ASX ANNOUNCEMENT ASX: LRK
29 August 2023
2023 Annual Report
Lark Distilling Co. Ltd (ASX: LRK) (“LARK” or the “Company”) is pleased to present its Annual report for the year
ended 30 June 2023, which includes the Company’s full year financial statements and Appendix 4E.
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For more information contact:
Lark Investor Relations
Peter Kopanidis
+61 412 171 673
investors@larkdistilling.com
This announcement has been approved for release by the Board of Directors.
91-93 MACQUARIE ST HOBART TAS 7000 WWW.LARKDISTILLING.COM
+61 3 6231 9088 ABN 62 104 600 544
ANNUAL
REPORT
2023
SINGLE MALT WHISK Y
LARK DISTILLING CO. LTD
Appendix 4E
PRELIMINARY FINAL REPORT
1. COMPANY DETAILS
Name of entity:
ABN:
Reporting period: For the year ended 30 June 2023
For the year ended 30 June 2022
Previous period:
Lark Distilling Co. Ltd
62 104 600 544
2. RESULTS FOR ANNOUNCEMENT TO THE MARKET
Analysis of number of equitable security holders by size of holding:
Revenues from ordinary activities
down
18.3% to
19,877,457
Loss from ordinary activities after tax attributable
to the owners of Lark Distilling Co. Ltd
Loss for the year attributable to the owners of Lark Distilling Co. Ltd
up
up
943.4% to
(4,908,029)
943.4% to
(4,908,029)
$
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
Refer to attached review of operations for commentary over the results for the period.
3. NET TANGIBLE ASSETS
Net tangible assets per ordinary security
Reporting
period
Cents
104.62
Previous
period
Cents
113.56
Net tangible assets excludes intangible assets, and right-of-use assets recognised under AASB 16 Leases.
4. CONTROL GAINED/LOST OVER ENTITIES
Not applicable.
5. DIVIDENDS
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
Lark Distilling Co. Ltd. APPENDIX 4E. Preliminary Final Report
ANNUAL
REPORT
2023
SINGLE MALT WHISK Y
6. DIVIDEND REINVESTMENT PLANS
Not applicable.
7. DETAILS OF ASSOCIATES AND JOINT VENTURE ENTITIES
Not applicable.
8. FOREIGN ENTITIES
Details of origin of accounting standards used in compiling the report:
Not applicable.
9. AUDIT QUALIFICATION OR REVIEW
Details of audit/review dispute or qualification (if any):
The financial statements were subject to an audit and the audit report is attached as part of the Annual Report.
10. ATTACHMENTS
Details of attachments (if any):
The Annual Report of Lark Distilling Co. Ltd for the year ended 30 June 2023 is attached.
11. SIGNED
David Dearie
Non-Executive Chairman
Date: 28 August 2023
Lark Distilling Co. Ltd. APPENDIX 4E. Preliminary Final Report
A N N U A L R E P O R T
SINGLE MALT WHISKY
2 0 2 3
L A R K D istilling C o. LTD
LARK Distilling Co. Ltd. Annual Report 2023 • 1
ANNUALREPORT2023 2
LARK Distillery, Cambridge, Tasmania
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CORPORATE DIRECTORY
DIRECTORS
Mr David Dearie
(Non-Executive Chairman)
Ms Laura McBain
(Resigned as Interim Managing
Director and appointed as Non-
Executive Director on 1 May 2023)
Mr Warren Randall
(Non-Executive Director)
Mr Domenic Panaccio
(Non-Executive Director)
CHIEF EXECUTIVE OFFICER
Mr Satya Sharma
(Appointed on 1 May 2023)
COMPANY SECRETARY
STOCK EXCHANGE LISTING
Ms Melanie Leydin
Lark Distilling Co. Ltd
REGISTERED OFFICE
AND PRINCIPAL PLACE
OF BUSINESS
Level 1, 91-93 Macquarie
Street, Hobart TAS 7000
AUDITOR
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne, VIC 3000
shares are listed on the Australian
Securities Exchange
(ASX code: LRK)
CORPORATE GOVERNANCE
STATEMENT
The Company’s 2022 Corporate
Governance Statement has been
released to ASX on this day and is
available on the Company’s
website at: https://larkdistillery.com/
investor-centre/
CONTENTS
MESSAGE FROM THE CHAIRMAN
CHIEF EXECUTIVE OFFICER’S REPORT
A YEAR IN REVIEW
AWARDS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER INFORMATION
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W e c o n t
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b a n k ,
- DAVID DEARIE, CHAIRMAN
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MESSAGE FROM
THE CHAIRMAN
DAVID DEARIE
CHAIRMAN
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DEAR FELLOW SHAREHOLDERS,
ON BEHALF OF YOUR BOARD OF DIRECTORS OF
LARK DISTILLING COMPANY, WE ARE DELIGHTED
TO PRESENT OUR 2023 ANNUAL REPORT. THE
GLOBAL ECONOMIC CHALLENGES AND REDUCED
CONSUMER CONFIDENCE DID NOT MATERIALLY
INFLUENCE OUR RESULTS ALTHOUGH WE DID
EXPERIENCE, LIKE MANY OTHERS IN THE LUXURY
SECTOR, A REDUCTION IN DIRECT E-COMMERCE
SALES AS THIS CHANNEL NORMALISED AFTER
COVID. THE MORE SIGNIFICANT IMPACT TO OUR
HEADLINE FY23 PERFORMANCE WAS CYCLING
ONE-OFF AND OPPORTUNISTIC TRANSACTIONS IN
THE PRIOR YEAR.
LARK generated $17.0 million Net Sales (revenue after
excise) in FY23 down on the previous year, however
organic Net Sales generated some 15% growth,
suggesting that retailers and consumers continue
to engage with and enjoy the whisky and gin so
meticulously crafted by all our distillers.
Our whisky and our company are constantly recognised
and awarded for our amazing product quality both
domestically and by the international community. LARK
had a record year in FY23, recognised with 56 medals
across product, people and innovation. However, it is
not only our whisky and gin that is being recognised.
We also received awards and recognition for our brand
building and our hospitality with the LARK Cellar Door
being awarded a Silver medal for Venue of the Year by
the Australian Whisky Awards, and The Still receiving a
High Commendation for Contribution to Spirits Tourism
by the Spirits Business Awards.
While this recognition is exciting and encouraging, what
is also exciting about the future is the resilience of the
spirits category. Many of the global leaders in our sector
have continued to invest in major infrastructure projects
to support growing consumer demand.
At LARK we are no different, we continued to invest in
our Whisky Bank, in building our brands and our people.
We are also finalising plans for the redevelopment of
Pontville, where, in addition to increasing capacity
of production, we are confident of crafting our New
Make Spirit more efficiently and effectively. All this
investment is being carried out with financial and capital
expenditure discipline.
Much of the Board’s attention this year was in recruiting
a new Chief Executive Officer and a new Chief Financial
Officer. I am delighted that we secured Satya who
started with LARK in May and that we also secured Iain
to our Executive Team. Both are highly experienced
and respected professionals in the spirits sector, and
I am excited that they made the choice to further their
careers and professional reputations at LARK Distilling
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LARK Distilling Co. LTDANNUALREPORT2023
MESSAGE FROM THE CHAIRMAN, CONT’D
The Board, Satya and the Executive Team’s immediate
priorities are executing our annual plan, implementing
the culture and values required to win in this competitive
sector, developing our people and in communicating
the long-term vision for our Company and the Investor
Day planned for October 17th 2023 in Hobart.
On behalf of the Board, I would like to express our
thanks to our LARK team for their tireless efforts during
a challenging year, for their passion and dedication to
LARK and for their unwavering belief in the wonderful
whisky that we craft, market, and sell every day.
The Board would also place on record our thanks and
appreciation to Laura McBain who stepped up to take
on the interim CEO role and to lead our company during
a period of significant challenge.
Finally, I would like to thank you, the shareholders
of LARK Distilling, for your continued support of the
Company.
DAVID DEARIE
CHAIRMAN
Company. Their collective almost 25 years of Global
spirits experience will complement and enhance the
skills, experience, and professionalism of the existing
executive team.
What is particularly exciting is that they chose to
further their careers at LARK because of the potential
of building a global luxury brand, as well as the stage of
development requiring international expertise to drive
growth. It is exciting that LARK Distilling Company,
with our history, heritage, quality credentials, luxury
positioning, leadership positioning and international
growth potential is capable of attracting talented
industry professionals like Satya and Iain.
Your Board is confident that with Satya leading our
company we have a bright future ahead. Already we
are seeing a new disciplined approached across every
aspect of the Company, and an inclusive approach
to problem solving with a bias towards fact-based
decision making. All with the sole purpose of building
the foundation for sustainable, profitable growth,
particularly from the exciting and dynamic international
markets and consumers.
Satya has made an immediate impact at LARK in his
short time with our Company. He has, for example,
introduced an integrated operating model, progressed
international expansion partnership discussions,
segmented the Whisky Bank, right sized the company,
reallocated investments to drive the priority issues,
while ensuring shareholders are engaged and informed.
All designed to create a solid foundation to further our
growth aspirations.
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CHIEF EXECUTIVE
OFFICER’S REPORT
SATYA SHARMA
CEO
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WE ARE PLEASED TO PRESENT OUR 2023 ANNUAL
REPORT. THE YEAR HAS BEEN A CHALLENGING ONE,
HOWEVER I AM PROUD OF THE DECISIONS TAKEN IN
FY23 TO SET THE BUSINESS UP FOR SUSTAINABLE
AND CONSISTENT GROWTH GOING FORWARD.
FINANCIALS
The Company has seen a decrease in its Net Sales
(revenue after excise) from $20.3 million in 2022 to $17.0
million in FY23. Net Sales in FY22 included a number
of one-off and opportunistic sales, which meant
cycling strong year-on-year comparatives. E-commerce
channels were lower as consumer behaviour regulated
post Covid, while the resumption of international travel
reduced domestic tourism and footfall through our
owned hospitality venues.
BUILDING FOUNDATIONS FOR FUTURE GROWTH
In late FY23 we created and introduced an integrated
operating model within the business to build agility
through having clear ways of working, roles and
responsibilities and appropriate decision-making
autonomy. We are confident that these changes will
provide the foundations for future growth for LARK.
Highlights for the year ended 30 June 2023 included:
2.4m LITRES OF WHISKY
UNDER MATURATION
Underlying Net
Sales Increase1
15%
Cash position of
$7.1m
+ undrawn bank facility
of $15.0 million, as at
30 June 2023
Normalised Operating
EBITDA loss of2
$2.0m
Net Sales
$17.0m
Organisational restructure completed
Q4 2023
1. After adjusting for one-off and opportunistic transactions.
2. After adjusting for one-off non-recurring costs, and non-cash Share based payments expense.
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LARK Distilling Co. LTDANNUALREPORT2023
CHIEF EXECUTIVE
OFFICER’S REPORT, CONT’D
WHISKY BANK AND PRODUCTION
The Company has continued to develop its Whisky Bank
as a key pillar of its strategic growth objectives. LARK
achieved 2.4 million litres of whisky under maturation (at
43% ABV) as at 30 June 2023.
There is a significant current focus on segmenting the
Whisky Bank by age, profile, and finish to align with
long term product architecture. The existing Whisky
Bank allows us to optimise production in the short to
medium term.
With a focus on capital discipline and in preparation
for the Pontville build, we made the decision to focus
distilling operations at Cambridge from May 2023.
The new Pontville distillery will be able to produce
approximately 1,000,000 litres of new make spirit
annually which will grow the whisky bank more
efficiently into the future.
The Pontville site contains heritage listed buildings
and enables LARK to develop a true luxury tourism
destination for new and existing customers.
QUALITY CREDENTIALS
The quality of the whisky produced by LARK has not
gone unnoticed, winning accolades both domestically
and by the international community. LARK had a record
year in FY23, recognised with 56 medals across product,
people and innovation. My personal highlights were:
• The Global World Whisky Masters Medal for Chinotto
Cask Strength;
• Dan Murphy’s Decoded Spirits Awards for Winner of
Australian Whisky which went to Classic Cask; and
• Being named Australia’s best Blended Malt at the
World Whisky Awards for Symphony No 1.
LARK EXPORT OPPORTUNITY –
STRUCTURED ASIAN EXPANSION
The importance of international expansion has been
well documented as LARK progresses into a global
luxury brand. We have started making actual progress
in unlocking this important building block of growth for
LARK, with the appointment of an Asia Sales Director
08
and ongoing progress being made on the appointment of
distributors within the region. This is only the beginning,
with the expansion of the export opportunities and the
launch into new Global Travel Retail locations both critical
focus areas for FY24 and beyond.
2024 PERSPECTIVES
We have emerged from a year of significant change in a
better position to capitalise on growth opportunities, as
well as deliver more consistent results.
We are aware challenges remain, as we expect inflation,
particularly rising supply chain, energy and labour
costs to pressure the cost base. However, supported by
decisions taken in FY23, we will look to manage these
costs through increased sales and disciplined cost
management.
In FY24, our focus will be on growing brand equity,
investing in seeding international markets and building
positive, repeatable, and consistent sales momentum.
We will continue our disciplined approach to capital
management while ensuring we optimise our Whisky
Bank for the long term. We have a passionate and
energised team who wear their hearts on their sleeves
and are committed to continuing to build Australia’s
Number 1 Luxury Single Malt.
I look forward to sharing our long-term vision, strategic
road map, priorities and scorecard with you at the
Investor Day on 17th October 2023 to be held in Hobart.
The success of LARK relies strongly on our consumers,
customers and community and we thank them for
their ongoing belief. I also thank our team members for
their continued dedication and contribution. Finally,
I thank you, our shareholders, for your trust, ongoing
investment and support.
SATYA SHARMA
CEO
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- SATYA SHARMA, CEO
LARK Distilling Co. Ltd. Annual Report 2022 • 9
ANNUALREPORT2023
A YEAR IN REVIEW
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LARK Distilling Co. LTDANNUALREPORT2023
2022/2023 LARK
AWARDS PORTFOLIO
INTERNATIONAL WINE
& SPIRITS COMPETITION
CHINA WINE &
SPIRITS AWARDS
THE CHRISTMAS CASK
91 points
90 points
90 points
90 points
GARAGE PROJECT
THE RISING TIDE
REBELLION
SYMPHONY NO. 1
CLASSIC CASK
CLASSIC CASK
SHERRY SHERRY II
CHINOTTO II 60%
PARA 100 II RARE CASK SERIES
PARA 1992
MAZUNA RARE CASK SERIES
CHRISTMAS CASK III
CLASSIC CASK STRENGTH
CLASSIC CASK STRENGTH
SPIRITS BUSINESS AWARDS
BEST NEW MARKETING CAMPAIGN
DARK LARK 2022
LIFETIME ACHIEVEMENT
BILL LARK
BEST EVENT
HIGH COMMENDATION
30TH ANNIVERSARY GALA
CONTRIBUTION TO SPIRITS TOURISM
HIGH COMMENDATION
THE STILL
BLENDER OF THE YEAR
HIGH COMMENDATION
CHRIS THOMSON
TASMANIAN PEATED
SLAINTE LIQUEUR
DARK LARK 2023
WHISKY BAR SERIES:
SAVILLE ROW
HONG KONG
INTERNATIONAL WINE
& SPIRITS COMPETITION
DARK LARK 2022
WOLF OF THE WILLOWS V
PARA 50 II RARE CASK SERIES
PARA 100 II RARE CASK SERIES
PARA 1992
LARK X GLENFARCLAS
CLASSIC CASK
CLASSIC CASK STRENGTH
SYMPHONY NO. 1
CHINOTTO CASK II 60%
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2022/2023 LARK
AWARDS PORTFOLIO
GLOBAL WHISKY MASTERS
CHINOTTO CASK STRENGTH II 60%
AUSTRALIAN
WHISKY AWARDS
WHISKY OF THE YEAR
DARK LARK 2022
CLASSIC CASK
SYMPHONY NO.1
CLASSIC DOUBLE TAWNY
DARK LARK 2022
PARA 100 II RARE CASK SERIES
PARA 1992
CHINOTTO II
MUSCAT II
DISTILLERY OF THE YEAR
LARK DISTILLERY
PERSONALITY OF THE YEAR
BILL LARK
WORLD WHISKY AWARDS
DISTILLER OF THE YEAR
CHRIS THOMSON
SYMPHONY NO. 1
VENUE OF THE YEAR
LARK CELLAR DOOR
CHINOTTO CASK STRENGTH II 60%
DAN MURPHY’S
DECODED SPIRITS AWARDS
WOLF OF THE WILLOWS V
PARA 100 II RARE CASK SERIES
WINNER OF AUSTRALIAN WHISKY
CLASSIC CASK
CLASSIC CASK
DARK LARK 2022
LARK X GLENFARCLAS RARE CASK SERIES
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LARK Distilling Co. LTDANNUALREPORT2023
It’s been a year for cheer
As we continued to add to our trophy cabinet this financial year, Lark Distilling’s passion for creating the
finest Tasmanian whisky and gin grew stronger than ever. We’re humbled and honoured to have been
nominated and awarded a variety of accolades both at home and around the world.
