value of the Thorpedo Foods investment. In addition, the results included
an overall income tax benefit of $138k ($263k prior period) largely resulting from a prior year tax
adjustment for increased allowances for research and development.
The result reflected operating EBITDA above the prior corresponding period, with improving sales
and margins from Freedom Foods Cereal operations offset by planned higher investment in
marketing expenditure and lower sales of biscuits. Specialty Seafood achieved improved profitability
from growth in share of the red salmon segment and increased retail distribution. Equity Associates
contributions reflected increased profitability from the Pactum Australia joint venture and share of
profits from A2 Corporation.
Freedom Foods Group Limited
3
Executive Director’s Review of Operations (continued...)
HIGHLIGHTS
Highlights for the year included:
•
•
•
•
•
•
•
•
•
Freedom Cereal volume growth of 28% against the prior period (+14% in Sales), reflecting
improved quality from Leeton in house manufacture, investment in lower price points for
core cereal products and launch of new products aligned with new look packaging.
Stabilisation of the Soy & Rice beverage business, resulting from strong growth in the
Australia’s Own Organic brand.
Specialty Seafood business performed strongly, reflecting growth in red salmon volumes of
21%. Paramount strengthened its No 2 branded position and Brunswick maintained its No 1
branded position in Sardines in Australia and New Zealand.
Record sales and profit result in UHT contract manufacturing business, Pactum Australia.
Completion of the sale of 50% of A2 Dairy Products Australia in exchange for a cornerstone
shareholding in A2 Corporation (A2C), resulting in a gain of $3.9m, subsequent subscription
of $683k for new shares in A2C in December 2010 and exercise of option through
subscription of $2.0m in July 2011.
Successful convertible preference share capital raising in December 2010 of $5.8m from
existing shareholders.
Successful refinancing of banking facilities with HSBC, Net Debt / Equity down to 36% from
53% at June 2010.
Net assets per share at $0.52 and net tangible assets increased to $0.29 cents per share
Resumption of dividend payments with a dividend of $0.005 cents per ordinary share paid in
June 2011, a final dividend of $0.005 cents per ordinary share to be paid in November 2011
and dividends for the converting preference shareholders.
BUSINESS UNITS - WHOLLY OWNED
Freedom Foods
The Freedom Foods business continued to progress delivering on the sales
and cost opportunities provided by the dedicated gluten, wheat and nut free
manufacturing facility near Leeton NSW, a facility which the Company
believes is the only integrated scale manufacturing capability in Australia and
overseas for cereals and snacks “free from” key allergens such as gluten, nuts
and dairy.
The facility delivers capability for Freedom Foods to internally manufacture its
core range of shelf stable “free from” products and provides a platform for
growth through improved quality, innovation and lower costs.
Significant cash investment occurred during the year on driving the Freedom
branded portfolio through lower price points for core cereal products, launch
of new Cereal products, new look contemporary packaging and an interactive
consumer friendly website to compliment the recent changes to brand and
products.
4
Annual Report 2011
Executive Director’s Review of Operations (continued...)
The business reengaged with its core free from consumers, with a
resulting volume growth in Cereals of 28% and sales growth of 14%,
compared to the prior year. The benefits of Leeton manufacturing
facility saw a material improvement in Cereal margins and growing
Cereal volumes which are expected to further improve in FY 2012.
The business experienced a decline in biscuit / snack bar volumes and
margins in the period, resulting from commissioning challenges that
delayed the completion of the integrated biscuit / snack bar line.
These challenges have now been largely overcome and integrated
production is expected to commence by 2nd quarter FY 2012. The
snack bar line is an important part of Freedom’s strategy to leverage
its Cereal base into breakfast snack alternatives, as well as meeting
demand for “nut free” snacks to manage anaphylaxis risks particularly
around children.
Soy and rice beverage sales stabilised during the year, resulting from
strong growth in Australia’s Own Organic brand reflecting new
packaging and improved distribution, largely offsetting a decline in
So Natural branded products. Bakery wraps and mayonnaise products
performed generally in line with the prior year.
The business continued to invest in sales resources to increase retail
distribution in supermarkets and independent channels, including
establishing a small but growing sales base of Cereal products specific
to the Food Service and Industrial channels, as well as an initial export
order of Cereals into North America.
Additional cost benefits were achieved during the period including
commencement of milling at site of rice brokens into rice flour, a
major raw material component. The Leeton operation now processes
from gluten free grains approximately 90% of its flour requirements.
With material capital expenditure planned for Leeton now largely
complete and the core consumer market reengaged with the
Freedom brand, the focus for the business in the next 12 months will
be on increasing sales through growth in distribution channels and
increased awareness of the brand and products across a broader
consumer market.
focus, along with continued
in
This growth
manufacturing efficiencies at the Leeton site is expected to deliver an
improved business contribution in FY 12, progressing to meeting our
benchmark 15% return on funds employed in the medium term.
improvement
Specialty Seafood
The Speciality Seafood business performed strongly with increased
sales and business contribution for the year.
Paramount, the No 2 proprietary brand in the Salmon category,
increased its salmon sales volumes, with Red Salmon volume up 21%
reflecting increasing consumer awareness of the Paramount offer and
improved retail distribution. Pink Salmon sales were in line with
previous years, as higher pink inventory costs from 2010 catch flowed
through to retail pricing.
Freedom Foods Group Limited
5
Executive Director’s Review of Operations (continued...)
Brunswick sardines maintained its No 1 brand leadership
position in Australia and New Zealand with increased sales
volumes on the prior year, reflecting increased market
share in New Zealand.
While the business benefitted from higher exchange rates
on inventories purchased in $USD and $CAD, this assisted
in salmon and sardine
in managing cost
procurement, while also
increased trade
investment.
facilitating
increases
The business continued to utilise the procurement power
of Bumble Bee Foods of North America, with Bumble Bee
securing annual inventory requirements and assisting in
managing short term requirements for additional Red
Salmon inventory in the later part of the financial year.
BUSINESS UNITS - JOINT VENTURES
Pactum Australia Pty Limited, 50% Equity Interest
Pactum Australia
(Pactum) which provides contract
manufacture of UHT beverages for private label and
proprietary customers delivered a record sales and
business contribution since its formation in 2005.
Sales grew on the prior year period by 15% from higher
volumes and business contribution (EBDITA) increased to
improved manufacturing
approximately $3.9m
efficiencies and higher mix of sales of value added UHT
products. The business return on funds employed was
above the internal benchmark of 15%.
from
As the only independent low cost manufacturer of UHT
beverages on east coast of Australia, the Pactum business
is focussed on expanding capabilities to meet the
increasing demands from its private label customer base.
Initially, this will involve an expansion of its packaging
capability at its southern Sydney site in FY 2012 to provide
portion pack UHT (250-330ml configuration) for value
added beverages and dairy milk for export markets such as
China.
As a result of the improved financial returns and FFG’s
strategy to build further critical mass in earnings and
cashflow, the Company is reviewing an acquisition of the
50% shareholding held by the Perich Group in Pactum. A
full acquisition of Pactum is subject to agreement of
definitive terms and shareholder approval.
6
Annual Report 2011
Executive Director’s Review of Operations (continued...)
A2 Corporation Limited, 27.5% (26.4% fully diluted)
Equity Interest
As detailed at the half year, FFG completed in July 2010 the sale of its 50%
interest in A2DPA in consideration for a cornerstone shareholding in A2
Corporation being approximately 23.3% of the enlarged capital of A2C.
The transaction has proven to have provided a stable platform for the
ongoing development of the business in Australia, create an integrated
business model with A2C and enable FFG and its shareholders to share in
A2C’s growth opportunities in Australia and international markets. FFG
equity accounted $295k, being its share of A2C net profit for FY 2011.
A2C announced that its a2 Milk™ business in Australia has continued to
grow strongly with sales volumes of 21.6m litres, an increase on prior year
of 32%. The planned commencement of processing of a2 milk at its new
South West Sydney facility in early 2012 will allow for the continued
expansion of the business.
Following on the initial transaction, FFG subscribed for 9.1 million shares
for a total consideration of A$682k to support the establishment of A2C’s
own milk processing facility in Australia and under an anti-dilution
provision subscribed in June for 1.59m ordinary shares and 6.15m partly
paid shares for a total consideration of A$129k.
In July 2011, FFG announced that under the terms of an option agreement
between A2C and FFG, FFG has subscribed for 18.7m fully paid ordinary
shares in A2C at a price of NZ$0.13 (A$0.11) for a total consideration of
A$2.06 million, which resulted in FFG increasing its shareholding in A2C to
27.5% of A2C (26.4% fully diluted), with FFG now the largest single
shareholder in A2C.
A2C is listed on the alternative market (NZAX) of the New Zealand Stock
Exchange (NZX: ATM), with a current market capitalisation of NZ$129m
(A$102m), implying a value for FFG’s 27.5% investment above its book
value of approximately A$11.7million.
Thorpedo Foods (75% owned)
Yakult Honsha, our licensee for Thorpedo beverages in Japan, continued to support the portfolio,
however sales in the period were below last year and were additionally impacted in the second half
by the Japanese Tsunami in March which resulted in closure of certain of Yakult’s beverage
manufacturing facilities for a period of time. As indicated at the half year, FFG wrote-down the
carrying value of its goodwill investment by an amount of $1.78m (no tax effect on write-down of
goodwill), which has no cash impact on the financial results.
CAPITAL RAISING
In December 2010, the company invited shareholders to participate in a non-renounceable
entitlement offer of converting preference shares which successfully raised $5.8m through the issue
of 19,414,800 converting redeemable preference shares. The capital raised was utilised in working
capital for the business and for growth initiatives.
Freedom Foods Group Limited
7
Executive Director’s Review of Operations (continued...)
FINANCE FACILITIES
In December 2010, the Company refinanced its existing bank facilities of approximately $15.0m
(excluding equipment finance facilities) with HSBC. The refinancing was achieved at a similar cost
of funds to the prior facility and provides increased flexibility to meet the working capital
requirements of the business. The Company amortised approximately $1.65 million of its banking
facilities during the financial year.
OUTLOOK
FFG has continued to make progress in the development of its unique business platforms in
specialised areas of the food market, with three key growth opportunities within Freedom Foods,
Pactum and A2 Milk and a stable business base in Specialty Seafood.
The continued progress in realisation of the benefits from the unique “free from” Leeton facility
provides a strong base from which to continue to grow sales and earnings in Freedom Foods over
the medium term.
The sales and profitability improvements in Pactum provides opportunity for the business to expand
its capabilities to meet the increasing demands from its private label customer base, while reviewing
opportunities to increase its exposure to value added beverages including dairy milk for growing
export markets such as China. The potential integration of Pactum into FFG will assist in building
more critical mass in earnings and cashflow of the group.
The repositioning of the investment in a2 milk™ enables FFG and its shareholders to share in A2C’s
growth opportunities in Australia and international markets.
The Company will pay a final fully franked dividend of $0.005 per ordinary share in November 2011,
consistent with the interim dividend paid in June 2011. Dividend priority remains with the converting
preference shareholders, with a further dividend to be paid in accordance with the terms of the
converting preference shares in October 2011.
Rory J F Macleod
Group Executive Director
29 September 2011
8
Annual Report 2011
Directors’ Report
n Director’s Report
Your Directors submit the financial report of Freedom Foods Group Limited (the Company) for the
year ended 30 June 2011. In order to comply with the provisions of the Corporations Act 2001, the
Directors report as follows:
Directors
For the names and particulars of the Directors of the Company during or since the end of the
financial year, refer to the Corporate Governance Statement.
Company Secretary
Mr Rory J F Macleod was appointed Company Secretary on 28th September 2010. He has been with
the Company for over 8 years and is the Group Executive Director and Chief Financial Officer.
Principal activities
The principal activities of the consolidated entity during the financial year were:
• manufacture, distribution and marketing of allergen free cereals, nutritional snacks and
biscuits;
• manufacture and distribution of long life beverages;
•
•
distribution and marketing of canned seafood;
investment in branded dairy milk manufacture, marketing and distribution activities
There were no significant changes in the nature of the principal activities during the financial year.
Review of operations
The consolidated entity’s profit attributable to equity holders of the Company, after providing for
income tax, amounted to $4,387,000 (2010 profit: $3,357,000).
Refer to the commentary in the Executive Directors Review of Operations.
Dividends paid or recommended
In respect of the financial year ended 30 June 2011, the Directors are recommending that a final
ordinary dividend of $0.005 per share be paid in November 2011 and a converting preference share
(CRPS) dividend of $0.02 per CRPS be paid in October 2011. During the financial year 2011, an
interim ordinary dividend of $0.005 per share was declared and paid totaling $387,200 and a CRPS
dividend of $0.001 per CRPS was delcared and paid totalling $19,415.
Significant changes in state of affairs
There were no significant changes to the state of affairs of the consolidated entity that occurred
during the financial year, not otherwise disclosed in this report.
Subsequent Events
On 28 July 2011 the Company announced that it had subscribed for new shares in A2 Corporation
Limited (NZX: A2C) under the terms of an option agreement between A2C and FFG. The subscription
was for 18,761,657 fully paid ordinary shares in A2C at a price of NZ$0.13 (A$0.11) for a total
consideration of A$2.06 million. The subscription for shares has resulted in the Company increasing
Freedom Foods Group Limited
9
Directors’ Report (continued...)
its shareholding in A2C to 27.5% of the total number of fully paid ordinary shares in A2C (26.4% fully
diluted for partly paid shares in A2C), with the Company now the largest single shareholder in A2C.
On 29 August 2011, the Company announced that as a result of the improved financial returns and
its strategy to build further critical mass in earnings and cashflow, it is reviewing an acquisition of the
50% shareholding held by the Perich Group in Pactum. A full acquisition of Pactum is subject to
agreement of definitive terms and shareholder approval.
No other matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the consolidated entity, the results of those
operations, or the state of affairs of the consolidated entity in subsequent financial years.
Future developments
Likely developments in the operation of the consolidated entity and the expected results of these
operations have not been included in this report as the Directors believe, on reasonable grounds,
that inclusion of such information would be likely to result in unreasonable prejudice to the
consolidated entity.
Environmental regulations
The consolidated entity’s operations are subject to environmental regulation under the law of the
Commonwealth (AQIS) and the State (Workcover, EPA, Sydney Water, Safe Food NSW) and local
council regulations.
•
•
•
The consolidated entity operates under a Dangerous Goods Licence issued by Workcover.
There were no breaches of environmental laws, regulations or permits during the year.
The consolidated entity is currently operating in accordance with local council consent in
regard to hours of operation.
Indemnification of officers and auditors
The Company has not, during or since the financial year, in respect of any person who is or has been
an officer or auditor of the Company or a related body corporate:
•
•
indemnified or made any relevant agreement for indemnifying against liability incurred as an
officer, including costs and expenses in successfully defending legal proceedings; or
paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred as
an officer for the costs or expenses to defend legal proceedings; with the exception of the
following matter:
During the financial year the Company paid premiums to insure each of the Directors against
liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of
their conduct while acting in the capacity of an officer of the Company. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
Rounding off of amounts
The Company is an entity to which ASIC Class Order 98/0100 applies. Accordingly amounts in the
financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.
Meetings of Directors
During the financial year 15 meetings of Directors (including committees) were held.
10
Annual Report 2011
Directors’ Report (continued...)
The following persons acted as Directors of the company during or since the end of the financial
year with attendances to meetings of Directors as follows:
P.R. Gunner
G.H. Babidge
A.M. Perich
R. Perich
M. Miles
R.J.F. Macleod
M.R. Perich (alternate director)
Directors Meeting
Audit, risk & compliance committee
meetings
Remuneration & nomination
committee meetings
Eligible to attend
11
11
11
11
11
11
11
Attended
11
11
9
11
11
10
10
Eligible to attend
2
-
-
2
2
-
-
Attended Eligible to attend
2
-
-
2
2
-
-
2
-
-
2
2
-
-
Attended
2
-
-
2
2
-
-
Remuneration report - audited
This report details the nature and amount of remuneration for each Director and the Executives
receiving the highest remuneration.
Key management personnel (incorporating the Group and Company Executive who receive the
highest remuneration for the year) include:
P.R. Gunner - Chairman and Non-Executive Director
R.J.F. Macleod - Group Executive Director, Chief Financial Officer and Company Secretary
G.H. Babidge - Non-Executive Director
A.M. Perich - Non-Executive Director.
R. Perich - Non-Executive Director.
M. Miles - Non-Executive Director
M Bracka, Chief Operating Officer (Freedom Foods and Specialty Seafood Business Units)
P. Brown - Executive General Manager Sales (Freedom Foods and Specialty Seafood Business Units)
P. Bartier - National Supply Chain Manager (Freedom Foods and Specialty Seafood Business Units)
C. Pensini - Manufacturing Operations Manager (Freedom Foods Leeton Operation)
Remuneration policy
Remuneration arrangements for key management personnel of the Company and Group (“the
Directors and Executives”) are set competitively to attract and retain appropriately qualified and
experienced Directors and Executives. As part of its agreed mandate, the Remuneration and
Nomination Committee obtains independent advice when required on the appropriateness of
remuneration packages given trends in comparable companies and the objectives of the
consolidated entity’s remuneration strategy.
The remuneration structures explained below are designed to attract suitably qualified candidates.
The remuneration structures take into account:
•
•
•
The capability and experience of the Directors and Executives;
The Directors and Executives’ ability to control the relevant operational performance; and
The amount of incentives within each Director and Executive’s remuneration.
Executive Director and Executives
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and
includes any FBT charges related to employee benefits including motor vehicles), as well as
employer contributions to superannuation funds.
Freedom Foods Group Limited
11
Directors’ Report (continued...)
The Group Executive Director and Executives remuneration levels are reviewed annually by the
Remuneration and Nomination Committee through a process that considers the overall performance
of the Group.
Performance based remuneration
Performance based remuneration is at the discretion of the Remuneration and Nomination
Committee. These can take the form of share options or cash payments. During the year, no cash
payments were made and no further options were issued.
Options are valued using the binomial method.
Options have been issued to key management personnel in the past, however these options do not
relate to the performance of the Company but are used to assist in retaining personnel for future
periods by linking the vesting of such options to a personnel’s employment.
Non-Executive Directors
The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to
approval by shareholders at the Annual General Meeting. Total fees for all Non-Executive Directors,
last voted upon by shareholders was in October 2006, was not to exceed $300,000 in total. Total fees
paid to Non-Executive Directors for 2011 was $170,000 (2010: $163,000). To align director interests
with shareholder interests, the Directors are encouraged to hold shares in the Company.
The Chairman receives twice the base fee of Non-Executive Directors. Non-Executive Directors do
not receive performance related remuneration. Directors’ fees cover all main Board activities. Non-
Executive Directors who sit on the Remuneration and Nomination Committee and the Audit, Risk
and Compliance Committee receive an additional payment of $1,000 and the Chairman of each
receives $2,000. There are no termination or retirement benefits for Non-Executive Directors.
Service agreements
Neither the Group Executive Director or any other Executive has a fixed term contract.
Company performance, shareholder wealth and directors and senior
management remuneration
The remuneration policy of the company and group does not directly link the remuneration of the
Directors and senior Executives to Company performance or shareholder wealth.
The following table shows the revenue, profits, dividends and earnings per share for the past five
years for the consolidated entity.
Revenue ($000s)
Net Profit / (Loss) After Tax ($000s)
Ordinary Dividends Per Share (cents)
CRPS Dividends Per Share (cents)
Basic Earnings per Share (cents)
2011
45,256
4,387
0.5
0.01
5.7
2010
44,071
3,357
-
2009
48,596
1,320
1
2008
54,082
956
2
5.0
2.4
2.0
2007
48,683
1,174
1
-
2.6
The Remuneration and Nomination Committee considers that the Company’s remuneration
structure is appropriate to building shareholder value in the medium term.
