Michelmersh
Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 2 2 Corporate Directory Directors Reg Weine (Non-executive Chairman) Chantale Millard (Chief Executive Officer/Executive Director) (Appointed Managing Director on 2 August 2021) Maggie Beer AM (Non-executive Director) Tom Kiing (Non-executive Director) Hugh Robertson (Non-executive Director) “Our group now has four premium Australian brands and established a scalable digital e-commerce platform to spearhead our future growth.” - REG WEI NE, CH AIRMAN Company Secretary Sophie Karzis Registered office 2 Keith Street, Tanunda, SA 5352 Tel: +61 8 7004 1307 Fax: +61 8 9077 9233 Principal place of business 2 Keith Street, Tanunda, SA 5352 Tel: +61 8 7004 1307 Fax: +61 8 9077 9233 Share register Boardroom Pty Limited Level 12, 225 George Street, Sydney NSW 2000 GPO Box 3993, Sydney NSW 2001 Tel: 1300 737 760 Fax: 1300 653 459 Auditor PricewaterhouseCoopers Level 19/2 Riverside Quay Southbank, VIC 3006 Stock exchange listing Maggie Beer Holdings Ltd shares are listed on the Australian Securities Exchange (ASX code: MBH) Website www.maggiebeerholdings.com.au Corporate Governance The company’s Corporate Governance charters are located on the company’s website at the following link: www.maggiebeerholdings.com.au/investors/corporate-governance/ M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 3 3 Our Brands S H ARE OUR PA SSION OF MAKING AND CURATING Q UALITY, PREMIUM AUSTRALIAN F OO D & BEVERAGE PRODUCTS, WITH THE FINES T INGREDIENTS. Maggie Beer Holdings proudly represents four premium Australian brands, all with a passion for providing exceptional food and beverage products. Our brands use Australian ingredients wherever possible, generating support for local farmers, growers, their families and communities. Now with a substantial e-commerce presence, we connect with an ever-expanding consumer base, giving us a clear path to sustained growth. Maggie Beer Products, Hampers and Gifts Australia, Paris Creek Farms and Saint David Dairy are all committed to making and providing innovative products, meeting consumer demand for high quality, nutritious, convenient and indulgent food, beverage and gifting products. All four brands resonate strongly with Australian consumers who are increasingly looking for premium products that strive to support local. Maggie Beer Products Maggie Beer Products is an iconic brand that bases its reputation on Maggie’s own philosophy of using superior in season ingredients, to produce premium cooking, entertaining, gifting and indulgent products, for the domestic and international markets. Flavour always comes first! Paris Creek Farms Paris Creek Farms is a leading Australian bio-dynamic organic dairy processing and manufacturing company. For more than 30 years, it has created a wide range of natural dairy products in the most sustainable way, and its award-winning dairy products are sold and loved in both domestic and international markets. Saint David Dairy Saint David Dairy is inner-Melbourne’s only premium micro-dairy. Loved by baristas, restaurateurs and consumers alike, its ever-growing appeal comes from its community roots, local dairy and its superior tasting dairy products. Based in Fitzroy, St David Dairy delivers the flavour of artisanal crafted produce into the hands of the community – real milk, real local. Hampers and Gifts Australia Hampers and Gifts Australia is home to two leading e-commerce brands: The Hamper Emporium and Gifts Australia. These two premier e-commerce platforms specialise in providing premium, luxury hampers as well as personalised, beautiful and thoughtful gifts. Offering a unique selection of premium quality food, beverage and gifting items, these businesses are two of Australia’s most sought after and trusted online destinations for beautiful gifts for any occasion. M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 44 “The group performed strongly returning a positive net profit after tax.” - REG WEINE, CH A IRMA N M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202155 02 07 08 11 16 18 30 35 36 37 38 39 70 71 77 Contents Corporate Directory Letter from the Chairman Letter from the CEO and Managing Director Operations Report Risk Statement 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 2021 Additional Securities Exchange Information Our mission is to match the evolving needs of consumers, by providing innovative food, beverage and gifting products of the highest quality, that match people’s ever-changing shopping habits and lifestyles. Maggie Beer Holdings Ltd ABN 69 092 817 171 Annual Report - 30 June 2021 M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 66 “ “The group had net sales growth of 18.8% year on year underpinned by 23% net sales growth in Maggie Beer Products.” - REG WEINE, C HA IRMA N M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 7 7 Letter from the Chairman R EG W E INE CH A IRMA N Dear Shareholders The 2021 financial year was a pivotal year for Maggie Beer Holdings Ltd (MBH). The group achieved a positive net profit, reflecting the underlying strength of our premium brands, diversified business model, tight cost control and focus on continuous improvement and innovation. Reflecting the strength of our brands, these results were achieved through a period of unprecedented challenges brought on by the evolving global COVID-19 pandemic. During this ongoing crisis, employee safety and wellbeing remained our primary concern and I’m pleased to say our operations in all States continued to operate well under the COVID Safe Plans and restrictions the group put in place. Group net sales increased 18.8% year on year underpinned by 23% growth in Maggie Beer Products (MBP). We continue to benefit from the consumer shift to on-line purchasing through growth in our Maggie Beer Food Club and our direct-to-consumer channel, with MBP’s e-commerce sales increasing 103% year on year. Group revenue was up 18.1% to $53.8 million in FY21, and trading EBITDA was $3.1 million, a 177% increase on FY20. In March 2021, we announced the acquisition of the category leading premium hamper e-commerce business – Hampers and Gifts Australia (HGA). We warmly welcome all the talented HGA employees to the Maggie Beer Holdings family and we are delighted to have the HGA vendors become shareholders of MBH. Having completed the acquisition in May 2021, we have already integrated the business and commenced generating synergies. HGA is a high growth, high margin e-commerce business, achieving unaudited net sales growth of 98% last year to $36 million and delivering an unaudited full year trading EBITDA of $9 million. Consistent with our growth strategy, the successful HGA acquisition has created a large scale, premium branded direct-to-consumer business, that leverages and strengthens our core MBP business. This highly complementary acquisition has significantly increased our digital marketing and direct-to- consumer logistics capability, as well as enhancing our new product development process. Most importantly it has accelerated our customer penetration and reach, with combined HGA and MBP e-commerce sales in FY22 forecast to represent more than 40% of group net sales. Once again, our Melbourne based St David Dairy business was more impacted than our other businesses by the COVID-19 disruption to the foodservice and hospitality sectors. Despite this, customer growth achieved in the speciality retail channel, appointment of new distributors, and increased sales of yoghurt and plant-based milk, saw the business finish the year with 10% revenue growth, which was a very pleasing result. Our Paris Creek Farms business finished FY21 with net sales increase of 3.5 % on last year, reflecting the re- alignment of our private label business. We continue to reposition the portfolio and better balance the basket of dairy products that we manufacture at Paris Creek, and we have had some recent success with additional ranging of our new Greek yogurt range. We are part way through the strategic review of the business that we announced in May, in an effort to unlock greater shareholder value. Maggie Beer Holdings has a strong balance sheet, is profitable and is cashflow positive. With the recent addition of a category leading e-commerce business and best in class e-commerce capability, power brands, and a strong pipeline of innovative new products, Maggie Beer Holdings remains uniquely positioned for sustained growth in revenue and earnings. On behalf of the Board, I would like to thank all stakeholders including employees, customers, suppliers, and our shareholders for their continued support. I very much look forward to welcoming you at the Annual General Meeting in October. Reg Weine Chairman M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 88 CEO & Managing Director’s Report C HANTALE M ILLAR D CEO & MA NA GI NG DIREC TOR Dear Shareholders, It has been a privilege to lead the Maggie Beer Holdings group (MBH) through FY21, a year that has seen us well and truly shift from “fix it” mode to “growth” mode and successfully create the foundations for sustained future growth. The past 12 months wasn’t without its challenges, with the global COVID-19 pandemic continuing to cause disruption and lockdowns impacting all four businesses to varying degrees. However, all our businesses continued to show resilience, with good diversification and management plans in place, and