14
FORTY SPOTTED GIN
AWARDS PORTFOLIO
GLOBAL GIN MASTERS
WORLD GIN AWARDS
MASTERS
Citrus & Pepperberry
Wild Rose
GOLD
Classic Tassie Gin
Pinot Noir
CHINA WINE &
SPIRITS AWARDS
DOUBLE GOLD
Bush Honey
SILVER
Classic Tassie Gin
Citrus & Pepperberry
Wild Rose
GOLD
Wild Rose
SILVER
Classic Tassie Gin
Bush Honey
DAN’S DECODED
SPIRITS AWARDS
FINALIST IN AUSTRALIAN GIN
Classic Tassie Gin
INTERNATIONAL WINE
& SPIRITS AWARDS
SILVER
Bush Honey
Pinot Noir
BRONZE
Classic Tassie Gin
Citrus & Pepperberry
BRONZE
(ALTERNATIVE DRINKS AWARDS)
Raspberry & Rose
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LARK Distilling Co. LTDANNUALREPORT2023
DIRECTORS’
REPORT
The directors present their report, together with the
financial statements, on the consolidated entity (referred
to hereafter as the ‘Group’) consisting of Lark Distilling
Co. Ltd (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 2023.
DIRECTORS
The following persons were directors of Lark Distilling
Co. Ltd during the whole of the financial year and up to
the date of this report, unless otherwise stated:
Mr David Dearie - Non-Executive Chairman
Ms Laura McBain - Non-Executive Director (Resigned
as Interim Managing Director and appointed as Non-
Executive Director on 1 May 2023)
Mr Warren Randall - Non-Executive Director
Mr Domenic Panaccio - Non-Executive Director
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year
ended 30 June 2023 were in the production, marketing,
sale, and distribution of Australian craft spirits.
DIVIDENDS
There were no dividends paid, recommended or
declared during the current or previous financial year.
REVIEW OF OPERATIONS
The loss for the Group after providing for income tax
amounted to $4,908,029 (30 June 2022: $470,398).
KEY HIGHLIGHTS
Lark delivered revenue from ordinary activities for
the year ended 30 June 2023 of $19.9 million, down
18.3% compared to last year.
Net Sales (revenue after excise) for the year was
$17.0 million, down $3.3 million compared to last
year. Sales last year included sales from transactions
with a whisky subscription business, private cask
collectors, and other opportunistic sales which were
not repeated in the current year. When normalising
•
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16
for non-organic and opportunistic transactions Lark
delivered underlying organic net sales growth of
+15%. Lark’s core Signature and Symphony product
ranges performed strongly growing 53% and 49% vs
last year
•
Gross profit came in at $11.7 million, reflecting
gross margins of 68.9% (% of net sales). Gross
margins were up from 66.5% last year supported by
favourable product and channel mix.
OPERATING EXPENSES INCREASED DURING
THE YEAR DUE TO:
•
Maintaining marketing investment year on year as
the Company continues to build long term brand
equity to support both domestic sales and provide a
strong platform for international market expansion.
Marketing spend as a % of Net Sales increased
3ppts from last year to 18.3%.
•
Other operating costs increased compared to last
year driven by:
- Annualisation of costs associated with both
domestic sales team expansion and two
hospitality venues opened in the prior year
- Costs associated with ongoing work to expand
into export channels, and additional headcount
in marketing
•
The result included $2.3 million non-recurring and
one-off items made up of the following:
- $1.1 million – one-off staff & CEO recruitment
costs, as well as and restructuring costs incurred
to allow future reallocation of resources
- $0.9 million - Obsolete stock costs relating to
dry and liquid goods relating to a number of non-
whisky products, obsolete gift packs, old branded
packaging, and the termination of some R&D trials
- $0.3 million – costs relating to the acquisition of
Kernke Family Shene Estate
FINANCIAL POSITION
•
•
•
•
Lark’s whisky under maturation continued to strengthen during the year to 2.38 million litres at 43% ABV, as at 30 June
2023 with maturing inventory balance at cost increasing to $55.6 million, up $4.9 million from last year. Finished goods
balance decreased by $1.7 million as limited releases on hand at the end of last year were sold through.
Lark ended the year with a cash balance of $7.2 million, after repaying $5m of debt during the year. A $15 million
undrawn bank facility remains available.
$3.7 million of Government grants were received during the year consisting of a Federal Government Modern
Manufacturing Grant, in relation to the new distillery build at Pontville, and a Tasmanian Government Tourism
Innovation grant. The balance of these grants have been recorded within Deferred Government Grants.
During the year, the group finalised both the acquisition and acquisition accounting of Kernke Family Shene Estate,
the owner of Pontville Distillery and Estate, with the remaining $1.1 million balance outstanding paid.
BUSINESS RISKS
RISK
DESCRIPTION
MITIGATION STRATEGIES
Changes in consumer
preferences and market
may have an adverse
impact on sales
Unanticipated changes to consumer preferences
from factors including health, economic conditions,
and market trends could have a material adverse
impact on operating and financial performance.
Incident leading to
reputational and or
brand damage
Lark has built its reputation based on the award-
winning quality of the whisky. The reputation
of the Lark brand is key to the success of the
business. Risks to Lark’s reputation include both
internal and external activity including quality
incident, counterfeited product, black market trade,
inaccurate media coverage, unsatisfactory supplier
performance.
A material adverse incident could have a material
adverse effect on financial and operating
performance.
• Lark maintains a diversified product portfolio, channel
and customer mix. Lark is selectively targeting export
markets to suit our portfolio, while also diversifying
across multiple markets to mitigate changes in
preferences.
• Ongoing monitoring of consumer insights and
consumer trends inform brand strategy and product
portfolio and product strategy that includes both
portfolio rationalisation & innovation.
• Our award-winning Whisky is flexible so that it can be
adapted to changing consumer preferences.
• General quality controls and checks
• Code of Conduct, Responsible Marketing Guidelines,
Responsible Consumption program, Responsible
Procurement Code, Environment Policy and Standard,
Media Policy and Social Media Policy and incident
management procedures.
• Brand and intellectual property protection strategies
(trademarks).
Failure to attract and
retain talent
The company is heavily reliant on key personnel.
Loss of key personnel could cause significant
disruptions to operational and financial performance.
• Talent review and succession planning processes.
• Market competitive remuneration and benefits
offering.
• Incentive and reward programs aligned to the
achievement of Lark’s financial and business goals.
• Initiatives targeting improved culture including
training & development, Wellness committee, &
engagement surveys.
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LARK Distilling Co. LTDANNUALREPORT2023 DIRECTORS’ REPORT,
CONT’D
RISK
DESCRIPTION
MITIGATION STRATEGIES
Storage of whisky
Lark has a significant amount of maturing whisky
stored in a number of facilities. Lark’s storage
facilities may be impacted by a fire or major weather
event (such as a storm) or subject to malicious
attack, which may result in the loss, damage,
contamination or destruction of all or some of its
stored product inventory.
Interruption to supply
chain
Loss of suppliers may restrict or disrupt Lark’s new
make whisky production impacting future sales
or bottling & finished goods production of spirits
impacting current sales.
Loss of information
through cyber security
or fraud thread
The business relies on IT infrastructure, systems and
processes to support ongoing business growth.
The use of these systems poses risk in error, which
includes increased costs and processing times or
damage to business reputation, or decision making
based on inaccurate information. The storage of
information increases risk of theft which may impact
Lark’s ability to trade, and or reputational risk.
Compliance with laws &
regulations
Lark operates in a highly regulated industry in
the production of spirts and selling in various
overseas markets. Each of these markets have
differing regulations that govern many aspects
of Lark, including privacy, taxation, production,
manufacturing, pricing, marketing, advertising
and distribution, & ASX reporting requirements.
Remaining compliant with regulations, including
changes to existing, or new regulations, requires
ongoing monitoring by the business.
• Use of multiple storage sites that are separated
geographically.
• Regular site security and safety checks.
• Regular sampling of spirit quality.
• Utilisation of technologies including Radio Frequency
Identification on each cask.
• Insurance coverage.
• Preventative repair and maintenance program.
• Risk assessments for key suppliers.
• Broad range of potential suppliers.
• Long Term Agreements with key partner suppliers in
progress.
• Joint business planning processes to support and
align internal and partner incentives.
• Multi-regional and diversified supplier base.
• Information User Policy, supporting framework and
specialised resources.
• Restricted and segregated management of sensitive
business/supplier/customer data.
• Periodic employee training and alerts to ensure
secure handling of sensitive data.
• Outsourced IT experts bringing best practice
processes to supplement Internal Resource on
specialist areas.
• Compliance framework.
• Specialised and experienced resources and teams.
• Company-wide policies, standards and procedures.
• Relationships and engagements with key government,
industry advocacy and regulatory bodies.
Failure to maintain
appropriate quality
standards
Sale of defective products due to non-compliance
with Lark operational quality processes could result
in damage to Lark’s corporate and brand reputation.
This could also lead to additional costs from product
recall, penalties and litigation.
• Maintenance of appropriate policies, standards and
procedures relating to Production & Operations.
• HACCP Accreditation.
• Regular auditing program.
Changing Geopolitical
environment
Government actions may influence or restrict
international trade, including increasing duties
and tariffs could significantly impact the nature of
operations and reduce the demand for products in
these markets.
• Relationships and engagement (where relevant)
with key government, industry advocacy and
regulatory bodies.
• Selectively targeting entry to export markets and
diversifying across multiple markets.
18
RISK
DESCRIPTION
MITIGATION STRATEGIES
Ability to access
funding
Insufficient funding may restrict Lark’s ability to
trade, including brand investment with entry to new
markets, or volume of whisky production, restricting
future sales growth. Lark is currently loss making and
is not cash flow positive which may adversely impact
Lark’s access to funding.
• Lark maintains flexibility with spending requirements
due to having a significant whisky bank enabling
flexible approach to levels of whisky production. In
addition, Lark have minimal contractual obligations on
capital expenditure.
• While Lark has no debt balance, the company also
maintains optionality with access to different sourcing
options and a close relationship with our current
borrowing facility provider.
Health Safety &
Wellbeing
The health, safety, and wellbeing of the Lark team
remains our highest priority. The production and
sale of spirts, and operation of hospitality venues,
involves the use of complex equipment and
processes that pose a risk that could result in death,
injury or illness leading to a financial, operational,
and reputational impact to Lark.
Lark recognises the importance of managing existing
risks, and monitoring emerging risks that have
potential to cause harm to employees, contractors
or visitors.
• Formally defined, and periodically reviewed, Health,
safety, and well-being policies, standards, procedures
and tools.
• Induction and ongoing training programs
• Regular cleaning of sites and equipment. Regular
inspections and preventative repairs and
maintenance of equipment.
• Monitoring of safety performance including regular
risk assessments, incident reporting and corrective
action plans.
• Promotion of a healthy workplace culture.
Climate Change
Climate change may adversely impact the
maturation time and or quality of spirits produced
through disruptions to supply chain.
In addition, consumer awareness and retailer
requirements regarding Climate change action may
adversely impact financial performance.
• Assessment of impact of climate on maturation.
• Climate focused business strategy including
consideration to ongoing sourcing availability and
carbon footprint.
• Regular risk assessments to identify and address
potential climate-related impacts, such as floods or
droughts, on production and distribution.
• Maintenance of accreditation of certified carbon
neutral under the Federal Government’s Climate
Active Program.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
No matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the
Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
LIKELY DEVELOPMENTS AND RESULTS OF OPERATIONS
The Group expects to drive sales growth through expansion to international markets. Additional information on the
operations and financial position of Lark is set out in the OFR accompanying this Director’s report.
19
LARK Distilling Co. LTDANNUALREPORT2023 DIRECTORS’ REPORT,
CONT’D
INFORMATION ON DIRECTORS
MR DAVID DEARIE
MR WARREN RANDALL
Title: Non-Executive Chairman
Title: Non-Executive Director
Qualifications: MHCIMA,
Glasgow College of Food and
Technology, Institute of Marketing
Diploma, University of Hull
Qualifications: Bachelor of
Agricultural Science & Wine Science
(Adelaide), Bachelor of Oenology
(Wine Science) (Charles Sturt)
Experience and expertise: A
global beverage industry leader
with over 30 years’ experience
in alcohol retailing, distribution
and brand building. Founding
CEO of Treasury Wines estates
Ltd (TWE), and senior executive
positions with Fosters Group Ltd
and Brown-Forman.
Other current directorships:
None
Former directorships
(last 3 years): None
Interests in shares: 374,986 fully
paid ordinary shares
Interests in rights: 620,000
performance rights
Experience and expertise: Over 40
years in the Australian Wine Industry
graduating from Adelaide University
in Agricultural Science and Charles
Sturt University in Wine Science,
with experience working for Seppelt
Great Western Winery, Andrew
Garrett Wines, Tinlins Wines, Wynns
Winegrowers, Seaview Champagne
Cellars and Lindemans Wines.
Warren was also appointed a
Director of the board at the Adelaide
Football Club.
Other current directorships: None
Former directorships (last 3 years):
None
Special responsibilities: Member
of the Audit and Risk Committee
Interests in shares: 2,889,295
(shares are all held by Seppeltsfield
Pty Ltd (Seppeltsfield Estate A/C))
Interests in rights: 300,000
performance rights
ENVIRONMENTAL
REGULATION
The Group is certified carbon
neutral, under the Federal
Government’s Climate Active
Program, one of the most widely
recognised carbon neutral
programs of its kind. This renowned
certification is only awarded to
businesses that have credibly
reached a state of achieving zero net
emissions.
The Group’s operations are not
subject to significant environmental
regulation under a law of the
Commonwealth or of a state or
territory of Australia or international
markets that Lark export to. The
Group’s management regularly and
routinely monitor compliance with
relevant environmental regulations
and has established procedures to
monitor and manage compliance
with existing regulations and new
regulations that may be established.
During the financial year, the
Directors have not been notified
or are aware to be in breach of any
environmental regulations.
The Group is committed to
minimising its environmental
footprint and maintaining its carbon
neutrality. This is expected to
minimise any financial impacts from
legislative changes going forward.
20
INFORMATION ON DIRECTORS
DIRECTORS’ REPORT,
CONT’D
L
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ANNUAL
REPORT
2023
MS. LAURA MCBAIN
Title: Non-Executive Director (Resigned as Interim
Managing Director and appointed as Non-Executive
Director on 1 May 2023)
Experience and expertise: Brand, marketing and
strategy leader for Asia-Pacific FMCG businesses
with accounting background. MD/CEO of Bellamy’s
Australia from 2007 to 2017 pioneering Australia’s infant
formula brands in China. MD of Maggie Beer Holdings
Ltd 2017 to 2019, leading several acquisitions and
integrations of premium food businesses into public
company. Strategic advisor to nutrition businesses
and former director of Export Finance Australia
(Australia’s government export credit agency). 2013
Telstra Australian Businesswoman of the Year (Private
and Corporate) and Telstra Tasmanian Businesswoman
of the year. Holds a Bachelor of Commerce and
completed IMD Leadership Challenge 2013 and IESE/
Wharton/CEIBS Global CEO program 2017.
