ANNUAL REPORT 2015
growth fuelled
innovation
by
Making food better
+ FROM AUSTRALIA TO THE WORLD
We desire to be recognised as creators — creating on-trend,
great-tasting, responsibly Australian produced food and
beverages. Food and beverages that people enjoy and feel
good about.
We aim to continually innovate and reimagine what is
possible, to change the way the world eats for the better.
Through our brands and customers, we will leverage
new categories and emerging consumer trends while
also understanding our consumers’ needs, backed up by
strong research and product development, marketing and
commercial capabilities uniquely based on Australian
source advantage.
Strategic investments in our manufacturing footprint and
supply chain will allow us to continue scaling and controlling
our business into the future in both Australia and key Asia
Pacific global markets.
FREEDOM FOODS GROUP LIMITED ABN 41 002 814 235
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2015
ANNUAL GENERAL MEETING
date
29 October 2015
time
12.00 pm
location
DLA Piper Australia Level 22,
1 Martin Place Sydney NSW 2000
Contents
05
Chairman’s
Letter
06
Managing Director’s
Review of Operations
28
Directors’
Report
41
Corporate Governance
Statement
42
43
Auditor’s Independence
Declaration
Statement of Profit
and Loss and Other
Comprehensive Income
44
Statement of
Financial Position
45
Statement of
Cash Flows
46
47
Statement of
Changes in Equity
Notes to the Financial
Statements
81
Directors’
Declaration
82
Independent Auditor's
Report to the Members
of Freedom Foods
Group Limited
84
Shareholder
Information
86
Corporate
Directory
PG 4
"We believe that people’s
needs have moved towards
safer, nutrient rich, longer
life convenient foods".
freedom foods group limited + annual report 2015
Chairman's Letter
PG 5
Dear All
I am pleased to report a successful year, investing in the
Company’s capability and capacities for profitable growth
consistent with our 3 year plan.
During the year, a number of significant initiatives were
completed across our business activities, with the
highlights being:
» Commissioning of a state of the art Nutritional Snacks line
3 months ahead of plan, and at the same time launching
5 innovative nutritional snacks into the mainstream aisle,
from February 2015
» Launch in February 2015 of the Australia’s Own brand in
China, in partnership with Shenzhen JLL, with the brand
being used to support Shenzhen JLL's Kids Milk brand
» A highly successful launch of Pactum Dairy Group (PDG)
joint venture, achieving sales of close to $50 million in its
first full year, tracking ahead of its 3 year business plan,
with demand from customers in China, South East Asia
and Australia
Each of the above initiatives is consistent with building
product and channel diversification, as well as a strong
export sales platforms into the Asian (China and South
East Asia) and Pacific regions.
The rapid and changing face of the Company in recent
years is illustrated by close to 20% of sales in the financial
year 2015 originating from markets outside of Australia/New
Zealand. Additionally, and of equal importance, only 43% of
total group sales are now derived from major Australian retail
customers, as compared to 75% five years ago.
To further build on our paddock to plate capability across our
Beverage and Cereals and Snacks platform, the Company
undertook or announced a series of investments including:
» the Company becoming a 10% equity participant, and a
member of the Board, in Australian Fresh Milk Holdings
consortium (AFMH), which acquired Moxey Farms,
Australia's largest single-site dairy operation, as part
of the development of a long term strategic dairy milk
supply chain; and
» acquisitions of the Darlington Point Mill and a proposed
Oats based cereals and snacks manufacturing business to
accelerate the business and provide further value adding
scale benefits to the expanding sales, manufacturing and
supply chain footprint of the Cereals and Snacks business.
Alongside the significant expansion of our Company’s
manufacturing capabilities, we also invested in people,
quality and systems: in particular an expansion of our R&D
and product development capabilities to drive innovation
in product and channels for future sales development.
The Company achieved an underlying Operating EBDITA of
$15.2 million, broadly in line with the previous corresponding
period. Our financial results reflected the impact of the
ramp-up phase of the capital equipment investment process,
particularly in our Cereals and Snacks platform. The results
included one off investment costs relating to snack bars
commissioning and launch costs, which impacted gross
margin and operating expense in the Group by $2.8 million.
The Operating EBDITA and statutory result was also impacted
by the expensing of $1.2 million of increased Almond input
costs (reflecting adverse exchange rate and market price
movements). Overall, the Board believes the operating
earnings result to be a good achievement considering the
significant development within the Company during the
financial year.
The Reported Net Profit of $56.6 million included non-
operating employee share option expense of $252k (after
tax) and a reclassification investment gain of $51.96 million
(after tax), arising from the gain on reclassification of The
a2 Milk Company (a2MC) investment to a 'available for sale
investment', reflecting a change in accounting treatment
following the retirement of myself from a2MC board.
In relation to our strategic investment in a2MC, we continue
to review all our options with regard to the a2MC investment,
including evaluating the benefits of maintaining a strategic
stake in a2MC.
The Board has recommended payment of a final fully franked
dividend of 1.5 cents per ordinary share in November 2015,
taking total dividends for the 2015 financial year to 3.0 cents
per share fully franked.
On behalf of all shareholders, I want to thank Mr Mel Miles
who resigned from the Board in August this year for his
significant contribution to the business over many years.
Mel joined the Board in 2006 after the Perich family became
major shareholders in the company. Along with working
with the board and management on building the Company,
in particular he has made a strong contribution to its
manufacturing and operational disciplines.
On behalf of the Board, I would like to thank my fellow
directors and all our employees for their dedication and
hard work throughout the year.
There is much to be done and a great deal of confidence
about Freedom Foods Group long-term prospects.
Perry Gunner
Chairman
freedom foods group limited + annual report 2015 PG 6
Managing Director's Review of Operations
Operating Highlights
» A successful year investing in the Company’s capability
and capacities for profitable growth consistent with its
3 year plan
» Commissioning of a state of the art Nutritional Snacks
line 3 months ahead of plan, with launch of 5 innovative
nutritional snacks into the mainstream aisle from
February 2015
» Sales growth in new value added Cereals and Bars in
Australia, with growth in cereals in North America from
increased distribution, albeit incurring significant start-up
sales and marketing costs in both markets
» Sales growth in non-dairy beverage, led by growth in
branded and non-branded sales in the fast growing
Almond Milk category, with margins impacted by
increased cost of almond inputs (exchange rate and
market price)
» Launch in February 2015 of the Australia’s Own
brand in China, in partnership with Shenzhen JLL
» Highly successful launch of Pactum Dairy Group (PDG)
achieving sales of close to $50 million in its first full year,
tracking ahead of its 3 year business plan with demand
from customers in China, South East Asia and Australia
» Launch of new and differentiated packaging for the
Brunswick Specialty Seafood brand to consolidate
its leadership position
» Significant investment in manufacturing capabilities,
people, quality and systems
» Significant investment in new employees in research and
development (R&D) and product development to drive
innovation in product and channel development
» Investment process impacted revenue and margins in the
short term relating to commissioning process, deletion of
our biscuit range and run-out of old lines
» As part of our development of a long term strategic dairy
milk supply chain, the Company became a 10% equity
participant in Australian Fresh Milk Holdings consortium
(AFMH), with the acquisition of Moxey Farms, Australia's
largest single-site dairy operation
» Announced acquisitions of the Darlington Point Mill and a
proposed Oats based cereals and snacks manufacturing
business to accelerate the business plan and provide
further value adding scale benefits to the expanding sales,
manufacturing and supply chain footprint of the Cereals
and Snacks business
safer
+
nutritious
+
full life
+
convenience
freedom foods group limited + annual report 2015 PG 7
freedom foods group limited + annual report 2015
PG 8
Managing Director's Review of Operations
Financial Summary
The Company reported a net profit of $56.6 million, a material
increase from the prior corresponding period.
The net profit included an unrealised post-tax fair value gain
of $51.96 million, arising from the gain on reclassification of
The a2 Milk Company (a2MC) investment to a 'available for
sale investment', reflecting a change in accounting treatment
following the retirement of Mr Perry Gunner from the a2MC
board. The resignation of Mr Gunner from the board of a2MC
resulted in the Company no longer being able to clearly
demonstrate that it could exercise significant influence over
the operation of the a2MC business.
The Company achieved an underlying Operating EBDITA of
$15.2 million, broadly in line with the previous corresponding
period. The statutory reported EBDITA of $12.1 million reflected
one off investment costs relating to snack bar commissioning
and launch costs, which impacted gross margin and operating
expense in the Group by $2.8 million. The Operating EBDITA
and statutory result was also impacted by the expensing
of $1.2 million of increased Almond input costs (reflecting
adverse exchange rate and market price movements).
Each of the business units (with the exception of Seafood)
achieved increased sales, notably including incremental
growth in revenue in our joint venture Pactum Dairy Group
of $49 million in its first full year of operation. The Freedom
Foods branded product range increased revenue, although
profitability was impacted by commissioning of the new
nutritional snack equipment reducing manufacturing
recoveries and gross margin during the half. Non-dairy UHT
operations performed ahead of the prior year. Although
Specialty Seafood’s revenue declined its contribution to
Operating EBDITA increased.
The Company considers the Operating EBDITA result
satisfactory having regard to:
» the significant investment and commissioning of the
plant being undertaken and adjustments required to the
operating structure of the business in this phase; and
» the impact of material market development expenditure,
adverse exchange rate changes and Almond input costs.
Set out below is a reconciliation of statutory EBDITA to
underlying Operating EBDITA before significant items.
YEAR ENDED 30TH JUNE (A$’000)
2015
2014
Underlying Operating EBDITA before significant items
16,420
15,289
Significant Items expensed to profit:
Exchange and Market Demand Impact on Purchases of Almond inputs
Underlying Operating EBDITA
Other costs not representing underlying performance
One off Marketing and Promotional Costs for Mainstream Bar Launch
One off Marketing Costs for Cereal Launch
Bar Line Commissioning Impact on Gross Margin
Total Other Costs
Operating EBDITA
Employee Share Option Expense (non cash)
Statutory EBDITA
(1,183)
15,237
(1,351)
(550)
(890)
(2,791)
12,446
360
12,086
-
15,289
-
-
-
-
15,289
360
14,929
Note:
Operating EBDITA is a non-IFRS measure as contemplated in ASIC Regulatory Guide 230 Disclosing non-IFRS financial information (RG230). Operating
EBDITA is used by management and the directors as the primary measures of assessing the financial performance of the Group and individual segments.
freedom foods group limited + annual report 2015 Summary Financials
12 MONTHS TO 30 JUNE
Gross Sales Revenues (1)
Net Sales Revenues (1)
Net Sales Revenue (Statutory)
EBDITA (Underlying Operating pre significant)
EBDITA (Statutory Operating) (2)
EBITA (Operating) (2)
Equity Associates Share of Profit (3)
Pre Tax Profit (Operating) (4)
Pre Tax Profit (Reported)
Income Tax
Net Profit (Operating) (4)
Net Profit (Reported)
Interim Ordinary Dividend (cps)
Interim CRPS Dividend (cps)
EPS (cents per share) (Fully Diluted for CRPS)
EPS Operating (cents per share) (Fully Diluted)
Net Debt/Equity
Net Assets per Share
PG 9
2015
2014
Change
$’000
$’000
129,502
111,125
91,460
16,420
12,086
9,092
(42)
9,240
61,980
5,349
4,970
56,631
1.50
1.35
35.99
3.14
27%
120
122,772
104,616
87,856
15,289
14,929
12,201
(26)
13,059
12,673
541
12,518
12,132
1.50
1.35
8.14
8.15
4%
81
%
5.5%
6.2%
4.1%
7.4%
-19.0%
-25.5%
-61.5%
-29.2%
389.1%
888.7%
-60.3%
366.8%
0.0%
0.0%
342.1%
-62.7%
575.0%
48.1%
59.0%
Net Tangible Assets per Share
106.35
66.88
Notes:
1. Gross Sales Revenues do not include revenues from group associate entity, Pactum Dairy Group Pty Limited. Net Sales Revenues in the table
above differs from the Appendix 4E, as the Net Sales Revenue above includes intercompany sales eliminated from the statutory reported Net
Sales Revenue figure. This treatment reflects the Group’s arm’s length trading policy between Group activities.
2. Operating EBDITA and EBITA excludes pre-tax abnormal or non-operating charges and gains with an add back of non cash employee share
option expense of $360k, elimination of the fair value gain of $53.1 million due to the reclassification of the a2MC investment and the share of
losses from associate.
3. Share of losses from associate.
4. Operating Pre Tax Profit and Net Profit does not include the fair value gain of $53.1 million due to the reclassification of the a2MC investment
and the share of losses from associate.
freedom foods group limited + annual report 2015
PG 10
Managing Director's Review of Operations
We desire to
be recognised
as creaters
- creating
on-trend,
great tasting,
responsibly
Australian
produced food
and beverages.
freedom foods group limited + annual report 2015
UHT Beverage Business Group
PG 11
Non Dairy Activities
Non-dairy production volumes increased during the period to
support the growth of the Australia’s Own and Blue Diamond
brands, as well as an expansion of private label requirements
for UHT Almond.
Non-dairy beverage sales continued the upward trend from
the 2014 financial year with volume growth compared to
the previous corresponding period, reflecting increased
market share of Australia’s Own Organic in the UHT Almond
segment. Our Australia’s Own brand and our licensed Blue
Diamond Almond Breeze brands remain market leaders with
a 43.7% (MAT August 15) share of the Almond UHT segment.
As at August 2015, the UHT Almond Milk category accounted
for 33% of the retail non-dairy category, compared to 26%
at August 2014. UHT Soy declined further with total share at
43.7%, compared to +50% in prior years. It is expected that
UHT Almond and related blends will exceed UHT Soy market
share within the next 18 months, reflecting a similar trend in
North America.
Other UHT alternative categories including Almond Coconut
and Coconut also increased share. The business had a
minimal product exposure to these growing segments during
the period. We are introducing products in the categories
as well as introducing new UHT product categories such as
Cashew, the combined effect of which will be to significantly
improve our exposure to these categories in FY 2016.
Financial returns in the Almond portfolio were impacted
during the period by increased Almond inputs (reflecting
exchange rate and market pricing).
Australia’s Own UHT liquid stocks increased sales and
distribution during the period. The business is also a
significant supplier of liquid stocks to retailer and other brands.
The business continued to see the benefit of increasing its
mix of other value added UHT products, to a range of private
label and proprietary customers.
Sales of UHT portion pack products were reduced from
prior year reflecting the withdrawal of a major brand from the
breakfast drink category. We continued to grow our private
label business in the UHT portion pack category and have
also reallocated surplus capacity to support growth in JLL
Australia’s Own Kids Milk UHT portion pack requirements.
The business continues to develop plans for the launch of
UHT Almond Milk into Asian markets using the Company’s
Australian production base. This leverages both the free
trade agreements between Australia and Asia as well as the
Company’s relationship and distribution base within these
markets. The Company sees further opportunity to develop
non-dairy UHT products from an Australian manufacturing
base into China and SE Asia.
During the period, the business invested significantly in its
UHT R&D and product development capabilities to ensure it is
a leading participant in developing innovative UHT solutions in
non-dairy and dairy applications for its customers in Australia,
China and South East Asia. The benefits of this investment is
expected to lead to increased sales and distribution in and
beyond FY 2016.
freedom foods group limited + annual report 2015 PG 12
Managing Director's Review of Operations
The new facility will provide for existing and new UHT
packaging capabilities including carton and plastic over
different stages. This will allow customisation of beverage and
food products and packaging for local and export markets
with efficiency and speed, to meet the growing demand
for high quality safe foods from Australia. It is intended that
production will be marketed under the Company’s brands
and leading brands of key customers in Australia and Asia.
The facility will also be capable of processing dairy products,
to allow a two-way redundancy with the Shepparton facility,
while providing opportunity to expand the Company’s base
in dairy from multiple processing sites as required.
New Facility at Ingleburn,
South West Sydney
Existing UHT non-dairy capabilities are constrained in both
production and distribution at our Taren Point operation,
restricting growth and financial returns.
With increasing demand from its private label and proprietary
customer base for additional capacity and product format
capability across non-dairy and value added dairy categories,
the Company is investing for future growth through a planned
expansion at a new site in Ingleburn in South West Sydney.
The planned new facility will provide for significant expansion
in capacity and efficiency improvements compared to current
operations, including providing a materially more efficient and
lower cost warehousing and logistics solution compared to
current arrangements.
The acquisition of aproximately 66,000 sq. metres of land
in Ingleburn for a cost of approximately $16.6 million, which
will provide the site for our new facility, was completed in
June 2015. All requisite development approvals have been
obtained for construction of the new facility. Construction of
a warehousing and distribution facility has commenced in the
first half of FY 2016, with UHT production commencing during
the calendar year 2017. The first stage installed capacity is
expected to be approximately 80 million litres, from current
capacity at the Taren Point facility of approximately 50
million litres.
freedom foods group limited + annual report 2015 Dairy Activities
PG 13
Pactum Dairy Group
(PDG)
PDG commenced operations in April 2014 to provide
innovative UHT dairy milk capability for customers in
domestic and export markets.