12
Annual Report 2011
Directors’ Report (continued...)
Directors and executive officers emoluments
The benefits of each Director who held office and five highest paid Executive Officers for the year
ended 30 June 2011 are as follows:
2011
Short-term employee benefits
Directors
Salary
Directors'
Fees
Committee
Fees
Other
P.R. Gunner
R.J.F. Macleod
G.H. Babidge (1)
A.M. Perich
R. Perich
M. Miles
Executive Officers
M. Bracka (2)
(Chief Operating Officer)
P. Wilson (3)
(General Manager Leeton Manufacturing Operations)
P. Bartier
(National Supply Chain Manager)
P. Brown
(Executive General Manager Sales)
C. Pensini (4)
(Manufacturing and Operations
Manager)
148,409
162,385
137,614
259,800
64,133
-
-
-
232,351
151,000
$
-
$
60,000
-
-
31,800
30,000
30,000
-
-
-
-
-
$
3,000
-
-
-
2,000
2,000
-
-
-
-
-
$
-
-
75,425
-
-
-
-
-
-
-
-
1,155,692
151,800
7,000
75,425
Post employ-
ment benefits
Share
based
payments
% of
total
being
Superannuation
Contributions
Options
Total
Options
$
5,670
15,199
2,533
1,125
2,880
2,880
11,399
-
11,890
12,444
11,728
$
-
43,680
43,680
-
-
-
-
-
-
-
-
$
68,670
318,679
185,771
32,925
34,880
34,880
243,750
151,000
160,299
174,829
149,342
-
14%
19%
-
-
-
-
-
-
-
-
77,748
87,360
1,555,025
6%
Non-
cash
Benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
(1) Other is payment for leave and other statutory entitlements relating to change in role from
executive to non executive director in September 2010
(2) Commenced 17 October 2010
(3) Resigned April 2011
(4) Commenced 1 July 2009
Freedom Foods Group Limited
13
Directors’ Report (continued...)
2010
Short-term employee benefits
Directors
Salary
Directors'
Fees
Committee
Fees
Other
$
-
255,778
375,778
-
-
-
-
187,692
159,011
136,697
144,084
137,615
$
60,000
-
-
36,000
30,000
30,000
-
-
-
-
-
-
P.R. Gunner
R.J.F. Macleod
G.H. Babidge
A.M. Perich
R. Perich
M. Miles
Executive Officers
G.J. Hughes (1)
(Chief Operating Officer)
P. Wilson
(General Manager Leeton Manufactur-
ing Operations)
M. Gilio
(Group Finance Manager & Company
Secretary)
P. Bartier
(National Supply Chain Manager)
P. Brown (2)
(Executive General Manager Sales)
C. Pensini (3)
(Manufacturing and Operations
Manager)
$
3,000
-
-
-
2,000
2,000
-
-
-
-
-
-
$
-
-
-
-
-
-
141,356
-
-
-
-
-
1,396,655
156,000
7,000
141,356
(1) $141,356 termination payment made 3 July 2009
(2) Commenced 10 August 2009
(3) Commenced 1 July 2009
Non-
cash
Benefits
$
-
Post employ-
ment benefits
Share
based
payments
% of
total
being
Superannuation
Contributions
Options
Total Options
$
5,670
14,222
15,428
2,700
2,880
2,880
-
-
14,323
12,303
12,968
12,385
$
-
42,934
42,934
-
-
-
-
-
-
-
-
-
$
68,670
312,934
434,140
38,700
34,880
34,880
141,356
187,692
173,334
149,000
157,052
150,000
-
14%
10%
-
-
-
-
-
-
-
-
-
95,759
85,868
1,882,638
5%
-
-
-
-
-
-
-
-
-
-
-
-
No Director or senior management person appointed during the year received a payment as part of
his or her consideration for agreeing to hold the position.
Bonus payments as compensation for the current financial year
Other than for bonus payments in equity associates company, Pactum Australia Pty Limited, no
bonus payments were granted to other group executives during 2011.
Bonus payments as compensation for the prior financial year
Other than for bonus payments in equity associates company, CBPA Pty Limited, no bonus payments
were granted during 2010.
14
Annual Report 2011
Directors’ Report (continued...)
Employee share options
During and since the end of the financial year no share options were granted to key management
personnel of the Company and consolidated entity as part of their remuneration.
Details of unissued shares or interests under option as at the date of this report are:
Issuing entity
Freedom Foods Group Limited (i)
Freedom Foods Group Limited (ii)
Grant date
(i) Issued 30 November 2006
(ii) Issued 26 April 2007
Recipients
Issued 30 November 2006
Issued 26 April 2007
Number of shares
under option
3,400,000
300,000
Class of shares
Ordinary
Ordinary
Exercise price of
options
$0.50
$0.50
Expiry date of
options
30 November 2011
26 April 2012
Name
G.H. Babidge
R.J.F. Macleod
P. Nathan
Number
1,700,000
1,700,000
300,000
Fair Value ($)
170,000
170,000
30,000
Fair value at grant
$0.10
$0.10
Conditions
Employment
Employment
Employment
There are no further performance criteria that need to be met in relation to options granted.
Options vest over a period of either 2 or 4 years and relate to an employee’s service period only.
The holders of these options do not have the right by virtue of the option, to participate in any
share issue or interest issue of any other body corporate or registered scheme.
Directors’ shareholding
Refer to Principle 2 “Structure of the Board to add value” in the Corporate Governance Statement.
Non-audit services
During the year Deloitte Touche Tohmatsu, the auditors have performed certain other services in
addition to their statutory duties. With respect to the non-audit services provided during the year
by the auditor, the Board has considered written advice provided and a recommendation of the
Audit, Risk and Compliance Committee. The Board is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did not compromise, the auditor
independence requirements of the Corporation Act 2001 for the following reasons:
•
•
all non-audit services were subject to the corporate governance procedures adopted
by the Company and have been reviewed by the Audit, Risk and Compliance
Committee to ensure they do not impact the integrity and objectivity of the auditor;
and
the non-audit services provided do not undermine the general principles relating to
auditor independence as set out in the Code of Conduct APES 110 Code of Ethics for
Professional Accountants issued by The Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the company, acting as advocate for the company or
jointly sharing economic risks and rewards.
Freedom Foods Group Limited
15
Directors’ Report (continued...)
Details of the amounts paid/payable to the auditor of the consolidated entity, Deloitte Touche
Tohmatsu for audit and non-audit services provided during the year are set out below:
Audit Services
Auditors of the Company - Deloitte Touche Tohmatsu
- audit and review of financial reports
- taxation advice
- accounting advice
- research and development advice
Consolidated
2011
$
148,985
58,952
-
19,751
227,688
2010
$
167,660
43,542
5,838
-
217,040
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under Section 307C of the
Corporations Act follows the Directors’ Report.
Proceedings on behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or
intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all of those proceedings.
Signed in accordance with a resolution of the Board of Directors made pursuant to s.298(2) of the
Corporations Act 2001.
On behalf of the Directors
Perry Gunner
Chairman
Dated at Sydney 29 September 2011.
Rory J F Macleod
Executive Director
16
Annual Report 2011
n Lead Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
The Barrington
Level 10
10 Smith Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia
DX 28485
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au
The Board of Directors
Freedom Foods Group Limited
80 Box Road
TAREN POINT NSW 2229
29 September 2011
Dear Board Members
Freedom Foods Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Freedom Foods Group Limited.
As lead audit partner for the audit of the financial statements of Freedom Foods Group Limited
for the financial year ended 30 June 2011, I declare that to the best of my knowledge and belief,
there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Freedom Foods Group Limited
17
Corporate Governance Statement
n Corporate Governance Statement
Freedom Foods Group Limited (the Company) is committed to implementing the highest possible standards of corporate
governance and ensures, wherever possible, that its practices are consistent with the Second Edition of the Australian
Securities Exchange (ASX) Corporate Governance Council’s Principles and Recommendations. In relation to the
amendments of July 2010, the change in reporting requirements will apply to Freedom Foods Group first financial year
commencing on or after 1 January 2011. Accordingly, as Freedom Foods Group financial year begins on 1 July, disclosure
will be required in relation to the financial year ended 30 June 2012 and will be made in the annual report published by
end of October 2012.
Each of the eight principles are listed in turn. In certain circumstances, due to the size and stage of development of the
Company and its operations, it may not be practicable or necessary to implement the ASX Principles in their entirety. In
such instances, the Company will identify the areas of divergence. The Corporate Governance Statement, policies and
Charters are published on the Company’s website: http://www.ffgl.com.au.
Principle 1
Lay solid foundations for management and oversight
by the Board
The Board’s responsibilities are encompassed in a charter
which
(the
is published on http://www.ffgl.com.au
Company’s website). The Board is responsible for, and has
the authority to determine, all matters relating to the
strategic direction, policies, practices, establishing goals
for management and the operation of the Company.
Without intending to limit this general role of the Board,
the specific functions and responsibilities of the Board
include:
(1) oversight of the Company, including its control and
accountability systems;
(2) appointing and removing executive management,
for the ongoing management task of developing
and implementing suitable strategies consistent
with the Company’s policies and strategic direction,
including approving remuneration of executive
management and remuneration policy and
succession plans for executive management;
(3) reviewing and determining the strategic direction
and policies of the Company, the allocation of
resources, planning for the future and succession
planning;
(4) reviewing and ratifying systems of risk management
and internal compliance and control, codes of
conduct and legal compliance;
(5) monitoring executive management performance
and implementation of strategy and ensuring
appropriate resources are available;
(6) approving and monitoring the progress of major
capital expenditure, capital management and
acquisitions and divestitures;
(7) continuously monitoring and overseeing the
Company’s financial position; and
(8) approving and monitoring financial and other
reporting.
Key responsibilities of the Board include the overseeing of
the strategic direction of the Company, determining its
policies and objectives and monitoring executive
management performance. The Board adopts a three-
year business plan and a 12 month operating plan for the
Company. Financial results and general performance are
closely monitored against the operating plan objectives.
To assist in carrying out its responsibilities, the Board has
established the following committees of its members.
They are:
(1) Audit, Risk and Compliance Committee; and
(2) Remuneration and Nomination Committee.
The responsibilities delegated by the Board to the
Company’s management, as set out in the Company’s
Statement of Delegated Authority, include managing the
day-to-day operations of the Company and Consolidated
entities. The Statement of Delegated Authority has been
posted to the Company’s website http://www.ffgl.com.au.
Group Executive management have service contracts and
position descriptions respectively setting out their duties,
responsibilities, and conditions of service and termination
entitlements. Any new Directors appointed will receive
formal letters of appointment setting out the key terms,
conditions and expectations of their appointment.
Group executive management are subject to a formal
performance review process on an annual basis. The
Remuneration and Nomination Committee reviews the
performance of executive management against clear
secondary
performance objectives. Principal and
18
Annual Report 2011
objectives for the financial year have been established
which are evaluated against and
includes monthly
monitoring of performance. A performance evaluation
was undertaken in July 2011 in accordance with the
process disclosed.
Principle 2
Structure of the Board to add value
The Board determines the Board’s size and composition,
subject to limits imposed by the Company’s Constitution.
The Constitution provides for a minimum of three Directors
and a maximum of ten. At this time the Board comprises of
six Directors (excluding alternate Director), two of whom
are non-executive independent Directors including the
Chairman. A Director is deemed to be independent if he or
she is a Non-Executive Director and:
(1) is not a substantial shareholder;
(2) has not been employed in an executive capacity in
the Company in the last three years;
(3) has not acted as a material consultant to the
Company in the last three years;
(4)
is not a material supplier or customer of the
Company;
(5) has no material contractual relationship with the
Company;
(6) has not served on the Board for a period which
could materially interfere with his or her ability to act
in the best interests of the Company; and
(7)
is free from any interest which could materially
interfere with his or her ability to act in the best
interests of the Company.
The test of independence for Directors is set out in
detail under section 4 of the Board Charter, which has
been posted on the website of the Company:
http://www.ffgl.com.au. Materiality thresholds referred to
above are assessed on a case-by-case basis.
Whilst the Board is not structured with a majority of
independent directors in terms of the ASX Corporate
Governance Council’s discussion of independent status,
the Board believes that the Directors are able, and do
make, quality and independent judgement in the best
interests of the Company on all relevant issues before the
Board. The Board considers that the Company is not
currently of a size, nor are its affairs of such complexity to
justify the expense of the appointment of a majority of
independent Directors.
Corporate Governance Statement (continued...)
The names and particulars of the Directors of the Company
during or since the end of the financial year are:
Mr P.R. Gunner
Chairman (Non-Executive), Age 64. Appointed in April 2003, Director
8 years.
B.Ag.Sc - is former Chairman and CEO of Orlando Wyndham
Wine Group. Also current Deputy Chairman of Viterra Inc
and Director of Australian Vintage Ltd.
Appointed
Chairman in July 2006. Chairman of the Remuneration &
Nomination Committee.
Interest in shares and options are 510,732 ordinary shares,
159,604 convertible redeemable preference shares and
159,604 $0.40 options over ordinary shares. Measured
against the
independence criteria adopted by the
Company, Mr. Gunner is considered an independent
Director.
Mr R.J.F. Macleod
Group Executive Director, Chief Financial Officer, Company Secretary
Age 43. Appointed Director in May 2008, Director 3 years.
B.Econ (Hons) - currently Group Executive Director and
director of all Group entities. Has been with group for the
past 8 years responsible for strategic and corporate
development, finance & administration. Former senior
Director, corporate finance for UBS in Australasia and
Europe where he gained extensive experience in strategy
and commercial development, mergers and acquisitions
and corporate analysis.
Interest in shares and options are 182,775 ordinary shares,
6,666 convertible redeemable preference shares, 6,666
$0.40 options over ordinary shares and 1,700,000 options
under the employee share option scheme. Mr Macleod,
being an Executive Director of the Company, is not
considered independent.
Mr G.H. Babidge
Non Executive Director, Age 58. Appointed Director in January 2002,
Director 9 years.
B.Comm., ACA – extensive public company experience
within the food industry. Currently Managing Director of
A2 Corporation Limited. Former Managing Director of
Freedom Foods Group Limited, former CEO of the major
milling and baking group, Bunge Defiance and many years
Managing Director of the dairy interests of National Foods
Limited.
Interest in shares and options are 98,057 ordinary shares,
30,643 convertible redeemable preference shares, 30,643
$0.40 options over ordinary shares and 1,700,000 options
Freedom Foods Group Limited
19
Corporate Governance Statement (continued...)
under the employee share option scheme. Mr Babidge,
being a former Executive Officer of the Company within
the past 3 years, is not considered independent.
Mr A.M. Perich
Director (Non-Executive), Age 70. Appointed Director in July 2006,
Director 6 years.
Member of the Order of Australia - Joint Managing Director
of Arrovest Pty Limited, Leppington Pastoral Company,
one of Australia’s largest dairy producers, and various other
entities associated with Perich Enterprises Pty Limited. He
is also a property developer, farmer and business
entrepreneur. Outside of the Perich Group Mr. A.M. Perich
holds a number of other directorships which include MRC
Biotech Limited, Greenfields Narellan Holdings, East Coast
Woodshavings Pty Limited, Breeders Choice Woodshavings
Pty Limited, Austral Malaysian Mining Limited, Pulai Mining
Sdn Bhd (Malaysia) and Inghams Health Research Institute.
Memberships include Narellan Chamber of Commerce,
Narellan Rotary Club, Urban Development Institute of
Australia, Urban Taskforce, Property Council of Australia,
past President of Narellan Rotary Club and Past President
of Dairy Research at Sydney University.
Interest in shares and options are 51,465,265 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. A.M.
Perich is not considered an independent Director.
Mr R. Perich
Director (Non-Executive), Age 68. Appointed Director in April 2005,
Director 7 years.
Joint Managing Director of Arrovest Pty Limited,
Leppington Pastoral Company, one of Australia’s largest
dairy producers, and various other entities associated with
Perich Enterprises Pty Limited. He is also a property
developer, farmer and business entrepreneur. Former
Director of United Dairies Limited. Appointed Director in
April 2005. Member of the Audit, Risk & Compliance
Committee and member of
the Remuneration &
Nomination Committee.
Interest in shares and options are 51,465,265 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. R.
Perich is not considered an independent Director.
Mr M. Miles
Director (Non-Executive), Age 62. Appointed Director in November
2006, Director 5 years.
B.Sc (Hons) F.I.B.D. - former Vice President of Carlton and
United Breweries and Foster’s Group, former Director of
Carlton & United Breweries & its subsidiaries and former
Chairman of South Pacific Distilleries, Fiji. Member of the
Strategic Planning Committee of the Institute of Brewing
and Distilling Asia Pacific. Chairman of Audit, Risk &
Compliance Committee and member of the Remuneration
and Nomination Committee.
Interest in shares and options are 210,110 ordinary shares,
64,584 convertible redeemable preference shares and
64,584 $0.40 options over ordinary shares. Measured
against the
independence criteria adopted by the
Company, Mr. Miles is considered an independent director.
Mr M.R. Perich
Alternate Director (Non-Executive), Age 36. Appointed Alternate
Director for A.M Perich and R. Perich in March 2009, Director 2 years.
B AppSci (SysAg), Director of Arrovest Pty Limited,
Leppington Pastoral Company, one of Australia’s largest
dairy producers, and various other entities associated with
Perich Enterprises Pty Limited. Former Director of Contract
Beverages Packers of Australia Pty Limited, a joint venture
controlled equally by the Company and Arrovest, Director
of Australian Dairy Conference, affiliated with NSW Farmers
Association (Diary Section), Future Dairy Steering Group,
Intensive Agriculture Consultative Committee, Dairy
Research Foundation and Graduate Member of the
Australian Institute of Company Directors post nominals.
Interest in shares and options are 51,465,265 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. M.
Perich is not considered an independent Director.
In order to facilitate independent judgement in decision
making, each Director may seek indendent professional
advice at the Companys expense. If advice is sought by
the Chairman, he must obtain board approval if the fees
for such advice exceeds $50,000 (exclusive of GST), such
approval is not to be unreasonably withheld. Where
advice is sought by the other Directors, prior written
approval by the Chairman is required but approval will not
be unreasonably withheld. If the Chairman refuses to give
approval, the matter must be referred to the Board. All
Directors are made aware of the professional advice
sought and obtained.
There is a clear division of responsibility between the
Chairman and Group Executive Director.
The Remuneration and Nomination Committee of the
Board comprises of three Non-Executive Directors; Messrs.
P.R Gunner, R.Perich and M.Miles. Two out of three
committee members are independent. Mr Gunner, who is
an independent Director, is the Committee Chairman. The
20
Annual Report 2011
Corporate Governance Statement (continued...)
Committee Charter which has been posted on the website
of the Company: http://www.ffgl.com.au details out the
process and timing for re election of directors. The Board’s
policy for nomination and appointment of Directors also
forms part of the Charter.
The Company Constitution states that at each Annual
General Meeting (AGM) one-third of the Directors for the
time being, or if their number is not three or a multiple of
three, then the nearest number greater than one-third,
shall retire from office. A retiring Director shall be eligible
for re-election. No Director (other than a Managing
Director) may hold office without re-election past the
third annual general meeting following their appointment
or three years, whichever is longer or, in the case of a
Director appointed by the Directors as an additional
Director or to fill a casual vacancy, past the next annual
general meeting of the company. Any Director appointed
by the Board since the last AGM must stand for election at
the next AGM.
The Committee is responsible for ensuring that the Board
is of a size and composition that allows for:
(1) decisions to be made expediently;
(2) a range of different perspectives to be put forward
regarding issues before the Board;
(3) a range of different skills to be brought to Board
deliberations; and
(4) Board decisions to be made in the best interests of
the Company as a whole rather than of individual
shareholders or interest groups.