Other current directorships: Capitol Health Limited
(ASX: CAJ) (appointed 1 July 2021)
Former directorships (last 3 years): Maggie Beer
Holdings Limited (ASX: MBH) (resigned 27 November
2019)
Special responsibilities: Member of Audit and Risk
Committee
Interests in shares: 81,000 (shares all held by Vermilion
21 Pty Ltd (McNelhaus Super Fund A/C))
Interests in rights: 90,000 performance rights
MR DOMENIC PANACCIO
Title: Non-Executive Director
Qualifications: Certified Public Accountant and
member of the Australian Institute of Company
Directors
Experience and expertise: Domenic has had a long
and distinguished career in senior management of
large public companies including 20 years at Fosters
Group and 10 years at Westfield. From 2010 to 2014,
Domenic was Chief Executive Officer of Westfield
Retail Trust, one of the largest ASX listed property trusts
in Australian at that time. Domenic previously held a
number of senior positions including Deputy Chief
Financial Officer of Westfield Group, Chief Financial
Officer of Westfield America and Chief Financial Officer
for the Foster’s Group Wine Division, Beringer Blass
Wine Estates.
Other current directorships: None
Former directorships (last 3 years): None
Interests in shares: 109,954
Special responsibilities: Chair of Audit and Risk
Committee
‘Other current directorships’ quoted above are current
directorships for listed entities only and excludes
directorships of all other types of entities, unless
otherwise stated.
‘Former directorships (last 3 years)’ quoted above are
directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of
entities, unless otherwise stated.
21
DIRECTORS’ REPORT,
CONT’D
CHIEF EXECUTIVE OFFICER
Mr Satya Sharma
(Appointed on 1 May 2023)
Mr Sharma joined Lark from William Grant & Sons
Ltd, where he was the Regional Managing Director
for Southeast Asia and Australasia. Mr Sharma also
had a complementary role as member of the board
for that company’s Branded Business Unit, which is
responsible for the business’s brands globally. In this
role, Mr Sharma had been instrumental in driving the
momentum of William Grant & Sons portfolio across
Southeast Asia and the broader Asia Pacific region,
developing strong distributor relationships, growing
brand equity, and accelerating the contribution of
luxury to the group through the launch of the world’s
first “The Distiller’s Library” concept.
Over his 10-year career with William Grant & Sons
across Singapore, China, and UK, Mr Sharma
held roles including Head of Business Strategy &
Development, Interim Finance Director APAC, and
Head of Commercial. Prior to his time with William
Grant & Sons Ltd, Mr Sharma was based in Australia
and held various roles with Campbell Arnott’s, and
was a Senior Manager in Corporate Finance at Pitcher
Partners (previously Moore Stephens).
Mr Sharma holds a degree in Business and Law from
the University of Technology Sydney and is a member
of the Institute of Chartered Accountants Australia and
New Zealand.
CHIEF FINANCIAL OFFICER
Mr Iain Short, CA
(Appointed on 12 June 2023)
Mr Short joined Lark from William Grant & Sons Ltd,
where he was the Finance Director - Asia Pacific and
Global Travel Retail. In this role Mr Short was a key
member of the development and implementation of the
strategy in the APAC region which has seen significant
distribution growth and brand portfolio development
for William Grant & Sons.
Mr Short had an extensive career with William Grant
& Sons, where he worked in numerous senior finance
and strategy roles including Finance and Operations
22
Director for Australia and New Zealand, and Finance
Director for UK and Ireland. Mr Short previously
worked at PwC in London, holds an Economics degree
from The University of Edinburgh and is a Chartered
Accountant.
Mr. Alex Aleksic, CPA
(Resigned on 31 December 2022)
Mr Alex Aleksic is a senior business strategist and
advisor with more than 20 years’ experience in
commercial, operational and financial roles within
multinationals, ASX Top 50 organisations, Private
Equity and high net worth ownership structures. He
was Chief Financial Officer at Accent Group, which
owns a variety of brands including Platypus, HYPE
DC, Skechers & VANS and Shaver Shop. Alex has also
held numerous senior multi-discipline roles within
Goodyear Dunlop (Beaurepaires), Telstra, Coles and
Kodak Australasia.
COMPANY SECRETARY
Ms Melanie Leydin – BBus (Acc. Corp Law) CA FGIA
Ms Leydin holds a Bachelor of Business majoring
in Accounting and Corporate Law. Ms Leydin is a
member of the Institute of Chartered Accountants,
Fellow of the Governance Institute of Australia and is
a Registered Company Auditor. Ms Leydin graduated
from Swinburne University in 1997, became a
Chartered Accountant in 1999 and since February
2000 had been the principal of chartered accounting
firm, Leydin Freyer. Upon the merger of Leydin Freyer
with Vistra in November 2021, Ms Leydin is the country
head of Vistra Australia. Vistra is a prominent provider
of specialised consulting and administrative services
to clients in the Fund, Corporate, Capital Markets, and
Private Wealth sectors.
Ms Leydin has over 25 years’ experience in the
accounting profession and has extensive experience
holding Board positions including Company Secretary
of ASX listed entities. She has extensive experience in
relation to public company responsibilities, including
ASX and ASIC compliance, control and implementation
of corporate governance, statutory financial reporting,
reorganisation of companies, initial public offerings,
secondary raisings and shareholder relations.
DIRECTORS’ REPORT,
CONT’D
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of
Directors (‘the Board’) held during the year ended 30
June 2023, and the number of meetings attended by
each director were:
Directors’
Meetings
Attended Held
10
10
9
10
10
10
10
10
Mr David Dearie
Ms Laura McBain
Mr Warren Randall
Mr Domenic Panaccio
Held: represents the number of meetings held during
the time the director held office.
The Company has previously established an Audit and
Risk Committee, however, due to the size of the Board and
there not being a majority of independent directors on the
Board, the Board fulfilled the roles and responsibilities
in relation to the Audit and Risk Committee for the year
ended 30 June 2023. The Audit and Risk Committee has
reconvened from financial year 2024.
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management
personnel remuneration arrangements for the Group, in
accordance with the requirements of the Corporations
Act 2001 and its Regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing
and controlling the activities of the entity, directly or
indirectly, including all directors.
Remuneration Policy
The remuneration policy of the Company has been
designed to align key management personnel objectives
with shareholder and business objectives. The board
of the Company believes the remuneration policy to
be appropriate and effective in its ability to attract
and retain the best key management personnel to run
and manage the consolidated group, as well as create
goal congruence between directors, executives and
shareholders.
The remuneration report is set out under
the following main headings:
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional information
•
Additional disclosures relating
to key management personnel
The board’s policy for determining the nature and
amount of remuneration for key management personnel
of the consolidated group is as follows:
•
•
•
The remuneration policy, setting the terms and
conditions for the key management personnel, was
developed by the remuneration committee and
approved by the board after seeking professional
advice from independent external consultants.
All key management personnel receive a base salary
(which is based on factors such as length of service
and experience), superannuation, fringe benefits,
with the potential for options and other incentives.
Options to be issued at the discretion of the Board.
The remuneration committee reviews key
management personnel packages annually by
reference to the consolidated group’s performance
and executive performance.
The performance of key management personnel is
reviewed annually and is based predominantly on the
forecast growth of the consolidated group’s profits and
shareholders’ value. All bonuses and option incentives
are issued at the discretion of the Board. Any incentives
or bonuses must be justified by reference to measurable
performance criteria. The policy is designed to attract
the highest calibre of other key management personnel
executives and reward them for performance that
results in long-term growth in shareholder wealth.
Key management personnel are also entitled to
participate in the employee share and option
arrangements.
23
LARK Distilling Co. LTDANNUALREPORT2023 DIRECTORS’ REPORT,
CONT’D
All remuneration paid to key management personnel is valued at the cost to the company and expensed, shares given
to key management personnel are valued as the difference between the market price of those shares and the amount
paid by key management personnel. Options are valued using Monte-Carlo or Black-Scholes methodology.
The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities.
The Company’s constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive
directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined
is then divided between the directors as agreed. The latest determination was as outlined in the Company’s Initial Public
Offering prospectus of $300,000 per annum.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is
apportioned amongst directors is reviewed annually. The board considers advice from external parties as well as the
fees paid to non-executive directors of comparable companies when undertaking the annual review process. Fees
for non-executive directors are not linked to the performance of the consolidated group. However, to align directors’
interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to
participate in the employee option plan.
Key Management Personnel Remuneration Policy
The board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and
retain key management of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
The remuneration structure for key management personnel is based on a number of factors, including length of service,
particular experience of the individual concerned, and overall performance of the company. The contracts for service
between the company and key management personnel are on a continuing basis, the terms of which are not expected
to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements
accrued to date of retirement.
DETAILS OF REMUNERATION
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of Lark Distilling Co. Ltd:
• Mr David Dearie - Non-Executive Chairman
•
Ms Laura McBain -Non-Executive Director (Resigned as Interim Managing Director
and appointed as Non-Executive Director on 1 May 2023)
• Mr Warren Randall - Non-Executive Director
• Mr Domenic Panaccio - Non-Executive Director
And the following persons:
Mr Satya Sharma – Chief Executive Officer (Appointed on 1 May 2023)
Mr Iain Short - Chief Financial Officer (Appointed on 12 June 2023)
Mr Alex Aleksic - Chief Financial Officer (Resigned on 31 December 2022)
24
DIRECTORS’ REPORT,
CONT’D
L
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2023
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
2023
Non-Executive Directors:
Mr David Dearie
Mr Warren Randall (a)
Mr Domenic Panaccio
Ms Laura McBain (b)
Other KMP
85,000
50,000
50,000
425,000
-
-
-
-
Mr Satya Sharma (c)
112,449
500,000
Mr Iain Short (d)
Mr Alex Aleksic (e)
56,154
196,452
-
20,000
975,055
520,000
-
-
-
-
-
-
-
-
-
-
-
-
6,323
2,211
-
8,534
-
-
-
-
-
-
-
-
115,099
50,309
-
200,099
100,309
50,000
144,376
569,376
115,908
734,680
-
(24,587)
58,365
191,865
401,105
1,904,694
(a)
During the period ended 30 June 2023, the Group made purchases amounting to $144,558 (June 2022: $341,052) from an entity associated with
Warren Randall (Non-Executive Director). These transactions were for the purchase of wooden barrels from Seppeltsfield Wines Pty Ltd (ABN: 97
127 078 282) for the Group to use in its’ production process of Lark. These transactions are considered to be arms-length transactions.
(b) Ms Laura McBain resigned as Interim Managing Director and appointed as Non-Executive Director on 1 May 2023.
(c)
Mr Satya Sharma appointed as Chief Executive Officer 1 May 2023. Performance rights were issued to Mr Sharma in two tranches of 197,280 and
343,357 on 1 May 2023 and 19 June 2023, respectively. As per AASB 2 Share-based Payment, the fair value of these equity instruments were
measured at grant date, which is 1 May 2023.
(d)
Mr Iain Short appointed as Chief Financial Officer on 12 June 2023. Salaries and fees included $35,096 fees for allowance paid for onboarding
while offshore from 8 May 2023 to 11 June 2023.
(e) Mr Alex Aleksic resigned as Chief Financial Officer 31 December 2022.
2022
Non-Executive Directors:
Mr David Dearie
Mr Warren Randall (a)
Mr Domenic Panaccio
Executive Directors
Ms Laura McBain (b)
Mr Geoff Bainbridge (b)
Other KMP
Mr Alex Aleksic
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
85,000
50,000
16,667
220,417
288,630
378,352
1,039,066
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,044
46,693
-
210,044
96,693
16,667
115,870
336,287
12,813
301,443
52,421
430,773
352,841
1,391,907
25
DIRECTORS’ REPORT,
CONT’D
(a) During the period ended 30 June 2022, the Group made purchases amounting to $341,052 (June 2021: $288,217) from an entity associated with
Warren Randall (Non-Executive Director). These transactions were for the purchase of wooden barrels from Seppeltsfield Wines Pty Ltd (ABN: 97
127 078 282) for the Group to use in its’ production process of Lark. These transactions are considered to be arms-length transactions.
(b) Geoff Bainbridge resigned as Managing Director on 16 February 2022 and Ms Laura McBain (previously a Non-Executive Director) was appointed
Interim Managing Director on 16 February 2022.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Mr David Dearie
Mr Warren Randall
Mr Domenic Panaccio
Ms Laura McBain
Other Key Management Personnel:
Mr Satya Sharma
Mr Iain Short
Mr Alex Aleksic
Mr Geoff Bainbridge
Service agreements
Fixed remuneration
At risk - STI
At risk - LTI
2023
2022
2023
2022
2023
2022
42%
50%
100%
75%
16%
100%
102%
-
40%
52%
100%
66%
-
-
88%
96%
-
-
-
-
68%
-
10%
-
-
-
-
-
-
-
-
-
58%
50%
-
25%
16%
-
(12%)
-
60%
48%
-
34%
-
-
12%
4%
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Mr David Dearie
Non-Executive Chairman
Agreement commenced:
1 May 2020
Term of agreement:
No fixed term
Details:
Remuneration: $85,000 per annum
Mr David Dearie can terminate the agreement with 3 months’ notice. The Company can terminate the
agreement with 3 months’ notice, or payment in lieu thereof. Employment may be ended immediately by
either party if at any time the other party is, or becomes, in breach of any terms of the agreement and that
breach is incapable of remedy; or if capable of remedy, continues for a period of 14 days after the party
not in breach gives the other party a notice in writing requiring the breach to be remedied.
As at 30 June 2023, the following Performance Rights remained on issue, with terms and conditions as
noted, and with an expiry of 31 December 2026:
Target market share price and continuous service to:
Performance rights to vest
$1.950 31 December 2022
$2.250 31 December 2023
$2.550 31 December 2024
70,000
200,000
350,000
Tranche no.
Tranche 3
Tranche 4
Tranche 5
26
DIRECTORS’ REPORT,
CONT’D
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ANNUAL
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2023
Name:
Title:
Mr Warren Randall
Non-Executive Director
Agreement commenced:
21 May 2019
Term of agreement:
No fixed term
Details:
Remuneration: $50,000 annual directors fee (excluding GST)
Mr Warren Randall’s appointment as a Non-Executive Director is subject to retirement by rotation under
the Company’s constitution. Mr Warren Randall can resign from office subject to written notice or in
accordance with the law or the Company’s constitution with a notice period acceptable to both parties.
As at 30 June 2023, the following Performance Rights remained on issue, with terms and conditions as
detailed and with an expiry date of 31 December 2026:
Target market share price and continuous service to:
Performance rights to vest
$2.250 31 December 2023
$2.550 31 December 2024
100,000
200,000
Mr Domenic Panaccio
Non-Executive Director
Tranche no.
Tranche 4
Tranche 5
Name:
Title:
Agreement commenced:
1 March 2022
Term of agreement:
No fixed term
Details:
Remuneration: $50,000 annual directors fee (excluding GST).
Mr Domenic Panaccio’s appointment as a Non-Executive Director is subject to retirement by rotation
under the Company’s constitution. Mr Domenic Panaccio can resign from office subject to written notice
or in accordance with the law or the Company’s constitution with a notice period acceptable to both
parties.
As at 30 June 2023, Mr Domenic did not have any Performance Rights on issue.
Name:
Title:
Ms Laura McBain
Non-Executive Director (Resigned as Interim Managing Director and
appointed as Non-Executive Director on 1 May 2023)
Agreement commenced:
1 May 2023 (Continued service from 1 June 2020)
Term of agreement:
No fixed term
Details:
Remuneration: $50,000 annual directors fee from 1 May 2023 (excluding GST).
