Freedom Foods Group Limited
Financial report
30 June 2021
Freedom Foods Group Limited
Australian Business Number (ABN) 41 002 814 235
Annual Financial Report - 30 June 2021
Freedom Foods Group Limited
Directors' report
30 June 2021
Directors Report ............................................................................................................................................................................. 3
Auditor’s Independence Declaration ........................................................................................................................................... 43
Consolidated statement of profit or loss and other comprehensive income .............................................................................. 44
Consolidated statement of financial position .............................................................................................................................. 46
Consolidated statement of cash flows ......................................................................................................................................... 47
Consolidated statement of changes in equity .............................................................................................................................. 48
Nates to the consolidated financial statements .......................................................................................................................... 49
Directors’ declaration ................................................................................................................................................................. 114
Independent auditor’s report to the members of Freedom Foods Group Limited .................................................................... 115
Shareholder information ............................................................................................................................................................ 122
Corporate directory .................................................................................................................................................................... 126
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Freedom Foods Group Limited
Directors' report
30 June 2021
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 2021.
The financial statements are presented in Australian Dollars.
1. Principal activities
Freedom Foods Group Limited is a leading consumer branded beverage and nutritional group with over 560 employees operating in
four locations across Australia and two locations in Asia (Singapore and China).
The principal activities of the Group (on a continuing basis), during the financial year were:
•
developing, sourcing, manufacturing, selling, marketing and distribution of plant-based and dairy beverages, dairy
and nutritional products to wholesale and consumer markets;
•
selling, marketing and distribution of canned specialty seafood to consumer markets; and
•
an investment in dairy farming operations.
The Group operates marketing, sales and distribution activities in Australia, China and South-East Asia and sells products to retailers and
distributors in New Zealand, South Africa and the Middle East.
There were no significant changes in the nature of the principal activities during the financial year, with the exception that the Group
has withdrawn from operating activities in North America, exited its specialty Cereal and Snacks business and is exploring strategic
options related to its specialty seafoods business.
2. Going concern
The Group has prepared the financial statements for the year ended 30 June 2021 on a going concern basis, which assumes continuity
of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
Financial Position
The Group made a loss after tax for the year ended 30 June 2021 of $53.2m (FY20 restated loss of $175.7m). Net cash outflows used in
operations was $5.5m (FY20: $74.8m) and net cash outflows used in operating activities for the year ended 30 June 2021 was $52.8m
(FY20: $98.7m). The losses incurred in the year ended 30 June 2021 were anticipated by management as the business has restructured
and includes $27.9m of restructuring/litigation costs (of which $11.3m are grouped under net finance costs).
As at 30 June 2021, the Group had net current assets of $40.1m (FY20: net current liabilities of $276.5m), net assets of $1.5m (FY20: net
assets of $54.1m). The net assets at 30 June 2021 included liabilities of $251m in respect of convertible notes which were marked to
market as per the accounting standard requirements. The convertible notes will cease to be a liability at such time when the noteholders
convert the notes into equity or are repaid.
Recapitalisation
In response to the financial issues affecting the Group, the Directors and management have implemented and are continuing to
implement decisive actions to stabilise and transform the business.
The successful completion of the capital raising in May 2021 marked an important step towards the Group's financial turnaround, as the
new funding arrangements provide a more flexible capital structure to support the Group's transformation. From the proceeds raised
from the Convertible Note issue of $265m, the Group applied $231m towards repayment in full of senior term, senior revolving and
subordinated debt. The balance of the proceeds provided working capital of $34m for general corporate purposes and to pay fees and
expenses associated with the recapitalisation. Following completion of the capital raising, while the aggregate level of debt will not
reduce as the convertible notes are classified as debt for financial reporting purposes, the Group expects its senior leverage and finance
costs to reduce over time as the business performance improves and the convertible notes are either converted to equity or repaid.
As part of the recapitalisation, the Group entered into a new two year, $36m senior secured revolving credit facility with its Senior
Financiers whereas the Group's existing equipment financing facilities and debtor financing facilities remained in place on substantially
similar terms. The cash at bank combined with the available headroom in the new $36m revolving credit facility and the debtor financing
facilities of $12m are considered by the Board and management to provide the Group with sufficient liquidity to cater for the day-to-
day operations of the business. In addition, the Group’s financial performance is expected to continue to improve in FY22 and result in
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Freedom Foods Group Limited
Directors' report
30 June 2021
positive operating cash flows as management executes its strategy of driving operational improvements and focusing on profitable
growth.
Whilst the recapitalisation addressed the uncertainty regarding the Group's immediate ability to continue as a going concern due to a
lack of available funding, the Group is still subject to legal proceedings that have the potential to materially and adversely impact the
Group’s financial and operating performance (refer to Note 34). These include:
•
Legal proceedings brought against Freedom Foods Pty Ltd (a subsidiary of the Company) by Blue Diamond Growers in respect
of alleged breaches of the Licence Agreement between Blue Diamond Growers and Freedom Foods Pty Ltd;
•
Two Class Actions brought against the Company in respect of alleged breaches of the Corporations Act 2001 (Cth), Australian
Securities and Investments Commission Act and Australian Consumer Law.
The Group is defending the litigation referred to above and has engaged appropriate legal counsel to assist in defending the Group
against such claims.
The legal proceedings brought against Freedom Foods Pty Ltd (a subsidiary of the Company) by Blue Diamond Growers and the two
Class Actions commenced against the Company (“claims”) are at a preliminary stage. Any likely outcomes and potential financial impact
are not able to be assessed with any certainty at the time of signing of the financial statements.
Should the Group be unsuccessful in its defence against these claims, the Group may become liable for material compensation amounts
and the impacts may include potential restrictions on the Group’s operations. There is a risk that the Group will have insufficient funds
to be able to pay these compensation amounts and that restrictions on the Group’s operations may also have a material impact on its
ability to continue operating as a going concern.
As noted above, any potential financial impact and likely outcomes cannot be assessed with any certainty at the time of signing of the
financial statements (and, in addition, the Directors are proactively taking steps to manage and mitigate the risks associated with the
claims) and accordingly, the financial report has been prepared on a going concern basis.
Due to the uncertainty surrounding the above matters, a material uncertainty exists which may cast significant doubt on the Group’s
ability to continue as a going concern and therefore whether it may be able to realise its assets and discharge its liabilities in the normal
course of business.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that may be necessary should the Group be unable to continue as a going concern.
3. Operating and Financial review
The Group’s continuing operations recorded a loss after income tax for the year ended 30 June 2021 attributable to the owners of
Freedom Foods Group Limited of $38.8m (FY20 loss of $136.4m).
The Group’s continuing operations recorded an EBITDA of $15.8m (FY20 loss of $62.1m). These results include restructuring/litigation
costs of $16.6m (FY20: $2.2m).
3.1 Overview of material matters during the year and material matters subsequent to 30 June 2021
This section describes:
•
the significant events that have occurred in the FY21; and
•
the material matters, events, and decisions taken by the Group subsequent to 30 June 2021 and up to the publication
of this report.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Board Changes
At the conclusion of the Annual General Meeting (AGM) held on 29 January 2021, the following Board changes took place:
•
Perry R. Gunner, Non-Executive Chair of the Board retired after serving 17 years on the Board.
•
Trevor J. Allen, an Independent Non-Executive Director of the Board retired after serving 7 years on the Board.
•
Ronald Perich, a Non-Executive Director of the Board retired after serving 15 years on the Board.
•
Genevieve Gregor was elected as an Independent Non-Executive Director of the Board and was subsequently
appointed as Chair of the Board.
•
Jane McKellar was elected as an Independent Non-Executive Director of the Board. Jane is Chair of the People and
Culture sub-committee.
•
Anthony (Tony) Perich (AM) was re-elected as a Non-Executive Director of the Board. Tony is Deputy Chair of the
Board.
•
Timothy Bryan, previously an alternate Director for Anthony Perich and Ronald Perich, was elected as a Non-
Executive Director. Timothy was appointed as Interim Chair of the Audit and Finance sub-committee while the
Board finalised its search for an Independent Director to Chair the Audit and Finance sub-committee. Tim is Chair
of the Risk and Compliance sub-committee.
•
Stuart Black (AM) was appointed as an Independent non-Executive Director of the Board and was appointed as
Chair of the Finance and Audit sub-committee, effective 22 March 2021.
From 22 March 2021, the Board comprised a majority of Independent Non-Executive Directors.
Key Executive changes
On 6 August 2020, the Board appointed Michael Perich as Interim CEO, Perry Gunner ceased as Executive Chair and reverted to Non-
Executive Chair and Brendan Radford returned to his previous role as CEO Commercial Operations. Brendan Radford ceased to be CEO
Commercial Operations on 25 September 2020. Michael Perich was confirmed as the permanent CEO on 19 March 2021.
The Company announced the appointment of Josée Lemoine as Group CFO on 1 October 2020 and she assumed this role on 19
February 2021. The Interim CFO, Stephanie Graham, left the Company on 19 February 2021.
The Company appointed a General Manager of Internal Audit, Tim Phoon on 23 November 2020 and appointed Justin Coss as Group
General Counsel and Company Secretary on 23 November 2020. An interim Company Secretary, Scott Standen was appointed on 13
July 2020 and ceased the role as joint Company Secretary on 30 June 2021.
Stuart Muir was appointed as Chief Operating Officer in April 2021, Denis Phelps was appointed as Chief Customer Officer in August
2021 and Gerard Smith was appointed Chief Marketing Officer in August 2021. The rebuild of the senior leadership team is now
complete.
Voluntary suspension from ASX listing and Restatement
The Group applied for voluntary suspension from quotation of its securities on ASX listing on 25 June 2020 to restructure its operations
and refinance for the benefit of stakeholders. The Group’s bankers were supportive and provided a standstill to enable the
recapitalisation which was accomplished by a successful Convertible Notes issue and a refreshing of existing facilities and a new
revolving credit facility. The recommencement of trading of the Group’s securities on the ASX occurred on 22 March 2021.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Operations
Having completed a comprehensive review of the Group’s operating performance during the restructure and the refinancing, the
business has now been substantially reset. Management is now executing a company-wide transformation that will continue to be
implemented over the FY22 fiscal year and beyond.
The transformation strategy is designed to deliver best-in-class operating performance across the Company’s facilities, driving
improved productivity, lower costs and higher margins, earnings and sales – all within a culture of financial discipline.
While there is more work to do, significant improvements have already been delivered in key areas:
•
Site Operations: Operating efficiencies and cost reductions. For example, focusing on ensuring equipment meets required
maintenance standards and underpinning this investment with the right maintenance support to drive efficiency and
utilisation across the plant. Thereby, reducing wastage and improving quality issues across all sites.
•
Product Portfolio: Building profitable product portfolios by rationalising unprofitable product lines and better focusing on
customer needs.
•
Costs: Understanding the true costs per unit of production. Improving reporting and analytics to ensure better monitoring
and tracking of costs.
•
Milk supply: Implementing improved planning processes to ensure that supply better matches with demand.
•
Trade Spend: Trade spending policies have been reviewed, with funding re-focused and more disciplined.
•
Marketing Spend: Better targeted marketing spend. For example, MILKLAB Almond was supported with advertising in Q4
FY21, delivering strong consumer results, with improvements in ‘awareness’.
•
Supply Chain: Work continues on assessing and redefining our inbound and outbound supply chains, locally and
internationally, where improvements can be achieved.
•
Capital Expenditure / New Product Development: Capital and new product development project governance structure
strengthened – with set project gateways – for approvals, review and execution of capital projects, R&D and new product
development.
•
Inventory: Strong controls and governance structure now established.
Impacts of COVID-19
The COVID-19 pandemic and associated government responses have affected and are likely to continue to affect the Group’s
businesses. The Board and management are actively assessing the challenges and opportunities affecting the business on a regular
basis.
•
Operations and Employee safety: The Group implemented and enhanced employee health and safety measures, including
shift protocols, well-being programs and flexible and remote work practices appropriate for food manufacturing
environments. These measures have kept employees safe and ensured minimal COVID-19 related interruptions to operations.
All operating sites have implemented QR code sign in for staff and deliveries, with temperature checking to maintain a safe
workplace. The Group is strongly encouraging all employees to be vaccinated, as supply of appropriate vaccines relative to
their personal situation become available.
•
Consumer response: COVID-19 and government-imposed lockdowns have influenced consumer behaviours, which we
anticipate will continue to be impacted with each new development and lockdown. We expect pandemic events will become
part of the new “normal” and are adapting our business model accordingly. Grocery shelf stable beverage sales increase
through the lockdown periods, together with increased sales of our shelf-stable seafood range. Demand in the domestic out-
of-home sector is regionally impacted as areas go in and out of lockdown. The Group is developing new digital channels to
provide easier access to our products in this new environment.
•
Supply chain: COVID-19 has disrupted supply chains worldwide with significant impacts on logistics effecting raw material and
packaging supplies, freight availability and cost.
•
Financial impact: COVID-19 has adversely affected revenue and profitability. Margins in the grocery channel are materially
lower than out-of-home, with lower than expected out-of-home sales affecting profitability in FY21, impacting the sales mix.
Export volume to China and SE Asia have partly rebounded but each lockdown sees an impact on sales depending on the
severity of the lockdown implemented in these regions. The Group has not accessed JobKeeper wage subsidies or other
government support programs to date.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Prior periods’ restatement
During the FY21 year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in
implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current accounting
standards apply to these types of arrangements. The new accounting policy and the restated historical financial information to account
for the impact of the change are disclosed in Note 3 of the financial statements.
The FY20 results have been restated for the divestment of Cereal and Snacks, so the prior period can be compared on a continuing
business basis. Certain costs associated with marketing were reclassified to better align with future treatment of similar costs.
Recapitalisation and Capital Structure
As previously disclosed on 11 September 2020, with the support of the majority shareholder, the Group entered into a standstill
agreement with its primary lenders, National Australia Bank Limited and HSBC Bank Australia Limited (Banks), to provide the Group
sufficient time to recapitalise. The standstill agreement was extended several times and was subsequently removed following the
successful completion of the recapitalisation on 27 May 2021.
The Group issued a prospectus on 19 March 2021 and two supplementary prospectus which provide details of the recapitalisation. Full
details can be found on the Company’s website.
The first part of the recapitalisation was completed on 27 May 2021 with the issuance of the Convertible Notes and refinancing of
certain debt facilities and the second part of the recapitalisation was completed on 30 July 2021 with the issuance of the Company
options.
The recapitalisation has resulted in the Group having the following capital structure:
•
$36.0m 2-year senior secured revolving credit facility;
•
$85.8m of varying maturity senior secured equipment finance facilities;
•
$65.0m non-recourse (off balance sheet) debtor financing facilities;
•
$25.0m recourse senior secured debtor finance facilities;
•
$265m unlisted, subordinated, secured convertible notes with a six-year maturity; and
•
27,698,189 options exercisable and fundable after FY23 results are published. If all options are exercised, the Company will
raise $27,144,225 which will be used for working capital purposes.
As at 30 June 2021, the Company had $349.9m of borrowings and $41.9m drawn in off-balance sheet facilities.
For further details of the Group’s recapitalisation, please refer to the various ASX announcements on the group’s website at Reports,
Results & Presentations - Freedom Foods Group Limited (ffgl.com.au).
Refer to Notes 22 and 23 in the financial statements for further information on assets pledged as security and financing arrangements.
Recall
The Group conducted a product recall in September 2020 of certain batches of plant-based beverages. The recall applied only to the
specific batches. The operational issues that resulted in this recall have been resolved. The Company had insurance to cover the costs
of the recall, subject to an excess of $500,000. The insurance claim was finalised in June 2021 and the net amount payable to the
Company after deduction of the policy excess has been received in full and is reflected in Other Income in the financial statements.
Board and ASIC Investigations
As previously disclosed, the Board initiated two investigations in 2020 which concluded in FY21, with the assistance of external advisers
including PwC, Moelis Australia, Arnold Bloch Leibler and Ashurst. The results of matters identified have been outlined in the prior
periods’ restatements detailed in the FY20 Annual Report and the H1 FY21 Report.
ASIC has commenced an investigation under section 13 of the ASIC Act, in relation to suspected breaches of or offences committed
under the Corporations Act (including continuous disclosure and financial reporting obligations) by the Group and the officers and
directors of the Group between 1 July 2014 and 30 June 2020 (ASIC Investigation).
The Group continues to cooperate with ASIC in relation to the Investigation and produce materials and information as requested. The
investigation has not been concluded as at the date of issuance of these financial statements and hence no provision is recognised.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Blue Diamond Proceedings
Various disclosures have been made regarding Blue Diamond proceedings including in the Prospectus dated 19 March 2021 (and
supplementary Prospectuses) and the ASX releases dated 30 September 2020, 8 March 2021 and 28 May 2021. For further details,
refer to note 34 Capital commitments and contingent Liabilities.
Class Actions
Various disclosures have been made regarding the Class Actions including in the Prospectus dated 19 March 2021 (and supplementary
Prospectuses) and the ASX releases dated 30 September 2020, 8 March 2021 and 28 May 2021. For further details, refer to note 34
Capital commitments and contingent Liabilities.
Cereal and Snacks divestment
On 17 December 2020, the Group announced the sale of its Cereal and Snacks operations to the Arnott’s Group as part of the ongoing
program to simplify the Company’s business. The sale completed on 31 March 2021.
Other
The Company has identified a liability with respect to Blue Diamond royalty withholding taxes and has provisioned accordingly in the
financial statements.
COVID-19 pandemic
The COVID-19 pandemic has commenced a new national Delta wave subsequent to 30 June 2021. The impact on the Victorian Local
Government area of Shepparton where one of the Group’s manufacturing sites is located has been significant, with a lockdown of over
1/3rd of the population, impacting the available labour force. The lock down measures taken by the Victorian government to contain
the virus have affected economic activity. The Group has taken a number of measures to monitor and mitigate the effects of COVID-
19, such as safety and health measures for the Group’s workforce and securing the supply of materials that are essential to our
production process. At this stage, the impact on our business and results has not been significant with no positive cases in our staff or
the family of our staff. We will continue to monitor this situation, follow the various government policies and advice and do our utmost
to continue our operations in the best and safest way possible.
Except as disclosed above, no matter or circumstance has arisen since 30 June 2021 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.
3.2 Business Strategy
Freedom Foods is undergoing a three-stage transformation journey: Reset, Transform and Grow.
The financial, structural, operational and cultural reset of the Group was substantially completed in FY21, providing the Group with the
platform and talent to transform the business.
Actions to Transform the Group are now well underway, with operational improvements across the business already driving improved
productivity, sales and earnings performance.
Those improvements provide the springboard to Grow the business through three streams: products, channels and geographies.
At the upcoming AGM, Freedom Foods shareholders will be asked to approve a new corporate name, which will be revealed before the
AGM. The sale of Cereal and Snacks – which included the Freedom Foods brand name itself – necessitates a corporate rebranding. The
new name represents a clean break with the past and the emergence of a reset and refreshed organisation with significant opportunities
ahead of it as a leading Australian beverage and Nutritionals company.
The Group continues to review all options for its Specialty Seafood business. The Group recently launched a dual-track process for
Seafood – ‘retain and improve’ or “divestment”.
3.3 Operating and financial review – continuing operations (all comparatives refer to restated FY20)
Set out below is a summary statement of profit and loss for the year ended 30 June 2021 together with a restated summary statement
of profit and loss for the year ended 30 June 2020. The restated summary statement of profit and loss for the year ended 30 June 2020
reflects the accounting changes required to incorporate the effect of the SaaS IFRIC mandatory changes (refer to note 3 of the financial
statement) on the profit and loss of the group for that period.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Continuing Operations
30 June
2021
30 June
2020
$'000
$'000
Net sales
559,068
516,651
EBITDA
15,786
(62,146)
Share of associates profit/(loss)
607
586
Depreciation and amortisation
(27,700)
(27,583)
Fair value changes of convertible notes
13,994
-
Impairment of right of use assets
-
(3,794)
Impairment of non-financial assets
(1,910)
(21,930)
Net finance costs
(39,535)
(21,595)
Net loss before tax
(38,758)
(136,462)
Income tax expense
(17)
101
Net loss after tax
(38,775)
(136,361)
Adjusted Operating EBITDA*
The following table adjusts EBITDA for various non-trading and non-recurring items:
Continuing Operations
30 June 21
30 June 20
$'000
$'000
EBITDA
15,786
(62,146)
Additional inventory provision
-
14,758
Product recall costs
(998)
-
Restructuring expenses
9,216
1,310
Litigation
7,377
-
Additional debtor provisioning
-
3,013
Acquisition costs
-
861
Discount charge - limited recourse facility
1,319
1,471
Unrealised foreign exchange loss
770
(8)
Employee incentives (FY20: share-based payments)
753
(417)
Other non-trading expenses
126
5
Adjusted Operating EBITDA (post AASB 16)
34,350
(41,153)
Adjusted Operating EBITDA (pre AASB 16)
22,357
(53,988)
* Adjusted Operating EBITDA (Earnings before interest, tax, depreciation and amortisation) is a non-IFRS measure as contemplated in
ASIC Regulatory Guide 230 Disclosing non-IFRS financial information (RG230). Adjusted Operating EBITDA is used by management and
the directors as one of the key measures of assessing the financial performance of the Group and individual segments. Adjusted
Operating EBITDA excludes items including the additional inventory provisions above a normalised level (FY20) and other expenses
including acquisition costs, restructuring costs and other non-trading expenses.
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Freedom Foods Group Limited
Directors' report
30 June 2021
Consolidated FFGL - Continuing operations
12 Months to 30 June ('000)
Jun-21
Jun-20
Change
Change
$
%
Revenue
559,068
516,651
42,417
8.2%
Adjusted Operating EBITDA Pre AASB16
22,357
(53,988)
76,345
141.4%
Adjusted Operating EBITDA Pre AASB16 Margin %
4.0%
(10.4%)
Adjusted Operating EBITDA Post AASB16
34,350
(41,153)
75,503
183.5%
Adjusted Operating EBITDA Post AASB16 Margin %
6.1%
(8.0%)
EBITDA
15,786
(62,146)
77,932
125.4%
EBITDA Margin %
2.8%
(12.0%)
Net sales increased by 8.2% to $559.1m reflecting strong growth across our key continuing businesses. In Australia net sales increased
2.6% to $426.5m and in export markets net sales rose 31.3% to $132.6m. Dairy and Nutritionals net sales rose 6.8% to $394.3m mainly
in export markets where net sales increased 34.7% to $120.8m. Plant-based net sales of $152.9m rose 15.6% driven by strong growth in
MILKLAB net sales up 49.1%.
Net losses after tax decreased by 71.6% from $136.4m to $38.8m demonstrating improved performance.
Adjusted Operating EBITDA (pre AASB 16) of $22.4m showed a significant improvement from losses in FY20 of $54.0. Adjustments
include restructuring costs, including costs related to lender management, legal matters, accounting restatement and divestment
activities.
Impairment of non-financial assets charges decreased to $1.9m on the prior year
Depreciation and amortisation charges of $27.7m are broadly in line with the prior year. The increase in depreciation in plant &
equipment was slightly offset by the renegotiation of a lease (AASB 16 impact). The split in depreciation charges between traditional
plant and equipment depreciation and AASB 16-related depreciation is as follows:
Depreciation – buildings, plant and equipment: $19.9m (FY20: $17.7m)
Depreciation – AASB 16 related: $7.8m (FY20: $9.9m)
Amortisation – software: nil
Net finance costs increased by 83.1% from $21.6m to $39.5m as a result of the increased margins and fees charged by the lenders during
the standstill, the transactions costs incurred on convertible notes issuance and the break costs paid on early termination of interest
rate swaps. The split of finance costs between interest paid, the AASB 16 related finance charge and transaction costs was as follows:
Interest – based on debt facilities: $18.7m (FY20: $9.9m)
Interest – AASB 16 related: $11.2m (FY20: $11.7m)
Transaction financing costs – Convertible notes: $9.6m
Fair value changes of convertible notes amounting to $14m resulted in a 5.3% decline in the value of convertible notes from $265m to
$251m. This change in fair value is recorded in profit or loss in accordance with the accounting standards but does not impact the
redemption and conversion rights available to the investors under the terms of the convertible notes.
Impairments of brands, goodwill and right of use assets decreased by 100% from $25.7m to nil.
Non-recurring Inventory provisions were nil in FY21 (FY20: $14.8m).
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Freedom Foods Group Limited
Directors' report
30 June 2021
3.4 Segment performance of continuing operations
The Group measures its financial and operating performance by reference to the following segments:
Dairy and Nutritionals
A range of shelf stable dairy milk beverage, nutritional products and performance and adult
nutritional powders including the Crankt brand. These products are manufactured in Australia and
sold in Australia and overseas.
Plant Based Beverages
A range of shelf stable beverage products including liquid stocks, soy, rice, oat and almond
beverages. These products are manufactured in Australia and sold in Australia and overseas.
Specialty Seafood
A range of canned seafood covering sardines and salmon. These products are imported and sold in
Australia and New Zealand.
Set out below is the segment performance for the continuing operations of the Group for the year ended 30 June 2021, together with
a restated segment performance table for the year ended 30 June 2020.
Dairy and
Nutritional
Plant Based
Specialty
Unallocated
Shared
Total
Continuing Operations 30 June 2021
Ingredients1
Beverages
Seafood
Services
$'000
$'000
$'000
$'000
$'000
Revenue
394,344
152,950
11,775
-
559,068
EBITDA
342
27,680
(141)
(12,095)
15,786
Product recall costs
-
(980)
-
(19)
(998)
Restructuring
-
-
-
9,216
9,216
Litigation
-
6,048
-
1,330
7,377
Discounting charge - limited recourse facility
-
-
-
1,319
1,319
Unrealised foreign exchange loss
-
-
-
770
770
Employee incentives
-
-
-
753
753
Other non-trading expenses
140
300
-
(314)
126
Adjusted Operating EBITDA (post AASB 16)
482
33,048
(141)
961
34,350
Adjustment for rental expense
(4,555)
(7,395)
(43)
-
(11,993)
Adjusted Operating EBITDA (pre AASB 16)
(4,073)
25,653
(184)
961
22,357
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Freedom Foods Group Limited
Directors' report
30 June 2021
Dairy and
Nutritional
Plant Based
Specialty
Unallocated
Total
Continuing Operations 30 June 2020
Ingredients1
Beverages
Seafood
Shared
Services2
Continuing
Operations
$'000
$'000
$'000
$'000
$'000
Revenue
369,287
132,319
15,045
-
516,651
EBITDA
(62,539)
9,390
(309)
(8,688)
(62,146)
Additional inventory provisioning
10,902
3,856
-
-
14,758
Additional debtor provisioning
-
3,013
-
-
3,013
Restructuring
403
129
19
759
1,310
Litigation
-
-
-
-
-
Acquisition costs
-
-
-
861
861
Discounting charge - limited recourse facility
-
-
-
1,471
1,471
Unrealised foreign exchange gain
-
-
-
(8)
(8)
Employee incentives
-
-
-
(417)
(417)
Other non-trading expenses
(572)
306
271
5
Adjusted Operating EBITDA (post AASB 16)
(51,806)
16,694
(290)
(5,751)
(41,153)
Adjustment for rental expense
(4,877)
(7,953)
(5)
-
(12,835)
Adjusted Operating EBITDA (pre AASB 16)
(56,683)
8,741
(295)
(5,751)
(53,988)
1 Dairy & Nutritionals include retained product results from divested Cereals & Snacks business.
2 FY20 Unallocated Shared Services of $22.3m have been allocated to segments on the same basis as FY21 to enable year on year
comparability.
3.4 Segment performance (FY21 Adjusted Operating EBITDA is pre AASB 16 and all comparatives refer to FY20) 3
Dairy and Nutritionals
12 Months to 30 June ('000)
Jun-21
Jun-20
Change
Change
$
%
Revenue
394,344
369,287
25,057
6.8%
Adjusted Operating EBITDA Pre AASB16
(4,073)
(56,683)
52,610
92.8%
Adjusted Operating EBITDA Pre AASB16 Margin %
(1.0%)
(15.3%)
Adjusted Operating EBITDA Post AASB16
482
(51,806)
52,288
100.9%
Adjusted Operating EBITDA Post AASB16 Margin %
0.1%
(14.0%)
EBITDA
342
(62,539)
62,881
100.5%
EBITDA Margin %
0.1%
(16.9%)
Revenue for the twelve months to 30 June 2021 rose 6.8% to $394.3m as the business reset improved profitability with Adjusted
Operating EBITDA pre AASB16 loss of $4.1m compared to a loss of $56.7m previously. The business launched a transformation and
operational turnaround strategy focused on a number of areas, including reducing wastage, increasing production efficiencies, removing
or reducing unprofitable products, optimising milk supply and curtailing losses from the sale of surplus milk as experienced in previous
periods. The Shepparton plant in Victoria is now operating on a much-improved basis, with sales of the Company’s PUREnFERRIN
lactoferrin product rising 215% in the year. Sales of consumer nutritionals, including Vital Strength, UPROTEIN and Crankt Protein, rose
5% in the year despite fall in demand caused by the temporary closure of gyms and specialty stores during COVID-19.
3 Segment Results are post allocation of group shared services overhead except for realised FX and Board / ASX related costs.