PDG is a joint venture between Pactum and Australian
Consolidated Milk (ACM), a major Australian dairy milk
supply group.
Commencing volumes are tracking ahead of its 3 year
business plan, with good demand from customers in
Australia, China and South East Asia.
In its first full year of operation, the Company delivered sales
of close to $50 million (+$44 million or +635%) and a close
to break-even EBDITA result. Slower demand in the 2nd
half particularly for 1 litre formats reflected subdued market
conditions in China and delays in import certifications. These
short term market fluctuations delayed the expected move to
profitability, which is now expected in the first half of FY 2016.
The business secured additional customers and volume
from Australia, China and South East Asia, with supply
commencing in FY 2016. These include a major Australian
retailer, Lion Dairies and IDP (Vietnam). In Australia, PDG is
now the largest dairy UHT supplier to one of the three major
Australian retailers under a long term supply arrangement,
complementing our existing position as the largest non-
dairy UHT supplier to that retailer. This position reflects that
customer’s recognition of our leading UHT capabilities.
Notwithstanding the short term subdued market conditions
in China the Company has established key relationships with
major dairy manufacturers and brand owners there including
New Hope Dairy (Chengdu), Shenzhen JLL (Guangzhou)
and Bright Dairy (Shanghai), online retailer Yihaodian and
a number of regional dairy manufacturers and distributors.
Each of these relationships is complementary, as both
Freedom and our customers in China recognise the level
of regionalisation and hence diversification in local market
distribution, product range and capability within that market.
The recent addition of a major Chinese based dairy customer
reflects the increasing recognition of PDG as a supplier
of choice in UHT dairy ex Australia, based on our unique
customer partnership model.
The Company has also developed other customer
relationships outside of China into South East Asia in
markets such as Hong Kong, Philippines and Vietnam.
It is anticipated that our customer requirements are expected
to grow beyond their initial volumes as demand for milk
increases in their respective home markets, with Australian
milk products providing the highest quality and safety at a
comparative cost advantage compared to locally sourced
milk. The $AUD exchange rate depreciation and expected
free trade agreement with China provide further competitive
advantage to the business in the medium to long term.
During the year, PDG installed additional portion pack
capacity in 250ml Prisma and 200-330ml formats. Total
installed capacity based on these additions is approximately
120 million litres or 290 million packs per annum.
freedom foods group limited + annual report 2015 PG 14
Managing Director's Review of Operations
To meet expected expansion in milk demand in UHT format
and customer format requirements over the medium term,
the Company is evaluating additional processing and filling
capabilities, as well as an expansion of warehousing and
logistics capabilities. Opportunities to vertically integrate
into other value added dairy product streams are also being
reviewed, such streams being aligned to our customer’s long
term requirements.
Consistent with this opportunity, the Company has acquired
approximately 77,400 sq. metres of land adjacent to the
PDG site at Shepparton in Victoria. The acquisition price
was $4 million and settlement occurred on 24 September
2015. The acquisition of the land provides the capacity and
flexibility to develop longer term warehousing and distribution
requirements for the Pactum Dairy operation. Additional
customised manufacturing and warehouse capacity will
provide space for future expansion of processing and
packaging operations at the site and potential expansion
of other dairy processing capabilities in the future.
With the increasing scale of the PDG and Freedom Foods
Group operations, the Company augmented the management
capability within the PDG business with the appointment
of senior commercial and operational resources with long
established experience in both UHT dairy processing and
UHT commercial sales.
With the commencement of operations and significant
resourcing to meet the expected ramp up in volumes, the
business recorded a net after tax loss in FY 2015. FNP equity
accounted 1% of the loss in line with the current ownership
structure. The Company has the capacity to obtain a 50%
interest in PDG by converting convertible notes issued to it
as part of its original investment. It is expected that this will
occur in FY 2016, after which the Company’s share of profits
will increase to 50% in line with the increase in shareholding.
It is expected that FY 2016 will show PDG making a positive
operating result, hence contributing to Freedom’s operating
EBDITA, reflecting the business’s increasing revenues and
customer base.
Australia’s Own Brand
Partnership
The Company commenced production of our “Australia’s
Own” branded “Kids Milk” to support its launch in China in
February 2015.
Australia’s Own Kids Milk is being marketed and distributed
in China through a long term 50 year partnership with
Guangzhou based Shenzhen JiaLiLe Food Co. Ltd (JLL),
which is owned and led by parties associated with the
establishment of the largest selling ready to drink beverage
in China. The arrangements reflect the strategic approach of
our business model to engage established partners in foreign
markets who understand local business requirements. The
initial product is a single serve 200ml pack, which is the first
Australian milk product marketed specifically to the post-
infant-formula toddler market in China.
The product has been initially targeted in Tier 2 and Tier
3 cities, with considerable marketing investment by JLL,
including point of sale promotion and sampling, external
promotion and more recently TV commercials. Volume
continues to build monthly.
Production commenced in late 2014 sourced from the
Company’s Taren Point UHT facility, due to the 200ml
format capability in Sydney. Longer term supply decisions
will be determined based on spare capability at either the
Shepparton or Ingleburn facilities.
freedom foods group limited + annual report 2015 Dairy Activities
PG 15
Australian Fresh Milk
Holdings Consortium
Investment
In July 2015, the Australian Fresh Milk Holdings consortium
(AFMH), comprising Leppington Pastoral Company Pty
Limited (LPC), New Hope Dairy Holdings Co Ltd and
Freedom Foods Group Limited executed binding agreements
to acquire Moxey Farms, Australia's largest single-site dairy
operation. Collectively the combined Moxey and Leppington
Pastoral dairy milk production makes it the largest dairy
milking operation in Australia.
Moxey Farms operates a fully integrated dairy farming
operation located in the Lachlan Valley, New South Wales,
340 km west of Sydney. Moxey Farms land portfolio covers
an area of 2,700 hectares has and includes 3,700 milking
cows that produce approximately 50 million litres of milk per
year, with a large proportion of this milk from a2 cows.
The Moxey family will operate Moxey Farms in joint venture
with the Perich family under a new Farm Management
Agreement with AFMH, ensuring continuity of existing
operations for key customers and staff.
The Moxey family have retained a strategic stake in AFMH,
which will have assets and operations across every aspect
of the dairy value chain. FNP has a 10% equity shareholding
and Board representation in AFMH, with the balance held by
the other consortium members.
The acquisition will provide FNP with the opportunity to
secure access to a consistent and long-term supply of high
quality milk as AFMH explores expansion opportunities to
further build on the acquisition of the Moxey operations. The
consortium arrangement will also enable AFMH to leverage
FNP’s processing capabilities and New Hope Dairy’s Asian
footprint to readily access export markets such as China and
South East Asia.
The Company intends to equity account 10% of the net
profit of AFMH.
China Representative
Office
The Group has had a representative in China since 2013.
Consistent with the growth in our business in China, the
Group has established a China representative office to
provide for growth in its sales, marketing and supply chain
requirements. While this team in China will initially be
substantially engaged in supporting the dairy activities,
the increased resource will provide a base for increased
distribution of a broad range of the Company’s products. In
September 2015, the Company will launch its online trading
platforms in China specifically for Freedom Foods branded
product. It is anticipated that the office will also provide
representation for alliance brands desiring to access China
using the Company’s Australian sourced production.
freedom foods group limited + annual report 2015 PG 16
Managing Director's Review of Operations
freedom foods group limited + annual report 2015
Cereal & Cereal Snacks
PG 17
The Freedom Foods branded business continued to build
momentum in its Cereal and Cereal based Snacks portfolio,
with material investments in production capacity and
capabilities for future growth.
Traditional format products (i.e. Corn Flakes, Rice Puffs)
experienced declines against the prior corresponding period.
The business maintained category leadership in Health
Cereals (retail) of circa 45% (MAT August 15).
Significant capital expenditure occurred at Leeton, together
with further investment in R&D, product development and
an increase in marketing to support new product launches.
The business delivered sales growth in its Cereals, Snacks
and related Ingredients segments compared to the previous
corresponding period. With a focus on its core product
portfolio for future growth, the business is progressively
reducing its presence in non-core categories including
biscuits. The reduction in non-core products impacted sales
in the period, with some resulting impact on margins and
manufacturing recoveries.
Alongside investment in sales, marketing and specific product
launch investment, the business is investing heavily in R&D
and product development capability to drive growth in retail
and other channels such as food service in the medium term.
The business experienced growth in new format combination
products such as Active Balance, Oats and Muesli products.
Functional and combination format products, as well as
portable and convenience options, will be key drivers of
growth in Cereals and Snack business. These areas are also
a key focus for our innovation investment, while ensuring our
products achieve a 3.5 – 5.0 star rating within the Government
health star rating system.
As part of ensuring best quality and growth in supply of key
grains to our Freedom production facilities, the business
developed its Freedom Farmer platform, with a number of key
farmer groups engaged to build the Company’s specialised
grains supply platform over the coming years. This will
guarantee our strategy of being an integrated paddock to
plate provider. Australian sourcing of all ingredients will be
a key source of competitive advantage for the Company.
freedom foods group limited + annual report 2015 PG 18
Managing Director's Review of Operations
Capacity Investment
During the year, the business invested approximately $11
million in capital expenditure at Leeton, including completing
the upgrade of Cereal extrusion and packaging capabilities
to improve efficiencies and provide increased capacity in
range and format for both Cereals and Cereal Snacks.
The investments had a material impact on earnings during
FY 2015, through commissioning impacts on Cereal, Snacks
and other operational outputs. The impact of these is not
expected to be recurring in FY 2016.
A significant part of the capital expenditure was incurred
on the installation of a new state of the art automated
nutritional snacks line, the most advanced capability installed
currently in Australia. The line was installed in record time
with new formats delivered within 2 months of installation
commencement.
Both these investments will significantly increase Freedom
Foods production capability, with no material increase in cash
overheads and a lower cost per case. Expansion of extrusion
capabilities will provide additional internal capacity for Cereal
and Bars, as well as capacity for third party ingredient sales.
Nut Free Snacks
Launch into Mainstream
A key objective for the business from the installation of the
new nutritional snack line was the introduction of a high star
rated nut free nutritional snack bar range into mainstream
supermarkets.
This was achieved, notwithstanding significant pressure on
operational resources of the business, with a successful
launch of 5 new products in Coles and Independents from
January 2015. The range is the only “nut free” snack bar
range on sale in Australia.
The launch delivered a material impact on sales growth in the
second half (+68% volume, +97% gross sales), although
the requirement to bring forward the commissioning timeline
of the new line at Leeton had an impact on manufacturing
recoveries and gross margin during the year. Additional
significant marketing and promotional costs associated with
the launch were incurred and expensed during the second
half of FY 2015.
Since launch, the products have performed well, with certain
SKU’s delivering incremental growth above category average.
Additional SKU’s, increased facings and retail distribution are
expected to be achieved during FY 2016.
freedom foods group limited + annual report 2015 Cereal & Cereal Snacks
PG 19
North America
In North America, our 80% owned subsidiary invested in
building sales and distribution capabilities, increasing sales
and store distribution within the Specialty and Natural Product
Retailer markets. Considerable investment has been made
in developing relationships with retailers including Sprouts,
Whole Foods, Wegmens, Kroger and HEB.
A total of 3,500 distribution points were established as at
30 June 2015. Freedom Foods is now ranked in the Top 10
Cereal brands in Specialty and Natural channels in the USA.
Sales increased from A$696k in FY 2014 to A$1.56 million in
FY 2015, with the net loss increasing from A$684k to A$903k
(including exchange rate impact) as the business continues
to invest to build a sustainable market share within the retail
and wholesale price point parameters available in the North
American market. The North American business contributes
to + 15% of Leeton Cereal production output.
The North America business will continue to build distribution
and consumer awareness within existing and new retail
stores, reflecting our unique proposition in Allergen Free
and Non GMO Cereals and Cereal Snacks.
With current portfolio sales skewed to a small number of
sweeter tasting products, product development efforts have
been focussed on new products that are better aligned to the
North American consumer taste requirement. New product
launches in Cereal are planned for launch in 2016, along
with the introduction of Allergen Free nutritional snack bars
to provide increased sales and distribution growth.
With the North American business having established a
strong consumer profile within the Allergen Free and Non
GMO categories, the business will look to significantly expand
distribution over the medium term through the application of
additional localised sales and marketing resource.
The Company is also actively considering options for
increased scale in the North American market. The business
remains focused on delivering a profitable sales base within
the medium term through sales of branded Cereals and
Cereal snacks that account for a material proportion of
groups cereal and snack production capability.
Darlington Point Mill
The Company has completed in August 2015, the acquisition
of the business and assets of the Darlington Point Mill based
in the Riverina district of New South Wales, approximately
32kms from Freedom Foods allergen free cereal and cereal
snacks facility at Stanbridge near Leeton.
The Mill operates an established grain processing facility for
the supply of milled flours and popping corn. It is a significant
processor of popping corn, with a +40% share in Australia,
while also processing gluten free and non GMO grains.
The business has existing customers in food service and
processing markets in Australia as well as export markets.
Our plans are to expand the milling operations for internal use
and external third party customers to grow sales and access
cost efficiencies. We will also expand into processing of other
key grains. Existing milling operations will be relocated from
our Leeton facility to the Darlington Point Mill, providing for
increased finished goods warehousing capabilities at our
operations at Leeton. The acquisition is well timed to benefit
from the changes to labelling requirements which give more
prominence to Australian grown products.
freedom foods group limited + annual report 2015 PG 20
Managing Director's Review of Operations
The acquisition comprises assets located at the site including
7.5 hectares of land, several modern large and medium sized
grain silos, flour processing plants, other machinery and
equipment and buildings including an export container facility.
We will also acquire raw materials including popping corn
and maize. The acquisition price for the assets (excluding
raw materials) is approximately $5.85 million. The business
will contribute to earnings in FY 2016.
Oats based Cereals
& Snacks Business
Acquisition
The Company has entered into an exclusive term sheet
to acquire a major Australian based manufacturer of Oats
based Cereals and Snacks.
Oats is an expanding consumer preference in
Australia and Asia.
The acquisition will enable Freedom to expand its brand and
category segment offering in oat based products in Australia
and into Asia, and for the first time allow Freedom to access
manufacturing capability in both Allergen free (Leeton)
and nut based capabilities (the new business) on a cost
competitive basis. There will also be integration opportunities
in milling and ingredients supplies into the new business from
our in-house facilities.
The acquisition is expected to be accretive to earnings in
its first full year of operation and is expected to provide
operational efficiencies in the medium term. The acquisition
is subject to confirmatory due diligence and other customary
documentation and closing requirements.
Outlook
The focus for the business into 2016 and beyond is on
increasing sales in Australia through building on its category
leadership in the health channel and further growth in
distribution channels, while establishing key products,
channels and distribution for expansion of product into
export markets in Asia and North America.
The acquisitions of the Darlington Point Mill and the proposed
Oats based business will accelerate the business plan and
provide further value adding scale benefits to the expanding
sales, manufacturing and supply chain footprint of the Cereal
and Snacks business.
The Group’s significant investment in R&D and product
development capabilities will deliver an exciting innovation
pipeline of new products in Cereals, Nutritional Snacks and
new formats for convenience and food services channels.
The significant capital expenditure in Cereals and Snacks
capability is now largely complete. The impact on earnings
in the most recent financial year is now behind the business.
An expanded and more relevant product suite, a lower cost
base and significant capacity, will enable the business to
build sales on a cost effective basis. The opportunity to build
our state of the art facilities into significant value adding
assets through processing high value added niche products
will assist in building a leading Cereals and Snacks business
across all segments of the market.
freedom foods group limited + annual report 2015 PG 21
at freedom foods
honesty is
our promise
and when
we claim
that a
product is
free from
something,
we make
sure it
really is.
freedom foods group limited + annual report 2015 PG 22
Managing Director's Review of Operations
Brunswick
Wild Sardines
are small fish
with huge
nutritional
benefits and
are packed
with flavour.
freedom foods group limited + annual report 2015
Specialty Foods
PG 23
Exchange rate impacts in FY 2016 may be potentially offset
by improved Salmon pricing from a strong 2015 Salmon
catch. The business continued to utilise the procurement
power of Bumble Bee Foods of North America, with Bumble
Bee securing 2015 inventory requirements through priority
access to salmon and sardine catch volumes.
The Company continues to review opportunities for other
food format. Tetra Recart technology has some significant
and compelling consumer and retailer benefits. The
Company is trailing product development formats with
potential customers as part of the feasibility study.
Brunswick Sardines maintained its No 1 brand leadership
position in Australia and New Zealand.
The Paramount Salmon brand performed well during the
period. Commencing Salmon inventory reduced exposure
to AUD/USD exchange rate decline during the year. Tight
management of sales promotions, while leading to lower
gross sales during the year, reduced promotional spend and
improved gross margin. Operating performance improved
reflecting Company’s increased management resourcing
and focus on the business.