$500,000 annual Interim Managing Director fee from 1 July 2022 to 1 May 2023
Tranche no.
Tranche 4
Tranche 5
Ms Laura McBain appointment as a Non-Executive Director is subject to retirement by rotation under
the Company’s constitution. Ms Laura McBain can resign from office subject to written notice or in
accordance with the law or the Company’s constitution with a notice period acceptable to both parties.
As at 30 June 2023, the following Performance Rights remained on issue, with terms
and conditions as detailed and with an expiry date of 31 December 2026:
Target market share price and continuous service to:
Performance rights to vest
$2.25 December 2023
$2.55 December 2024
45,000
45,000
27
DIRECTORS’ REPORT,
CONT’D
Name:
Title:
Mr Satya Sharma
Chief Executive Officer (Appointed on 1 May 2023)
Agreement commenced:
1 May 2023
Term of agreement:
No fixed term
Details:
Remuneration: $675,000 per annum (inclusive of superannuation)
Mr Sharma can terminate the agreement with 6 months’ notice. The Company can terminate the
agreement with 6 months’ notice, or payment in lieu thereof. The Company may terminate the contract at
any time without notice if a serious misconduct or breach of contract has occurred.
As at 30 June 2023, the following Performance Rights remained on issue, with terms and conditions as
detailed and with an expiry date of 31 May 2025:
Tranche no.
Target market share price and continuous service to:
Performance rights to vest
Sign-on Share Rights
Long Term Incentive (LTI)*
Long Term Incentive (LTI)
$0.00 1 May 2024
$4.00 1 May 2026
343,357
197,280
Mr Sharma’s long-term incentives are intended to be in the form of Share Rights to acquire Shares in the Company
valued at up to $975,000. The performance rights will vest and be exercisable upon the satisfaction of service condition
and performance conditions, which were agreed as part of the LTI.
Service condition
The time-based Vesting Condition is based on Mr Sharma remaining employed by the Group at an executive level for
the period from the Grant Date up to and including the 1 May 2026.
Performance condition
The performance based Vesting Condition is based on the Company’s Shares sustaining a certain 10-day volume
weighted average price for at least 20 consecutive days. If at any point during the Relevant Period the Company
achieves the target market share price specified in the table below, then Mr Sharma’s Share Rights will entitle him to
Shares equal to the value specified in the adjacent column, upon satisfaction of the service condition. The notes to the
table provide further detail of how Mr Sharma’s entitlement is to be determined.
Target market share price
Value of entitlement (AUD)
Notes
$4.00
$195,000
-
>$4.00 to $5.00
>$195,000 to $650,000
>$5.00 to $6.00
>$650,000 to $975,000
Entitlement is $195,000 plus additional entitlement determined
on a pro-rata, straight line basis from $4.00 to $5.00.
Entitlement is $650,000 plus additional entitlement determined
on a pro-rata, straight line basis from $5.00 to $6.00.
* 197,280 performance rights noted in Mr Sharma’s performance rights table and their fair value for accounting purposes have been determined based
on estimated grant date, probability of achieving the vesting conditions and the Company’s closing share price at 30 June 2023. Actual number of
performance rights may be different at the grant date and are subject to shareholder approval.
28
DIRECTORS’ REPORT,
CONT’D
Name:
Title:
Mr Iain Short
Chief Financial Officer
Agreement commenced:
12 June 2023
Term of agreement:
No fixed term
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Details:
Remuneration: $390,292 per annum (inclusive of superannuation)
Mr Short can terminate the agreement with 3 months’ notice. The Company can terminate the agreement
with 3 months’ notice, or payment in lieu thereof. The Company may terminate the contract at any time
without notice if a serious misconduct or breach of contract has occurred.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2023.
Options
There were no options issued to directors and other key management personnel as part of compensation that were
outstanding as at 30 June 2023.
Performance rights
Details of performance rights over ordinary shares granted, vested and lapsed for directors and other key management
personnel as part of compensation during the year ended 30 June 2023 are set out below:
Name
Grant date
Expiry date
Number
granted
Value of
granted
$
Number
vested
Value of vested
$
Mr David Dearie
25/11/2019
31/12/2026
-
-
70,000
70,140
Mr Satya Sharma*
1/05/2023
1/05/2026
197,280
Mr Satya Sharma*
1/05/2023
1/05/2026
343,357
260,410
500,000
-
-
-
-
Number
lapsed /
disposed
$
-
-
-
* Mr Satya Sharma appointed as chief executive officer on 1 May 2023. Performance rights were issued to Mr Sharma in two tranches of 197,280
and 343,357 on 1 May 2023 and 19 June 2023, respectively. As per AASB 2 Share-based Payment, the fair value of these equity instruments were
measured at grant date, which is 1 May 2023.
Fair value of share options have been determined based on estimated grant date, the numbers of which are subject to shareholder approval. The
option numbers have been estimated and related expenses have been recognised for the current year, based on the expected number or LRK shares
on issue at 30 June 2023.
29
DIRECTORS’ REPORT,
CONT’D
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors
and other key management personnel in this financial year or future reporting years are as follows:
Grant date
25/11/2019
25/11/2019
25/11/2019
1/07/2021
1/07/2021
1/07/2021
29/11/2021
29/11/2021
1/05/2023
1/05/2023
Vesting date and
exercisable date
31/12/2022
31/12/2023
31/12/2024
31/12/2022
31/12/2023
31/12/2024
31/12/2023
31/12/2024
1/05/2024
1/05/2024
Expiry date
31/12/2026
31/12/2026
31/12/2026
31/12/2026
31/12/2026
31/12/2026
31/12/2026
31/12/2026
1/05/2026
1/05/2026
Share price
hurdle for
vesting
Fair value
per right
at grant date
$1.950
$2.250
$2.550
$1.950
$2.550
$2.550
$2.550
$2.250
$4.000
$0.000
$1.00200
$0.96300
$0.95100
$3.27000
$3.27000
$3.27000
$4.84000
$4.84000
$1.32000
$1.45600
Performance rights granted carry no dividend or voting rights.
Additional information
The earnings of the Group for the five years to 30 June 2023 are summarised below:
Sales revenue
19,877,457
24,337,904
16,542,984
7,426,459
5,523,207
Profit / (loss) after income tax
(4,908,029)
(470,398)
3,441,475
(1,272,296)
(4,327,069)
2023
$
2022
$
2021
$
2020
$
2019
$
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Mr David Dearie
Mr Warren Randall
Ms Laura McBain
Mr Domenic Panaccio
Mr Alex Aleksic*
Mr Satya Sharma**
Mr Iain Short***
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
327,265
2,889,295
81,000
12,000
10,000
-
-
-
-
-
-
47,721
-
-
97,954
-
-
-
-
20,000
-
(30,000)
-
-
15,166
-
-
-
Balance at
the end of
the year
374,986
2,889,295
81,000
109,954
-
15,166
-
3,319,560
20,000
160,841
(30,000)
3,470,401
* Mr Alex Aleksic resigned as Chief Financial Officer on 31 December 2022.
** Mr Satya Sharma appointed as Chief Executive Officer on 1 May 2023.
*** Mr Iain Short appointed as Chief Financial Officer on 12 June 2023.
30
DIRECTORS’ REPORT,
CONT’D
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial
year by each director and other members of key management personnel of the Group, including
their personally related parties, is set out below:
Performance rights over ordinary shares
Mr David Dearie
Mr Warren Randall
Ms Laura McBain
Mr Domenic Panaccio
Mr Satya Sharma*
Mr Iain Short**
Mr Alex Aleksic***
Balance at
the start of
the year
620,000
300,000
90,000
-
-
-
135,000
1,145,000
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
540,637
-
-
540,637
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(135,000)
(135,000)
620,000
300,000
90,000
-
540,637
-
-
1,550,637
* Mr Satya Sharma was appointed as Chief Executive Officer on 1 May 2023. Performance rights were issued to Mr Sharma in two tranches of 197,280
and 343,357 on 1 May 2023 and 19 June 2023, respectively. As per AASB 2 Share-based Payment, the fair value of these equity instruments were
measured at grant date, which is 1 May 2023.
Fair value of performance rights have been determined based on estimated grant date, the numbers of which are subject to shareholder approval. The
option numbers have been estimated and related expenses have been recognised for the current year, based on the expected number or LRK shares
on issue at 30 June 2023.
** Mr Iain Short appointed as Chief Financial Officer on 12 June 2023.
*** Mr Alex Aleksic resigned as Chief Financial Officer on 31 December 2022.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
There were no outstanding Options over unissued ordinary shares of Lark Distilling Co. Ltd at the date of this report.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
The following ordinary shares of Lark Distilling Co. Ltd were issued during the year ended 30 June 2023 and up to the
date of this report on the exercise of options granted:
Date options granted
Exercise
price
Number of
shares issued
02/11/2020
$2.250
16,667
31
LARK Distilling Co. LTDANNUALREPORT2023 DIRECTORS’ REPORT,
CONT’D
SHARES UNDER PERFORMANCE RIGHTS
Unissued ordinary shares of Lark Distilling Co. Ltd under performance rights at the date of this report are as follows:
Grant date
25/11/2019
16/03/2020
01/07/2021
29/11/2021
01/03/2023
03/01/2023
03/03/2023
08/03/2023
14/03/2023
15/03/2023
16/03/2023
01/05/2023
01/05/2023
Expiry date
31/12/2026
31/12/2026
31/12/2026
31/12/2026
01/06/2025
01/06/2025
01/06/2025
01/06/2025
01/06/2025
01/06/2025
01/06/2025
01/05/2026
01/05/2026
Number
920,000
130,000
395,000
90,000
15,734
3,252
13,006
16,783
78,671
49,825
20,979
*197,280
343,357
2,273,887
* 197,280 performance rights were part of Mr Satya Sharma’s Long Term Incentive plan. Number of Performance Rights and their fair value for
accounting purposes have been determined based on estimated grant date, probability of achieving the vesting conditions and the Company’s closing
share price at 30 June 2023. Actual number of Performance Rights may be different at the grant date and are subject to shareholder approval.
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the
company or of any other body corporate.
SHARES ISSUED ON THE EXERCISE OF PERFORMANCE RIGHTS
The following ordinary shares of Lark Distilling Co. Ltd were issued during the year ended 30 June 2023 and up to the
date of this report on the exercise of performance rights granted:
Date performance rights granted
Exercise
price
Number of
shares issued
16/03/2020
18/10/2021
$0.000
$0.000
30,000
57,000
87,000
32
DIRECTORS’ REPORT,
CONT’D
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the directors and executives of the Company for costs incurred,
in their capacity as a director or executive, for which they may be held personally liable, except where
there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives
of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of
the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
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.
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 29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise
the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and 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.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS
OF RSM AUSTRALIA PARTNERS
There are no officers of the Company who are former partners of RSM Australia Partners.
33
LARK Distilling Co. LTDANNUALREPORT2023 DIRECTORS’ REPORT,
CONT’D
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 immediately after this directors’ report.
AUDITOR
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
ROUNDING OF AMOUNTS
Lark Distilling Co. Ltd is a type of Company that is referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been
rounded to the nearest dollar.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
David Dearie
Non-Executive Chairman
28 August 2023
34
AUDITOR’S INDEPENDENCE
DECLARATION
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Lark Distilling Co. Ltd. for the year ended 30 June 2023, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
B Y CHAN
Partner
Dated: 28 August 2023
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
35
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
35
LARK Distilling Co. LTDANNUALREPORT2023 36
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2023
FINANCIAL
STATEMENTS
LARK Distilling Co. LTDANNUALREPORT2023
Statement of profit or loss and other comprehensive income
FOR THE YEAR ENDED 30 JUNE 2023
Revenue
Revenue
Cost of sales
Gross profit
Other income
Expenses
Selling and distribution expenses
Administration expenses
Employee benefit expense
Depreciation and amortisation
Costs relating to acquisition and equity raise
Operating (loss)/profit
Finance costs
Finance income
Note
Consolidated
2023
$
2022
$
5
19,877,457
24,337,904
(8,151,411)
(10,856,197)
11,726,046
13,481,707
383,465
633,147
(3,087,660)
(6,401,106)
(7,366,216)
(877,235)
(346,813)
(3,122,808)
(5,067,103)
(4,525,751)
(466,274)
(598,706)
(5,969,519)
334,212
(267,799)
42,268
(326,473)
3,378
6
7
8
9
10
(Loss) / profit before income tax benefit / (expense)
(6,195,050)
11,117
Income tax (expense) / benefit
11
1,287,021
(481,515)
Loss after income tax benefit / (expense) for the year
attributable to the owners of Lark Distilling Co. Ltd
(4,908,029)
(470,398)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
-
-
2
2
Total comprehensive income / (loss) for the year
attributable to the owners of Lark Distilling Co. Ltd
(4,908,029)
(470,396)
Basic earnings per share
Diluted earnings per share
37
37
Cents
(6.51)
(6.51)
Cents
(0.66)
(0.66)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
38 • LARK Distilling Co. Ltd. Annual Report 2023
Statement of financial position
AS AT 30 JUNE 2023
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Financial liabilities
Employee benefits
Deferred government grants
Total current liabilities
Non-current liabilities
Borrowings
Financial liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2023
$
2022
$
12
13
14
16
14
17
15
18
19
20
22
23
24
21
22
23
25
26
7,159,778
1,994,999
15,993,162
116,820
16,096,404
4,110,428
20,430,247
180,591
25,264,759
40,817,670
45,916,614
15,201,278
4,521,931
21,238,641
3,994,389
39,741,486
15,271,786
1,631,574
21,602,426
2,525,040
90,872,853
80,772,312
116,137,612
121,589,982
2,676,684
369,906
463,448
3,675,000
7,185,038
-
4,216,367
59,664
4,276,031
5,676,914
420,191
448,789
-
6,545,894
5,000,000
1,255,513
34,647
6,290,160
11,461,069
12,836,054
104,676,543
108,753,928
116,486,221
116,448,720
2,769,873
(14,579,551)
1,976,730
(9,671,522)
104,676,543
108,753,928
The above statement of financial position should be read in conjunction with the accompanying notes
LARK Distilling Co. Ltd. Annual Report 2023 • 39
ANNUALREPORT2023 Statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2023
Consolidated
Balance at 1 July 2021
Loss after income tax benefit for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
/ (loss) for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 25)
Share-based payments (note 38)
Shares issued as Consideration for
business acquisition (note 26)
Issued
capital
$
58,498,886
Reserves
$
1,100,504
Accumulated
losses
$
Total equity
$
(9,201,124)
50,398,266
-
-
-
56,571,214
-
2
2
-
-
876,224
1,378,620
-
(470,398)
(470,398)
2
(470,398)
(470,396)
-
-
56,571,214
876,224
1,378,620
Balance at 30 June 2022
116,448,720
1,976,730
(9,671,522)
108,753,928
Consolidated
Balance at 1 July 2022
Loss after income tax benefit for the year
Other comprehensive income
for the year, net of tax
Total comprehensive loss for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 25)
Share-based payments (note 38)
Issued
capital
$
116,448,720
Reserves
$
1,976,730
Accumulated
losses
$
Total equity
$
(9,671,522)
108,753,928
-
-
-
37,501
-
-
-
-
-
793,143
(4,908,029)
(4,908,029)
-
-
(4,908,029)
(4,908,029)
-
-
37,501
793,143
Balance at 30 June 2023
116,486,221
2,769,873
(14,579,551)
104,676,543
The above statement of changes in equity should be read in conjunction with the accompanying notes
40 • LARK Distilling Co. Ltd. Annual Report 2023
Statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2023
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Production and purchase of inventory
Interest paid
Interest received
Government grants and tax incentives received
Consolidated
Note
2023
$
2022
$
24,192,173
(19,700,209)
(10,162,510)
(203,067)
42,268
379,755
25,087,220
(17,344,696)
(15,835,380)
(260,715)
3,378
634,861
Net cash used in operating activities
36
(5,451,590)
(7,715,332)
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
33
Payments for property, plant and equipment
Payments for intangibles
Proceeds from sale of property, plant and equipment
Government Grants towards purchase of equipment
(1,119,850)
(610,005)
(204,026)
9,091
3,675,000
(37,251,965)
(2,175,370)
(76,105)
5,000
-
Net cash from/(used in) investing activities
1,750,210
(39,498,440)
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from the exercise of options
Proceeds from borrowings
Repayment of borrowings
Repayment of financial liabilities
Payment of lease liabilities under AASB 16
Share issue transaction costs
37,501
57,860,000
-
-
(5,000,000)
-
(272,747)
55,053
5,000,000
(5,000,000)
(81,892)
(264,339)
-
(1,904,520)
Net cash (used in) / from financing activities
(5,235,246)
55,664,302
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(8,936,626)
16,096,404
8,450,530
7,645,874
Cash and cash equivalents at the end of the financial year
12
7,159,778
16,096,404
The above statement of cash flows should be read in conjunction with the accompanying notes
LARK Distilling Co. Ltd. Annual Report 2022 • 41
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 1. GENERAL INFORMATION
Critical accounting estimates
The financial statements cover Lark Distilling Co. Ltd as a
Group consisting of Lark Distilling Co. Ltd and the entities
it controlled at the end of, or during, the year. The financial
statements are presented in Australian dollars, which
is Lark Distilling Co. Ltd’s functional and presentation
currency.