most importantly all our people were kept safe and well. FY21 delivered a strong financial performance across all key metrics The group performed strongly over the past 12 months, achieving: n net sales of $52.9 million, up 18.8% on FY20 (including Hampers and Gifts Australia from 21 May 2021) n trading EBITDA of $3.1 million, up 177% on FY20 n a positive net profit after tax of $1.9 million, compared to a net loss after tax of $14.8 million in FY20 (included $12.1 million impairment for Paris Creek Farms) In addition, MBH has a strong balance sheet, with $13.5 million in cash at 30 June 2021 and $3 million in undrawn debt facilities, so it is well positioned to fund the growth ahead. The Group recognised carried forward tax losses in FY21 of $4.3m and expects to be able to gain further cash benefit from utilising its remaining tax losses in future years. In terms of growth, FY21 was abundant with opportunity, with Maggie Beer Products (MBP) growing its retail and e-commerce businesses, the launch of new products across the group, and the successful acquisition of Hampers and Gifts Australia. Acquisition of Hampers and Gifts Australia fast tracks direct to consumer and e-commerce growth With improved investor confidence, the group completed the purchase of the highly complementary premium e-commerce business, Hampers and Gifts Australia (HGA) on 21 May 2021. This exciting addition fast tracks MBH’s key strategic goals of growing its direct to consumer and e-commerce business and diversifying revenue beyond the retail sector. HGA is an impressive addition, with high gross margins, strong cash generation and excellent EBITDA contribution. The HGA business had 98% net sales growth in FY21 compared to FY20, and importantly Q4 FY21 grew 26% on Q4 FY20, even with Q4 FY20 including the height of the COVID-19 pandemic uplift. HGA’s unaudited results for FY21 were net sales of $36 million and trading EBITDA of $9.4 million. Pleasingly the integration of HGA into the group is now complete, with the MBP e-commerce business relocated to Sydney and HGA taking over the management of MBP’s digital marketing. HGA has successfully implemented a new ERP system to give greater insight into operations and allow group synergies. HGA will include over 10 of MBP’s products in its hamper range over Christmas and HGA have also assisted in creating 16 new hampers for MBP, including exclusive new products developed together by the two businesses. The cultural alignment of HGA with the group is excellent and has been the key to the speed of the successful integration. HGA’s inhouse digital marketing expertise, e-commerce, logistics and customer value proposition, combined with MBP’s operational expertise and premium food range, provide the platform for the ongoing growth of our e-commerce businesses. Maggie Beer Products was the driver of the group’s growth in FY21 MBP’s net sales grew by 23% to $25.6 million, with the key categories of cheese, cooking stocks, fruit paste and pate all experiencing good growth. MBP’s e-commerce business delivered exceptional growth of 103%. The love for the Maggie Beer brand continues to grow and there are now over 6.7 million views of our “Cooking with Maggie” series, an increase in the Maggie Beer Food Club membership to 65k and over 2 million visitors to its website in FY21. The new, combined digital marketing power of MBP and HGA will allow us to increase conversions and sales from our highly engaged customer base. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20219 9 Large consumer base supports e-commerce growth The future is bright With people’s shopping habits appearing to be permanently changed from COVID-19, we are seeing continuing growth from both the MBP and the HGA e-commerce businesses, and with a combined audience of over 690k from our data bases and social media platforms, we now have a large e-commerce business with a large consumer base to continue our growth trajectory. Consumers are choosing premium Australian brands Our core retail business has also experienced excellent growth, with people continuing to choose to buy Australian premium dairy, cooking and entertaining products as part of their weekly shop. This is highlighted by the upcoming August 2021 launch of a range of 100% Natural Finishing Sauces and Bone Broths nationally for MBP, which are a great addition to its existing convenient at home, premium cooking range. Paris Creek Farms progressing well We continue to review the future strategy for Paris Creek Farms, with an ongoing focus on returning the business to profitability and increasing value, with a reset cost base and launch of its new Greek Yogurt range in late Q4 FY21. In FY21 net sales (excluding intercompany sales) grew by 3.5% year on year and the business reduced its trading EBITDA loss substantially to $0.27 million. In Q4FY21, Paris Creek Farms conducted a review of its private label business and elected to no longer do an unprofitable white milk contract, which did impact overhead factory recoveries, and our Q4 FY21 result. However, as the business focuses and grows its branded business, it will be better positioned going forward. We continue to have a strong milk pool, with great relationships with our loyal Bio-dynamic Organic dairy farmers, who are positioned to grow with the business. St David Dairy continues to grow St David Dairy’s net sales increased by 10% year on year, despite continued lockdowns in Victoria due to COVID- 19. The business continued to pivot further into retail, with approximately 25% of its revenue now from the retail sector. The business has also signed on two new distributors to service the Mornington Peninsula/Gippsland and Ballarat/ Bellarine Peninsula regions which are growing well. Consumer loyalty to its brand, the launch of a new soft cheese range and the business’ ability to pivot into new markets has seen it continue to remain profitable and cashflow positive, as well as maintain sales growth and a solid EBITDA in FY21. MBH’s house of premium brands resonate strongly with Australian consumers who are more discerning than ever and are looking to buy locally sourced high-quality products. Following the purchase of HGA, the group now has a strong e-commerce business that will accelerate growth, while leveraging its manufacturing operations. FY22 will see MBH continue to grow its retail grocery businesses, with new product launches and investments in marketing and key people, whilst also accelerating the growth of its e-commerce business with the addition of HGA to the group. The opportunities are many, with the group transformed and with a very clear path for sustained growth. We are excited about the future of the group, as we push towards group revenue of $100 million over the next 12 months and look forward to rewarding our shareholders whilst providing continued innovation to our customers and support to our local suppliers and the communities in which we operate. Thank you to our shareholders for their continued belief and support in the group and a huge thank you to all of the MBH teams, for their hard work and dedication to achieve this great result. Chantale Millard CEO and Managing Director “ “We are looking forward to FY22, with the exciting growth prospects of the group’s combined e-commerce and retail businesses.” - CH ANTALE MI LLARD, CEO & MANAGING DIRECTOR M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 10 10 “ “The group continues to capitalise on opportunities for growth and creating long term value for shareholders.” - CHANTALE MILLA RD, CEO & MANAGING DIREC TO R M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 11 11 Operations Report Financial Performance In FY21, the group continued its strong performance following the completion of MBH’s restructure in FY20. The COVID-19 pandemic continues to affect all MBH’s businesses, however they have all shown resilience and adaptability with strong performance despite various State lockdown restrictions being in place. The group completed its purchase of Hampers and Gifts Australia (HGA) on 21 May 2021. HGA is a leading e-commerce gourmet hamper and gift business that aligns with the group’s premium food and beverage portfolio and strategy of growing its direct to consumer business. The group achieved 18.1% growth in FY21 revenue to $53.8 million (FY20: $45.6 million), with continued growth from all businesses and the inclusion of HGA from the 21 May 2021. The group achieved a significant turnaround in net profit after tax to $1.9 million (FY20: loss of $14.8 million) reflecting: n Maggie Beer Products: Continued strong net sales and profit growth n Paris Creek Farms: Operational turnaround, sales growth and change in product mix underpinning a strong improvement in its trading EBITDA n St David Dairy: Resilient sales and customer growth despite the ongoing COVID-19 restrictions and lockdowns faced in Melbourne throughout the year n Hampers and Gifts Australia: Acquired on 21 May 2021, with strong cash generation, gross margin and EBITDA contribution n Head Office: Reduced corporate costs following completion of restructure in FY20. Maggie Beer Products Maggie Beer Products continued to deliver strong results with its trading EBITDA up 22.6% to $3.9 million (FY20: $3.2 million). Net sales were up 23.4% to $25.6 million (FY20: $20.8 million) driven by the launch of new products and a continued focus on growing its