The business remains focused on positioning for growth
into FY 2016 through category leadership of the Specialty
Seafood channel, including new product opportunities aligned
to consumer demand for convenience and superior health
benefits. As part of this approach, the business introduced
revitalized packaging and website content for the Brunswick
brand. The Company sees further category and product
expansion opportunities within the Specialty Seafood category
in response to the brand and packaging repositioning.
freedom foods group limited + annual report 2015 PG 24
Managing Director's Review of Operations
The a2 Milk Company
Limited (a2MC), 17.8%
Equity Interest
The Company is the largest single shareholder in The a2 Milk
Company Limited (a2MC). a2MC owns and commercialises
unique and comprehensive intellectual property rights relating
to a2™ brand milk and related dairy products in a range of
international markets including Australia.
a2™ branded milk is the fastest growing milk brand in the
Australian market and the major driver of category growth
nationally, accounting for approximately 9.3% of grocery
channel market share by value.
a2MC also markets a2™ Platinum™ infant formula to consumers
in Australia and China, with infant formula being ranged
nationally in Coles, Woolworths, Independents and Pharmacy.
a2MC entered the North American fresh milk market with a
launch of a2 branded fresh milk to selected retailers from
April 2015.
During the period, the Company was required to reclassify
how it accounts for the investment in a2MC. This resulted
from the resignation of Mr P R Gunner from the a2MC Board
in November 2014 and the determination by the Group that
it no longer was able to clearly demonstrate that it exercised
significant influence over a2MC. Significant influence was
deemed to be lost at the conclusion of the a2MC AGM
and therefore on this date the group has reclassified the
investment to an Available for Sale investment (AFS) under
the requirements of AASB 139 Financial Instruments:
Recognition and Measurement.
At the date of reclassification, a fair value gain of $53.1 million
($51.96 million net of tax) was recorded in the statement
of profit or loss. The investment in a2MC continues to be
recorded at fair value, with any gains and losses arising from
changes in fair value recognised in other comprehensive
income and accumulated in the investments revaluation
reserve. An additional $5.84 million net of tax has been added
to the carrying value of the a2MC investment as at 30 June
2015, reflecting the increase in market price of a2MC shares
in the second half of FY 2015.
The Company did not recognise any equity accounted profit
from a2MC during the period.
a2MC listed on the Australian Stock Exchange in April 2015.
On 21 June 2015, the Company, along with consortium partner
Dean Foods, submitted an Expression of Interest (EOI) to
a2MC which set out a preliminary, indicative non-binding
proposal to explore an acquisition of a2MC. The Company is
disappointed that the Board of a2MC did not engage with the
consortium. The Company has had no communication with
a2MC since then and the Company and Dean Foods have
ceased detailed discussions in relation to a2MC.
As previously advised, the Company continues to review all
its options with regard to its a2MC investment including
evaluating the benefits of maintaining a strategic stake in a2MC.
Capital Management
The Company held cash of $2.3 million at 30 June 2015,
with total borrowings of $52.9 million, comprising term facilities,
equipment finance leases and working capital facilities. Net
debt at 30 June 2015 was $50.6 million. Net debt excludes
financial assets and loans to Associate entities.
At 30 June 2015, the Company had lent $14.3 million ($12.8
million at 30 June 2014) to Pactum Dairy Group to support
further capital investment and working capital requirements.
The loan attracts interest at a rate of 8.0% per annum.
Net cash flow from operations was $8.3 million, an increase
of $1.1 million from FY 2014, reflecting increases in working
capital requirements associated with inventory build for
changing mix of business in beverages and new product
launches.
During the period, the Company invested $49.6 million
in capital expenditure and drew down financing facilities
of $43.1 million. The capital expenditure comprised
commitments to expansion at Freedom’s Leeton facility,
expansion of packaging capabilities at Shepparton,
acquisition of land and payments for building works
at Ingleburn and a deposit paid for land at Shepparton.
Dividends
Consistent with the positive outlook for group performance,
the Company will pay a final fully franked dividend of 1.5
cents per ordinary share in November 2015. The record date
for determining entitlements is 2 November 2015 and the
payment date is 30 November 2015.
The Company’s dividend reinvestment plan (DRP)
remains open.
The Company will pay a fully franked converting preference
share dividend in accordance with the terms of the converting
preference shares. The record date for determining
entitlements is 2 November 2015 and the payment date is
30 November 2015. There are 137,027 converting preference
shares remaining on issue at 30 June 2015. 15,100
converting preference shares were converted to ordinary
shares during FY 2015.
freedom foods group limited + annual report 2015 PG 25
Capital Investment &
Acquisition Programme
The Group is well advanced on a 3 pillar capital investment
and acquisition programme which will transform its
operations over the next 3 years and provide the opportunity
to become a leading Australian based Food Company with a
strong export platform.
The 3 pillars of the programme involve the following:
» Cereal and Snack Production (Allergen Free and oats/nuts).
The Group has installed world class equipment to increase
production capacity significantly for growth in sales and
profitability at our allergen free site at Leeton over the next
3 years. Upgraded Cereals and new Snacks production
lines have been commissioned and are ramping up to full
efficiency. The design of the upgrade provides for modular
expansion at relatively low capital cost thereafter. We are
now looking to finalise the acquisition of an integrated Oats
and nuts production business which will allow Freedom to
operate across the full spectrum cereals and cereal based
snacks. These core businesses will be supported by our
newly acquired Darlington Point milling capabilities.
» Creation of Pactum Dairy Group and the development
of a high speed low cost dairy focussed UHT facility at
Shepparton. Operations commenced in April 2014 and
the business is now moving into profitability on relatively
low volumes compared to the rated capacity. Significant
expansion of throughput has occurred during the year
with the third and fourth lines becoming operational.
» The development of a low cost high speed UHT
processing and distribution facility at Ingleburn for non-
dairy and dairy products with the potential for other food
related products over time.
As in any major expansion or reshaping of a business, not
all matters proceed to plan. Commissioning issues, shutdown
of existing production etc. can occur. This was reflected in our
lower operating profit from our Cereals and Snacks operations
for the year compared to the prior corresponding period. At
the same time, the effort from our business to achieve the
outcomes detailed in this release has been outstanding.
The Company is well placed to capitalise on the capital
investment programme from the efforts of the team to bring
these plans to fruition.
Funding for these major growth programmes will be provided
from existing capital, prudent expansion of debt financing
and the medium term realisation of other assets. Where
equity capital is required, it will be sourced predominantly
through entitlements offers to all shareholders.
Outlook
The Company through its UHT business and Cereals and
Snacks platforms continues to build on its capability and
capacities for growth, investing in our brands, our
manufacturing facilities, R&D and product development as
well as establishing key customer relationships in Asia and
North America.
The expansion of UHT capabilities in Sydney will result in
an increase in sales and profitability, with further growth
opportunities through meeting the increasing demands of
its private label and proprietary customer base, including
under the Company’s key brands “Australia’s Own” and
“Freedom Foods” and leading brands of key customers
in Australia and internationally.
The UHT dairy platform in Pactum Dairy Group provides
a material opportunity to increase exposure to the growing
demand for high quality and safe dairy products from South
East Asia, including China, aligned with our key strategic
customers. With strong sales growth and delivery of
profitability in FY 2016, the Company plans to convert its
PDG convertible note into a 50% shareholding, allowing it
to equity account PDG’s sales and profit result, consistent
with the business’s increasing profitability and returns.
The Cereals and Cereal Snacks business is expected to
deliver improved results from revenue growth through
innovation in new products, expansion of distribution
channels in Australia and international markets, together with
increasing manufacturing efficiencies from volume and cost
efficiencies arising from the capital investment program at
the Leeton facility. This, aligned with investment in building
awareness of the brand across a broader consumer market
open to healthier products, is expected to provide a strong
base for growth into future years.
The acquisitions of the Darlington Point Mill and the proposed
Oats based business will accelerate the business plan and
provide further value adding scale benefits to the expanding
sales, manufacturing and supply chain footprint of the
Cereals and Snacks business.
The strategic investment in a2MC provides the Company
and its shareholders a potentially significant value creation
opportunity. We will continue to review all our options with
regard to the a2MC investment, including evaluating the
benefits of maintaining a strategic stake in a2MC.
Overall the Company anticipates that the benefits of the
multi stage capital investment programme will commence
to increase group profits and returns from FY 2016.
freedom foods group limited + annual report 2015 PG 28
freedom foods group limited + annual report 2015
PG 27
2015 Financial Report
28
Directors’
Report
41
42
43
Corporate Governance
Statement
Lead Auditor’s
Independence Declaration
Statement of Profit
and Loss and Other
Comprehensive Income
44
Statement of
Financial Position
45
Statement of
Cash Flows
46
47
Statement of
Changes in Equity
Notes to the Financial
Statements
81
Directors’
Declaration
82
Independent Auditor's
Report to the Members
of Freedom Foods
Group Limited
84
Shareholder
Information
86
Corporate
Directory
freedom foods group limited + annual report 2015 PG 28
Directors' report
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Freedom Foods Group Limited (referred to hereafter as the 'Company' or 'parent entity') and the
entities it controlled at the end of, or during, the year ended 30 June 2015.
Directors
The following persons were directors of Freedom Foods Group Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Perry R. Gunner - Chairman (Non-Executive)
Rory J.F. Macleod - Managing Director (Executive)
Anthony M. Perich - Director (Non-Executive)
Ronald Perich - Director (Non-Executive)
Melvyn Miles - Director (Non-Executive) (resigned on 14 August 2015)
Trevor J. Allen - Director (Non-Executive)
Michael R. Perich - Alternate Director (Non-Executive)
Company secretaries
Managing Director, Rory J F Macleod held the position of Company Secretary during and at the end of the financial year.
Mrs Sharon Maguire is the Assistant Company Secretary.
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 ingredients;
manufacture and distribution of long life beverages;
distribution and marketing of canned seafood; and
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 profit for the Group after providing for income tax amounted to $56,631,000 (30 June 2014: $12,132,000).
Refer to the commentary in the Managing Directors Review of Operations.
freedom foods group limited + annual report 2015 Directors' report
Dividends
Final fully franked dividend for the year ended 30 June 2014 (2014: 30 June 2013)
of 1.5 cents (2014: 1.0 cents) per ordinary share
Dividends reinvested: fully franked at 30% tax rate
Interim fully franked dividend for the year ended 30 June 2015 (2014: 30 June 2014)
of 1.5 cents (2014: 1.5 cents) per ordinary share
Dividends reinvested: fully franked at 30% tax rate
Final fully franked dividend for the year ended 30 June 2014 (2014: 30 June 2013)
of 1.35 cents (2014: 1.4 cents) per convertible redeemable preference share
Interim fully franked dividend for the year ended 30 June 2015 (2014: 30 June 2014)
of 1.35 cents (2014: 1.35 cents) per convertible redeemable preference share
PG 29
PG 29
consolidated
2015 $'000
2014 $'000
556
1,718
595
1,705
2
2
1,101
49
1,842
413
241
2
4,578
3,648
On 31 August 2015, the directors declared a fully franked final dividend of 1.50 cents per share to the holders of fully paid
ordinary shares in respect of the financial year ending 30 June 2015, which is to be paid to shareholders on 30 November
2015. The record date for determining the entitlements to the final dividend is 2 November 2015. The dividend has not been
included as a liability in these financial statements. The total estimated dividend to be paid is $2,319,000.
On 31 August 2015, the directors declared a fully franked final dividend of 1.35 cents per share to the holders of the
converting redeemable preference shares in respect of the financial year ending 30 June 2015, which is to be paid to
shareholders on 30 November 2015. The record date for determining the entitlements to the final dividend is 2 November
2015. The dividend has not been included as a liability in these financial statements. The total estimated dividend to be
paid is $2,000.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Asset Purchase Agreement Ringwood Mill (to be known as Darlington Point Mill)
The Group entered into an Asset Purchase Agreement with the Ringwood Group of Companies to acquire the business and
assets of the Ringwood Mill (to be known as Darlington Point Mill) based at Darlington Point in the Riverina district of New
South Wales on 13 July 2015 (Acquisition).
Darlington Point Mill operates an established grain processing facility for the supply of milled flours and popping corn. It is
a significant processor of popping corn in Australia and processes gluten free and non GMO grains. Darlington Point Mill
currently supplies customers in food service and processing markets in Australia as well as in export markets.
The Acquisition will enable Freedom Foods to expand its milling operations for internal use and external third party customers
through increased capabilities and capacity, access to cost efficiencies and the ability to consider expansion into processing
of other key grains. Freedom Foods existing milling operations will be relocated to the Darlington Point Mill, providing for
increased finished goods warehousing capabilities at its current operations.
Under the terms of the Acquisition, Freedom Foods will acquire assets located at the site including 7.5 hectares of land,
several modern large and medium sized grain silos, flour processing plants, other machinery and equipment and buildings
including an export container facility. Freedom Foods will also acquire raw materials including popping corn and maize. The
acquisition price for the assets (excluding raw materials) is approximately $5.9 million (exclusive of stamp duty) and working
capital for raw material of popping corn.
Settlement occurred on 31 August 2015.
freedom foods group limited + annual report 2015 PG 30
Directors' report
The Group acquired 10% of the consortium Australian Fresh Milk Holdings Pty Limited
The Group, as part of the consortium Australian Fresh Milk Holdings Pty Limited (AFMH), completed the acquisition of Moxey
Farms on 3 August 2015. Moxey Farms is one of Australia’s largest single-site dairy operations. The consortium comprises
Leppington Pastoral Company Pty Limited (LPC), New Hope Dairy Holdings Co Ltd (New Hope Dairy) and Freedom Foods
Group Limited. The Group acquired 10% of the consortium for $6 million.
Moxey Farms operates a fully integrated dairy farming operation located in the Lachlan Valley, New South Wales, 340 km
west of Sydney. Moxey Farms’ land portfolio covers an area of 2,700 hectares and includes 3,700 milking cows that produce
approximately 50 million litres of milk per year. The Moxey family retained a significant interest in Moxey Farms.
Under the terms of the Acquisition, the Moxey family will continue to operate Moxey Farms in a joint venture with the Perich family
under a Farm Management Agreement with AFMH, ensuring continuity of existing operations for key customers and staff.
The completion of the Acquisition ensures AFMH has in place a scalable operating platform to invest in additional greenfield
dairy sites, enabling the consortium to become a significant player in the Australian dairy industry.
The Group has entered into an exclusive term sheet to acquire a major Australian
based manufacturer of Oat based Cereal and Snacks
Oats is an expanding consumer preference in Australia and Asia.
The acquisition will enable Freedom Foods to expand its brand and category segment offering in oat based products in
Australia and into Asia, and for the first time allow access to manufacturing capability in both Allergen free (Leeton) and nut
based capabilities (the new business) on a cost competitive basis. There will also be integration opportunities in milling and
ingredient supplies into the new business from our in-house facilities.
The acquisition is expected to be accretive to earnings in its first full year of operation and is expected to provide operational
efficiencies in the medium term. The acquisition is subject to confirmatory due diligence and other customary documentation
and closing requirements.
Completion of acquisition of land at Shepparton for Pactum Dairy expansion
The Group has completed the acquisition of land (approximately 77,400 sq. metres) adjacent to the Pactum Dairy site in
Shepparton Victoria on 24 September 2015. The acquisition price was $4 million (exclusive of stamp duty) and was funded
from existing finance facilities. The land will provide capacity and flexibility for longer term warehousing and distribution
requirements for the Pactum Dairy operation. Existing warehousing capability on site and adjacent to the site is insufficient for
long term requirements, including operating a low cost automated logistics function, with facilities for export containerisation.
Additional warehouse capacity will provide space for future expansion of processing and packaging operations at the site
and potential expansion of other dairy processing capabilities in the future.
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2015 that
has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's
state of affairs in future financial years.
Likely developments and expected results of operations
In future years, the consolidated entity expects to further grow through organic sales development leveraging its expanding
capabilities in supply chain and manufacturing, product development, sales, marketing and distribution. Growth beyond
Australia and New Zealand will be targeted through key export markets in Asia (China and South East Asia) and North
America, either through company owned capabilities or through strategic alliances and partnerships.
Environmental regulation
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.
freedom foods group limited + annual report 2015 Directors' report
PG 31
Indemnity and insurance of officers
The group has not, during or since the financial year, in respect of any person who is or has been an officer 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 Group 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 Group. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year
ended 30 June 2015, and the number of meetings attended by each director were:
P.R. Gunner
R.J.F. Macleod (i)
A.M. Perich
R. Perich
M. Miles (ii)
T.J. Allen
M.R. Perich
full board
audit, risk & compliance
remuneration & nomination
attended
held
attended
held
attended
held
11
11
11
11
8
11
10
11
11
11
11
11
11
11
-
2
-
2
2
2
-
-
-
-
2
2
2
-
1
-
-
1
-
1
-
1
-
-
1
-
1
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
(i) R.J.F. Macleod attended the Audit, Risk and Compliance Committee meetings at the invitation of the Audit Committee.