Lark Distilling Co. Ltd is a listed public company limited
by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
Level 1
91-93 Macquarie Street
Hobart TAS 7000
A description of the nature of the Group’s operations and
its principal activities are included in the directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in
accordance with a resolution of directors, on 28 August
2023. The directors have the power to amend and reissue
the financial statements.
NOTE 2. SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PREPARATION
These general-purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit
oriented entities. These financial statements also comply
with International Financial Reporting Standards as
issued by the International Accounting Standards Board
(‘IASB’).
The financial statements cover Lark Distilling Co. Limited
(“Company”) and its controlled entities as a consolidated
entity (“Group”). Lark Distilling Co. Limited is a company
limited by shares, incorporated and domiciled in
Australia. Compliance with Australian Accounting
Standards ensures that the financial statements and
notes of Lark Distilling Co Ltd and its controlled entities
comply with International Financial Reporting Standards
(IFRS). Lark Distilling Co Ltd is a for profit entity for the
purpose of preparing the financial statements.
Historical cost convention
The financial statements have been prepared under the
historical cost convention, except for, where applicable,
the revaluation of financial assets and liabilities at fair
value through profit or loss, financial assets at fair value
through other comprehensive income, investment
properties, certain classes of property, plant and
equipment and derivative financial instruments.
42 • LARK Distilling Co. Ltd. Annual Report 2023
The preparation of the financial statements requires
the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the
process of applying the Group’s accounting policies.
The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed
in note 3.
NEW OR AMENDED ACCOUNTING STANDARDS AND
INTERPRETATIONS ADOPTED
The group has adopted all of the new or amended
Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are
mandatory for the current reporting period.
Any new or amended Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.
FINANCIAL INSTRUMENTS
Financial Assets
Recognition and Initial Measurement
Financial assets and financial liabilities are recognised
in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of
the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in
profit or loss.
All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets
within the time frame established by regulation or
convention in the marketplace. All recognised financial
assets are measured subsequently in their entirety at
either amortised cost or fair value, depending on the
classification of the financial assets.
Classification of financial assets
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market and are subsequently measured at
amortised cost using the effective interest rate method.
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Impairment of financial assets
The Group recognises lifetime expected credit losses for
trade receivables. The expected credit losses on these
financial assets are estimated using a provision matrix
based on the Group’s historical credit loss experience,
adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both
the current as well as the forecast direction of conditions
at the reporting date, including time value of money
where appropriate.
Derecognition
Financial assets are derecognised where the contractual
rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer
has any significant continuing involvement in the risks
and benefits associated with the asset.
Financial Liabilities
Non-derivative financial liabilities (excluding financial
guarantees) are subsequently measured at amortised
cost using the effective interest rate method.
Financial liabilities that are not
(i) contingent consideration of an acquirer in a business
combination,
(ii) held-for-trading, or
(iii) designated as at fair value through profit or loss
(“FVTPL”), are measured subsequently at amortised
cost using the effective interest method. The effective
interest method is a method of calculating the
amortised cost of a financial liability and of allocating
interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and
points paid or received that form an integral part of
the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of
the financial liability, or (where appropriate) a shorter
period, to the amortised cost of a financial liability.
Derecognition
Financial liabilities are derecognised where the related
obligations are either discharged, cancelled or expire.
The difference between the carrying value of the financial
liability extinguished or transferred to another party and
the fair value of consideration paid, including the transfer
of non-cash assets or liabilities assumed, is recognized in
profit or loss.
Impairment of assets
At each reporting date, the group reviews the carrying
values of its tangible and intangible assets to determine
whether there is any indication that those assets
have been impaired. If such an indication exists, the
recoverable amount of the asset, being the higher of the
asset’s fair value less costs to sell and value in use, is
compared to the asset’s carrying value. Any excess of
the asset’s carrying value over its recoverable amount
is expensed to the statement of profit or loss and other
comprehensive income.
Impairment testing is performed annually for goodwill
and intangible assets with indefinite lives. Where it is
not possible to estimate the recoverable amount of an
individual asset, the group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs.
An impairment loss in respect of goodwill is not reversed.
For other assets, an impairment loss is reversed only
to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Parent entity information
In accordance with the Corporations Act 2001, these
financial statements present the results of the Group only.
Supplementary information about the parent entity is
disclosed in note 32.
Principles of consolidation
A controlled entity is any entity that the Company has
the power to control the financial and operating policies
of the entity so as to obtain benefits from its activities.
In assessing the power to govern, the existence and
effect of holdings of actual and potential voting rights are
considered.
A list of controlled entities is contained in note 34 to the
consolidated financial statements. All controlled entities
have a June financial year-end, except for Aowei Liquor
Industries Beijing Limited (former name Beijing Montec
Commercial Limited), which has a December year end;
and Australian Whisky Holdings (HK) Limited (former
name Montec International (HK) Limited), which has a
March year end.
As at reporting date, the assets and liabilities of all
controlled entities have been incorporated into the
consolidated financial statements as well as their results
for the year then ended. Where controlled entities have
entered the consolidated group during the year, their
operating results have been included from the date
control was obtained.
All inter-company balances and transactions between
entities in the Group, including any unrealised profits
or losses, have been eliminated on consolidation.
Accounting policies of subsidiaries have been changed to
ensure consistencies with those policies applied by the
parent entity.
LARK Distilling Co. Ltd. Annual Report 2023 • 43
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Foreign currency translation
The financial statements are presented in Australian
dollars, which is Lark Distilling Co. Ltd’s functional and
presentation currency.
Foreign currency transactions are translated into
Australian dollars using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and from the translation at financial year-end exchange
rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
Exchange differences arising on the translation of
monetary items are recognised in the statement of Profit
or Loss and other Comprehensive Income.
Exchange differences arising on the translation of non-
monetary items are recognised directly in equity to
the extent that the gain or loss is directly recognised
in equity, otherwise the exchange difference is
recognised in the statement of Profit or Loss and other
Comprehensive Income.
The financial results and position of foreign operations
whose functional currency is different from the group’s
presentation currency are translated as follows:
•
•
•
assets and liabilities are translated at year-end
exchange rates prevailing at that reporting date;
income and expenses are translated at average
exchange rates for the period, where this
approximates the rate at date of transaction; and
retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on translation of foreign
operations are transferred directly to the group’s foreign
currency translation reserve in the statement of Financial
Position. These differences are recognised in the
statement of Profit or Loss and other Comprehensive
Income in the period in which the operation is disposed.
Income tax
The income tax expense or benefit for the period is the
tax payable on that period’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted
by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses
and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are
settled, based on those tax rates that are enacted or
substantively enacted, except for:
•
When the deferred income tax asset or liability arises
from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business
44 • LARK Distilling Co. Ltd. Annual Report 2023
combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
•
When the taxable temporary difference is associated
with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are
future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where
there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax
assets against deferred tax liabilities, and they relate to
the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle
simultaneously.
Lark Distilling Co. Ltd (the ‘head entity’) and its wholly-
owned Australian subsidiaries have formed an income
tax consolidated group under the tax consolidation
regime. The head entity and each subsidiary in the tax
consolidated group continue to account for their own
current and deferred tax amounts. The tax consolidated
group has applied the ‘separate taxpayer within group’
approach in determining the appropriate amount of taxes
to allocate to members of the tax consolidated group.
Current and non-current classification
Assets and liabilities are presented in the statement of
financial position based on current and non-current
classification.
An asset is classified as current when: it is either
expected to be realised or intended to be sold or
consumed in the Group’s normal operating cycle; it is
held primarily for the purpose of trading; it is expected to
be realised within 12 months after the reporting period;
or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at
least 12 months after the reporting period. All other assets
are classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the Group’s normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled
within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
Interest income
Interest income is recognised as interest accrues using the
effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the
interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial asset to the net carrying amount of the
financial asset.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is
recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the
amount of GST receivable or payable. The net amount
of GST recoverable from, or payable to, the tax authority
is included in other receivables or other payables in the
statement of financial position.
Rounding of amounts
The Company is of a kind referred to in Corporations
Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to ‘rounding-
off’. Amounts in this report have been rounded off in
accordance with that Corporations Instrument to the
nearest dollar.
NOTE 3. CRITICAL ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates
its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and
assumptions on historical experience and on other
various factors, including expectations of future events,
management believes to be reasonable under the
circumstances. The resulting accounting judgements and
estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are
discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled
transactions with employees by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value is determined by using either the
Monte Carlo or Black-Scholes model taking into account
the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would
have no impact on the carrying amounts of assets and
liabilities within the next annual reporting period but may
impact profit or loss and equity.
Goodwill and other indefinite life 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 18. Critical
accounting judgements, estimates and assumptions have
been applied in the assessment of impairment. Further
information on the goodwill impairment assessment is
included in note 18 to the financial statements.
Ukraine conflict
The current evolving conflict between Ukraine and Russia
(Ukraine Conflict) is impacting global economic markets.
The nature and extent of the effect of the Ukraine Conflict
on the performance of the Group remains unknown.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible
temporary differences and carried forward losses only
if the Group considers it is probable that future taxable
amounts will be available to utilise those temporary
differences and carried forward losses. To the extent
possible, management’s expectation is to utilise the
available carried forward losses in the future.
Environmental, Social and Governance
The Group is certified carbon neutral, under the Federal
Government’s Climate Active Program, one of the
most widely recognised carbon neutral programs of
its kind. This renowned certification is only awarded
to businesses that have credibly reached a state of
achieving zero net emissions. The Group is committed to
minimising its environmental footprint and maintaining
its carbon neutrality. This is expected to minimise any
financial impacts from legislative changes going forward.
Revenue from contracts with customers involving sale of
goods
When recognising revenue in relation to the sale of
goods to customers, the key performance obligation of
the Group is considered to be the point of delivery of the
goods to the customer, as this is deemed to be the time
that the customer obtains control of the promised goods
and therefore the benefits of unimpeded access.
LARK Distilling Co. Ltd. Annual Report 2023 • 45
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Provision for impairment of inventories
The provision for impairment of inventories assessment
requires a degree of estimation and judgement. The level
of the provision is assessed by taking into account the
recent sales experience, the ageing of inventories and
other factors that affect inventory obsolescence.
Estimation 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.
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 economical
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. 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.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be
readily determined, an incremental borrowing rate is
estimated to discount future lease payments to measure
the present value of the lease liability at the lease
commencement date. Such a rate is based on what
the Group estimates it would have to pay a third party to
borrow the funds necessary to obtain an asset of a similar
value to the right-of-use asset, with similar terms, security
and economic environment.
Employee benefits provision
As discussed in note 23, the liability for employee
benefits expected to be settled more than 12 months from
the reporting date are recognised and measured at the
present value of the estimated future cash flows to be
made in respect of all employees at the reporting date. In
46 • LARK Distilling Co. Ltd. Annual Report 2023
determining the present value of the liability, estimates of
attrition rates and pay increases through promotion and
inflation have been taken into account.
Business combination
Significant judgement is applied to the acquisition of
an asset or a group of assets to conclude if the asset
or group of assets acquired represents a business
combination. The Group follows a 4-step process:
•
•
•
Identification of the ‘acquirer’
Determination of the ‘acquisition date’
Recognition and measurement of the identifiable
assets acquired, the liabilities assumed
a) Inventory was measured at fair value on a
discounted cash flow basis. Key assumptions for the
valuation included the estimated cash inflows from
whisky liquid acquired, and timings for when the
liquid was sold. Cash outflow assumptions included
bottling and selling costs, which were based on the
Group’s current costs. A pre-tax discount rate of 15%
has been used for the valuation; and
b) Fair value of Land and buildings were determined
utilising external valuation experts with valuation
prepared in accordance with International Valuation
Standards Committee (IVSC) definition of market
value endorsed by Australian Property Institute and
AASB13 Fair Value Measurement.
•
Recognition and measurement of goodwill or a gain
from a bargain purchase
NOTE 4. OPERATING SEGMENTS
Identification of reportable operating segments
The Group is organised into three operating segments:
whisky, gin, and other. These operating segments are
based on the internal reports that are reviewed and
used by the Board of Directors (who are identified as the
Chief Operating Decision Makers (‘CODM’)) in assessing
performance and in determining the allocation of
resources.
The operations of the Group in management of equity
investments are consistent with the Groups’ strategy to
continue its investment and growth in both whisky (“Lark”
as the hero brand) and gin (“Forty Spotted Gin”). Whisky
and gin are assessed as separate segments by the CODM
due to the differences in production processes, inventory
life cycle, market categories, working capital requirements
and financial contribution to the Group. The “other”
segment is representative of function’s that attribute to
Group results but are not directly attributable to whisky or
gin segments. Operating segments are therefore split into
the three segments: Whisky, Gin and Other.
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable
that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are
eliminated on consolidation.
Major customers
During the year ended 30 June 2023, approximately 18.5% of the Group’s external revenue was derived from sales to one
customer (FY22: 13.9%) with revenue of the Group from direct customers being materially derived from the Australian
geographical market.
Loss before income tax benefit
(4,294,716)
(1,439,070)
Operating segment information
Consolidated - 2023
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Finance costs
Interest Income
Income tax benefit
Loss after income tax benefit
Consolidated - 2022
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Finance costs
Interest income
Profit / (loss) before income tax expense
Income tax expense
Loss after income tax expense
Whisky
$
Gin
$
Other
$
Total
$
16,014,758
308,948
16,323,706
2,506,771
48,359
2,555,130
1,355,928
26,158
1,382,086
19,877,457
383,465
20,260,922
(3,406,246)
(1,299,999)
(386,039)
(5,092,284)
(706,766)
(215,759)
34,055
(110,629)
(33,772)
5,330
(59,840)
(18,268)
2,883
(461,264)
(877,235)
(267,799)
42,268
(6,195,050)
1,287,021
(4,908,029)
Whisky
$
Gin
$
Other
$
Total
$
19,567,444
506,518
20,073,962
1,433,161
(373,019)
(261,178)
2,702
801,666
3,716,413
126,629
3,843,042
(724,535)
(69,941)
(48,971)
507
(842,940)
1,054,047
24,337,904
-
1,054,047
633,147
24,971,051
91,860
(23,314)
(16,324)
169
52,391
800,486
(466,274)
(326,473)
3,378
11,117
(481,515)
(470,398)
LARK Distilling Co. Ltd. Annual Report 2023 • 47
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Accounting policy for operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the
internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources
to operating segments and assessing their performance. The CODM does not assess the balance sheet in separate segments as it is
impractical to do so.