e-commerce business. The MBP cheese range was the highest selling category with 50% growth from last year. The key core portfolio of products of cooking stocks, fruit paste and pate also continued to achieve solid growth on the prior year. The business launched its new e-commerce platform in early November 2020 which has given the consumer an enhanced shopping experience, contributing to online sales increasing 103% in FY21. Expenses continued to remain under control with an experienced management team in place, with total expenses as a percentage of net sales reducing by a further 2.3 points to 30.2% in FY21 (FY20: 32.5%). Whilst focusing on the businesses cost base, management has also been concentrating on keeping up with consumer demand by developing new products with a range of Finishing Sauces and Bone Broths launching nationally in September 2021. Paris Creek Farms Paris Creek Farms’ performance in FY21 reflected the anticipated turnaround in sales and benefits from operational changes implemented in late FY19 and early FY20. The business’ reduced cost base and recovery in sales, underpinned a 71% improvement in trading EBITDA. Net sales (excluding intersegment sales) for FY21 grew 3.5% to $16.1 million (FY20: $15.5 million). Sales growth was impacted by Paris Creek Farms’ private label business review and in Q4 FY21 electing not to pursue unprofitable milk business. This decreased net sales in comparison to the prior year and has impacted factory overheads in the short term but will ultimately see the business in a better position over the medium term. FY21 gross profit was up 8.9% to $7.6 million (FY20: $6.9 million), with gross margin percentage improving by 3.8 points to 47.0%. This improvement is the result of the business continuing to refine its cost base and selling a more profitable mix of products. With the business continually reviewing its cost base, it achieved further savings in FY21 with total expenses as a percentage of sales, reducing by 1.5 points to 49.0% in FY21 (FY20 50.5%). Overall, Paris Creek Farms FY21 trading EBITDA was $0.6 million higher than FY20, narrowing the loss to $0.3 million. Further refinements to its cost base and improving sales and products mix, are expected to underpin further growth and return to a sustained positive trading EBITDA. M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 1212 Operations Report, continued. St David Dairy Corporate St David Dairy has continued to be tremendously resilient in the face of the continued COVID-19 related restrictions and lockdowns throughout the year in Melbourne. The business continued to diversify its mixture of customers with revenue from the retail sector now comprising 25% of sales. Despite the restrictions and lockdowns imposed throughout the year, St David Dairy continued to deliver revenue growth and increase its customer base. Net sales were up 9.9% to $9.0 million (FY20: $8.2 million), with the number of ordering customers increasing by 17% in FY21. Milk sales continued to perform strongly and were the largest product category at 67% of total net sales (FY20: 67%). FY21 milk sales were up 4% compared to FY20, and plant-based milk sales continued to gain momentum, now making up 7% of total net sales (FY20: 4%). The 32% increase in net sales to retailers in FY21 was driven by a 54% increase in yoghurt sales (compared to FY20). The recent lockdown in Sydney has impacted demand from our Sydney based distributor, but we expect this to return to growth once restrictions ease. Costs are now under control with the new truck fleet continuing to deliver savings, with transport costs 47% lower than FY20. Labour costs stabilised in FY21 and finished 0.6 points less than FY20 as a percentage of sales. With the launch of a new soft cheese range and the business’ ability to adapt to the everchanging COVID-19 environment, St David Dairy continued to remain profitable and cashflow positive in FY21. Hampers and Gifts Australia The recent acquisition of HGA will be highly complementary to the group with high gross margins, high EBITDA margins, and strong cash generation forecasted. HGA’s (unaudited) FY21 net sales for FY21 grew by 98% over FY20 with Q4 FY21 and importantly it had 26% net sales growth in Q4 FY21 compared to Q4 FY20, with FY20 including the substantial COVID-19 uplift. HGA’s digital marketing & e-commerce expertise will be an invaluable addition to the group, accelerating its e-commerce presence and growth opportunities. HGA will provide a full year contribution to the group’s financial results in FY22, given the acquisition was completed on 21 May 2021. Shared services and corporate office costs of $2.0 million (excluding one-off items) were $0.5 million lower than FY20, with employee costs the most significant component. FY21 included net one off costs of $1.9 million (FY20: $0.3 million) related to non-cash share options issued, HGA acquisition costs, offset by a claim settlement and COVID-19 government grants. The restructure of the Head Office is now complete, having been consolidated into our South Australian operations. Balance Sheet and Cashflows The group is supported by a strong balance sheet with net assets at 30 June 2021 of $102.8 million (30 June 2020: $50.6 million), including a cash balance of $13.5 million (30 June 2020: $7.2 million) and an undrawn invoice finance facility of $3.0 million. Due to the positive performance of the group and strong cash reserves, on 20 August 2020, the company repaid a $400,000 loan in full early, together with accrued interest, to the Beer Family Holdings Pty Ltd as trustee for the Beer Family Trust and in late June 2021, another loan from the Beer Family Trust was repaid in full 5 years earlier than the contractual term saving future interest costs. The total undiscounted loan value repaid in FY21 was $0.9 million (FY20 balance: $1.0 million). The increase in group net assets is mainly due to the acquisition of Hampers and Gifts Australia. The group achieved a strong positive operating cashflow position for FY21 of $1.5 million, a $1.7 million turnaround on FY20’s cash outflow of $(0.2) million. This demonstrates the strong turnaround of the group in FY21 and positions us for increased growth in FY22. This positive operating cashflow result was after the inclusion of acquisition costs for HGA and working capital payments for HGA as it stocks up for the busy Christmas season. Inventory at 30 June 2021 was $8.5 million (30 June 2020: $3.5 million) or 16.1% of annualised sales (FY20: 7.9%), with HGA holding $4.3 million of stock, Maggie Beer Products holding $3.3 million of stock (30 June 2020: $2.5 million), Paris Creek Farms holding $0.7 million of stock (30 June 2020: $0.8 million) and St David Dairy holding $0.2 million of stock (30 June 2020 $0.2 million). Inventory as a percentage of annualised sales will normalise in FY22 with a full 12 months of sales for HGA. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20211313 Overall working capital for the company is at circa 18% of sales, an increase of 8 points compared to 30 June 2020, due to the increase in inventory on acquisition of HGA. Once again this will stabilise over FY22 as the group has a full 12 months of net sales from HGA. The management team’s disciplined approach to working capital and the group’s cash management will continue. Positive outlook for continued growth The group continues to capitalise on opportunities for growth and deliver long term value for its shareholders. Maggie Beer Holdings continues to align with consumer demands for locally sourced high-quality products. The group will continue to grow its retail businesses, whilst accelerating growth of its e-commerce business by developing further innovative products and growing its premium food and beverage portfolio. “ “Successful acquisition of Hampers and Gifts Australia created a large scale, premium branded direct- to-consumer business.” - REG W EIN E, C HA IRMA N M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 14 14 “ We believe in sustainable farming & creating products as naturally as they can be.” M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202115 15 “ “With a strong balance sheet and cash position, the group is well funded for future growth.” - CH ANTALE MILLARD, CEO & MANAGING DIRECTOR M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20211616 Risk Statement KEY RISKS AND MITIGANT S The company is committed to the effective management of risk to reduce uncertainty in the group’s business outcomes and to protect and enhance shareholder value. There are various risks that could have a material impact on the achievement of the group’s strategic objectives and future prospects. Key risks and mitigation activities associated with the company’s objectives are set out below: Risk Dairy Prices Milk supply Profitable Growth Mitigation Action n Delivery of the company’s strategic initiatives focused on shifting the products mix to value added products to reduce the exposure to price movements. n Fixed prices within farmer supplier contracts. n Contracts with all farmer suppliers to capture available milk supply. n Provide farmer suppliers incentives to grow their milk pool. n When appropriate, provide incentives to attract new farmer suppliers to convert from conventional farming to biodynamic organic farming. n Establishing prices to reflect the premium nature of the product range. n