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Freedom Foods Group Limited
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Plant Based Beverages
12 Months to ('000)
Jun-21
Jun-20
Change
Change
$
%
Revenue
152,950
132,319
20,631
15.6%
Adjusted Operating EBITDA Pre AASB16
25,653
8,741
16,912
193.5%
Adjusted Operating EBITDA Pre AASB16 Margin %
16.8%
6.6%
Adjusted Operating EBITDA Post AASB16
33,048
16,694
16,354
98.0%
Adjusted Operating EBITDA Post AASB16 Margin %
21.6%
12.6%
EBITDA
27,680
9,390
18,290
194.8%
EBITDA Margin %
18.1%
7.1%
Revenue increased 15.6% to $152.9m in the plant-based beverages segment, the out-of-home market continues to deliver robust growth
across all channels and all brands, particularly MILKLAB where domestic sales increased 49.5% in the year and export sales increased
46.4%. Adjusted Operating EBITDA pre AASB16 rose 193.5% to $25.7m, with profitability continuing to improve as economies of scale
increase. MILKLAB sales increased 49.1% in the year with the MILKLAB brand now sold in over 20 countries. The Group is committed to
undertaking disciplined capital investment to increase production capacity to meet growing demand.
Specialty Seafood
12 Months to ('000)
Jun-21
Jun-20
Change
Change
$
%
Revenue
11,774
15,045
(3,271)
(21.7%)
Adjusted Operating EBITDA (Pre AASB16)
(184)
(295)
111
(37.6%)
Adjusted Operating EBITDA (Pre AASB16) Margin %
(1.6%)
(2.0%)
Adjusted Operating EBITDA (Post AASB16)
(141)
(290)
149
(51.4%)
Adjusted Operating EBITDA Margin %
(1.2%)
(1.9%)
EBITDA
(141)
(309)
168
(54.4%)
EBITDA Margin %
(1.2%)
(2.1%)
Revenue for the twelve-month period fell 21.7% to $11.8m as COVID-19 disrupted global supply chains, causing stock shortages. Adjusted
Operating EBITDA pre AASB 16 recovered $0.1m edging closer to breakeven, with demand for shelf-stable products during COVID-19
enabling the Group to be able to pass on higher seafood prices while reducing promotional activity and prioritising trade marketing
spend. The Company continues to review all options for its Specialty Seafood business and recently launched a dual-track process for
Seafood – ‘retain and improve’ or divestment.
3.5 Cereal and Snacks (discontinued operation) performance
On 17 December 2020, the Group announced the sale of its Cereal and Snacks operations to the Arnott’s Group as part of the ongoing
program to simplify the Company’s business. The sale completed on 31 March 2021. Accordingly, the Group has classified the Cereal
and Snacks business as a discontinued operation and disclosed its performance below separately from the continuing operations of the
Group:
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Freedom Foods Group Limited
Directors' report
30 June 2021
Discontinued Operation
31 Mar 21
30 Jun 20
$'000
$'000
Revenue
35,321
63,540
EBITDA
(13,512)
(36,775)
Additional inventory provisioning
-
3,269
Additional debtor provisioning
-
559
Restructuring expenses
-
133
Loss on sales of assets/investments
894
-
Other non-trading expenses
-
(40)
Adjusted Operating EBITDA (post AASB 16)
(12,618)
(32,854)
Adjustment for rental expense
(1,575)
(1,941)
Adjusted Operating EBITDA (pre AASB 16)
(14,193)
(34,795)
Cereal and Snacks recorded an adjusted pre AASB 16 EBITDA loss of $14.2m in the year (9 months to 31 March 2021), compared to
$34.8m loss previously as key product lines failed to recover the cost of production. As anticipated, a planned rationalisation of loss-
making product lines and a reduction in trade marketing resulted in a fall in sales, with revenue for the year down 44% to $35.3m.
3.6 Statement of financial position
Set out below is a summary balance sheet as at 30 June 2021 together with summary balance sheet as at 30 June 2020.
Consolidated
30 Jun 2021
30 Jun 2020
restated
$'000
$'000
Current assets
133,791
138,250
Assets held for sale
6,464
-
Non-current assets
398,414
524,579
Total assets
538,669
662,829
Current liabilities
(100,198)
(414,770)
Non-current liabilities
(436,978)
(193,982)
Total liabilities
(537,176)
(608,752)
Net assets
1,493
54,077
Share capital
598,712
598,712
Reserves
(60,378)
(55,851)
Accumulated losses
(536,841)
(488,784)
Total equity
1,493
54,077
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30 June 2021
Commentary on specific items in the statement of financial position
Cash and cash equivalents increased by $14.5m to $31.7m following the Group’s recapitalisation.
Trade and other receivables decreased by 3.8% from $52.1m to $50.1m, reflecting increased usage of the debtor sale facility and the
sale of Cereals and Snacks. Debtor days decreased from 60 days to 55 days due to the improved collections.
Inventories decreased by 24.0% from $63.7m to $48.4m, reflecting improved inventory management and the sale of Cereals & Snacks.
Trade and other payables decreased by 39.4% from $111.3m to $67.4m, reflecting the significant effort that has gone into reducing the
level of aged creditors in the first half and improving controls.
Property, plant and equipment decreased by 13.7% from $293.7m to $253.6m, reflecting the sale of Cereal and Snacks and depreciation.
There is no significant capital expenditure currently under consideration by the Group, with the focus on maximising efficiencies from
the existing asset base.
The shift between current liabilities and non-current liabilities is a result of the successful completion of the recapitalisation which
ended the standstill agreement with the Group’s primary banks. The convertible notes are a hybrid instrument. Due to their conversion
feature, they are classified as long-term liability and in time, upon conversion, could turn into equity.
Deferred tax liabilities remain at $nil. The full extent of the potential tax benefit has not been recognised due to the number of years
that it will take for tax losses to be utilised. This position will be reassessed on an annual basis.
Borrowings increased by 19.6% from $292.3m to $349.9m following the successful completion of the Group’s recapitalisation in May
2021. Further detail on cashflow and funding is discussed below.
Net assets of $1.5m includes convertible note liability of $251m. The convertible notes will cease to be a liability at such time when the
noteholders convert the notes into equity or are repaid.
Shareholders’ equity decreased from $54.1m to $1.5m, reflecting primarily the loss incurred by the Group in FY21, which includes the
impact of all operating and litigation/restructuring expenses discussed above in section 3.3.
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Freedom Foods Group Limited
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3.7 Cash flow and funding
Consolidated
30 Jun 21
30 Jun 20
restated
$'000
$'000
Cash flow from operations
(5,523)
(74,788)
Cash flow from operations including adjustments and financing costs
(47,274)
(23,889)
Cash flow from operating activities
(52,797)
(98,677)
Cash flow from investing activities
13,500
(23,671)
Cash flow from financing activities
53,798
84,130
Net increase / (decrease) in cash and cash equivalents
14,501
(38,218)
Cash and cash equivalents at the beginning of the financial year
17,167
55,385
Cash and cash equivalents at the end of the financial year
31,668
17,167
Continuing operations
30 Jun 21
30 Jun 20
restated
$'000
$'000
Cash flow from operations
11,517
(38,911)
Cash flow from operations including adjustments and financing costs
(47,006)
(23,342)
Cash flow from operating activities
(35,489)
(62,253)
Cash flow from investing activities
(2,658)
(22,338)
Cash flow from financing activities
61,817
86,526
Net increase in cash and cash equivalents
23,670
1,934
Discontinued operations
31 Mar 21
30 Jun 20
$'000
$'000
Cash flow from operating activities
(17,308)
(36,424)
Cash flow from investing activities
16,158
(1,333)
Cash flow from financing activities
(8,019)
(2,396)
Net decrease in cash and cash equivalents
(9,169)
(40,152)
Cash flow from continuing operations before financing and non-recurring adjustments were $50.4m higher than prior period. This was
due to the improved operational performance and working capital management.
Cash flow from investing activities were $19.7m lower in the continuing operations primarily attributable to a significant reduction in
capital expenditure following the completion of the capital projects in earlier years. Cash flow from investing activities of $16.2m in the
discontinued operations reflect the cash inflows from the sales of the Cereals & Snacks business partially offset by the pay out of
related equipment finance leases of $6.5m in the cash outflows from financing activities.
Cash flow from financing costs are in line with the Group’s recapitalisation.
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Freedom Foods Group Limited
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4. Dividends
There were no dividends declared for FY21.
Dividends paid during the prior financial year were as follows:
Consolidated
2021
2020
$'000
$'000
Final unfranked dividend of 3.25 cents per ordinary share for the year ended 30 June 2019 paid in
cash during the year ended 30 June 2020 (2019: 2.75 cents 50% franked)
-
2,658
Dividends reinvested: unfranked at 30% tax rate (2019: 50% franked)
-
6,211
Final unfranked dividend of 1.35 cents per convertible redeemable preference share paid in cash
during the year ended 30 June 2020 (2019: 1.35 cents 50% franked)
-
1
-
8,870
5. Environmental, Social and Governance
The Group is developing a comprehensive Environmental, Social & Governance (ESG) strategy to improve its ESG performance,
reporting and profile. As part of the transformation underway, a focus on the refresh of Freedom’s ESG aspirations was identified:
what must we do; what should we do; what could we do. These strategic aspirations will drive our ESG strategy and reporting going
forward and enable the measurement and management of ESG factors such as carbon emissions, workforce diversity, and supply chain
sustainability. This ESG refresh is under way and our policy on ESG will be released in FY22
5.1 Environmental regulation
The Group’s operations are subject to environmental regulation under the laws and regulations of the Commonwealth of Australia, and
various Australian State and local regulatory bodies. The Group has conformed to environmental laws, regulations, standards and other
requirements such as site permits to operate or waste management
5.2 Environment and Sustainability Statement
The Group is committed to making a distinctive and positive contribution to its communities and its operating environments.
Sustainability is a business method that ensures safety, efficiency and responsibility in a manner that protects the Group’s employees,
communities, shareholders, and the environment, now and in the future. Our daily operations align business performance with a
commitment to environmental, social and community stewardship.
Set out below are examples of work undertaken by the Group:
•
Installation of 3rd Dissolved Air Floatation (DAF) (wastewater treatment plant) at Shepparton, improving quality and volumes
of discharged wastewater from the site.
•
Installation of Reverse Osmosis (RO) plant at Shepparton to use water from processes into cooling towers reducing town
water consumption.
•
A new screw compressor was installed on the trade waste plant at Shepparton to reduce liquid waste to landfill.
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5.3 Quality and food safety
Quality and food safety is an important foundation for the ongoing success of the Group. The Group strives to achieve quality across
the business through its products, services and people. Quality and food safety is intrinsic to the business philosophy and culture. The
quality and safety of the products, as well as meeting the requirements of our customers, are high priorities of the Group.
The Group has a range of certification and regulatory bodies independently auditing our sites based on standards including:
•
State-based Food Authority audits and Export Registered Facilities audit via the Department of Agriculture, Water, and the
Environment;
•
Global Food Safety Initiative (GFSI) Standards such as Safe Quality Food (SQF) and British Retail Consortium (BRC);
•
HACCP Certification;
•
Retailer and customer standards; and
•
Product-specific standards, such as Australian Certified Organics and Gluten-Free Certification program.
We continue to review our certification requirements specifically for export markets requirements. Freedom Foods has a continuous
improvement focus on all our quality processes and practices and continues to be in compliance with all food safety standards. The
group has continued to improve in consumer complaints and first-time quality across the 12months of the reporting period.
5.4 Safety
Statement of commitment
The Group is committed to providing a workplace that enables all work activities to be carried out safely.
The Group will take all reasonably practicable measures to eliminate or minimise risks to the health, safety and welfare of workers,
contractors, visitors and anyone else who may be affected by our operations.
The Group is committed to ensuring it complies with the Work Health and Safety Act 2011 (the Act) and any other relevant legislation
and required codes and standards that are applicable to the Group.
The WHS Management Plan and WHS Policies and Procedures set out the safety arrangements and principles which are to be observed
by the Group and its workers to ensure compliance with the WHS Act and to provide appropriate mechanisms for continuing
consultation and management of WHS matters.
All elements of the WHS Management Plan, Policies and Procedures are designed to enhance our safety culture and provide our team
members with guidance on how their roles contribute to high quality safety outcomes. The group continues to drive a continuous
improvement approach to safety in the workplace which is focussed on reducing injuries through creating a positive safety culture,
reducing risk and driving compliance.
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6. Risks
The Group considers risk management integral to the successful achievement of its mission, vision, and values. It is committed to
protecting itself, its people, its customers, its suppliers, and the public while conducting its business activities. It recognises that effective
risk management is critical for anticipating and managing situations or events that could prevent it from achieving its objectives.
Key to this is to ensure that the processes of risk identification, assessment and management are embedded in every aspect of the
Group’s businesses. The Risk and Compliance Committee has, during FY 2021, undertaken a comprehensive review of the Group’s risk
appetite, its risk management framework and its key risks and how they are being managed.
Key initiatives arising from the review that have been completed include:
•
Approval of a revised risk management framework
•
Approval of a new compliance policies management framework
•
Establishment of a dedicated risk management function
•
Implementation of a new technology-based approach to the management of risk across the Group
•
A comprehensive re-assessment of the Group’s risk profile
•
Appointment of a GM Internal Audit
•
Draft of new Risk Appetite Statement for FY21/22 and
•
Key Risk Indicators have been developed for reporting against in FY22.
The Group’s Risk Management Framework (RMF) aims to ensure that risk management is undertaken throughout the business and
managed in a structured and systematic manner. The RMF describes the key elements that govern the Group’s approach for managing
risk and the strategy for managing its material risks. The RMF, together with the approved risk appetite, supporting policies and culture
provide a consistent approach to managing risk to reasonably practicable levels which enables the achievement of the Group’s strategy
and business plans.
There are a number of material business risks that have the potential to impact the Group’s ability to achieve its objectives. These risks
are summarised below and are each accompanied by the details of how the Group responds to and manages the risk in each category.
Risk Type
Description of the risks
How we manage the risks
Access to financial
resources
The Group’s business activities require access to
equity and debt markets to finance its day-to-day
working capital and invest in long-term income-
producing assets. Access to these markets can
change from time to time based on economic and
financial markets conditions, geopolitical issues in
the markets in which the Group operates in, the
risk appetite of banks and other credit providers,
the investment appetite of equity investors, and
the view of the Group as a suitable party to extend
credit to or invest in.
This financial year, the Group’s board and
management have devoted significant time and
resources to improving the financial management
of the Group to allow it to obtain ongoing access
to equity and debt markets to assist financing the
Group’s activities and to meet future needs. The
Board has sought additional input from external
advisors.
The Finance & Audit Committee is focused on
continuing to improve the overall financial
management of the Group in future periods.
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Risk Type
Description of the risks
How we manage the risks
Changing consumer
preferences in
competitive markets
Consumer tastes and buying preferences in
relation to the Group’s products are constantly
changing. These preference changes can be in
response to a range of factors, including new
products entering the market, environmental
factors, health and nutritional advices, regulation,
sales and marketing initiatives by the Group’s
competitors, and product price changes by the
Group and its competitors.
The capacity of the Group’s competitors to
introduce competing products with those of the
Group is high. The Group can be at risk of its
products being replaced in key channels by
products produced by its competitors. Any
reduction in the Group’s product sales and market
shares in each segment may impact its financial
performance in the short, medium and long term.
The Group focuses on being a leading innovator in
its chosen product and channel segments. This
focus has, in recent years, seen the launch of
numerous products in existing and new segments.
The Group seeks to maintain market share by
having consistently high-quality and consumer-
relevant products.
The Group strives to be at the forefront of changes
in market trends at the consumer level and
understanding the response from competitors to
these changes. It uses consumer insights, research
and data in its development of new products and
improving the existing portfolio.
A rigorous new product development process has
been implemented.
Impact of climate change
and environmental risks
The Group is exposed to the short, medium, and
long-term climate change and environment
related risks. These risks include:
•
physical climate-related event risks,
extreme weather events, increased
volatility and change in weather patterns
including drought, floods and bushfires;
•
restricted availability, use and pricing of
water in manufacturing activities
•
the impact of climate change events on
the supply and cost of milk and other
agricultural products,
•
treatment and disposal of waste from
manufacturing processes; and
•
increased
energy
costs,
increased
taxation and other environmental and
climate related transactions costs as
operating economics change and adapt
to environmental and climate change
impacts;
These risks could adversely affect the Group’s
operations, business practices, financial
performance and reputation if not adequately
managed.
The Group has been proactive in its operational
activities
to
reduce
the
impact
on
the
environment through capital investment in
chemical treatment and removal programs,
factory site rooftop solar energy generation to
replace electricity, and increasing efficiencies in
production and reducing the amount of waste
needing to be processed off site.
Further projects are planned to increase the
sustainability of the production sites.
The Group will develop a more comprehensive
approach to sustainability and climate change
strategy in 2022. It also intends to include in its
corporate disclosures climate and environment
related risks and related financial impacts, in line
with market practices. The climate change and
environment strategy will address a range of
issues including emission reduction targets,
benchmarks for business partnership agreements,
and other initiatives.
Cultural
Among other things, poor corporate culture can
lead to unethical practices, lack of trust, poor
decision-making, increased employee turnover
and reduced motivation.
The Group’s Board and management are laying
the groundwork for a positive and inclusive
culture.
A refresh of key senior executive appointments
and board renewal have been undertaken.
A new remuneration structure has been
established to align with business strategy and
desired behaviours. The People and Culture
Committee
has
refreshed
its
policy
documentation, including the Committee Charter.
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Freedom Foods Group Limited
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Risk Type
Description of the risks
How we manage the risks
Pandemic Risks
The COVID-19 pandemic that emerged in March
2020 in Australia has impacted most businesses.
The Group has been impacted by the COVID-19
pandemic including the loss of revenue, mainly in
the sale of cream and out-of-home products.
The length and duration of the current pandemic
and the economic impact remain uncertain. The
pandemic will continue to have an ongoing and
unknown impact on the Group.
Any further virus outbreaks in Australia or
overseas may adversely affect the Group’s
business operations and financial performance.
The Group put in place measures in early 2020 to
protect its key sites and employees. The Group has
detailed protocols in place for any virus outbreaks
in the states and regions in which it operates. As a
result of the measures put in place, production at
all the Group’s manufacturing sites has not been
impacted in any material way by COVID-19.
The Group closely monitors the markets and
geographic regions in which it distributes its
products to assess the impact of COVID-19.
The Group continues to seek better ways to serve
its consumers and has enhanced distribution and
sales via digital channels.
Doing Business in Export
Markets
The Group is exposed to a range of risks doing
business in international markets, particularly in
China and South East Asian markets. Business
practices and local laws and regulations differ
greatly from country to country.
There are also personal risks to the Group’s
employees operating in or travelling to these
countries that can include arbitrary detention,
criminal or civil charges, or fines for alleged illegal
business practices.
The Group seeks to manage these risks in a number
or ways:
•
Employing experienced local personnel
and
working
with
long-established
business partners and customers to assist,
understand and navigate the local
business environment in each market;
Ongoing monitoring for any adverse
geopolitical, business and regulatory
developments in each market;
•
Ensuring business decisions, business
partnerships
and
other
contractual
arrangements do not place employees or
the Group at risk;
•
Ensuring there is no over reliance on one
single customer or country by imposing
customer and country limits; and
•
Contracting with offshore buyers to take
delivery of products within Australia as
opposed to at the Country of destination.
Quality and Food Safety
The Group supplies a range of food products for
human consumption. As a result, the Group is
inherently exposed to risks in the entire
production chain from receipt of ingredients
through to dispatch to the end consumer. Risks
can include food safety, product or packaging
quality and/or food integrity issues (including
interference by third parties) that may result in
injury or harm to consumers.
In addition, any food quality or safety incidents
may cause disruption to business activities, result
in increased costs, lead to potential litigation and
damage the Group’s reputation.
The Group has measures in place to manage and
minimise food quality, packaging and safety risks
using the latest technologies, including:
•
rigorous
food
safety
and
quality
management systems, using the latest
technologies, which are the subject of
continuous review;
•
staff training and communication;
•
reputable third-party suppliers and
partners;
•
compliance with food safety and
standard
laws
and
accreditation
processes; and
•
established food safety incident and
product recall policies and procedures
(including trial runs).
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Legal action
Legal action arises from time to time in the normal
business activities of the Group. Litigation can
arise from commercial disputes between the
Group and its business partners, suppliers,
employees
and
other
third
parties,
and
government bodies for alleged or actual failures
to adhere to government regulations.
Litigation is costly and time consuming and
consumes board and management time and
resources. It can create reputational risk, brand
damage and potential liabilities for the Group, its
Directors and Officers, and employees.
The Group is conscious of the reputational and
financial impacts that can arise from litigation
and takes all practical measures to manage
potential or actual legal disputes. This includes
endeavouring
to
prevent
disputes
from
escalating, ensuring advice is taken on matters to
address a dispute, seeking to avoid the use of
court processes and, where appropriate, having
insurance in place to limit the financial impact.
Manufacturing disruption
Production and sale of the Group’s products relies
on the continued operation of the Group’s
manufacturing facilities and consistent delivery of
product volumes to meet the Group’s contractual
requirements and demand growth.
Any material disruption to key parts of the
manufacturing process may result in a failure to
meet contractual sales volumes, loss of sales and
revenue, termination of contracts and business
partnership agreements, litigation and reputation
damage.
The Group seeks to manage these risks in a
number or ways:
•
Employing experienced personnel;
•
Well-designed manufacturing plant and
equipment;
•
Well-designed operating systems; and
•
Industry best practice in relation to
maintenance and business continuity
planning.
Property and business interruption insurance is in
place for our operations.
Regulatory investigations
and other action
The Group may be the subject of regulatory
investigations that may result in an adverse
impact on the Company and stakeholders.
The outcomes of any such investigations can be
litigation, civil or criminal prosecution and/or lead
to fines, compensation, remediation expense
and/or restrictions on the Group’s ability to
operate its businesses.
The Group seeks to manage all its risks in order to
avoid adverse events that may lead to regulatory
investigations and other actions. The Group’s
organisation
structure
includes
specific
operational teams focused on financial, quality,
workplace health and safety and people and
culture matters. The overall management of risk
is governed by the Group’s Risk Management
Framework. The Risk and Compliance Committee
has oversight of operation of the Risk
Management Framework and the management
of risk across the Group.
Technology and Security
This concerns the risk of a material cyber intrusion
which could severely disrupt operations or
otherwise compromise critical information
The Group uses reputable providers of security
services and regularly performs penetration
testing. The group is increasing its cyber
education and compliance testing to meet the
changing cyber environment.
22
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7. Information on Directors
Name:
Ms Genevieve Gregor
Title:
Chair of the Board (from 29 January 2021) and Independent, Non-Executive Director (from
2 March 2020)
Qualifications:
B. Economics (UQ), Graduate Diploma Applied Finance & Investment (SIA), Honorary
Doctorate of Letters (WSU), GAICD
Experience and expertise:
Genevieve was a Founding Partner of Colinton Capital Partners, a mid-market private equity
firm investing in Australian growth companies. Prior to this, Genevieve was the co-head and
Managing Director of the Asia Special Situations Group in Australia for Goldman Sachs for
eight years. Genevieve has had over 25 years’ experience working in banking and finance.
She has completed numerous major financing transactions for the Australian corporate
market over her career and been involved in a number of high-profile mergers and
acquisitions. Prior to joining Goldman Sachs, Genevieve was head of the Australian loan
capital markets business at Citigroup. Prior to Citigroup, she worked at MIM Holdings, now
Xstrata Australia Limited. Genevieve was until recently the Deputy Chancellor of Western
Sydney University, Chair of the Finance and Investment Committee and Trustee at WSU for
over 10 years.
Other current listed directorships:
None
Former listed directorships (last 3
years):
None
Special responsibilities:
Former Chair of the Risk and Compliance Committee (until 19 March 2021), Member of the
Finance and Audit Committee and Member of the Remuneration and Nomination
Committee (now People and Culture Committee) (from 29 January 2021).
Interests in shares:
Indirect interest in 23,500 ordinary shares, 150,000 convertible notes and 7,298 listed
options.
Name:
Mr Anthony M. Perich AM
Title:
Deputy Chair and Non-Executive Director
Experience and expertise:
Anthony is a Member of the Order of Australia. He is joint Managing Director of Arrovest
Pty Limited, Leppington Pastoral Co Pty Ltd, 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, Anthony holds
a number of other directorships which include Greenfields Narellan Holdings, Breeders
Choice Woodshavings Pty Limited, and Ingham Institute for Applied Medical Research.
Memberships include Greater 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 as a Director in July 2006
Other current listed directorships:
None
Former listed directorships (last 3
years):
None
Special responsibilities:
Member of the Finance and Audit Committee (until 29 January 2021) and Member of the
Risk and Compliance Committee (from 29 January 2021)
Interests in shares:
Indirect interest in 145,556,000 ordinary shares and 126,142,300 convertible notes
23
Freedom Foods Group Limited
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Name:
Mr Timothy Bryan
Title:
Non-Executive Director (from 29 January 2021)
Qualifications:
BCom; CA, GAICD
Experience and expertise:
Tim is the Chief Executive Officer of the Perich Group. He was formerly managing partner
of the chartered accounting firm Kelly & Partners South West Sydney. Outside of the Perich
Group, Timothy holds a number of other directorships, which include Kids of Macarthur
Health Foundation and Ingham Institute for Applied Medical Research, where he also chairs
the finance and audit committee.
Other current listed directorships:
None
Former listed directorships (last 3
years):
None
Special responsibilities:
Former Chair of the Finance and Audit Committee (from 29 January 2021 to 22 March 2021)
and thereafter a Member, Chair of the Risk and Compliance Committee from 19 March 2021
and Member of the People and Culture Committee from 19 March 2021.
Interests in shares:
Indirect interest in 54,126 ordinary shares and 25,000 convertible notes
Name:
Ms Jane McKellar
Title:
Independent, Non-Executive Director (from 8 May 2020)
Qualifications:
MA (Hons) University of Aberdeen, GAICD
Experience and expertise:
Jane is an experienced non-executive director in both public and private companies in
Australia and the US, bringing deep international consumer, digital, brand and marketing
experiences to bear. Jane’s executive experience as both a CEO and Chief Marketing Officer
spans the consumer-focused FMCG, luxury and retail industries and she is one of the original
‘digital natives’ in Australia. She has held senior roles in Unilever, Microsoft, Elizabeth Arden
and Stila Corporation. Jane has extensive global experience, particularly in Asia, Europe and
North America and she has built a strong reputation over the years for leading teams and
transforming businesses in difficulty back to profitability and growth. Her key contributions
are in customer and consumer-focused business transformation, harnessing digital,
technology, brand and marketing to enhance business performance.
Other current listed directorships:
GWA Group Limited and McPhersons Limited
Former listed directorships (last 3
years):
Automotive Holdings Group
Special responsibilities:
Chair of the People and Culture Committee (formerly Remuneration Committee) and
member of the Finance and Audit Committee (from 29 January 2021) and the Risk &
Compliance Committee (from 29 January 2021).
Interests in shares:
Direct interest in 1,605 ordinary shares and 74,910 convertible notes.
Name:
Mr Stuart Black AM
Title:
Independent, Non-Executive Director (from 22 March 2021)
Qualifications:
FCA, FAICD, BA (Accounting)
Experience and expertise:
Stuart is a Chartered Accountant with extensive experience in business. He retired in 2013
as managing partner of a practice specialising in agribusiness to concentrate his time on
non-executive director roles. Stuart has over twenty years’ experience as an ASX non-
executive director. Stuart is a Past President of the Institute of Chartered Accountants of
Australia. He was the inaugural Chair and a past board member of the Accounting
Professional and Ethical Standards Board and served as the Australian representative on the
International Federation of Accountants SMP Committee. Stuart is former Chair of the
Chartered Accountants Benevolent Fund Limited and a former director of the Country
Education Foundation of Australia Limited. In 2012, Stuart was appointed a Member of the
Order of Australia for services to the profession of accounting, to ethical standards, as a
contributor to professional organisations and to the community.
Other current listed directorships:
Australian Agricultural Company Limited and Palla Pharma Limited
Former listed directorships (last 3
years):
NetComm Wireless Limited (appointed in 2013 and resigned in 2019).
Special responsibilities:
Chair of the Finance and Audit Committee (from 22 March 2021) and a member of the Risk
and Compliance Committee (from 22 March 2021).
Interests in shares:
Indirect interest in 25,000 convertible notes
24
Freedom Foods Group Limited
Directors' report
30 June 2021
Information on Directors who retired in FY21
Name:
Mr Perry R. Gunner
Title:
Chair of the Board and Non-Executive Director (until 29 January 2021)
Qualifications:
B.Ag.Sc, Grad Business Administration
Experience and expertise:
Perry is former Chair and CEO of Orlando Wyndham Wine Group and was appointed Chair
in July 2006
Other current listed directorships:
None
Former listed directorships (last 3
years):
Australian Vintage Ltd
Special responsibilities:
Member (and former Chair) of the Remuneration and Nomination Committee (now People
and Culture Committee), Finance and Audit Committee and Risk and Compliance
Committee (until 29 January 2021)
Interests in shares:
Direct interest in 164,139 ordinary shares and indirect interest in 1,123,960 ordinary
shares
Name:
Mr Ronald Perich
Title:
Non-Executive Director (until 29 January 2021)
Experience and expertise:
Ronald is joint Managing Director of Arrovest Pty Limited, Leppington Pastoral Co Pty Ltd,
one of Australia's largest dairy producers, and various other entities associated with Perich
Enterprises Pty Limited. He is also a business entrepreneur and former Director of United
Dairies Limited. He was appointed as a Director in April 2005
Other current listed directorships:
None
Former listed directorships (last 3
years):
None
Special responsibilities:
Member of the Risk and Compliance Committee (until 29 January 2021)
Interests in shares:
Indirect interest in 145,556,000 ordinary shares
Name:
Mr Trevor J. Allen
Title:
Independent Non-Executive Director (until 29 January 2021)
Qualifications:
B Comm (Hons), CA, FAICD
Experience and expertise:
Trevor has over 40 years' experience in the corporate and commercial sectors, primarily as
a corporate and financial adviser to Australian and international public and privately owned
companies. Trevor is an independent Non-Executive Director of Peet Limited and an
independent Non-Executive Director of Eclipx Group Limited. Trevor is also a Non-Executive
Director of the holding company of Real Pet Food Company. Prior to Trevor's Non-Executive
roles, he had senior executive positions in the investment banking and corporate advisory
sector, at SBC Warburg (now UBS), Baring Brothers Australia and KPMG. He was appointed
as a Director in July 2013
Other current listed directorships:
Peet Limited and Eclipx Group Limited
Former listed directorships (last 3
years):
Nil
Special responsibilities:
Chair of the Finance and Audit Committee and a member of the Risk and Compliance
Committee and Remuneration and Nomination Committee (now People and Culture
Committee) (until 29 January 2021).