NOTE 5. REVENUE
Whisky revenue
Gin revenue
Other revenue
Consolidated
2023
$
16,014,758
2,506,771
1,355,928
2022
$
19,567,444
3,716,413
1,054,047
19,877,457
24,337,904
Revenue recognition
The Group recognises revenue as follows:
Accounting policy for revenue from contracts with customers
Revenue relating to sale of goods is recognised at a point in time. The amount recognised reflects the consideration to which the
Group is expected to be entitled in exchange for transferring goods to a customer. For each contract with a customer, the Group:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price
which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct goods to be dispatch; and
recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of
the goods promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and returns, any potential bonuses receivable from the customer and any other contingent events. Such estimates are
determined and consistently applied using either the ‘expected value’ or ‘most likely amount’ method. The measurement of
variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint
continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are
subject to the constraining principle are recognised as a refund liability.
Sale of goods
Revenue derived from all sale of inventories to customers is recognised at the time of transfer of ownership of goods. Typically,
this occurs at the time of dispatch of goods, unless otherwise specified in the trading terms of that customer. All revenue is stated
net of the amount of goods and services tax (GST).
Other revenue
Other revenue is a combination of Hospitality sales of Non-Lark products, as well as Slainte, Brandy, Rum & Sanitiser and is
recognised when it is received or when the right to receive payment is established.
48 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 6. OTHER INCOME
Excise rebates
R&D grant income
Other income
Gain on sale of fixed assets
Other income
Consolidated
2023
$
350,000
-
29,755
3,710
2022
$
350,006
164,938
118,203
-
383,465
633,147
Accounting policy for R&D tax incentive income
Research and Development tax incentives are recognised in accordance with AASB 120: Accounting for Government Grants and
Government Assistance. The Research and development tax credit is recognised when there is reasonable assurance that the
grant will be received, and all conditions have been complied with.
Accounting policy for excise rebates and other incomes
Excise rebates and other incomes are recognised when it is received or when the right to receive payment is established.
NOTE 7. ADMINISTRATION EXPENSES
Consulting fees
Legal fees
Directors' fees
Insurance costs
Inventory losses
Occupancy costs
IT and communications
Travel, transport and entertainment
Other administration and corporate costs
Consolidated
2023
$
694,806
234,243
610,001
311,561
1,331,953
485,896
68,786
565,731
2,098,129
2022
$
1,045,776
279,128
653,334
244,486
506,123
713,686
41,324
373,793
1,209,453
6,401,106
5,067,103
LARK Distilling Co. Ltd. Annual Report 2023 • 49
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 8. EMPLOYEE BENEFIT EXPENSE
Salaries and wages
Superannuation
Movement in employee benefit provisions
Share based payments expense
Other employee expenses
NOTE 9. DEPRECIATION AND AMORTISATION
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangibles
Consolidated
2023
$
2022
$
5,715,254
3,033,290
525,005
39,676
793,143
293,138
231,408
132,316
876,224
252,513
7,366,216
4,525,751
Consolidated
2023
$
577,725
228,227
71,283
2022
$
268,695
178,924
18,655
877,235
466,274
Depreciation capitalised into inventory
411,607
379,307
NOTE 10. FINANCE COSTS
Interest expense
Bank and other fees
Consolidated
2023
$
65,939
201,860
2022
$
193,538
132,935
267,799
326,473
Accounting policy for finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
50 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 11. INCOME TAX (BENEFIT) / EXPENSE
Income tax (benefit)/expense
Deferred tax - origination and reversal of temporary differences
Adjustment in respect of prior year
Aggregate income tax (benefit) / expense
Numerical reconciliation of income tax (benefit) / expense and tax at the statutory rate
(Loss) / profit before income tax benefit / (expense)
Tax at the statutory tax rate of 25%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
R&D offset income
Other
Acquisition related costs
Restate tax effect balances to reflect change in tax rate
Prior year under/over
Consolidated
2023
$
2022
$
(1,256,913)
(30,108)
388,694
92,821
(1,287,021)
481,515
(6,195,050)
(1,548,763)
198,286
-
6,861
86,703
(1,256,913)
-
(30,108)
11,117
2,779
219,056
(41,235)
24,087
91,380
296,067
92,627
92,821
Income tax (benefit) / expense
(1,287,021)
481,515
The Group qualifies as a base rate entity as defined from the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities)
Act 2018. Accordingly at 30 June 2023, the Group’s tax rate 25% in 2022/23 financial year (2021/22: 25%) as per the requirements
of the Treasury Laws Amendment Act 2018.
LARK Distilling Co. Ltd. Annual Report 2023 • 51
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 11. INCOME TAX (BENEFIT) / EXPENSE CONT’D
Amounts credited directly to equity
Deferred tax assets (note 19)
Tax losses not recognised
Consolidated
2023
$
2022
$
-
(476,130)
Unused tax losses for which no deferred tax asset has been recognised
18,362,305
18,362,305
Potential tax benefit @ 25% (2022:25%)
4,590,576
4,590,576
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can
only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed and
future taxable profits are available to offset against the carry forward tax losses.
The franking account balance as at 30 June 2023 was Nil (30 June 2022: Nil).
NOTE 12. CASH AND CASH EQUIVALENTS
Current assets
Cash on hand
Cash at bank
Consolidated
2023
$
2022
$
2,313
2,313
7,157,465
16,094,091
7,159,778
16,096,404
Accounting policy for cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at call deposits with banks
or financial institutions, net of bank overdrafts.
NOTE 13. TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Less: Allowance for expected future credit losses
Other receivables
Deposits paid
52 • LARK Distilling Co. Ltd. Annual Report 2023
Consolidated
2023
$
2022
$
1,965,557
(45,000)
1,920,557
19,442
55,000
1,994,999
3,998,130
-
3,998,130
36,978
75,320
4,110,428
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 13. TRADE AND OTHER RECEIVABLES, CONT’D
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
Other receivables are recognised at amortised cost.
NOTE 14. INVENTORIES
Current assets
Raw materials - at cost
Work in progress - at cost
Finished goods - at cost
Inventory in casks
Provision for obsolescence
Non-current assets
Inventory in casks
Finished Goods - at cost
Consolidated
2023
$
2022
$
2,023,326
2,605,512
2,049,282
9,940,969
(625,927)
3,843,114
1,737,390
3,793,620
11,222,598
(166,475)
15,993,162
20,430,247
45,693,973
222,641
39,519,561
221,925
45,916,614
39,741,486
Accounting policy for inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value.
Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of
variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow
hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates and discounts received or
receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Work in progress inventory reflects whisky and gin currently in production but not yet bottled or barrelled.
LARK Distilling Co. Ltd. Annual Report 2023 • 53
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 15. RIGHT-OF-USE ASSETS
Non-current assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Consolidated
2023
$
2022
$
5,047,082
(525,151)
1,933,250
(301,676)
4,521,931
1,631,574
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out following:
Consolidated
Balance at 1 July 2021
Additions
Depreciation expense
Balance at 30 June 2022
Additions
Depreciation expense
Balance at 30 June 2023
Land and
buildings
right-of-use
$
1,643,857
166,641
(178,924)
1,631,574
3,118,584
(228,227)
Total
$
1,643,857
166,641
(178,924)
1,631,574
3,118,584
(228,227)
4,521,931
4,521,931
Additions to the right-of-use assets during the year were $3,118,584.
The Group leases land and buildings for its offices, warehouses and retail outlets under agreements of between five to fifteen
years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are
renegotiated. The Group also leases plant and equipment under agreements of between three to seven years.
The Group leases office equipment under agreements of less than two years. These leases are either short-term or low-value, so
have been expensed as incurred and not capitalised as right-of-use assets.
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of
inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site
or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the
asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the
depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of
lease liabilities.
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.
54 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 16. PREPAID ASSETS
Current assets
Prepaid wood
Prepaid packaging and other
NOTE 17. PROPERTY, PLANT AND EQUIPMENT
Non-current assets
Land and buildings at cost
Impairment
Building improvements - at cost
Less: Accumulated depreciation
Plant, equipment & production assets - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Consolidated
2023
$
-
116,820
2022
$
176,451
4,140
116,820
180,591
Consolidated
2023
$
2022
$
9,464,644
(529,683)
8,934,961
1,514,502
(607,923)
906,579
6,222,273
(2,032,005)
4,190,268
94,157
(55,712)
38,445
9,364,644
(529,683)
8,834,961
1,514,502
(261,109)
1,253,393
5,819,243
(1,553,472)
4,265,771
154,044
(102,525)
51,519
Capital work in progress
1,131,025
866,142
15,201,278
15,271,786
LARK Distilling Co. Ltd. Annual Report 2023 • 55
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 17. PROPERTY, PLANT AND EQUIPMENT, CONT’D
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Land and
buildings
$
Building
improvements
$
Plant,
equipment
and
production
assets
$
Motor
vehicles
$
Capital WIP
$
Total
$
Balance at 30 June 2021
4,034,961
449,478
3,247,988
61,244
Additions
-
18,998
483,178
Additions through business
combinations (note 33)
4,800,000
Disposals
Depreciation capitalised
to inventory
Transfers in/(out)
Depreciation expense
-
-
-
-
574,267
(3,113)
-
-
-
(371,541)
(7,766)
-
-
-
640,649
1,612,128
-
-
-
8,434,320
2,114,304
5,374,267
(3,113)
(379,307)
972,485
(187,568)
414,150
(79,158)
-
(1,386,635)
-
(1,959)
-
(268,685)
Balance at 30 June 2022
8,834,961
1,253,393
4,265,771
51,519
866,142
15,271,786
Additions
Additions through
business combinations
Disposals
Capitalised to inventory
Transfers in/(out)
Depreciation expense
100,000
-
-
-
-
-
-
-
-
-
-
245,122
314,200
-
(406,788)
-
-
-
(5,381)
(4,819)
-
(346,814)
(228,037)
(2,874)
264,883
610,005
-
-
-
-
-
314,200
(5,381)
(411,607)
-
(577,725)
Balance at 30 June 2023
8,934,961
906,579
4,190,268
38,445
1,131,025
15,201,278
Accounting policy for property, plant and equipment
Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items
(major components) of property, plant and equipment.
Freehold land is not depreciated.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
recognised in profit and loss.
The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the consolidated group
commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Property, plant and equipment
depreciation rates
Building improvements
Plant, equipment and production assets
Motor vehicles
2.5% - 44%
5% - 33%
10% - 20%
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its
estimated recoverable amount.
56 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 18. INTANGIBLES
Non-current assets
Goodwill - at cost
Intangible assets - at cost
Less: Accumulated amortisation
Consolidated
2023
$
2022
$
20,735,100
21,231,628
738,836
(235,295)
503,541
534,810
(164,012)
370,798
21,238,641
21,602,426
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 30 June 2021
Additions
Additions through business combinations (note 33)
Amortisation expense
Balance at 30 June 2022
Additions
Additions through business combinations
Amortisation expense
Goodwill
$
10,934,839
-
10,296,789
-
21,231,628
-
(496,528)
-
Other
intangibles
$
289,675
78,506
21,272
(18,655)
370,798
204,026
-
(71,283)
Total
$
11,224,514
78,506
10,318,061
(18,655)
21,602,426
204,026
(496,528)
(71,283)
Balance at 30 June 2023
20,735,100
503,541
21,238,641
During the year ended 30 June 2023, as part of the completion of business combination accounting, the Group transferred
$496,528 from goodwill to property, plant and equipment. Refer note 33 for further information.
Goodwill is attributable to business acquisitions and has been allocated to the Whisky segment (cash generating unit or CGU).
Goodwill is considered to have an indefinite useful life due to the on-going cash generation attributable to the respective CGU and
its recoverable value is assessed annually on a value-in-use (VIU) discounted cash flows basis.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of assumptions, including:
Cash flow forecasts
Forecast future cash flows are based on the most recent Board approved six-year financial plans.
The financial plans comprise forecasts of revenue, profit margin, staff costs, selling and distribution costs, and overheads. The
financial plans have been based on current and anticipated market conditions, and anticipated costs of expanding to new
export markets and have been referenced against industry projections. While the Group have a level of control over the staff and
overheads cost, revenue forecasts are inherently subject to uncertainty due to macro-economic factors and timing of expansion
into new export markets. The financial plans include assumptions to changes in working capital based on historical and expected
future trends.
LARK Distilling Co. Ltd. Annual Report 2023 • 57
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
For the purposes of assessing impairment of goodwill,
cash forecasts have assumed that the whisky litres under
maturation balance is maintained over time. Capital
expenditure has been based on historical and expected
future costs to maintain this inventory level.
Long- term growth rates
Cash forecasts beyond a six-year period have been
extrapolated using a conservative terminal growth rate
of 2%. The rate has been applied for the purposes of
assessing impairment of goodwill only, which Management
and the Board believe is prudent in assessing for indicators
of impairment.
Discount rates
The discount rate applied of 15% pre-tax reflects
management’s estimate of the time value of money and
the Group’s weighted average cost of capital, the risk-free
rate and the volatility of the share price relative to market
movements.
Sensitivity Analysis
Increases in discount rates or changes in other key
assumptions, such as operating conditions or financial
performance, may cause the recoverable amount to fall
below carrying values. Management and the Board have
assessed sensitivity analysis of the impact of reductions to
cash flow growth, and increases to the discount rate. Based
on the extent of changes to these assumptions required to
reduce headroom to nil, Management and the Board are
comfortable that there are no indicators of impairment as at
30 June 2023.
Accounting policy for intangible assets
Intangible assets acquired as part of a business
combination, other than goodwill, are initially measured
at their fair value at the date of the acquisition. Intangible
assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are
subsequently measured at cost less any impairment. Finite
life intangible assets are subsequently measured at cost
less amortisation and any impairment. The gains or losses
recognised in profit or loss arising from the derecognition
of intangible assets are measured as the difference
between net disposal proceeds and the carrying amount
of the intangible asset. The method and useful lives of
finite life intangible assets are reviewed annually. Changes
in the expected pattern of consumption or useful life are
accounted for prospectively by changing the amortisation
method or period.
(ii) any non-controlling interest (determined under either
the full goodwill or proportionate interest method); and
(iii) the acquisition date fair value of any previously held
equity interest;
over the acquisition date fair value of any identifiable
assets acquired and liabilities assumed.
Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The
carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to
owners of the Company.
The amount of goodwill recognised on acquisition of
each subsidiary in which the Group holds less than 100%
interest will depend on the method adopted in measuring
the non-controlling interest. The Group can elect in most
circumstances to measure the non-controlling interest in
the acquiree either at fair value (full goodwill method) or
at the non-controlling interest’s proportionate share of the
subsidiary’s identifiable net assets (proportionate interest
method). In such circumstances, the Group determines
which method to adopt for each acquisition and this is
stated in the respective note to the financial statements
disclosing the business combination.
Under the full goodwill method, the fair value of the
non-controlling interest is determined using valuation
techniques which make the maximum use of market
information where available.
Goodwill on acquisition of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates is
included in investments.
Goodwill is tested for impairment annually and is allocated
to the Group’s cash-generating units or groups of cash-
generating units, representing the lowest level at which
goodwill is monitored and not larger than an operating
segment. Gains and losses on the disposal of an entity
include the carrying amount of goodwill related to the entity
disposed of.
Changes in the ownership interests in a subsidiary that do
not result in a loss of control are accounted for as equity
transactions and do not affect the carrying amounts of
goodwill.
Goodwill
Other intangible assets
Goodwill is carried at cost less any accumulated
impairment losses.
Goodwill is calculated as the excess of the sum of:
(i) the consideration transferred;
Other intangible assets including patents and trademarks
and the whisky barrel fund, that are acquired by the
Group and have finite useful lives are measured at cost
less accumulated amortisation and any accumulated
impairment losses.
58 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as
incurred.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not amortised. The estimated
useful lives for current and comparative periods are as follows:
Intangible asset
Useful life
Other intangible assets
5-8 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
NOTE 19. DEFERRED TAX
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and 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. The following is the analysis of the deferred tax balances (after offset) for financial reporting
purposes.