The Committee’s functions are to review and report to the
Board on:
-
-
-
-
-
Remuneration policy for the entire consolidated
entity (including Executive Officers and Non-
Executive Directors);
identifying nominees for Directorships and other key
Executive appointments;
assessing Director competencies;
evaluating the Board’s performance annually; and
remuneration policies and practices.
The Remuneration and Nomination Committee
responsible for the:
is
(1) evaluation and review of the performance of the
Board (excluding the Chairman);
(2) evaluation and review of the performance of
individual Directors;
(3) review of and making of recommendations on the
size and structure of the Board; and
(4) review of the effectiveness and programme of Board
meetings.
A review of the performance of the individual Directors
occurs each year. The Board undertook an evaluation of
itself and its committees in July 2011, with all Directors
providing input as to the effectiveness of the board
processes, meetings, composition and reporting with
Directors having an opportunity to discuss and comment
on such matters with the Chairman. The Board review its
performance and composition on an annual basis to
ensure that its has the appropriate mix of expertise and
experience. The Board also reviews the performance and
composition of its committees on an annual basis.
The Committee meets as frequently as required and at
least once a year. The quorum for such meetings is two
members, at least one of whom shall be independent.
Details of the Committee members’ attendance at
Committee meetings are set out in the Directors’ Report.
Subject to normal privacy requirements, each Director has
the right of access to all of the Company’s records,
information and senior Executives. They receive regular
detailed reports on financial and operational aspects of
the Company’s business and may request elaboration or
explanation of these reports at any time. New Directors
undergo an induction process in which they are given a
full briefing of the operations of the Company. Where
possible, this includes meetings with key Executives, tours
of the operating sites (if practicable), provision of an
induction package containing key corporate information
and presentations. Directors and Executives are
encouraged to broaden their knowledge of the Company’s
business and to keep abreast of developments in business
more generally by attendance at relevant courses,
seminars, conferences, etc. The Company meets expenses
involved in such activities.
Names of Members of Committees
Remuneration
and Nomination
Committee
3
-
-
3
3
-
Audit Risk and
Compliance
Committee
-
3
-
3
3
-
P.R. Gunner
G.H. Babidge
A.M. Perich
R. Perich
M. Miles
R.J.F. Macleod
Freedom Foods Group Limited
21
Corporate Governance Statement (continued...)
Principle 3
Promote ethical and responsible decision-making
The Directors acknowledge the need for, and continued
maintenance of, a high standard of corporate governance
practices and ethical conduct by all Directors and
its ethical standards, the
employees.
Company will:
In maintaining
(1) behave with integrity in all its dealings with
customers, shareholders, employees, suppliers,
business partners and the community;
(2) ensure its actions comply with applicable laws and
regulations;
(3) not engage in any activity that could be construed
to involve an improper inducement;
(4) achieve a working environment where:
(i) equal opportunity is rigorously practised;
(ii) harassment and other offensive forms of
behaviour are not tolerated;
(iii) confidentiality of commercially sensitive
information is protected; and
(iv) employees are encouraged to discuss concerns
and ethical behaviour with Directors and senior
Executives.
The Board, senior Executives and all employees of the
Company are committed to implementing this Code of
Ethics and each
is accountable for such
compliance. A copy of the Code is made available to
Directors, employees, contractors and relevant personnel
on the Company’s website: http://www.ffgl.com.au
individual
implementing
The Group executive management is responsible for
establishing,
the
effectiveness of the Code of Ethics as well as for overseeing
that all of the Company’s employees and contractors
understand, and act in accordance with the Code.
reviewing
and
The Board has implemented a range of procedures
designed to oversee that the Company complies with the
law and achieves high ethical standards in identifying and
resolving or managing conflicts of interest. All Directors
must advise the Chairman of all business dealings with the
Company.
As a part of active promotion of ethical behaviour, any
behaviour that does not comply with the Code must be
duly reported. Protection will be provided for those who
report violations in good faith.
“The Company has a Securities Trading Policies for
Directors and senior executives, which was updated and
lodged with the ASX on 18 January 2011. The policies
generally allow Directors and senior executives to deal in
the Company’s securities other than the following:
a.
from 1 month prior to the release of the annual or
half yearly accounts;
b. within the period of 1 month prior to the issue of a
prospectus; and
c. where there is price sensitive information that has
not been disclosed because of an ASX Listing Rule
exemption; and
d. any additional period arising from time to time that
the Board imposes a prohibition on trading by Key
Management Personnel as an ‘ad-hoc’ prohibition on
trading of Securities. It is the policy that generally
Directors and senior executives should wait at least
2 days after the relevant release before dealing in
Securities so that the market has had time to absorb
the information. Further details of the policies are
available on the website of the Company:
http://www.ffgl.com.au
In accordance with the ASX Corporate Governance
Recommendations on diversity, the Board will establish a
diversity policy in the upcoming financial year which
includes:
a.
a requirement that the Board establish measurable
objectives for achieving gender diversity; and
b. a requirement for the Board to assess annually both
the gender objectives and the progress in achieving
them.
This policy once adopted will be available on the website
of the Company http://www.ffgl.com.au and assessments
will be reported in the annual report.
Principle 4
Safeguard integrity in financial reporting
The Board has established an Audit, Risk and Compliance
Committee comprising three Non-Executive Directors,
with appropriate experience. Every member of the
Committee must be able to read and understand financial
statements with experience in financial and accounting
matters. Currently, the Committee comprises of Mr M.
Miles (Chairman), Mr R. Perich and Mr G H Babidge. One
out of the three Committee members are independent.
The Chairman of the Committee is an independent
Director and is not Chairman of the Board.
The Group Executive Director, other senior management
and external audit partner attend Committee meetings at
the discretion of the Committee.
22
Annual Report 2011
Corporate Governance Statement (continued...)
The external auditors have a direct line of communication
at any time to either the Chairman of the Audit, Risk and
Compliance Committee or the Chairman of the Board.
The Audit, Risk and Compliance Committee is responsible
for:
years. The Board may select an external auditor based on
the criteria relevant to the business of the Company such
as experience in the industry in which the Company
operates, references, costs, and any other matters deemed
relevant by the Board.
(1) reviewing and reporting to the Board on the half
Principle 5
yearly and annual reports and financial statements
of the Company and consolidated entities;
(2) nominating the external auditor and reviewing the
adequacy, scope and quality of the annual statutory
audit and half yearly statutory review;
(3) reviewing the effectiveness of the Company’s
internal control systems;
(4) monitoring and reviewing the reliability of financial
reporting;
(5) monitoring and reviewing the compliance of the
Company with applicable laws and regulations;
(6) monitoring the Australian Accounting Standards
and Interpretations;
(7) monitoring financial risks and exposure of the
Company’s assets;
(8) monitoring the risk management policy and plans;
(9) reviewing the Company’s Occupational Health and
Safety obligations and the Company’s compliance;
(10) reviewing the Company’s insurance policies and
coverage; and
(11) overseeing the independence of external auditors
and annually reviewing the Company’s policy on
maintaining the independence of external auditor.
The Committee has a formal Charter which is posted on
the website of the Company http://www.ffgl.com.au. The
Committee meets as frequently as required and at least
twice a year. The quorum for such meetings is two
members, at least one of whom shall be independent.
Details of the Committee members’ attendance at
Committee meetings are set out in the Directors’ Report.
The minutes of each Committee meeting are reviewed at
the subsequent Board meeting and signed as an accurate
record of proceedings. At the subsequent Board meeting
the Chairman of the Committee
reports on the
Committee’s conclusions and recommendations.
The candidates for the position of external auditor must
be able to demonstrate complete independence from the
Company and an ability to maintain
independence
throughout the engagement period. The external auditors
have advised, after consultation with the Company, that
the audit engagement partner shall be rotated every five
Make timely and balanced disclosure
The purpose of the Continuous Disclosure Policy is to
ensure that there are mechanisms in place to provide all
investors with equal and timely access to material
information concerning the Company. Such information
must be presented in a clear and balanced way so as not
to omit any material information.
This Policy is designed to ensure that the Company meets
its continuous disclosure obligations under the ASX Listing
Rules and has been posted to the website of the Company
http://www.ffgl.com.au
Type of information that needs to be disclosed
Listing Rule 3.1 states that any
information that a
reasonable person would consider to have a material
effect on the value of the Company securities must be
disclosed. Examples of such information include a change
in revenue, asset values or significant transactions.
Directors receive copies of all announcements immediately
after notification to the ASX. All announcements are
posted to the Company’s website. A report is submitted to
each Board meeting of disclosures to the ASX since last
meeting with the Disclosure File available for review.
Disclosure Officer
The Board has appointed the Company Secretary to act as
the Disclosure Officer, responsible for communications
with the ASX. The Company Secretary in discussion with
the Company Chairman decides what information must
be disclosed. The Disclosure Officer holds the primary
responsibility for ensuring that the Company complies
with its disclosure obligations. In addition, Directors,
employees or consultants are all responsible for reporting
price sensitive information that is not generally available
to the Disclosure Officer.
To enhance clarity and balance of reporting and to enable
investors to make an
informed assessment of the
Company’s performance, financial results are accompanied
by commentary.
Freedom Foods Group Limited
23
Corporate Governance Statement (continued...)
Principle 6
Respect the rights of shareholders
The Company aims to keep shareholders informed of the
Company’s performance in an ongoing manner. Apart
from information provided pursuant to the Company’s
legal and ASX Listing Rules obligations regarding
continuous disclosure of information, the Company also
communicates with shareholders through the:
(1) Annual Report which is available to all shareholders.
The Annual Report includes relevant information
about the Company’s operations and performance;
(2)
Invitation to the annual general meeting and all
accompanying papers;
(3) The Company’s website at http://www.ffgl.com.au;
(4) Reports to the ASX and the press;
(5) Half year and full year profit announcements; and
(6)
Information and presentations to analysts (which are
released to the ASX).
The Annual General Meeting provides an important
opportunity for shareholders to express their views and
respond to initiatives being proposed by the Board.
The Company also requests that the external auditor
attend the Annual General Meeting and be available to
answer shareholder questions about the audit and the
preparation and content of the audit reports.
In
a
accordance The Company will establish
Communications with Shareholder Policy, incorporating
matters disclosed above. The policy once adopted will be
available on the website of the Company http://www.ffgl.
com.au
Principle 7
Recognise and manage risk.
Risk oversight and management policies
The Company has recently adopted a Risk Mana-
gement Policy, which has been posted to its website
http://www.ffgl.com.au. The Policy covers the areas of
oversight, risk management, risk profile, compliance and
control and assessment of effectiveness. The Audit, Risk
and Compliance Committee (details and composition of
which have been set out earlier) is responsible for
providing the Board with advice and recommendations
regarding the ongoing development of the Policy.
Risk management and risk profile
The Committee is responsible for:
(1) providing the Board with advice and
recommendations regarding the Company’s:
(i) risk management system; and
(ii)
risk profile that describes the material risks
(including financial and non-financial risks)
(2) reviewing the effectiveness of the Company’s
implementation of the risk management system at
least once a year;
(3) regularly reviewing and updating the Company’s risk
profile; and
(4) ensuring that the appropriate Executives have
established and implemented a system for
identifying, assessing, monitoring and managing risk
throughout the organisation. The system is to
include the Company’s internal compliance and
control systems.
Executive management provide the Committee and
Board with regular reports on operational, financial,
regulatory and commercial matters within their business
divisions. This ensures Management accountability.
Executive management is responsible for designing and
implementing a risk management and internal control
system to manage the Company’s material business risks.
Executive management identifies and reviews the major
risks impacting each area of the business and develops
strategies to effectively mitigate these risks.
As required by the ASX Principles, Executive management
has reported to the Board on the effectiveness of the
management of its material business risks. The ultimate
responsibility for risk oversight and management rests
with the Board.
Due to the size and scale of operations of the Company,
there is no separate internal audit function.
Executive Management Assurances
As part of the structure of financial review and
authorisation, the Group Executive Director and other
executive management are required to provide written
assurances that the financial reports present a true and fair
view of the Company’s and consolidated entities financial
position in all material aspects and that the integrity of the
financial statements is founded on a system of risk
management and internal compliance and control which
implements the policies adopted by the Board and is
24
Annual Report 2011
operating efficiently and effectively in all material aspects
in relation to financial reporting risks. As part of internal
management reporting policy relevant senior personnel
provide written assurances regarding the integrity of the
financial reports to support the Executive Director and
other executive management assurances to the Board.
The Board received the written assurances with respect to
the 2011 financial year.
Principle 8
Remunerate fairly and responsibly.
The Board has established a Remuneration and Nomination
Committee to consider and report on, among other
matters, remuneration policies and packages applicable
to Board members and to senior executives of the
Company. The Committee is responsible for ensuring that
any equity-based Executive or Non-Executive Director‘s
remuneration is made in accordance with any thresholds
approved by shareholders. The composition and details of
the Committee have been detailed earlier
in this
Statement.
In respect of remuneration issues, the responsibilities of
the Committee
include determining, evaluating and
reporting to the Board with respect to:
(1) executive remuneration and incentive policies,
including ensuring that the remuneration policies
and practices of the Company are consistent with its
strategic goals and human resource objectives;
(2) the Company’s recruitment, retention and
termination policies and procedures for executives;
(3) incentive schemes;
(4) superannuation arrangements; and
(5) the remuneration framework for Directors.
The Committee operates independently of the senior
management of the Company in its recommendations to
the Board in relation to:
(1) reviewing on an annual basis the performance and
salary of the Executive management group
including Executive and Employee Share Option
Plan participation;
(2) the remuneration packages and other terms and
conditions of appointment and continuing
employment of senior Executives; and
(3) reviewing Non-Executive Directors’ remuneration
within the maximum amount approved by
shareholders.
Corporate Governance Statement (continued...)
The Board believes that Directors are properly rewarded
through payment of a fee which is reviewed annually in
the light of market conditions and has regard to the
responsibilities placed on the Directors by the legal and
financial framework within which they act.
The Committee’s main functions include:
(1) Conditions of service and remuneration of Executive
management and their direct reports:
(2) Performance of the Executive management;
(3) Ensure that the remuneration policy achieves both a
level and composition of remuneration that is both
competitive and reasonable.
Remuneration policies are designed to attract and
maintain talented and motivated Directors and employees
as well as raising the level of performance of the Company.
(4) Recommendation to the Board, which has the
discretion to reward eligible employees with the
payment of bonuses, share options and other
incentive payments. These incentive payments are
designed to link reward to performance and are
determined by both financial and non-financial
imperatives.
the
Executive management attend meetings of
Remuneration and Nomination Committee by invitation
when
report on, and discuss, senior
management performance, remuneration matters, etc.
required to
Non-Executive Directors receive fees determined by the
Board, but within the aggregate limit approved by
Shareholders at a General Meeting.
The structure of remuneration for Non-Executive Directors
and Executive Directors is different. As explained in the
Remuneration Report, the Executive Director and key
management personnel receive fixed remuneration,
employer contributions to superannuation funds and
options. Options are valued using the binomial method
and are not linked to the performance of the Company,
but to the personnel’s employ. The Securities Trading
Policy for Directors and senior executives restricts entering
into transactions with securities in associated products
which operate to limit the economic risk of any unvested
entitlements under any equity based remuneration
scheme offered by the Company. Remuneration packages
of Non-Executive Directors are fee based. Non-Executive
Directors do not participate in bonus payments or any
retirement benefits other than statutory superannuation.
Freedom Foods Group Limited
25
Consolidated Statement of Comprehensive Income
n Consolidated Statement of Comprehensive Income
For the financial year ended 30 June 2011
Notes
Consolidated
$000
2011
2010
5
5
6
6
34
35
7
9
9
45,353
(31,262)
14,091
403
(2,042)
(5,338)
(3,160)
-
3,954
(1,092)
2,862
(1,529)
3,884
(1,778)
(326)
841
295
4,249
138
4,387
-
4,387
4,387
-
4,387
4,387
-
4,387
5.67
4.99
0.50
0.1
44,443
(30,676)
13,767
465
(1,558)
(4,862)
(3,741)
(250)
3,821
(1,004)
2,817
(1,031)
-
-
-
1,308
-
3,094
263
3,357
-
3,357
3,357
-
3,357
3,357
-
3,357
5.00
5.00
-
-
Revenue from sale of goods
Cost of sales
Gross profit
Other income
Marketing expenses
Selling and distribution expenses
Administrative expenses
Loss on disposal of Non Current Assets
Profit before depreciation, income tax, finance costs and equity accounted investments
Depreciation
Profit before income tax, finance costs and equity accounted investments
Finance costs
Profit on sale of A2DP shares
Impairment of Goodwill
Write off of non recurring legal expense and unrecoverable amounts
Share of profit of joint ventures accounted for using the equity method
Share of profit of associates accounted for using the equity method
Profit before tax
Income tax benefit
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Profit attributable to:
Owners of the company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the company
Non-controlling interests
Earnings per share
From continuing operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Ordinary Dividends per share paid - Interim (cents per share)
CRPS Dividends per share paid ( cents per share)
Notes to the statement of comprehensive income are included on pages 30 to74.
26
Annual Report 2011
Consolidated Statement of Financial Position
n Consolidated Statement of Financial Position
For the financial year ended 30 June 2011
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current tax assets
Prepayments
Assets Classified as held for Sale
Total Current Assets
Non-current assets
Investments in associates
Deferred tax assets
Property, plant and equipment
Goodwill
Other intangible assets
Total non-current assets
TOTAl ASSETS
lIABIlITIES
Current liabilities
Trade and other payables
Borrowings
Other liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Deferred tax liability
Provisions
Total non-current liabilities
TOTAl lIABIlITIES
NET ASSETS
EquITY
Capital and Reserves
Equity attributable to owners of the company
Issued capital
Reserves
Retained earnings
TOTAl EquITY
Notes to the statement of comprehensive income are included on pages 30 to 74.
Notes
22(a)
10
11
12
7
38
11
7
14
13
13
15
16
11
17
15
16
7
17
18
19
20
Consolidated
$000
2011
2010
182
10,097
-
5,349
-
665
16,293
-
16,293
11,440
3,401
24,095
5,214
16,274
60,424
76,717
5,579
10,357
53
855
16,844
504
7,995
1,261
130
9,890
26,734
49,983
39,288
1,006
9,689
49,983
34
9,362
784
7,121
151
610
18,062
4,141
22,203
1,152
2,038
22,431
6,992
16,274
48,887
71,090
7,252
15,576
-
868
23,696
1,064
5,766
47
254
7,131
30,827
40,263
33,637
919
5,707
40,263
Freedom Foods Group Limited
27
Consolidated Statement of Cash Flows
n Consolidated Statement of Cash Flows
For the financial year ended 30 June 2011
Notes
Consolidated
$000
2011
2010
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest paid
Income tax refund
Receipt of government grants
Net cash generated by operating activities
22(b)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
Payment for property, plant and equipment
Investment in Equity Interest
Investment in jointly controlled entity
Costs asscociated with Sale of Joint Venture
Dividends paid
Advance (to) / from Joint Venture
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of equity instruments of the company
Payment of share issue costs
Proceeds from borrowings
Repayment of borrowings
Net cash provided by financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
Notes to the statement of comprehensive income are included on pages 30 to 74.