Interests in shares:
Indirect interest in 139,925 ordinary shares
Notes:
'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 three years)' quoted above are directorships held in the last three years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
25
Freedom Foods Group Limited
Directors' report
30 June 2021
8. Company secretary
Mr Trevor Allen accepted the role of Company Secretary in an acting capacity from 23 June 2020 to 13 July 2020. Mr Scott Standen was
appointed Company Secretary from 13 July 2020 and concluded his interim role on 30 June 2021. Mr Justin Coss was appointed Group
General Counsel and Joint Company Secretary on 23 November 2020 and from 1 July 2021 is the sole Company Secretary for the Group.
9. 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 2021 and the number of meetings attended by each Director were:
Full Board
Finance and Audit
Committee
Risk and Compliance
Committee (ii)
People & Culture
Committee
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Perry Gunner
19
19
19
19
1
2
1
1
Michael Perich1
22
22
14
21
3
3
1
1
Anthony Perich2
22
26
10
19
1
1
-
-
Ronald Perich
17
19
-
-
1
2
-
-
Trevor Allen
19
19
19
19
0
2
1
1
Genevieve Gregor
26
26
22
23
4
4
1
1
Jane McKellar3
26
26
4
4
1
1
2
2
Timothy Bryan
7
7
4
4
2
2
1
1
Stuart Black
4
4
1
1
1
1
-
-
Michael Perich (Alternate)
4
4
-
-
1
1
-
-
Timothy Bryan (Alternate)
19
19
19
19
-
-
-
-
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
Notes:
1 Michael Perich attended the Finance and Audit and Risk and Compliance Committee meetings in his capacity as CEO from 6 August
2020.
2 Anthony Perich also attended 3 Finance and Audit Committee meetings as an observer after he ceased being a member of the
Committee.
3 Jane McKellar also attended 18 Finance and Audit and 3 Risk and Compliance Committee meetings as an observer prior to joining
these Committees.
In addition to the above-mentioned meetings, the Board met more frequently on an informal basis as required.
26
Freedom Foods Group Limited
Directors' report
30 June 2021
10. Remuneration Report (Audited)
Overview
This remuneration report for the year ended 30 June 2021 details the remuneration arrangements of the Group in accordance with the
requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C)
of the Act.
KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the
Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company.
Given the change in the finance structure of the Group, in the interests of investors and stakeholders, this Remuneration Report sets out
the design for the Company’s Executive KMP remuneration framework and governance in alignment with the Convertible Note
arrangement and stakeholder value creation.
10.1. KMP Remuneration Framework and Governance
10.1.1. Role of the People and Culture Committee in Remuneration Governance
The People and Culture Committee Charter states that:
The People and Culture Committee makes recommendations to the Board, in line with the Board Charter, to ensure that the Company:
•
has effective remuneration policies and practices in order to attract and retain high calibre Directors, the CEO and KMP for the
Company;
•
makes recommendations to the Board regarding the approval of rewards policies, practices and mechanisms for KMP and the
broader group of employees of the Company for the purpose of building optimal remuneration quantum and mix to enable the
Company to effectively attract and retain high calibre talent, and to ensure the Company’s remuneration practices remain
competitive relative to the market;
•
provides appropriate guidance to ensure that remuneration and nomination policies, practices and frameworks comply with ASX
Corporate Governance Principles and guidelines;
•
ensures remuneration and nomination practices are fair and align with industry benchmarks and changes to market
remuneration practices;
•
ensures remuneration strategies reward Board members, KMP and senior executives in line with performance and in a manner
that contributes to long-term shareholder value creation.
10.1.2. Remuneration Principles
The Group remuneration strategy is designed to attract, engage and retain talented people by aligning market competitive remuneration
with sustainable business performance.
The objectives are to have a remuneration framework that:
•
Aligns with shareholder/stakeholder value creation
•
Aligns with strategy and goal achievement
•
Is clear and simple
•
Attracts, retains, and motivates talented executives
•
Is always subject to Board approval in the interests of strong governance.
10.1.3. Engagement of Independent Remuneration Advisors to the Board
The FY22 STIP and LTIP performance measures are designed to drive the Company’s financial, operational and cultural transformation in
the short, medium and long term.
The Board of Freedom Foods Group Limited engaged independent advisors Ernst & Young (EY) to provide market guidance on the
proposed new business performance metrics and Short-Term Incentive (STIP) and Long-Term Incentive (LTIP) plans for FY22, to be
implemented as part of the Company’s recapitalisation and relisting on the Australian Securities Exchange (ASX). EY were not paid any
amount in FY21, given they are paid on completion of the work in FY22, and it is noted that supplementary guidance was obtained during
FY21 from:
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30 June 2021
•
Crichton + Associates, who were engaged to provide market guidance regarding Executive and Non-executive Director
remuneration, as well as guidance on employee equity schemes (and who were paid $14,477.11 in FY21)
•
and
•
HaRe Group, who were engaged to provide supplementary market guidance regarding Non-executive Director remuneration
(who were paid $660.00 including GST in FY21).
10.1.4. KMP Remuneration Framework and Executive Incentive Structure Supporting Stakeholder Outcomes
As mentioned previously, the executive incentive framework was re-designed for FY21 and was reviewed and refined for FY22 to support
the stages of transformation of the organisation - these are described below:
10.1.4. i. FY21
The FY21 remuneration framework changes were outlined in the FY20 annual report. Crichton + Associates were engaged by the Board
in FY20 to provide independent advice on the FY21 remuneration framework.
Until a detailed review was undertaken in the fourth quarter of FY20, the Group’s executive KMP’s were remunerated via fixed salary,
including remuneration and superannuation, plus long-term incentives delivered by way of market-priced options, subject to service and
EBITDA performance. No short-term incentives were provided. Approval was provided at the Annual General Meeting in November 2016
for the adoption and establishment of the Freedom Foods’ Equity Incentive Plan (EIP) to replace the Group’s then existing Employee
Share Option Plan (ESOP) for any new issue of securities under the LTIP. The ESOP was terminated in the year ending 30 June 2021. No
share scheme interests were issued under the EIP in FY21. Of note, all share scheme interests issued prior to FY21 have now vested or
lapsed.
The executive KMP remuneration framework for FY21 was adopted by the Board with the aim of setting employee and executive
remuneration that is competitive and appropriate for the markets in which the Group operates. This approach is in line with generally
accepted market practice standards and consistent with ASX Corporate Governance Guidelines. The principles of the Group’s revised
remuneration strategy for FY21 included:
•
Providing a market competitive fixed annual remuneration for all positions under a transparent framework and review
procedures;
•
Providing market competitive remuneration opportunities for intra-year performance if financial, customer and employee key
performance indicators (KPI) are met;
•
Linking executive rewards to shareholder value accretion by providing appropriate equity (or equivalent) incentives to selected
senior executives and employees linked to long-term company performance and core values;
•
Providing competitive total rewards to attract and retain appropriately skilled employees and executives;
•
Having a meaningful portion of remuneration ‘at risk’, dependent upon meeting pre-determined benchmarks, both short
(annual) and long term (3+ years);
•
Establishing appropriate, demanding performance hurdles for any executive equity incentive remuneration;
•
Driving the right senior leadership behaviours and outcomes to build a constructive culture through balanced scorecard
measures; and
•
Introducing malus forfeiture (claw back) guidelines to LTIP, addressing financial and non-financial matters. The strategy has been
drafted in such a way as to enable the Group to navigate the complexity of managing remuneration across varying job roles and
geographies.
It was also announced that salary reviews for Board approval will be undertaken each year. However, given the impacts of COVID-19 and
prevailing market conditions, no company-wide salary review or general increase pool was awarded across the business for FY21.
28
Freedom Foods Group Limited
Directors' report
30 June 2021
10.1.4. ii. FY22
In support of the recapitalisation and transformation, and under independent guidance from EY, the Committee reviewed the
remuneration framework again for FY22 and on 26 August 2021 the Board resolved to adopt new business performance metrics and a
new executive incentive framework., This describes the link between executive KMP incentives with the Company’s business plans and
objectives.
The new executive incentive framework for FY22 provides discrete performance measures for the STIP and LTIP in line with market
practice. This framework ensures short-term performance is assessed against operational and financial metrics and long-term
performance is assessed against value creation.
Under the new LTIP arrangement for FY22, all awards are to be awarded, deferred and paid in cash subject to achievement of key
performance criteria.
Key features of the new framework are depicted in the chart below and are described as follows:
The remuneration framework consists of fixed remuneration and an executive incentive structure. The executive incentive structure
comprises STIP and LTIP.
•
Performance hurdles for the STIP and LTIP will be set at the commencement of Year 1 of each performance period. The STIP and
LTIP are subject to discrete sets of performance metrics. Any award which does not vest lapses immediately and is not retested.
•
Performance is measured once over a one-year performance period for the STIP and once over a three-year performance period
for the LTIP.
•
Performance is weighted across safety, quality, financial, operational and cultural metrics to create a balanced scorecard
approach to assess remuneration.
10.1.5. Governance
•
Any STIP or LTIP payments are always to be approved by the Board and released after audited accounts are confirmed.
•
The board retains discretion to award any subsequent incentives in cash or equity.
•
Both STIP and LTIP may be subject to malus and/or clawback in cases of employee misconduct including but not limited to fraud;
gross misconduct; and solicitation of employee and/or customer for 12 months following termination. In addition, the LTIP is
only paid if the executive remains employed by the business and is not under notice, three years after the LTIP is initially granted.
•
The Board of Directors maintains absolute discretion over all invitations and awards (pay-outs) under any incentive scheme.
•
Performance gateways must be achieved for related incentives to be paid. Failure to achieve gateways will reduce related
incentive/s to zero.
10.1.6 KPIs and Balanced Scorecard
The design for the new Executive KMP STIP and LTIP ensures metrics are not replicated between short- and long-term incentives to avoid
the potential for “double dipping” on performance outcomes. Each metric is assessed individually, with threshold, target, and stretch
outcome paid on each line item in the scorecard, subject to the achievement of minimum gateways. The Company has adopted the
balanced scorecard framework to set performance targets and measure performance, with KPIs adopted across the following metrics:
•
Financial (50% of target): Includes cash conversion, EBIT, NPAT and return on assets.
•
Non-Financial (50% of target): Includes safety and quality targets, customer service and employee engagement
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Directors' report
30 June 2021
10.2 Key Management Personnel in this Report
Key management personnel are defined by AASB 124 Related Party disclosures. Directors, the Chief Executive Officer and executives that
have the authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly and are
responsible for the entity’s governance are classified as KMP.
The following persons acted as Directors and KMP of the Group during or since the end of FY21:
Name
Position
Period as KMP
Executive KMP
Michael Perich1
Chief Executive Officer
From 19 March 2021 (interim 6 August 2020 to 18
March)
Josée Lemoine2
Chief Financial Officer
From 19 February 2021
Stuart Muir3
Chief Operations Officer
From 12 April 2021
Timothy Moses
Head of Operations
From 1 July 2020 to 26 March 2021
Stephanie Graham
Acting Chief Financial Officer
From 1 July 2020 to 18 February 2021
Brendan Radford
Perry Gunner4
Trevor Allen5
Acting Chief Executive Officer
Executive Chairman
Interim Company Secretary/Executive Director
From 1 July 2020 to 6 August 2020
From 1 July 2020 to 6 August 2020
From 1 July 2020 to 13 July 2020
Non-executive Directors
Perry Gunner
Chair and Non-executive Director
1 July 2020 to 29 January 2021
Genevieve Gregor6
Chair and Independent Non-executive Director
NED Full Year / Chair from 29 Jan 2021
Anthony Perich AM
Deputy Chair and Non-executive Director
Full Year
Ronald Perich
Non-executive Director
1 July 2020 to 29 January 2021
Trevor Allen
Non-executive Director
1 July 2020 to 29 January 2021
Jane McKellar
Independent Non-executive Director
Full Year
Timothy Bryan7
Stuart Black AM3
Non-executive Director
Independent Non-executive Director
Full Year
From 22 March 2021
Michael Perich8
Alternate Non-executive Director to Ronald
Perich
1 July 2020 to 5 August 2020
Notes:
1 Michael Perich was interim CEO between 6 August 2020 and 18 March 2021, and prior to 6 August 2020, was Alternate Non-executive
Director to Ronald Perich. Michael Perich was also Chief Operating Officer on an interim basis between 30 July 2020 to 5 August 2020
and was not paid any additional remuneration during this period.
2 Josée Lemoine commenced as CFO from 19 February 2021, and prior to this was Financial Consultant, 23 November 2020 to 18 February
2021
3 Company commencement dates for Stuart Muir and Stuart Black AM
4 Perry Gunner was appointed Executive Chair for the period 23 June 2020 to 6 August 2020 (no additional remuneration was provided
for this period)
5 Trevor Allen was appointed Interim Company Secretary/Executive Director from 23 June 2020 until 13 July 2020 (no additional
remuneration was provided for this period)
6 Genevieve Gregor was appointed Independent Chair of the Board, effective 29 January 2021 and continues her role as Independent
Non-executive Director
7 Timothy Bryan was Alternate Non-executive Director to Anthony Perich AM from 1 July 2020 to 29 January 2021
8 Michael Perich ceased to be Alternate Non-executive Director to Ronald Perich on 6 August 2020
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10.3 The Link Between Performance and Executive KMP Remuneration
The Board is satisfied that any recommendations on the remuneration framework as adopted by the People and Culture Committee and
the Board in FY21 were made free from undue influence from any member of the KMP to whom the recommendations related.
For the period up to 30 June 2021, KMPs received fixed annual remuneration and performance-based remuneration in the form of cash
linked to key milestones achieved by the business. These key milestones included variable remuneration awards to KMP who have
contributed significant effort and expertise to finalising the recapitalisation of the business, completing the sale of the cereal and snacks
business and the organisation turn around. The tables below provide the notations regarding any such Executive KMP awards.
The earnings of the Group for the five years to 30 June 2021 are summarised below:
20211
2020 restated1 2019 restated
20183
20173
$'000
$'000
$'000
$'000
$'000
Net sales revenue
559,068
516,651
461,768
Not
Not
Adjusted Operating EBITDA2
22,357
(53,988)
(88,482)
restated
restated
(Loss)/profit after income tax
(38,775)
(136,361)
(145,827)
Notes:
1 Earnings from continuing operations.
2 Adjusted for non-trading and non-recurring items (including restructuring costs, product recall claim and unrealised foreign exchange
loss), pre AASB 16. It is a non-IFRS measure as contemplated in ASIC Regulatory Guide 230 Disclosing non-IFRS financial information
(RG230). Operating EBITDA is a term defined in the offer letters to employees which is used by management and directors as a key
measure of assessing the financial performance of the Group and individual segments. The Operating EBITDA is equivalent to the
Adjusted Operating EBITDA as set out in the directors’ report excluding AASB16 adjustments i.e. Adjusted Operating EBITDA (pre
AASB16).
3 Restatement of the FY19 revenue and Adjusted Operating EBITDA has consequently resulted in the prior year announced results being
non-comparable. These amounts have therefore not been restated.
Adjusted Operating EBITDA
The following table adjusts EBITDA for various non-trading and non-recurring items:
Continuing Operations
30 June 21
30 June 20
$'000
$'000
EBITDA
15,786
(62,146)
Additional inventory provision
-
14,758
Product recall costs
(998)
-
Restructuring expenses
9,216
1,310
Litigation
7,377
-
Additional debtor provisioning
-
3,013
Acquisition costs
-
861
Discount charge - limited recourse facility
1,319
1,471
Unrealised foreign exchange loss
770
(8)
Employee incentives (FY20: share-based payments)
753
(417)
Other non-trading expenses
126
5
Adjusted Operating EBITDA (post AASB 16)
34,350
(41,153)
Adjusted Operating EBITDA (pre AASB 16)
22,357
(53,988)
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Directors' report
30 June 2021
10.4 Executive KMP Remuneration Mix
Salary reviews for Board approval will be undertaken each year. KMP salary increases are at the discretion of the Board.
The following remuneration mix is recommended by level:
Position
Fixed
Remuneration (FR) Short Term Incentive Plan (STIP)
Long Term
Incentive Plan
(LTIP)
Total Targeted
Remuneration (TTR)
Chief Executive Officer1
Up to 50%
Up to 25%
Up to 25%
100%
Other KMP (CFO, COO)
Up to 60%
Up to 20%
Up to 20%
100%
Notes:
1 While CEO performance and accountability remains aligned with the business performance metrics of the Group, the Chief Executive
Officer, Michael Perich, elected not to participate in the STIP and LTIP in FY21 and FY22.
The Board has approved an executive remuneration malus and claw back provision in relation to performance-based remuneration.
The Committee will review the performance measures, remuneration framework and associated guiding principles once per annum, or
more frequently if required for a specific purpose. The intention is to review the Executive KMP remuneration framework in future to
incorporate a higher at-risk component (as a percentage of overall package), if appropriate.
10.5 Executive KMP Remuneration and STIP and LTIP outcomes
In making an assessment of the KMP, a review of the roles performed by KMP is undertaken each year. This review takes into
consideration KMP ability to plan, direct and control the principle activities of the Group.
The statutory disclosures required by the Corporations Act 2001 (Cth), as amended, and its regulations are set out below.
The tables below set out the total cash value of remuneration realised for the KMP and provide shareholders with details of the “take-
home” pay received/receivable during the year. These earnings include cash salary, and where applicable, other benefits, directors’ fees,
bonus, superannuation and the value of shares issued to, or acquired on behalf of KMP following the vesting and exercise of options
during the financial year. The tables do not include the accounting value of share-based payments consisting of options granted in the
current and prior years required for statutory purposes. This is because those share-based payments are dependent on the achievement
of performance hurdles and so may or may not be realised. It is noted that all past options plans have now vested or expired, and there
are no remaining employee options plans.
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10.6 Executive KMP Remuneration Tables
Non-statutory disclosures are as follows:
Executive KMP FY2021
Salary
(a)
Other benefits
(b)
Bonus
(c)
Superannuation
Value of
exercised
options
(d)
Total
$
$
$
$
$
$
Michael Perich1
657,342
-
-
21,694
-
679,036
Josée Lemoine2
204,000
-
360,000
5,789
-
569,789
Stuart Muir2
96,214
-
-
5,424
-
101,638
Timothy Moses
259,129
25,913
-
16,270
-
301,312
Stephanie Graham
178,764
20,873
-
14,576
-
214,213
Brendan Radford
133,563
-
-
5,975
-
139,538
Perry Gunner3
-
-
-
-
-
-
Trevor Allen4
-
-
-
-
-
-
1,529,012
46,786
360,000
69,728
2,005,526
Notes:
1 Michael Perich was an Executive KMP effective 6 August 2020, therefore no prior year comparison is shown.
2 Josée Lemoine and Stuart Muir commenced employment in FY21, therefore no prior year comparison is shown. Amounts reflect time
in KMP role.
3 Perry Gunner appointed Executive Chair from 23 June 2020 until 6 August 2020 (with no additional remuneration)
4 Trevor Allen was appointed Interim Company Secretary/Executive Director from 23 June 2020 until 13 July 2020 (with no additional
remuneration)
(a) cash salary.
(b) other benefits include employment entitlements paid – one-off cash payment in recognition of additional hours worked, noting
also that Timothy Moses and Stephanie Graham were granted 6.5 days each of leave for time in lieu in the period.
(c) bonus amounts for FY21 were awarded at Board discretion. The STIP and LTIP amounts awarded to Josée Lemoine are: $180,000
STIP and $180,000 LTIP, representing a 100% payout post confirmation of audited accounts on the STIP and where the LTIP
remains subject to the 3-year retention period being met
(d) no options were awarded or exercised in the period and all share scheme interests issued prior to FY21 have now
lapsed.
33
Freedom Foods Group Limited
Directors' report
30 June 2021
(a) Cash salary.
(b) Other benefits include employment entitlements paid.
(c) There were no cash bonuses earned or paid
(d) value of exercised options.
The tables below are calculated in accordance with statutory obligations and Australian Accounting Standards. The amounts in the
“Share-based payments” column relate to the component of the fair value of awards from the current year and prior year made under
the various incentive plans attributable to the year measured in accordance with AASB 2 Share-based payments.
Executive KMP 2020
Salary
(a)
Other benefits
(b)
Bonus
(c)
Superannuation
Value of
exercised
options
(d)
Total
$
$
$
$
$
$
Executive Director:
Rory J.F. Macleod (until 29 Jun
2020)
547,397
-
-
21,003
-
568,400
-
-
-
-
-
-
Other Key Management Personnel:
-
-
-
-
-
-
Amine Haddad (until 9 Jun 2020)
519,811
-
-
19,252
945,000 1,484,063
Campbell Nicholas (until 23 Jun
2020)
359,622
-
-
21,003
-
380,625
Timothy Moses
344,397
-
-
21,003
1,216,800 1,582,200
Brendan Radford
(from 24 Jun 2020)
8,057
-
-
404
-
8,461
Stephanie Graham
(from 24 Jun 2020)
4,990
-
-
404
-
5,394
1,784,274
-
-
83,069
2,161,800 4,029,143
34
Freedom Foods Group Limited
Directors' report
30 June 2021
Statutory disclosures are as follows:
Short Term Benefits
Post-
employment
benefits
Long
Term
Benefits
Long Term
incentives*
Executive KMP
2021
Salary
Other
benefits
Short
Term
Incentives
Superannuation
Long
Service
Leave
Termin-
ation
Benefits
Cash (paid
in 3 yrs)
Total
$
$
$
$
$
$
$
$
Key Management
Personnel:
Michael Perich1
657,342
-
-
21,694
-
-
-
679,036
Josée Lemoine2
204,000
-
180,000
5,789
-
-
180,000
569,789
Stuart Muir
96,214
-
-
5,424
-
-
-
101,638
Timothy Moses3
259,129
25,913
-
16,270
-
241,8144
-
543,126
Stephanie Graham3
178,764
20,873
-
14,576
-
22,676
-
236,889
Brendan Radford3
133,563
-
-
5,975
-
39,869
-
179,407
Perry Gunner5
-
-
-
-
-
-
-
Trevor Allen6
-
-
-
-
-
-
-
1,529,012
46,786
180,000
69,728
304,359
180,000
2,309,885
Notes:
1 While CEO performance and accountability remains aligned with the business performance metrics of the Group, the Chief Executive
Officer, Michael Perich, elected not to participate in the STIP and LTIP in FY21 and FY22.
2 bonus amounts for FY21 were awarded at Board discretion. The STIP and LTIP amounts awarded to Josée Lemoine are: $180,000 STIP
and $180,000 LTIP, representing a 100% payout post confirmation of audited accounts on the STIP and where the LTIP remains
subject to the 3-year retention period being met
3 Eligible termination payments: Timothy Moses – redundancy payments; Stephanie Graham – termination release; Brendan Radford –
payment in lieu of notice.
4 Timothy Moses was also paid out $52,063 in Long Service Leave benefits at termination of his employment (the amounts were accrued
in FY20)
5 Perry Gunner was appointed Executive Chair for the period 23 June 2020 to 6 August 2020 (with no additional remuneration)
6 Trevor Allen was appointed Interim Company Secretary/Executive Director from 23 June 2020 until 13 July 2020 (with no additional
remuneration)
No options were awarded or exercised in the period, all share scheme interests issued prior to FY21 have now lapsed.
35
Freedom Foods Group Limited
Directors' report
30 June 2021
Short Term benefits
Post-
employment
benefits
Long Term
Benefits
Share-based
payments/
Service rights
Executive KMP 2020
Salary
Other
benefits
Short Term
Incentives
Superannuation
Long Service
Leave
Options
Total
$
$
$
$
$
$
$
Executive Director:
Rory J. F. Macleod
547,397
-
-
21,003
64,193
(905,597) 2
(273,004)
Other Key Management
Personnel:
Amine Haddad
519,811
-
-
19,252
86,679
(543,358) 2
82,384
Campbell Nicholas
359,622
-
-
21,003
-
(4,762) 2
375,863
Timothy Moses
344,397
-
-
21,003
57,525 1
188,555
611,480
Brendan Radford
8,057
-
-
404
-
-
8,461
Stephanie Graham
4,990
-
-
404
-
-
5,394
Michael Perich
-
-
-
-
-
-
-
Perry Gunner3
-
-
-
-
-
-
-
Trevor Allen4
-
-
-
-
-
-
-
1,784,274
-
-
83,069
208,397
(1,265,162)
810,578
Notes:
1 this amount relates to accrual of Long Service Leave, allowing for up to 10 years of service
2 the share-based benefits noted for FY20 are negative due to the reversal of previously recognised share-based expense arising from
forfeiture of share options granted to Rory Macleod, Campbell Nicholas and Amine Haddad.
3 Perry Gunner was appointed Executive Chair for the period 23 June 2020 to 6 August 2020 (with no additional remuneration)
4 Trevor Allen was appointed Interim Company Secretary/Executive Director from 23 June 2020 until 13 July 2020 (with no additional
remuneration)
36
Freedom Foods Group Limited
Directors' report
30 June 2021
Executive KMP shareholdings
Of note, no share scheme interests were issued under the Executive Incentive Plan in FY21 and all share scheme interests issued prior
to FY21 have now lapsed.
The number of shares in the Company held during the financial year by each Executive KMP of the Group, including their related parties,
is set out below:
Balance at the
start of the
year
Received on
exercise of
options
Dividend
reinvestment
plan
Other
changes
during the
year
Balance at the
end of the year
Number of ordinary shares
Timothy Moses (ceased 26 March 2021)
321,032
0
0
(260,000)2
61,032
Michael Perich1
145,556,000
-
-
-
145,556,000
145,877,032
-
-
(260,000)
145,617,032
Notes:
1 Anthony M. Perich, Ronald Perich and Michael Perich (as Interim Chief Executive Officer from 6 August 2020) are Directors of Arrovest
Pty Limited, an entity holding direct interest in the Group.
2 Sold on 25 March 2021
Balance at
the start of
the year
Notes
acquired
Notes
converted
Other
changes
during the
year
Balance at the
end of the year
Number of convertible notes
Michael Perich1
-
126,142,300
-
-
126,142,300
-
126,142,300
-
-
126,142,300
Notes:
1 Anthony M. Perich, Ronald Perich and Michael Perich (as Interim Chief Executive Officer from 6 August 2020) are Directors of
Arrovest Pty Limited, an entity holding direct interest in the Group.
37
Freedom Foods Group Limited
Directors' report
30 June 2021
10.7 Non-executive Director Remuneration
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 at the 2019 AGM was not
to exceed $1,050,000 in total. Total fees paid to Non-executive Directors for FY21 was $703,660 (excluding any exertion payments
(FY20: $702,172). To align director interests with shareholder/stakeholder interests, the Directors are encouraged to hold shares in the
Company. The Executive Incentive Plan (EIP) allows the Company to grant a range of different salary sacrifice share scheme interests to
all directors (excluding Ronald Perich and Anthony M. Perich AM and their Alternates), although no arrangements have been put in
place to date.
Non-executive Directors do not receive performance-related remuneration. Directors' fees cover all main Board activities including
Committee Fees. Other than contributions towards superannuation funds, there are no termination or retirement benefits available to
Non-executive Directors. From time to time, the Board may deem it appropriate for Non-executive Directors to receive Company
exertion payments or securities as consideration for work performed over-and-above the typical duties of a Director. From time to
time, the Board may deem it be acceptable for past Directors to be engaged and paid as consultants to assist the Company.
The Directors volunteered to reduce their Board fees by 20% for FY21 (commencing 1 July 2020 to 30 June 2021).
Short Term
Benefits
Short Term
Benefits
Short Term
Benefits
Post-Employment
Benefits
Long Term
Benefits
Share-based
payments
Non-Executive Directors FY21
Director's
Fees
Committee
Chair Fee6
Short Term
Incentives
Superannuation
Long Service
Leave
Options
Total
$
$
$
$
$
$
$
Perry Gunner1
68,189
-
-
6,478
-
-
74,667
Genevieve Gregor2
138,659
1,288
-
10,006
-
-
149,953
Anthony Perich AM
117,199
-
-
11,134
-
-
128,333
Ronald Perich1
59,665
-
-
5,668
-
-
65,333
Trevor Allen1
64,523
-
-
810
-
-
65,333
Jane McKellar
103,903
3,805
-
8,097
-
-
115,805
Timothy Bryan3
57,833
3,805
-
5,856
-
-
67,494
Stuart Black AM 4
28,718
2,663
-
2,981
-
-
34,362
Michael Perich5
2,174
206
2,380
640,863
11,561
-
51,236
-
-
703,660
Notes:
1 Perry Gunner, Ronald Perich and Trevor Allen retired from the Board on 29 January 2021
2 Genevieve Gregor was an Independent Non-executive Director for the full year and was appointed as Chair effective 29 January 2021,
and her remuneration reflects time in the Chair role
3 Timothy Bryan was appointed as Non-executive Director effective 29 January 2021 and was an Alternate Director to Ronald Perich up
to that date
4 Stuart Black AM was appointed as Independent Non-executive Director effective 22 March 2021 and his remuneration reflects time
in the role
5 Michael Perich was appointed as Chief Executive Officer from 6 August 2020 and was not an Alternate Director from that date.