Deferred tax asset and liabilities comprises deductible
temporary differences attributable to:
Tax losses
Inventories
Provisions and accruals
Other liabilities
Capital raising costs
Foreign exchange
Other
Fixed assets and right of use assets
Prepayments
Consolidated
2023
$
2022
$
3,407,650
1,799,906
15,283
372,757
1,146,568
367,811
55
63,857
(1,350,386)
(29,206)
214,364
232,333
418,926
76,168
12,117
-
(703,868)
(1,036)
Total deferred tax asset recognised in profit or loss
3,994,389
2,048,910
Amounts recognised in equity:
Transaction costs on share issue
Net deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss (note 11)
Credited to equity (note 11)
Additions through business combinations
Closing balance
-
476,130
3,994,389
2,525,040
2,525,040
1,287,021
-
182,328
2,501,104
(481,515)
476,130
29,321
3,994,389
2,525,040
LARK Distilling Co. Ltd. Annual Report 2023 • 59
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 20. TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Sundry creditors and accrued expenses
Deferred consideration payable on business combination
Consolidated
2023
$
2022
$
1,053,024
1,623,660
-
2,161,743
2,515,171
1,000,000
2,676,684
5,676,914
Refer to note 27 for further information on financial instruments.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which
are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured
and are usually paid within 30 days of recognition.
NOTE 21. BORROWINGS
Total secured liabilities - non-current
Loan- National Australia Bank
Consolidated
2023
$
2022
$
-
5,000,000
The Company maintains a $15 million debt facility from National Australia Bank. The key terms of the debt facility from National
Australia Bank are as follows:
• Facility amount up to $15,000,000;
•
•
Interest rate based on BBSY+ 1.97% per annum;
Interest only loan with principal due at the end of the term
• Maturity on 31 January 2024;
•
Key covenant - Minimum Interest Cover Ratio of 2.5 times, measured as 12-month period EBITDA divided by total interest
payments ending on 30 June and thereafter yearly. The Group did not fulfil the financial ratio requirements outlined in its
financial agreement at 30 June 2023. A letter of waiver was received from the National Australia Bank Limited on 24 May 2023
stating no action would be taken as a result of the breach. The facility remains available to be drawn.
Assets pledged as security
The loan is secured by a registered security interest in real property and whisky held by the Group.
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
60 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 22. FINANCIAL LIABILITIES
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Consolidated
2023
$
2022
$
369,906
420,191
4,216,367
1,255,513
The carrying value of lease liabilities is determined based on cash cost and term of leases, with future lease payments discounted
to present value using the Group’s assessed incremental borrowing rate.
Refer note 27 for further information lease maturity and interest rates.
Accounting policy for financial liabilities
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. Lease payments comprise of fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated
termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which
they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
NOTE 23. EMPLOYEE BENEFITS
Current liabilities:
Current liabilities
Employee benefits - current
Non-current liabilities
Employee benefits
Consolidated
2023
$
2022
$
463,448
448,789
59,664
34,647
LARK Distilling Co. Ltd. Annual Report 2023 • 61
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 23. EMPLOYEE BENEFITS, CONT’D
Accounting policy for employee benefits
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the required
period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount
is presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past
experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12
months.
Short-term employee benefits
Provision is made for the consolidated group’s liability for employee benefits arising from services rendered by employees to
balance date. Employee benefits expected to be settled within one year, have been measured at the amounts expected to be paid
when the liability is settled plus related on-costs. Other employee benefits payable later than one year have been measured at the
present value of the estimated future cash outflows to be made for those benefits. Those cashflows are discounted using market
yields on national government bonds with terms to maturity that match the expected timing of cashflows.
Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred.
Other long-term employee benefits
The liability for annual leave and 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 24. DEFERRED GOVERNMENT GRANTS
Current liabilities
Deferred government grants
Government grant
Consolidated
2023
$
3,675,000
2022
$
-
Grants from the government are recognised at their fair value (where there is a reasonable assurance that the grant will be
received), and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognized
in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants
relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited
to the income statement on a straight-line basis over the expected lives of the related assets.
NOTE 25. ISSUED CAPITAL
Ordinary shares - fully paid
75,430,044
75,306,377
116,486,221
116,448,720
Consolidated
2023
Shares
2022
Shares
2023
$
2022
$
62 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 25. ISSUED CAPITAL, CONT’D
Movements in ordinary share capital
$3.590
$0.000
$0.000
$2.250
$0.000
$0.000
$0.000
19,950
17,549
(1,428,389)
116,448,720
37,501
-
-
-
Details
Balance
Issue of shares
Exercise of options
Exercise of options
Placement of shares
Share purchase plan
Placement of shares
to the Directors
Conversion of vested
performance rights
Consideration shares in
relation to the acquisition
of the Pontville Distillery
Exercise of options
Exercise of options
Transactions costs for period
Date
1 July 2021
12 July 2021
12 July 2021
1 September 2021
22 October 2021
22 November 2021
23 December 2021
6 January 2022
Shares
Issue price
$
63,069,350
20,000
8,334
8,334
9,300,000
1,000,000
1,272,000
293,332
$3.230
$2.250
$2.250
$5.000
$5.000
$5.000
$0.000
58,498,886
64,600
18,752
18,752
46,500,000
5,000,000
6,360,000
-
1 February 2022
306,360
$4.500
1,378,620
18 March 2022
25 March 2022
12,000
16,667
-
Balance
30 June 2022
75,306,377
Exercise of options
9 September 2022
Exercise of performance rights
17 October 2022
Exercise of performance rights
28 February 2023
Issue of shares to employees
14 March 2023
16,667
57,000
30,000
20,000
Balance
30 June 2023
75,430,044
116,486,221
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to
the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not
have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
Share buy-back
There is no current on-market share buy-back.
Accounting policy for issued capital
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.
LARK Distilling Co. Ltd. Annual Report 2023 • 63
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 26. RESERVES
Foreign currency reserve
Share-based payments reserve
Foreign currency reserve
Consolidated
2023
$
48,466
2,721,407
2022
$
48,466
1,928,264
2,769,873
1,976,730
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations
to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and
other parties as part of their compensation for services.
NOTE 27. FINANCIAL INSTRUMENTS
a. Financial Risk Management Policy
The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, loans to and from
subsidiaries.
The Board and Management monitor risks on a regular basis as part of formal board meeting and ad-hoc management discussion.
i. Financial Risk Exposures and Management
The main risks the Group is exposed to through its financial instruments are liquidity risks, foreign currency risk and credit risk.
Liquidity risks
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities
when they are due, under both normal and stressed conditions.
Foreign currency risk
The Group does not have any material foreign currency risk exposure.
Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial
assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial
position and notes to the financial statements.
There are no material amounts of collateral held as security at 30 June 2023 (30 June 2022: Nil).
The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments
entered into by the Group.
b. Financial Instruments
i. Derivative Financial Instruments
The Group has not participated in the use of any derivative financial instruments during the year.
64 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 27. FINANCIAL INSTRUMENTS, CONT’D
ii. Financial instrument composition and maturity analysis
The tables below reflect the weighted average effective interest rate on classes of financial assets and financial liabilities:
Cash
Trade and other receivables
Financial liabilities
Trade payables
Loan- National Australia Bank
(Floating interest rate)
Leases
Non-interest
Bearing
2023
$
7,159,778
1,994,999
Non-interest
Bearing
2022
$
16,096,404
4,110,428
Interest Rate
2023
%
Interest Rate
2022
%
Total
2023
$
7,159,778
1,994,999
Total
2023
$
Total
2022
$
16,096,404
4,110,428
Total
2022
$
-
-
-
2,676,684
4,676,914
2.38%
-
5,000,000
Implicit
interest rate
2023
%
Implicit
interest rate
2022
%
Total
2023
$
Total
2022
$
Operating leases
2.70%
2.70%
4,586,273
1,675,704
Trade and other payables are expected to be paid as follows:
Less than 6 months
Maturity analysis of total borrowings as at the reporting date are as follows:
Payable within 12 months
Payable after 12 months
30 June
2023
$
30 June
2022
$
2,676,684
4,676,914
Consolidated
2023
$
2022
$
-
-
-
-
5,000,000
5,000,000
LARK Distilling Co. Ltd. Annual Report 2023 • 65
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 27. FINANCIAL INSTRUMENTS, CONT’D
Maturity analysis of total lease liabilities as at the reporting date are as follows:
1 year or less
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
The Group maintains a $15 million secured loan facility.
Drawn
Undrawn
Consolidated
2023
$
2022
$
369,906
356,479
1,054,533
2,805,355
420,191
189,768
355,653
710,092
4,586,273
1,675,704
Consolidated
2023
$
-
15,000,000
2022
$
5,000,000
10,000,000
15,000,000
15,000,000
Interest Rate Risk and Foreign Currency Risk
The Group has not performed a sensitivity analysis relating to its exposure to interest rate risk and foreign currency risk at balance date
as these risks are not material to the Group.
Remaining contractual maturities
The amounts disclosed in the above tables are the maximum amounts allocated to the earliest period in which the guarantee could be
called upon. The Group does not expect these payments to eventuate earlier.
NOTE 28. KEY MANAGEMENT PERSONNEL DISCLOSURES
Directors
The following persons were directors of Lark Distilling Co. Ltd during the financial year:
Mr David Dearie
Non-Executive Chairman
Ms Laura McBain
Non-Executive Director (Resigned as Interim Managing Director
and appointed as Non-Executive Director on 1 May 2023)
Mr Warren Randall
Non-Executive Director
Mr Domenic Panaccio
Non-Executive Director
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group,
directly or indirectly, during the financial year:
Mr Satya Sharma
Chief Executive Officer (appointed on 1 May 2023)
Mr Iain Short
Mr Alex Aleksic
Chief Financial Officer (appointed on 12 June 2023)
Chief Financial Officer (resigned on 31 December 2022)
66 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 28. KEY MANAGEMENT PERSONNEL DISCLOSURES, CONT’D
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term benefits to employee / consultants
Share-based payments
Consolidated
2023
$
1,503,589
401,105
1,904,694
2022
$
1,039,066
352,841
1,391,907
NOTE 29. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners and Deloitte Touche
Tohmatsu (Resigned as auditor on 5 April 2023) (2022: Deloitte Touche Tohmatsu), the auditor of the Company:
Audit or review of the financial statements
RSM Australia Partners (Audit fees at 30 June 2023)
Deloitte Touche Tohmatsu (Audit and review fees at 31 December
2022 and 30 June 2022) (Resigned as auditor on 5 April 2023)
Consolidated
2023
$
2022
$
75,000
82,000
157,000
-
142,800
142,800
NOTE 30. COMMITMENTS AND CONTINGENT LIABILITIES
The Group is in planning phase for distillery expansion, but no decisions have been made in relation to these capital costs as at the
date of this report. There are no other commitments for the Group for the period ended 30 June 2023.
The Group had no contingent liabilities as at 30 June 2023 and 30 June 2022.
NOTE 31. RELATED PARTY TRANSACTIONS
Parent entity
Lark Distilling Co. Ltd is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included in the directors’ report.
Transactions with related parties
During the period ended 30 June 2023, the Group made purchases amounting to $144,558 (30 June 2022: $341,052) from an
entity associated with Warren Randall (Non-Executive Director). These transactions were for the purchase of wooden barrels from
Seppeltsfield Wines Pty Ltd (ABN: 97 127 078 282) for the Group to use in its’ production process of Lark. There was no balance
payable or receivable as at the period ended 30 June 2023 (30 June 2022: Nil).
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
LARK Distilling Co. Ltd. Annual Report 2023 • 67
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 32. PARENT ENTITY INFORMATION
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Foreign currency reserve
Share-based payments reserve
Accumulated losses
Parent
2023
$
4,504,520
106,314,857
2,269,843
3,649,434
2022
$
12,628,686
110,831,267
713,083
6,417,986
116,486,222
116,448,720
16,397
2,721,407
(16,558,603)
16,397
1,928,264
(13,980,100)
Total equity
102,665,423
104,413 ,281
Financial performance
Profit for the year
Other comprehensive income
Consolidated
2023
$
2022
$
2,578,503
4,360,323
-
-
Total comprehensive income
2,578,503
4,360,323
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2023 and 30 June 2022.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2023 and 30 June 2022.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following:
•
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
68 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 33. BUSINESS COMBINATIONS
On 2 February 2022, the Group acquired 100% of the ordinary shares of Kernke Family Shene Estate Pty Ltd, the owner of the Pontville
Distillery and Estate, for the total consideration of $39,998,469. The business is a whisky producer business and was acquired to
increase the whisky production capacity of the Group. The goodwill of $9.8 million is the fair value of consideration paid in excess of
the fair value of acquired assets and liabilities, and represents the residual value of the inputs, processes and outputs acquired as part
of the business combination.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Inventories
Raw materials
Finished goods
Land and buildings
Property, Plant and equipment
Patents and trademarks
Trade and other payables
Deferred tax asset
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Lark Distilling Co. Ltd shares issued to vendor
Deferred consideration paid on 23 February 2023
Working capital adjustment payable
Fair value
$
248,035
111,437
23,948,174
45,993
100,001
4,800,000
888,467
21,272
(176,821)
211,650
30,198,208
9,800,261
39,998,469
37,500,000
1,378,620
1,000,000
119,849
39,998,469
Cash acquired on business combination
Purchase consideration paid to vendor
Consolidated
2023
$
-
2022
$
248,035
(1,000,000)
(37,500,000)
Net cash used in business combination
(1,000,000)
(37,251,965)
As part of the acquisition outlined above, the Group agreed to pay a deferred consideration of $1,000,000, which was paid on 23
February 2023.
LARK Distilling Co. Ltd. Annual Report 2023 • 69
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 33. BUSINESS COMBINATIONS, CONT’D
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other
assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For
each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of
the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and
other pertinent conditions in existence at the acquisition-date.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in
the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is
recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net
assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer
on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts
recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained
about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12
months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value.
NOTE 34. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy:
Name
Australian Whisky Holdings
Bothwell Pty Ltd
Australian Whisky Holdings
Services Pty Ltd
Australian Whisky Holdings
Management Pty Ltd
Ownership interest
Principal place of business /
Country of incorporation
2023
%
2022
%
Level 1, 91-93 Macquarie Street 7000
100.00%
100.00%
Level 1, 91-93 Macquarie Street 7000
100.00%
100.00%
Level 1, 91-93 Macquarie Street 7000
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Aowei Liquor Industries Beijing Limited
Beijing PRC 100022
Australian Whisky Holdings (HK) Limited
Kowloon, Hong Kong
Lark Distillery Pty Ltd
40 Denholms Road,
Cambridge, TAS 7170
Kernke Family Shene Estate Pty Ltd
76 Shene Rd, Pontville TAS 7030
Shene Distillery Pty Ltd
76 Shene Rd, Pontville TAS 7030
70 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 35. EVENTS AFTER THE REPORTING PERIOD
No matter or circumstance has arisen since 30 June 2023 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.
NOTE 36. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH USED
IN OPERATING ACTIVITIES
Loss after income tax benefit / (expense) for the year
(4,908,029)
(470,398)
Consolidated
2023
$
2022
$
Adjustments for:
Depreciation and amortisation
Net gain on disposal of property, plant and equipment
Movement in deferred taxes recognised to equity
Movement in deferred taxes related to acquisition
Non-cash share-based payments
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Decrease/(increase) in deferred tax assets
Decrease in prepayments
Increase in other provisions
877,235
(3,710)
-
182,328
793,143
2,115,424
(1,326,436)
(1,469,349)
63,771
39,676
466,274
-
476,129
-
1,015,830
(1,473,324)
(9,876,356)
5,386
527,498
182,750
Decrease/Increase in trade creditors and accruals
(1,815,643)
1,430,879
Net cash used in operating activities
(5,451,590)
(7,715,332)
NOTE 37. EARNINGS PER SHARE
Consolidated
2023
$
2022
$
Loss after income tax attributable to the owners of Lark Distilling Co. Ltd
(4,908,029)
(470,398)
Weighted average number of ordinary shares used in calculating basic earnings per share
75,375,916
Number
Number
71,033,931
Weighted average number of ordinary shares used in
calculating diluted earnings per share
75,375,916
71,033,931
LARK Distilling Co. Ltd. Annual Report 2023 • 71
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 37. EARNINGS PER SHARE, CONT’D
Basic earnings per share
Diluted earnings per share
Cents
(6.51)
(6.51)
Cents
(0.66)
(0.66)
As at 30 June 2023, the Group had and 2,270,523 Performance Rights over ordinary shares, which are excluded from the calculation of
basic and diluted earnings per share. These equity instruments are considered to be anti-dilutive, as their inclusion would not decrease
earnings per share nor increase the loss per share, from continuing operations.