22(a)
44,143
(40,061)
4,082
(1,612)
152
75
2,697
-
(2,460)
(812)
-
(383)
(359)
(356)
(4,370)
5,825
(192)
11,108
(13,520)
3,221
1,548
(1,366)
182
45,082
(40,982)
4,100
(1,338)
9
-
2,771
19
(7,225)
-
(10)
-
-
294
(6,922)
2,332
(215)
4,362
(3,023)
3,456
(695)
(671)
(1,366)
28
Annual Report 2011
Consolidated Statement of Changes in Equity
n Consolidated Statement of Changes in Equity
For the financial year ended 30 June 2011
Notes
Fully paid
ordinary
shares
$000
CRPS
Shares
ATTRIBuTABlE TO EquITY hOlDERS OF ThE PARENT
Total
Retained
earnings
Equity - settled
employee
benefits reserve
$000
Asset
revaluation
reserve
$000
$000
$000
$000
2,350
319
473
30,161
CONSOlIDATED
Balance as at 30 June 2009
Equity issues
Share issue costs
Related income tax
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Recognition of share-based payments
Dividends paid
Balance as at 30 June 2010
Equity issues
Share issue costs
Related income tax
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Recognition of share-based payments
Dividend paid
18
18
19
21
18
18
19
21
27,019
6,833
(307)
92
-
-
-
-
-
33,637
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,824
(272)
81
-
-
-
-
-
Balance as at 30 June 2011
33,655
5,633
-
-
-
3,357
-
3,357
-
-
5,707
-
-
-
4,387
-
4,387
-
(405)
9,689
-
-
-
-
-
-
127
-
446
-
-
-
-
-
-
87
-
533
Non
controlling
interest
$000
Total
Equity
$000
-
-
-
-
-
-
-
-
-
30,161
6,833
(307)
92
3,357
-
3,357
127
-
-
-
-
-
-
-
-
-
6,833
(307)
92
3,357
-
3,357
127
-
473
40,263
-
40,263
-
-
-
-
-
-
-
-
5,842
(272)
81
4,387
-
4,387
87
(405)
-
-
-
-
-
-
-
-
5,842
(272)
81
4,387
-
4,387
87
(405)
473
49,983
-
49,983
Notes to the statement of comprehensive income are included on pages 30 to 74.
Freedom Foods Group Limited
29
Notes to the Financial Statements
n Notes to the Financial Statements
For the financial year ended 30 June 2011
1. General Information
The financial report of Freedom Foods Group Limited (“Group” or “Company”) for the year ended 30
June 2011 was authorised for issue in accordance with resolution of Directors on 29 September
2011.
Freedom Foods Group Limited is a company incorporated in Australia whose shares are publicly
traded on the Australian securities exchange. The company is trading under the symbol ‘FNP’.
The nature of the operations and principal activities of the Group are described in note 4.
2. Adoption of New and Revised Accounting Standards
2.1 Standards and Interpretations affecting amounts reported in the current
period (and/or prior periods)
The following new and revised Standards and Interpretations have been adopted in the
current period and have affected the amounts reported in these financial statements.
Standards affecting presentation and disclosure
Amendments to AASB 7 ‘Financial Instruments: Disclosure’ (adopted in advance of effective
date of 1 January 2011)
Amendments to AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’
Amendments to AASB 101 ‘Presentation of Financial Statements’ (adopted in advance of
effective date of 1 January 2011)
Amendments to AASB 107 ‘Statement of Cash Flows’
2.2 Standards and Interpretations adopted with no effect on financial
statements
The following new and revised Standards and Interpretations have also been adopted in these
financial statements. Their adoption has not had any significant impact on the amounts
reported in these financial statements but may affect the accounting for future transactions or
arrangements.
AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project’
AASB 2009-8 ‘Amendments to Australian Accounting Standards – Group Cash-Settled
Sharebased Payment Transactions’
AASB 2009-10 ‘Amendments to Australian Accounting Standards – Classification of Rights
Issues’
AASB 2010-3 ‘Amendments to Australian Accounting Standards arising from the Annual
Improvements Project’
AASB 2010-4 ‘Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project’
Interpretation 19 ‘Extinguishing Financial Liabilities with Equity Instruments’
2.3 Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed
below were in issue but not yet effective.
30
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
2. Adoption of New and Revised Accounting Standards
(continued...)
Standard/Interpretation
AASB 124 ‘Related Party Disclosures’ (revised December 2009)
AASB 2009-12 ‘Amendments to Australian Accounting Standards’
AASB 9 ‘Financial Instruments’
AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9’
AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’
AASB 2009-14 ‘Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement’
AASB 2010-5 ‘Amendments to Australian Accounting Standards’
AASB 2010-6 ‘Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets’
AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets’
AASB 1054 ‘Australian Additional Disclosures’
AASB 2011-8 ‘Amendments to Australian Accounting Standards arising from AASB 13’
AASB 2011-9 ‘Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income’
AASB 10 ‘Consolidated Financial Statements’
AASB 11 ‘Joint Arrangements’
AASB 12 ‘Disclosure of Involvement with Other Entities’
AASB 119 ‘Employee Benefits’
AASB 127 ‘Separate Financial Statements (2011)’
AASB 128 ‘Investments in Associates and Joint Ventures’
Effective for
annual reporting
periods beginning
on or after
1 January 2011
1 January 2011
1 January 2013
1 January 2013
1 January 2013
1 January 2011
1 January 2011
1 July 2011
1 January 2012
1 July 2011
1 January 2013
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
Expected to be
initially applied
in the financial
year ending
30 June 2012
30 June 2012
30 June 2014
30 June 2014
30 June 2014
30 June 2012
30 June 2012
30 June 2012
30 June 2013
30 June 2012
30 June 2014
30 June 2013
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
3. Significant Accounting Policies
The following significant accounting policies have
been adopted in the preparation and presentation of
the financial report:
(a) Statement of compliance
The financial report is a general-purpose financial
report which has been prepared in accordance with
the Corporations Act 2001, Accounting Standards
Interpretations, and complies with other
and
requirements of the law. The financial report includes
the consolidated financial statements of the Group.
Accounting Standards include Australian equivalents
to
International Financial Reporting standards
(‘A-IFRS’). Compliance with A-IFRS ensures that the
financial statements and notes of the Group comply
with
International Financial Reporting standards
(‘IFRS’).
The financial statements were authorised for issue by
the directors on 29th September 2011.
(b) Basis of preparation
The financial report has been prepared on the
historical cost basis, except for the revaluation of
certain non-current assets and financial instruments.
Cost is based on the fair values of the consideration
given in exchange for assets.
The financial report is presented in Australian dollars
and all values are rounded to the nearest thousand
dollars ($’000) unless otherwise stated under the
option available to the Parent under ASIC Class Order
98/0100, dated 10 July 1998. The Parent is an entity to
which the class order applies.
(c) Critical accounting judgments and key
sources of estimation uncertainty
is
required to make
In the application of the Group’s accounting policies,
management
judgments,
estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent
from other sources. The estimates and associated
assumptions are based on historical experience and
other factors that are considered to be relevant.
Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised if the revision affects only that
period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Freedom Foods Group Limited
31
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
Key sources of estimation uncertainty:
Impairment of goodwill and other intangible assets
Determining whether goodwill or other intangible
assets are impaired requires an estimation of the
value in use of the cash generating units to which the
goodwill or other
intangible assets have been
allocated. The value in use calculation requires the
directors to estimate the future cash flows expected
to arise from the cash generating unit and a suitable
discount rate in order to calculate the present value.
The value of the goodwill as at the end of the financial
year was $5,214,000, with $1,778,000 impairment loss
charged against this goodwill.
The value of other intangible assets as at the end of
the financial year was $16,274,000, with no
impairment loss charged against the other intangible
assets.
Further details in relation to the goodwill and other
intangible assets of the consolidated entity are set
out in note 13.
(d) Basis of consolidation
The consolidated financial statements incorporate
the financial statements of Freedom Foods Group
Limited and its subsidiaries as at 30 June each year
(‘the Group’). Control is achieved where the Company
has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its
activities. The results of subsidiaries acquired or
disposed of during the year are included in the
consolidated statement of comprehensive income
from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their
accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.
(e) Business combinations
Acquisitions of subsidiaries and businesses are
accounted for using the acquisition method. The cost
of the business combination is measured as the
aggregate of the fair values (at the date of exchange)
of assets given, liabilities incurred or assumed, and
equity instruments issued by the group in exchange
for control of the acquiree. Acquisition related costs
are recognised in profit and loss as incurred. The
acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition
under AASB 3 ‘Business Combinations’ are recognised
at their fair values at the acquisition date, except for
non-current assets (or disposal groups) that are
classified as held for sale in accordance with AASB 5
‘Non-current Assets Held for Sale and Discontinued
Operations’, which are recognised and measured at
fair value less costs to sell.
Goodwill arising on acquisition is recognised as an
asset and initially measured at cost, being the excess
of the cost of the business combination over the
Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognised.
If, after reassessment, the Group’s interest in the net
fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities exceeds the cost of the
business combination, the excess
is recognised
immediately in profit or loss.
The interest of minority shareholders in the acquiree
is initially measured at the minority’s proportion of
the net fair value of the assets,
liabilities and
contingent liabilities recognised.
(f) Interests in joint ventures
The Group’s interest in joint ventures represent jointly
controlled entities which have been measured by
applying the equity method of accounting. Under
the equity method of accounting the carrying
amounts of interests in joint venture entities are
increased or decreased to recognise the Group’s
share of the post acquisition profits or losses and
other changes in net assets of the joint ventures.
(g) Foreign currency translation
Both the functional and presentation currency of
Freedom Foods Group Limited and its Australian
subsidiaries is Australian dollars (AUD). Transactions
in foreign currencies are initially recorded in the
functional currency at the exchange rates ruling at
the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are
restated at the rate of exchange ruling at the end of
32
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
each reporting period. Exchange differences are
recognised in the profit or loss in the period in which
they arise.
(h) Property, plant and equipment
Plant and equipment, motor vehicles and equipment
under finance
less
accumulated depreciation and impairment.
lease are stated at cost
impairment
losses. Fair value
Land and Buildings held for use in the production of
goods, are carried in the statement of financial
fair value, less any
position at
subsequent
subsequent
accumulated
and
depreciation
accumulated
is
determined on the basis of an independent valuation
prepared by external valuation experts, based on
discounted cash flows or capitalisation of net income,
as appropriate. Revaluations are performed with
sufficient regularity such that the carrying amounts
do not differ materially from those that would be
determined using fair values at the end of each
reporting period. Any revaluation increase arising on
the revaluation of land and buildings is credited to a
revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset
previously recognised as an expense in the profit or
loss, in which case the increase is credited to the
proift or loss to the extent of the decrease previously
charged. A decrease in carrying amount arising on
the revaluation of land and buildings is charged as an
expense in profit or loss to the extent that it exceeds
the balance, if any, held in the revaluation reserve
relating to a previous revaluation of that asset.
Construction in progress is stated at cost. Cost
includes expenditure that is directly attributable to
the acquisition or construction of the item. In the
event that settlement of all or part of the purchase
consideration is deferred, cost is determined by
discounting the amounts payable in the future to
their present value as at the date of acquisition.
including
Depreciation is provided on property, plant and
equipment,
freehold buildings but
excluding land. Depreciation is calculated on a
straight line basis so as to write off the net cost of
each asset over its expected useful life to its estimated
residual value. The estimated useful lives, residual
values and depreciation method are reviewed at the
end of each annual reporting period, with the effect
of any changes recognised on a prospective basis.
Assets held under finance leases are depreciated over
their expected useful lives on the same basis as
owned assets or, where shorter, the term of the
relevant lease.
The gain or loss arising on disposal or retirement of
an
is
item of property, plant and equipment
determined as the difference between the sales
proceeds and the carrying amount of the asset and is
recognised in profit or loss.
The following depreciation rates are used in the
calculation of depreciation:
Class of Fixed Assets
Buildings
Plant and equipment
Leased plant and equipment
Motor vehicles
Depreciation Rate
2-6%
5-20%
5-20%
15-33%
(i) Non-current assets classified as held for
sale
Non-current assets and disposal groups classified as
held for sale are measured at the lower of carrying
amount and fair value less costs to sell.
Non-current assets and disposal groups are classified
as held for sale if their carrying amount will be
recovered principally through a sale transaction
rather than through continuing use. This condition is
regarded as met only when the asset (or disposal
group) is available for immediate sale in its present
condition subject only to terms that are usual and
customary for such a sale and the sale is highly
probable. The sale of the asset (or disposal group)
must be expected to be completed within one year
in the
from the date of classification, except
circumstances where sale is delayed by events or
circumstances outside the Group’s control and the
Group remains committed to a sale.
(j) Borrowing costs
to
Borrowing costs directly attributable
the
acquisition, construction or production of qualifying
assets, which are assets that necessarily take a
substantial period of time to get ready for their
intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially
ready for their intended use or sale. Investment
income earned on the temporary investment of
specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
All other borrowing costs are recognised in profit or
loss in the period in which they are incurred.
Freedom Foods Group Limited
33
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
(k) Goodwill
and accumulated impairment losses, on the same
basis as intangible assets acquired separately.
(m) Impairment of long-lived assets excluding
goodwill
Goodwill acquired in a business combination is
initially measured at its cost, being the excess of the
cost of the business combination over the Group’s
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised at the
is subsequently
date of acquisition. Goodwill
measured at its cost less any impairment losses.
For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating
units (CGUs) or groups of CGUs, expected to benefit
from the synergies of the business combination.
CGUs (or groups of CGUs) to which goodwill has
been allocated are tested for impairment annually, or
more frequently if events or changes in circumstances
indicate that goodwill might be impaired. If the
recoverable amount of the CGU (or group of CGUs) is
less than the carrying amount of the CGU (or groups
of CGUs), the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated
to the CGU (or groups of CGUs) and then to the other
assets of the cash-generating units pro-rata on the
basis of the carrying amount of each asset in the CGU
(or groups of CGUs). An impairment loss recognised
for goodwill is recognised immediately in profit or
loss and is not reversed in a subsequent period. On
disposal of an operation within a CGU, the attributable
amount of goodwill is included in the determination
of the profit or loss on disposal of the operation.
(l) Intangible assets
Brand names
Brand names recognised by the group have an
indefinite useful life and are not amortised. Each
period, the useful life of this asset is reviewed to
determine whether events and circumstances
continue
life
assessment for the asset. Such assets are tested for
impairment in accordance with the policy in note
3(m).
indefinite useful
to support an
Intangible assets acquired in a business
combination
Intangible assets acquired in a business combination
are
from
identified and recognised separately
goodwill where they satisfy the definition of an
intangible asset. Subsequent to initial recognition,
intangible assets acquired in a business combination
are reported at cost less accumulated amortisation
At each reporting date the Group reviews the
carrying amounts of its assets to determine whether
there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows
that are independent from other assets, the Group
estimates the recoverable amount of the CGU to
which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be
identified.
that
the asset may be
Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested
for impairment annually and whenever there is an
indication
impaired.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset for which
the estimates of future cash flows have not been
adjusted. If the recoverable amount of an asset (or
CGU) is estimated to be less than its carrying amount,
the carrying amount of the asset (CGU) is reduced to
its recoverable amount. An
is
recognised in profit or loss immediately.
impairment
loss
Where an impairment loss subsequently reverses, the
carrying amount of the asset (CGU) is increased to
the revised estimate of its recoverable amount, but
only to the extent that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (CGU) in prior years. A
reversal of an
recognised
immediately in profit or loss.
impairment
loss
is
(n) Inventories
Inventories are measured at the lower of cost and net
realisable value.
34
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
Raw materials: purchase cost on a first-in, first-out
basis;
Manufactured finished goods: cost of direct materials,
direct
labour and an appropriate portion of
manufacturing variable and fixed overheads based
on normal operating capacity but excluding
borrowing costs;
Purchased finished goods: purchase cost on a
weighted average cost basis.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.
(o) Cash and cash equivalents
Cash and short-term deposits in the statement of
financial position comprise cash at bank and in hand
and cash equivalents, which are short-term deposits
with an original maturity of three months or less.
For the purposes of the Statement of Cash Flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding
bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the statement of
financial position.
(p) Other financial liabilities
Other financial liabilities, including borrowings, are
initially measured at fair value, net of transaction
costs. Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method, with interest expense recognised
on an effective yield basis.
interest method
is a method of
The effective
calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash payments
through the expected life of the financial liability, or,
where appropriate, a shorter period.
(q) Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result of
a past event, it is probable that the Group will be
required to settle the obligation, and a reliable
estimate can be made of the amount of the
obligation. The amount recognised as a provision is
the best estimate of the consideration required to
settle the present obligation at reporting date, taking
into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using
the cash flow estimated to settle the present
obligation, its carrying amount is the present value of
those cash flows. When some or all of the economic
benefits required to settle a provision are expected to
be recovered from a third party, the recoverable
amount is recognised as an asset if it is virtually
certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
(r) Employee benefits
A liability is recognised for benefits accruing to
employees in respect of wages and salaries, annual
leave and long service leave when it is probable that
settlement will be required and they are capable of
being measured reliably. Liabilities recognised in
respect of short term employee benefits are
measured at
the
remuneration rate expected to apply at the time of
settlement. Liabilities recognised in respect of long
term employee benefits are measured at the present
value of the estimated future cash outflows to be
made by the Group in respect of services provided by
employees up to reporting date.
their nominal values using
Defined contribution plans
Contributions to defined contribution superan-
nuation plans are expensed when incurred.
(s) Share-based payments
Equity-settled payments with employees and others
providing similar services are measured at the fair
value of the equity instrument at the grant date. Fair
value is measured by use of a binomial model. The
expected life used in the model has been adjusted,
based on management’s best estimate, for the effects
of non-transferability, exercise
restrictions, and
behavioural considerations. Further details on how
the
share-based
transactions has been determined can be found in
note 29.
fair value of equity-settled
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on
the Group’s estimate of shares that will eventually
vest.
Freedom Foods Group Limited
35
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
At each reporting date, the Group revises its estimate
of the number of equity instruments expected to
vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss over
the remaining vesting period, with corresponding
adjustment to the equity-settled employee benefits
reserve.
(t) Leased Assets
Group as lessor
Rental income from operating leases is recognised
on a straight-line basis over the term of the relevant
lease. However, contingent rentals arising under
operating leases are recognised as income in a
manner consistent with the basis on which they are
determined. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the
carrying amount of the leased asset and recognised
on a straight-line basis over the lease term.
Leases are classified as finance leases when the terms
of the lease transfer substantially all the risks and
rewards incidental to ownership of the leased asset
to the lessee. All other leases are classified as
operating leases.
Group as lessee
leases are
Assets held under finance
initially
recognised at their fair value or, if lower, at amounts
equal to the present value of the minimum lease
payments, each determined at the inception of the
lease. The corresponding liability to the lessor is
included in the statement of financial position as a
finance lease obligation.
Lease payments are apportioned between finance
charges and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged
directly against income, unless they are directly
attributable to the qualifying assets, in which case
they are capitalised in accordance with the Group’s
general policy on borrowing costs. Refer to note 3(j).
Contingent rentals are recognised as expenses in the
periods in which they are incurred. Finance leased
assets are amortised on a straight line basis over the
estimated useful life of the asset.
Operating lease payments are recognised as an
expense on a straight-line basis over the lease term,
except where another systematic basis is more
representative of the time pattern in which economic
leased asset are consumed.
benefits from the
Contingent rentals arising under operating leases are
recognised as an expense in the period in which they
are incurred.
Lease incentives
In the event that lease incentives are received to
enter into operating leases, such incentives are
recognised as a liability. The aggregate benefits of
incentives are recognised as a reduction of rental
expense on a straight-line basis, except where
another systematic basis is more representative of
the time pattern in which economic benefits from
the leased asset are consumed.