(ii) M. Miles was asked to take a leave of absence from 25 June 2015 until his resignation on 14 August 2015 as a result of his role on
the a2MC board which caused him not to be present for 1 meeting of the full board.
freedom foods group limited + annual report 2015 PG 32
Directors' report
Information on directors
Name:
Title:
Mr Perry R. Gunner
Chairman and Non-Executive Director (Independent)
Qualifications:
B.Ag.Sc
Experience and expertise:
Perry is former Chairman and CEO of Orlando Wyndham Wine Group
and was appointed Chairman in July 2006.
Other current directorships:
Non-Executive Director of Australian Vintage Ltd.
Former directorships (last 3 years):
None
Special responsibilities:
Chairman of the Remuneration and Nomination Committee and member
of the Audit, Risk and Compliance Committee.
Interests in shares:
853,157
Name:
Title:
Qualifications:
Experience and expertise:
Mr Rory J.F. Macleod
Managing Director
B.Econ (Hons)
Mr Macleod has been with the group for the past 12 years and is responsible for
strategic and corporate development and finance and administration. He is a 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.
Other current directorships:
Non-Executive Alternate Director, Company Secretary and Public Officer of
Australian Fresh Milk Holdings Pty Limited and Fresh Dairy One Pty Limited.
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
None
None
1,824,482
Employee Share Options 833,334 @ $0.40 and 133,333 @ $0.60
Mr Anthony M. Perich
Non-Executive Director
Anthony is a Member of the Order of Australia. He 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,
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.
He was appointed a director in July 2006.
Other current directorships:
Austral Malaysian Mining Limited
Former directorships (last 3 years):
None
Special responsibilities:
Deputy Chairman
Interests in shares:
86,938,153
freedom foods group limited + annual report 2015 Directors' report
PG 33
Name:
Title:
Mr Ronald Perich
Non-Executive Director
Other current directorships:
Austral Malaysian Mining Limited
Former directorships (last 3 years):
None
Special responsibilities:
Deputy Chairman
Interests in shares:
86,938,153
Experience and expertise:
Ronald is 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.
He was appointed as a director in April 2005
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Audit, Risk & Compliance Committee and member of the
Remuneration & Nomination Committee
Interests in shares:
86,938,153
Name:
Title:
Mr Melvyn Miles (resigned on 14 August 2015)
Non-Executive Director (Independent)
Qualifications:
B.Sc (Hons), F.I.B.D.
Experience and expertise:
Melyvn has extensive Fast Moving Consumer Goods (FMCG) experience throughout
Australasia, North America and the UK over a period of 26 years. Former Vice
President of Carlton and United Breweries and Foster's Group, former Director
of Carlton & United Breweries & its subsidiaries. Current Director of The a2 Milk
Company and Brewtique Pty Limited and former Chairman of South Pacific
Distilleries, Fiji. He was appointed as a director in November 2006.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Audit, Risk & Compliance Committee
Interests in shares:
335,410
freedom foods group limited + annual report 2015 PG 34
Directors' report
Name:
Title:
Mr Trevor J. Allen
Non-Executive Director (Independent)
Qualifications:
B Comm (Hons), CA, FF, MAICD
Experience and expertise:
Mr Allen has thirty seven years’ experience in the corporate and commercial sectors,
primarily as a Corporate and Financial Adviser to Australian and international public
and privately owned companies. Mr Allen is an independent Non-Executive Director
of Peet Limited, where he chairs its Audit and Risk Management Committee and
is a member of its Remuneration Committee. He is an independent Non-Executive
Director of Eclipx Limited, where he also chairs its audit and risk management
committee and is a member of its remuneration committee, Aon Superannuation Pty
Ltd, the trustee of the Aon Master Trust, where he also chairs the audit committee,
and Yowie Group Limited. Mr Allen is a consultant to PPB Advisory. Mr Allen has
recently stepped down after seven years as Non-Executive Director and honorary
treasurer of the Juvenile Diabetes Research Foundation. He was also a member of
FINSIA’s Corporate Finance Advisory Group Committee for ten years until December
2013. Prior to Mr Allen’s non-executive roles, he had senior executive positions in
the investment banking and corporate advisory sector, including Executive Director
– Corporate Finance at SBC Warburg (now part of UBS) for over 8 years, Director
at Baring Brothers Australia for one year and as a Corporate Finance Partner at
KPMG for nearly 12 years. At the time of his retirement from KPMG in December
2011, he was the lead partner in its National Mergers and Acquisitions group. From
1997 – 2000 he was Director - Business Development for Cellarmaster Wines, having
responsibility for the integration and performance of a number of acquisitions made
outside Australia in that period. He was appointed as a director in July 2013
Other current directorships:
Non-Executive Alternate Director, Company Secretary and Public Officer of
Australian Fresh Milk Holdings Pty Limited and Fresh Dairy One Pty Limited
Former directorships (last 3 years):
Australian Childcare Projects Limited
Special responsibilities:
Chairman of the Audit Risk & Compliance Committee and a member of the
Remuneration Committee
Interests in shares:
61,178
Name:
Title:
Mr Michael R. Perich
Alternate Non-Executive Director
Qualifications:
B AppSci (SysAg)
Experience and expertise:
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 and Dairy NSW, Vice President of Dairy Research Foundation and
Graduate Member of the Australian Institute of Company Directors post nominals.
He was appointed as an alternate director in March 2009.
Other current directorships:
Non-Executive Director of Australian Fresh Milk Holdings Pty Limited
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
None
None
86,938,153
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
freedom foods group limited + annual report 2015 Directors' report
PG 35
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Group performance, shareholder wealth and directors and senior management remuneration
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
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.
Managing 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.
The Managing 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 bonuses although the Company's preference is to link performance and service to a long term
incentive arrangement through the Company's Employee Share Option Plan (ESOP).
The ESOP allows the Company to grant options over shares to all directors (excluding Ron and Anthony Perich) and
permanent full time or part time employees, or their respective nominees, of a company in the Group (Group Companies),
which includes related bodies corporate of the Company and a body corporate in which the Company has voting power
of 20% or more, whom the Board determines to be eligible to participate. The Board believes that Options granted are
appropriate to aligning key executive performance with long term performance and growth of the Company. The options on
issue at 30 June 2015 vest over a period of 3 years and relate to an employee's service period only. 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 the options issued at 30 June 2015
other than continuing employment within the Group.
freedom foods group limited + annual report 2015 PG 36
Directors' report
At the AGM on 30 October 2014, approval was granted for 2,500,000 options under the Employee Share Option Plan to
be issued to Mr Rory J. F Macleod, Managing Director on 1 July 2015. Unlike the options on issue at 30 June 2015, these
options will have a 5 year exercise period and will vest based on the achievement of Group Company EBDITA performance
per the below:
750,000 on achievement of Audited Group EBDITA of A$38 million;
750,000 on achievement of Audited Group EBDITA of A$45 million; and
1,000,000 on achievement of Audited Group EBDITA of A$57 million
Audited Group Earnings before depreciation, interest, tax and amortisation (EBDITA) includes 100% of Equity Associate
Pactum Dairy Group’s EBDITA. Audited Group EBDITA will be adjusted for any material divestment and/or acquisition of a
material asset or business. The exercise price is equal to the volume weighted average price of the Company's shares traded
on the ASX on the trading days in the month of June 2015.
Options are valued using the binomial method.
Non-Executive Directors
The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders
at an Annual or Extraordinary General Meeting. Total fees for all Non-Executive Directors, last voted upon by shareholders
in June 2013, was not to exceed $500,000 in total. Total fees paid to Non-Executive Directors for 2015 was $443,475 (2014:
$344,129). To align director interests with shareholder interests, the Directors are encouraged to hold shares in the Company.
The Chairman receives approximately 1.3 times the base fee of Non-Executive Directors. Non-Executive Directors do not
receive performance related remuneration. Directors' fees cover all main Board activities including Committee Fees. There are
no termination or retirement benefits for Non-Executive Directors.
Service agreements
Neither the Managing Director nor any other Executive has a fixed term contract. 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 occurred. 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 9 months for the Managing Director, 6 months for CEO, Commercial Operations and 12 months for CEO, Freedom Foods
North America. Other notice periods for other executives are between 1 and 2 months.
Group performance, shareholder wealth and directors and senior
management remuneration
The remuneration policy of the Company and Group is at the discretion of the Remuneration and Nomination Committee.
The earnings of the Group for the five years to 30 June 2015 are summarised below:
2015 $'000
2014 $'000
2013 $'000
2012 $'000
2011 $'000
Gross Sales Revenue*
Operating EBITDA**
Operating Net Profit**
Profit after income tax
129,502
122,722
115,514
72,556
57,664
16,420
4,970
56,631
15,289
12,518
12,132
11,600
6,351
13,722
5,447
3,305
3,012
4,041
3,735
4,387
*
Gross Sales Revenues do not include revenues from group associate entity, Pactum Dairy Group Pty Limited (PDG). Gross Sales
Revenues in the table above differs from the reported revenue, as the Gross Sales Revenue above includes intercompany sales
eliminated from the statutory reported Net Sales Revenue figure. This treatment reflects the Group’s arm’s length trading policy
between Group activities.
** Operating EBITDA/Operating Net Profit excludes the non-operating charges and gains with an add back of the non cash employee
share option expense of $360k, elimination of the fair value gain of $53.1 million on reclassification of the a2MC investments and
share of losses of $42k from the associate PDG.
freedom foods group limited + annual report 2015 Directors' report
PG 37
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
EPS (Fully Diluted for CRPS) on Operating Net Profit
2015
2014
2013
2012
2.96
3.00
37.11
35.99
3.14
2.76
2.50
8.65
8.14
8.15
1.65
2.00
14.73
11.96
5.40
0.60
0.50
3.88
3.03
3.32
2011
0.34
0.50
5.67
4.99
2.91
The Remuneration and Nomination Committee considers that the Company's remuneration structure is appropriate to
building shareholder value in the medium term.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of Freedom Foods Group Limited:
P.R. Gunner - Chairman and Non-Executive Director
R.J.F. Macleod - Managing Director
A.M. Perich - Non-Executive Director
R. Perich - Non-Executive Director
M. Miles - Non-Executive Director (resigned on 14 August 2015)
T.J. Allen - Non-Executive Director
Executive Officers
A. Haddad - CEO, Commercial Operations
M. Bracka - CEO, Freedom Foods North America
The benefits of each Director who held office and other key management personnel for the year ended 30 June 2015
are as follows:
short-term benefits
salary $
directors
fees $
post-employment
benefits
superannuation $
long-term
benefits
share-based
payments
long service
leave $
options $
total $
2015
Non-Executive Directors:
P.R. Gunner
A.M. Perich
R. Perich
M. Miles
T.J. Allen
-
-
-
-
-
95,000
85,000
75,000
75,000
75,000
Executive Directors:
R.J.F. Macleod
389,550
Other Key Management
Personnel:
A. Haddad
M. Bracka (1)
331,203
402,261
-
-
-
1,123,014
405,000
9,025
8,075
7,125
7,125
7,125
18,783
18,783
-
76,041
-
-
-
-
-
-
-
-
-
-
-
-
-
-
104,025
93,075
82,125
82,125
82,125
60,443
468,776
43,062
48,856
393,048
451,117
152,361
1,756,416
(1) M. Bracka was resident in North America and his salary in USD was $335,000, the above is the converted AUD amount.
Superannuation Contributions were not due or payable.
freedom foods group limited + annual report 2015 PG 38
Directors' report
short-term benefits
salary $
directors
fees $
post-employment
benefits
superannuation $
long-term
benefits
share-based
payments
long service
leave $
options $
total $
2014
Non-Executive Directors:
P.R. Gunner
A.M. Perich
R. Perich
M. Miles
T.J. Allen (1)
-
-
-
-
-
85,000
65,000
55,000
55,000
55,000
Executive Directors:
R.J.F. Macleod
332,225
Other Key Management
Personnel:
A. Haddad
M. Bracka (2)
312,225
365,506
-
-
-
1,009,956
315,000
7,853
6,012
5,088
5,088
5,088
17,775
17,775
-
64,679
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,853
71,012
60,088
60,088
60,088
106,067
456,067
75,567
85,733
405,567
451,239
267,367
1,657,002
(1) T.J. Allen became a director in July 13.
(2) M. Bracka was resident in North America and his salary in USD was $335,000, the above is the converted AUD amount.
Superannuation Contributions were not due or payable.
No bonus payments are payable to Executive Directors or other Key Management Personnel with respect to the financial year
ended 30 June 2015. The remuneration is fixed in the above tables.
Additional disclosures relating to key management personnel
Key management personnel equity holdings
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the Group, including their personally related parties, is set out below:
balance at the
start of the year
received on
exercise of
options
on market
trades
dividend
reinvestment
plan
balance at the
end of the year
Ordinary shares
P.R. Gunner
R.J.F. Macleod
A.M. Perich*
R. Perich*
M. Miles
T.J. Allen
M. Perich*
M. Bracka
A. Haddad
853,157
-
-
-
853,157
1,426,790
433,333
(36,790)
1,149
1,824,482
86,000,000
86,000,000
331,893
41,178
86,000,000
917,271
538,088
-
-
-
-
-
1,400,000
650,001
262,108,377
2,483,334
26,962
26,962
-
20,000
26,962
(417,700)
(519,000)
(872,604)
911,191
86,938,153
911,191
86,938,153
3,517
-
335,410
61,178
911,191
86,938,153
19,595
1,919,166
910
669,999
2,758,744
266,477,851
*
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 direct interest in the Group.
freedom foods group limited + annual report 2015 Directors' report
PG 39
Employee Share Options in the Group
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
balance at the
start of the year
granted
exercised
expired/
forfeited/lapsed
balance at the
end of the year
Options over ordinary shares
R.J.F. Macleod
M. Bracka
A. Haddad
Options over ordinary shares
R.J.F. Macleod
A. Haddad
1,400,000
1,466,667
1,366,667
4,233,334
-
-
-
-
(433,333)
(1,400,000)
(650,001)
(2,483,334)
-
-
-
-
966,667
66,667
716,666
1,750,000
vested and
exercisable
vested and
unexercisable
balance at the
end of the year
900,000
649,999
1,549,999
-
-
-
900,000
649,999
1,549,999
All share options issued to key management personnel were made in accordance with the provisions of the Employee Share
Option Plan.
No director or senior management personnel of the Group appointed during the year received a payment as part of his or her
consideration for agreeing to hold the position.
Share-based compensation
Employee Share Options
grant date
2 February 2012
30 August 2012
1 July 2013
recipients
R.F.J. Macleod - Issued 2 February 2012
A. Haddad - Issued 2 February 2012
R.F.J. Macleod - Issued 30 August 2012
M. Bracka - Issued 30 August 2012
A. Haddad - Issued 30 August 2012
number of
shares under
option
expiry
date
exercise
price
fair value
per option at
grant date
1,416,667
2 February 2017
1,375,002
30 August 2017
1,525,000
1 July 2018
$0.40
$0.60
$1.65
$0.122
$0.066
$0.181
number during
the year 2015
fair value ($) during
the year 2015
833,334
583,333
133,333
66,667
133,333
101,667
71,167
8,800
4,400
8,800
There are no performance criteria that need to be met in relation to options granted above. The options detailed above vest
over a period of 3 years and relate to an employee's service period only.
freedom foods group limited + annual report 2015 PG 40
Directors' report
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.
At the AGM on 30 October 2014, approval was granted for 2,500,000 options under the Employee Share Option Plan to
be issued to Mr Rory J. F Macleod, Managing Director on 1 July 2015. Unlike the options on issue at 30 June 2015, these
options will have a 5 year exercise period and will vest based on the achievement of Group Company EBDITA performance
per the below:
750,000 on achievement of Audited Group EBDITA of A$38 million;
750,000 on achievement of Audited Group EBDITA of A$45 million; and
1,000,000 on achievement of Audited Group EBDITA of A$57 million
Audited Group Earnings before depreciation, interest, tax and amortisation (EBDITA) includes 100% of Equity Associate
Pactum Dairy Group’s EBDITA. Audited Group EBDITA will be adjusted for any material divestment and/or acquisition of a
material asset or business. The exercise price is equal to the volume weighted average price of the Company's shares traded
on the ASX on the trading days in the month of June 2015.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 32 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 32 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
all non-audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed and approved to ensure that 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.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on
the following page.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
______________________________
______________________________
Perry Gunner
Chairman
30 September 2015
Sydney
Rory J F Macleod
Managing Director
freedom foods group limited + annual report 2015
Corporate Governance Statement
PG 41
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 Third Edition of the Australian Securities
Exchange (ASX) Corporate Governance Council’s Principles and Recommendations (ASX Principles).
For full details refer to the Company’s Corporate Governance statement and its Appendix 4G which are available from
the corporate governance section of the Company’s website at: www.ffgl.com.au together with other governance related
information.
Key developments
Since that start of the 2015 financial year, the following key developments have been undertaken by the Company in relation
to its corporate governance practices.