6 Committee Chair fees were introduced in FY21 and were paid as pro-rata for the period February to June 2021.
Board exertion payments
In recognition of significant additional contributions made during FY21 in their roles as part of the recapitalisation process, the Board
determined to pay exertion payments of $300,000 to Board Chair Ms Genevieve Gregor and $150,000 to the Chair of the People &
Culture Committee Ms Jane McKellar. Additional payments are in recognition of additional days worked by Ms Gregor and Ms McKellar
during the recapitalisation process above those typically required of a Director. Ms Gregor and Ms McKellar agreed to reinvest the after
tax amount of the additional payments to acquire Notes under the wholesale investor offer. Ms Gregor and Ms McKellar acquired Notes
up to the after-tax amounts of the exertion payment (i.e. up to approximately 150,000 for Ms Gregor and up to approximately 75,000
for Ms McKellar).
38
Freedom Foods Group Limited
Directors' report
30 June 2021
FY20
Short Term
Benefits
Short Term
Benefits
Short Term
Benefits
Post
Employment
Benefits
Long Term
Benefits
Share-based
payments
Non-executive Directors FY20
Director's
Fees
Other
Benefits
Short Term
Incentives Superannuation
Long Service
Leave
Options
Total
$
$
$
$
$
$
$
Perry R. Gunner
143,836
-
-
13,664
-
-
157,500
Anthony Perich AM
134,703
-
-
12,797
-
-
147,500
Ronald Perich
125,571
-
-
11,929
-
-
137,500
Trevor J. Allen
125,571
-
-
11,929
-
-
137,500
Genevieve Gregor1
41,798
-
-
3,971
-
-
45,769
Jane McKellar2
18,522
-
-
1,760
-
-
20,282
Michael Perich (Alternate)3
32,443
-
-
3,082
-
-
35,525
Timothy Bryan (Alternate)
18,809
-
-
1,787
-
-
20,596
641,253
-
-
60,919
-
-
702,172
Notes:
1 Genevieve Gregor was appointed as Independent Non-executive Director effective 2 March 2020 and her remuneration reflects
time in the role.
2 Jane McKellar was appointed as Independent Non-executive Director effective 8 May 2020 and her remuneration reflects time in
the role.
3 Michael Perich was an Executive KMP from 6 August 2020.
Non-Executive Director shareholdings
The number of shares in the Company held during the financial year by each Non-executive Director of the Group, including their
personally related parties, is set out below:
Balance at the
start of the
year
Received on
exercise of
options
Dividend
reinvestment
plan
Other changes
during the year
Balance at the
end of the year
Number of ordinary shares
Perry R. Gunner
1,288,099
-
-
-
1,288,099
Anthony M. Perich AM4
145,556,000
-
-
-
145,556,000
Ronald Perich4
145,556,000
-
-
-
145,556,000
Trevor Allen
139,925
-
-
-
139,925
Genevieve Gregor
23,500
-
-
-
23,500
Jane McKellar
1,605
-
-
-
1,605
Timothy Bryan
54,126
-
-
-
54,126
147,063,255
-
-
-
147,063,255
Notes:
4 Anthony M. Perich, Ronald Perich and Michael Perich (as Interim Chief Executive Officer from 6 August 2020) are Directors of Arrovest
Pty Limited, an entity holding direct interest in the Group. For the purposes of this table, this interest is only included once in the
total.
39
Freedom Foods Group Limited
Directors' report
30 June 2021
Balance at the
start of the
year
Notes acquired
Notes
converted
Other changes
during the year
Balance at the
end of the year
Number of convertible notes
Anthony M. Perich AM1
-
126,142,300
-
-
126,142,300
Ronald Perich1
-
126,142,300
-
-
126,142,300
Genevieve Gregor
-
150,000
-
-
150,000
Jane McKellar
-
74,910
-
-
74,910
Timothy Bryan
-
25,000
-
-
25,000
Stuart Black
-
25,000
-
-
25,000
-
126,417,210
-
-
126,417,210
Notes:
1 Anthony M. Perich, Ronald Perich and Michael Perich (as Interim Chief Executive Officer from 6 August 2020) are Directors of Arrovest
Pty Limited, an entity holding direct interest in the Group. For the purposes of this table, this interest is only included once in the
total.
Balance at the
start of the
year
Options
acquired
Options
exercised
Other changes
during the year
Balance at the
end of the year
Number of listed options
Genevieve Gregor
-
7,298
-
-
7,298
-
7,298
-
-
7,298
This completes the audited remuneration report
40
Freedom Foods Group Limited
Directors' report
30 June 2021
11. Indemnity and insurance of officers
Under the Company’s Constitution, to the maximum extent permitted by law, the Company indemnifies the officers and former officers
of the Company against all losses, liabilities, costs, charges and expenses incurred by the officer in the execution of the officer’s duties
as an officer of the Company.
The Company has entered a Deed of Access and Indemnity with each of its Directors and officers (each an Officer). This Deed:
•
indemnifies the Officer to the maximum extent permitted by law against liabilities incurred by the Officer arising from the
person’s position as an Officer of the Company;
•
requires the Company to maintain, and pay the premium for, a D&O insurance policy in respect of the Officer; and
•
provides the Officer access to books of the Company for a purpose permitted by the Deed.
During the financial year, the Group paid premiums to insure each of the Officers against liabilities for costs and expenses incurred by
them in defending any legal proceedings arising out of their conduct while acting in the capacity of an Officer of the Group. The contract
of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not, during the financial year, in respect of any person who is or has been an officer of the Company, indemnified or
agreed to indemnify that person in respect of any liability described in section 199A(2) or (3) of the Corporations Act 2001 (Cth).
12. 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.
13. 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.
14. 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 43 to the consolidated 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 43 to the consolidated 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.
15. Rounding of amounts
The Group is of a kind referred to in Australian Securities and Investments Commission (ASIC) Corporations (Rounding in
Financial/Directors' Reports) Instrument 2016/191, dated 24 March 2016 and in accordance with that Corporations Instrument
amounts in the Directors' Report are rounded off to the nearest thousand dollars, unless otherwise indicated.
41
Freedom Foods Group Limited
Directors' report
30 June 2021
16. 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 page 43.
This report is made in accordance with a resolution of Directors, pursuant to section 306(3)(a) of the Corporations Act 2001.
On behalf of the Directors
___________________________
Genevieve Gregor
Chair
30 August 2021
Sydney
42
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
30 August 2021
Dear Board Members,
Auditor’s Independence Declaration to 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 2021, 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 faithfully
DELOITTE TOUCHE TOHMATSU
David White
Partner
Chartered Accountants
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
The Board of Directors
Freedom Foods Group Limited
80 Box Road
Taren Point NSW 2229
43
Freedom Foods Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2021
Consolidated
Note
2021
2020 restated1
$'000
$'000
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Revenue
Revenue from sale of goods
5
559,068
516,651
Cost of sales
(461,763)
(503,357)
Gross margin
97,305
13,294
Selling and marketing expenses
(22,474)
(28,989)
Distribution expenses
(43,281)
(39,430)
Gross profit
31,550
(55,125)
Other income/(expense)
6
19,332
(191)
Expenses
Product development expenses
(1,831)
-
Expected credit losses
10
347
(3,080)
Administrative expenses
7
(47,318)
(31,334)
Impairment of right of use assets
16
-
(3,793)
Impairment of non-financial assets
7
(1,910)
(21,930)
Net finance costs
7
(39,535)
(21,595)
Share of profits/(losses) of associates accounted for using the equity method
14
607
586
Loss before income tax (expense)/benefit from continuing operations
(38,758)
(136,462)
Income tax (expense)/benefit
25
(17)
101
Loss after income tax (expense)/benefit from continuing operations
(38,775)
(136,361)
Loss after income tax expense from discontinued operations
32
(14,402)
(39,297)
Loss after income tax (expense)/benefit for the year attributable to the owners of
Freedom Foods Group Limited
(53,177)
(175,658)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
(Loss) / gain on revaluation of land and buildings, net of tax
31
(30)
411
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
31
623
137
Other comprehensive income for the year, net of tax
593
548
Total comprehensive income for the year attributable to the owners of Freedom Foods
Group Limited
(52,584)
(175,110)
44
Freedom Foods Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2021
Consolidated
Note
2021
2020 restated
$'000
$'000
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Total comprehensive income for the year is attributable to:
Continuing operations
(38,182)
(136,195)
Discontinued operations
(14,402)
(38,915)
(52,584)
(175,110)
1Refer to Note 3 for detailed information on restatement of comparatives arising from change in accounting standards.
Cents
Cents
Earnings per share for loss from continuing operations attributable to the owners of
Freedom Foods Group Limited
Basic earnings per share
8
(13.99)
(49.69)
Diluted earnings per share
8
(13.99)
(49.69)
Earnings per share for loss from discontinued operations attributable to the owners of
Freedom Foods Group Limited
Basic earnings per share
8
(5.20)
(14.32)
Diluted earnings per share
8
(5.20)
(14.32)
Earnings per share for loss attributable to the owners of Freedom Foods Group Limited
Basic earnings per share
8
(19.19)
(64.01)
Diluted earnings per share
8
(19.19)
(64.01)
45
Freedom Foods Group Limited
Consolidated statement of financial position
As at 30 June 2021
Consolidated
Note
2021
2020 restated1
$'000
$'000
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
Assets
Current assets
Cash and cash equivalents
9
31,668
17,167
Trade and other receivables
10
50,141
52,101
Inventories
11
48,358
63,674
Derivative financial instruments
12
-
2,504
Prepayments
3,624
2,804
133,791
138,250
Non-current assets classified as held for sale
32
6,464
-
Total current assets
140,255
138,250
Non-current assets
Financial assets at fair value through other comprehensive income
13
5,857
-
Investments accounted for using the equity method
14
22,684
27,934
Property, Plant and Equipment
15
253,575
293,742
Right of use assets
16
86,534
172,304
Intangibles
17
29,764
30,599
Total non-current assets
398,414
524,579
Total assets
538,669
662,829
Liabilities
Current liabilities
Trade and other payables
18
67,464
111,011
Payable to related parties
18
1,103
245
Bank borrowings
20
24,316
292,324
Lease liabilities
19
1,427
2,304
Derivative financial instruments
21
-
2,329
Provisions
27
5,888
6,557
Total current liabilities
100,198
414,770
Non-current liabilities
Bank borrowings
22
74,597
-
Convertible notes
23
251,006
-
Lease liabilities
24
111,047
192,341
Provisions
28
328
1,641
Total non-current liabilities
436,978
193,982
Total liabilities
537,176
608,752
Net assets
1,493
54,077
Equity
Issued Capital
29
598,712
598,712
Reserves
31
(60,378)
(55,851)
Accumulated losses
(536,841)
(488,784)
Total equity
1,493
54,077
1Refer to Note 3 for detailed information on restatement of comparatives arising from change in accounting standards.
46
Freedom Foods Group Limited
Consolidated statement of cash flows
For the year ended 30 June 2021
Consolidated
Note
2021
2020 restated1
$'000
$'000
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
Cash flows from operating activities
Receipts from customers (inclusive of GST)
596,693
574,782
Payments to suppliers and employees (inclusive of GST)
(602,216)
(649,570)
(5,523)
(74,788)
Payments for restructuring expenses
(15,095)
-
Interest received
-
672
Interest on lease liabilities paid
(11,262)
(11,932)
Other interest and finance costs paid
(20,917)
(12,629)
Net cash used in operating activities
41
(52,797)
(98,677)
Cash flows from investing activities
Payments for property, plant and equipment
42
(2,658)
(19,258)
Proceeds from disposal of business
32
16,158
-
Investment in associates and joint ventures
14
-
(4,413)
Net cash from/(used in) investing activities
42
13,500
(23,671)
Cash flows from financing activities
Proceeds from issue of equity instruments of the company
29
-
3,555
Payment of share issue costs
-
(252)
Dividends paid
30
-
(2,659)
Proceeds from issue of convertible notes
23
265,000
-
(Repayments) / proceeds from bank borrowings
(196,785)
86,330
Payments for transaction costs related to issue of convertible notes
(8,963)
-
Payments for other finance related transaction costs
(1,214)
-
Repayment of leases
(4,240)
(2,844)
Net cash from financing activities
42
53,798
84,130
Net increase/(decrease) in cash and cash equivalents
14,501
(38,218)
Cash and cash equivalents at the beginning of the financial year
17,167
55,385
Cash and cash equivalents at the end of the financial year
9
31,668
17,167
Refer to Note 41 for non-cash investing and financing activities.
1Refer to Note 3 for detailed information on restatement of comparatives arising from change in accounting standards.
47
Freedom Foods Group Limited
Consolidated statement of changes in equity
For the year ended 30 June 2021
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
Total equity
Issued capital
Reserves
Accumulated
losses
Consolidated
$'000
$'000
$'000
$'000
Balance at 1 July 2019
589,123
(44,750)
(309,716)
234,657
Prior year restatement (note 3)
-
-
(5,772)
(5,772)
Balance at 1 July 2019 - restated
589,123
(44,750)
(315,488)
228,885
Loss after income tax benefit for the year
-
-
(175,658)
(175,658)
Other comprehensive income for the year, net of tax
-
548
-
548
Total comprehensive income for the year
-
548
(175,658)
(175,110)
Issue of ordinary shares in accordance with the dividend
reinvestment plan (note 29)
3,555
-
-
3,555
Issue of ordinary shares from an entitlement offer (note 29)
6,211
-
-
6,211
Share issue costs (note 29)
(252)
-
-
(252)
Related income tax
75
-
-
75
Share based payments (note 40)
-
(11,649)
11,232
(417)
Dividends paid (note 30)
-
-
(8,870)
(8,870)
Balance at 30 June 2020
598,712
(55,851)
(488,784)
54,077
Total equity
Issued capital
Reserves
Accumulated
losses
Consolidated
$'000
$'000
$'000
$'000
Balance at 1 July 2020
598,712
(55,851)
(488,784)
54,077
Loss after income tax expense for the year
-
-
(53,177)
(53,177)
Other comprehensive income for the year, net of tax
-
593
-
593
Total comprehensive income for the year
-
593
(53,177)
(52,584)
Land and buildings revaluation (note 31)
-
(3,518)
3,518
-
Share based payments (note 40)
-
(1,602)
1,602
-
Balance at 30 June 2021
598,712
(60,378)
(536,841)
1,493
48
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note
Notes to the consolidated financial statements
Page
Significant accounting policies, judgements and restatements
1
General information
51
2
Significant accounting policies
51
3
Restatement of comparatives
59
Financial performance
4
Operating segments
62
5
Revenue
65
6
Other gains/(losses)
65
7
Expenses
65
8
Earnings per share
68
Current assets
9
Cash and cash equivalents
69
10
Trade and other receivables
69
11
Inventories
71
12
Derivative financial instruments
71
13
Financial assets at fair value through other comprehensive income
71
Non-current assets
14
Investments accounted for using the equity method
72
15
Property, plant and equipment
74
16
Right of use assets
76
17
Intangible assets
78
Current liabilities
18
Trade and other payables
81
18
Payable to related parties
81
19
Lease liabilities
82
20
Bank borrowings
82
21
Derivative financial instruments
82
27
Provisions
89
Non-current liabilities
22
Bank borrowings
82
23
Convertible loan notes
84
24
Lease liabilities
86
28
Provisions
90
Equity
29
Issued Capital
90
30
Dividends
92
31
Reserves
92
49
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note
Notes to the consolidated financial statements
Page
Other
25
Income tax expense/(benefit)
89
26
Deferred tax
90
32
Discontinued operations
94
33
Financial instruments
96
34
Capital commitments and contingent liabilities
101
35
Interests in subsidiaries
103
36
Deed of cross guarantee
103
37
Parent entity information
105
38
Related party transactions
106
39
Key management personnel disclosures
108
40
Share-based payments
108
41
Reconciliation of loss after income tax to net cash used in operating activities
110
42
Reconciliation of assets and liabilities arising from investing and financing activities
110
43
Remuneration of auditors
113
44
Events after the reporting period
113
50
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 1. General information
The financial statements of Freedom Foods Group Limited ("Group" or "Company") for the year ended 30 June 2021 were authorised
for issue in accordance with resolution of Directors on 30 August 2021. The Directors have the power to amend, restate and reissue the
financial statements.
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'.
Effective 2 August 2021, the Company's share options are also trading on ASX under the symbol 'FNPO'.
The nature of the operations and principal activities of the Group are described in note 4. Discontinued operations' results are shown
on one line in the Statement of profit and loss for both FY21 and FY20 with the results of the continuing operations reflected above
that line. Both the Statement of financial position and cash flows reflect the consolidated results.
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 in the consolidated financial statements, unless
otherwise stated.
The following accounting policies have been adopted in the preparation and presentation of the financial statements.
(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 refers to 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 statements of the Group have been prepared as a going concern 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 Company is of the kind referred to in the Australian Securities and Investments Commission Corporations (Rounding in Financial/
Directors' Reports) Instrument 2016/191, relating to the "rounding off" of amounts in the financial statements are rounded off to the
nearest thousand dollars, unless otherwise indicated.
The financial statements are presented in Australian dollars.
Going concern
The Group has prepared the financial statements for the year ended 30 June 2021 on the going concern basis, which assumes continuity
of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
The Group made a FY21 loss after tax of $53.2m (FY20 restated loss of $175.7m). Net cash outflows from operating activities in FY21
were $52.8m (FY20 $98.7m). The losses incurred in the year ended 30 June 2021 were anticipated by management as the business is
restructured and includes $27.9m of recapitalisation, financial restatement, litigation and redundancy expenses.
At 30 June 2021, the Group had net current assets of $40.1m (FY20: net current liabilities of $276.5m), net assets of $1.5m (FY20:
$54.1m). The net assets at 30 June 2021 included $251m in respect of convertible notes which were marked to market as per the
accounting standard requirements. The convertible notes will cease to be a liability at such time when the noteholders convert the
notes into equity or are repaid (refer to note 23).
51
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
In response to the financial issues affecting the Group, the Directors and management have implemented and are continuing to
implement decisive actions to stabilise and transform the business.
The successful completion of the capital raising marked an important step towards the Group's financial turnaround, as the new funding
arrangements provide a more flexible capital structure to support the Group's transformation. From the proceeds raised from the
convertible notes issue of $265m, the Group applied $231m towards repayment of senior term, senior revolving and subordinated
debt. The balance of the proceeds provided working capital of $34m for general corporate purposes and to pay fees and expenses
associated with the recapitalisation. Following completion of the capital raising, while the aggregate level of debt will not reduce as the
convertible notes are classified as debt for financial reporting purposes, the Group expects its senior leverage and finance costs to
reduce over time as the business performance improves and the convertible notes are either converted to equity or repaid.
As part of the recapitalisation, the Group entered into a new two year, $36m senior secured revolving facility with its Senior Financiers
whereas the Group's existing equipment financing facilities and debtor financing facilities remained in place on substantially similar
terms. The cash at bank combined with the available headroom in the new $36m revolving credit facility and the debtor financing
facilities of $12m are considered by the Board and management to provide the Group with sufficient liquidity to cater for the day to
day operations of the business. In addition, the Group’s financial performance is expected to continue to improve in FY22 and result in
positive operating cash flows as management executes its strategy of driving operational improvements and focusing on profitable
growth.
Whilst the recapitalisation addressed the uncertainty regarding the Group's immediate ability to continue as a going concern due to a
lack of available funding, the Group is still subject to legal proceedings that have the potential to materially and adversely impact the
Group’s financial and operating performance (refer to note 34). These include:
•
Legal proceedings brought against Freedom Foods Pty Ltd (a subsidiary of the Company) by Blue Diamond Growers in
respect of alleged breaches of the Licence Agreement between Blue Diamond Growers and Freedom Foods Pty Ltd; and
•
Two Class Actions brought against the Company in respect of alleged breaches of the Corporations Act 2001 (Cth),
Australian Securities and Investments Commission Act and Australian Consumer Law.
The Group is defending the litigation referred to above and has engaged appropriate legal counsel to assist in defending the Group
against such claims.
The legal proceedings brought against Freedom Foods Pty Ltd (a subsidiary of the Company) by Blue Diamond Growers and the two
Class Actions commenced against the Company (“claims”) are at a preliminary stage and any likely outcomes and potential financial
impact are not able to be assessed with any certainty at the time of signing of the financial statements.
Should the Group be unsuccessful in its defence against these claims the Group may become liable for material compensation amounts
and the impacts may include potential restrictions on the Group’s operations. There is a risk that the Group will have insufficient funds
to be able to pay these compensation amounts and that restrictions on the Group’s operations may also have a material impact on its
ability to continue operating as a going concern.
As noted above, any potential financial impact and likely outcomes cannot be assessed with any certainty at the time of signing of the
financial statements (and, in addition, the Directors are proactively taking steps to manage and mitigate the risks associated with the
claims and accordingly, the financial report has been prepared on a going concern basis.
Due to the uncertainty surrounding the above matters, a material uncertainty exists which may cast significant doubt on the Group’s
ability to continue as a going concern and therefore whether it may be able to realise its assets and discharge its liabilities in the normal
course of business.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that may be necessary should the Group be unable to continue as a going concern.
New and amended standards adopted by the Group
During the year, the Group has applied a number of new and revised accounting standards issued by the Australian Accounting
Standards Board (AASB) that are effective for an accounting period that begins on or after 1 July 2020, as follows:
52
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
•
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
•
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
•
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
•
AASB 2019-3 Amendments to Australian Accounting Standards - Interest Rate Benchmark Reform
•
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet
issued in Australia
•
AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19 related Rent Concessions
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly
affect the current or future periods.
In addition to the amendments listed above, IFRIC issued an agenda decision in April 2021 in relation to upfront configuration and
customisation costs incurred in implementing SaaS arrangements clarifying its interpretation of how current accounting standards apply
to these types of arrangements. This resulted in a change in accounting policy and the Group restated historical financial information
to account for the impact of the change which is disclosed in note 3.
(c) Basis of consolidation
The Consolidated financial statements incorporate the financial statements of Freedom Foods Group Limited and entities controlled by
the Group and its subsidiaries ('the Group'). The Group controls an entity when:
•
it 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 profit or loss and
comprehensive income from the date on which the Company obtains control and until such time at the Company ceases to control
such entity.
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 amounts attributable to the non-controlling interests are not separately disclosed as the financial statements are rounded to the
nearest thousand dollars under Australian Securities and Investments Commission Corporations Instrument 2016/191.
Associates are all entities over which the Group has significant influence but not control or joint control. Significant influence is the
power to participate in the financial and operating policy decisions of the Company and usually exists where the Group holds between
20% and 50% of the voting rights or representation on the Board of Directors. Investments in associates are accounted for using the
equity method of accounting after initially being recognised at cost.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group’s
share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of the investment.
Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the group.
(d) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
53
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
•
fair values of the assets transferred
•
liabilities incurred to the former owners of the acquired business
•
equity interests issued by the group
•
fair value of any asset or liability resulting from a contingent consideration arrangement, and
•
fair value of any pre-existing equity interest in the subsidiary.
The excess of the:
•
consideration transferred
•
amount of any non-controlling interest in the acquired entity, and
•
acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in
the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised 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) Foreign currency
Transactions, assets and liabilities denominated in foreign currencies are translated into Australian dollars at reporting date
using the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Transactions
Date of the transaction
Monetary assets and liabilities
Reporting date
Non-monetary assets and liabilities carried at fair value
Date fair value is determined
Foreign exchange gains and losses resulting from translation are recognised in the statement of profit or loss and other comprehensive
income, except for qualifying cash flow hedges which are deferred to equity.
On consolidation the assets, liabilities, income and expenses of foreign operations are translated into Australian dollars using the
following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Income and expenses
Average exchange rate
Assets and liabilities
Reporting date
Equity
Historical date
Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve and
subsequently transferred to the profit or loss on disposal of the foreign operation.
54
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
(f) Investments and other financial assets
Classification
The Group classifies its financial assets in the following measurement categories:
•
those to be measured subsequently at fair value (either through Other Comprehensive Income "OCI" or through profit
or loss), and
•
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other comprehensive income ("FVOCI").
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
Recognition and derecognition
Purchases and sales of financial assets are recognised on trade date, being the date on which the group commits to purchase or sell the
asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss ("FVTPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at FVTPL are expensed in profit or loss.
Debt instruments
The measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics
of the asset. There are three measurement categories into which the group classifies its debt instruments:
•
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost. Interest income from these financial assets is
included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses.
Impairment losses are presented as separate line item in the statement of profit or loss.
•
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’
cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying
amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign
exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses).
Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign
exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line
item in the statement of profit or loss.
•
FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt
investment that is subsequently measured at FVTPL is recognised in profit or loss and presented net within other
gains/(losses) in the period in which it arises.
Equity instruments
The Group measures all investments in equity instruments at fair value. Where the Group’s management has elected to present fair
value gains and losses on equity instruments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss
following the derecognition of the instrument. Dividends from such instruments continue to be recognised in profit or loss as other
income when the group’s right to receive payments is established.
55
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Changes in the fair value of financial assets at FVTPL are recognised in other gains/(losses) in the statement of profit or loss as applicable.
Impairment losses (and reversal of impairment losses) on equity instruments measured at FVOCI are not reported separately from
other changes in fair value.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost
and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables, see Note 10 for further details.
(g) Impairment of non-financial assets including investments accounted for using the equity method
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets, including investments
accounted for using the equity method, are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
(h) Critical accounting estimates and judgements
In applying the Group’s accounting policies, the Directors are required to make estimates, judgements and assumptions that affect the
amounts reported in the financial report.
The estimates, judgements and assumptions are based on historical experience, adjusted for current conditions and other factors that
are believed to be reasonable under the circumstances and reviewed on a regular basis.
The actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate
is revised.
The estimate and judgements which involve a higher degree of complexity or that have a higher likelihood of causing adjustment to the
carrying amounts of assets and liabilities are included in the following notes:
● Note 10: Estimation of expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected
credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group.
These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and
forward-looking information that is available. The allowance for expected credit losses, as disclosed in Note 10, is calculated based on
the information available at the time of preparation. The actual credit losses in future years may be higher or lower.
● Note 11: Estimation of net realisable value of inventories
The Group reviews net realisable value (NRV) of inventories regularly to determine that it is stated at the lower of cost and NRV. Factors
that could affect NRV and hence future realisation of inventories include competitor actions and market trends. Changes in the NRV of
inventory could affect profit in the future period.
● Note 13: Financial assets at fair value through other comprehensive income
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The fair value
of the Group's investment in Shenzhen JiaLiLe Co. Limited (JLL) is determined by the market approach using prices and other relevant
information generated by market transactions involving identical or comparable businesses and interest shown by shareholders.
56
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
● Note 14: Judgement in determining significant influence and whether to apply equity accounting to certain investments
The Group has a 10% ownership interest in Australian Fresh Milk Holdings Pty Limited (AFMH). Although the Group holds less than 20%
of the equity shares of AFMH but the Group exercises significant influence by virtue of having a related party holding 37% of the equity
shares.
● Note 15: Estimates of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and
equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other
event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
● Note 15: Estimates of cost of assets included in capital work in progress and the timing of transfer of capital work in progress to
property, plant and equipment
The Group applies AASB 116 in the determination of costs that may be capitalised as part of capital work in progress, as reflected in its
fixed assets accounting policy. Judgement is required in determining the extent to which the costs are eligible for capitalisation including
employee and borrowing costs, the period over which they should be capitalised and when those assets are ready for their intended
use. Depreciation commences from the point when such assets are ready and available for their intended use.
● Note 15: Identification of cash generated units ("CGUs")
If there is any indication that an asset may be impaired, the Group estimates the recoverable amount for the individual asset. If it is not
possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the CGU to which
the asset belongs. It is the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. Identification of an asset’s CGU involves judgement. In identifying whether cash inflows from an asset
(or group of assets) are largely independent of the cash inflows from other assets (or groups of assets), the Group considers various
factors including product lines, businesses, individual locations, regional areas or how the decisions are made about continuing or
disposing of the Group’s assets and operations.
● Note 16: Determining the lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised
in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In
determining the lease term, all facts and circumstances that create an economic incentive to exercise an extension option, or not to
exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the
asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties;
existence of significant leasehold improvements; and the costs and disruption to replace the asset. These factors are difficult to assess
and require judgement. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a
termination option, if there is a significant event or significant change in circumstances.
● Note 17: Determining the recoverable amounts of tangible and intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other
indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 17. The Group
also assesses whether there are any indicators of impairment for individual assets and performs impairment testing when required.
The recoverable amounts of these assets are assessed with reference to forecast demand for existing and new products, forecast
production efficiencies of manufacturing equipment, future use in other parts of the production facilities, costs of repurposing and/or
commissioning assets and. estimating market prices for assets which aren’t supported by their value in use. The recoverable amounts
of cash-generating units ('CGUs') have been determined based on value-in-use calculations. These calculations require the use of
assumptions, including estimated revenue growth, gross margin growth, manufacturing efficiency gains and other operational cost
reductions, forward foreign currency exchange rates, royalty rates and discount rates based on the current cost of capital.
● Note 24: Determining the incremental borrowing rate (IBR) to measure lease liabilities
When measuring its lease liability, the Group discounts its remaining lease payments using IBR if the interest rate implicit in the lease
cannot be readily determined. Determination of an appropriate IBR requires consideration of various factors including lease asset type,
currency, term, funding amount and the economic environment in which the lease asset is obtained.