(u) Revenue
Revenue
is measured at the fair value of the
consideration received or receivable. Revenue is
reduced
rebates and other similar
allowances.
for terms,
Sale of goods
Revenue from the sale of goods is recognised when
all the following conditions are satisfied:
•
•
•
•
•
the Group has transferred to the buyer the
significant risks and rewards of ownership of
the goods;
the Group retains neither continuing
managerial involvement to the degree usually
associated with ownership nor effective control
over the goods sold;
the amount of revenue can be measured
reliably;
it is probable that the economic benefits
associated with the transaction will flow to the
entity; and
the costs incurred or to be incurred in respect
of the transaction can be measured reliably.
Licensing fees
is recognised on an accrual basis
Revenue
in
accordance with the substance of the relevant
agreement. Revenue is calculated on the basis of the
turnover of the licensee.
Interest revenue
Interest is accrued on a time basis, by reference to the
principal outstanding and at the effective interest
is the rate that exactly
rate applicable, which
36
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
liability (or asset) to the extent that it is unpaid (or
refundable).
discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net
carrying amount.
Rental income
Revenue from operating leases is recognised in
accordance with the Group’s accounting policy
outlined in note 3(t).
Deferred tax
Deferred tax is accounted for on the basis of
temporary differences between the tax base of an
asset or liability and its carrying amount in the
statement of financial position. The tax base of an
asset or liability is the amount attributed to that asset
or liability for tax purposes.
(v) Government grants
Government grants are assistance by the government
in the form of transfers of resources to the Group in
return for past or future compliance with certain
conditions relating to the operating activities of the
entity. Government grants
include government
assistance where there are no conditions specifically
relating to the operating activities of the group other
than the requirement to operate in certain regions or
industry sectors.
Government grants are not recognised until there is
reasonable assurance that the Group will comply
with the conditions attaching to them and the grants
will be received. Government grants whose primary
is that the Group should purchase,
condition
construct or otherwise acquire long-term assets are
recognised as deferred income in the statement of
financial position and recognised as income on a
systematic and rational basis over the useful lives of
the related assets.
Other government grants are recognised as income
over the periods necessary to match them with the
related costs which they are intended to compensate,
on a systematic basis.
are
receivable
Government grants
as
that
compensation for expenses or losses already incurred
or for the purpose of giving immediate financial
support to the Group with no future related costs are
recognised as income of the period in which it
becomes receivable.
(w) Income tax
Current tax
Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect of
the taxable profit or loss for the period. It is calculated
using tax rates and tax laws that have been enacted
or substantively enacted by reporting date. Current
tax for current and prior periods is recognised as a
In principle, deferred tax liabilities are recognised for
all taxable temporary differences. Deferred tax assets
are recognised to the extent that it is probable that
sufficient taxable amounts will be available against
which deductible temporary differences or unused
tax losses and tax offsets can be utilised. However,
deferred tax assets and liabilities are not recognised if
the temporary differences giving rise to them arise
from the initial recognition of assets and liabilities
(other than as a result of a business combination)
which affects neither taxable income nor accounting
profit. Furthermore, a deferred tax liability is not
recognised
temporary
differences arising from the initial recognition of
goodwill.
relation
taxable
to
in
Deferred tax liabilities are recognised for taxable
temporary differences associated with investments
in branches and associates and interests in joint
ventures except where the Group is able to control
the reversal of the temporary differences and its
probable that the temporary differences will not
reverse in the foreseeable future. Deferred tax assets
arising
temporary differences
associated with these investments and interests are
only recognised to the extent that it is probable that
there will be sufficient taxable profits against which
to utilise the benefits of the temporary differences
and they are expected to reverse in the foreseeable
future.
from deductible
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)
when the asset and liability giving rise to them are
realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by
reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences
that would follow from the manner in which the
Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the company/Group intends to settle
its current tax assets and liabilities on a net basis.
Freedom Foods Group Limited
37
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
(continued...)
Current and deferred tax for the period
Current and deferred tax is recognised as an expense
or income in profit or loss, except when it relates to
items credited or debited directly to equity, in which
case the deferred tax is also recognised directly in
equity, or where it arises from the initial accounting
for a business combination, in which case it is taken
into account in the determination of goodwill or
excess.
(x) Goods and services tax
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (‘GST’) except:
• where the amount of GST incurred is not
recoverable from the taxation authority, in
which case the GST is recognised as part of
acquisition of the asset or as part of the
expense item as applicable; or
•
for receivables and payables which are stated
with the amount of GST included.
The net amount of GST recoverable from, or payable
to, the taxation authority is included as part of
receivables or payables in the statement of financial
position.
Cash flows are included in the Statement of Cash
Flows on a gross basis and the GST component of
cash flows arising from investing and financing
activities, which is recoverable from, or payable to,
the taxation authority are classified within operating
cash flows.
(y) Financial instruments
Recognition of investments
Investments are initially measured at fair value, net of
transaction costs, except for those financial assets
carried at fair value through profit and loss, which are
initially measured at fair value when the related
contractual rights or obligations exist. Subsequent to
initial recognition these investments are measured as
set out below.
Financial assets at fair value through profit and
loss
A financial asset is classified in this category if
acquired principally for the purpose of selling in the
short term if so designated by management and
within the requirements of AASB 139: Recognition
Instruments.
and Measurement of
Financial
Derivatives are also categorised as held for trading
unless they are designated as hedges. Realised and
unrealised gains and losses arising from changes in
their fair value of these assets are included in the
statement of comprehensive income in the period in
which they arise.
Effective interest method
interest method
The effective
is a method of
calculating the amortised cost of a financial asset and
of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including
all fees on points paid or received that form an
integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the
expected
life of the financial asset, or, where
appropriate, a shorter period.
Income is recognised on an effective interest rate
basis for debt instruments other than those financial
assets ‘at fair value through profit or loss’.
Loans and receivables
Loans and receivables have fixed or determinable
payments that are not quoted in an active market
and are stated at amortised cost using the effective
interest rate method
Interest
less
income is recognised by applying the effective
interest rate.
impairment.
Held-to maturity investments
These investments have fixed maturities, and it is the
group’s intention to hold these investments to
maturity. Any held-to-maturity investments held by
the group are stated at amortised cost using the
effective interest rate method less impairment.
Available-for-sale financial assets
Available-for-sale financial assets include any financial
assets not included in the above categories. Available-
for-sale financial assets are reflected at fair value.
Unrealised gains and losses arising from changes in
fair value are taken directly to equity.
Derecognition of financial assets
The Group derecognises a financial asset only when
the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and
substantially all the risks and rewards of ownership of
the asset to another entity. If the Group neither
transfers nor retains substantially all the risks and
rewards of ownership and continues to control the
transferred asset, the Group recognises its retained
38
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
3. Significant Accounting Policies
Embedded derivatives
(continued...)
interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of
a transferred financial asset, the Group continues to
recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
Impairment of financial assets
Financial assets, other than those at fair value through
profit or loss, are assessed for indicators of impairment
at the end of each reporting period. Financial assets
are impaired where there is objective evidence that
as a result of one or more events that occurred after
the initial recognition of the financial asset the
estimated future cash flows of the investment have
been impacted.
Financial liabilities
Non-derivative financial liabilities are recognised at
less
amortised cost, comprising original debt
principal payments and amortisation.
(z) Derivative financial instruments
are
statements. Derivatives
The Group enters into a variety of derivative financial
instruments to manage its exposure to foreign
exchange rate risk,
including foreign exchange
forward contracts. Further details of derivative
financial instruments are disclosed in note 26 to the
financial
initially
recognised at fair value at the date a derivative
contract
into and are subsequently
remeasured to their fair value at each reporting date.
The resulting gain or loss is recognised in profit or
loss immediately unless the derivative is designated
and effective as a hedging instrument, in which
event, the timing of the recognition in profit or loss
depends on the nature of the hedge relationship. The
Group has not adopted hedge accounting during
the financial year or previous corresponding period.
is entered
Derivatives embedded in other financial instruments
or other host contracts are treated as separate
derivatives when their risks and characteristics are
not closely related to those of host contracts and the
host contracts are not measured at their fair value
with changes in fair value recognised in profit or loss.
4. Operating Segments
The Group is organised into three segments which is
the basis on which the Group reports. The principal
products and services of these segments are as
follows:
Seafood: A range of canned seafood covering
sardines, salmon, tuna and specialty seafood. These
products are produced overseas and sold in Australia
and overseas.
Freedom Foods: A range of products for consumers
requiring a solution to specific dietary or medical
conditions including gluten free, wheat free, low
sugar or salt or highly fortified. The product range
covers breakfast cereals, cookies, snack bars, soy and
rice beverage, frozen prepared foods and other
complimentary products. These products are
produced and sold in Australia and overseas.
Thorpedo Foods: Thorpedo range of low GI beverages.
These products are produced and sold in Australia
and overseas.
Operating segments are identified on the basis of
internal reports about components of the Group that
are regularly reviewed by the Board of Directors in
their capacity as the chief operating decision maker
of the company in order to allocate resources to the
segments and assess their performance.
Information regarding these segments is presented
below. The following is an analysis of the Group’s
revenue and results by reportable operating segment
for the periods under review:
Segment revenue
Continuing operations
Seafood
Freedom Foods
Thorpedo Foods
Other
Total revenue of the consolidated group
External sales
2011
$’000
2010
$’000
Other revenue
2011
$’000
2010
$’000
Total
2011
$’000
18,914
26,256
85
-
18,093
25,804
174
-
-
-
72
-
-
-
378
-
18,914
26,256
157
429
45,756
2010
$’000
18,093
25,804
552
459
44,908
Freedom Foods Group Limited
39
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
4. Operating Segments
(continued...)
Revenue generated by equity accounted associates from external sales is not consolidated, instead under the equity
method of accounting, the carrying amounts of interest in joint venture entities are increased or decreased to recognise
the Group’s share of post acquisition profits or losses and other changes in net assets of the joint venture/minority interest.
97% of total external sales of the consolidated group and equity accounted associates are generated in Australia (2010:
97%) and more than 80% of total external sales are through major Australian retailers.
Segment result
Continuing operations
Seafood
Freedom Foods
Thorpedo Foods
FFG share of equity accounted associates
Shared services
Finance costs
Depreciation
Profit before income tax
Profit on sale of A2DP shares
Write off of non recurring legal expense and unrecoverable amounts
Income tax benefit
Profit for the year from continuing operations
2011
$’000
2010
$’000
3,978
3,249
(1,748)
5,479
1,136
(3,303)
(1,529)
(1,092)
691
3,884
(326)
138
4,387
3,440
4,010
249
7,699
1,308
(3,878)
(1,031)
(1,004)
3,094
-
-
263
3,357
Total profit from equity accounted associates for the period totalled $2,422,000 (2010: $2,616,000). The consolidated
entities share of these profits was $1,136,000 (2009: $1,308,000).
5. Revenue
Segment revenue
Continuing operations
Sale of goods
Interest received
• Loans and receivables
• Cash and Cash equivalents
License fee
Other revenue
Government/State grants - refer below
Gain/(loss) on disposal of fixed assets
Payroll Tax Refund
Rental income
Management fee received
40
Annual Report 2011
Consolidated
$000
2011
2010
45,256
44,071
25
72
45,353
81
-
70
14
238
403
16
356
44,443
85
13
10
3
354
465
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
5. Revenue
(continued...)
The above government grant is the Export Market Development Grant received for 2010 and receivable for 2011 (2011
$20,000, 2010 $22,000).
The above state grants are the Dept of Innovation Grant (2010 $20,000), State Training Grant (2011 $30,000, 2010 $43,000)
and Department of Education, Employment and Workplace Relations Grant (2011 $31,000) received for 2010 and
receivable for 2011.
6. Profit for the year before tax
Profit for the year was arrived at after charging the following expenses:
Finance costs
• Interest on bank overdrafts and loans
• Interest on obligations under finance leases
• Interest on convertible notes
Total borrowing costs
Unrealised fair value mark-to-market of derivative financial instruments (i)
Unrealised foreign currency exchange losses/(gains)
Depreciation on property, motor vehicles, plant and equipment
Loss / (Gain) on disposal of plant and equipment
Rental expense on operating leases (equipment)
Rental expense on operating leases (property)
Research and development costs expensed
Impairment of trade receivables
Employee benefit expense
Post employment benefits - defined contribution plans
Share-based payments - equity settled share based payments
Redundancies
Other employee benefits
Total employee benefit costs
(i) The Group uses derivative financial instruments to
hedge its exposure to foreign exchange risks arising
from operational, financing and investment
activities.
In accordance with its treasury policy, the Group
does not hold or issue derivative financial instruments
for trading purposes.
During the financial year the Group utilised foreign
exchange contracts for the purchase of inventory.
The foreign exchange contracts were denominated
in $USD. As at 30 June 2011 we held foreign exchange
contracts totalling $USD590K.
The contracts related to highly probable forecasted
transactions for the purchase of inventory for the
Specialty Seafood business (Salmon and Sardines)
and the Freedom Foods business (Spreads) with the
purchase consideration being settled in the above
Consolidated
$000
2011
1,502
27
-
1,529
-
-
1,092
-
145
73
500
(27)
580
87
-
4,959
5,626
2010
990
41
-
1,031
-
8
1,004
(13)
123
222
100
10
587
127
321
5,302
6,337
currencies. The Group’s objective in entering into
foreign exchange contracts is to provide certainty to
the income and cash flow implications for the
designated foreign currency purchase, relating to
purchase of inventory.
As the Group does not utilise hedge accounting,
derivative financial instruments held by the Group
are
required under the Australian Accounting
Standards to be valued at fair value as at balance
date. A valuation at fair value assumes that the Group
would settle the contracts at a specific date and
recognise a gain or loss depending on the prevailing
spot rate at value date, even though the intention of
the Group is to settle the contract at contract expiry
in relation to the purchase of inventory or an asset
required for manufacturing.
Freedom Foods Group Limited
41
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
6. Profit for the year before tax
(continued...)
The gain or loss value at fair value is required by Australian Accounting Standards to be recognised in profit or loss.
There were USD foreign exchange contracts open as at 30 June 2011 with a fair value loss of $18K, this being
immaterial, the valuation of foreign exchange contracts held at balance date reflected no adjustment and there were
no foreign exchange contracts held at 30 June 2010.
(ii) Operating EBDITA (being EBDITA adjusted for corporate development costs, redundancies, equity settled share
based payments, share of profits under equity accounting, unrealised exchange losses, fair value mark to market of
derivative financial instruments and asset write downs) was $4,041,000 (2010: $3,816,000).
7. Income Taxes
Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax of prior years
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Total (income) tax recognised in the current year relating to continuing operations
Consolidated
$000
2011
1,342
(1,330)
(150)
(138)
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:
Profit before tax from continuing operations
Income tax expense calculated at 30%
Effect of revenue/expenses that are not deductible in determining taxable profit
Effect of tax concessions (research and development)
Adjustments recognised in the current year in relation to the current tax of prior years
Prior year R&D claim
Other
4,249
1,275
67
(150)
(951)
(379)
(138)
2010
(258)
45
(50)
(263)
3,094
928
(1,228)
(8)
45
(263)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the
previous reporting period.
Income tax recognised directly in equity
An amount of $81,000 was credited to equity in relation to share issue costs during the year (2010 $92,000).
Income tax recognised in other comprehensive income
No current or deferred tax amounts were charged/(credited) directly to the other comprehensive income during the year.
Current tax assets
Income tax receivable attributable to:
• Entities in the tax-consolidated group
42
Annual Report 2011
Consolidated
$000
2011
-
-
2010
151
151
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
7. Income Taxes
(continued...)
Deferred tax balances
Deferred tax assets/(liabilities) arise from the following:
Consolidated 2011
Temporary differences:
Provisions
Doubtful debts
Property plant & equipment
Other
unused tax losses and credits:
Tax losses (i)
Withholding tax paid
Presented in the statement of financial position as follows:
Deferred tax (liability) - non current
Deferred tax asset - non current
Opening Balance
$’000
Charged to
income
$’000
Closing balance
$’000
337
12
(24)
165
490
1,161
340
1,501
1,991
(41)
(8)
1
(1,148)
(1,196)
1,342
4
1,346
150
296
4
(23)
(983)
(707)
2,503
344
2,847
2,140
(1,261)
3,401
2,140
(i) Current year earnings together with forecast future earnings support the recognition of carried forward losses
as deferred tax assets
Consolidated 2010
Temporary differences:
Provisions
Doubtful debts
Property plant & equipment
Other
unused tax losses and credits:
Tax losses
Withholding tax paid
Presented in the statement of financial position as follows:
Deferred tax (liability) - non current
Deferred tax asset - non current
Opening Balance
$’000
Charged to
income
$’000
Closing balance
$’000
273
9
7
317
606
1,013
322
1,335
1,941
64
3
(31)
(152)
(116)
148
18
166
50
337
12
(24)
165
490
1,161
340
1,501
1,991
(47)
2,038
1,991
Freedom Foods Group Limited
43
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
8. Auditors remuneration
Current year
Remunerations of the auditors of the Group for:
• audit or review of the financial report
• taxation advice and preparation of tax returns
• accounting advice
• research and devolopment advice and preparation of the return
The auditor of the consolidated entity is Deloitte Touche Tohmatsu.
9. Earnings per share
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
The earnings and weighed average number of ordinary shares used in the calculation of basic and
diluted earnings per share are as follows:
(a) Earnings used in the calculation of basic EPS
(b) Earnings used in the calculation of diluted EPS
(c) Weighted average number of ordinary shares outstanding during the year used in the
calculation of basic EPS
Weighted average number of ordinary shares and potential ordinary shares used in the
calculation of diluted EPS including CRPS
During 2011, 19,414,800 Convertible Redeemable Preference Shares were issued by the Parent
During 2011, 19,377, 235 options were issued over ordinary shares by the Parent
At 30 June 2011, 19,376,362 options were outstanding (Exercisable at $0.40 cents per share)
10. Trade and other receivables
Current
Trade receivables
Allowance for doubtful debts
Other receivables
44
Annual Report 2011
Consolidated
$
2011
148,985
58,952
-
19,751
227,688
2010
167,660
43,542
5,838
-
217,040
Consolidated
Cents per share
2011
5.67
4.99
$000
4,387
4,387
Number ‘000
77,435
87,861
Consolidated
$000
2011
9,513
(14)
9,499
598
10,097
2010
5.0
5.0
3,357
3,357
66,823
66,823
2010
8,712
(43)
8,669
693
9,362
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
10. Trade and other receivables
(continued...)
The average credit period on sales of goods is 34 days (2010: 37 days). No interest is charged on trade receivables. An
allowance has been made for estimated irrecoverable trade receivable amounts arising from past sale of goods, determined
by reference to past default experience. During the current financial year, the allowance for doubtful debts decreased by
$28,000 (2010: increased by $12,000) in the Group. Included in the allowance for doubtful debts are individually impaired
trade receivables with a balance of $15,000 (2010: $43,000). The Group does not hold any collateral over these balances.
Current (i)
Past due but not impaired (ii)
Consolidated
$000
2011
9,218
281
2010
8,545
124
(i)
The current receivables for the Group are with a weighted average of 38 days (2010: 38 days). Management
considers that there are no indications as of the reporting date that the debtors will not meet their payment
obligations.
(ii) The past due but not impaired receivables for the Group are with a weighted average of 61 days (2010: 135 days).
These relate to a number of customers for whom there is no recent history of default and other indicators of
impairment. Management considers that no provision is required on these balances.
The Group does not have significant risk exposure to any one debtor, however 83% (2010 - 81%) of sales and 82%
(2010 - 86%) of year end receivables are concentrated in major supermarkets throughout Australia.
Movement in the allowance for doubtful debts
Balance at the beginning of the year
Impairment losses recognised on receivables
Amounts written off as uncollectable
Amounts recovered during the year
Impairment losses reversed
Balance at the end of the year
Consolidated
$000
2011
43
-
(1)
-
(28)
14
2010
31
8
-
4
-
43
Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Management has
assessed that these are all recoverable and no impairment has been taken.