A board skills matrix was introduced
The Board developed a matrix setting out the relevant skills and experience which the Board currently has and is looking to
achieve in its membership.
The matrix covers the criteria of:
Leadership: Strategy and development; Financial acumen; Governance, risk and compliance; ex-CEO experience;
listed Company board experience
People, behaviours and culture: People Management; Retention and Succession Planning
Customer: Food Quality and Safety
Operations: Workplace Health and Safety
Digital technology and Analytics: Information Technology and System Scalability
Industry specific skills: Agricultural science, including food safety; retailing which also includes sales, branding and
marketing; small medium enterprise (SME) business experience; regional, customer and community focus
The Board believes it currently has an appropriate mix of these skills and experience amongst its membership to enable the
Board to operate effectively. Further details are set out in the Corporate Governance Statement. Biographical details for the
Directors can be found on pages 32 to 34 of the Directors’ report.
The Risk Management Framework was enhanced
The Board engaged a leading firm of chartered accountants, Ernst & Young to assist with the development of a ‘risk-
aware culture’, where identifying, responding to and managing risk underpins day to day decision making, in support of
organisational growth and strategic objectives.
A series of Board and senior management workshops were held with the purpose of:
Identifying the risks/challenges with the potential to impact on achievement of Freedom’s strategic objectives
Identifying those controls currently in place and initiatives currently underway to manage the identified risks/challenges
Identifying and prioritising additional initiatives required to effectively manage the identified risks/challenges.
From this exercise, the Company’s risk management framework is focused on the following aspects as approved by the
Board’s assessment of the risks and opportunities facing the Company in light of its strategic objectives.
People, behaviours and culture: People Management, Retention and Succession Planning
Customer: Food Quality and Safety
Operations: Workplace Health and Safety
Digital technology and Analytics: Information Technology and System Scalability
The Company will continue to refine this framework during FY16 on an ongoing basis and make any changes in focus and
in risk management activity as required. This work will be overseen by the Audit, Risk and Compliance Committee on behalf
of the Board.
freedom foods group limited + annual report 2015 PG 42
Auditor's independence declaration
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
Freedom Foods Group Ltd
80 Box Road
Taren Point
NSW 2229 Australia
30 September 2015
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 2015, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Andrew J Coleman
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
freedom foods group limited + annual report 2015 Statement of profit or loss and other
comprehensive income For the year ended 30 June 2015
PG 43
Revenue
Revenue from sale of goods
Cost of sales
Gross profit
Other income
Gain from reclassification of a2MC investment
Expenses
Marketing expenses
Selling and distribution expenses
Administrative expenses
Depreciation
Net finance (costs)/income
Share of losses of associates accounted for using the equity method
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable
to the owners of Freedom Foods Group Limited
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Gain on the revaluation of land and buildings, net of tax
Items that may be reclassified subsequently to profit or loss
Revaluation of investment in a2MC, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable
to the owners of Freedom Foods Group Limited
Basic earnings per share
Diluted earnings per share
consolidated
note
2015 $'000
2014 $'000
5
26
25
11
17
26
17
6
6
91,460
(58,385)
33,075
896
53,148
(4,264)
(12,221)
(5,040)
(3,354)
(218)
(42)
61,980
(5,349)
56,631
1,026
5,841
(193)
6,674
87,856
(53,960)
33,896
665
-
(3,070)
(12,075)
(4,472)
(2,743)
498
(26)
12,673
(541)
12,132
-
-
4
4
63,305
12,136
cents
37.11
35.99
cents
8.65
8.14
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
freedom foods group limited + annual report 2015 PG 44
Statement of financial position
For the year ended 30 June 2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Prepayments
Total current assets
Non-current assets
Investments accounted for using the equity method
Investment in a2MC
Property, plant and equipment
Intangibles
Deferred tax
Loans due from associated entities
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Income tax
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Payables
Borrowings
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
consolidated
note
2015 $'000
2014 $'000
18
7
8
25
25
26
9
10
12
25
14
20
13
21
12
15
17
2,329
25,303
24,475
1,700
2,094
55,901
4,432
72,618
103,430
21,488
-
13,136
215,104
271,005
18,779
22,025
8,316
1,776
193
4,873
20,655
18,967
689
1,211
46,395
15,061
-
55,077
21,488
385
12,823
104,834
151,229
13,068
3,899
4,155
1,438
287
51,089
22,847
52
30,890
2,785
260
33,987
85,076
53
5,927
-
169
6,149
28,996
185,929
122,233
99,028
3,398
83,503
94,419
(3,636)
31,450
185,929
122,233
The above statement of financial position should be read in conjunction with the accompanying notes
freedom foods group limited + annual report 2015 Statement of cash flows For the year ended 30 June 2015
PG 45
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Other income received
Receipts of government grants
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Purchase of shares in associated entity
Advances to associates
Repayment of loan by associate
Proceeds from disposal of associate shares
Investment in equity interest
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
Dividends paid
Proceeds/(repayments) of borrowings
Payment of related party transactions
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
consolidated
note
2015 $'000
2014 $'000
87,104
(78,797)
8,307
10
(1,691)
-
371
(960)
6,037
(49,625)
(529)
(2,758)
1,200
107
-
(51,605)
1,264
(77)
(1,155)
43,088
(96)
43,024
(2,544)
4,873
2,329
87,783
(80,595)
7,188
-
(1,010)
578
143
-
6,899
(19,937)
(678)
(14,146)
17,500
-
(4,500)
(21,761)
32,198
(1,227)
(3,186)
(12,539)
(9,617)
5,629
(9,233)
14,106
4,873
19
9
25
15
16
18
The above statement of financial position should be read in conjunction with the accompanying notes
freedom foods group limited + annual report 2015
PG 46
Statement of changes in equity
For the year ended 30 June 2015
consolidated
issued capital
$'000
reserves
$'000
retained profits
$'000
total equity
$'000
Balance at 1 July 2013
62,978
(3,549)
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax (note 17)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares under employee
share option plan (note 15)
Issue of ordinary shares from unlisted options
exercised (note 15)
Issue of ordinary shares in accordance with
the dividend replacement plan (note 15)
Issue of ordinary shares from a capital raising
allotment (including an entitlement offer) (note 15)
Share issue costs (note 15)
Related income tax (note 15)
Share-based payments (note 17)
Acquisition of subsidiary under common control (note 17)
Dividends paid (note 16)
Balance at 30 June 2014
consolidated
-
-
-
1,239
992
462
29,998
(1,868)
618
-
-
-
-
4
4
-
-
-
-
-
-
360
(451)
-
94,419
(3,636)
22,966
12,132
-
82,395
12,132
4
12,132
12,136
-
-
-
-
-
-
-
-
(3,648)
31,450
1,239
992
462
29,998
(1,868)
618
360
(451)
(3,648)
122,233
issued capital
$'000
reserves
$'000
retained profits
$'000
total equity
$'000
Balance at 1 July 2014
94,419
(3,636)
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax (note 17)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares under employee
share option plan (note 15)
Issue of ordinary shares in accordance with
the dividend replacement plan (note 15)
Share issue costs (note 15)
Related income tax (note 15)
Share-based payments (note 17)
Dividends paid (note 16)
Balance at 30 June 2015
-
-
-
1,264
3,422
(110)
33
-
-
-
6,674
6,674
-
-
-
-
360
-
99,028
3,398
31,450
56,631
-
56,631
122,233
56,631
6,674
63,305
-
-
-
-
-
1,264
3,422
(110)
33
360
(4,578)
83,503
(4,578)
185,929
The above statement of changes in equity should be read in conjunction with the accompanying notes
freedom foods group limited + annual report 2015 PG 47
Note 1. General information
The financial report of Freedom Foods Group Limited ("Group" or "Company") for the year ended 30 June 2015 was
authorised for issue in accordance with resolution of Directors on 30 September 2015.
Freedom Foods Group Limited is a company incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange (ASX). The company is trading under the symbol 'FNP'.
The nature of the operations and principal activities of the Group are described in note 3.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 September 2015.
The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective
notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New and amended standards adopted by the Group
The Group has adopted all relevant new and amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (“AASB”) which are effective for annual reporting periods beginning on or after 1 July 2014.
None of the new standards or amendments to standards that are mandatory for the first time materially affected any of the
amounts recognised in the current period or any prior period and they are not likely to significantly affect future periods.
During the current year, the Group also elected to early adopt the following standard:
AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101.'
The Group has early adopted AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101’ ahead of the mandatory, effective date of 1 January 2016. AASB 2015-2 amends AASB 101
‘Presentation of Financial Statements’ to provide clarification regarding the disclosure requirements in AASB 101. The Group
has applied these amendments in determining relevant disclosures in the preparation of these financial statements.
Significant accounting policies
The following accounting policies have been adopted in the preparation and presentation of the financial report.
(a) Statement of compliance
These financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The
financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the
consolidated financial statements, the Company is a for-profit entity. Accounting Standards include Australian Accounting
Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the
company and the Group comply with International Financial Reporting Standards (‘IFRS’).
(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 26 June 2014.
The Parent is an entity to which the class order applies.
(c) 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 power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
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.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 48
Note 2. Significant accounting policies (continued)
(c) Basis of consolidation (continued)
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.
The Non-controlling interests in the investment Freedom Foods North America Inc. are entitled to their proportionate share of
that entity's net assets, profits and losses and other comprehensive income during the period. The amounts attributable to
the non-controlling interests are not separately disclosed as this financial report is rounded to the nearest thousand dollars
($'000) under ASIC Class Order 98/0100.
(d) 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.
(e) 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.
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 less impairment. Interest income is recognised by applying the
effective interest rate.
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.
Issued standards and interpretations not early adopted
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality’
Effective date - Annual reporting period beginning on or after 1 July 2015.
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards
2012-2014 Cycle’; AASB 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture’; AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method
in Separate Financial Statements’; AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable
Methods of Depreciation and Amortisation’
Effective date - Annual reporting period beginning on or after 1 January 2016.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 49
AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian Accounting Standards
arising from AASB 15’
Effective date - Annual reporting period beginning on or after 1 January 2017.
The International Accounting Standards Board (IASB) is currently undertaking a consultation process to discuss stakeholder
challenges arising from the implementation of the new revenue standard. In finalising its assessment of the impact of the
new standards, the Group will continue to monitor developments in this area. The Group does not intend to adopt this new
standard or amendments before their mandatory effective dates.
AASB 9 (2014) ‘Financial Instruments’, and the relevant amending standards.
Effective date - Annual reporting period beginning on or after 1 January 2018.
Note 3. Operating segments
The Group is organised into four segments which is the basis on which the Group reports and the principal products and
services of each of these operating segments are as follows:
Freedom Foods -
Cereals and Snacks
Freedom Foods North America -
Cereal and Snacks
Seafood
Pactum Australia -
Beverages
A range of products for consumers requiring a solution to specific dietary or medical
conditions including allergen free (ie gluten free, wheat free, nut free) low sugar or
salt or highly fortified. The product range covers breakfast cereals, snack bars, soy,
almond and rice beverages and other complimentary products. These products are
manufactured and sold in Australia and overseas.
A range of products for consumers requiring a solution to specific dietary or medical
conditions including allergen free (ie gluten free, wheat free, nut free) low sugar or salt
or highly fortified. The product range covers breakfast cereals and other complimentary
products. These products are manufactured in Australia and sold in North America.
A range of canned seafood covering sardines, salmon and specialty seafood. These
products are manufactured overseas and sold in Australia and overseas.
A range of UHT (long life) food and beverage products including liquid stocks, soy,
rice, almond and dairy milk beverages. These products are manufactured and sold in
Australia and overseas.
The 'unallocated group' consists of the Group's other operating segments that are not separately reportable, including the
investment in a2MC and Pactum Dairy Group Pty Limited, as well as various shared service functions.
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 Group in order to allocate resources to
the segments and assess their performance.
Information regarding these segments is presented below.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 50
Note 3. Operating segments (continued)
The following is an analysis of the Group's revenue and results by reportable operating segment for the periods under review:
consolidated 2015
freedom
foods $'000
freedom
foods north
america $'000
seafood
$'000
pactum
$'000
unallocated
$'000
total
$'000
Revenue
Sales to external customers
Intercompany sales elimination
Total sales revenue
Total revenue
EBITDA
Depreciation and amortisation
Shared services
Net finance costs
Gain on a2MC investment
Convertible loan note interest
Other income
Share of equity accounted associates
46,934
1,229
48,163
48,163
3,350
(1,920)
-
-
-
-
-
-
1,560
12,802
30,164
-
91,460
-
1,560
1,560
-
18,436
12,802
48,600
12,802
48,600
(19,665)
(19,665)
(19,665)
-
91,460
91,460
(903)
2,535
10,457
-
15,439
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,316)
-
-
-
-
-
-
(118)
(3,889)
(218)
(3,354)
(3,889)
(218)
53,148
53,148
525
371
(42)
525
371
(42)
Profit/(loss) before income tax expense
1,430
(903)
2,535
9,141
49,777
61,980
Income tax expense
Profit after income tax expense
Assets
Segment assets
Unallocated assets:
Shared services
Investment in associate
Investment in a2MC
Total assets
Total assets includes:
Investment in a2MC
Acquisition of non-current assets
Liabilities
Segment liabilities*
Unallocated liabilities:
Shared services
Total liabilities
(5,349)
56,631
86,622
1,707
19,141
67,272
-
174,742
19,213
4,432
72,618
271,005
-
15,160
-
-
-
-
-
72,618
72,618
29,933
4,530
49,623
24,398
2,491
5,494
38,232
-
70,615
14,461
85,076
*
The segment liabilities include finance leases, debtor finance facilities and multi advance facilities relevant to the
appropriate operating segment.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 51
consolidated 2014
freedom
foods $'000
freedom
foods north
america $'000
seafood
$'000
pactum
$'000
unallocated
$'000
total
$'000
Revenue
Sales to external customers
Intercompany sales elimination
Total sales revenue
Total revenue
EBITDA
Depreciation and amortisation
Shared services
Net finance costs
Share of equity accounted associates
43,415
828
44,243
44,243
7,131
(1,639)
-
-
-
696
13,239
30,506
-
87,856
-
696
696
-
15,932
13,239
46,438
13,239
46,438
(684)
2,431
9,748
-
-
-
-
-
-
-
-
(1,045)
-
-
-
(16,760)
(16,760)
(16,760)
-
(59)
(3,682)
498
(26)
-
87,856
87,856
18,626
(2,743)
(3,682)
498
(26)
Profit/(loss) before income tax expense
5,492
(684)
2,431
8,703
(3,269)
12,673
Income tax expense
Profit after income tax expense
Assets
Segment assets
Unallocated assets:
Shared services
Investment in associate
Investment in a2MC
Total assets
Total assets includes:
(541)
12,132
61,679
1,219
20,184
33,908
19
117,009
19,159
4,474
10,587
151,229
Investments in associates
Acquisition of non-current assets
-
9,135
-
3,394
-
-
-
-
15,061
129
15,061
12,658
Liabilities
Segment liabilities*
Unallocated liabilities:
Shared services
Total liabilities
7,637
1,095
1,956
13,258
7
23,953
5,043
28,996
*
The segment liabilities include finance leases, debtor finance facilities and multi advance facilities relevant to the
appropriate operating segment.
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.
94% of total external sales of the consolidated group (2014: 96%) and 56% of total external sales (2014: 61%) are through
major Australian retailers.
Total (loss) from equity accounted associates for the period totalled $(4,200,000) (2014: $2,600,000). The consolidated
entities share of these (losses) was $(42,000) (2014: $(26,000)).
Information about major customers
Included in revenues arising from external sales of $91.5 million (2014: $87.9 million) (see segment revenue above) are revenues
of approximately $51.5 million (2014: $53.2 million) which arose from sales to the Group’s two largest customers. No other single
customers contributed 10% or more to the Group’s revenue for both 2015 and 2014.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 52
Note 4. Expenses
Profit before income tax includes the following specific expenses:
Research and development costs expensed
Defined contribution superannuation expense
Share-based payments expense
Employee benefits expense excluding superannuation and share-based payment expense
Note 5. Revenue
Revenue
Revenue from sale of goods
Significant accounting policies
consolidated
2015 $'000
2014 $'000
500
1,254
360
6,860
500
974
360
7,226
consolidated
2015 $'000
2014 $'000
91,460
87,856
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for terms, rebates and
other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
the significant risks and rewards of ownership of the goods have been transferred;
the amount of revenue can be measured reliably;
it is probable the revenue will be received; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Note 6. Earnings per share
Profit after income tax attributable to the owners of Freedom Foods Group Limited
Share-based payments expense
Profit after income tax attributable to the owners of Freedom Foods Group
Limited used in calculating diluted earnings per share
consolidated
2015 $'000
2014 $'000
56,631
360
56,991
12,132
360
12,492
number
number
Weighted average number of ordinary shares used in calculating basic earnings per share
152,587,346
140,246,504
Adjustments for calculation of diluted earnings per share:
CRPS
ESOP
141,205
4,720,898
5,637,970
8,554,589
Weighted average number of ordinary shares used in calculating diluted earnings per share
158,366,521
153,521,991
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 Basic earnings per share
Diluted earnings per share
PG 53
cents
37.11
35.99
cents
8.65
8.14
At 30 June 2015 there were 154,624,900 Ordinary shares (2014: 150,645,371) on issue and 137,027 Convertible Redeemable
Preference shares (2014: 152,127).