● Note 25: Recognition of deferred tax asset
The Group estimates future taxable profits based on approved budgets and forecasts. Future taxable profits are influenced by a variety
of general economic and business conditions, which are outside the control of the Group. A change in any of these assumptions could
57
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
have an impact on the future profitability of the Group and may affect the recognition and/or recovery of deferred tax assets. The
potential business impacts of COVID-19 have been reflected in the current forecasts. The recognition of deferred tax assets including
those arising from tax losses has been determined with reference to these forecasts.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the Group based on
known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing
and geographic regions in which the Group operates. Key impacts are summarised below:
•
Grocery shelf stable beverage sales increased through the lockdown periods, together with increased sales of Group's
shelf-stable seafood range. Demand in the domestic out-of-home sector is regionally impacted as areas go in and out of
lockdown. Margins in the grocery channel are materially lower than out-of-home.
•
Export volume to China and South East Asia have partly rebounded but each lockdown sees an impact on sales depending
on the severity of the lockdown implemented in these regions.
•
Supply chains are disrupted worldwide with significant impacts on logistics effecting raw material supplies, freight
availability and cost.
New accounting standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations are relevant to current operations. They are available for early
adoption but have not been applied by the Group in this Financial Report.
The following new or amended standards are not expected to have a significant impact on the Group’s consolidated financial
statements:
•
Classification of Liabilities as Current or Non-current (Amendments to AASB 101)
•
Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture (Amendments to AASB 10 and AASB
128)
•
Annual Improvements 2018–2020 and Other Amendments (Amendments to AASB 1, AASB 3, AASB 9, AASB 116 and AASB
137)
58
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 3. Restatement of comparatives
(a) Change in accounting policy
During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in
implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current accounting
standards apply to these types of arrangements. The new accounting policy and the restated historical financial information to account
for the impact of the change are disclosed in this note.
Accounting policy
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over
the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider's application
software, are recognised as operating expenses when the services are received unless such costs are incurred for the development of
software code that is under the Groups control.
The costs incurred for the development of software code that enhances or modifies or creates additional capability to existing on-
premise systems and is under the Group’s control meet the definition of and recognition criteria for an intangible asset. These costs
are recognised as intangible software assets and amortised over the useful life of the software on a straight-line basis. The useful lives
of these assets are reviewed at least at the end of each financial year, and any change accounted for prospectively as a change in
accounting estimate.
Critical judgement
Part of the customisation and configuration activities undertaken in implementing SaaS arrangements may entail the development of
software code that enhances or modifies, or creates additional capability to the existing on-premise software to enable it to connect
with the cloud-based software applications (referred to as bridging modules or APIs). Judgements were applied in determining whether
the additional code meets the definition of and recognition criteria for an intangible asset in AASB 138 Intangible Assets.
Costs incurred to configure or customise the cloud provider's application software are recognised as operating expenses when the
services are received. In a contract where the cloud provider provides both the SaaS configuration and customisation, and the SaaS
access over the contract term, the Group applied judgement to determine whether these services are distinct from each other or not,
and therefore, whether the configuration and customisation costs incurred are expensed as the software is configured or customised
(i.e. upfront), or over the SaaS contract term.
Specifically, where the configuration and customisation activities significantly modify or customise the cloud software, these activities
will not be distinct from the access to the cloud software over the contract term. Judgement was applied in determining whether the
degree of customisation and modification of the cloud-based software that would be deemed significant.
Impact on financial information
In FY21, the change in accounting policy resulted in a net decrease in loss after tax expense from continuing operations by $0.8m due
to the reversal of software amortisation charge partially offset by software asset write off. The intangible assets and net assets in the
statement of financial position also reduced by $6.1m.
Historical financial information has also been restated to account for the impact of the change in accounting policy and detailed below.
Statement of profit or loss for the year ended 30 June 2020 (both continuing and discontinued operations):
59
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 3. Restatement of comparatives (continued)
Consolidated
2020
2020
Reported
$'000
Adjustment
$'000
Restated
$'000
Revenue from sale of goods
516,651
-
516,651
Cost of sales
(503,357)
-
(503,357)
13,294
-
13,294
Administrative expenses
(30,184)
(1,150)
(31,334)
Other operating expenses
(119,008)
-
(119,008)
Share of profits of associates accounted for using the equity method
586
-
586
Loss before income tax benefit from continuing operations
(135,312)
(1,150)
(136,462)
Income tax benefit
101
-
101
Loss after income tax benefit from continuing operations
(135,211)
(1,150)
(136,361)
Loss after income tax benefit from discontinued operations
(39,297)
-
(39,297)
(174,508)
(1,150)
(175,658)
Cents
Cents
Reported
Restated
Basic earnings per share
(63.59)
(64.01)
Diluted earnings per share
(63.59)
(64.01)
Statement of financial position for the year ended 30 June 2020:
Consolidated
2020
2020
Reported
$'000
Adjustment
$'000
Restated
$'000
Current assets
146,536
-
146,536
-
-
-
Non-current assets
-
-
-
Intangible assets
36,753
(6,154)
30,599
Other non-current assets
498,613
(768)
497,845
681,902
(6,922)
674,980
Current liabilities
(426,921)
-
(426,921)
Non-current liabilities
(193,982)
-
(193,982)
(620,903)
-
(620,903)
60,999
(6,922)
54,077
Issued Capital
598,712
-
598,712
Reserves
(55,851)
-
(55,851)
Accumulated losses
(481,862)
(6,922)
(488,784)
60,999
(6,922)
54,077
60
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 3. Restatement of comparatives (continued)
Statement of financial position for the year ended 30 June 2019:
Consolidated
2019
Reported
Adjustment
2019
Restated
$'000
$'000
$'000
Current assets
208,227
-
208,227
-
-
-
Non-current assets
-
-
-
Intangible assets
53,020
(5,772)
47,248
Other non-current assets
294,260
-
294,260
555,507
(5,772)
549,735
Current liabilities
(187,344)
-
(187,344)
Non-current liabilities
(133,506)
-
(133,506)
234,657
(5,772)
228,885
Issued Capital
589,123
-
589,123
Reserves
(44,750)
-
(44,750)
Accumulated losses
(309,716)
(5,772)
(315,488)
234,657
(5,772)
228,885
(b) Reclassifications
(i) Selling expenses:
The Group reclassified its selling expenses from distribution expenses (previously called selling and distribution expenses) to selling and
marketing expenses (previously called marketing expenses). Accordingly, the statement of profit or loss and other comprehensive
income for FY20 is restated to conform with the current year presentation. Selling expenses for FY20 were $18.5m.
(ii) Inventory spares:
The Group reclassified its inventory spares from property, plant and equipment to inventory as they are consumables in nature and do
not meet the definition of property, plant and equipment. Accordingly, statement of financial position for FY20 is restated to conform
with the current year presentation. Inventory spares for FY20 were $3.9m (refer to note 11).
(iii) Trade spend accruals:
The Group reclassified its trade spend accruals from trade and other payables to trade and other receivables as these expenses are net
settled by the customers. Accordingly, statement of financial position for FY20 is restated to conform with the current year
presentation. Trade spend accruals for FY20 were $12.2m.
61
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 4. Operating segments
The Group is organised into four core business segments which is the basis on which the Group reports. The principal products and
services of each of these operating segments are as follows:
Dairy and Nutritionals*
A range of UHT (shelf stable) dairy milk beverage, nutritional products and performance and adult
nutritional powders. These products are manufactured in Australia and sold in Australia and
overseas.
Plant Based Beverages
A range of UHT (shelf stable) beverage products including liquid stocks, soy, rice, oat and almond
beverages. These products are manufactured in Australia and sold in Australia and overseas.
Cereal and Snacks*
A range of products for consumers including allergen free, nutritional oat based, low sugar or salt,
highly fortified or functional. The product range covers breakfast cereals, snack bars and other
complementary products. These products are manufactured and sold in Australia and overseas.
Specialty Seafoods
A range of canned seafood covering sardines, salmon and specialty seafood. These products are
imported and sold in Australia and New Zealand.
*The Cereal and Snacks business was disposed of in March 2021 and hence classified as a discontinued operation during the financial
year. The related results, assets and liabilities are shown separately in note 32. The Crankt protein brand, a component of the Cereal
and Snacks business, has been retained by the Group. The financial performance of Crankt is now merged with the Dairy and Nutritionals
segment.
The 'Unallocated Shared Services' group consists of the Group's shared service functions that are not separately reportable and provide
support services to other reportable operating segments. The Group’s borrowings such as term loan facilities, recourse debtor financing
facilities, revolver financing facilities, subordinated financing facilities and equipment financing facilities (together with associated
finance costs) are not considered to be segment liabilities but are managed by the central treasury function. Although the equipment
financing facilities are not considered to be segment liabilities, the underlying equipment has been appropriately allocated to the
related segment.
Operating segments are identified on the basis of internal reports that are regularly reviewed by the Board of Directors, CEO and senior
leadership team in their capacity as the chief operating decision maker of the Group in order to allocate resources to the segments and
assess their performance.
Set out below is an analysis of the Group's revenue and results by reportable operating segment for the periods under review, together
with prior year comparatives:
62
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 4. Operating segments (continued)
Dairy &
Nutritionals
Plant Based
Beverages
Specialty
Seafood
Unallocated
Shared
Services
Total
Consolidated - 2021
$'000
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
394,344
152,950
11,774
-
559,068
Total revenue
394,344
152,950
11,774
-
559,068
EBITDA
342
27,680
(141)
(12,095)
15,786
-
-
-
-
-
Share of associates profits
-
-
-
607
607
Depreciation
(15,799)
(9,759)
-
(2,142)
(27,700)
Fair value changes of convertible notes
-
-
-
13,994
13,994
Impairment of non-financial assets
-
(1,910)
-
-
(1,910)
Net finance costs
(2,090)
(8,181)
-
(29,264)
(39,535)
Profit/(loss) before income tax expense from
continuing operations
(17,547)
7,830
(141)
(28,900)
(38,758)
Income tax expense
(17)
Loss after income tax expense from continuing
operations
(38,775)
Assets
Segment assets
299,743
157,739
4,893
47,753
510,128
Financial assets at FVOCI
5,857
Investment in associate and joint venture
22,684
Total assets
538,669
Liabilities
Segment liabilities
84,424
80,799
786
371,167
537,176
Total liabilities
537,176
63
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 4. Operating segments (continued)
Dairy &
Nutritionals1
Plant Based
Beverages
Specialty
Seafood
Cereal &
Snacks
Unallocated
Shared
Services2
Total
Consolidated - 2020 restated
$'000
$'000
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
369,287
132,319
15,045
-
-
516,651
Total revenue
369,287
132,319
15,045
-
-
516,651
EBITDA
(62,539)
9,390
(309)
-
(8,688)
(62,146)
-
-
-
-
-
-
Share of associates losses
-
-
-
-
586
586
Depreciation
(14,500)
(11,000)
-
-
(2,083)
(27,583)
Impairment of right of use assets
-
-
-
-
(3,794)
(3,794)
Impairment of non-financial assets
(2,170)
(4,065)
(15,695)
-
-
(21,930)
Net finance costs
(2,122)
(8,701)
-
-
(10,772)
(21,595)
Loss before income tax benefit
from continuing operations
(81,331)
(14,376)
(16,004)
-
(24,751)
(136,462)
Income tax benefit
101
Loss after income tax benefit from
continuing operations
(136,361)
Assets
Segment assets
309,006
247,148
4,937
35,811
37,993
634,895
Investment in associates and joint
venture
27,934
Total assets
662,829
Liabilities
Segment liabilities
94,369
166,709
1,734
19,698
326,242
608,752
Total liabilities
608,752
(1)
Dairy and Nutritionals include retained product results from divested Cereals and Snacks business.
(2)
Unallocated shared services liabilities include convertible notes, equipment finance, debtor finance facilities and multi advance
facilities which are not allocated to relevant operating segments. FY20 Unallocated Shared Services have been allocated to
segments on the same basis as FY21 to enable year on year comparability.
All operations are conducted in Australia, with the exception of Dairy and Nutritionals (Freedom Foods Shanghai and Freedom Foods
Singapore). The operations of Freedom Foods North America were closed in FY21.
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 arrangement 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 associates.
77% of total external sales of the Group are generated in Australia (FY20: 79%) with 14% generated from China (FY20: 11%) and 9%
generated from other overseas countries (FY20: 10%).
Information about major customers
Included in total revenues (both continuing and discontinued operations) arising from external sales of $594.4m (FY20: $580.2m) are
revenues of approximately $224.7m (FY20: $251.5m), generated from the top three retail customers representing 38% (FY20: 43%) of
total revenue.
64
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 5. Revenue
Consolidated
2021
2020
$'000
$'000
Revenue
Continuing operations
559,068
516,651
Discontinued operations
35,321
63,540
Total revenue
594,389
580,191
Significant accounting policies
The Group applies AASB 15 Revenue from Contracts with Customers for revenue recognition. Revenue is recognised when control of
the product has transferred and there is no unfulfilled obligation that could affect the customer’s acceptance of the product. For
domestic sales, the control is transferred when the product is delivered to the customer. Delivery occurs when the product has been
shipped to the location specified by the customer and the customer accepts the product. For international sales, the transfer of control
varies from order to order depending on the nature of the sales contract and the revenue is recognised when the goods are delivered
and the customer takes ownership either when they are picked up from the Group's warehouse, delivered to the departure port or
shipped to the destination port.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for trading terms, rebates and
other similar allowances.
The Group recognises its revenue from contracts with customers for the transfer of goods at a point in time i.e., when the goods are
delivered and the customer takes ownership.
For segment information, refer to note 4 and discontinued operations, refer to note 32.
Note 6. Other income/(expense)
Consolidated
2021
2020
$'000
$'000
Net foreign exchange gain/(losses)
5,117
(838)
Net gain on financial derivatives held at fair value through profit or loss
-
999
Net gain on financial liabilities held at fair value through profit or loss (note 23)
13,994
-
Other
221
(352)
Other income/(expense)
19,332
(191)
Note 7. Expenses
Loss before income tax (both from continuing and discontinued operations) includes the following specific expenses:
65
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 7. Expenses (continued)
Consolidated
2021
2020 restated
$'000
$'000
Employee benefits
Superannuation expenses
5,737
4,540
Share-based benefit*
-
(417)
STI and LTI expense
753
-
Employee benefits expense excluding superannuation and share-based payment expense
70,170
73,286
Total employee benefits
76,660
77,409
Employee benefits allocated to:
Continuing
67,373
62,987
Discontinued
9,287
14,422
76,660
77,409
Depreciation expense allocated to:
Continuing
27,694
27,581
Discontinued
810
1,950
Total depreciation expense
28,504
29,531
Impairment of non-financial assets
Goodwill (note 17)
-
5,846
Brand names and trademarks (note 17)
-
10,549
Property, plant and equipment (note 15)
-
4,800
Investments accounted for using the equity method (note 14)
-
735
Non-current assets classified as held for sale (note 32)
1,910
-
Total impairment of non-financial assets (all continuing operations)
1,910
21,930
Impairment of right of use assets allocated to:
Continuing
-
3,793
Discontinued
-
358
Total impairment of right of use assets
-
4,151
66
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 7. Expenses (continued)
Consolidated
2021
2020 restated
$'000
$'000
Administrative expenses
Salaries and wages
16,830
15,988
Financial reporting restatement and recapitalisation expenses
8,680
1,443
Litigation expenses
7,377
-
IT related expenses
3,791
4,938
Insurance
3,334
742
Audit, legal and professional fees
2,471
1,944
Depreciation
2,054
2,884
Share-based benefit*
-
(418)
STI and LTI expenses
753
-
Acquisition costs
-
861
Other expenses
3,186
4,675
Total administrative expenses
48,476
33,057
Administrative expenses allocated to:
Continuing
47,318
31,334
Discontinued
1,158
1,723
48,476
33,057
Net finance costs
Interest expense
16,860
9,343
Interest on lease liabilities
11,262
11,932
Financing costs
1,861
539
Recapitalisation transaction costs related to convertible notes issue**
9,638
-
Total net finance costs
39,621
21,814
Net finance costs allocated to:
Continuing
39,535
21,595
Discontinued
86
219
39,621
21,814
*The share-based expense for FY20 is negative due to the inclusion of the reversal of previously recognised expense arising from
forfeiture of share options granted to employees.
**Included in recapitalisation, financial reporting restatement, litigation and redundancy expenses under ref. (3) of significant items
below.
Significant items
Significant items affecting the result for the financial year ended 30 June 2021 include the following impacts:
Consolidated
2021
2020
Ref.
$'000
$'000
Impairment of non-current assets held for sale
(1)
1,910
4,800
Product recall insurance proceeds - net
(2)
(998)
-
Recapitalisation, financial reporting restatement, litigation and redundancy expenses
(3)
27,885
1,443
67
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 7. Expenses (continued)
(1)
During the year, the Group classified a plant and equipment (UHT bottling line) as held for sale and recorded an impairment charge
of $1.9m as the carrying amount exceeded the fair value less cost of disposal (refer to note 32).
(2)
The Group conducted a product recall in September 2020 of certain batches of plant-based beverages. The recall applied only to
the specific batches. The operational issues that resulted in this recall have been resolved. The Company had insurance to cover
the costs of the recall, subject to an excess of $500,000. The insurance claim was finalised in June 2021 and the net amount
payable to the Company after deduction of the policy excess, has been received in full and is reflected in Other Income in the
financial statements.
(3)
Various expenses incurred by the Group on recapitalisation, prior year restatements and legal expenses in respect to litigation
defence.
Note 8. Earnings per share
Consolidated
2021
2020 restated
$'000
$'000
Earnings per share for loss from continuing operations
Loss after income tax attributable to the owners of Freedom Foods Group Limited
(38,775)
(136,361)
Cents
Cents
Basic earnings per share
(13.99)
(49.69)
Diluted earnings per share
(13.99)
(49.69)
Consolidated
2021
2020 restated
$'000
$'000
Earnings per share for loss from discontinued operations
Loss after income tax attributable to the owners of Freedom Foods Group Limited
(14,402)
(39,297)
Cents
Cents
Basic earnings per share
(5.20)
(14.32)
Diluted earnings per share
(5.20)
(14.32)
Consolidated
2021
2020 restated
$'000
$'000
Earnings per share for loss
Loss after income tax attributable to the owners of Freedom Foods Group Limited
(53,177)
(175,658)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
277,109,319
274,406,504
Weighted average number of ordinary shares used in calculating diluted earnings per share
277,109,319
274,406,504
68
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 8. Earnings per share (continued)
Cents
Cents
Basic earnings per share
(19.19)
(64.01)
Diluted earnings per share
(19.19)
(64.01)
At 30 June 2021, there were 277,109,319 ordinary shares (FY20: 277,109,319) on issue and 101,130 convertible redeemable preference
shares (FY20: 101,130).
The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary
shares for the purpose of diluted earnings per share:
2021
2020
Number
Number
Convertible notes (note 23)
378,571,429
-
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 issues.
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.
Note 9. Current assets - Cash and cash equivalents
Consolidated
2021
2020
$'000
$'000
Cash
31,668
17,167
Note 10. Current assets - Trade and other receivables
Consolidated
2021
2020
$'000
$'000
Trade receivables
50,032
53,456
Less: loss allowance
(2,631)
(5,555)
47,401
47,901
Other receivables
2,740
4,200
50,141
52,101
The credit period on sales of goods ranges from 30 to 70 days for domestic sales and up to 120 days for international sales. An allowance
has been made for estimated irrecoverable trade receivable amounts arising from past sale of goods, determined by expected credit
losses. The expected loss rates are based on the payment profiles of sales over a period and the corresponding historical credit losses
experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to settle the receivables as well as customers identified to have known
issues which might affect recoverability. The Group does not hold any collateral over these balances. The loss allowance for trade
receivables as at 30 June 2021 and 30 June 2020 was determined as follows:
69
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 10. Current assets - Trade and other receivables (continued)
Expected credit loss rate
Carrying amount
Allowance for expected credit
losses
2021
2020
2021
2020
2021
2020
Consolidated
%
%
$'000
$'000
$'000
$'000
Not overdue
0.02%
3.64%
35,714
38,497
8
1,403
0 to 3 months overdue
0.11%
0.80%
11,399
7,457
13
60
3 to 6 months overdue
52.52%
0.82%
556
1,128
292
9
Over 6 months overdue
98.10%
64.05%
2,363
6,374
2,318
4,083
50,032
53,456
2,631
5,555
Some of the Group’s customers have experienced cash flow and financial difficulties due to mandatory COVID-19 closures and the
general economic downturn caused by the COVID-19 pandemic. As a result, the provision of uncollectable debts is also impacted as at
30 June 2021 and an additional credit loss allowance has been made for customers in areas where the economic downturn has been
particularly severe.
50% of year end receivables are concentrated to the top five customers (FY20: 49%).
The Group holds letters of credit over export receivables of $1.2m (2020: $1.5m). The letters of credit held equals the carrying amount
of the relevant receivables. Refer to note 33 for further details on the Group’s exposure to, and management of, credit risk.
Movements in the allowance for expected credit losses are as follows:
Consolidated
2021
2020
$'000
$'000
Opening balance
5,555
2,496
Additional provisions recognised
428
3,639
Receivables written off during the year as uncollectable
(2,577)
(580)
Unused amounts reversed
(775)
-
Closing balance
2,631
5,555
Significant accounting policies
Trade receivables are recognised initially at the amount of consideration that is unconditional.
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables. This approach also considers the qualitative factors surrounding the debtors and the risks that they may have
or will be facing as a result of the impact of unusual situations (such as COVID-19) on their business operations and financial position.
To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and the days past due.
70
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 11. Current assets - Inventories
Consolidated
2021
2020
$'000
$'000
Raw materials and packaging - at cost
12,955
11,324
Finished goods - at lower of cost and net realisable value
28,241
48,483
Inventory spares
7,162
3,867
48,358
63,674
Total cost of sales (for both continuing and discontinued operations) recognised as an expense during the year was $499.8m (FY20:
$578.0m).
During the year, write-downs of inventories amounting to $1.5m (FY20: $18.5m), were recognised as an expense and included in cost
of sales in the statement of profit or loss. This write-down mainly arose as a result of slow moving, obsolete and discontinued products.
The Group disposed its Cereals and Snacks business during the year (refer to note 32). FY20 inventory balances included $11.1m related
to Cereals and Snacks business.
Significant accounting policies
Inventories are measured at the lower of cost and net realisable value (“NRV”).
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
•
Raw materials, packaging and inventory spares: 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 12. Current assets - Derivative financial instruments
Consolidated
2021
2020
$'000
$'000
Forward foreign exchange contracts
-
2,504
Significant accounting policies
Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and they are subsequently remeasured
to their fair value at the end of each reporting period.
Refer to note 33 for further information on financial instruments.
Note 13. Non-current assets - Financial assets at fair value through other comprehensive income
Financial assets at FVOCI comprise equity securities which are not held for trading, and which the Group has irrevocably elected at
initial recognition to recognise in this category. These are strategic investments and the Group considers this classification to be more
relevant.
Equity investments at FVOCI comprise the following individual investment:
71
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 13. Non-current assets - Financial assets at fair value through other comprehensive income (continued)
Consolidated
2021
2020
$'000
$'000
Investment - JLL
5,857
-
For the year ended 30 June 2021, the Group has classified the investment in JLL as fair value through other comprehensive income
(FVOCI). The Group always held a 10% ownership stake in JLL but classified the investment as equity accounted in the past as it held a
Board seat and an option to subscribe for up to 30% of JLL's registered capital within 3 years from the date of the initial subscription.
The Group was able to influence the key decisions of JLL as with the option to subscribe for additional capital, the Group also had the
right to veto those decisions.
The option period expired on 4 July 2020 and was extended to October 2020 (without a corresponding extension of veto rights) but the
Group did not exercise its right to subscribe for the additional equity interest. Although, the Group still holds a Board seat, it no longer
has the ability to influence the key decisions of JLL as with the expiry of the option to subscribe to additional capital, the Group does
not have the right to veto those decisions.
The Group is in preliminary discussions with JLL and Guangzhou Langfeng Investment Co. Ltd (other shareholder in JLL) in relation to a
potential sale of the Group's 10% interest in JLL. The terms of the sale are still being negotiated and the Group has not yet agreed to
sell its shareholding in JLL.
As described in Note 2, the determination of the fair value of the investment in JLL requires judgement and the Group determines the
fair value by applying the market approach and using prices and other relevant information generated by market transactions involving
identical or comparable businesses. At 30 June 2021, the fair value is based on most recent negotiations to transact in this investment.
Note 14. Investments accounted for using the equity method
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:
Ownership interest
Principal place of business /
2021
2020
Name
Country of incorporation
%
%
Australian Fresh Milk Holdings Pty Limited (AFMH)
Australia
10.00%
10.00%
Goulburn Valley Nutritionals Pty Limited (GVN)
Australia
49.00%
49.00%
Consolidated
2021
2020
$'000
$'000
Investment in associate - AFMH
22,684
22,077
Investment in associate - JLL
-
5,857
Investment in joint venture - GVN
735
735
23,419
28,669
Less: accumulated impairment
(735)
(735)
22,684
27,934
The Group's interest in associates represent entities over which the Group exercises significant influence and have been measured by
applying the equity method of accounting. Under the equity method of accounting the carrying amounts of interests in associates 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
associates.
72
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 14. Investments accounted for using the equity method (continued)
Australian Fresh Milk Holdings Pty Limited (AFMH)
The shareholders of AFMH comprises Leppington Pastoral Investments Pty Limited (LPI), NewAustralia Holdings Pty Limited (NA), Paul
Moxey Family Trust, Quentin Moxey Family Trust and Freedom Foods Group Operations Limited. The Group acquired its 10% interest
in AFMH in 2015 for $5.7 million. The Group has made additional investments over the years to maintain its 10% shareholding, including
an investment of $5.8 million during FY19 and $4.0 million during FY20. The Group ownership remained at 10%.
Although the Group holds less than 20% of the equity shares of AFMH, the Group exercises significant influence by virtue of having a
related party (LPI) holding a 37% shareholding in AFMH.
Goulburn Valley Nutritionals Pty Limited (GVN)
The shareholders of GVN comprises NewAustralia Holdings Pty Limited (NA) and Freedom Foods Group Nutritionals Pty Limited. The
Group acquired its 49% interest in GVN in 2019 for $0.7 million.
Although the Group held 49% of the equity shares of GVN, the Group exercised joint control by virtue of a joint venture agreement that
requires unanimous consent of both the venturers to all key decisions of GVN. The commercial operations of GVN did not commence
and it remained dormant during FY19 and FY20. This investment is unlikely to have an ongoing business value and was fully impaired
in FY20.
Summarised financial information
AFMH
2021
2020
$'000
$'000
Summarised statement of financial position
Current assets
110,433
50,693
Non-current assets
340,484
359,987
Total assets
450,917
410,680
Current liabilities
26,217
28,211
Non-current liabilities
206,750
169,999
Total liabilities
232,967
198,210
Net assets
217,950
212,470
Summarised statement of profit or loss and other comprehensive income
Revenue
114,386
107,415
Expenses
(106,580)
(102,619)
Profit before income tax
7,806
4,796
Income tax expense
(2,342)
(1,439)
Profit after income tax
5,464
3,357
Other comprehensive income
-
-
Total comprehensive income
5,464
3,357
73
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 14. Investments accounted for using the equity method (continued)
AFMH
2021
2020
$'000
$'000
Reconciliation of the Group's carrying amount
Opening carrying amount
22,077
17,741
Share of profit after income tax*
607
335
Equity investment
-
4,001
Closing carrying amount
22,684
22,077
*Total share of profit after income tax for FY20 was $0.6m this included both AFMH and JLL being equity accounted.
No cash dividends were received in FY21 or FY20 from equity accounted investees.
The Group has also conducted an impairment assessment of the investments accounted for using the equity method and determined
that the recoverable amount is greater than the carrying amount and hence no impairment loss should be recognised.
Note 15. Non-current assets - Property, Plant and Equipment
Consolidated
2021
2020 restated
$'000
$'000
Freehold land - at independent valuation
4,200
4,871
Buildings - at independent valuation
5,480
14,020
Less: accumulated depreciation
(2,885)
(3,124)
2,595
10,896
Make good asset - at cost
-
1,080
Less: accumulated depreciation
-
(772)
Less: Impairment
-
(308)
-
-
Plant and equipment - at cost
322,426
382,637
Less: accumulated depreciation
(75,876)
(87,803)
Less: impairment
-
(42,145)
246,550
252,689
Capital work in progress
1,700
30,086
Less: impairment
(1,470)
(4,800)
230
25,286
253,575
293,742
74
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 15. Non-current assets - Property, Plant and Equipment (continued)
Movements in the carrying amounts of each class of property, plant and equipment between the beginning and the end of the current
financial year:
Freehold Land
Buildings
Plant and
equipment**
Capital work in
progress
Total
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2019
4,722
10,727
220,688
34,608
270,745
Additions*
-
3
1,998
48,365
50,366
Transfers at completion of projects
-
-
52,887
(52,887)
-
Impairment of assets
-
-
-
(4,800)
(4,800)
Reclassification to inventory (notes 3 and 11)
-
-
(3,867)
-
(3,867)
Reclassification from intangible assets
-
-
254
-
254
Revaluation
149
546
-
-
695
Depreciation expense
-
(380)
(19,271)
-
(19,651)
Balance at 30 June 2020
4,871
10,896
252,689
25,286
293,742
Additions*
-
-
3,407
2,640
6,047
Transfers at completion of projects
-
80
19,090
(19,170)
-
Asset classified as held for sale (note 32)
-
-
-
(8,374)
(8,374)
Discontinued operation (note 32)
(491)
(7,987)
(8,365)
(152)
(16,995)
Revaluation
(180)
-
-
-
(180)
Depreciation expense
-
(394)
(20,271)
-
(20,665)
Balance at 30 June 2021
4,200
2,595
246,550
230
253,575
*
Included in additions is nil amount (FY20: $0.5m) of capitalised interest from borrowings related to AASB 123.