11. Other financial assets / (liabilities)
Current
Loans to joint ventures - refer Note 28 Related party transactions
Non-current
Investment in joint venture entities - refer note 34 Jointly controlled operations and assets
Investment in associates - refer Note 28 Related party transactions
Consolidated
$000
2011
(53)
1,882
9,558
11,440
2010
784
1,152
-
1,152
Freedom Foods Group Limited
45
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
11. Other financial assets / (liabilities)
(continued...)
(i) Loans to related parties:
The Group has provided short-term loans to joint venture entities interest free and at call. Management has assessed
that these are all recoverable and no impairment exists. Further information in relation to amounts due from related
entities is set out in note 28.
12. Inventories
Current
Raw materials
Finished goods
Provision for stock obsolescence
Work In Progress Factory
Consolidated
$000
2011
1,468
3,985
(119)
16
5,349
2010
1,228
5,909
(36)
20
7,121
All inventories of the Group are expected to be recovered within a 12 month period.
13. Intangibles
2011
Balance at 1 July 2010
Impairment of Goodwill
Balance at 30 June 2011
2010
Balance at 1 July 2009
Balance at 30 June 2010
Goodwill
$’000
Brand Names
$’000
Total
$’000
6,992
(1,778)
5,214
6,992
6,992
16,274
-
16,274
16,274
16,274
23,266
(1,778)
21,488
23,266
23,266
Goodwill and brands are initially recorded at cost. All brands have been assessed as having indefinite useful lives because
there is no expiration date and all brands are profitable. Impairment losses of $1,778,000 were charged during the 2011
financial year (2010: $nil).
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
Seafood
Freedom Foods
Thorpedo Foods
The consolidated entity carries an amount of $16,274,000 of brand names with indefinite useful lives allocated between
the Seafood and Freedom Foods cash generating units. The brand names relate to major brands purchased as part of
business combinations that have long establishment and are considered to be market leaders within their market
segment. The brand names operate in a stable industry with a strong positioning in the consumer functional foods market.
46
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
13. Intangibles
(continued...)
The carrying amount of goodwill has been allocated to the identified cash-generating units as follows:
Seafood
Freedom Foods
Thorpedo Foods
Consolidated
$000
2011
1,982
3,232
-
5,214
2010
1,982
3,232
1,778
6,992
The recoverable amounts of the cash generating units are determined based on a value in use calculation which uses cash
flow projections based on financial budgets approved by management covering a five-year period, and a discount rate of
10.3% pa (2010: 10.3% pa). Cash flow projections during the budget period for the cash-generating units are also based
on the same expected gross margins during the budget period.
Key assumptions
Cash-generating units
Budgeted market share
Average market share in the period immediately before the budget period plus a
growth of up to 1% of market share per year. Management believes that the planned
market share growth per year for the next four years is reasonable.
Budgeted gross margin
Average gross margins achieved in the period immediately before the budget period
is consistent with that used by management.
Impairment of cash-generating units including goodwill
There was an impairment loss recognised of $1,778,000 during the period for Thorpedo Foods cash generating unit.
14. Property, plant and equipment
Non-current
Freehold land (at fair value)
Accumulated depreciation
Total Land
Buildings (at fair value)
Accumulated depreciation
Total Buildings
Total Land and Buildings
Consolidated
$000
2011
160
-
160
4,850
(384)
4,466
4,626
2010
150
-
150
4,850
(263)
4,587
4,737
Freedom Foods Group Limited
47
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
14. Property, plant and equipment
(continued...)
Plant and Equipment (at cost)
Accumulated depreciation
Capital work in progress at cost
Total Owned Plant and Equipment
Motor Vehicles (under finance leases)
Accumulated depreciation
Total Motor Vehicles
Total property, plant and equipment
Consolidated
$000
2011
16,432
(2,981)
13,451
5,976
19,427
157
(115)
42
24,095
2010
15,553
(2,039)
13,514
4,122
17,636
157
(99)
58
22,431
Movements in the carrying amounts of each class of property, plant and equipment between the beginning and the end
of the current financial year:
Group 2011
Balance at 1 July 2010
Additions
Disposals
Depreciation expense
Balance at 30 June 2011
Group 2010
Balance at 1 July 2009
Additions
Disposals
Depreciation expense
Balance at 30 June 2010
Freehold land
$000
Buildings
$000
Plant & Equipment
$000
Motor Vehicles
$000
150
10
-
-
160
150
-
-
-
150
4,587
-
-
(121)
4,466
4,709
-
-
(122)
4,587
17,636
2,723
23
(955)
19,427
10,413
8,319
(254)
(842)
17,636
58
-
-
(16)
42
51
49
(2)
(40)
58
Total
$000
22,431
2,733
23
(1,092)
24,095
15,323
8,368
(256)
(1,004)
22,431
Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of
other assets during the year:
Freehold land and buildings
Plant and equipment
Motor vehicles
Consolidated
$000
2011
121
955
16
1,092
2010
122
842
40
1,004
Freehold land and buildings carried at cost
An independent valuation of the Group’s land and buildings was performed by Herron Todd White (MIA) Pty Limited to
determine the fair value of the land and buildings. The valuation, which conforms to Australian Valuation Standards, was
determined by reference to capitalisation of net income method, utilising a net rental of approximately $45 per square
metre per annum. The effective date of the valuation was 30 June 2011. The revaluation was not recorded in the books of
the Group.
48
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
15. Trade and other payables
Current
Trade payables (i)
Other payables and accruals (ii)
Non-current
Other payables and accruals (ii)
Consolidated
$000
2011
3,079
2,500
5,579
504
504
2010
4,754
2,498
7,252
1,064
1,064
(i) The average credit period on purchases of certain goods from North America is 60 days (2010: 60 days). Additional trade
payables are paid on average within 60 days of invoice date. No interest is charged on trade payables.
(ii) Included in other payables and accruals is an amount due to the vendor of $1,113,000 (2010: $1,724,000) for the
purchase of the Leeton property. The portion of this payable due to be settled within 12 months is $551,000 (2010:
$660,000).
16. Borrowings
Secured - at amortised cost
Current
Bank overdrafts (i)
Loan payable (i)
Finance leases (ii) (iii)
Finance Facility (i)
Non-current
Loan payable (i)
Finance leases (ii) (iii)
Disclosed in the financial statements as:
Current borrowings
Non-current borrowings
Consolidated
$000
2011
-
2,913
1,396
6,048
3,150
4,845
18,352
10,357
7,995
18,352
2010
1,400
13,047
1,129
-
-
5,766
21,342
15,576
5,766
21,342
(i) Secured by assets as detailed in note 36.
(ii) Secured by leased assets as detailed in note 24.
(iii) Included as part of the finance leases is the Equipment Financing utilised to purchase equipment for Leeton.
Freedom Foods Group Limited
49
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
17. Provisions
Current
Employee benefits (i)
Non-current
Employee benefits
Employee benefits movement
Balance at 1 July 2010
Additional provision recognised
Amounts used
Balance at 30 June
Consolidated
$000
2011
855
130
985
1,122
726
(863)
985
2010
868
254
1,122
930
1,147
(955)
1,122
(i) The current Group provision for employee benefits includes $107,000 of annual leave and vested long service leave
entitlements accrued but not expected to be taken within 12 months (2010: $163,000).
18. Issued capital
Fully paid ordinary shares
77,496,602 (2010: 77,435,382) ordinary shares fully paid
Balance at 1 July 2010
Issue of shares (i)(ii)
Balance at 30 June 2011
Consolidated
$000
2011
33,655
33,637
18
33,655
2010
33,637
27,019
6,618
33,637
(i) During the year there were 873 ordinary shares issued as a result of exercise of options at $0.40 cents per share and
60,347 ordinary shares issued under the dividend reinvestment plan (DRP) at $0.30 cents per share. No costs were
incurred.
(ii) During the prior year there were 22,775,112 ordinary shares issued at $0.30 cents per share. Issue costs of $272,000
were incurred during the share issue process.
Fully paid ordinary shares carry one vote per share and carry the right to dividends. Changes to the then Corporations Law
abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company
does not have a limited amount of authorised capital and issued shares do not have a par value.
The Dividend Reinvestment Plan provides shareholders with the opportunity to receive ordinary shares, in lieu of cash
dividends, at a discount (set by the directors) from the market price at time of issue.
Convertible Redeemable Preference Shares
The CRPS are perpetual with no maturity, but redeemable after 3 years at the option of the Company. The CRPS are
transferable. The dividend rate is 9.0% p.a on the issue price of $0.30. It is a preferred, discretionary and non-cumulative
dividend and CRPS holders have no claim or entitlement in respect of a non-payment.
Dividends are to be payable half-yearly in arrears. CRPS holders who convert their CRPS prior to a dividend payment date
will not be entitled to any dividend for that part period in respect of that CRPS. However upon conversion to ordinary
shares a holder who is on the register on the record date for a dividend payable in respect of ordinary shares will be
50
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
18. Issued capital
(continued...)
entitled to the full ordinary dividend for that period. Dividends on the CRPS will be payable in April and October each year
until converted or redeemed. CRPS holders are entitled to receive dividends in priority to holders of ordinary shares and
equally with the holders of other CRPS that may be issued by Company on these terms.
CRPS are convertible into fully paid ordinary shares in Company on the basis that each CRPS is convertible at the election
of the CRPS holder into one ordinary share, subject to any restrictions imposed by the Corporations Act and ASX Listing
Rules. There is no time limit within which CRPS must be converted. No additional consideration is payable on conversion.
Notwithstanding the right of holders of CRPS to convert at any time, all CRPS will convert into ordinary shares automatically
on the occurrence of certain trigger events including certain transactions involving a change in control of Company, such
as a takeover of Company or a scheme or merger between Company and another body.
From the date that is 3 years from the date of issue of the CRPS, the Company may redeem the CRPS at its option for the
payment per CRPS of the higher of:
•
•
the issue price of $0.30; and
an amount determined by the Board of the Company with reference to the value of a CRPS as determined by an
independent expert appointed by the Board.
19,414,800 (2010: 0) convertible redeemable preference shares
Balance at 1 July 2010
Issue of shares (i)(ii)
Balance at 30 June 2011
Consolidated
$000
2011
5,633
-
5,633
5,633
2010
-
-
-
-
(i) During the year there were 19,414,800 convertible redeemable preferance shares issued at $0.30 cents per share.
Issue costs of $272,000 were incurred during the share issue process.
Share options granted under the employee share option plan
(i) For information relating to the Freedom Foods Group Limited Employee Share Option Plan, including details of options
issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer note 29.
(ii) No share options were issued to key management personnel during the financial year, refer note 28. At 30 June
2011, there were 3,700,000 (30 June 2010: 4,700,000 of which 1,000,000 have lapsed in the financial year ended 30
June 2011) employee share options over ordinary shares still outstanding.
19. Reserves
Asset revaluation
Equity-settled employee benefits
Equity-settled employee benefits
Balance at 1 July
Share based payment
Balance at 30 June
Consolidated
$000
2011
473
533
1,006
446
87
533
2010
473
446
919
319
127
446
The equity-settled employee benefits reserve arises on the grant of share options to executives and senior employees under
the Employee Share Option Plan. Amounts are transferred out of the reserve and into issued capital when the options are
exercised. Further information about share-based payments to employees is made in note 29 to the financial statements.
Freedom Foods Group Limited
51
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
19. Reserves
(continued...)
Asset revaluation
Balance at 1 July 2010
Revaluation increment
Balance at 30 June 2011
Consolidated
$000
2011
473
-
473
2010
473
-
473
The asset revaluation reserve arises on the revaluation of land and buildings. Where a revalued land or building is sold that
portion of the asset revaluation reserve which relates to the asset, and is effectively realised, is transferred directly to
retained earnings.
20. Retained Profits
Balance at 1 July 2010
Profit attributable to owners of the company
Dividends paid
Balance at 30 June 2011
21. Dividends
Recognised amounts
Fully paid ordinary shares
Final dividend: fully franked at 30% tax rate
Interim dividend: fully franked at 30% tax rate
Convertible Redeemable Preference Shares
Final dividend: fully franked at 30% tax rate
Interim dividend: fully franked at 30% tax rate
Consolidated
$000
2011
5,707
4,387
(405)
9,689
2010
2,350
3,357
-
5,707
2011
Cents per share
2010
Total
$000
Cents per share
Total
$000
-
0.5
-
0.1
-
386
-
19
-
-
-
-
-
-
-
-
On 29 August 2011, the directors declared a fully franked final dividend of $0.005 cents per share to the holders of fully
paid ordinary shares in respect of the financial year ending 30 June 2011 to be paid to shareholders (registered as at 3rd
November 2011) on 30th November 2011 and dividends for the converting preference shareholders (registered on 3rd
October 2011) on 31st October 2011. The total estimated dividend to be paid is $387k for ordinary dividend and $393k for
the CRPS dividend.
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
52
Annual Report 2011
Parent
$000
2011
298
334
2010
472
-
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
22. Notes to the statement of cash flows
(a) Reconciliation of cash and cash equivalents
For the purposes of the statement of Cash Flows, cash and cash equivalents includes cash on hand and funds held in
cash management and cheque accounts net of bank overdrafts. Cash at the end of the financial year as shown in the
statement of cash flows is reconciled to the related items in the statement of financial position as follows:
Cash
Overdraft
Consolidated
$000
2011
182
-
182
(b) Reconciliation of profit for the period to net cash flows from operating activities
Profit for the year
Depreciation of non-current assets
Movement in provision for employee entitlements
Loss / (Gain) on disposal of assets
Goodwill write off
Profit on Sale of A2DP shares
Foreign currency revaluation
Fair value interest recognised regarding Leeton facility
Share based payments
Interest received
Interest capitalised
(Gain) / Loss in associates
(Gain) / Loss in jointly controlled entity
Movements in Working Capital
(Increase) / Decrease in trade and other receivables
Decrease / (Increase) in inventory
(Increase) / Decrease in other assets
Increase in deferred tax assets
Decrease in trade and other payables
Increase / (Decrease) in provision for income tax
Increase in provision for deferred income tax liability
Net cash from operating activities
4,387
1,092
136
-
1,778
(3,884)
-
239
87
(25)
(346)
(406)
(730)
(651)
1,671
(42)
(1,379)
(579)
135
1,214
2,697
2010
34
(1,400)
(1,366)
3,357
1,004
192
(13)
-
-
8
172
127
(16)
(479)
-
(1,308)
857
(168)
41
(75)
(730)
(227)
29
2,771
Details of credit stand-by arrangements available and unused loan facilities are shown in note 23 to the financial
statements.
(c) Non-cash financing and investing activities
During the current financial year, the Group acquired $nil (2010: $49,000) of motor vehicles under finance leases.
These acquisitions will be reflected in the statement of Cash Flows over the term of the finance lease via lease
repayments.
Freedom Foods Group Limited
53
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
23. Standby arrangements and unused credit facilities
Financing Facility
Secured bank overdraft facility
- amount used
- amount unused
Secured loan facilities
- amount used
- amount unused
Secured finance facilities
- amount used
- amount unused
Unused financing facilities
Consolidated
$000
2011
-
-
-
6,063
987
7,050
12,289
1,452
13,741
2,439
2010
1,400
600
2,000
13,047
3
13,050
7,520
480
8,000
1,083
The bank finance facilities are arranged with HSBC Australia with general terms and conditions and certain facility
components are subject to annual review. The bank facilities of the Group are secured by a first registered mortgage over
all the Group’s property, excluding items specifically discharged under the Freedom Foods equipment finance arrangement,
and a first equitable mortgage over the whole of the Group’s assets and undertakings including uncalled capital. The
mortgage is held by HSBC Australia.
The equipment finance facility relates to specific equipment operating at the Freedom Foods Leeton facility and is
arranged with National Australia Bank. This facility is secured over the assets financed under the facility, which have been
specifically discharged from the first registered mortgage held over all the Group’s property.
Interest rates are variable and subject to adjustment.
24. Capital and leasing commitments
Finance leases
Leasing arrangements
Finance leases relate to motor vehicles and equipment with lease terms of up to 5 years. The Group has options to purchase
the equipment for an agreed amount at the conclusion of the lease agreements. The Group’s obligation under finance
leases are secured by the lessor’s title to the leased assets.
54
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
24. Capital and leasing commitments
(continued...)
Finance lease liabilities
Payable:
• No later than 1 year
• Later than 1 year but not later than 5 years
Minimum future lease payments (i)
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as: (note 16)
Current borrowings
Non-current borrowings
Minimum future lease payments
Present value of minimum future lease
payments
Consolidated
$000
2011
Total
$000
2010
Consolidated
$000
2011
1,844
5,207
7,051
(810)
6,241
1,701
6,514
8,215
(1,320)
6,895
1,396
4,845
6,241
-
6,241
1,396
4,845
6,241
Total
$000
2010
1,129
5,766
6,895
-
6,895
1,129
5,766
6,895
(i) Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.
Operating leases
Disclosure for lessees
Leasing arrangements
Operating leases relate to office equipment with lease terms of between one and two and a half years. The Group does
not have an option to purchase the leased asset at the expiry of the lease period.
Non-cancellable operating lease commitments
- Not longer than 1 year
- Longer than 1 year but not longer than 5 years
Group's share of jointly controlled entities capital commitments
- Not longer than 1 year
25. Personnel note
The entity employs casual and full time staff numbering
Consolidated
$000
2011
87
18
105
593
Consolidated
$000
2011
133
2010
114
4
118
624
2010
133
Freedom Foods Group Limited
55
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
26. Financial instruments
(a) Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of debt and equity balances.
The Group’s overall strategy remains unchanged from 2010. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 16, cash and cash equivalents and equity attributable to equity holders of the
parent comprising issued capital, reserves and retained earnings as disclosed in notes 18, 19 and 20 respectively.
Operating cash flows are used to maintain and expand the group’s manufacturing and distribution assets, as well as to
make the routine outflows of tax, dividends and repayment of maturing debt. The Group’s policy is to borrow centrally,
using a variety of capital market issues and borrowing facilities, to meet anticipated funding requirements.
Gearing ratio
The Group’s financial management team reviews the capital structure on a regular basis. As a part of this review
management considers the cost of capital and the risks associated with each class of capital.
Financial liabilities
Debt (i)
Cash and cash equivalents
Net debt
Equity (ii)
Net debt to equity ratio
Consolidated
$000
2011
18,352
(182)
18,170
49,983
36%
2010
19,942
1,366
21,308
40,263
53%
(i) Debt is defined as long and short-term borrowings, as detailed in note 16.
(ii) Equity includes all capital and reserves.
(b) Financial risk management objectives
The Group’s financial management team provides services to the each of the group businesses, co-ordinates access to
domestic and international financial markets, monitors and manages the financial risks relating to the operations of the
Group through internal risk reports which analyses exposures by degree magnitude of risks. These risks include market risk
(including currency risk and price risk), credit risk and liquidity risk.
The Group seeks to minimise the effects of these risks, by using derivative financial instruments to hedge these risk
exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which
provide written principles on foreign exchange risk, credit risk and the investment of excess liquidity. The Group does not
enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
(c) Market Risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest
rates. The Group enters into foreign exchange forward contracts to manage exposure to foreign currency risk for its
imports. There has been no change to the Group’s exposure to market risks or the manner in which it manages and
measures the risk.
The Corporate Treasury function reports monthly to the board which monitors risks and policies implemented to mitigate
risk exposure.
56
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
26. Financial instruments
(continued...)
(d) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 3 to the financial statements.
(e) Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign
exchange contracts.
The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the reporting
date is as follows:
Consolidated
US dollars (USD)
Canadian dollars (CAD)
Financial assets
$000
Financial liabilities
$000
2011
9
310
2010
498
100
2011
227
215
2010
214
1,013
There have been no changes to the group’s exposure to foreign currency risks or the manner in which it manages and
measures the risks from the previous period.