Targeted sales channels to maximise distribution. n Focused allocation of milk supply to maximise the profitability of the product portfolio. n Optimisation of the existing product portfolio complemented with new product development. n Target investment in delivering growth strategies into new markets. n Develop innovative new products for current and new market channels, with nimble go to market plans. n Develop new sales channels for growth. n Capitalising on the purchase of Hampers and Gifts Australia to grow our group e-commerce presence and sales. COVID-19 n All production facilities of the group have enacted a COVID-19 response plan, which includes following Government recommendations and imposed restrictions, physical distancing measures, increased sanitisation and cleaning procedures, a higher level of personal protective clothing, temperature checks and contactless delivery. n Full business segregation measures have been put in place within all four manufacturing sites, when required, to ensure isolated shutdowns and continuing operations should a staff member become infected with COVID-19. n Alternative production sites were identified wherever possible, in case a site was shut down due to COVID-19. n Where possible, staff have been directed to work from home. n Employee safety and wellbeing is paramount with strict COVID-19 testing regimes and support in place for employees who feel unwell. n We encourage all employees to get vaccinated once they are able to and support employees with time off and sick leave if required. People safety n Focus on safety through active identification and management of safety hazards and operational risks. n Continued capital investment to mitigate safety hazards. n Embedding a culture of safety into our workplaces and teams. Product quality and safety Environmentally sustainable business practices n Continue to deliver food quality and safety disciplines with absolute commitment to meeting or exceeding all food safety requirements. n Continued capital investment to support the production of quality products. n Mechanisms in place to identify, manage and monitor compliance with key environmental requirements. n Focus on reducing environmental footprint through effective management of emissions. n Continued investments to increase operational effectiveness and efficiency of productive assets. Change in regulations n The group employs suitable people to monitor and manage compliance. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202117 17 “ “The future is bright with a clear path for sustained growth.” - CHANTALE MI LL A RD, CEO & MANAGIN G DI RECT OR M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 1818 Directors’ Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of Maggie Beer Holdings 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 2021. Directors The following persons were directors of Maggie Beer Holdings Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Reg Weine (Non-executive Chairman) Chantale Millard (Executive Director/Chief Executive Officer) (Appointed Director on 2 August 2021) Maggie Beer AM (Non-executive Director) Tom Kiing (Non-executive Director) Hugh Robertson (Non-executive Director) Principal activities During FY21, the principal continuing activity of the consolidated entity was the sale of branded premium food and beverage in Australia and overseas markets. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The profit for the consolidated entity after providing for income tax amounted to $1.9 million (30 June 2020: loss of $14.8 million). Financial Position The net assets of the consolidated entity increased by $52.2 million to $102.8 million (30 June 2020: $50.6 million). This increase was mainly due to the acquisition of Hampers and Gifts Australia (HGA). Operating results for the year The consolidated entity reported a net profit after tax of $1.9 million for the financial year (30 June 2020: loss of $14.8 million). The turnaround of the business reflected continued strong growth from all businesses. The net profit after tax of $1.9 million, included recognition of $4.3 million of deferred taxes on acquisition of brands and customer lists of Hampers and Gifts Australia (HGA). Significant changes in the state of affairs On 16 July 2020, the company held a General Meeting of shareholders where the following resolutions were approved by the shareholders: n Change of name to Maggie Beer Holdings Ltd In accordance with the Board’s strategy to refresh and enhance the group’s brand, the name of the parent company was changed from Longtable Group Limited to Maggie Beer Holdings Ltd. The Board is of the opinion that changing the name of the company to Maggie Beer Holdings Ltd better reflected the company’s core focus, whilst the Maggie Beer Products brand provides a premium halo for the company’s diverse product portfolio. Maggie Beer Holdings Ltd will be instantly recognised by shareholders, employees, customers and consumers of the group’s products. The Board believes that the new name has and will continue to facilitate an improved understanding of the company’s businesses and its potential for growth n Non-executive directors’ fees taken in shares The Director Fees Plan was established to allow the company’s directors to elect, from time to time, to be paid their remuneration through the issue of shares in the company, rather than as a cash payment. The Board believes the Director Fees Plan forms an important part of the remuneration for the company’s non-executive directors that elect to participate in the Director Fees Plan, aligning their interests with those of shareholders by linking their remuneration to the long-term success of the company and its financial performance. n Chairman’s options 4,500,000 Options were issued to the Chairman, Mr Reginald Weine, under the company’s Employee Share Option Plan. On 20 August 2020, the company repaid a $400,000 loan (Loan Amount) in full early, together with accrued interest, to the Beer Family Holdings Pty Ltd as trustee for the Beer Family Trust. On 30 September 2020, the company announced the resignation of Clinton Orr from his position of General Counsel and Company Secretary and appointed Sophie Karzis as the Company Secretary. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20211919 On 5 November 2020, the company issued 282,840 fully paid ordinary shares to settle director fees owing, totalling $90,000, and 9,000,000 options under the company’s Employee Share Option Plan exercisable in 3 equal tranches upon satisfaction of time and performance-based conditions as at 30 June 2021, 30 June 2022 and 30 June 2023 respectively. On 30 March 2021 the company announced the acquisition of The Hamper Emporium and Gifts Australia Pty Ltd (“HGA”) for $40 million plus earnout comprising a mix of cash and shares and a capital raising of $30 million consisting of a Placement and Accelerated Non-Renounceable Entitlement Offer to fund the acquisition and provide working capital to support the growth strategy of the group. On 1 April 2021 the company advised the successful completion of placement and institutional component of its fully underwritten pro-rata accelerated non-renounceable entitlement offer of 1 new fully paid ordinary share for every 3.8 existing fully paid ordinary shares at $0.35 per share (Entitlement Offer) announced on the ASX on 30 March 2021 to raise up to approximately $20.4 million. Applications were received under the Entitlement Offer for a total of 58,245,174 new fully paid ordinary shares (New Shares) meaning that a total of $20,385,810.90 was raised under the Entitlement Offer. The New Shares issued comprised of 31,142,858 shares under Placement and 27,102,316 under the institutional component of the Entitlement Offer. On 22 April 2021 the company advised the successful completion of retail entitlement offer of 1 new fully paid ordinary share for every 3.8 existing fully paid ordinary shares at $0.35 per share (Entitlement Offer) announced on the ASX on 30 March 2021 to raise up to approximately $9.6 million. Together with the Placement and the institutional component of the Entitlement Offer, the total amount raised under the Offer is approximately $30 million. Applications were received under the retail Entitlement Offer for a total of 27,540,318 new fully paid ordinary shares (New Shares) meaning that a total of $9,639,111.30 was raised under the retail Entitlement Offer. The New Shares issued comprised of 27,540,318 shares applied for under shareholder entitlements. On 20 May 2021, the company held an extraordinary general meeting of shareholders to approve the issue of upfront consideration shares and earn out shares to vendors as part of The Hampers Emporium and Gifts Australia acquisition. The shareholders also approved participation of Reg Weine in the placement. On 21 May 2021 the company completed its acquisition of Hampers and Gifts Australia Pty Ltd having paid $20 million in cash and 57,142,858 in shares issued at an issue price of $0.35, totalling $20 million to the vendor. The shares have been escrowed for 2 years from the date of issue. At the end of June, the loan from the Beer Family Trust was repaid early with accrued interest 5 years earlier than the contractual term saving on future interest costs. The total undiscounted loan value repaid in FY21 was $0.9 million (FY20 balance: $1.0 million). There were no other significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year On 2 August 2021, Chantale Millard was appointed as a director of the Board. No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. Likely developments and expected results of operations The future developments of the consolidated entity includes leveraging the strength of each brand, growing the distribution points for each business, launching new products, creating further synergies across the group and driving brand awareness through targeted marketing campaigns. Information on these developments is included in the review of operations and activities. Environmental regulation The company takes a proactive approach in relation to the management of environmental matters. Paris Creek Farms is licenced under the Environment Protection Act 1993 to undertake milk processing works. In accordance with customary wastewater management practices for a dairy facility, wastewater generated by the plant is tanked offsite and fully utilised by a business local to Paris Creek Farms, which includes the wastewater in its organic compost matter. The EPA has approved Paris Creek Farms’ action plans in regards to wastewater generated at the site. All other significant environmental risks have been reviewed and the group has no other legal obligation to take corrective action in respect of any environmental matter. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20212020 Directors’ Report, continued. CHANTALE MILLARD CEO & Managing Director (Appointed Director on 02 August 2021) Experience and expertise: Chantale has 15 years experience in executive roles holding the position of Chief Operating Officer, Finance Director and Chief Financial Officer in private companies and private equity owned businesses in Australia and overseas. Her experience includes FMCG, manufacturing, hospitality, publishing and financial services. Chantale is currently on the Board of KeyInvest Limited, was previously on the Board of not for profit YWCA Adelaide and on the board of a large privatively owned family group. Chantale has a Bachelor of Commerce, is a qualified FCPA and a member of the Australian Institute of Company Directors (GAICD). Other current directorships: None Former directorships (last 3 years): None Interests in shares: 106,853 Interests in options: 9,000,000 INFORMATION ON DIR E C TO R S REG WEINE Non-executive Chairman Experience and expertise: Reg Weine is a dynamic and trusted executive with over 25 years experience in agri-food and FMCG businesses, including the past 10 years as Managing Director/ CEO. Reg has worked with large companies and leading brands including SPC Ardmona (Coca-Cola Amatil), Bulla Dairy Foods, and Blackmores. His FMCG experience includes international expansion and new market entry and Reg has a deep understanding of global food & beverage markets including China. Reg is on the Board of the Apple & Pear Association Ltd (APAL) as well as the Starlight Children’s Foundation. He was previously a Board Member of the Australia Food & Grocery Council (AFGC) and past Chair of the AFGC’s Sustainability Committee. Reg has a Bachelor of Business from Monash University, is a Graduate of the Australian Institute of Company Directors (GAICD) and is a Certified Practising Marketer and Fellow with the Australian Marketing Institute. Other current directorships: None Former directorships (last 3 years): None Interests in shares: 500,000 fully paid up ordinary shares Interests in options: 4,500,000 options over ordinary shares MAGGIE BEER AM Non-executive Director Experience and expertise: Maggie Beer’s career in the food industry spans over 40 years, beginning as a farmer at the Pheasant Farm in 1979, whereby the fresh, seasonal ingredients produced led to a farm shop in the Barossa, and soon after a nationally acclaimed restaurant, followed by a commercial food production business, Maggie Beer Products. Maggie was Telstra South Australia Business Woman of the Year in 1997, Senior Australian of the Year 2010 and once again in 2011, appointed as a Member of the Order of Australia in 2012 and awarded an honorary doctorate of Macquarie University in 2013, and honorary doctorate of the University of South Australia in 2016 in recognition of her achievements in tourism, hospitality and the promotion of Australian cuisine. In addition to this, Maggie established the Maggie Beer Foundation in 2014 to improve the food experiences for older Australians, particularly those living within aged care homes. Maggie Beer joined the Board of the consolidated entity as part of the acquisition of Maggie Beer Products Pty Ltd by the group. Maggie continues to play a pivotal role in the growth and strategy of the Maggie Beer Products business, as well as remaining deeply involved in the development of new and exciting products. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 8,296,423 fully paid up ordinary shares Interests in options: None MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 2121 ‘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. TOM KIING Non-executive Director HUGH ROBERTSON Non-executive Director Experience and expertise: Hugh is a senior investment adviser with Bell Potter. He has worked in the stockbroking industry for 36 years with a variety of firms including Falkiners stockbroking, Investor First and Wilson HTM. Among his areas of interest is a concentration on small cap industrial stocks. Other current directorships: Centrepoint Alliance Limited (ASX: CAF) (appointed 2 May 2016) Envirosuite Limited (ASX:EVS) Former directorships (last 3 years): AMA Limited (ASX: AMA) - resigned 3 August 2018 Special responsibilities: Member of Audit Committee and Chairman of Remuneration and Nomination Committee Interests in shares: 3,721,129 fully paid up ordinary shares Interests in options: None Experience and expertise: Board member since July 2008, Tom is also a director of Bridge Capital Pty Ltd, an Australian technology investment firm that manages a portfolio of investments in the IT sector. Tom also sits on the Board of The Atomic Group, a retail and footwear company which holds the Adidas license in Australia. Tom has extensive experience as a technology, retail and consumer brand executive in building and growing businesses in the field. Tom travels extensively through the ASEAN region to promote a wide range of Australian investment opportunities to Asian institutions and private investors. Other current directorships: None Former directorships (last 3 years): Melbourne IT Limited (ASX: MLB) - resigned 30 September 2017 Special responsibilities: Chairman of Audit Committee and a member of the Remuneration and Nomination Committee Interests in shares: 9,472,100 fully paid up ordinary shares Interests in options: None MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 2222 Directors’ Report, continued. COMPANY SECRETARY Sophie Karzis Sophie is a practising lawyer with over 15 years experience as a corporate and commercial lawyer, and Company Secretary and General Counsel for a number of private and public companies. Sophie is the principal of Legal Counsel, a corporate law practice with a focus on equity capital markets, mergers and acquisitions, corporate governance for ASX-listed entities, as well as the more general aspects of corporate and commercial law. Meetings of directors The number of meetings of the company’s Board of directors (‘the Board’) held during the year ended 30 June 2021, and the number of meetings attended by each director were: Reg Weine Maggie Beer AM Tom Kiing Hugh Robertson Full Board Audit and Risk Committee Attended Held Attended Held 17 17 17 17 17 17 17 17 2 2 2 2 2 2 2 2 Held: represents the number of meetings held during the time the director held office. Retirement, election and continuation in office of directors n Details of remuneration The Board of directors (Board) has power to appoint persons as directors to fill any vacancies. Other than those directors appointed during the year, at least one director is required to retire by rotation at each annual general meeting and is eligible to stand for re-election together with those directors appointed during the year to fill any vacancy who must retire and stand for election. A director may not hold office for more than three years or beyond the third annual general meeting following the director’s appointment (whichever is the longer period) without submitting for re-election. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: n Principles used to determine the nature and amount of remuneration n Executive contracts n Share-based compensation n Additional information n Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: n competitiveness and reasonableness n acceptability to shareholders n performance linkage / alignment of executive compensation n transparency MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20212323 The Remuneration and Nomination Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. No external specialist remuneration advice was sought in respect of remuneration arrangements for non-executive directors of the Board and key management personnel of the group during the year. General reward advice is sought on an ad hoc basis. The reward framework is designed to align executive reward to shareholders’ interests. The Board have considered that it should seek to enhance shareholders’ interests by: n having economic profit as a core component of plan design n focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value n attracting and retaining high calibre executives Additionally, the reward framework should seek to enhance executives’ interests by: n rewarding capability and experience n reflecting competitive reward for contribution to growth in shareholder wealth n providing a clear structure for earning rewards Maggie Beer AM has continued as a brand ambassador during the year, continuing her association with the Maggie Beer brand, its product development program and customer relationship. Maggie Beer receives fees of $13,092 per month for her services. Maggie Beer received $157,104 for services provided during the year. Each non-executive director receives a fee for being a director of the company but no additional fees for sitting on or chairing committees. Director fees are inclusive of superannuation entitlements. All non-executive directors except the company’s Chairman have elected to receive their fees in shares in the company which was approved by shareholders at the Annual General Meeting held on 16 July 2020. The maximum director aggregate fee pool is $400,000. Executive remuneration The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: n base pay and non-monetary benefits n short-term performance incentives n share-based payments n other remuneration such as superannuation and long service leave The combination of these comprises the executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Remuneration and Nomination Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The short-term incentives (‘STI’) program is designed to align the targets of the business units with the targets of those executives responsible for meeting those targets. Short-term incentives are used to differentiate rewards based on performance on a year by year basis. The principal performance indicator of the short-term incentive plan is the group’s financial performance. The financial performance measurements selected are revenue growth and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). They have been selected as the most appropriate measures of trading performance, and are calculated based on a percentage above a revenue and EBITDA threshold level. This allows the individual to be rewarded for growth in revenue and profitability of the company. The percentage and threshold level can differ for each individual and are reviewed every year. The revenue and EBITDA thresholds are determined based on the ability of the key management personnel to influence the group’s earnings. The long-term incentives (‘LTI’) include long service leave and share-based payments. Shares and options are occasionally awarded to executives over a period of three years based on long-term incentive measures. These include increases in shareholders’ value relative to the entire market and the increase compared to the consolidated entity’s direct competitors. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20212424 Directors’ Report, continued. Feature Description Key Management Personnel Chantale Millard Options Options to acquire ordinary shares Opportunity/Allocation 9,000,000 options with each tranche comprising 3,000,000 options Performance Hurdle Tranche 1: EBITDA requirement and continuous employment until 1 July 2021 Tranche 2: EBITDA requirement and continuous employment until 1 July 2022 Tranche 3: EBITDA requirement and continuous employment until 1 July 2023 Exercise price Exercisable at $0.15 (Tranche 1), $0.18 (Tranche 2) and $0.20 (Tranche 3) Forfeiture and termination Options will lapse if performance conditions are not met. Options will be forfeited on cessation of employment unless the Board determines otherwise, e.g. in the case of retirement due to injury, disability, death or redundancy. Feature Description Key Management Personnel Reg Weine Options Options to acquire ordinary shares Opportunity/Allocation 4,500,000 options with each tranche comprising of 1,500,000 options Performance Hurdle No performance hurdle required. Options have vested immediately on grant date of 16 July 2020 Exercise price Exercisable at $0.15 (Tranche 1), $0.18 (Tranche 2) and $0.20 (Tranche 3) Forfeiture and termination Options will be forfeited on cessation of employment unless the Board determines otherwise, e.g. in the case of retirement due to injury, disability, death or redundancy. Consolidated entity performance and link to remuneration A component of remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Remuneration and Nomination Committee. Refer to the section ‘Additional information’ below for details of the earnings and total shareholders return for the last five years. Voting and comments made at the company’s 2020 Annual General Meeting (‘AGM’) At the 2020 AGM, 99.28% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2020. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices Executive contracts The remuneration and other terms of employment for executives are covered in formal employment contracts that have no fixed terms. The group may terminate an executive’s employment contract immediately for cause, in which case the executive is not entitled to any payment other than the value of total fixed remuneration (and accrued entitlements) up to the termination date. Executive KMP contracts have a notice period of 2 months by either the employee or company. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Maggie Beer Holdings Ltd: Non-Executive Directors: n Reg Weine n Maggie Beer AM n Tom Kiing n Hugh Robertson And the following persons: n Chantale Millard (Chief Executive Officer) n Eddie Woods (Chief Financial Officer) (appointed 1 October 2020) MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 2525 Table A: KMP Remuneration for the year ended 30 June 2021 Short-term benefits Post- employment benefits Long-term benefits Share-based payments 2021 Cash salary and fees $ Bonus $ Others $ Super- annuation $ Long Service leave**** $ Equity Settled $ Total $ Non-Executive Directors: Reg Weine* 60,274 Maggie Beer AM** Tom Kiing** Hugh Robertson** - - - - - - - Other Key Management Personnel: Chantale Millard Eddie Woods*** 289,247 239,875 83,400 71,233 589,396 154,633 - - - - - - - 5,726 - - - - - - - 549,865 615,865 40,000 40,000 40,000 40,000 40,000 40,000 21,694 21,021 48,441 11,705 1,085,065 1,491,111 2,231 - 334,360 13,936 1,754,930 2,561,336 * ** Reg Weine equity settled amount relates to 4,500,000 options granted and approved by shareholders at the Annual General Meeting held on 16 July 2020. Non-executive directors have agreed to have their salaries settled for shares in the company in lieu of cash for FY21. This amounts to $40,000 each for Tom Kiing, Hugh Robertson and Maggie Beer respectively. This was granted and approved by shareholders at the Annual General Meeting held on 16 July 2020. The shares are issued to the directors on a quarterly basis based on an issue price of 5 day VWAP. *** Eddie Woods appointed on 1 October 2020 as Chief Financial Officer. **** Long service leave represents the movement in provision. Table B: KMP Remuneration for the year ended 30 June 2020 Short-term benefits Post- employment benefits Long-term benefits Share-based payments Cash salary and fees $ Bonus $ Termination payments* $ Super- annuation $ Long Service leave $ Equity Settled $ Total $ 2020 Non-Executive Directors: Reg Weine** Maggie Beer AM*** Tom Kiing*** Hugh Robertson*** Tony Robinson** Executive Directors: Laura McBain* 152,280 17,580 18,265 20,000 18,265 22,831 - - - - - - - - - - - 1,670 1,735 - 1,735 2,169 180,390 7,001 - - - - - - - - - - 20,000 20,000 20,000 - - - - 19,250 40,000 40,000 40,000 25,000 339,671 435,000 357,323 60,000 1,296,244 Other Key Management Personnel: Chantale Millard 278,997 135,000 - Michael Caragounis* 222,779 - 122,085 750,997 135,000 302,475 21,003 12,459 47,772 Laura McBain resigned 27 November 2019 as Managing Director. Michael Caragounis resigned 23 January 2020 as Chief Financial Officer. * ** Reg Weine appointed 13 March 2020 as non-executive Chairman. Tony Robinson retired 29 November 2019 as non-executive Chairman Non-executive directors have agreed to have their salaries settled for shares in the company in lieu of cash for the second half of FY20. *** This amounts to $20,000 each for Tom Kiing, Hugh Robertson and Maggie Beer respectively. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 2626 Directors’ Report, continued. Table C: Proportion of KMP’s fixed remuneration and remuneration linked to performance Name Non-executive Directors: Reg Weine Maggie Beer AM Tom Kiing Hugh Robertson Tony Robinson Other Key Management Personnel: Chantale Millard Eddie Woods Share-based compensation Fixed remuneration At risk - STI At risk - LTI 2021 2020 2021 2020 2021 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - - - - - - - 20% 78% 69% - 6% 22% 31% - 74% - - - - - - - - No performance rights were granted as remuneration to KMP during FY21 Table D: Number of options granted as remuneration to KMP during FY21 Options KMP Reg Weine Reg Weine Reg Weine Chantale Millard Chantale Millard Chantale Millard Grant Date Number granted Value per Option Number Vested 16/07/2020 16/07/2020 16/07/2020 28/10/2020 28/10/2020 28/10/2020 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 3,000,000 $0.131 $0.121 $0.115 $0.220 $0.217 $0.219 1,500,000 1,500,000 1,500,000 - - - Table E: Movements during FY21 in the options over shares in the company held directly, indirectly or beneficially, by each KMP, including their related parties Name Reg Weine* Chantale Millard Balance at start of year Granted as part of remuneration Additions Disposals/ Other Total Number vested - - - - - - 4,500,000 9,000,000 13,500,000 - - - 4,500,000 4,500,000 9,000,000 3,000,000 13,500,000 7,500,000 * Reg Weine’s 4,500,000 options vested on 16 July 2020 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 2727 Table F: Terms and conditions of options over ordinary shares affecting remuneration of directors and KMP Grant date 16/07/2020 16/07/2020 16/07/2020 28/10/2020 28/10/2020 28/10/2020 Vesting/ exercisable date 16/07/2020 16/07/2020 16/07/2020 01/07/2021 01/07/2022 01/07/2023 Expiry date 15/07/2024 15/07/2024 15/07/2024 27/10/2024 27/10/2024 27/10/2024 Exercise Price $0.15 $0.18 $0.20 $0.15 $0.18 $0.20 Number of options 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 3,000,000 Fair value per option at grant date $0.131 $0.121 $0.115 $0.220 $0.217 $0.219 Table G: Number of performance rights affecting remuneration of directors and KMP No performance rights granted in 2021 Additional information The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below: Total revenue Profit/(loss) before tax Profit/(loss) after income tax 2021 $’000 53,804 (2,429) 1,861 2020 $’000 45,555 (14,754) (14,754) 2019 $’000 25,753 (24,160) (21,656) The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: Share price at financial year end ($) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2021 0.390 0.805 0.805 2020 0.140 (7.120) (7.120) 2019 0.210 (16.726) (16.726) 2018 $’000 8,733 (7,694) (6,670) 2018 0.730 (10.308) (10.308) 2017 $’000 - (10,293) (10,293) 2017 0.016 (40.571) (40.571) The value of basic and diluted earnings per share relating to 2015 - 2017 years have been adjusted to reflect the share consolidation of 25:1 completed in 2018. No dividend has been paid in the past 5 years. Additional disclosures relating to key management personnel Additional information The number of shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Ordinary shares Reg Weine Maggie Beer AM Tom Kiing Hugh Robertson Chantale Millard Eddie Woods Balance at the start of the year Received as part of remuneration Additions Disposals/ other - - 500,000 6,295,332 143,089 1,858,002 8,429,010 143,089 900,001 2,508,421 143,089 1,069,619 6,853 20,000 - - 100,000 - 17,259,616 429,267 4,427,622 - - - - - - - Balance at the end of the year 500,000 8,296,423 9,472,100 3,721,129 106,853 20,000 22,116,505 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20212828 Directors’ Report, continued. Loans to key management personnel and their related parties There were no loans given to KMPs during the year. Other transactions with key management personnel and their related parties Maggie Beer has continued as a brand ambassador, continuing her association with the Maggie Beer brand, its product development program and customer relationship. Maggie Beer receives fees of $13,092 per month for her services. Maggie Beer received $157,104 for services provided during the year. During the year, the company completed capital raisings amounting to a fair value of approximately $30 million from the issue of 86,285,492 shares at an issue price of $0.35 (35 cents). These capital raisings were fully underwritten by Bell Potter Securities Limited, an entity associated with Hugh Robertson. Bell Potter was paid management and underwriting fees of $1,480,417. This concludes the remuneration report, which has been audited. Shares under option Unissued ordinary shares of Maggie Beer Holdings Ltd under option at the date of this report are as follows: Grant date 16 July 2020 16 July 2020 16 July 2020 28 October 2020 28 October 2020 28 October 2020 Expiry date 16 July 2024 16 July 2024 16 July 2024 27 October 2024 27 October 2024 27 October 2024 Exercise price Number under option $0.150 $0.180 $0.200 $0.150 $0.180 $0.200 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 3,000,000 13,500,000 No option holder has any right under the options to participate in any other share issue of the company or any other entity. Shares issued on the exercise of options or performance rights 31,332 ordinary shares of Maggie Beer Holdings Ltd were issued on the exercise of performance rights during the year ended 30 June 2021 and up to the date of this report. 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. The company has indemnified each director referred to in this report, the company secretary and previous directors and secretaries (officers) against all liabilities or loss (other than to the company or a related body corporate) that may arise from their position as officers of the company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith or indemnification is otherwise not permitted under the Corporations Act. The indemnity stipulates that the company will meet the full amount of any such liabilities, including costs and expenses, and covers a period of seven years after ceasing to be an officer of the company. The company has also indemnified the current and previous directors of its controlled entities and certain members of the company’s senior management for all liabilities and loss (other than to the company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith or indemnification is otherwise not permitted under the Corporations Act. The company has executed deeds of indemnity in favour of each non-executive director of the company and certain non-executive directors of related bodies corporate of the company as well as with the company secretary. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 20212929 Officers of the company who are former partners of PricewaterhouseCoopers There are no officers of the company who are former partners of PricewaterhouseCoopers. 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 thousand dollars, or in certain cases, the nearest dollar. 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 PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. 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 Reg Weine Non-executive Chairman 19 August 2021 The company has paid insurance premiums in respect of directors’ and officers’ liability insurance contracts, for officers of the company and of its controlled entities. The insurance cover is on standard industry terms and provides cover for loss and liability for wrongful acts in relation to the relevant person’s role as an officer, except that cover is not provided for loss in relation to officers gaining any profit or advantage to which they were not legally entitled, or officers committing any criminal, dishonest, fraudulent or malicious act or omission, or any knowing or wilful violation of any statute or regulation. Cover is also only provided for fines and penalties in limited circumstances and up to a small financial limit. The insurance does not provide cover for the independent auditors of the company or of a related body corporate of the company. In accordance with usual commercial practice, the insurance contract prohibits disclosure of details of the nature of the liabilities covered by the insurance, the limit of indemnity and the amount of the premium paid under the contract. 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 28 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. M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 30 Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Maggie Beer Holdings Ltd for the year ended 30 June 2021, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Maggie Beer Holdings Ltd and the entities it controlled during the period. Brad Peake Partner PricewaterhouseCoopers Melbourne 19 August 2021 PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 31 “ “Large consumer base supports e-commerce growth.” - CHANTALE MI LLA RD, CEO & MANAGIN G DI RECT OR M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202132 32 “ “Maggie Beer Products was the driver of the group’s growth in FY21.” - CH A NTA LE MI LL A RD, CEO & MAN A G IN G DI RECT OR M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202133 33 “Consumers are choosing premium Australian brands” M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202134 Financial Statements M A G G I E B E E R H O L D I N G S LT D | A N N U A L R E P O R T | 2 0 2 1 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 35 Revenue Revenue Other income Expenses Consolidated Note 2021 $’000 52,879 925 53,804 2020 $’000 44,503 1,052 45,555 Raw materials and consumables used (28,127) (22,936) Overheads Occupancy and utilities costs Employee benefits expense Transportation expense Professional fees Marketing and advertising expense Other expenses Depreciation expense Amortisation expense Finance costs Impairment expense (1,475) (1,304) (13,685) (3,153) (1,295) (1,264) (2,209) (2,198) (1,119) (404) (1,513) (1,285) (11,892) (3,161) (701) (869) (2,440) (2,181) (956) (308) 12 - (12,067) Loss before income tax benefit (2,429) (14,754) Income tax benefit 6 4,290 - Profit/(loss) after income tax benefit for the year attributable to the owners of Maggie Beer Holdings Ltd 1,861 (14,754) Other comprehensive income for the year, net of tax - - Total comprehensive income for the year attributable to the owners of Maggie Beer Holdings