**
Included in plant and equipment is net book value of $71.6m (FY20: $96.9m) related to equipment obtained under equipment
finance facilities as disclosed in Note 22.
Revaluation of land and building
At 30 June 2021, the Group recorded a decrease in land value of $0.2m. The Group obtains independent valuations for its freehold land
and buildings related to certain manufacturing sites at least annually. At the end of each reporting period, the Group updates its
assessment of the fair value of such property, taking into account the most recent independent valuations.
For FY21, the fair value of the land is determined by Knight Frank Valuation & Advisory Victoria. All resulting fair value estimates for
properties are included in level 3 of the fair value hierarchy. Level 3 fair value is estimated using inputs that are not directly observable.
As at 30 June 2021, the level 3 fair value for the Group has been derived using the sales comparison approach. The key inputs under
this approach are the rental per square metre and capitalisation rate. The current year rentals of comparable properties in the area
(location and size) form the basis for rental per square metre and the associated market yields of such properties are used to determine
the capitalisation rate.
Significant accounting policies
Land and buildings are recognised at fair value, less any subsequent accumulated depreciation and impairment. A revaluation surplus
is credited to reserves in shareholders’ equity.
Plant and equipment, motor vehicles and equipment obtained under equipment finance facilities are stated at cost less accumulated
depreciation and impairment.
Capital work in progress ("CWIP") represents asset under construction and not yet commissioned and includes all expenditure directly
attributable to bringing the asset to its working condition for its intended use which are incremental and unavoidable as a result of the
construction of the asset. CWIP is assessed for impairment at each reporting period.
75
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 15. Non-current assets - Property, Plant and Equipment (continued)
Costs include installation costs, delivery costs, consultancy costs incurred to install the asset, fit out costs, interest on associated
borrowings, project labour costs and commissioning costs. Start-up costs and similar pre-production costs do not form part of the cost
of an asset unless they are necessary to bring the asset to its working condition. Initial operating losses incurred prior to an asset
achieving planned performance must be recognised as an expense. Included in this expenditure are the estimate cost of dismantling
and removing the asset and restoring the site (where applicable).
The costs will be initially recognised as CWIP from the time that it satisfies the general recognition criteria for assets under the
accounting standards.
The Group formally assesses whether project costs are to be reclassified from CWIP to Plant and Equipment. An asset is considered to
be capable of operating in the manner intended by management when it is consistently capable of producing saleable product. This
assessment is done periodically taking into consideration when the commissioning phase of each asset has been completed i.e. when
the asset is in the location and condition necessary for it to be capable of operating in the manner intended by management. At this
point, it is classified as property, plant and equipment, to be depreciated from the date of reclassification over the useful life of the
asset.
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.
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
20-40 years
Plant and equipment
5-20 years
Leased plant and equipment
5-20 years
Freehold land is not depreciated.
Note 16. Non-current assets - Right of use assets
Consolidated
2021
2020
$'000
$'000
Right of use asset - Land and buildings
105,976
184,217
Less: Accumulated depreciation ROU
(16,394)
(9,096)
Less: Impairment
(3,793)
(3,793)
85,789
171,328
Right of use asset - Other
2,430
2,116
Less: Accumulated depreciation ROU
(1,327)
(782)
Less: Impairment
(358)
(358)
745
976
86,534
172,304
76
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 16. Non-current assets - Right of use assets (continued)
Movement of the written down values at the beginning and end of the current and previous financial year are set out below:
Land and
buildings
Other
Total
Consolidated
$'000
$'000
$'000
Balance at 1 July 2019
-
-
-
Adoption of AASB 16
182,138
1,940
184,078
Additions
2,079
176
2,255
Impairment of assets
(3,793)
(358)
(4,151)
Depreciation expense
(9,096)
(782)
(9,878)
Balance at 30 June 2020
171,328
976
172,304
Additions
201
316
517
Remeasurement of lease liabilities (note 24)
(78,441)
-
(78,441)
Depreciation expense
(7,299)
(547)
(7,846)
Balance at 30 June 2021
85,789
745
86,534
The Group leases land and buildings for its offices, warehouses and manufacturing plant under agreements of between 2 to 20 years
with, in some cases, options to extend to 30 years. The leases have various rental escalation clauses. On renewal or option extension,
the rent can be renegotiated. The Group also leases plant and equipment, motor vehicles and office equipment under other right of
use agreements (previously described as operating leases) of between 2 to 5 years.
During the year, the Group also recognised as expense, rental of short term leases amounting to $0.2m.
Significant accounting policies
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is initially measured at cost, which
comprises:
•
The amount of the initial measurement of the lease liability
•
Any lease payments made at or before the commencement date, less any lease incentives and any initial direct costs
incurred by the lessee
•
An estimate of the costs to dismantle and remove underlying asset or to restore the underlying asset
Subsequently the right-of-use asset is measured at cost less any accumulated depreciation and impairment losses and adjusted for
certain remeasurements of the lease liability.
The right-of-use asset is depreciated over the shorter period of the lease term and the economic useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group will exercise a purchase
option, the asset will be depreciated from the commencement date to the end of the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
If the recoverable amount of a right-of-use asset is less than its carrying value, an impairment charge is recognised in the profit or loss
account, and the carry value of asset written-down to its recoverable amount. Should the recoverable amount increase in future periods
the carrying value may be adjusted to the lower of the recoverable value or the amortised cost of the asset had it not been impaired.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12
months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
77
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 17. Non-current assets - Intangibles
Consolidated
2021
2020
$'000
$'000
Goodwill
45,795
68,755
Less: accumulated impairment
(37,476)
(60,436)
8,319
8,319
Brand names and trademarks
31,994
37,720
Less: accumulated impairment
(10,549)
(15,440)
21,445
22,280
29,764
30,599
The reduction in goodwill, brand names and trademarks and accumulated impairment is arising from sale of Cereals and Snacks business
(refer to note 32).
Goodwill
Brand names
and
trademarks
Software
Total
Consolidated
$'000
$'000
$'000
$'000
Balance at 1 July 2019
14,165
32,829
6,026
53,020
Prior year restatement (note 3)
-
-
(5,772)
(5,772)
Reclassification to plant and equipment
-
-
(254)
(254)
Impairment of assets
(5,846)
(10,549)
-
(16,395)
Balance at 30 June 2020
8,319
22,280
-
30,599
Discontinued operation (note 32)
-
(835)
-
(835)
Balance at 30 June 2021
8,319
21,445
-
29,764
The carrying amount of goodwill, brand names and trademark is allocated to cash generating units as follows:
Goodwill
Brand names
and
trademarks
Goodwill
Brand names
and
trademarks
2021
2021
2020
2020
Consolidated
$'000
$'000
$'000
$'000
Cereal and Snacks
-
-
-
835
Consumer Nutritionals*
8,319
21,445
8,319
21,445
8,319
21,445
8,319
22,280
*Brand names and trademarks of Consumer Nutritionals CGU now include Crankt which previously formed part of Cereal and Snacks
CGU.
Brand names and trademarks
The Group carries $21.4m (FY20: $22.3m) of brand names with indefinite useful lives. The brand names relate to established major
brands purchased as part of business combinations. Intangible assets with indefinite useful lives that are acquired separately are carried
at cost less accumulated impairment losses.
78
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 17. Non-current assets - Intangibles (continued)
Impairment of goodwill and other intangible assets
Determining whether goodwill or other intangible assets are impaired requires an estimation of the recoverable amount of the cash
generating units (CGU) to which the goodwill or other intangible assets have been allocated. The recoverable amount is determined
using a value in use or fair value less cost to sell method. The cash generating units are subject to annual impairment testing as they
hold indefinite life intangible assets amongst their assets.
Impairment testing requires a high degree of judgement in assessing whether the carrying value of assets is supported by their
recoverable amount. The Group uses the relief from royalty method to determine the fair value of the brand names and trademarks
and considers this to be a Level 3 treatment of the fair value hierarchy.
Dairy and Nutritionals
The Dairy and Nutritionals CGU, which forms part of Dairy and Nutritional segment along with Consumer Nutritional CGU, produces
branded dairy UHT products under Group owned and third party owned brands. It also produces nutritional products such as lactoferrin
for sale to domestic and international customers. The Dairy and Nutritionals CGU forms part of the Dairy & Nutritionals operating
segment.
The recoverable amount of the Dairy and Nutritionals CGU has been determined using the discounted cash flow forecast to determine
the value-in-use of the CGU as a whole utilising forecast cash flows for the period July 2021 to June 2026 and a terminal cashflow.
Management initiated a transformation program in April 2021 introducing various operational initiatives across the Group which are
intended to generate significant cost benefits and ensure future profitability of the business. The carrying value of the assets of the
Dairy and Nutritional CGU as at 30 June 2021 is dependent on the realisation of such operational efficiencies and related cost benefits
within a specified timeframe. The cash flow forecast used for the purposes of impairment testing of the CGU includes these cost
benefits.
In calculating the value-in-use, the recoverable amount exceeded the carrying value by $2.8m and as a result no impairment was
recognised.
Sensitivities
If the long term growth rate used in the value-in-use calculation for the Dairy and Nutritionals CGU had been 0.25% lower than
management’s estimates at 30 June 2021 (2.25% instead of 2.50%), the Group would have to recognise an impairment loss of $4m
against property, plant and equipment.
If the post tax discount rate applied to the cash flow projections of this CGU had been 0.25% higher than management’s estimates
(8.5% instead of 8.25%), the Group would have to recognise an impairment loss of $5.9m against property, plant and equipment.
If the 5 year forecast CAGR of revenue from FY22-26 was 10% lower than managements estimates the Group would have had to
recognise an impairment of $17.9m against property, plant and equipment.
If the USD exchange rate applied to the cash flow projections of this CGU had a 1 cent movement (positive / negative) against
management’s estimates (AUD/USD 0.75), it would change the CGU headroom by $17.3m if the corresponding pricing is not passed to
the customers.
79
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 17. Non-current assets - Intangibles (continued)
Consumer Nutritionals
The Consumer Nutritionals CGU produces branded protein powders for sale mainly to domestic customers, predominantly through the
pharmacy and grocery channels and includes Vital Strength and Crankt brands. This CGU forms part of the Dairy & Nutritionals operating
segment.
The recoverable amount of the Consumer Nutritionals CGU has been determined using the following methodologies:
•
Brands have been valued using a relief from royalty method to determine the fair value;
•
Discounted cash flow forecast to determine the value-in-use of the CGU, utilising forecast cash flows for the period July 2021
to June 2026 and a terminal cash flow.
In calculating the value-in-use, the recoverable amount exceeded the carrying value by $3.3m and as a result no impairment was
recognised.
Sensitivities
If the long-term growth rate used in the fair value calculation for the Consumer Nutritionals CGU had been 0.25% lower than
management’s estimates at 30 June 2021 (2.25% instead of 2.50%), the CGU would have a reduction in headroom of $1.1m.
If the post-tax discount rate applied to the cash flow projections of this CGU had been 0.25% higher than management’s estimates
(9.5% instead of 9.25%), the CGU would have a reduction in headroom of $1.4m.
If the 5 year forecast CAGR of revenue from FY2022-2026 was 10% lower than managements estimates, the Group would have to
recognise an impairment loss of $0.1m
If the owned brand relief from royalty rate used in the fair value calculation for the Consumer Nutritionals CGU had been 0.50% lower
than management’s estimates at 30 June 2021, the brand’s would have had a total reduction in headroom of $2.3m (Crankt $0.6m and
Vital Strength $1.7m) and would not result in impairment of either brand.
Specialty Seafood
The Specialty Seafood CGU produces branded seafood for sale to domestic and international customers and includes Paramount and
Brunswick brands. During FY20, the Group impaired all non-current assets and the CGU now consists of current assets (trade receivables
and inventories) which are assessed for impairment separately based on the relevant accounting standards (AASB 9 and AASB 102).
Plant Based
There was low risk of impairment in the Plant Based CGU as the recoverable amount exceeded the carrying amount by a significant
amount.
Key assumptions
In calculating the recoverable amount of each CGU a discounted cash flow model was utilised forecasting cash flows for the period FY22
to FY26. The following key assumptions were made:
2021
2020
Key assumptions used for goodwill and
plant and equipment impairment
Dairy and
Nutritionals
Consumer
Nutritionals
Speciality
Seafood
Dairy and
Nutritionals
Consumer
Nutritionals
Speciality
Seafood
%
%
%
%
%
%
Long term growth rate (terminal value)
2.50%
2.50%
-
2.50%
2.50%
2.50%
Post tax discount rate
8.25%
9.25%
-
8.25%
9.25%
8.00%
Revenue growth rate*
5.57%
6.00%
-
8.20%
5.00%
2.10%
USD exchange rate**
0.75
-
-
-
-
-
*Compounded annual growth rate over 5 years from FY22-26.
**Applicable to cash flow forecast from FY23-26.
80
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 17. Non-current assets - Intangibles (continued)
2021
2020
Key assumptions used for brand
impairment
Consumer
Nutritionals
Speciality
Seafood
Consumer
Nutritionals
Cereals and
Snacks
Speciality
Seafood
%
%
%
%
%
Long term growth rate (Terminal rate)
2.50%
-
2.50%
2.50%
2.50%
Post tax discount rate
9.25%
-
9.25%
8.25%
8.00%
Owned brand - relief from royalty rate
5.85%
-
5.85%
5.85%
1.00%
Revenue growth rate*
6.00%
-
5.00%
44.40%
2.30%
*Compounded annual growth rate over 5 years from FY22-26.
The recoverability of the assets is dependent on the Group’s ability to improve their margins.
Software
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line basis over the asset’s estimated useful life. The estimated useful life
and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted
for on a prospective basis.
For accounting policy on Software-as-a-Service (SaaS) arrangements, please refer to note 3.
Note 18. Current liabilities - Trade and other payables
Consolidated
2021
2020
$'000
$'000
Trade payables
48,703
82,442
Accrued expenses
14,748
15,855
Other payables
4,013
12,714
67,464
111,011
Consolidated
2021
2020
$'000
$'000
Payable to related parties (note 38)
1,103
245
Trade payables, including amounts payable for capital expenditure and are paid on average within 60 days of invoice date (FY20: 60
days).
Significant accounting policies
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid.
The amounts are unsecured and are presented as current liabilities unless payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
81
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 19. Current liabilities - Lease liabilities
Consolidated
2021
2020
$'000
$'000
AASB 16 lease liabilities
1,427
2,304
Note 20. Current liabilities - Bank borrowings
Consolidated
2021
2020
$'000
$'000
Term loan facilities
-
141,174
Recourse debtor financing facilities
13,084
15,466
Revolver financing facilities
-
36,176
Equipment financing facilities
11,232
99,508
24,316
292,324
Refer to note 22 for further information on financing arrangements.
Note 21. Current liabilities - Derivative financial instruments
Consolidated
2021
2020
$'000
$'000
Forward foreign exchange contracts
-
127
Interest rate swap contracts
-
2,202
-
2,329
Refer to note 33 for further information on financial instruments.
Note 22. Non-current liabilities - Bank borrowings
Consolidated
2021
2020
$'000
$'000
Equipment financing facilities
74,597
-
Refer to note 33 for further information on financial instruments.
82
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 22. Non-current liabilities - Bank borrowings (continued)
Total drawn secured bank borrowings
The total drawn secured bank borrowings (current and non-current) are as follows:
Consolidated
2021
2020
$'000
$'000
Term loan facilities
-
141,174
Recourse debtor financing facilities
13,084
15,466
Revolving financing facilities
-
36,176
Equipment financing facilities
85,829
99,508
98,913
292,324
Banking Facilities
The Group's primary bank facilities are arranged with HSBC Bank Australia Limited (HSBC) and National Australia Bank (NAB). They
include a syndicated revolving credit facility (from HSBC and NAB), equipment financing facilities (from NAB) and debtor financing
facilities (from HSBC).
The Group has other bi-lateral facilities from a range of financiers including equipment finance and other general transactional banking
facilities as required for the operations of the Group's business.
On 27 May 2021, the Group repaid principal amount of bank borrowings amounting to $231m from the proceeds of convertible notes
(refer to note 23).
Syndicated Revolving Credit Facility
In May 2021, the Group entered a new $36m revolving credit facility with HSBC and NAB. The facility has a maturity date of two years
and it was fully undrawn at 30 June 2021.
The syndicated facility is secured over all the assets and undertaking of the Group (other than low value subsidiaries), as well as
mortgages over real property owned by the Group and key property leases.
Equipment Financing Facilities
The equipment financing facilities relate to specific equipment operating at the Company's Shepparton and Ingleburn operating sites.
It also includes vehicle financing facilities. The equipment finance facilities are secured over the assets financed under the relevant
facility. These facilities are over a period of 1 to 6 years and the final residuals on the current arrangements are due between 2022 and
2027.
Debtor Finance Facilities
HSBC has provided the Group with a limited recourse debtor finance facility of $65m (FY20: $113.5m), which is being utilised as a source
of working capital. Under this facility, the Group sells receivables of its major grocery retail customers to HSBC in exchange for cash.
These receivables are de-recognised as an asset, as the significant risk associated with the collection of the receivables is transferred to
HSBC at the time of sale. The amount funded under this facility is not recognised as a liability by the Group. The funded amount under
this facility as at 30 June 2021 was $41.9m (FY20: $41.1m).
The Group also has a full recourse debtor finance facility with total limit of $25m (FY20: $22m). Under this facility, the Group sells
receivables from its out-of-home channel. The receivables are recognised as an asset since the risk has not fully transferred to HSBC at
the time of sale. The Group is responsible for the collection of the receivables. HSBC has recourse to the Group if the debt is
unrecoverable. As at the balance sheet date, the Group utilised an amount of $13.1m (FY20: $15.5m) from the full recourse debtor
finance facility.
83
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 22. Non-current liabilities - Bank borrowings (continued)
The total banking facilities as at 30 June 2021 are shown below:
Consolidated
2021
2020
$'000
$'000
Total facilities
Term loan facilities
-
141,174
Recourse debtor financing facilities
25,000
22,000
Revolving financing facilities
36,000
100,000
Equipment financing facilities
85,829
115,000
146,829
378,174
Used at the reporting date
Term loan facilities
-
141,174
Recourse debtor financing facilities
13,084
15,466
Revolving financing facilities
-
36,176
Equipment financing facilities
85,829
99,508
98,913
292,324
Consolidated
2021
2020
$'000
$'000
Unused at the reporting date
Term loan facilities
-
-
Recourse debtor financing facilities
11,916
6,534
Revolving financing facilities
36,000
63,824
Equipment financing facilities
-
15,492
47,916
85,850
Unused financing facilities
The Group had unused banking facilities relating to recourse debtor and revolving financing facilities amounting to $47.9m (FY20:
$85.9m) as at 30 June 2021.
In the statement of cash flows, the funds received from the bank under the limited recourse debtor facility are included in cash flows
from operations as receipts from customers. Funding received from the full recourse debtor facility is included in the consolidated
statement of cash flows under financing activities as proceeds from borrowings.
Note 23. Non-current liabilities - Convertible notes
Consolidated
2021
2020
$'000
$'000
Convertible notes
251,006
-
The Group issued 265 million unlisted, subordinated, secured, redeemable convertible loan notes on 27 May 2021. A summary of the
key terms of convertible notes is summarised below:
84
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 23. Non-current liabilities - Convertible notes (continued)
•
fully paid – the issue price of $1.00 per note is paid to the Group before the notes are issued;
•
maturity - the notes have a maturity date of 6 years from issuance;
•
redeemable – the notes may be redeemed, which means the Group may be required to buy back the notes prior to the
maturity date at the Makewhole Amount ranging between $464m (Year 1) and $610m (Year 6) subject to certain
conditions;
•
subordinated secured – the notes are secured by security granted by the Group and the Guarantors over all of their
assets and undertakings, to the Trustee under the terms of the Transaction Documents;
•
ranked, for security purposes, after all Priority Permitted Debt – the notes have priority over the Group’s ordinary shares,
all Shortfall Debt and the claims of unsecured creditors, however the notes rank behind the Group’s Priority Permitted
Debt and the claims of other creditors with priority at law in a winding up;
•
convertible into shares – the notes are converted into shares calculated by dividing the Equity Conversion Amount by a
Conversion Price of $0.70;
•
interest - for the first 30 months the Notes bear a cash interest of 7.0% p.a. or of 8.5% p.a. if the interest payment is
capitalised. After the first 30 months, the Group can elect to pay 7.0% cash interest p.a. or to pay a total interest rate of
8.5% p.a. but broken down between a minimum 5.0% p.a. cash and 3.5% p.a capitalisation of interest.
The net cash received from the issue of the convertible loan notes was mainly used to repay bank borrowings and transaction costs
incurred on the recapitalisation.
Consolidated
2021
2020
$'000
$'000
Movement of the fair values at the beginning and end of the current financial year is set out below:
Opening balance
-
-
Proceeds from issue of convertible notes
265,000
-
Fair value changes through profit or loss
(13,994)
-
251,006
-
The convertible notes are classified entirely as liabilities and as the embedded conversion features of the notes meet the definition of
a derivative, the Group has designated the whole convertible note as at fair value through profit or loss.
The Group used Binomial Tree methodology to determine the convertible notes fair value at 30 June 2021. This methodology allows
incorporation of the probability of exercising the conversion option and the investor’s right to redeem in the valuation. One of the key
inputs to this methodology is the current share price of the Group which directly impacts the embedded derivative component of the
convertible note. Due to share price movement prior to financial year end, the overall value of the convertible notes reduced by $14m
at 30 June 2021. This change in fair value is recorded in profit or loss in accordance with AASB 9 but does not impact the redemption
and conversion rights available to the investors under the terms of the convertible notes. The fair value change did not arise from the
Group's own credit risk and hence no amount is recognised in other comprehensive income ("OCI").
Significant accounting policies
The convertible notes are classified entirely as liabilities because they were issued with the conversion features that are not closely
related to the debt host contract. As the instrument contains an embedded derivative, it has been designated as at fair value through
profit or loss on initial recognition and as such the embedded conversion feature is not separated. All transaction costs related to
financial instruments designated as at fair value through profit or loss are expensed as incurred.
The component of fair value changes relating to the Group’s own credit risk is recognised in OCI. Amounts recorded in OCI related to
credit risk are not subject to recycling in profit or loss, but are transferred to retained earnings when realised. Fair value changes relating
to market risk are recognised in profit or loss.
85
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 24. Non-current liabilities - Lease liabilities
Consolidated
2021
2020
$'000
$'000
AASB 16 lease liabilities
111,047
192,341
Total AASB 16 lease liabilities:
Current
1,427
2,304
Non-current
111,047
192,341
112,474
194,645
Movement during the year in total lease liabilities (current and non-current) is as follows:
Opening balance
194,645
-
Adoption of AASB 16
-
195,234
Additions
516
2,255
Repayment
(13,569)
(14,776)
Discontinued operation (note 32)
(1,939)
-
Remeasurement of lease liabilities*
(78,441)
-
Interest
11,262
11,932
Closing balance
112,474
194,645
The following table presents the contractual undiscounted cash flows for lease obligations as at 30
June 2021:
Within one year**
11,752
14,186
One to five years**
47,497
53,467
More than five years***
86,132
124,997
More than five years - extension options assumed to be exercised****
171,974
226,432
317,355
419,082
*During the financial year, the Group renegotiated its land and building lease with a related party at Ingleburn (NSW) site and
remeasured the lease liability based on the revised terms with the corresponding adjustment in the right of use asset. The
remeasurement arose from reduction in lease rentals and fixed escalation. This lease modification is not accounted for as a separate
lease and hence the Group remeasured the lease based on the revised terms of the modified lease by discounting the revised lease
payments using an increased discount rate of 12% at the effective date of the modification. In August 2021, the Group also renegotiated
its land and building lease with a related party at its Taren Point (NSW) site. This lease variation has not been recognised in the FY21
financial statements as the agreement was executed subsequent to 30 June 2021.
**Non-cancellable lease payments.
***Non-cancellable lease payments, subject to market review.
****Cancellable lease but extension options are considered reasonably certain to be exercised, subject to market review.
Refer to note 33 for further information on financial instruments.
Significant accounting policies
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the
lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Group's incremental borrowing rate.
86
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 24. Non-current liabilities - Lease liabilities (continued)
Variable lease payments not included in the initial measurement of the lease liability are recognised directly in profit or loss.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
●
the lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate;
●
the lease payments change due to changes in an index of rate or a change in the amount expected to be payable under a residual
value guarantee; or
●
a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount
rate at the effective date of the modification.
Note 25. Income tax expense/(benefit)
Consolidated
2021
2020 restated
$'000
$'000
Income tax expense/(benefit)
Adjustments recognised in the current year in relation to the current tax of prior years
-
(18)
Deferred tax (income)/expense relating to the origination and reversal of temporary differences
17
(83)
Aggregate income tax expense/(benefit)
17
(101)
Consolidated
2021
2020 restated
$'000
$'000
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Loss before income tax (expense)/benefit from continuing operations
(38,758)
(136,462)
Loss before income tax expense from discontinued operations
(14,402)
(39,297)
(53,160)
(175,759)
Tax at the statutory tax rate of 30%
(15,948)
(52,728)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Effect of expenses that are not deductible in determining taxable profit
289
140
Over-provision in respect of prior years
-
(18)
Non-assessable income
(3,659)
(176)
(19,318)
(52,782)
Current year tax losses not recognised
14,104
46,109
Current year temporary differences not recognised
5,515
6,274
Effect of overseas tax rates
(284)
298
Income tax expense/(benefit)
17
(101)
87
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 25. Income tax expense/(benefit) (continued)
Amounts recognised in OCI and statement of changes in equity
Revaluation surplus on land and building
(17)
176
Tax on share issue costs
-
(75)
(17)
101
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.
Significant accounting policies
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 the end of the reporting date.
Deferred tax
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts 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. No deferred tax will be recognised from the initial recognition of an asset
or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is credited in the statement of profit or loss and other comprehensive income except where it relates to items that may
be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that is probable that future taxable profits will be available against which
deductible temporary differences can be utilised.
The amount of the benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable
income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Deferred tax assets 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.
Uncertain tax position
If the Group concludes that it is not probable the tax authorities will accept a tax position, it uses the “most likely amount” or “expected
value” in determining its tax balances. Any subsequent variation between the “most likely amount/expected value” and the amount
recorded in the consolidated financial statements are adjusted in the period in which such variation occurs.
Note 26. Non-current assets - Deferred tax
Deferred tax comprises temporary differences attributable to the following:
88
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 26. Non-current assets - Deferred tax (continued)
Consolidated
2021
2020
$'000
$'000
Deferred tax asset
Provisions
6,863
6,753
Lease liabilities
33,705
58,385
Finance facilities
25,527
29,852
Deferred tax asset
66,095
94,990
Deferred tax liability
Property, plant and equipment
(18,972)
(19,994)
Right of use asset
(25,923)
(51,683)
Intangibles
(6,437)
(6,437)
Other
(14,763)
(16,876)
Deferred tax liability
(66,095)
(94,990)
-
-
Carry forward tax losses of $455m (FY20: $392m), have not been recognised in deferred tax.
Consolidated
2021
2020
$'000
$'000
Deferred tax movements are as follows:
Opening balance
-
-
Provisions
110
2,919
Property, plant and equipment
1,022
(546)
Intangibles
-
2,946
Lease liabilities
(24,680)
58,574
Right of use asset
25,760
(51,692)
Finance facilities
(4,325)
(2,378)
Other
7,803
(9,823)
Movement for the year
5,690
-
Deferred asset tax not recognised
(5,690)
-
-
-
Note 27. Current liabilities - Provisions
Consolidated
2021
2020
$'000
$'000
Annual leave
5,475
5,843
Long service leave
413
714
5,888
6,557
The reduction in annual and long service leave provision is arising from sale of Cereal and Snacks business (refer to note 32).
89
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 27. Current liabilities - Provisions (continued)
Significant accounting policies
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect
of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Note 28. Non-current liabilities - Provisions
Consolidated
2021
2020
$'000
$'000
Long service leave
328
525
Lease make good*
-
1,116
328
1,641
*Lease make good provision was related to Cereals and Snacks business and transferred upon sale of business (note 32).
Significant accounting policies
Lease make good provisions
Lease make good provision represents the present value of the estimated costs to make good the premises leased by the Group at the
end of the respective lease terms.
Long service leave
The liability for long service leave not expected to be settled within 12 months of the reporting date are measured at the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit
credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Note 29. Equity - Issued Capital
Consolidated
2021
2020
2021
2020
Shares
Shares
$'000
$'000
Ordinary shares - fully paid
277,109,319
277,109,319
598,698
598,698
Convertible redeemable preference shares - fully paid
101,130
101,130
14
14
277,210,449
277,210,449
598,712
598,712
90
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 29. Equity - Issued Capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
1 July 2019
272,903,282
589,109
Employee share options exercised
561,666
$1.65
927
Employee share options exercised
900,000
$2.92
2,628
Employee share options exercised
1,545,000
$0.00
-
Convertible redeemable preference shares ('CRPS')
conversions
497
$0.30
-
Dividend reinvestment plan ('DRP') shares
1,198,874
$5.18
6,211
Transaction costs - net of tax
-
$0.00
(177)
Balance
30 June 2020
277,109,319
598,698
Balance
30 June 2021
277,109,319
598,698
Movements in convertible redeemable preference shares
Details
Date
Shares
Issue price
$'000
Balance
1 July 2019
101,627
14
Conversion to ordinary shares
(497)
$0.30
-
Balance
30 June 2020
101,130
14
Balance
30 June 2021
101,130
14
Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to dividends. The Company does not have a limited amount of
authorised capital and issued shares do not have a par value.