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Lark Distilling Co. Ltd, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
NOTE 38. SHARE-BASED PAYMENTS
Employee incentive plan
An employee incentive plan has been established by the Group and approved by shareholders at a general meeting, whereby the
Group may, at the discretion of the Nomination and Remuneration Committee, grant options over ordinary shares in the Company
and performance rights to certain key management personnel and employees of the Group. These options and performance rights
are issued for nil consideration and are granted in accordance with performance guidelines established by the Nomination and
Remuneration Committee
Options
Set out below are summaries of options granted, exercised and expired / forfeited under the plan:
2023
Grant date
Expiry date
Exercise
price
02/11/2020
31/12/2022
$2.250
2022
Grant date
Expiry date
28/11/2017
31/07/2021
02/11/2020
31/12/2022
Exercise
price
$2.250
$2.250
Balance at
the start of
the year
141,666
141,666
Balance at
the start of
the year
102,776
233,335
336,111
Granted
Exercised
-
-
(16,667)
(16,667)
Expired/
forfeited/
other
(124,999)
(124,999)
Balance at
the end of
the year
-
-
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
(33,335)
(33,335)
(102,776)
(58,334)
(161,110)
-
141,666
141,666
The weighted average remaining contractual life of options outstanding at the end of the financial year was Nil years (30 June 2022:
0.5 years).
72 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
NOTE 38. SHARE-BASED PAYMENTS, CONT’D
Performance rights
During 2020 and 2021 financial years, the Company issued performance rights to employees and key management personnel with the
following vesting conditions;
•
•
•
Target market share price $1.95 and continued service 31 December 2022
Target market share price $2.25 and continued service 31 December 2023
Target market share price $2.55 and continued service 31 December 2024
During the year ended 30 June 2023, the Company issued performance rights to employees and directors with the following vesting
conditions;
• Continued service until 30 June 2025 (there are no performance conditions, i.e Nil target market share price).
•
Target market share price $3.814 and continued service until 30 June 2025
Chief Executive Officer Performance Rights
Mr Satya Sharma was appointed as Chief Executive Officer on 1 May 2023 and issued with the following performance rights;
•
•
343,357 performance rights as part of Short-Term Incentives (Sign-on Share Rights). These performance rights will vest provided
Mr Sharma completes continuous service with the Group until 1 May 2024.
197,280 performance rights as part of Long-Term Incentives (LTI). These performance rights will vest and be exercisable upon the
satisfaction of a service condition of continuous service until 1 May 2026 and Target Market Share Prices (performance conditions),
which were agreed as part of the LTI.
The LTI entitles Mr Sharma to acquire shares in the Company valued at up to $975,000. If at any point during the Relevant Period the
Company achieves the target market share price specified in the table below, then Mr Sharma’s LTI will entitle him to shares equal to
the value specified in the adjacent column, upon satisfaction of the service condition. The notes to the table provide further detail of
how Mr Sharma’s entitlement is to be determined.
Target market share price
Value of entitlement (AUD)
$4.00
>$4.00 to $5.00
$195,000
>$195,000 to $650,000
>$5.00 to $6.00
>$650,000 to $975,000
Notes
-
Entitlement is $195,000 plus additional entitlement
determined on a pro-rata, straight line basis from
$4.00 to $5.00.
Entitlement is $650,000 plus additional entitlement
determined on a pro-rata, straight line basis from
$5.00 to $6.00.
197,280 performance rights noted in Mr Sharma’s LTI performance rights table and their fair value for accounting purposes have been
determined based on estimated grant date, probability of achieving the vesting conditions and the Company’s closing share price at
30 June 2023. Actual number of performance rights may be different at the grant date and are subject to shareholder approval.
LARK Distilling Co. Ltd. Annual Report 2023 • 73
ANNUALREPORT2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
Set out below are summaries of performance rights granted, exercised and expired / forfeited under the plan:
2023
Grant date
Expiry date
25/11/2019
25/11/2019
25/11/2019
31/12/2026
31/12/2026
31/12/2026
16/03/2020
31/12/2026
16/03/2020
31/12/2026
16/03/2020
31/12/2026
12/02/2021
31/12/2026
12/02/2021
31/12/2026
12/02/2021
31/12/2026
25/06/2021
31/12/2026
25/06/2021
31/12/2026
18/10/2021
29/11/2021
29/11/2021
17/10/2022
31/12/2026
31/12/2026
01/03/2023
01/06/2025
01/03/2023
01/06/2025
03/01/2023
01/06/2025
03/03/2023
01/06/2025
08/03/2023
01/06/2025
08/03/2023
01/06/2025
14/03/2023
01/06/2025
14/03/2023
01/06/2025
15/03/2023
01/06/2025
15/03/2023
01/06/2025
15/03/2023
01/06/2025
15/03/2023
01/06/2025
16/03/2023
01/06/2025
16/03/2023
01/06/2025
01/05/2023
01/05/2026
01/05/2023
01/05/2026
Vesting
hurdle
Balance at
the start of
the year
Granted*
Exercised/
converted*
Expired/
forfeited/
other
changes
Balance at
the end of
the year
$1.950
$2.250
$2.550
$1.950
$2.250
$2.550
$1.950
$2.250
$2.550
$2.250
$2.550
$0.000
$2.250
$2.550
$0.000
$3.814
$0.000
$3.814
$0.000
$3.814
$0.000
$3.814
$0.000
$3.814
$0.000
$3.814
$0.000
$3.814
$0.000
$4.000
70,000
300,000
550,000
60,000
53,334
46,666
50,000
168,332
171,668
98,334
176,666
60,500
45,000
45,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,895,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,147
12,587
3,252
13,006
3,357
13,426
15,734
62,937
5,770
23,076
4,196
16,783
4,196
16,783
343,357
197,280
738,887
-
-
-
(30,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
(40,000)
(100,000)
(130,000)
-
-
(57,000)
(3,500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,000
300,000
550,000
30,000
53,334
46,666
10,000
68,332
41,668
98,334
176,666
-
45,000
45,000
3,147
12,587
3,252
13,006
3,357
13,426
15,734
62,937
5,770
23,076
4,196
16,783
4,196
16,783
343,357
197,280
(87,000)
(273,500)
2,273,887
74 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
2022
Grant date
Expiry date
25/11/2019
25/11/2019
25/11/2019
25/11/2019
31/12/2026
31/12/2026
31/12/2026
31/12/2026
16/03/2020
31/12/2026
16/03/2020
31/12/2026
16/03/2020
31/12/2026
16/03/2020
31/12/2026
12/02/2021
31/12/2026
12/02/2021
31/12/2026
12/02/2021
31/12/2026
25/06/2021
31/12/2026
25/06/2021
31/12/2026
18/10/2021
17/10/2022
29/11/2021
29/11/2021
29/11/2021
29/11/2021
31/12/2026
31/12/2026
31/12/2026
31/12/2026
Vesting
hurdle
Balance at
the start of
the year
Granted*
Exercised/
converted *
Expired/
forfeited
other
changes
Balance at
the end of
the year
$1.650
$1.950
$2.250
$2.550
$1.650
$1.950
$2.250
$2.550
$1.950
$2.250
$2.550
$2.250
$2.550
$0.000
$1.650
$1.950
$2.250
$2.550
110,000
130,000
650,000
1,050,000
133,333
70,000
63,334
56,666
80,000
248,332
256,668
98,334
176,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85,750
50,000
25,000
-
-
(110,000)
-
-
-
-
(133,333)
-
-
-
-
(45,000)
(45,000)
-
-
-
(50,000)
(60,000)
(350,000)
(500,000)
-
(10,000)
(10,000)
(10,000)
(30,000)
(35,000)
(40,000)
-
-
(25,250)
-
-
(25,000)
45,000
45,000
-
-
-
70,000
300,000
550,000
-
60,000
53,334
46,666
50,000
168,332
171,668
98,334
176,666
60,500
-
-
45,000
45,000
3,123,333
160,750
(293,333)
(1,095,250)
1,895,500
*
During the current and previous financial years, the performance rights were converted to ordinary shares on vesting at Nil exercise
share price.
The weighted average share price during the financial year was $2.18 (2022: $4.24).
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3.21 years (June
2022: 4.37 years).
Set out below are the performance rights exercisable at the end of the financial year:
Grant date
25/11/2019
16/03/2020
12/02/2021
Expiry date
31/12/2026
31/12/2026
31/12/2026
2023
Number
70,000
30,000
10,000
110,000
2022
Number
-
-
-
-
LARK Distilling Co. Ltd. Annual Report 2023 • 75
ANNUALREPORT2023 Lark Distilling Co. Ltd
Notes to the financial statements
30 JUNE 2023
For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Vesting
hurdle
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
01/05/2023
01/05/2026
$2.400
$0.000
57.00%
-
3.23%
$1.32000
Accounting policy for share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering
of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by
reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the
Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that
entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period.
The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of
awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial
or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The
cumulative charge to profit or loss until settlement of the liability is calculated as follows:
•
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired
portion of the vesting period.
•
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the
liability.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional
expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based
compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any
remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is
recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as
if they were a modification.
76 • LARK Distilling Co. Ltd. Annual Report 2023
LARK DISTILLING CO. LTD
DIRECTORS’ DECLARATION
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 2023 and of its
performance for the financial year ended on that date; and
•
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
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
David Dearie
Non-Executive Chairman
28 August 2023
LARK Distilling Co. Ltd. Annual Report 2023 • 77
ANNUALREPORT2023
78 • LARK Distilling Co. Ltd. Annual Report 2023
ANNUAL
REPORT
2023
LARK Distilling Co. Ltd. Annual Report 2023 • 79
Lark Distilling Co. Ltd
Independent Auditor’s Report
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Lark Distilling Co. Ltd
Opinion
We have audited the financial report of Lark Distilling Co. Ltd. (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2023, 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:
(i) giving a true and fair view of the Group's financial position as at 30 June 2023 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
78
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
80 • LARK Distilling Co. Ltd. Annual Report 2022
Lark Distilling Co. Ltd
Independent Auditor’s Report
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Revenue Recognition
Refer to Note 5 in the financial statements
Revenue for the year ended 30 June 2023 was $19.9
million.
Our audit procedures in relation to the recognition of
revenue included:
Revenue recognition was considered a key audit
matter due to the materiality and significance of the
balance.
•
•
•
•
•
Assessing whether
revenue
recognition policies were in compliance with AASB
15 Revenue from Contracts with Customers;
the Group’s
Evaluating and testing the operating effectiveness
of the Group’s internal controls related to revenue
recognition;
Performing tests of detail on a sample basis to test
the validity and accuracy of revenue transactions,
including the inspection of sales contracts and
delivery documentation;
testing over
Performing cut-off
transactions
recorded either side of the period end, to ensure
that revenues were recorded in the appropriate
period; and
Assessing the appropriateness of the disclosures
in the financial report.
79
LARK Distilling Co. Ltd. Annual Report 2023 • 81
ANNUALREPORT2023 Lark Distilling Co. Ltd
Independent Auditor’s Report
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Valuation of inventory
Refer to Note 14 in the financial statements
The Group has inventory with a carrying value of
$61.9 million as at 30 June 2023.
Our audit procedures in relation to the valuation of
inventory included:
The existence and valuation of
is
considered a key audit matter, due to the materiality
judgments
of
involved in:
the balance, and
the significant
inventory
•
•
•
Valuing finished goods, including assumptions
about the conversion costs of direct labour,
overheads, utilities, raw materials and other
variable costs;
Assessing the net realisable value of inventories;
and
determination
The
obsolescence.
of
a
provision
for
•
•
•
•
•
•
Performing analytical procedures on the inventory
balance;
Attending year end inventory counts for a sample
of locations;
Testing inventory costing by verifying the key inputs
in the costing calculations against supporting
documentation and evaluating the reasonableness
of management's estimates;
Verifying that inventory is being held at the lower of
cost and net realisable value;
Assessing the reasonableness of the Group's
inventory methodology
the
provision for obsolescence and its application; and
for determining
Evaluating management
and
estimates applied to the provision for obsolescence
through analysis of historical sales levels by
inventory product.
assumptions
80
82 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Independent Auditor’s Report
Key Audit Matters (continued)
Impairment of goodwill and intangible assets
Refer to Note 18 in the financial statements
The Group has goodwill and intangible assets of
$21.2 million as at 30 June 2023.
Our audit procedures in relation to impairment of
intangibles and goodwill included:
Management is required to assess the intangible
assets for impairment in accordance with AASB 136
Impairment of Assets, with a value in use cashflow
model needing to be prepared for each identified
cash-generating-unit (CGU). There is an inherent risk
that the future cash flows of each CGU do not support
the carrying value of intangible assets.
•
•
Assessing management’s determination of the
CGU applied to the goodwill based on the nature of
the Group’s business and the manner in which
results are monitored and reported;
Assessing the overall valuation methodology used
to determine the value in use;
• Checking
the mathematical accuracy of
the
discounted cash flow models and reconcile input
data to supporting evidence;
• Considering and challenging the reasonableness
of key assumptions, including the cash flow
projections, budgets,
rated,
discount rates and sensitivities used; and
revenue growth
• Reviewing the accuracy of disclosures of critical
financial
valuation
estimates and assumptions
statements
in
methodologies.
relation
the
the
to
in
Managements’ assessment of the ‘value in use’ of
the CGU involves judgements about the future
underlying cash flows of the CGU and the discount
rates applied to them.
For the year ended 30 June 2023 management have
performed
the
Intangibles and Goodwill by:
impairment assessments over
•
Identifying the CGUs to which the goodwill
belongs;
• Calculating the value in use for the CGU using a
discounted cash flow model. These models used
cash flows (revenues, expenses and capital
expenditure) for the CGU for 6 years;
•
•
The model includes a terminal growth rate
applied to the 6th year;
These cash flows were then discounted to net
present value using CGU specific weighted
average cost of capital (“WACC”); and
• Comparing the resulting value in use of the CGU
to the respective book values.
81
LARK Distilling Co. Ltd. Annual Report 2023 • 83
ANNUALREPORT2023 Lark Distilling Co. Ltd
Independent Auditor’s Report
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 2023, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This
description forms part of our auditor's report.
82
84 • LARK Distilling Co. Ltd. Annual Report 2023
Lark Distilling Co. Ltd
Independent Auditor’s Report
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2023.
In our opinion, the Remuneration Report of Lark Distilling Co. Ltd., for the year ended 30 June 2023, 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.
RSM AUSTRALIA PARTNERS
B Y CHAN
Partner
Dated: 28 August 2023
Melbourne, Victoria
83
LARK Distilling Co. Ltd. Annual Report 2023 • 85
ANNUALREPORT2023 Lark Distilling Co. Ltd
Shareholder information
30 JUNE 2023
The shareholder information set out below was applicable as at 31 July 2023
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Number of
holders of
ordinary
shares
2,254
1,454
383
356
71
Number of
ordinary
shares held
Percentage
of ordinary
shares held
965,954
3,526,242
2,835,593
9,956,054
58,146,201
1.281
4.675
3.759
13.199
77.086
4,518
75,430,044
100.000
Holding less than a marketable parcel
1,113
212,994
0.282
EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
QUALITY LIFE PTY LTD
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