At 30 June 2015 there were no unlisted ordinary share options (2014: Nil). There were 4,316,669 (2014: 7,075,001) employee
share options were outstanding (1,416,667 (2014: 3,766,667) exercisable at $0.40 per share, 1,375,002 (2014: 1,708,334)
exercisable at $0.60 per share and 1,525,000 (2014: 1,600,000) exercisable at $1.65 per share.
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Freedom Foods Group Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 7. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
consolidated
2015 $'000
2014 $'000
21,935
-
21,935
3,368
25,303
17,497
(59)
17,438
3,217
20,655
The average credit period on sales of goods is 45 days (2014: 36 days). No interest is charged on trade receivables. No
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
$59,000 (2014: increased by $30,000) in the Group. The allowance for doubtful debts/impaired trade receivables as at
30 June 2015 is nil (2014: $59,000). The Group does not hold any collateral over these balances.
Customers with balances past due but without provision for impairment of receivables amount to $2,228,000 as at
30 June 2015 ($892,000 as at 30 June 2014).
The current receivables for the Group have a weighted average of 33 days (2014: 31 days). Management considers that
there are no indications as of the reporting date that the debtors will not meet their payment obligations.
The past due but not impaired receivables for the Group have a weighted average of 33 days (2014: 56 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 56% (2014: 61%) of sales and 68%
(2014: 64%) of year end receivables are concentrated in major supermarkets throughout Australia.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 54
Note 8. Current assets - inventories
Raw materials - at cost
Finished goods - at cost
Less: Provision for impairment
consolidated
2015 $'000
2014 $'000
10,436
14,039
-
24,475
6,095
12,988
(116)
18,967
All inventories of the Group are expected to be recovered within a 12 month period.
The cost of inventories recognised as an expense during the year in respect of continuing operations was $58,384,951
(2014: $53,959,849)
Significant accounting policies
Inventories are measured at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
Raw materials: purchase cost on a first in, first out basis.
Manufactured finished goods: cost of direct materials, direct labour and an appropriate proportion 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.
Note 9. Non-current assets - property, plant and equipment
Freehold Land - at independent valuation
Buildings - at independent valuation
Less: Accumulated depreciation
Plant and Equipment - at cost
Less: Accumulated depreciation
Add: Capital Work in Progress - at cost
Motor Vehicles - under lease
Less: Accumulated depreciation
consolidated
2015 $'000
2014 $'000
254
5,446
-
5,446
64,150
(16,643)
50,154
97,661
109
(40)
69
254
4,850
(748)
4,102
51,492
(13,438)
12,658
50,712
21
(12)
9
103,430
55,077
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 Movements in the carrying amounts of each class of property, plant and equipment between the beginning and the end of the
current financial year:
PG 55
consolidated
freehold land
$'000
buildings
$'000
plant & equipment
$'000
motor vehicles
$'000
Balance at 1 July 2013
Depreciation at 1 July 2013
Additions*
Depreciation expense
Balance at 30 June 2014
Additions*
Revaluation adjustment
Depreciation write back on revaluation
Depreciation expense
Balance at 30 June 2015
254
-
-
-
254
-
-
-
-
254
4,850
(626)
-
(122)
4,102
-
596
869
(121)
5,446
*
Included in additions is $617,192 (2014: $243,884) of capitalised interest
Significant accounting policies
51,492
(10,817)
12,658
(2,621)
50,712
50,154
-
-
(3,205)
97,661
total
$'000
56,617
(11,455)
12,658
(2,743)
55,077
50,242
596
869
21
(12)
-
-
9
88
-
-
(28)
69
(3,354)
103,430
The Leeton site is carried at fair value, as at 30 June 2015, less any subsequent accumulated depreciation. Fair value is
determined on the basis of an independent valuation which is carried out regularly by an external valuation expert, based
on discounted cash flows or capitalisation of net income, as appropriate.
Plant and equipment, motor vehicles and equipment under finance lease are stated at cost less accumulated depreciation
and impairment.
Construction in progress is stated at cost.
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 item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Accounting estimates
The following depreciation rates are used in the calculation of depreciation:
Buildings
Plant and equipment
2-6%
4-20%
Leased plant and equipment 4-20%
Motor vehicles
Leased motor vehichles
15-33%
15-33%
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015
PG 56
Note 10. Non-current assets - intangibles
Goodwill
Brand names
Significant accounting policies
consolidated
2015 $'000
2014 $'000
5,214
16,274
21,488
5,214
16,274
21,488
Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
Seafood
Freedom 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 established major brands purchased as part
of business combinations 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. There was no goodwill associated to the
Group's acquisition of Pactum Australia Pty Limited.
The carrying amount of goodwill has been allocated to the identified cash-generating units as follows:
Seafood
Freedom Foods
Accounting estimates
consolidated
2015 $'000
2014 $'000
1,982
3,232
5,214
1,982
3,232
5,214
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 terminal value, and a
discount rate range between 8.55% and 9.02% pa post tax and between 12.21% and 12.85% pa pre-tax (2014: 9.1% pa post
tax and 13.0% pa pre-tax). 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 used in the value in use calculations for 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 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 no impairment loss charged against 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.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 57
Note 11. Income tax expense
Income tax expense
Current tax
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
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Effect of revenue/expenses that are not deductible in determining taxable profit
Effect of tax concessions (research and development)
Tax impact on investment in a2MC
Prior year loss
Franking deficit tax
Prior year research and development claim
Income tax expense
consolidated
2015 $'000
2014 $'000
4,357
1,066
(74)
5,349
61,980
18,594
209
(50)
3,996
(3,455)
-
541
12,673
3,802
245
(50)
(14,470)
(3,100)
4,283
-
1,255
(189)
5,349
897
(9)
-
(347)
541
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 in other comprehensive income
A deferred tax amount recognised in other comprehensive income of $2,942,903 is attributable to the gain on the revaluation
of the investment in a2MC ($2,503,262) and the gain on the revaluation of land and buildings ($439,641).
Deferred tax balances
Deferred tax assets/(liabilities) comprises temporary differences attributable to:
Impairment of receivables
Plant and equipment
Provisions
Other
Tax losses
Withholding tax paid
Investments
Total deferred tax assets/(liabilities)
consolidated
2015 $'000
2014 $'000
-
(633)
605
(78)
-
38
(2,717)
(2,785)
18
(1,017)
523
(173)
996
38
-
385
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 58
Note 11. Income tax expense (continued)
Significant accounting policies
The Company and its wholly-owned Australian subsidiaries have formed a tax-consolidated group and are therefore taxed
as a single entity. The head entity within the tax consolidated group is Freedom Foods Group Limited. Income tax expense/
benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-
consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using
the 'separate taxpayer within group' approach by reference to the carrying amounts in the separate financial statements of
each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets
arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the
Company (as head entity in the tax-consolidated group).
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with
the head entity. Under the terms of the tax funding arrangement, Freedom Foods Group Limited and each of the entities in
the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax
liability or current tax asset of the entity.
The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an
entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member's liability for tax
payable by the tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.
Current tax
Current tax is calculated as the expected 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.
Deferred tax
Deferred tax is accounted for on the basis of temporary differences between the tax base of an asset or liability and it's
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.
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 in relation to taxable temporary differences arising from the initial recognition of goodwill.
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 it's probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from
deductible 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.
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
Group intends to settle its current tax assets and liabilities on a net basis.
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.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 Note 12. Non-current liabilities - deferred tax
Deferred tax liability
Movements:
Opening balance
Temporary difference - Provisions
Temporary difference - Doubtful debts
Temporary difference - Property, plant & equipment
Temporary difference - Other
Investments
Tax losses
Closing balance
Note 13. Current liabilities - income tax
PG 59
consolidated
2015 $'000
2014 $'000
2,785
(385)
(385)
(82)
18
(384)
(95)
2,717
996
2,785
(1,146)
(80)
(9)
619
231
-
-
(385)
consolidated
2015 $'000
2014 $'000
Income tax payable attributable to: Entities in the tax consolidated group
8,316
4,155
Note 14. Current liabilities - trade and other payables
Trade payables
Other payables and accruals
Refer to note 22 for further information on financial instruments.
Amounts not expected to be settled within the next 12 months
consolidated
2015 $'000
2014 $'000
14,724
4,055
18,779
10,442
2,626
13,068
consolidated
2015 $'000
2014 $'000
Payables to related parties - refer note 25 Related party transactions
193
287
Trade payables are paid on average within 60 days of invoice date. No interest is charged on trade payables.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 60
Note 15. Equity - issued capital
consolidated
2015 shares
2014 shares
2015 $'000
2014 $'000
Ordinary shares - fully paid
154,624,900
150,645,371
98,995
94,378
Convertible redeemable preference shares - fully paid
137,027
152,127
33
41
154,761,927
150,797,498
99,028
94,419
Movements in ordinary share capital
details
Balance
Employee share options exercised
Employee share options exercised
Unlisted options exercised
Convertible redeemable preference shares ('CRPS') conversions
Dividend Replacement Plan ('DRP') shares
Dividend Replacement Plan ('DRP') shares
Buy back of unmarketable parcels
Transaction costs
Balance
Employee share options exercised
Employee share options exercised
Employee share options exercised
Convertible redeemable preference shares ('CRPS') conversions
Dividend Replacement Plan ('DRP') shares
Dividend Replacement Plan ('DRP') shares
Transaction costs
Balance
Movements in convertible redeemable preference shares
details
Balance
Conversion to ordinary shares
Costs incurred and reallocated to fully paid ordinary shares
Balance
Conversion to ordinary shares
Transaction costs
Balance
date
shares
issue price
$'000
1 July 2013
113,754,106
408,332
2,483,333
2,478,533
17,066,888
20,126
149,234
14,284,819
-
30 June 2014
150,645,371
2,350,000
333,332
75,000
15,100
604,193
601,904
-
30 June 2015
154,624,900
$0.60
$0.40
$0.40
$0.30
$2.46
$2.76
$0.95
$0.00
$0.40
$0.60
$1.65
$0.30
$2.85
$2.83
$0.00
58,008
245
994
992
5,120
50
412
29,998
(1,441)
94,378
940
200
124
5
1,717
1,705
(74)
98,995
date
shares
issue price
$'000
1 July 2013
17,219,015
(17,066,888)
30 June 2014
-
152,127
(15,100)
-
30 June 2015
137,027
$0.30
$0.00
$0.30
$0.00
4,970
(5,120)
191
41
(5)
(3)
33
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015
PG 61
Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to dividends. Changes to the then Corporation Law
abolished the authorised capital and par value concept in relation to share capital form 1 July 1988. 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 the time of issue.
Convertible redeemable preference shares (CRPS)
The CRPS are perpetual with no maturity, but redeemable after 3 years at the option of the Company. The CRPS are
transferable and are convertible at the option of the CRPS holder. 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 entitled to the full
ordinary dividend for that period. Dividends on the CRPS will be payable in April and November 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 the 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.
The Company may redeem the CRPS, 3 years from the date of issue of the CRPS, being 16 December 2013, 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.
The Company at this time has no plans to redeem the remaining CRPS still on issue due to the expense of the process
of redemption being significantly more than the current value of the CRPS on issue.
Share options granted under the employee share option plan (ESOP)
For information relating to the Freedom Foods Group Limited ESOP, including details of options issued, exercised and lapsed
during the financial year and the options outstanding at year end, refer to note 31.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 62
Note 16. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final fully franked dividend for the year ended 30 June 2014 (2014: 30 June 2013)
of 1.5 cents (2014: 1.0 cents) per ordinary share
Dividends reinvested: fully franked at 30% tax rate
Interim fully franked dividend for the year ended 30 June 2015 (2014: 30 June 2014)
of 1.5 cents (2014: 1.5 cents) per ordinary share
Dividends reinvested: fully franked at 30% tax rate
Final fully franked dividend for the year ended 30 June 2014 (2014: 30 June 2013)
of 1.35 cents (2014: 1.4 cents) per convertible redeemable preference share
Interim fully franked dividend for the year ended 30 June 2015 (2014: 30 June 2014)
of 1.35 cents (2014: 1.35 cents) per convertible redeemable preference share
consolidated
2015 $'000
2014 $'000
556
1,718
595
1,705
2
2
1,101
49
1,842
413
241
2
4,578
3,648
On 31 August 2015, the directors declared a fully franked final dividend of 1.50 cents per share to the holders of fully paid
ordinary shares in respect of the financial year ending 30 June 2015, which is to be paid to shareholders on 30 November
2015. The record date for determining the entitlements to the final dividend is 2 November 2015. The dividend has not been
included as a liability in these financial statements. The total estimated dividend to be paid is $2,319,000.
On 31 August 2015, the directors declared a fully franked final dividend of 1.35 cents per share to the holders of the converting
redeemable preference shares in respect of the financial year ending 30 June 2015, which is to be paid to shareholders on
30 November 2015. The record date for determining the entitlements to the final dividend is 2 November 2015. The dividend
has not been included as a liability in these financial statements. The total estimated dividend to be paid is $2,000.
Franking credit
Franking credits available for subsequent financial years based on a tax rate of 30%
Franking debits that will arise from the payment of dividends declared subsequent
to the reporting date based on a tax rate of 30%
Net franking credits available based on a tax rate of 30%
Note 17. Equity - reserves
Land and buildings revaluation reserve
Investment revaluation reserve
Foreign currency translation reserve
Equity-settled employee benefits reserve
Common control reserve
consolidated
2015 $'000
2014 $'000
-
(696)
(696)
-
(969)
(969)
consolidated
2015 $'000
2014 $'000
1,499
5,841
(189)
1,711
(5,464)
3,398
473
-
4
1,351
(5,464)
(3,636)
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 63
Land and buildings revaluation reserve
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.
Investment revaluation reserve
The reserve is used to recognise increments and decrements in the fair value of the Group's investments in a2 Milk Company
Limited ('a2MC').
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of
foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments
in foreign operations.
Equity-settled employee benefits reserve
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 31 to the financial statements.
Common control reserve
The acquisition of Pactum by the Group was accounted for as a common control transaction. As a consequence, the
difference between the fair value of the consideration paid and the existing book values of assets & liabilities of Pactum has
been debited to a common control reserve ($5,464,000). Upon disposal of all interests in Pactum by the Group this reserve
would be transferred to retained earnings.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
consolidated
land & buildings
revaluation
reserve
$'000
investment
revaluation
reserve
$'000
foreign
currency
translation
reserve $'000
equity-settled
employee
benefits
reserve $'000
common
control
reserve
$'000
total
$'000
Balance at 1 July 2013
473
Share-based payments
Acquisition of subsidiary
under common control
Foreign exchange translation
Balance at 30 June 2014
Land and building revaluation
Revaluation of a2MC
investment
Foreign currency translation
Share-based payments
-
-
-
473
1,026
-
-
-
-
-
-
-
-
-
5,841
-
-
Balance at 30 June 2015
1,499
5,841
-
-
-
4
4
-
-
(193)
-
(189)
991
360
-
-
(5,013)
(3,549)
-
360
(451)
(451)
-
4
1,351
(5,464)
(3,636)
-
-
-
360
1,711
-
-
-
-
(5,464)
1,026
5,841
(193)
360
3,398
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 64
Note 18. Current assets - cash and cash equivalents
Cash
consolidated
2015 $'000
2014 $'000
2,329
4,873
Note 19. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share based payments
Interest received
Interest on associates loan
Interest capitalised
Share of loss/(profit) of associates
Fair value gain on a2MC
Movement for provision in employee entitlements
Movements in working capital:
Increase in trade and other receivables
Increase in inventories
Decrease in deferred tax assets
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Net cash from operating activities
consolidated
2015 $'000
2014 $'000
56,631
12,132
3,354
360
(10)
(1,086)
(617)
42
(53,148)
(429)
(5,727)
(5,508)
3,170
95
4,749
4,161
6,037
2,743
360
(42)
(1,265)
(244)
26
-
(305)
(2,120)
(4,081)
761
(290)
(556)
(220)
6,899
Details of credit standby arrangements available and unused loan facilities are shown in note 24 to the financial statements.
Non-cash financing and investing activities
In accordance with the Company's Dividend Reinvestment Plan, $3,422,483 was reinvested in the year to 30 June 2015
(2014: $462,154)
Note 20. Current liabilities - borrowings
Loan payable
Finance facility
Bank bill facility
Lease liability
consolidated
2015 $'000
2014 $'000
5,698
12,143
1,650
2,534
22,025
228
670
-
3,001
3,899
Refer to note 21 for further information on assets pledged as security and financing arrangements.