Forward Exchange Contracts
The Group enters into forward exchange contracts to buy specified amounts of foreign currencies in the future at stipulated
exchange rates. The objective of entering into the forward exchange contracts is to protect the Group against unfavourable
exchange rate movements for the contracted purchases undertaken in foreign currencies.
The Group had entered into contracts (for terms not exceeding 12 months) to purchase finished goods from suppliers in
the United States and Canada. The contracts related to highly probable forecasted transactions for the purchase of
inventory for the Specialty Seafood business (Salmon and Sardines) and the Freedom Foods business (Spreads) with the
purchase consideration being settled in the above currencies. The Group’s objective in entering into foreign exchange
contracts is to provide certainty to the income and cash flow implications for the designated foreign currency purchase,
relating to purchase of inventory or other capital assets. The Group had $USD590K outstanding foreign exchange contracts
as at 30 June 2011.
The Group does not adopt hedge accounting.
The following table details the forward foreign currency contracts outstanding as at reporting date:
Average exchange rate
Foreign currency
2011
2010
2011
FC'000
2010
FC’000
Contract value
2011
$’000
2010
$’000
Fair value
2011
$’000
2010
$’000
Outstanding contracts
Consolidated
Buy US Dollars
Less than 3 months
1.036
-
590
-
569
-
(18)
-
Freedom Foods Group Limited
57
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
26. Financial instruments
(continued...)
Foreign currency sensitivity analysis
The following table details the sensitivity to an increase / decrease in the Australian dollar against the relevant currencies
in relation to foreign exchange exposures. Sensitivity rates of 7% (USD) and 8.8% (CAD) have been used as these represent
managements assessment of a likely maximum change in foreign exchange rates.
A positive number indicates an increase in profit where the Australia Dollar strengthens against the respective currency.
For a weakening of the Australia Dollar against the respective currency there would be an equal and opposite impact on
the profit and the balances below would be negative.
Consolidated
US dollars (USD) impact
AUD appreciates by 16%
AUD depreciates by 16%
Canadian dollars (CAD) impact
AUD appreciates by 13%
AUD depreciates by 13%
Profit or loss
$000
2011
(16)
22
(22)
29
2010
(22)
25
166
(197)
This is mainly attributable to the exposure outstanding on foreign currency receivables and payables at year end in the
consolidated entity and the parent.
(f)
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The Group manages
this risk by maintaining an appropriate mix between fixed and floating rate borrowings.
Exposures to interest rate risk, which is the risk that a financial instrument’s value, its borrowing costs and interest income
will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those
financial instruments are set out below:
Group
Financial Instrument
Note
Fixed rate maturing in
Weighted average effective
interest rate
%
Variable Rate
2011
$ ‘000
2010
$ ‘000
less than 1 year
2011
$ ‘000
2010
$ ‘000
1 to 5 years
2011
$ ‘000
2010
$ ‘000
Financial Assets
Cash and cash equivalents
Total Financial Assets
Financial liabilities
Bank overdrafts
Finance leases
Other payable
Due to related parties
Loan payable
Total Financial Liabilities
22
16
16
15
16
16
0%
10%
8%
11%
12%
7%
182
182
-
-
-
-
6,063
6,063
34
34
-
-
-
-
-
-
-
-
1,400
-
-
-
13,047
14,447
-
1,396
608
-
-
2,004
-
1,129
660
-
-
1,789
-
4,845
504
-
-
5,349
-
5,766
1,064
-
-
6,830
58
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
26. Financial instruments
(continued...)
During the financial year there has been no change to the group’s interest rate risk exposure or the manner in which it
manages and measures these risks.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the impact of 150 basis point increase in interest rates on
the exposure to interest rates as detailed in the above table.
The impact of a 150 basis point interest rate movement during the year with all other variables being held constant will be:
•
an increase/decrease on the consolidated entity’s net profit of $44,000 (2010: $72,000) respectively.
This is mainly attributable to the consolidated entity’s exposure to interest rates on its variable rate borrowings.
A 150 basis point movement represents management’s assessment of the possible change in interest rates.
(g) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted the policy of only dealing with credit worthy counterparties as a means of mitigating the
risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded are spread amongst approved counterparties.
Quality of Trade and Other Receivables and Other Financial Assets have been disclosed in notes 10 and 11 respectively.
Credit risk from balances with banks and financial institutions is managed by Group Treasury in accordance with a Board
approved policy. Investments of surplus funds are made only with approved counterparties and within credit limits
assigned to each counterparty.
Counterparty credit limits are reviewed by the Board on an annual basis and may be updated throughout the year subject
to approval of the Board. The limits are set to minimise the concentration of risks and therefore mitigate financial loss
through potential counterparty failure. The credit risk on liquid funds is limited because the counterparties are banks with
high credit ratings assigned by international credit rating agencies.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at statement of financial
position date, to recognised financial assets of the Group which have been recognised on the statement of financial
position is the carrying amount, net of any allowance for doubtful debts.
(h) Liquidity risk management
Liquidity risk arises from the possibility that the Group may be unable to settle a transaction on the due date. The ultimate
responsibility for liquidity risk management rests with the Board of Directors, who has built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long-term funding and liquidity
management requirements. The Group manages risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities by continuously monitoring forecasts and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching profiles of financial assets and liabilities. Included
in Note 23 is a listing of additional undrawn facilities that the company and the consolidated entity has at their disposal to
further reduce liquidity risk.
Liquidity risk tables
The following table details the consolidated entity’s remaining contractual maturity for its financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
consolidated entity can be required to pay. The table includes both interest and principal cash flows.
Freedom Foods Group Limited
59
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
26. Financial instruments
(continued...)
Consolidated
Financial liabilities
Trade payables
Other payables and accruals
Other payables
Bank overdrafts
Finance leases
Loan payable
Total Financial liabilities
Weighted average
effective interest rate
%
less than 1 year
2011
$ ‘000
2010
$ ‘000
1 to 5 years
2011
$ ‘000
2010
$ ‘000
More than 5 years
2011
$ ‘000
2010
$ ‘000
-
-
11%
10%
8%
7%
3,079
1,892
850
-
1,844
2,998
10,663
4,754
1,838
850
1,539
1,701
13,737
24,419
-
-
850
-
5,207
3,376
9,433
-
-
1,700
-
6,514
-
8,214
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Fair value of financial instruments
The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair
values.
The fair values of financial assets and financial liabilities are determined as follows:
•
•
•
the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active
liquid markets are determined with reference to quoted market prices; and
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in
accordance with generally accepted pricing models based on discounted cash flow analysis; and
the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available use
is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments for
non-optional derivatives, and option pricing models for optional derivatives.
27. Key management personnel compensation
This report details the nature and amount of remuneration for each Director and the executives receiving the highest
remuneration.
Remuneration policy
Remuneration arrangements for Directors and executives of the Parent and Group (“the Directors and executives”) are set
competitively to attract and retain appropriately qualified and experienced Directors and executives. As part of its agreed
mandate, the Remuneration and Nomination Committee obtains independent advice when required on the
appropriateness of remuneration packages given trends in comparable companies and the objectives of the consolidated
entity’s remuneration strategy.
The remuneration structures explained below are designed to attract suitably qualified candidates. The remuneration
structures take into account:
•
•
•
The capability and experience of the Directors and executives;
The Directors and executives ability to control the relevant operational performance; and
The amount of incentives within each Director and executive’s remuneration.
Executive Directors and Executives
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges
related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.
60
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
27. Key management personnel compensation
(continued...)
Executive Director and Executives remuneration levels are reviewed annually by the Remuneration and Nomination
Committee through a process that considers the overall performance of the Group.
Performance based remuneration
Performance based remuneration is at the discretion of the Remuneration and Nomination Committee. This can take the
form of share options or cash payments. During the year no options were issued and no cash retention bonuses were paid.
Options are valued using the binomial method.
During and since the end of the financial year no share options were granted to key management personnel of the Parent
and consolidated entity as part of their remuneration.
Non-Executive Directors
The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders
at the Annual General Meeting.
Total fees for all Non-Executive Directors, last voted upon by shareholders in October 2006, was not to exceed $300,000 in
total.
Total fees for 2011 were $170,000 (2010: $163,000). To align Director interests with shareholder interests, the Directors are
encouraged to hold shares in the Parent.
The Chairman receives twice the base fee of Non-Executive Directors. Non-Executive Directors do not receive performance
related remuneration. Directors’ fees cover all main Board activities. Non-Executive Directors who sit on the Remuneration
and Nomination Committee and the Audit, Risk and Compliance Committee receive an additional payment of $1,000 and
the Chairman of each receives $2,000. There are no termination or retirement benefits for Non-Executive Directors.
Service agreements
All senior executive management are employed under contract. The agreements outline the components of the
remuneration paid to executives including annual review. The agreements do not obligate the business to increase fixed
remuneration, pay a short term incentive, make termination benefits or offer a long term incentive in any given year. The
Company may terminate the contract at any time without notice if serious misconduct has occured. Where termination
with cause occurs, the executive is only entitled to that portion of remuneration that is fixed, and only up to the date of
termination. The agreements may be terminated by written notice from either party or by the employing entity within
the Group making a payment in lieu of notice. The notice periods are 6 months for the Group Executive Director and 3
months for Chief Operating Officer (Freedom Foods and Specialty Seafood Business units). Other notice periods for other
executives is between 1 and 2 months.
Parent performance, shareholder wealth and directors and senior management remuneration
The remuneration policy of the company and group does not directly link the remuneration of Directors and senior
Executives to Group performance or shareholder wealth.
The following table shows the revenue, profits and dividends for the past five years for the Group.
Sales Revenue ($000's)
Net Profit After Tax ($000s)
Ordinary Dividends per share paid - Interim (cents)
CRPS Dividends per share paid ( cents)
Basic Earnings per Share (cents)
2011
45,256
4,387
0.50
0.01
5.7
2010
44,071
3,357
-
-
5.0
2009
48,596
1,320
1
-
2.4
2008
54,082
956
2
-
2.0
2007
48,683
1,174
1
-
2.6
Freedom Foods Group Limited
61
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
27. Key management personnel compensation
(continued...)
The Remuneration and Nomination Committee considers that the Parent’s remuneration structure is appropriate to
building shareholder value in the medium term.
The aggregate compensation made to Directors and other members of key management personnel of the Parent and the
Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payment
Termination payments
Consolidated
$000
2011
1,314,492
77,748
87,360
75,425
1,555,025
2010
1,559,655
95,759
85,868
141,356
1,882,638
Details of key management personnel
The Directors and other members of key management personnel of the Group during the year were:
P. R. Gunner (Chairman, Non-Executive Director)
R. J. F. Macleod (Group Executive Director, Chief Financial Officer, Company Secretary)
G.H. Babidge (Non-Executive Director)
A. M. Perich (Non-Executive Director)
R. Perich (Non-Executive Director)
M. Miles (Non-Executive Director)
M. Perich (Alternate Non-Executive Director)
M. Bracka (Chief Operating Officer, Freedom Foods and Speciality Seafood Business Units), commenced October 2010
P. Wilson (General Manager Leeton Manufacturing Operations), resigned April 2011
P. Bartier (National Supply Chain Manager, Freedom Foods & Specialty Seafood Business Units)
P. Brown (Executive General Manager Sales, Freedom Foods & Specialty Seafood Business Units)
C. Pensini (Freedom Foods Leeton Operations Manager)
Determination of remuneration of specified directors
Remuneration of Non-Executive Directors comprise fees determined having regard to industry practice and the need to
obtain appropriately qualified independent persons. Fees do not contain any non-monetary elements.
Remuneration of the Executive Director is determined by the Remuneration & Nomination Committee. In this respect,
consideration is given to normal commercial rates of remuneration for similar levels of responsibility.
Options have been granted to the executive director to acquire ordinary shares in Freedom Foods Group Limited.
62
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
27. Key management personnel compensation
(continued...)
The compensation of each member of the key management personnel of the Group is set out below:
2011
Short term benefits
Salaries and fees
Bonus
Non-monetary
Other
Post employment benefits
Superannuation
Equity compensation
Options
Total
Short term benefits
Salaries and Fees
Bonus
Non-monetary
Other
Post employment benefits
Superannuation
Equity compensation
Options
Total
P. R. Gunner
$
R.J.F. Macleod
$
A. M. Perich
$
R. Perich
$
M. Miles G.h. Babidge (i)
$
$
63,000
-
-
-
259,800
-
-
-
31,800
-
-
-
32,000
-
-
-
32,000
-
-
-
64,133
-
-
75,425
5,670
15,199
1,125
2,880
2,880
2,533
-
68,670
43,680
318,679
-
32,925
-
34,880
-
34,880
M Bracka (ii)
$
P Wilson (iii)
$
P Bartier
$
P Brown
$
C Pensini (iv)
$
232,351
-
-
-
151,000
-
-
-
148,409
-
-
-
162,385
-
-
-
137,614
-
-
-
43,680
185,771
Total
$
1,314,492
-
-
75,425
11,399
-
11,890
12,444
11,728
77,748
-
243,750
-
151,000
-
160,299
-
174,829
-
149,342
87,360
1,555,025
(i) Other is payment for leave and other statutory entitlements relating to change in role from executive to non
executive director in September 2010
(ii) M. Bracka commenced 17 October 2010
(iii) P. Wilson resigned April 2011
(iv) C. Pensini commenced 1 July 2009
2010
Short term benefits
Salaries and fees
Bonus
Non monetary
Other
Post employment benefits
Superannuation
Equity compensation
Options
Total
P. R. Gunner
$
G.h. Babidge
$
A. M. Perich
$
R. Perich
$
M. Miles
$
R. J. F. Macleod
$
63,000
-
-
-
375,778
-
-
-
36,000
-
-
-
32,000
-
-
-
32,000
-
-
-
255,778
-
-
-
5,670
15,428
2,700
2,880
2,880
14,222
-
68,670
42,934
434,140
-
38,700
-
34,880
-
34,880
42,934
312,934
Freedom Foods Group Limited
63
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
27. Key management personnel compensation
(continued...)
G.J. hughes (i)
$
P. Wilson
$
-
-
-
141,356
187,692
-
-
-
M. Gilio
$
159,011
-
-
-
P. Bartier
$
P. Brown (ii)
$
C. Pensini (iii)
$
136,697
-
-
-
144,084
-
-
-
137,615
-
-
-
Total
$
1,559,655
-
-
141,356
-
-
14,323
12,303
12,968
12,385
95,759
-
141,356
-
187,692
-
173,334
-
149,000
-
157,052
-
150,000
85,868
1,882,638
Short term benefits
Salaries and Fees
Bonus
Non monetary
Other
Post employment
benefits
Superannuation
Equity
compensation
Options
Total
(i) G.J. Hughes received a $141,356 termination payment made 3 July 2009
(ii) P. Brown commenced 10 August 2009
(iii) C. Pensini commenced 1 July 2009
28. Related party transactions
(a) Equity interests in related parties
(i) Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 31 to the financial statements.
(ii) Equity interest in joint ventures
Details of interests in joint ventures are disclosed in note 34 to the financial statements.
(b) Transactions with key management personnel
(i) Key management personnel compensation
Details of key management personnel compensation are disclosed in note 27 to the financial statements.
(ii) Key management personnel equity holdings
Fully paid ordinary shares of the Group.
64
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
28. Related party transactions
(continued...)
Balance at 30 June
2010
No.
Granted as
compensation
No.
Received on exercise
of options
No.
Net other
change
No.
Balance at 30 June
2011
No.
510,732
182,775
98,057
51,164,454
51,164,454
206,667
51,164,454
-
-
-
-
Balance at 1 July
2009
No.
360,517
156,108
69,217
36,164,454
36,164,454
106,667
36,164,454
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Granted as
compensation
No.
-
-
-
-
Received on exercise
of options
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,811
300,811
3,443
300,811
220,436
-
-
-
Net other
change
No.
150,215
26,667
28,840
15,000,000
15,000,000
100,000
15,000,000
-
-
-
510,732
182,775
98,057
51,465,265
51,465,265
210,110
51,465,265
220,436
-
-
-
Balance at 30 June
2010
No.
510,732
182,775
98,057
51,164,454
51,164,454
206,667
51,164,454
-
-
-
2011
P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
M Bracka (2)
P. Bartier
P. Brown
C. Pensini
2010
P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
P. Bartier
P. Brown
C. Pensini
(1) Mr A.M Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,
the entity holding a direct interest in the Group.
(2) M Bracka commenced employment with Group in October 2011.
Freedom Foods Group Limited
65
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
28. Related party transactions
(continued...)
Convertible Redeemable Preference shares of the Group (Issued in FY 2011)
Balance at 30 June
2010
No.
Granted as
compensation
No.
Received on exercise
of options
No.
Net other change
(3)
No.
Balance at 30 June
2011
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
2011
P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
M Bracka (2)
P. Bartier
P. Brown
C. Pensini
(1) Mr A.M Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,
the entity holding a direct interest in the Group.
(2) M Bracka commenced employment with Group in October 2011.
(3) Subscribed to during the year.
Option over ordinary shares of the Group (exercisable at $0.40 cents ) (Issued in FY 2011)
Balance at 30 June
2010
No.
Granted as
compensation
No.
Received on exercise
of options
No.
Net other change
(3)
No.
Balance at 30 June
2011
No.
2011
P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
M Bracka (2)
P. Bartier
P. Brown
C. Pensini
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
(1) Mr A.M Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,
the entity holding a direct interest in the Group.
(2) M Bracka commenced employment with Group in October 2011.
(3) Options issued free to holders of Convertible Redeemable Preference Shares in February 2011.
66
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
28. Related party transactions
(continued...)
Employee Share Options in the Group
Balance at
1 July
No.
lapsed
No.
2,000,000
2,400,000
300,000
(300,000)
(700,000)
-
2011
R. J. F. Macleod
G.H. Babidge
P. Nathan
2010
R. J. F. Macleod(i)
G.H. Babidge(i)
P. Nathan
2,000,000
2,400,000
300,000
-
-
-
Granted
as
compen-
sation
No.
-
-
-
-
-
-
Exercised
No.
Net other
change
No.
Balance at
30 June
No.
Balance
vested at
30 June
No.
Vested
but not
exercisable
No.
Vested and
exercisable
No.
1,700,000
1,700,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
1,700,000
1,700,000
300,000
1,700,000
1,700,000
300,000
2,000,000
2,400,000
300,000
1,575,000
1,975,000
300,000
-
-
-
-
-
-
1,575,000
1,975,000
300,000
425,000
425,000
-
Options
vested
during
year
No.
425,000
425,000
0
(i) As at 27 July 2010 700,000 vested options relating to G.H. Babidge and 300,000 vested options relating to R.J.F.
Macleod expired in accordance with the provisions of the Employee Share Option Plan.
All share options issued to key management personnel were made in accordance with the provisions of the
Employee Share Option Plan.
During the financial year nil options (2010: nil) were exercised by key management personnel.
Further details of the Employee Share Option Plan are contained in note 29 to the financial statements.
For further transactions with key personnel of the Group, refer to transactions between Group Company and its related
parties below.
(c) Transactions with other related parties
Other related parties include:
•
•
•
•
•
the parent entity
entities with joint control or significant influence over the Group.
joint ventures in which the entity is a venturer
subsidiaries
other related parties
(i) Transactions between the Group and its related parties
During the financial year, the following transactions occurred between the Group and its other related parties:
•
•
•
•
Pactum Australia Pty Limited sold goods totalling $5,523,000 (2010: $5,527,000) to the Group at cost.
The Group made interest payments of $118,000 (2010: $284,000) to Arrovest Pty Ltd. The weighted average
interest rate on the loans is 12%.