The DRP 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.
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds.
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.
If the dividend is declared by the Directors, it will be payable half-yearly in arrears i.e., in April and November each year. 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. 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.
91
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 29. Equity - Issued Capital (continued)
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.
Note 30. Equity - Dividends
There were no final dividends for FY20 or interim dividends for FY21. Dividends paid during prior year were as follows:
Consolidated
2021
2020
$'000
$'000
Final unfranked dividend of 3.25 cents per ordinary share paid in cash during the year ended 30 June
2020
-
2,658
Dividends reinvested: unfranked at 30% tax rate
-
6,211
Final unfranked dividend of 1.35 cents per convertible redeemable preference share paid in cash
during the year ended 30 June 2020
-
1
-
8,870
The Dividend Reinvestment Plan (DRP) is no longer open.
Franking credits
Consolidated
2021
2020
$'000
$'000
Franking credits available at the reporting date based on a tax rate of 30%
812
812
Net franking credits available
812
812
Note 31. Equity - Reserves
Consolidated
2021
2020
$'000
$'000
Land and buildings revaluation reserve
-
3,548
Common control reserve
(60,878)
(60,878)
Foreign currency translation reserve
500
(123)
Equity-settled employee benefits reserve
-
1,602
(60,378)
(55,851)
92
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 31. Equity - Reserves (continued)
Land and buildings revaluation reserve
The land and buildings 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.
Common control reserve
The common control reserve is used to account for the acquisition of Pactum Australia and Pactum Dairy Group by the Group. The
difference between the fair value of the consideration paid and the existing book values of the assets & liabilities of Pactum Australia
has been debited to a common control reserve ($5,464,000). On 31 January 2017, the reserve was increased due to the additional
interest acquired in Pactum Dairy Group. The difference between the fair value of the consideration paid and the non-controlling
interest balance on that date has been debited to a common control reserve ($55,414,000). Upon disposal of all interests in Pactum
Australia or Pactum Dairy Group by the Group, the applicable reserve would be transferred to retained earnings.
Foreign currency translation reserve
The foreign currency translation 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 40 to the financial statements.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Land and
buildings
revaluation
reserve
Common
control reserve
Foreign
currency
translation
reserve
Equity-settled
employee
benefits
reserve
Total
Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2019
3,137
(60,878)
(260)
13,251
(44,750)
Land and building revaluation - net of tax
411
-
-
-
411
Foreign currency translation
-
-
137
-
137
Share-based payments
-
-
-
(418)
(418)
Transfer of share based payments to accumulated
losses
-
-
-
(11,231)
(11,231)
Balance at 30 June 2020
3,548
(60,878)
(123)
1,602
(55,851)
Land and building revaluation - net of tax
(30)
-
-
-
(30)
Foreign currency translation
-
-
623
-
623
Transfer to accumulated losses
(3,518)
-
-
(1,602)
(5,120)
Balance at 30 June 2021
-
(60,878)
500
-
(60,378)
*
Upon sale of Cereals and Snacks business (refer to note 32), the Group has transferred related land and building revaluation
reserve amounting to $3.5m to accumulated losses.
**
The Group has also transferred $1.6m equity-settled employee benefits reserve to accumulated losses upon forfeiture of certain
employee share options scheme (refer to note 40).
93
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 32. Discontinued operations
Discontinued Operations - Cereal and Snacks
On 17 December 2020 the Group entered into a binding sale agreement for the sale of its Cereal and Snacks operations to the Arnott’s
Group which was completed in March 2021. The sale included the Cereal and Snacks manufacturing facilities in Leeton and Darlington
point in NSW and in Dandenong in Victoria as well as brands associated with the business, including Freedom Foods, Messy Monkeys,
Heritage Mill, Arnold’s Farm and Barley+. The sale did not include the Crankt Protein brand which will remain a valuable part of the
Freedom Foods Group nutritional product portfolio.
The Group reached an agreement to sell the related assets and liabilities of the Cereal and Snacks business for $19.4 million in cash.
Net cash proceeds were reduced after deducting costs associated with the transaction ($3.2m) and associated equipment leases
($6.5m). These costs were settled by the Group.
Cereal and Snacks business was an operating segment of the Group and hence a major line of business. Accordingly, it is reported in
the consolidated financial statements for the year ended 30 June 2021 as a discontinued operation. Financial information relating to
the discontinued operation for the period is set out below.
Financial performance information
Discontinued Operations
Mar 2021
Jun 2020
$'000
$'000
Revenue from sale of goods
35,321
63,540
Cost of sales
(38,148)
(74,605)
Gross margin
(2,827)
(11,065)
Selling and marketing expenses
(4,249)
(14,749)
Distribution expenses
(5,188)
(10,624)
Gross profit
(12,264)
(36,438)
Expenses
Expected credit losses
-
(559)
Administrative expenses
(1,158)
(1,723)
Impairment of right of use assets
-
(358)
Net finance costs
(86)
(219)
Loss before income tax expense
(13,508)
(39,297)
Income tax expense
-
-
Loss after income tax expense
(13,508)
(39,297)
Loss on disposal before income tax
(894)
-
Income tax expense
-
-
Loss on disposal after income tax expense
(894)
-
Loss after income tax expense from discontinued operations
(14,402)
(39,297)
94
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 32. Discontinued operations (continued)
FY21 financial performance for Cereal and Snacks business represent 9 month operations.
Cash flow information
Discontinued Operations
2021
2020
$'000
$'000
Net cash used in operating activities
(17,308)
(36,424)
Net cash from/(used in) investing activities
16,158
(1,333)
Net cash used in financing activities
(8,019)
(2,396)
Net decrease in cash and cash equivalents from discontinued operations
(9,169)
(40,153)
Carrying amounts of assets and liabilities disposed
Discontinued Operations
Mar 2021
Jun 2020
$'000
$'000
Inventories
3,906
-
Property, plant and equipment
16,995
-
Intangibles
834
-
Total assets
21,735
-
Lease liability
1,934
-
Provisions
2,749
-
Total liabilities
4,683
-
Net assets
17,052
-
Details of the disposal
Discontinued Operations
Mar 2021
Jun 2020
$'000
$'000
Total sale consideration
19,346
-
Carrying amount of net assets disposed
(17,052)
-
Disposal costs
(3,188)
-
Loss on disposal
(894)
-
95
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 32. Discontinued operations (continued)
Non-current assets classified as held for sale - UHT Bottling Line
In May 2021, the Group decided to sell a complete aseptic bottling line for low acid products which was originally acquired for an
expansion of the Plant Based segment. The sale is expected to be completed within 12 months and hence classified as held for sale.
The Group recorded an impairment charge of $1.9m as the expected fair value less cost of disposal was lower than the carrying amount
by this amount. The carrying amount of the asset at 30 June 2021 is $6.5m and presented within total assets of the Plant Based segment
in note 4.
Significant accounting policies
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their
carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits,
financial assets and investment property that are carried at fair value.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.
A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current
asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held
for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from
the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other
liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are
presented separately in the statement of profit or loss.
Note 33. 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 capital structure of the Group consists of debt, which includes borrowings, convertible loan notes, 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 routine
payments for tax, dividends and repayment of debt. The Group's policy is to borrow centrally; using a variety of capital market issues
and borrowing facilities, to meet anticipated funding requirements.
Market risk
The Group's activities expose it primarily to the financial risk of changes in foreign currency exchange rates and interest rates. The
Group adopts a natural hedge approach and at times enters into forward exchange and option contracts to manage net foreign currency
risk on its imports and exports.
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.
96
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 33. Financial instruments (continued)
Forward foreign exchange contracts
At times, the Group enters into forward foreign exchange contracts to hedge 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 and sales undertaken in foreign currencies.
At 30 June 2021, the Group had no foreign exchange forward contracts in place.
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
Assets
Liabilities
2021
2020
2021
2020
Consolidated
$'000
$'000
$'000
$'000
US Dollar
23,876
20,983
12,319
7,449
Canadian Dollar
5
6
-
-
Euro
-
-
1,125
588
New Zealand Dollar
-
-
-
579
Chinese Yuan
2,350
17,888
596
1,098
Singapore Dollar
43
-
390
233
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 5% (USD), 3% (EUR), 4% (CNY) and 3% (SGD) 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 Australian Dollar strengthens against the respective currency. For a
weakening of the Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and the
balances below would be negative.
The foreign currency sensitivity analysis sets out the sensitivity to variations in exchange rate on foreign currency receivables, payables
and cash and cash equivalents at year end in the Group.
AUD strengthened
AUD weakened
Consolidated - 2021
% change
Effect on profit
before tax
Effect on
equity
% change
Effect on profit
before tax
Effect on
equity
US dollar
5%
(552)
(552)
5%
610
610
Euro
3%
33
33
3%
(35)
(35)
Chinese Yuan
4%
(68)
(68)
4%
73
73
Singapore dollars
3%
10
10
3%
(10)
(10)
(577)
(577)
638
638
AUD strengthened
AUD weakened
Consolidated - 2020 restated
% change
Effect on profit
before tax
Effect on
equity
% change
Effect on profit
before tax
Effect on
equity
US dollar
5%
(1,094)
(1,094)
5%
1,207
1,207
Euro
3%
29
29
3%
(31)
(31)
Chinese Yuan
4%
(129)
(129)
4%
140
140
Singapore dollars
3%
(8)
(8)
3%
8
8
(1,202)
(1,202)
1,324
1,324
97
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 33. Financial instruments (continued)
Interest rate risk management
At 30 June 2021, the Group’s borrowings are largely at fixed rates (convertible loan notes and equipment finance facilities):
2021
2020
Weighted
average
effective
interest rate
Balance
Weighted
average
effective
interest rate
Balance
%
$'000
%
$'000
Cash and cash equivalents
-
31,668
-
17,167
Term loan facilities (variable interest rate)
-
-
5.10%
(141,174)
Recourse debtor financing facilities (variable interest rate)
3.49%
(13,084)
3.35%
(15,466)
Revolving financing facilities (variable interest rate)
-
-
4.95%
(36,176)
Equipment financing facilities (fixed interest rate)
4.71%
(85,829)
4.71%
(99,508)
Convertible notes (fixed interest rate)*
8.50%
(251,006)
-
-
(318,251)
(275,157)
*The Group is capitalising interest payments on convertible notes and hence subject to a fixed interest rate of 8.5% p.a. Since the Group
designated convertible notes at fair value through profit or loss and the interest is capitalised, no interest expense is recognised in the
income statement at 30 June 2021.
The Group has settled a large part of its bank borrowings with the proceeds received from issue of convertible notes. Hence the Group
does not have any outstanding interest rate swap contracts at 30 June 2021.
Interest rate sensitivity analysis
Since the Group's borrowings are largely at fixed rates, it does not have a material exposure to interest rate changes and hence
sensitivity analysis is not included in the financial statements.
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 creditworthy 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.
For trade receivables, the Group has applied the simplified approach in AASB 9 to measure the loss allowance at lifetime ECL. The Group
determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience
based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic
conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision
matrix.
Note 10 includes further details on the loss allowance for these assets.
The credit risk on liquid funds is limited because the Group only deposits monies with Australian banking counterparties 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.
98
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 33. Financial instruments (continued)
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 and executive management. The Group's Treasury 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.
Included in Note 22 is detail of the current status of funding facilities.
Consolidated 2021
Contractual cash flow
Carrying
amount
Weighted
average
effective
interest rate
Less than 1
year
Between 1 and
5 years
More than 5
years
Total
%
$'000
$'000
$'000
$'000
Non-interest bearing
Trade and other payables
67,464
-
67,464
-
-
67,464
Payable to related parties
1,103
-
1,103
-
-
1,103
-
-
-
-
-
-
Interest bearing - variable
-
-
-
-
-
-
Recourse debtor financing facilities
13,084
3.49%
13,084
-
-
13,084
-
-
-
-
-
-
Interest bearing - fixed
-
-
-
-
-
-
Equipment financing facilities
85,829
4.71%
15,094
70,587
14,316
99,997
Convertible notes*
251,006
8.50%
-
42,631
566,869
609,500
418,486
96,745
113,218
581,185
791,148
*
The convertible notes provide redemption and equity conversion options. Given the number of potential alternatives and the
timing of the potential cash repayment, the amount shown in the above table is indicative and the actual cash flows may be
different.
Consolidated 2020
Contractual cash flows
Carrying
amount
Weighted
average
effective
interest rate
Less than 1
year
Between 1 and
5 years
Total
%
$'000
$'000
$'000
Non-interest bearing
Trade and other payables
111,011
-
111,011
-
111,011
Payable to related parties
245
-
245
-
245
-
-
-
-
-
Interest bearing - variable
-
-
-
-
-
Term loan facilities
141,174
5.10%
163,465
-
163,465
Recourse debtor financing facilities
15,466
3.35%
15,478
-
15,478
Revolving financing facilities
36,176
4.95%
41,905
-
41,905
-
-
-
-
-
Interest bearing - fixed
-
-
-
-
-
Equipment financing facilities
99,508
4.71%
99,516
-
99,516
403,580
431,620
-
431,620
99
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 33. Financial instruments (continued)
Fair value of financial instruments
The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values.
For financial instruments measured and carried at fair value, the Group uses the following to categorise the methods used:
●
Level 1: fair value is calculated using quoted prices in active markets for identical assets or liabilities.
●
Level 2: fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
●
Level 3: fair value is estimated using inputs for the asset or liability that are not based on observable market data.
From time to time, the Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate
risk, including forward foreign exchange contracts and options. Derivative financial instruments are classified as Level 2, as the fair
values are calculated based on observable market interest rates and foreign exchange rates. The fair values of interest rate derivatives
are calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of the foreign
currency forwards are calculated as the difference between the forward rate and the spot exchange rate at the balance sheet date.
The fair value of the Group's investment in JLL is determined by the market approach using prices and other relevant information
generated by market transactions involving identical or comparable businesses and interest shown by shareholders. Investment in JLL
is classified as Level 3, as the fair value at 30 June 2021 is based on the most recent negotiations to transact in this investment.
The fair value of convertible loan notes is independently determined using a Binomial Tree approach that takes into account the equity
conversion options, redemption options, make whole payment scenario, expected price volatility of the underlying share, the expected
dividend yield, the risk-free interest rate for the term of the convertible loan notes and interest payment options. Since convertible
loan notes are not traded in an active market and the valuation exercise involves a combination of observable market data and
unobservable inputs, the convertible loan notes are classified as Level 2.
The Group has not adopted hedge accounting during the financial year or previous corresponding period.
During the year there were no transfers between Level 1, Level 2 and Level 3 fair value hierarchies.
Financial risk management objectives
The Group's Treasury provides services to each of the group businesses, and co-ordinates access to domestic and international financial
markets, for the purpose of monitoring and managing the financial risks relating to the operations of the Group.
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 and interest rate hedging risk. The Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
Consolidated
2021
2020 restated
$'000
$,000
Debt (i)
98,913
292,324
Convertible notes
251,006
-
Lease liabilities - AASB 16
112,474
194,645
Cash and cash equivalents
(31,668)
(17,167)
Net debt
430,725
469,802
Equity (ii)
1,493
54,077
100
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 33. Financial instruments (continued)
(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.
If the convertible notes are converted to equity, the net debt will reduce to $179.7m and equity will increase by $252.5m.
Note 34. Capital commitments and contingent liabilities
Consolidated
2021
2020
$'000
$'000
Capital commitments
Committed at the reporting date but not recognised as liabilities:
Plant and equipment
922
5,782
Consolidated
2021
2020
$000
$000
Contingent liabilities
Contingencies at the reporting date but not recognised as liabilities:
Bank guarantees provided in the normal course of business for certain property leases
-
1,036
Blue Diamond Proceedings
During FY21, legal proceedings commenced in both Australia and the United States between Blue Diamond Growers (Blue Diamond)
and a subsidiary of the Company including Freedom Foods Pty Ltd (FFPL).
Various disclosures have been made regarding Blue Diamond proceedings including in the Prospectus dated 19 March 2021 (and
supplementary Prospectuses) and the ASX releases dated 30 September 2020, 8 March 2021 and 28 May 2021.
The Blue Diamond claim seeks:
●
compensatory and general damages for breach of the Licence Agreement, which Blue Diamond asserts to be at least US$16
million;
●
compensatory and general damages for breach of an alleged oral agreement; and
●
specific performance of the Licence Agreement.
101
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 34. Capital commitments and contingent liabilities (continued)
The Group disputes Blue Diamond’s claims and is defending its position. Following hearings that took place in February 2021, the Federal
Court of Australia ordered on 5 March 2021 that all matters in dispute between the parties that were subjects of the three sets of
proceedings in the United States and Australia will now be determined in the Californian Arbitration.
The legal proceedings have the potential to materially adversely impact the Group’s financial and operating performance, both in terms
of the potentially significant costs associated with the proceedings and the potential outcomes if one or more of the remedies and
orders sought by Blue Diamond in such proceedings are granted. There is a risk that, as an outcome of the arbitration, the arbitrator
makes orders restraining FFPL (or compelling FFPL to restrain any entity acting on behalf of or in concert with FFPL) from manufacturing
or selling nut-based beverage products in Australia or New Zealand that are not Blue Diamond products, organic or private label
products (including a restraint on non-organic, nut-based beverage products), and any such restraints may have a significant impact on
the Group’s assets and operations. There is also a risk that Blue Diamond may seek to make additional claims, or amended claims during
the course of the proceedings, or otherwise seek additional or amended remedies and orders.
In addition to the potential impact on the Group, under the convertible notes terms, and the terms with its senior financiers, the Group
is subject to restrictions that prevent it from settling any dispute with Blue Diamond, or contributing to any damages or settlement
payment to Blue Diamond in connection with such proceedings, in each case, without the consent of the majority convertible
noteholders, and the consent of its senior financiers.
As the Californian Arbitration is progressing but is still at an early stage and any damages or settlement payment require the consent
of the majority convertible noteholders and senior financiers, the Group has not recognised a provision in the financial statements in
respect of these proceedings apart from the associated legal costs incurred as at 30 June 2021.
Class Action
Two separate class action proceedings were commenced against the Company and its auditor, Deloitte Touche Tohmatsu, alleging
breaches of the Corporations Act 2001 (Cth), Australian Securities and Investments Commission Act and Australian Consumer Law. The
Group has appointed Arnold Bloch Leibler to defend the actions. The class actions are at a very early stage and apart from the associated
legal costs incurred as at 30 June 2021, no provision is recognised in the financial statements.
ASIC Investigation
ASIC has commenced an investigation under section 13 of the ASIC Act, in relation to suspected breaches of or offences committed
under the Corporations Act (including continuous disclosure and financial reporting obligations) by the Company and the officers and
directors of the Company between 1 July 2014 and 30 June 2020 (ASIC Investigation).
In the course of the investigation, ASIC has issued notices to the Group for the production of books and the provision of reasonable
assistance.
The Group continues to cooperate with ASIC in relation to the ASIC Investigation and produce materials and information as requested.
The investigation has not been concluded as at the date of issuance of these financial statements and hence no provision is recognised.
102
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 35. Interests in subsidiaries
The Consolidated Statement of profit or loss and other comprehensive income and Statement of financial position of the entities party
to the deed of cross guarantee is the Consolidated Statement of profit or loss and other comprehensive income and Statement of
financial position included in the FY21 financial statements.
Ownership interest
Principal place of business /
2021
2020
Name
Country of incorporation
%
%
Paramount Seafoods Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Group Operations Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Group Financing Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Pty Limited*
Australia
100.00%
100.00%
Pactum Australia Pty Limited*
Australia
100.00%
100.00%
Pactum Dairy Group Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Group IP Pty Limited*
Australia
100.00%
100.00%
Thorpedo Foods Group Pty Limited*
Australia
100.00%
100.00%
Thorpedo Foods Pty Limited
Australia
75.00%
75.00%
Thorpedo Seafoods Pty Limited
Australia
75.00%
75.00%
Freedom Foods North America Inc**
North America
-
80.00%
Freedom Foods Group Dandenong Pty Limited (formerly
Popina (Vic) Pty Limited)*
Australia
100.00%
100.00%
Freedom Foods Group Ingleburn Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Group Nutritionals Pty Limited*
Australia
100.00%
100.00%
Freedom Foods Group Trading Pty Limited*
Australia
100.00%
100.00%
Crankt Protein International Pty Limited
Australia
100.00%
100.00%
Freedom Foods Shanghai Co. Limited
China
100.00%
100.00%
Freedom Foods Singapore Pte Limited
Singapore
100.00%
100.00%
*
These companies are members of the tax consolidated group.
**
The operations of Freedom Foods North America were closed in April 2021.
Note 36. Deed of cross guarantee
The following companies in the Group 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 audited financial statements and a directors' report.
Freedom Foods Group Limited
Paramount Seafoods Pty Limited
Freedom Foods Group Operations Pty Limited
Freedom Foods Group Financing Pty Limited
Freedom Foods Pty Limited
Pactum Australia Pty Limited
Thorpedo Foods Group Pty Limited
Freedom Foods Group Nutritionals Pty Ltd
Freedom Foods Group Dandenong Pty Limited (formerly Popina (Vic) Pty Limited)
Pactum Dairy Group Pty Limited
Freedom Foods Group Trading Pty Limited
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other parties to
the deed of cross guarantee that are controlled by Freedom Foods Group Limited, they also represent the 'Extended Closed Group'.
103
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 36. Deed of cross guarantee (continued)
Set out below is a consolidated statement of profit or loss, a consolidated statement of comprehensive income and a summary of
movements in consolidated retained earnings for the year ended 30 June 2021 of the closed group
Consolidated statement of comprehensive income
Consolidated
2021
2020 restated
$'000
$'000
Revenue from sale of goods
571,802
567,190
Cost of sales
(462,383)
(536,646)
Gross margin
109,419
30,544
Selling and marketing expenses
(22,937)
(43,034)
Distribution expenses
(48,069)
(50,054)
Gross profit/(loss)
38,413
(62,544)
Other income
3,755
1,987
Expenses
Product development expenses
(1,831)
-
Expected credit losses
347
(3,639)
Administrative expenses
(31,546)
(32,644)
Impairment of non-financial assets
(31,538)
(64,096)
Net finance costs
(31,367)
(15,409)
Share of profits of associates accounted for using the equity method
607
586
Loss before income tax (expense)/benefit
(53,160)
(175,759)
Income tax (expense)/benefit
(17)
101
Loss after income tax (expense)/benefit
(53,177)
(175,658)
Consolidated statement of financial position
Consolidated
2021
2020 restated
$'000
$'000
Assets
Current assets
Cash and cash equivalents
31,122
16,517
Trade and other receivables
56,854
61,830
Receivable from related parties
126,682
106,963
Loan due from a related party
13,116
14,464
Inventories
34,569
53,938
Derivative financial instruments
-
2,504
Prepayments
3,530
1,891
Total current assets
265,873
258,107
104
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 36. Deed of cross guarantee (continued)
Consolidated
2021
2020 restated
$'000
$'000
Non-current assets
Investment in subsidiaries - at cost
-
904
Investments accounted for using the equity method
22,684
22,077
Property, Plant and Equipment
137,952
161,360
Right-of-use assets
39,396
42,664
Intangibles
-
5,248
Total non-current assets
200,032
232,253
Total assets
465,905
490,360
Liabilities
Current liabilities
Trade and other payables
59,197
83,111
Bank borrowings
24,316
292,324
Lease liabilities
1,958
524
Derivative financial instruments
-
2,507
Provisions
6,652
4,635
Total current liabilities
92,123
383,101
Non-current liabilities
Bank borrowings
74,597
-
Convertible notes
251,006
-
Lease liabilities
46,633
51,642
Provisions
53
1,540
Total non-current liabilities
372,289
53,182
Total liabilities
464,412
436,283
Net assets
1,493
54,077
Equity
Issued Capital
598,712
598,712
Reserves
(60,378)
(55,851)
Accumulated losses
(536,841)
(488,784)
Total equity
1,493
54,077
Note 37. Parent entity information
Set out below is the supplementary information about the parent entity.
105
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 37. Parent entity information (continued)
Statement of profit or loss and other comprehensive income
Parent
2021
2020 restated
$'000
$'000
Loss after income tax
(52,584)
(159,722)
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income
(52,584)
(159,722)
Statement of financial position
Parent
2021
2020 restated
$'000
$'000
Total current assets
Total non-current (liabilities)/assets
1,493
54,126
Total current liabilities
-
(49)
Net assets
1,493
54,077
Equity
Issued capital
598,712
598,712
Reserves
-
1,602
Accumulated losses
(597,219)
(546,237)
1,493
54,077
Certain items in the table set out above related to the 2020 comparative have been restated. For details on the restatement of
comparatives, refer to note 3.
Freedom Foods Group Limited on 27 August 2021, provided a letter of support stating it will provide financial support to certain
controlled entities, at their request, to ensure that those subsidiaries are at all times able to pay all debts and liabilities owed by them,
as they become due and payable in the normal course of business.
Note 38. Related party transactions
Subsidiaries
Interests in subsidiaries are set out in Note 35.
Associates
Interests in associates are set out in Note 14.
Joint ventures
Interests in joint ventures are set out in Note 14.
Key management personnel
Disclosures relating to key management personnel are set out in note 39 and the remuneration report included in the Directors' report.
106
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 38. Related party transactions (continued)
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; and
•
other related parties.
The following transactions occurred with related parties:
Consolidated
2021
2020
$
$
Sale of goods and services during the year:
Sale of goods to JLL*
-
21,699,884
Sale of pallet racking to Perich Property Holdings
273,133
-
-
-
Proceeds from/(reimbursements) related to convertible loan notes:
-
-
Amount received from Arrovest Pty Limited
126,142,210
-
Reimbursement of legal advice to Arrovest Pty Limited
(253,000)
-
Amount received from Directors
275,000
-
-
-
Reimbursement for capital costs deemed to be landlord costs during the year:
-
-
Reimbursement of capital costs incurred by the Group that were deemed to be landlord costs of
Perich Property Holdings at Shepparton (related entity through common Directors)
263,865
1,687,970
Purchase of goods and services during the year:
Milk purchases from Fresh Dairy Four Pty Limited (wholly owned subsidiary of AFMH)
(8,142,206)
(12,308,452)
Recycling services from Direct Group Industries (50% owned by Arrovest Pty Limited)**
-
(11,048)
Payment for rent, outgoings and interest during the year:
Payment of rent and outgoings under a lease commitment with Perich Property Holdings at
Shepparton and Head Office (related entity through common Directors)
(5,199,589)
(4,874,354)
Payment of rent and outgoings under a lease commitment with Perich Property Unit Trust at
Ingleburn (related entity through common Directors)
(9,619,434)
(8,574,354)
Payment of principal and interest to Arrovest Pty Limited against short term loan facility
-
(848,892)
Payment for Director and Officer insurance and reimbursement of other legal costs to Leppington
Pastoral Company
(1,330,242)
-
Amount payable at the end of the year:
AASB 16 Lease liability with Perich Property Holdings at Shepparton and Head Office (related entity
through common Directors)
(48,080,697)
(49,368,532)
AASB 16 Lease liability with Perich Property Unit Trust at Ingleburn (related entity through common
Directors)
(61,827,983)
(138,696,637)
Payable for rent and outgoings under a lease commitment with Perich Property Holdings at
Shepparton and Head Office (related entity through common Directors)
(60,136)
-
Payable for milk purchases from Fresh Dairy Four Pty Limited (wholly owned subsidiary of AFMH)
(1,042,747)
(244,743)
*
Investment in JLL is classified as FVOCI during FY21 and hence not considered a related party.
**
Direct Group Industries was sold during FY20.
*** On 30 July 2021, the Group has issued 7,291 listed share options to the Chair of the Board, which related to the Chair’s underlying
ordinary shareholding. The options are not funded upfront.
107
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 39. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Consolidated
2021
2020
$
$
Short-term employee benefits
2,408,222
2,425,527
Post-employment benefits (superannuation contribution)
120,964
143,988
Long-term benefits (long service leave expense)
-
208,397
Termination benefits
304,359
-
Long term incentives
180,000
-
Share-based benefits*
-
(1,265,162)
3,013,545
1,512,750
*The share based benefits for FY20 is negative due to the reversal of previously recognised share based expense arising from forfeiture
of share options granted to key management personnel.
Note 40. Share-based payments
In the year ended 30 June 2021, the Group has not issued any new options or service rights under the employee share scheme. However
the following outstanding options, which were issued in prior years, did not vest during FY21:
1 October 2017 Options
Based on reported results, 80% of the second series of 2,250,000 options (Series 8) vested in FY19. None of the vested options were
exercised before the expiry date of 1 October 2020. The remaining 20% lapsed unvested.
18 April 2019 Options (Series 9)
This series, with an expiry date of 30 November 2020, have not vested given the performance of the two related financial years FY19
(as restated) and FY20.
2021
Grant Date Expiry Date
Exercise
price
Balance at the
start of the
year
Granted
Exercised
Expired/
Forfeited/
Lapsed
Balance at the
end of the year
Vested and
exercisable
01/10/2017 01/10/2020
$4.50
2,250,000
-
-
(2,250,000)
-
-
18/04/2019 30/11/2020
$5.75
2,850,000
-
-
(2,850,000)
-
-
5,100,000
-
-
(5,100,000)
-
-
Weighted average exercise price
$5.20
$0.00
$0.00
$5.20
$0.00
$0.00
108
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 40. Share-based payments (continued)
2020
Grant Date Expiry Date
Exercise
price
Balance at the
start of the year
Granted
Exercised
Expired/Forfeited/
Lapsed
Balance at the
end of the year
Vested and
exercisable
01/01/2013
01/09/2019
$1.65
561,666
-
(561,666)
-
-
-
01/07/2015
30/06/2020
$2.92
4,000,000
-
(900,000)
(3,100,000)
-
-
01/10/2017
01/10/2019
$4.50
2,250,000
-
-
(2,250,000)
-
-
01/10/2017
01/10/2020
$4.50
2,250,000
-
-
-
2,250,000
1,800,000
18/04/2019
30/11/2020
$5.75
2,850,000
-
-
-
2,850,000
-
23/03/2020
31/03/2020
$0.00
-
1,385,000
(1,385,000)
-
-
-
01/04/2020
30/04/2020
$0.00
-
160,000
(160,000)
-
-
-
11,911,666
1,545,000
(3,006,666)
(5,350,000)
5,100,000
1,800,000
Weighted average exercise price
$4.13
$0.00
$1.18
$3.58
$5.20
$0.00
Significant accounting policies
Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity
instrument at the grant date.