Refer to note 22 for further information on financial instruments.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 Note 21. Non-current liabilities - borrowings
Bank bill facility
Lease liability
Refer to note 22 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Loan payable
Finance facility
Lease liability
Bank bill facility
Assets pledged as security
PG 65
consolidated
2015 $'000
2014 $'000
16,500
14,390
30,890
-
5,927
5,927
consolidated
2015 $'000
2014 $'000
5,698
12,143
16,924
18,150
52,915
228
670
8,928
-
9,826
In accordance with the security arrangements of liabilities, all 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.
Freedom Foods Pty Limited has equipment leases in place 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 $13
million with lease terms of up to 5 years and residuals in the range of 20% to 55%. The facility is secured by the financed
equipment and Freedom Foods obligations under the leases are guaranteed by Freedom Foods Group Limited. In June 2013,
Pactum Australia Pty Limited entered into an equipment lease with National Australia Bank to assist in financing equipment
requirements for its 3rd line at the Taren Point site. The lease term is 5 years with a 35% residual. The facility is secured by the
financed equipment and Pactum Australia's obligations under the lease are guaranteed by Freedom Foods Group Limited.
The Group also holds equipment leases with Westpac relating to its acquisition of Pactum Australia Pty Limited. These
leases have a maximum lease term of 5 years with residual payments of between 20% and 50%. The facility is secured by
the financed equipment at our Taren Point site.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 66
Note 21. Non-current liabilities - borrowings (continued)
Financing arrangements
Total facilities
Loan facilities
Finance facilities
Bank bill facility
Used at the reporting date
Loan facilities
Finance facilities
Bank bill facility
Unused at the reporting date
Loan facilities
Finance facilities
Bank bill facility
Unused financing facilities
consolidated
2015 $'000
2014 $'000
9,700
35,050
18,150
62,900
5,698
29,067
18,150
52,915
4,002
5,983
-
9,985
9,700
33,155
-
42,855
228
9,598
-
9,826
9,472
23,557
-
33,029
The bank facilities are arranged with HSBC Bank Australia Limited with general terms and conditions and debtor finance
facility components are subject to annual review. The bank facilities of the Group are secured by a first equitable mortgage
over the whole of the Group's assets and undertakings (including uncalled capital), (except items specifically discharged
under the Freedom Foods and Pactum Australia equipment finance arrangements), and a first registered mortgage over the
Group's Leeton property.
The equipment finance facilities relate to specific equipment operating at the Freedom Foods Leeton facility and Pactum
Taren Point facility, arranged with National Australia Bank and Westpac. These facilities are 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. The leases are over a period of 3 to 7 years and the final residual on the current leases will be due in 2020.
Interest rates are variable and subject to adjustment.
Note 22. Financial instruments
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 2014. The capital structure of the Group consists of debt, which
includes the borrowings, cash and cash equivalents and equity attributable to equity holders of the parent comprising issued
capital, reserves and retained earnings as disclosed in their respective notes.
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.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 67
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
and export supply. There has been no change to the Group's exposure to market risks or the manner in which it manages and
measures the risk.
Significant accounting polices
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 2 to the financial statements.
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 and equipment from Europe and for sales receipts denominated in United States dollars
from export customers. 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 and Almond paste) with
the purchase consideration being settled in the above currencies and on sales orders from export customers. 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 USD 973,805
(Buy), USD 2,242,620 (Sell), CAD 318,470 (Buy) and EUR 323,181 (Buy) outstanding foreign exchange contracts as at
30 June 2015.
The Group does not adopt hedge accounting.
The following table details the forward foreign currency contracts outstanding as at reporting date in Australian dollars:
Buy US dollars
Maturity:
0 - 3 months
Buy Canadian Dollars
Maturity:
0 - 3 months
Buy Euros
Maturity:
0 - 3 months
Buy Australian dollars
Maturity:
0 - 3 months
3 - 6 months
sell australian dollars
average exchange rates
2015 $'000
2014 $'000
2015
2014
1,252
3,524
0.7777
0.9320
337
617
0.9457
1.0120
520
4,273
0.6212
0.6430
sell US dollars
average exchange rates
2015 $'000
2014 $'000
2015
2014
1,715
906
-
-
0.8640
0.8401
-
-
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 68
Note 22. Financial instruments (continued)
Australian dollars
Buy US dollars - Less than 3 months
Buy CAD dollars - Less than 3 months
Buy Euros - Less than 3 months
Sell US dollars - Less than 3 months
Sell US dollars - 3 to 6 months
Foreign currency risk management
fair value $'000
2015
2014
17
(1)
(49)
(152)
(162)
(24)
5
(261)
-
-
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date
were as follows (in the respective foreign currency):
consolidated
US dollar
Canadian dollar
Euro
New Zealand dollar
Chinese yuan
assets
liabilities
2015 $'000
2014 $'000
2015 $'000
2014 $'000
3,358
450
-
-
122
3,930
1,649
526
-
-
2,498
4,673
3,063
2,540
260
120
10
-
708
105
101
-
3,453
3,454
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.
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 10% (USD), 3% (CAD), 11% (NZD), 5% (EUR) and 6% (CNY) have
been used as these represent management's 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 2015
% change
aud
strengthened
effect on profit
before tax
effect on
equity
% change
aud
weakened
effect on profit
before tax
effect on
equity
US dollar
Canadian dollar
New Zealand dollar
Euro
Chinese yuan
10%
3%
11%
5%
6%
(57)
2
1
5
(1)
(50)
57
(2)
(1)
(5)
1
50
10%
3%
11%
5%
6%
69
(2)
(1)
(5)
2
63
(69)
2
1
5
(2)
(63)
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 69
consolidated 2014
% change
aud
strengthened
effect on profit
before tax
effect on
equity
% change
aud
weakened
effect on profit
before tax
effect on
equity
US dollar
Canadian dollar
New Zealand dollar
Euro
Chinese yuan
10%
5%
7%
6%
4%
87
9
6
29
(18)
113
(87)
(9)
(6)
(29)
18
(113)
10%
(105)
5%
7%
6%
4%
(10)
(7)
(33)
20
(135)
105
10
7
33
(20)
135
This is mainly attributable to the exposure outstanding on foreign currency receivables and payables at year end in the
consolidated entity and the parent.
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:
consolidated
Cash and cash equivalents
Loans due from related parties
Finance leases
Finance facilities
Loan payable
2015
2014
weighted
average
effective
interest rate %
balance
$'000
weighted
average
effective
interest rate %
-%
8.00%
5.76%
4.80%
4.77%
2,329
14,836
(16,924)
(12,143)
(23,848)
(35,750)
-%
8.00%
6.51%
5.30%
5.70%
balance
$'000
4,873
12,823
(8,928)
(670)
(228)
7,870
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 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
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 would be:
a decrease on the consolidated entity's net profit of $116,340 (2014: increase of $29,813)
This is attributable to the consolidated entity's exposure to interest rates on its variable borrowings.
A 150 basis point movement represents management's assessment of the possible change in interest rates.
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 values of transactions concluded are spread amongst approved counterparties.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 70
Note 22. Financial instruments (continued)
Credit risk from balances with banks and financial institutions is managed 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.
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 cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Included in
Note 17 is a listing of additional undrawn facilities that the company and the consolidated entity has at their disposal to further
reduce liquidity risk.
Unused borrowing facilities at the reporting date:
Loan facilities
Finance facilities
consolidated
2015 $'000
2014 $'000
4,002
5,983
9,985
9,472
23,557
33,029
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.
consolidated 2015
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Finance facilities
Loan payable
Interest-bearing - fixed rate
Bank bill loan
Finance lease liabilities
Total non-derivatives
weighted
average
effective
interest rate %
less than
1 year
$'000
between 1
and 5 years
$'000
remaining
contractual
maturities
$'000
-%
-%
4.80%
5.29%
4.61%
5.76%
14,724
4,055
12,143
5,698
1,650
3,557
41,827
-
52
-
-
16,500
15,680
32,232
14,724
4,107
12,143
5,698
18,150
19,237
74,059
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 consolidated 2014
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Finance facilities
Loan payable
Interest-bearing - fixed rate
Finance lease liabilities
Total non-derivatives
PG 71
weighted
average
effective
interest rate %
less than
1 year
$'000
between 1
and 5 years
$'000
remaining
contractual
maturities
$'000
-%
-%
10,442
2,626
5.30%
5.70%
6.51%
670
228
3,445
17,411
-
53
-
-
10,442
2,679
670
228
6,482
6,535
9,927
23,946
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 derivatives 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 applicable yield curve for the duration of the instruments for non-optional
derivatives and option pricing models for optional 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. Derivatives are initially recognised at fair value at the date a derivative contract
is entered 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.
Financial risk management objectives
The Group's financial management team provides services to 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 analyse exposures by degree and 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.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 72
Note 22. Financial instruments (continued)
Gearing ratio
consolidated 2015
Debt (i)
Cash and cash equivalents
Net debt
Equity (ii)
Net debt to equity ratio
2015 $'000
2014 $'000
52,915
(2,329)
50,586
9,826
(4,873)
4,953
185,929
122,233
27%
4%
(i) Debt is defined as long and short-term borrowings, as detailed in the notes to the financial statements.
(ii) Equity includes all capital and reserves.
Note 23. Capital and leasing commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Lease commitments - finance
Minimum future lease payments:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Representing:
Lease liability - current (note 20)
Lease liability - non-current (note 21)
consolidated
2015 $'000
2014 $'000
746
1,841
834
3,421
3,557
15,680
19,237
(2,313)
16,924
2,534
14,390
16,924
511
1,872
1,286
3,669
3,445
6,482
9,927
(999)
8,928
3,001
5,927
8,928
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 73
Note 24. Interests in subsidiaries
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
2015 financial report.
name
principal place of business/
country of incorporation
Paramount Seafoods Pty Limited*
Nutrition Ventures Pty Limited*
Nutrition Ventures Financing Pty Limited*
Freedom Foods Pty Limited*
Pactum Australia Pty Limited*
Pactum Dairy Group Pty Limited**
Australian Natural Foods Holdings Pty Limited*
Thorpedo Foods Group Pty Limited
Thorpedo Foods Pty Limited
Thorpedo Seafoods Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Freedom Foods North America Inc***
North America
ownership interest
2015 %
2014 %
100.00%
100.00%
100.00%
100.00%
100.00%
1.00%
100.00%
100.00%
75.00%
75.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
1.00%
100.00%
100.00%
75.00%
75.00%
80.00%
* These companies are members of the tax consolidated group.
** Pactum Dairy Group Pty Limited was registered on 4 May 2012 as a 100% subsidiary of Pactum Australia Pty Limited.
In October 2013 the share structure changed to 1% equity interest. Refer to shares in associates.
*** Freedom Foods North America Inc was incorporated on 17 July 2013.
Note 25. Interests in associates
Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are
material to the Group are set out below:
name
principal place of business/
country of incorporation
The a2 Milk Company Limited (a2MC)*
Pactum Dairy Group Pty Limited (PDG)
New Zealand
Australia
ownership interest
2015 %
2014 %
-%
1.00%
17.70%
1.00%
*
From 19 November 2014 The a2 Milk Company Limited was reclassified as an available for sale financial asset.
Refer to the details below.
The a2 Milk Company Limited (a2MC) The group holds 117,699,229 (17.8%) of the ordinary shares of a2MC, a company
listed on the main board of the New Zealand Exchange (NZX:ATM).
Mr P R Gunner resigned from the board of a2MC at the conclusion of the a2MC Annual General Meeting on 18 November 2014,
leaving Mr M Miles as the only common director on the a2MC board, until his resignation from the Board of Freedom Foods
Group Limited on 14 August 2015.
As a result of the resignation of Mr P R Gunner, the directors of the Group re-assessed whether the group continues to
exercise significant influence over this investment as contemplated in AASB 128 Investments in Associates and Joint Ventures
(AASB 128). The directors considered the following factors in assessing their significant influence; the total number of
directors on a2MC, the Group’s intent and ability to appoint directors to a2MC, the Group’s extent of ownership relative to
other a2MC shareholders, the lack of any material transactions with a2MC and the ability of the Group to participate in the
policy-making processes, including participation in decisions about dividends or other distributions of a2MC. In the directors’
judgment, these considerations in conjunction with the view that the directors retain the option to realise capital from the
investment to support further growth opportunities, result in the Group no longer being able to clearly demonstrate that they
exercise significant influence over a2MC.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 74
Note 25. Interests in associates (continued)
Significant influence was deemed to be lost at the conclusion of the a2MC AGM and therefore on this date the group has
reclassified the investment to an available for sales financial asset ('AFS') under the requirements of AASB 139 Financial
Instruments: Recognition and Measurement on this date.
Pactum Group Pty Limited (PDG)
PDG was established in 2013 for the purpose of supplying high speed low cost liquid products to the Domestic and
International market. PDG is a joint venture between Pactum Australia Pty Limited, a wholly owned subsidiary of the Group
and Australian Consolidated Milk Pty Limited ('ACM'), a major Australian dairy milk supply group. The facility was established
in the northern Victorian city of Shepparton, for a total investment of approximately $45 million, with initial capacity for 100
million litres of dairy milk production, with capability to be increased up to 300 million litres in the longer term. The facility was
completed over a construction period of approximately 9 months, with the project largely on budget. With the commencement
of operations and significant resourcing to meet the expected ramp up in volumes, the business recorded a loss in FY 2015.
FNP equity accounted 1% of the loss in line with the current ownership structure. The Group has the capacity to obtain a 50%
interest in PDG by converting convertible notes issued to it as part of its original investment.
Summarised financial information
a2MC 2015
$'000
a2MC 2014
$'000
PDG 2015
$'000
PDG 2014
$'000
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets/(liabilities)
Summarised statement of profit or loss
and other comprehensive income
Revenue
Expenses
Profit/(loss) before income tax
Other comprehensive income
Total comprehensive income
Reconciliation of the Group's carrying amount
Opening carrying amount
Share of loss after income tax
Equity investment
Transfer to available-for-sale financial asset
-
-
-
-
-
-
-
-
-
-
-
-
8,504
4,321
12,825
2,973
100
3,073
9,752
4,184
34,373
38,557
4,742
41,045
45,787
(7,230)
18,396
48,779
(18,394)
2
-
2
(52,983)
(4,204)
-
5,933
35,261
41,194
4,482
39,283
43,765
(2,571)
4,073
(6,654)
(2,581)
-
(4,204)
(2,581)
10,587
9,909
-
538
(11,125)
-
678
-
4,474
(42)
-
-
-
(26)
4,500
-
Closing carrying amount
-
10,587
4,432
4,474
The investment of $4,500,000 in PDG includes 100 Ordinary Shares at $1; 999,900 Convertible Notes at $1; and 3,500,000
Loan Notes at $1. Equity accounted loss for the year to 30 June 2015 was $42,000 (2014: $(26,000)).
Related party transactions
Current receivables and loans due from associates - refer to note 29 to the financial statements
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PDG receivable
a2MC receivable
PDG loan
PG 75
consolidated
2015 $'000
2014 $'000
1,700
-
13,136
14,836
660
29
12,823
13,512
The loan to PDG attracts interest at 8%.
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.
Note 26. Non-current assets - investment in a2MC
Investment in The a2 Milk Company Limited
Reconciliation
Reconciliation of the fair values at the beginning and end of the current
and previous financial year are set out below:
Opening fair value
Reclassification of investment
Gain on reclassification
Revaluation increments
Closing fair value
consolidated
2015 $'000
2014 $'000
72,618
-
11,125
53,148
8,345
72,618
-
-
-
-
-
-
The Group holds 117,699,229 (17.8%) of the ordinary shares of The a2 Milk Company (a2MC), a company listed on the main
board of the New Zealand Stock Exchange (NZX:ATM).
Mr P R Gunner resigned from the board of a2MC at the conclusion of the a2MC Annual General Meeting on 18 November
2014, leaving Mr M Miles as the only common director on the a2MC board, until his resignation from the Board of Freedom
Foods Group Limited on 14 August 2015.
As a result of the resignation of Mr P R Gunner, the directors of the Group have re-assessed whether the group continues to
exercise significant influence over this investment as contemplated in AASB 128 Investments in Associates and Joint Ventures
(AASB 128). The directors have considered the following factors in assessing their significant influence; the total number of
directors on a2MC, the group’s intent and ability to appoint directors to a2MC, the Group’s extent of ownership relative to
other a2MC shareholders, the lack of any material transactions with a2MC and the ability of the Group to participate in the
policy-making processes, including participation in decisions about dividends or other distributions of a2MC. In the directors’
judgment, these considerations in conjunction with the view that the directors retain the option to realise capital from the
investment to support further growth opportunities, result in the Group no longer being able to clearly demonstrate that they
exercise significant influence over a2MC.
Significant influence was deemed to be lost at the conclusion of the a2MC AGM and therefore on this date the Group
has reclassified the investment to an Available for Sale investment (AFS) under the requirements of AASB 139 Financial
Instruments: Recognition and Measurement on this date.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 76
Note 27. 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.