The Group received rental income of $15,000 (2010: $35,000) from A2DP.
The Group was reimbursed by A2DP $440,000 (2010: $769,000) for labour and other administrative services
provided.
Freedom Foods Group Limited
67
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
28. Related party transactions
(continued...)
These services are provided under normal terms and conditions.
The following balances arising from transactions between the Group and its other related parties are outstanding
at reporting date:
• Current loans totalling $46,000 are payable to joint ventures (2010: receivable from joint ventures $784,000).
All amounts advanced to or payable to related parties are unsecured and are subordinated to other liabilities.
The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has
been recognised during the financial year for bad or doubtful debts in respect of the amounts owed by
related parties.
(ii) Transactions between joint ventures in which the entity is a venturer and other related parties of the
Group
During the financial year, the following transactions occurred between joint ventures in which the entity is a
venturer and other related parties of the Group:
•
Leppington Pastoral Company sold goods and services totalling $5,004,000 (2010: $8,596,000) to Pactum
Australia Pty Limited at cost.
These services are provided under normal terms and conditions.
(d) Parent entities
The Parent entity of the Group is Freedom Foods Group Limited and the ultimate parent entity is Arrovest Pty Ltd
which is incorporated in Australia.
29. Share based payments - Employee Share Option Plan
Senior employees are eligible to participate in the share scheme under which executives are issued options to acquire
shares in the Parent. Each employee share option converts into one ordinary share of the Parent on exercise. No amounts
are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting
rights. Options may be exercised at any time from the date of vesting to the date of their expiry. There are no vesting
conditions attached to these options other than continuing employment within the Group.
The options granted expire within five years of their issue, or one year of the resignation of the senior employee, whichever
is the earlier. In relation to options issued during the financial year ended 30 June 2007 option series 4 vest in four equal
tranches over a period of 4 years and option series 5 vests in two equal tranches over two years.
The following share-based payment arrangements were in existence during the current and comparative reporting
periods:
Option series
(4) Issued 30 November 2006
(5) Issued 26 April 2007
Number
Grant date
Expiry date
3,400,000
300,000
30/11/06
26/04/07
30/11/11
26/04/10
Exercise price
$
0.50
0.50
Fair value at grant
$
0.10
0.10
The weighted average fair value of the share options granted during the financial year is $nil (2010: $nil). Options were
priced using a binomial option pricing model. Where relevant, the expected life used in the model has been adjusted on
management’s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
68
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
29. Share based payments - Employee Share Option Plan
(continued...)
Expected volatility is based on historical share price volatility over the past 2 years. It is expected that options will be
exercised only in the event of market price exceeding exercise price.
Inputs into the model
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Risk-free interest rate
Series 4
0.50
0.50
20%
5 years
2.5%
8%
Series 5
0.48
0.50
20%
5 years
2.5%
8%
The following reconciles the outstanding share options granted under the employee share option plan at the beginning
and end of the financial year:
Balance at beginning of the financial year
Granted during financial year
Lapsed during financial year
Cancelled during financial year
Exercisable at end of financial year
2011
Number of options
4,700,000
-
(1,000,000)
-
3,700,000
3,700,000
Weighted average
exercise price $
0.50
-
0.50
-
0.50
2010
Number of options
5,450,000
-
(750,000)
-
4,700,000
Weighted average
exercise price $
0.50
-
0.50
-
0.50
0.50
3,850,000
0.50
Balance at end of the financial year
The share options outstanding at the end of the financial year had an average exercise price of $0.50 (2010: $0.50), and a
weighted average remaining contractual life of 170 days (2010: 423 days). No options were exercised during the financial
year.
30. Contingent liabilities
Bank guarantee arising from rental of office premises. No liability is expected to accrue.
Consolidated
$000
2011
14
31. Controlled entities
Controlled Entity
Paramount Seafoods Pty Limited (i)
Nutrition Ventures Pty Limited (i)
Nutrition Ventures Financing Pty Limited (i)
Freedom Foods Pty Limited (i)
Australian Natural Foods Holdings Pty Limited (i)
Thorpedo Foods Group Pty Limited (i)
Thorpedo Foods Pty Limited
Thorpedo Seafoods Pty Limited
Country of Incorporation
Ownership interest
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2011
100%
100%
100%
100%
100%
100%
75%
75%
2010
14
2010
100%
100%
100%
100%
100%
100%
75%
75%
Freedom Foods Group Limited
69
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
31. Controlled entities
(continued...)
The consolidated statement of comprehensive income and statement of financial position of the entities party to the
deed of cross guarantee is the consolidated statement of comprehensive income and statement of financial position
included in the 2011 financial report.
(i)
These companies are members of the tax consolidated group.
32. Companies party to deed of cross guarantee
The following have entered into a deed of cross guarantee as a condition to obtaining relief under ASIC Class Order
98/1418 from the Corporations Act 2001 requirements to prepare and lodge an audited financial report and a directors’
report.
Members of the closed group are:
•
•
•
•
Freedom Foods Group Limited
Paramount Seafoods Pty Limited
Nutrition Ventures Pty Limited
Nutrition Ventures Financing Pty Limited
•
•
•
Freedom Foods Pty Limited
Australian Natural Foods Holdings Pty Limited
Thorpedo Foods Group Pty Limited
Each party to the deed of cross guarantee, guarantees to each creditor in the group payment in full of any debt upon
winding up under the provisions of the Corporations Act 2001 or, in any other case, if six months after a resolution or order
for winding up, any debt of a creditor that has not been paid in full. The consolidated financial report of the closed group
would not be materially different from the report of the group as a whole.
33. Parent entity disclosures
(a) Financial position
Parent
$000
2011
129
53,575
53,704
441
1,321
1,763
51,941
39,288
532
12,121
51,941
$000
2010
1,845
36,201
38,046
410
203
613
37,433
33,637
445
3,351
37,433
Assets
Current assets
Non-current assets
Total assets
liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
70
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
33. Parent entity disclosures
(continued...)
(b) Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
(c) Contingent liabilities of the parent entity
Bank guarantee
Parent
$000
2011
9,176
-
9,176
$000
2011
14
(d) Commitments for the acquisition of property, plant and equipment by the parent entity
Plant and equipment, PV of minimum future lease payments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
34. Jointly controlled operations and assets
The Group is a venturer in the following jointly controlled operations and assets:
$000
2011
8
39
-
$000
2010
1,240
-
1,240
$000
2010
14
$000
2010
21
55
-
Name of venture
Pactum Australia Pty Limited
A2DP
Country of incorporation
Australia
Australia
Principal activity
Contract beverage packing services
Sale of a2 milk
At the end of July 2010, the group sold its shareholding of 50% ownership in A2DP.
Reconciliation of movement in investments accounted for using the equity method:
Output interest
(%)
2011
50
-
2010
50
50
Balance at 1 July
Share of profits/(losses) for the year
Dividends
Equity investment transferred to Profit on Sale
Additions (i) (ii)
Balance at 30 June
Pactum
$’000
2011
1,152
730
1,882
-
-
-
1,882
2010
676
476
1,152
-
-
-
1,152
A2DP
$’000
2011
4,141
111
4,252
-
(4,252)
-
-
2010
2,859
832
3,691
-
-
450
4,141
Freedom Foods Group Limited
71
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
34. Jointly controlled operations and assets
(continued...)
Summarised financial information in respect of Freedom Foods Group Limited’s share in the joint venture is set out below:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total Liabilities
Net assets
Shareholder funds
Revenue
Profit / (loss) after income tax
Pactum
$’000
2011
5,302
4,453
9,755
4,052
4,294
8,346
1,409
1,409
16,551
730
2010
5,419
4,819
10,238
4,651
4,909
9,560
678
678
14,379
476
A2DP
$’000
2011
-
-
-
-
-
-
-
-
221
111
2010
3,506
770
4,276
1,353
644
1,997
2,279
2,279
13,010
832
35. Share in associate entity
Name of associate
A2 Corporation
Country of incorporation
New Zealand
Principal activity
Sale of a2 milk in Australia
2011
24
2010
-
At the end of July 2010, the group sold its shareholding of 50% ownership in A2DP to A2C in consideration for 120,376,950
fully paid ordinary shares in A2C. The group holds 131,115,562 ordinary shares and 6,158,910 partly paid shares at 30 June
2011.
Output interest (fully diluted)
(%)
Reconciliation of movement in investment accounted for using the equity method:
Balance at 1 July
Share of profits/(losses) for the year
Dividends
Equity investment
Costs associated with investment
Balance at 30 June
A2C
$’000
2011
-
295
295
-
9,256
7
9,558
2010
-
-
-
-
-
-
-
72
Annual Report 2011
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
35. Share in associate entity
(continued...)
Summarised financial information in respect of Freedom Foods Group Limited’s share in the associate is set out below:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total Liabilities
Net assets
Shareholder funds
Revenue
Profit / (loss) after income tax
A2C
$’000
2011
3,732
2,365
6,097
1,395
10
1,405
4,692
4,692
7,936
295
2010
-
-
-
-
-
-
-
-
-
-
36. Assets pledged as security
In accordance with the security arrangements of liabilities, as disclosed in note 16 to the financial statements, all non-
current assets of the Group, have been pledged as security. The holder of the security does not have the right to sell or
repledge the assets. The Group does not hold title to the equipment under finance lease pledged as security.
During 2009, Freedom Foods Pty Limited entered into an equipment lease with National Australia Bank to assist in
financing equipment requirements for the Freedom manufacturing site at Leeton. The maximum facility limit is for
financing amounts of up to $8 million with a lease term of 5 years with a 20% residual. The facility is secured by the
financed equipment and Freedom Foods obligations under the lease are guaranteed by Freedom Foods Group Limited.
37. Subsequent events
On 28 July 2011 the Company announced that it had subscribed for new shares in A2 Corporation Limited (NZX: A2C)
under the terms of an option agreement between A2C and FFG. The subscription was for 18,761,657 fully paid ordinary
shares in A2C at a price of NZ$0.13 (A$0.11) for a total consideration of A$2.06m. The subscription for shares has resulted
in the Company increasing its shareholding in A2C to 27.5% of the total number of fully paid ordinary shares in A2C (26.4%
fully diluted for partly paid shares in A2C), with the Company now the largest single shareholder in A2C.
After year end the joint venture, Contract Beverage Packers Australia Pty Limited changed its name to Pactum Australia Pty
Limited. The company has been referred to as Pactum throughout the annual report.
On 29 September 2011, the Company announced that as a result of the improved financial returns and its strategy to build
further critical mass in earnings and cashflow, it is reviewing an acquisition of the 50% shareholding held by the Perich
Group in Pactum Australia Pty Limited. A full acquisition of Pactum Australia Pty Limited is subject to agreement of
definitive terms and shareholder approval.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the
consolidated entity in subsequent financial years.
Freedom Foods Group Limited
73
Notes to the Financial Statements (For the financial year ended 30 June 2011) (continued...)
38. Assets Classified as Held for Sale
Investments Accounted for Using the Equity Method Held for Sale (Note 34)
Consolidated
$000
2011
-
2010
4,141
On 21 May 2010 Freedom Foods Group Limited announced that it had entered into a Sale and Subscription Implementation
Agreement with A2 Corporation Limited (‘’A2C’’) (NZAX:ATM) under which it would sell its 50% interest in A2 Dairy Products
Australia Pty Limited (being 2,700,000 fully paid ordinary shares) to A2C in consideration for 120,376,950 fully paid ordinary
shares in A2C, being 25% of the enlarged A2C transaction.
74
Annual Report 2011
Directors’ Declaration (For the financial year ended 30 June 2011)
n Directors’ Declaration
FREEDOM FOODS GROUP LIMITED
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2011
The director’s declare that:
(a)
in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
(b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in
note 3 to the financial statements.
(c)
in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
financial position and performance of the consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The
nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor
payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC
Class Order applies, as detailed in note 32 to the financial statements will, as a group, be able to meet any obligations or
liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the directors
P R Gunner
Chairman
Rory J F Macleod
Executive Director
Sydney, 29 September 2011
Freedom Foods Group Limited
75
Independent Audit Report
n Independent Audit Report
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
The Barrington
Level 10
10 Smith Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia
DX 28485
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of Freedom Foods Group
Limited
We have audited the accompanying financial report of Freedom Foods Group Limited, which comprises the statement of
financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the
statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages
26 to 75.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 3, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with International Financial
Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control, relevant to the entity’s preparation of the financial report that gives a true and fair view, in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
76
Annual Report 2011
Independent Audit Report (continued...)
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of Freedom Foods Group Limited, would be in the same terms if given to the directors as at the time of this auditor’s
report.
Opinion
In our opinion:
(a) the financial report of Freedom Foods Group Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in
Note 3.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 15 of the directors’ report for the year ended 30 June
2011. 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.
Opinion
In our opinion the Remuneration Report of Freedom Foods Group Limited for the year ended 30 June 2011, complies
with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Parramatta, 29 September 2011
Freedom Foods Group Limited
77
Shareholder Statistics
n Shareholding
Class of shares and voting Rights
At 31 August 2011, there were:
Substantial shareholders
77,496,602 ordinary shares of the Parent on issue.
19,414,800 convertible redeemable preference shares of the
Parent on issue.
The number of shares held substantial shareholders as listed in the Parent’s register as at 31 August 2011 are:
Ordinary Shares
Arrovest Pty Limited
Telunapa Pty Ltd
Convertible Redeemable Preference Shares
Arrovest Pty Limited
Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
Number
51,465,265
12,750,000
15,995,142
1,599,999
The Parent’s listed ordinary shares are of one class with equal voting rights and all are quoted on a Member Exchange of
the Australian Stock Exchange Limited (the home exchange being the Australian Stock Exchange (Sydney) Limited).
Distribution of ordinary shareholders as at 31 August 2011
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Ordinary
297
243
76
134
35
785
Non-marketable securities which are holdings of less than 1,666 ordinary shares are held by 362 shareholders. This statistic
is based on the share register as at 31 August 2011.
78
Annual Report 2011
20 largest ordinary shareholders as at 31 August 2011
Name
1 Arrovest Pty Ltd
2 Telunapa Pty Ltd
3 National Nominees Limited
4 East Coast Rural Holdings Pty Limited
5 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
6 Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
7 Mr Lawrence Lip & Mrs Sabina Lip
8 Mr Terence Edward Morris
9 Mr Lawrence Rose & Mrs Jennifer Rose
10 Bond Street Custodians Limited
11 Mr Michael Andris Bracka & Mrs Janine Elizabeth Bracka
12 Mr Melvyn Miles & Mrs Joanna Miles
13 Australian Food Holdings Pty Limited
14 Mr Legh Davis & Mrs Helen Davis
15 Mr Robert John Perry & Mrs Jennifer Joy Perry
16 Anisam Pty Limited
17 Economic Consultancy Services Pty Limited
18 Moorebank Property Management Pty Limited
19 Connaught Consultants (Finance) Pty Limited
20 Navarra Investments Pty Ltd ATF RJMT Super Fund
Shareholder Statistics
Number of Ordinary
Shares held
51,465,265
12,750,000
1,153,235
640,494
510,732
434,615
313,475
274,910
259,184
230,000
220,436
210,110
207,754
200,000
200,000
192,308
192,308
187,747
184,991
182,775
70,010,339
% held of
Ordinary Capital
66.41%
16.45%
1.49%
0.83%
0.66%
0.56%
0.40%
0.35%
0.33%
0.30%
0.28%
0.27%
0.27%
0.26%
0.26%
0.25%
0.25%
0.24%
0.24%
0.24%
90.34%
The proportion of ordinary shares held by the 20 largest shareholders is 90.34%
Stock exchanges that have granted quotation to the securities of the Parent quoted in Australia:
All Member Exchanges.
Distribution of convertible redeemable preference shareholders as at 31 August 2011
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Ordinary
24
23
15
35
5
102
Freedom Foods Group Limited
79
Shareholder Statistics
20 largest convertible redeemable preference shareholders as at 31 August 2011
Name
1 Arrovest Pty Ltd
2 Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
3 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
4 Mr Lawrence Lip & Mrs Sabina Lip
5 Mr Alexander MacDonald
6 Dr John Warwick Cox
7 Mr Lawrence Rose & Mrs Jennifer Rose
8 Mr Melvyn Miles & Mrs Joanna Miles
9 Australian Food Holdings Pty Limited
10 Mr Robert John Perry & Mrs Jennifer Joy Perry
11 Connaught Consultants (Finance) Pty Limited
12 Mr Michael Andris Bracka & Mrs Janine Elizabeth Bracka
13 Mr Legh Davis & Mrs Helen Davis
14 Mr Richard James Wishart & Mrs Jillian Rosemary Wishart
15 Mr Steven Kalyk & Mrs Mirjana Kalyk
16 Mr Ralph Stuart Bruce & Mrs Christine Ann Bruce
17 Mr Mathew John
18 Mrs Kathleen Alice O'Shea
19 Mr Robert William Owen & Mrs Yvonne Owen
20 Mr Kenneth Francis Smith & Mrs Margaret Lorraine Smith
Number of Ordinary
Shares held
15,995,142
1,599,999
159,604
150,000
133,333
100,000
80,995
64,584
63,860
62,500
57,929
50,391
40,869
40,625
36,835
35,920
34,720
33,300
31,559
31,250
18,803,415
% held of
Ordinary Capital
82.39%
8.24%
0.82%
0.77%
0.69%
0.52%
0.42%
0.33%
0.33%
0.32%
0.30%
0.26%
0.21%
0.21%
0.19%
0.19%
0.18%
0.17%
0.16%
0.16%
96.85%
The proportion of convertible redeemable preference shares held by the 20 largest shareholders is 96.85%
80
Annual Report 2011
Corporate Directory
n Corporate Directory
Company Secretary
Rory J F Macleod
Principal Registered Office
Bankers
80 Box Road
Taren Point, NSW 2229
Tel: (02) 9526 2555
Fax: (02) 9525 5406
Share Registry
Registries Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Tel: (02) 9290 9600
Fax: (02) 9279 0664
HSBC Australia Limited
Level 32, 580 George Street Sydney
Sydney NSW 2000
Tel: 1300 308 188 (toll free)
Fax: (02) 9255 2647
National Australia Bank Ltd.
26/255 George Street
Sydney NSW 2000
Tel: (02) 9237 1171
Fax: (02) 9237 1400
Insurance Brokers
Auditor
InterRisk Australia Pty Limited
Level 1, 7 Macquarie Place,
Sydney NSW 2000
Tel: (02) 9346 8050
Fax: (02) 9346 8051
Deloitte Touche Tohmatsu
Chartered Accountants
The Barrington,
10 Smith Street,
Parramatta NSW 2150
Tel: (02) 9840 7000
Fax: 02) 9840 7001
Solicitors
Gilbert & Tobin
2 Park Street,
Sydney NSW 2001
Tel: (02) 9263 4000
Fax: (02) 9263 4111
Addisons
Level 12,
60 Carrington Street,
Sydney NSW 2000
Tel: (02) 8915 1000
Fax: (02) 8916 2000
Management
Rory J F Macleod - Group Executive Director, Chief Financial Officer, Company Secretary
Michael Bracka - Chief Operating Officer (Freedom Foods and Specialty Seafood Business Units)
Peter Brown - Executive General Manager Sales (Freedom Foods and Specialty Seafood Business Unit)
Peter Bartier - National Supply Chain Manager (Freedom Foods and Specialty Seafood Business Unit)
Chris Pensini - Manufacturing and Operations Manager, Freedom Leeton
Freedom Foods Group Limited
81
Freedom Foods Group Limited
ABN 41 002 814 235 | Ph: 02 9526 2555 | Fax: 02 9525 5406
80 Box Road Taren Point NSW 2229 | PO Box 2531 Taren Point NSW 2229