The fair value of options and service rights granted is recognised as an employee benefits expense with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair value of the options and service rights granted:
●
including any market performance conditions (eg the entity’s share price)
●
excluding the impact of any service and non-market performance vesting conditions (eg profitability and remaining an employee
of the entity over a specified time period), and
●
including the impact of any non-vesting conditions (eg the requirement for employees to save or hold shares for a specific period
of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the
non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
Where shares are forfeited due to a failure by the employee to satisfy the service conditions, any expenses previously recognised in
relation to such shares are reversed effective from the date of the forfeiture.
109
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 41. Reconciliation of loss after income tax to net cash used in operating activities
Consolidated
2021
2020 restated
$'000
$'000
Loss after income tax (expense)/benefit for the year
(53,177)
(175,658)
Adjustments for:
Depreciation and amortisation
28,504
29,533
Impairment of non-current assets
1,910
26,081
(Gains)/losses on financial assets and liabilities
(13,994)
(999)
Loss on sale of assets
514
-
Impairment of financial assets
(347)
3,639
Share based payments
-
(418)
Deferred tax movement
17
(83)
Share of profit of associates
(607)
(586)
Transaction costs related to recapitalisation*
9,637
-
Revaluation loss on land
137
-
Unrealised exchange loss
770
1,298
Movements in working capital:
Decrease in trade and other receivables
2,304
2,011
Decrease in inventories
15,317
17,133
Increase in prepayments
(280)
-
Increase in amount due to other parties
858
-
Decrease in other operating assets
175
374
Decrease in trade and other payables
(42,553)
(82)
(Decrease)/increase in provision
(1,982)
134
Increase/(decrease) in other operating liabilities
-
(1,054)
Net cash used in operating activities
(52,797)
(98,677)
*These costs are classified as cash flow from financing activities and hence not forming part of net cash used in operating activities.
Note 42. Reconciliation of assets and liabilities arising from investing and financing activities
The table below details changes in the Group's assets and liabilities arising from investing and financing activities, including both cash
and non-cash changes. Liabilities arising from investing and financing activities are those for which cash flows were, or future cash flows
will be, classified in the Group's statement of cash flows as cash flows from financing activities.
110
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 42. Reconciliation of assets and liabilities arising from investing and financing activities (continued)
Movements in financing activities:
Consolidated 2021
Non-cash changes
Balance
30 June 2020
Financing cash
flows
Lease
remeasurement
Fair value
changes
Other non-
cash
Balance
30 June 2021
$'000
$'000
$'000
$'000
$'000
$'000
AASB 16 lease liabilities (note 24)
(194,645)
4,240
78,441
-
(510)
(112,474)
Term loan facilities (note 22)
(141,174)
141,174
-
-
-
-
Recourse debtor financing facilities
(note 20)
(15,466)
2,382
-
-
-
(13,084)
Revolving financing facilities (note
22)
(36,176)
36,176
-
-
-
-
Equipment financing facilities
(note 22)
(99,508)
17,085
-
-
(3,406)
(85,829)
Convertible loan notes (note 23)
-
(265,000)
-
13,994
-
(251,006)
Transaction costs
-
10,145
-
-
-
10,145
Share capital (note 29)
(598,712)
-
-
-
-
(598,712)
(1,085,681)
(53,798)
78,441
13,994
(3,916)
(1,050,960)
Consolidated 2020
Non-cash changes
Balance
30 June 2019
Financing cash
flows
DRP
Related
income tax
Other non-
cash
Balance
30 June 2020
$'000
$'000
$'000
$'000
$'000
$'000
AASB 16 lease liabilities (note 24)
-
2,844
-
-
(197,489)
(194,645)
Term loan facilities (note 22)
(92,350)
(48,824)
-
-
-
(141,174)
Recourse debtor financing facilities
(note 20)
(20,926)
5,460
-
-
-
(15,466)
Revolving financing facilities (note
22)
-
(36,176)
-
-
-
(36,176)
Equipment financing facilities
(note 22)
(64,141)
(6,790)
-
-
(28,577)
(99,508)
Share capital (note 29)
(589,123)
(3,303)
(6,211)
(75)
-
(598,712)
Dividend paid (note 30)
-
2,659
6,211
-
-
8,870
(766,540)
(84,130)
-
(75)
(226,066)
(1,076,811)
111
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 42. Reconciliation of assets and liabilities arising from investing and financing activities (continued)
Movements in investing activities:
Consolidated 2021
Non-cash changes
Balance
30 June 2020
(restated)
Investing
cash flows
Depreciation,
amortisation
and
impairment
Lease
remeasurement
Discontinued
operations
Other non-
cash changes
Balance
30 June 2021
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Property, plant and equipment
(note 15)
293,742
2,658
(20,664)
-
(25,369)
3,208
253,575
Right of use asset (note 16)
172,304
-
(7,840)
(78,441)
-
511
86,534
Intangibles (note 17)
30,599
-
-
-
(835)
-
29,764
Financial assets at FVOCI (note
13)
-
-
-
-
-
5,857
5,857
Investment accounted for using
the equity method (note 14)
27,934
-
-
-
-
(5,250)
22,684
Non-current assets classified as
held for sale (note 32)
-
-
(1,910)
-
8,374
-
6,464
Sale of discontinued operation
(note 32)
-
(16,158)
-
-
-
-
(16,158)
524,579
(13,500)
(30,414)
(78,441)
(17,830)
4,326
388,720
Consolidated 2020 (restated)
Non-cash changes
Balance
30 June 2019
(restated)
Investing
cash flows
Depreciation,
amortisation
and
impairment
Equipment
finance
Share of
profits using
equity
method
Other non-
cash changes
Balance
30 June 2020
(restated)
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Property, plant and equipment
(note 15)
269,403
19,258
(24,451)
28,577
-
955
293,742
Right of use asset (note 16)
-
-
(14,030)
-
-
186,334
172,304
Intangibles (note 17)
47,248
-
(16,395)
-
-
(254)
30,599
Investment accounted for using
the equity method (note 14)
23,515
4,413
(735)
-
586
155
27,934
340,166
23,671
(55,611)
28,577
586
187,190
524,579
112
Freedom Foods Group Limited
Notes to the consolidated financial statements
30 June 2021
Note 43. 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:
Consolidated
2021
2020
$
$
Audit or review of financial reports:
- Group FY21
829,000
-
- Group FY20*
540,300
640,300
- Subsidiaries and joint operations
57,673
44,339
1,426,973
684,639
Other assurance and agreed-upon procedures under other legislation or contractual arrangements
19,525
10,000
Other services:
Assistance with research and development claims
-
133,000
Tax compliance services
-
54,325
-
187,325
1,446,498
881,964
*Group FY20 audit fees incurred in 2021 relate to audit of financial statements restatement.
Note 44. Events after the reporting period
Share options
On 1 June 2021, the Company issued a prospectus offering 40,816,326 m share options to eligible shareholders in order to provide
them with the opportunity to participate in the recapitalisation plan. The Group received applications for a total of 27,698,189 options
which were issued on 30 July 2021. The options were quoted on the ASX from 2 August 2021.
The options are exercisable at $0.98 per option any time during the period commencing on the business day immediately following the
release of FY23 annual report and 30 July 2027. If all 27,698,189 options are exercised before 30 July 2027, the Group will raise
approximately $27,144,225 which will be used for working capital purposes.
Amongst the options issued include 7,291 listed share options issued to the Chair of the Board relating to the Chair’s pre-existing
shareholding.
COVID-19 pandemic
The COVID-19 pandemic has commenced a new national Delta wave subsequent to 30 June 2021. The impact on the Victorian Local
Government area of Shepparton where one of the Group’s manufacturing sites is located has been significant, with a lockdown of over
1/3rd of the population, impacting the available labor force. The lock down measures taken by the Victorian government to contain
the virus have affected economic activity. The Group has taken a number of measures to monitor and mitigate the effects of COVID-
19, such as safety and health measures for the Group’s workforce and securing the supply of materials that are essential to our
production process. At this stage, the impact on our business and results has not been significant with no positive cases in our staff or
the family of our staff. We will continue to monitor this situation, follow the various government policies and advice and do our utmost
to continue our operations in the best and safest way possible.
113
Freedom Foods Group Limited
Corporate directory
30 June 2021
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 2021 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 28 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
___________________________
Genevieve Gregor
Chair
30 August 2021
Sydney
114
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
Deloitte Touche Tohmatsu
ABN 74 490 121 060
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www.deloitte.com.au
Independent Auditor’s Report to the members of Freedom
Foods Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Freedom Foods Group Limited (the “Company”) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including
a summary of significant accounting policies and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
▪
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance
for the year then ended; and
▪
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to note 2 in the financial report, which indicates that the Group incurred a net loss after tax of
$53.2m during the year ended 30 June 2021 and had net cash outflows from operating activities of $52.8m. At 30
June 2021, the Group had net assets of $1.5m. The Group and its subsidiaries are subject to legal proceedings
brought against certain Group subsidiaries by Blue Diamond Growers in respect of alleged breaches of the Licence
Agreement between Blue Diamond Growers; and two class actions brought against the Company in respect of
alleged breaches of the Corporations Act 2001 (Cth), Australian Securities and Investments Commission Act and
Australian Consumer Law. The outcomes of each of these legal proceedings have the potential to materially and
adversely impact the Group’s financial and operating performance. Should the Group be unsuccessful in its
defence against either of these claims, the Group may become exposed to material compensation amounts,
financial penalties and potential restrictions on the Group’s operations. There is a risk that the Group will have
115
insufficient funds to be able to pay these amounts and/or that restrictions on the Group’s operations may also
have a material impact on its ability to continue operating as a going concern.
These events or conditions, as set forth in note 2, indicate that a material uncertainty exists that may cast
significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of
this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key Audit Matter
How the scope of our audit responded to the Key Audit Matter
Contingent liabilities
As described in notes 2 and 34 of the
financial statements, the Group has a
number of contingent liabilities regarding
significant legal matters. Judgement is
required in assessing the likelihood of
outflow, the potential quantum of any
outflow, the impact on the Group’s
operations and the associated disclosure
requirements. This key audit matter
specifically relates to the following two
legal matters:
Blue Diamond proceedings: The Group
entered into an exclusive manufacturing
and distribution agreement in respect of
the Australian and New Zealand market
with
Blue
Diamond
Growers
(“Blue
Diamond”) in respect of its Almond Breeze
products in 2011 which was amended in
2014 (the “License Agreement”). Blue
Diamond
has
commenced
legal
proceedings against certain of the Group’s
subsidiaries in respect of alleged breaches
of the Licence Agreement. Management
has concluded that it is not currently
possible to determine the outcome of
these legal proceedings with any certainty,
and therefore has treated the dispute as a
contingent liability and has concluded that
no provision is required at 30 June 2021.
Class action: The Group is subject to
separate class actions lodged by Slater &
Gordon and Omni Bridgeway on 9
December
2020
and
22
February
respectively (the “Class Actions”). The Class
Actions allege breaches by the Group of the
Corporations Act 2001 (Cth), Australian
Our audit procedures included but were not limited to the
following:
▪
Obtaining an understanding of relevant controls in relation
to the identification and assessment of legal claims relating
to the Group and its subsidiaries
▪
Assessing the reasonableness of management’s assessment
of the likelihood and quantification of outflow assessment in
respect of legal actions and claims against the Group and its
subsidiaries
▪
Reading Board meeting minutes to identify matters relevant
to the Group’s accounting and disclosure considerations
▪
Independently obtaining legal confirmations from the
Group’s legal advisors in respect of open legal matters
▪
Inquiring of the Group’s internal legal advisors to
understand ongoing and potential legal matters and
reviewing third party correspondence and reports
▪
Meeting with the Group’s external legal advisors to
challenge the status of the legal claims and actions and their
expectations as to expected outcome and the quantum of
any claims or financial penalties
▪
Challenging
the
appropriateness
of
management’s
conclusion that no provisions are required in respect of
these items at 30 June 2021; and
▪
Assessing the adequacy of the disclosures in notes 2 and 34
of the financial statements.
116
Securities and Investments Commission Act
(“ASIC Act”) and Australian Consumer Law.
Management has concluded that the claims
constitute contingent liabilities and that no
provision is required at 30 June 2021.
Recoverability of goodwill, intangible assets
and tangible assets
As described in notes 15, 16, 17 and 32 of
the financial statements, the Group held
$369.9m of goodwill, tangible assets and
intangible assets and $6.4m of non-
current assets held for sale as at 30 June
2021 (30 June 2020: $nil).
In accordance with AASB 136 Impairment
of Assets (“AASB 136”), the Group is
required to assess at 30 June 2021 whether
there are any indicators that individual
assets may be impaired. Where such
indicators are identified, the Group
assesses their carrying value by reference
to the higher of their value in use or fair
value less costs to sell. There are a number
of key estimates and assumptions made in
identifying and determining the carrying
value of under-utilised and inactive assets
which require significant judgement. These
include:
▪
Forecast demand for existing and new
products
▪
Forecast production efficiencies of
manufacturing equipment
▪
Future use in other parts of the
production facilities
▪
Costs
of
repurposing
and/or
commissioning assets; and
▪
Estimating market prices for assets
which aren’t supported by their value
in use.
The Group is also required to test goodwill
and indefinite life intangible assets for
impairment at least annually by assessing
the recoverable amount of each cash-
generating unit (“CGU”), or group of cash-
generating units, to which the goodwill and
intangible assets relate. The Group’s CGUs
contain a number of indefinite life
intangible assets related to brands which
are separately tested for impairment.
Where there are indicators of impairment,
Our audit procedures included but were not limited to:
▪
Understanding the Group’s process and relevant
controls related to its impairment assessment of
goodwill, intangible assets and tangible assets
▪
Obtaining
an
understanding
of
management’s
assumptions and judgements used in the impairment
assessments
▪
Attending the Group’s manufacturing sites on a sample
basis and inspecting plant and equipment and meeting
with operational site personnel to independently identify
under-utilised and inactive plant and equipment
▪
Challenging management on its planned use of under-
utilised and inactive plant and equipment including
whether:
o
The Group’s forecasts and business plans include
the use of these assets to meet future
anticipated sales/production levels, and the
existence of formalised processes and timelines
for review and approval by the board
o
Existing plant and equipment can meet current
and forecast production levels without the need
to modify or commission inactive equipment;
o
The Group has sufficient funding available for
plant
and
equipment
which
requires
modification or further commissioning costs to
operate in the manner intended by management
and that such costs form part of the Group’s
business plan; and
o
The assets held for sale are being actively
marketed and the basis on which their estimated
sales price less costs to sell has been determined
as required by AASB 5.
▪
Evaluating the methodology, principles and integrity of
the models used to determine the relevant recoverable
amounts
▪
Challenging the 2022 fiscal year forecast by:
o
assessing the reasonableness of forecast sales
based on individual product performance and
customer demand, including the ability to
renegotiate existing contract prices and secure
new contracts with customers; and
o
evaluating the forecast cost of production to
determine whether the inputs included
appropriate consideration of the cost structure
in the business including the cost of production
▪
Assessing the reasonableness of the longer-term
assumptions, including:
117
tangible assets are also assessed for
impairment.
As detailed in note 4 (Operating
segments), the Dairy & Nutritionals CGU
made a loss before income tax of $17.5m
(30 June 2020: loss before tax of $81.3m)
and the Plant Based Beverages CGU made
a profit before income tax of $7.8m (30
June 2020: loss before income tax of
$14.4m). The Group made significant
operating losses in prior periods, and the
recoverability of its goodwill, intangible
and tangible assets within the Dairy &
Nutritionals and Plant Based Beverages
CGUs as at 30 June 2021 is highly
dependent on the Group’s ability to
successfully execute its transformation
program.
As disclosed in notes 2 and 17, there are a
number of key estimates made which
require
significant
judgement
in
determining the inputs into the discounted
cash flow models which are then compared
to their carrying value, which include:
▪
Revenue growth
▪
Gross margin growth
▪
Manufacturing efficiency gains and
other operational cost reductions
▪
Forward foreign exchange rates
▪
Royalty rates (used in the relief from
royalty brand valuation models); and
▪
Discount rates applied to the
projected future cash flows.
In addition, in accordance with AASB 5
Non-current assets held for sale and
discontinued operations ("AASB 5"),
judgement is also required in determining
whether the recoverable amount of an
asset will be recovered principally through
a sale transaction rather than continuing
use.
o
sales and margin growth based on historical
performance, the Group’s five-year forecast,
supply agreements, industry benchmarks and
industry trading conditions; and
o
Assessing
the
feasibility
of
forecast
manufacturing efficiencies and other strategic
initiatives
▪
Evaluating, with the assistance of our valuation
specialists, the reasonableness of other key inputs and
assumptions in the models including:
o
the royalty rates used by comparison to the
market data on similar brands’ royalty rates
o
the discount rates used by assessing the Group’s
weighted average cost of capital; and
o
the appropriateness of terminal growth rates
applied
▪
Performing sensitivity analysis on the key model inputs
and assumptions
▪
Comparing the recoverable amount per the impairment
model to the carrying value of the CGU’s assets; and
▪
Assessing the adequacy of the disclosures in notes 2, 3,
15, 16, 17 and 32.
Inventory valuation
As at 30 June 2021, the Group has
inventories with a carrying value of $48.3m
Our audit procedures included but were not limited to:
▪
Understanding the Group’s process and relevant
controls related to the costing of inventory and the
determination of inventory write-downs
118
as disclosed in note 11 of the financial
statements.
In determining the cost of inventory,
significant
judgement
is
applied
by
management in allocating overheads and
other
indirect
costs.
Management
determines a standard cost for each stock
keeping unit (“SKU”) as part of its annual
budget setting process. Manufacturing and
price variances to these standard costs are
allocated to inventory on a regular basis to
reflect the actual cost of each SKU.
As described in note 2 of the financial
statements, inventories are carried at the
lower of cost and net realisable value.
Inventories are recorded at net realisable
value where the estimated selling price less
costs to sell of the SKU is less than the cost.
A write-down of inventory is determined
after considering the anticipated sales and
margins
based
on
recent
historical
performance and the broader market
conditions.
This
requires
significant
judgement in estimating of future sales and
prices.
▪
Assessing the Group’s methodology for determining
standard costs and allocating manufacturing and price
variances to SKUs
▪
Assessing the Group’s application of its processes and
methodology for identifying and calculating write-downs
of inventory
▪
Holding discussions with management and operational
personnel to understand the assumptions applied in
estimating inventory write-downs
▪
Testing on a sample basis the setting of the standard costs
per SKU and the determination of actual costs including
the allocation of manufacturing and price variances to
SKUs
▪
For inventory on hand at 30 June 2021:
o
assessing whether it was recorded at the lower
of cost and net realisable value by testing a
sample of inventory items to the most recent
sales price and/or sales contracts; and
o
for inventories close to expiration date
challenging the basis of the assessment of the
net realisable value of those inventories; and
▪
Assessing the adequacy of the disclosures in notes 2 and
11.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
119
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
▪
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
▪
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
▪
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
▪
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
▪
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
▪
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
120
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 40 of the Directors’ Report for the year ended
30 June 2021.
In our opinion, the Remuneration Report of Freedom Foods Group Limited, for the year ended 30 June 2021,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David White
Partner
Chartered Accountants
Sydney, 30 August 2021
121
Freedom Foods Group Limited
Shareholder information
30 June 2021
The Shareholder information set out below was applicable as at 20 August 2021
Number of holders / Classes of equity securities
There were:
•
8,572 shareholders, holding 277,109,319 fully paid ordinary shares;
•
20 holders of 101,130 convertible redeemable preference shares; and
•
2,797 holders of 27,698,189 listed options (ASX:FNPO)
Distribution schedule
Ordinary fully paid shares
Range
Securities
%
Number of
holders
%
100,001 and over
224,295,647
80.94%
160
1.87%
10,001 to 100,000
35,946,621
12.97%
1,265
14.76%
5,001 to 10,000
7,539,995
2.72%
990
11.55%
1,001 to 5,000
8,057,734
2.91%
3,199
37.32%
1 to 1,000
1,269,322
0.46%
2,958
34.51%
277,109,319
8,572
There are 3,534 shareholders holding an unmarketable parcel of the Company’s ordinary shares.
Convertible redeemable preference shares
Range
Securities
%
Number of
holders
%
100,001 and over
-
-
-
-
10,001 to 100,000
70,102
69.32%
3
15.00%
5,001 to 10,000
8,000
7.91%
1
5.00%
1,001 to 5,000
19,090
18.88%
7
35.00%
1 to 1,000
3,938
3.89%
9
45.00%
101,130
20
Listed options (ASX: FNPO)
Range
Securities
%
Number of
holders
%
100,001 and over
15,573,740
56.23%
37
1.32%
10,001 to 100,000
7,701,565
27.81%
246
8.79%
5,001 to 10,000
1,596,250
5.76%
228
8.15%
1,001 to 5,000
2,276,986
8.22%
1,002
35.82%
1 to 1,000
549,648
1.99%
1,284
45.90%
27,698,189
2,797
There are 2,427 option holders holding an unmarketable parcel of the Company’s ordinary shares.
122
Freedom Foods Group Limited
Shareholder information
30 June 2021
Unquoted securities
The Company has the following unquoted securities:
Class of unquoted securities
Number
Convertible redeemable preference shares
101,130
20 largest holders of quoted equity securities
The 20 largest holders of ordinary fully paid shares was as follows:
% Issued
Name
Number held
Capital
1
Arrovest Pty Ltd
145,556,000
52.53
2
HSBC Custody Nominees (Australia) Limited - A/C 2
14,450,339
5.21
3
Medich Capital Pty Ltd
5,102,803
1.84
4
HSBC Custody Nominees (Australia) Limited
4,509,071
1.63
5
3rd Wave Investors Pty Ltd
4,000,000
1.44
6
Citicorp Nominees Pty Limited
3,248,380
1.17
7
J P Morgan Nominees Australia Pty Limited
2,442,031
0.88
8
BPC Custody Pty Ltd
1,566,374
0.57
9
Mutual Trust Pty Ltd
1,414,315
0.51
10 Best Safety Glass International (Australia) Pty Ltd
1,400,000
0.51
11 Chessell Family Investments Pty Ltd
1,100,000
0.40
12 CS Fourth Nominees Pty Limited
969,604
0.35
13 Netwealth Investments Limited
870,038
0.31
14 BNP Paribas Noms Pty Ltd
865,881
0.31
15 Moorebank Property Management Pty Ltd
850,000
0.31
16 Mr Mark McInnes
839,000
0.30
17 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
800,493
0.29
18 Mrs Susan Michelle Hooton
750,000
0.27
19 Miss Rivka Jetske Louwen
745,402
0.27
20 BNP Paribas Nominees Pty Ltd Six Sis Ltd
736,812
0.27
192,216,543
69.36
123
Freedom Foods Group Limited
Shareholder information
30 June 2021
The 20 largest holders of the convertible redeemable preference shares was as follows:
Name
Number Held
% Issued
Capital
1. R & M Gugliotta Pty Limited
30,000
29.66
2. Lewis Little River Pty Limited
23,438
23.18
3. Mr Hugh Middendorp & Mr Peter Charles Nicholas Middendorp
16,664
16.48
4. Alan Ong Enterprises Pty Limited
8,000
7.91
5. Mrs Enid May Hartigan
5,000
4.94
6. Mr Craig Sargent
3,394
3.36
7. GWG Investments Pty Limited
3,125
3.09
8. Lokit Investments Pty Limited
2,214
2.19
9. Mr Robert William Russell
1,924
1.90
10. Mr Robert David Napier Nicholls
1,736
1.72
11. Palatine Holdings Pty Limited
1,697
1.68
12. Mr Gerald Millman
1,000
0.99
13. Mr Tjeerd Veenstra & Mrs Susan Lesley Veenstra
963
0.95
14. Mrs Michelle Louise Farrell
640
0.63
15. Mr Andrew Jonathon Achilles
500
0.49
16. Mr Neville Thiele
273
0.27
17. Mrs Dianne Joan Thiele
219
0.22
18. Mr Andrew Macfarlane
200
0.20
19. Mr Kim Wigram Jones
133
0.13
20. Mrs Bronwyn Itchins
10
0.01
101,130
100.00
The 20 largest holders of listed options was as follows:
Name
Number Held
% Issued
Capital
1
HSBC Custody Nominees (Australia) Limited - A/C 2
4,305,202
15.54
2
Medich Capital Pty Ltd
2,115,055
7.64
3
HSBC Custody Nominees (Australia) Limited
1,153,733
4.17
4
3rd Wave Investors Pty Ltd
1,102,484
3.98
5
J P Morgan Nominees Australia Pty Limited
580,418
2.1
6
Gazump Resources Pty Ltd
534,735
1.93
7
BPC Custody Pty Ltd
486,452
1.76
8
Netwealth Investments Limited
352,426
1.27
9
Little Cove Capital Pty Ltd
345,000
1.25
10 Aya International Pty Ltd
344,766
1.24
11 Mr Perry Richard Gunner and Mrs Felicity Jane Gunner
248,600
0.9
12 Best Safety Glass International (Australia) Pty Ltd
248,447
0.9
13 Citicorp Nominees Pty Limited
219,800
0.79
14 Goldacre Investments Pty Limited
218,189
0.79
15 Dover Downs Pty Ltd
201,242
0.73
16 Domran Investments Pty Ltd
200,000
0.72
17 Mrs Elizabeth Anne Fogarty and Miss Caitlyn Elizabeth Fogarty
195,186
0.7
18 Econotick Superannuation Pty Limited
170,807
0.62
19 Official Intelligence Pty Ltd
164,596
0.59
13,344,121
100.00
124
Freedom Foods Group Limited
Shareholder information
30 June 2021
Substantial Holders
As at 20 August 2021, there were two substantial holders of the Company’s ordinary fully paid shares that the company is aware of as
follows:
Name
Number of
ordinary
shares
%
Arrovest Pty Limited
145,556,000
52.53%
HSBC Custody Nominees (Australia) Limited
14,450,339
5.21%
Voting Rights
The voting rights relating to each class of equity securities is as follows:
Ordinary Shares
On a show of hands at a general meeting of the Company, every member present in person or by proxy shall have one vote and upon
poll each person present in person or by proxy shall have one vote for each ordinary share held.
Convertible Redeemable Preference Shares
On a show of hands at a general meeting of the Company, every member present in person or by proxy shall have one vote and upon
poll each person present in person or by proxy shall have one vote for each ordinary share held.
Options
Options do not have any voting rights.
Market Buy-Back
There is currently no on-market buy back.
125
Freedom Foods Group Limited
Corporate directory
30 June 2021
Name of Entity:
Freedom Foods Group Limited
Directors
Genevieve Gregor – Chair (Independent, Non-Executive) (from 29 January 2021)
Perry Gunner - Chair (Non-Executive) (ceased 29 January 2021)
Anthony Perich AM - Deputy Chair (Non-Executive)
Ronald Perich – Director (Non-Executive) (ceased 29 January 2021)
Trevor Allen – Director (Non-Executive) (ceased 29 January 2021)
Jane McKellar – Director (Independent, Non-Executive)
Timothy Bryan – Director (Non-Executive) (from 29 January 2021)
Stuart Black AM – Director (Independent, Non-Executive) (from 22 March 2021)
Alternate Directors
Michael Perich (Alternate Director for Ronald Perich until 6 August 2020)
Timothy Bryan (Alternate for Anthony Perich - appointed 4 December 2019 and Ronald
Perich appointed 6 August 2020 until 29 January 2021)
Managing Director and Michael Perich (appointed 6 August 2020)
Chief Executive Officer
Chief Financial officer Josée Lemoine (appointed 19 February 2021)
Interim Company secretary
Scott Standen (13 July 2020 – 30 June 2021)
Group General Counsel and Company
Secretary
Justin Coss (appointed 23 November 2020)
Notice of annual general meeting
The details of the Annual General Meeting of Freedom Foods Group Limited to be held
virtually are:
18 November 2021
Registered office
80 Box Road
Taren Point
NSW 2229
Tel: +61 2 9526 2555
Principal place of business
80 Box Road
Taren Point
NSW 2229
Tel: +61 2 9526 2555
Share register
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Tel: +61 2 8280 7111
Fax: +61 2 9287 0303
Auditors
Deloitte Touche Tohmatsu
Grosvenor Place, 225 George Street
Sydney NSW 2000
Tel: +61 2 9322 7000
Solicitors
Ashurst
Level 11, 5 Martin Pl
Sydney NSW 2000
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Freedom Foods Group Limited
Corporate directory
30 June 2021
Arnold Bloch Leibler
Chifley Tower, Level 24, 2 Chifley Square
Sydney NSW 2000
Bankers
HSBC Australia Limited
Level 27, 100 Barangaroo Ave
Sydney NSW 2000
National Australia Bank Limited
Level 3, 255 George Street
Sydney NSW 2000
Stock exchange listing
Freedom Foods Group Limited ordinary fully paid shares and options are listed on the
Australian Securities Exchange (ASX code: FNP and FNPO)
Website
www.ffgl.com.au
ABN
41 002 814 235
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