Freedom Foods Group Limited
Freedom Foods Pty Limited
Paramount Seafoods Pty Limited
Nutrition Ventures Pty Limited
Nutrition Ventures Financing Pty Limited
Australian Natural Foods Holdings Pty Limited
Thorpedo Foods Group Pty Limited
Pactum Australia 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. The main difference is the Freedom Foods North America result
which is disclosed in Note 3 above.
Note 28. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Other comprehensive income for the year, net of tax
Total comprehensive income
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
parent
2015 $'000
2014 $'000
48,406
-
48,406
(992)
-
(992)
parent
2015 $'000
2014 $'000
626
174,310
174,936
6,900
3,240
10,140
164,796
98,855
8,578
57,363
239
113,204
113,443
4,003
635
4,638
108,805
94,419
1,325
13,061
164,796
108,805
parent
2015 $'000
2014 $'000
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
-
3
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015
PG 77
Note 29. Related party transactions
Subsidiaries
Interests in subsidiaries are set out in note 24.
Associates
Interests in associates are set out in note 25.
Key management personnel
Disclosures relating to key management personnel are set out in note 30 and the remuneration report in the directors' report.
Transactions with related parties
Other related parties include:
entities with joint control or significant influence over the Group
joint ventures in which the entity was a venturer
subsidiaries
other related parties
The following transactions occurred with related parties:
Sale of goods and services:
Sale of goods to The a2 Milk Company (Australia) Limited
Sale of goods to subsidiaries
Sale of services to Pactum Dairy Group Pty Limited
Payment for goods and services:
Purchase of goods from Australian Consolidated Milk Pty Limited
Purchase of goods and services from Leppington Pastoral Company
Payment for services from The a2 Milk Company (Australia) Pty Limited
Payment for other expenses:
Payment for rent and outgoings under a lease commitment with
Perich Property Holdings
These services are provided under normal terms and conditions.
Note 30. Key management personnel disclosures
Compensation
consolidated
2015 $'000
2014 $'000
-
1,423,000
19,665,000
16,760,000
500,000
660,000
2,045,000
2,102,000
410,000
3,448,000
-
19,000
1,011,000
2,463,000
The aggregate compensation made to directors and other members of key management personnel of the Group
is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
consolidated
2015 $'000
2014 $'000
1,528,014
1,324,956
76,041
152,361
64,679
267,367
1,756,416
1,657,002
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 78
Note 31. Share-based payments
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 below expire within five years of their issue, or one year after the resignation of the senior employee,
whichever is the earlier. In relation to options issued during the financial year ended 30 June 2014, the options vest in three
equal tranches over a period of 3 years.
The following reconciles the outstanding share options granted under the employee share option plan at the beginning and
end of the financial year:
2015
grant date
expiry date
exercise
price
01/02/2012
01/02/2017
30/08/2012
30/08/2017
01/07/2013
01/07/2018
$0.40
$0.60
$1.65
balance at
the start of
the year
3,766,667
1,708,334
1,600,000
7,075,001
granted
exercised
expired/
forfeited/
lapsed
balance at
the end of
the year
-
-
-
-
(2,350,000)
(333,332)
(75,000)
(2,758,332)
-
-
-
-
1,416,667
1,375,002
1,525,000
4,316,669
Weighted average exercise price
$0.73
$0.00
$0.46
$0.00
$0.91
2015
grant date
expiry date
exercise
price
01/02/2012
01/02/2017
30/08/2012
30/08/2017
01/07/2013
01/07/2018
$0.40
$0.60
$1.65
balance at
the start of
the year
6,250,000
2,200,000
granted
exercised
expired/
forfeited/
lapsed
balance at
the end of
the year
-
-
(2,483,333)
-
3,766,667
(408,332)
(83,334)
1,708,334
-
1,600,000
-
-
1,600,000
8,450,000
1,600,000
(2,891,665)
(83,334)
7,075,001
Weighted average exercise price
$0.45
$1.65
$0.43
$0.60
$0.73
Set out below are the options exercisable at the end of the financial year:
grant date
expiry date
01/02/2012
01/02/2017
30/08/2012
30/08/2017
01/07/2013
01/07/2018
2015
number
2014
number
1,416,667
1,683,334
641,669
458,333
241,667
-
2,516,669
1,925,001
The weighted average exercise price during the financial year was $0.46 (2014: $0.43).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.3 years
(2014: 3.2 years).
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 79
Expected volatility is based on historical share price volatility over the past two years. It is expected that options will be
exercised only in the event of the market price exceeding the exercise price.
grant date
expiry date
share price
at grant date
exercise
price
expected
volatility
dividend
yield
risk-free
interest rate
fair value
at grant date
02/02/2012
02/02/2017
30/08/2012
30/08/2017
01/07/2013
01/07/2018
$0.46
$0.65
$1.80
$0.40
$0.60
$1.65
20.00%
5.00%
5.00%
2.50%
2.50%
2.50%
5.00%
5.00%
5.00%
$0.122
$0.066
$0.181
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.
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.
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.
Note 32. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu,
the auditor of the Company:
Audit services - Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services - Deloitte Touche Tohmatsu
Tax compliance services
Research and development advice and preparation of the return
Assurance services
consolidated
2015 $'000
2014 $'000
260,000
246,500
63,579
44,009
24,790
132,378
392,378
165,500
60,000
-
225,500
472,000
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 PG 80
Note 33. Events after the reporting period
Asset Purchase Agreement Ringwood Mill (to be known as Darlington Point Mill) The Group entered into an Asset Purchase
Agreement with the Ringwood Group of Companies to acquire the business and assets of the Ringwood Mill (to be known as
Darlington Point Mill) based at Darlington Point in the Riverina district of New South Wales on 13 July 2015 (Acquisition).
Darlington Point Mill operates an established grain processing facility for the supply of milled flours and popping corn. It is
a significant processor of popping corn in Australia and processes gluten free and non GMO grains. Darlington Point Mill
currently supplies customers in food service and processing markets in Australia as well as in export markets.
The Acquisition will enable Freedom Foods to expand its milling operations for internal use and external third party customers
through increased capabilities and capacity, access to cost efficiencies and the ability to consider expansion into processing
of other key grains. Freedom Foods existing milling operations will be relocated to the Darlington Point Mill, providing for
increased finished goods warehousing capabilities at its current operations.
Under the terms of the Acquisition, Freedom Foods will acquire assets located at the site including 7.5 hectares of land,
several modern large and medium sized grain silos, flour processing plants, other machinery and equipment and buildings
including an export container facility. Freedom Foods will also acquire raw materials including popping corn and maize. The
acquisition price for the assets (excluding raw materials) is approximately $5.9 million (exclusive of stamp duty) and working
capital for raw material of popping corn.
Settlement occurred on 31 August 2015.
The Group acquired 10% of the consortium Australian Fresh Milk Holdings Pty Limited
The Group, as part of the consortium Australian Fresh Milk Holdings Pty Limited (AFMH), completed the acquisition of Moxey
Farms on 3 August 2015. Moxey Farms is one of Australia’s largest single-site dairy operations. The consortium comprises
Leppington Pastoral Company Pty Limited (LPC), New Hope Dairy Holdings Co Ltd (New Hope Dairy) and Freedom Foods
Group Limited. The Group acquired 10% of the consortium for $6 million.
Moxey Farms operates a fully integrated dairy farming operation located in the Lachlan Valley, New South Wales, 340 km
west of Sydney. Moxey Farms’ land portfolio covers an area of 2,700 hectares and includes 3,700 milking cows that produce
approximately 50 million litres of milk per year. The Moxey family retained a significant interest in Moxey Farms.
Under the terms of the Acquisition, the Moxey family will continue to operate Moxey Farms in a joint venture with the Perich family
under a Farm Management Agreement with AFMH, ensuring continuity of existing operations for key customers and staff.
The completion of the Acquisition ensures AFMH has in place a scalable operating platform to invest in additional greenfield
dairy sites, enabling the consortium to become a significant player in the Australian dairy industry.
The Group has entered into an exclusive term sheet to acquire a major Australian based
manufacturer of Oat based Cereals and Snacks
Oats is an expanding consumer preference in Australia and Asia.
The acquisition will enable Freedom Foods to expand its brand and category segment offering in oat based products in
Australia and into Asia, and for the first time allow access to manufacturing capability in both Allergen free (Leeton) and nut
based capabilities (the new business) on a cost competitive basis. There will also be integration opportunities in milling and
ingredient supplies into the new business from our in-house facilities.
The acquisition is expected to be accretive to earnings in its first full year of operation and is expected to provide operational
efficiencies in the medium term. The acquisition is subject to confirmatory due diligence and other customary documentation
and closing requirements.
Completion of acquisition of land at Shepparton for Pactum Dairy expansion
The Group has completed the acquisition of land (approximately 77,400 sq. metres) adjacent to the Pactum Dairy site in
Shepparton Victoria on 24 September 2015. The acquisition price was $4 million (exclusive of stamp duty) and was funded
from existing finance facilities. The land will provide capacity and flexibility for longer term warehousing and distribution
requirements for the Pactum Dairy operation. Existing warehousing capability on site and adjacent to the site is insufficient for
long term requirements, including operating a low cost automated logistics function, with facilities for export containerisation.
Additional warehouse capacity will provide space for future expansion of processing and packaging operations at the site
and potential expansion of other dairy processing capabilities in the future.
Apart from the dividend declared as disclosed in note 16, no other matter or circumstance has arisen since 30 June 2015 that
has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's
state of affairs in future financial years.
Notes to the financial statementsFor the year ended 30 June 2015freedom foods group limited + annual report 2015 Directors' declaration
30 June 2015
PG 81
In the directors' opinion:
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2015
and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 27 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
______________________________
______________________________
Perry Gunner
Chairman
30 September 2015
Sydney
Rory J F Macleod
Managing Director
freedom foods group limited + annual report 2015 PG 82
Independent auditor's report to the members of
Freedom Foods Group Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Freedom Foods Group Limited
Report on the Financial Report
We have audited the accompanying financial report of Freedom Foods Group Limited (the
“Company”), which comprises the consolidated statement of financial position as at 30 June 2015, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of cash flows and the consolidated statement of changes in equity for the financial 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
43 to 81.
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 gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In the basis of preparation, 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 company’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 company’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
freedom foods group limited + annual report 2015 Independent auditor's report to the members of
Freedom Foods Group Limited
PG 83
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 2015
and of its performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in the basis of preparation.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 35 to 40 of the Directors’ report for the
financial year ended 30 June 2015. The directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Freedom Foods Group Limited for the financial year ended
30 June 2015, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Andrew J Coleman
Partner
Chartered Accountants
Sydney, 30 September 2015
freedom foods group limited + annual report 2015 PG 84
Shareholder information
The shareholder information set out below was applicable as at 31 August 2015.
Distribution of ordinary shareholders
number of holders of
ordinary shares
number of holders
of options over
ordinary shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
20 largest shareholders as at 31 August 2015
Stock exchanges that have granted quotation to the securities of the Parent quoted in Australia:
All Member Exchanges.
Ordinary shareholders
683
836
240
252
45
2,056
103
-
-
-
-
-
-
-
1. Arrovest Pty Limited
2. RBC Investor Services Australia Nominees Pty Limited
3. Citicorp Nominees Pty Limited
4. National Nominees Pty Limited
5. HSBC Custody Nominees (Australia) Limited
6. J P Morgan Nominees Australia Limited
7. UBS Wealth Management Australia Nominees Pty Limited
8. Mirrabooka Investments Limited
9. Mr Michael Andris Bracka
10. HSBC Custody Nominees (Australia) Limited
11. Australian Foundation Investment Company Limited
12. CS Fourth Nominees Pty Limited
13. Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
14. BNP Paribas Noms Pty Limited
15. Citicorp Nominees Pty Limited
16. Goldacre Investments Pty Limited
17. AMBK Trust Pty Limited
18. East Coast Rural Holdings Pty Limited
19. Mr Melvyn Miles & Mrs Joanna Miles
20. Mr Lawrence Lip & Mrs Sabina Lip
number
held
% of total ordinary
shares issued
86,938,153
18,896,544
7,934,224
4,588,034
4,124,049
3,235,487
2,586,803
1,828,906
1,687,766
1,025,149
989,281
869,716
853,157
679,607
564,887
502,220
416,667
363,815
335,410
333,695
56.23
12.22
5.13
2.97
2.67
2.09
1.67
1.18
1.09
0.66
0.64
0.56
0.55
0.44
0.37
0.32
0.27
0.24
0.22
0.22
138,753,570
89.74
freedom foods group limited + annual report 2015
Shareholder information
PG 85
CRPS shareholders
1. Mr Mathew John
2. R & M Gugliotta Pty Limited
3. Lewis Little River Pty Limited
4. Mr Hugh Middendorp & Mr Peter Charles
5. Alan Ong Enterprises Pty Limited
6. Est John William Hartigan & Mrs Enid May Hartigan
7. Mr Craig Sargent
8. GWG Investments Pty Limited
9. Lokit Investments Pty Limited
10. Mr Robert William Russell
11. Mr Robert David Napier Nicholls
12. Palatine Holdings Pty Limited
13. Mr Gerald Millman
14. Mr Tjeerd Veenstra & Mrs Susan Lesley Veenstra
15. Mr Brendan Andrew Hislop
16. Mrs Michelle Louise Farrell
17. Mr Andrew Jonathon Achilles
18. Mr Stuart William McDonald
19. Mr Neville Thiele
20. Mrs Dianne Joan Thiele
Distribution of CRPS shareholders
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
number
held
34,720
30,000
23,438
16,664
8,000
5,000
3,394
3,125
2,214
1,924
1,736
1,697
1,000
963
680
640
500
497
273
219
% of total
CRPS issued
25.34
21.89
17.10
12.16
5.84
3.65
2.48
2.28
1.62
1.40
1.27
1.24
0.73
0.70
0.50
0.47
0.36
0.36
0.20
0.16
136,684
99.75
number of holders
of CRPS shares
11
7
1
4
23
Substantial shareholders
The number of shares held by substantial shareholders as listed in the Parent's register as at 31 August 2015 are:
Arrovest Pty Limited
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
ordinary shares
number
held
% of total
shares issued
86,938,153
18,896,544
7,934,224
56.23
12.22
5.13
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).
freedom foods group limited + annual report 2015 PG 86
Corporate directory
Directors
Perry R. Gunner
Rory J.F. Macleod
Anthony M. Perich
Ronald Perich
Trevor J. Allen
Melvyn Miles (Resigned 14th August 2015)
Alternate Director
Michael R. Perich
Company secretaries
Rory J.F. Macleod
Assistant Company Secretary Sharon Maguire
Notice of annual general meeting
The details of the annual general meeting
of Freedom Foods Group Limited are:
29 October 2015 at 12:00 pm
DLA Piper Australia
Level 22, 1 Martin Place
Sydney NSW 2000
Registered office
80 Box Road
Taren Point NSW 2229
Tel: (02) 9526 2555
Fax: (02) 9525 5406
Principal place of business
80 Box Road
Taren Point
NSW 2229
Tel: +61 2 9526 2555
Fax: +61 2 9525 5406
Share register
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Tel: +61 2 8280 7111
Fax: +61 2 9287 0303
Auditor
Deloitte Touche Tohmatsu
Grosvenor Place, 225 George Street
Sydney NSW 2000
Tel: +61 2 9237 1171 Fax: +61 2 9237 1400
ABN
41 002 814 235
Solicitors
DLA Piper
Level 22, 1 Martin Place
Sydney NSW 2000
Tel: +61 2 9286 8000
Fax: +61 2 9286 8007
Gilbert + Tobin
2 Park Street
Sydney NSW 2000
Tel: +61 2 9263 4000
Fax: +61 2 9263 4111
Addisons
Level 12, 60 Carrington Street
Sydney NSW 2000
Tel: +61 2 8915 1000
Fax: +61 2 8916 2000
Bankers
HSBC Australia Limited
Level 32, 580 George Street
Sydney NSW 2000
Tel: +61 1300 308 188 (toll free)
Fax: +61 2 9255 2647
National Australia Bank Limited
Level 3, 255 George Street
Sydney NSW 2000
Tel: +61 2 9237 1171
Fax: +61 2 9237 1400
Stock exchange listing
Freedom Foods Group Limited shares are listed on
the Australian Securities Exchange (ASX code: FNP)
Website
www.ffgl.com.au
Insurance Brokers
GSA Insurance Brokers Pty Ltd
‘The Old Presbytery’ 137 Harrington St
Sydney NSW 2000
Tel: +61 2 8274 8100 Fax: + 61 2 9252 5882
Management
Rory J. F. Macleod - Managing Director
Amine Haddad - CEO Commercial Operations
Michael Bracka - CEO Freedom Foods North America
Noel Ayre - GM Commercial Pactum Dairy Group
Tim Moses - GM Group Operations
Abdul Badreddine - GM Group Quality
Luke Collis - GM Group Commercial Finance
freedom foods group limited + annual report 2015 PG 87
ANNUAL REPORT 2015
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