Ltd Basic earnings per share Diluted earnings per share 36 36 1,861 (14,754) Cents 0.805 0.805 Cents (7.120) (7.120) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202136 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Other current financial liabilities Lease liabilities Employee benefits Total current liabilities Non-current liabilities Other non-current financial liabilities Lease liabilities Employee benefits Contingent consideration Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Consolidated Note 2021 $’000 2020 $’000 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 13,542 8,001 8,514 1,351 31,408 16,768 3,066 78,414 98,248 7,245 8,022 3,500 429 19,196 17,347 3,345 24,138 44,830 129,656 64,026 7,925 411 - 1,644 1,249 11,229 - 1,636 217 13,790 15,643 6,883 - 623 1,098 970 9,574 1,195 2,505 153 - 3,853 26,872 13,427 102,784 50,599 169,386 3,267 (69,869) 120,695 1,634 (71,730) 102,784 50,599 The above statement of financial position should be read in conjunction with the accompanying notes MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 37 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021 Contributed Equity Option Reserves Accumulated Losses $’000 $’000 $’000 Total equity $’000 Consolidated Balance at 1 July 2019 120,695 1,721 (56,976) 65,440 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 37) - - - - - - - (14,754) (14,754) - - (14,754) (14,754) (87) - (87) Balance at 30 June 2020 120,695 1,634 (71,730) 50,599 Contributed Equity Option Reserves Accumulated Losses $’000 $’000 $’000 Total equity $’000 Consolidated Balance at 1 July 2020 120,695 1,634 (71,730) 50,599 Profit after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) Share-based payments (note 37) - - - 48,540 151 - - - - 1,633 1,861 - 1,861 - 1,861 1,861 - - 48,540 1,784 Balance at 30 June 2021 169,386 3,267 (69,869) 102,784 The above statement of changes in equity should be read in conjunction with the accompanying notes MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202138 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Other income received Net cash from/(used in) operating activities Cash flows from investing activities Payment for purchase of business, net of cash acquired Payments for property, plant and equipment Payments for intangibles Proceeds from disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment for share issue costs Repayment of loan Proceeds from chattel mortgage Proceeds from new loan Repayment of convertible note Principal elements of lease Interest and other finance costs paid Interest received Consolidated Note 2021 $’000 2020 $’000 35 32 10 12 22 54,106 (53,530) 891 43,945 (45,158) 1,054 1,467 (159) (20,000) (766) (207) 59 - (1,098) (306) - (20,914) (1,404) 30,200 (1,660) (1,303) - - - (1,122) (404) 33 - - (105) 516 400 (500) (1,098) (224) - Net cash from/(used in) financing activities 25,744 (1,011) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 6,297 7,245 (2,574) 9,819 Cash and cash equivalents at the end of the financial year 13,542 7,245 The above statement of cash flows should be read in conjunction with the accompanying notes MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 39 Notes to the Financial Statements 30 June 2021 NOTE 1. GENERAL INFORMATION The financial report is a general purpose financial report that has been prepared in accordance with Accounting Standards and Interpretations, the Corporations Act 2001 and complies with other requirements of the law. The financial report covers the company and controlled entities. The company is a public company, incorporated and domiciled in Australia. Maggie Beer Holdings Ltd changed its name from Longtable Group Limited on 16 July 2020. For the purpose of preparing the consolidated financial statements, the company is a for-profit entity. The financial report includes the consolidated financial statements of the group and is referred to as the group or consolidated entity. The financial statements were authorised for issue, in accordance with a resolution of directors, on 19 August 2021. The directors have the power to amend and reissue the financial statements. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity 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 amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern The financial statements have been prepared on the going concern basis, which assumes the continuity of normal business activities, and the realisation of assets and the settlement of liabilities in the ordinary course of business. For the year ended 30 June 2021, the group has a net profit after tax of $1.9 million (2021: loss: $14.8 million) and generated net cash inflows of $1.5 million (2020: $0.2 million outflow). As at year end, the cash position was $13.5 million (30 June 2020: $7.2 million). The company expects its normal cash flows over the next 12 months from the date of signing to be sufficient to continue as a going concern. The company’s ability to generate cash flows in continued challenging economic conditions has also been stress tested with scenarios including a 10% drop in sales over the next 12 months with no issues in relation to going concern identified. 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 presentation and functional currency of the group is Australian dollars. Historical cost convention The financial statements have been prepared under the historical cost convention. Critical accounting estimates 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 consolidated entity’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. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 31. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Maggie Beer Holdings Ltd (‘company’ or ‘parent entity’) as at 30 June 2021 and the results of all subsidiaries for the year then ended. Maggie Beer Holdings Ltd and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de- consolidated from the date that control ceases. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202140 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES, CONT. Income tax A controlled entity is any entity the company has the power over, and is exposed or has rights to variable returns from its involvement in the entity, and has the ability to use its power to affect its returns. A list of controlled entities is contained in note 33 to the financial statements. All inter-company balances and transactions between entities in the consolidated entity, including any recognised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the parent entity. Where controlled entities have entered or left the consolidated entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. The investments in controlled entities are measured at cost in the parent entity’s financial statements. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Revenue recognition The consolidated entity recognises revenue as follows: Sale of goods Revenue from the sale of goods is recognised to the extent that the group satisfies its single performance obligation to transfer agreed goods and the transaction price can be readily identified. All revenue is recognised at a point in time when control of the goods is transferred to the customer i.e. when the goods are delivered to the customer. Revenue is measured at the fair value of the consideration received or receivable being the amount to which the entity expects to be entitled to in exchange for goods. Amounts disclosed as revenue are net of discounts, trade allowances and rebates. All revenue from the sale of goods is recognised at a point in time. Interest Interest revenue 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. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. The charge for current income tax expense/(benefit) is based on the profit/(loss) for the year adjusted for any non- assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the statement of financial position date. Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is recognised or liability is settled. Deferred tax is credited in the profit or loss except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred 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 company and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognised its own current and deferred tax liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is then subsequently assumed by the parent entity. The group entered into the tax consolidation regime from 1st June 2006 and notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 1st June 2006. The tax will be paid by the parent entity as the group has not entered into a tax funding agreement. The company is the designated parent entity for tax consolidation purposes. 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 consolidated entity 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. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202141 Lease 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 consolidated entity’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. The group has not applied any practical expedients for lease liabilities. 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 consolidated entity’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 consolidated entity’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 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. Impairment of non-financial assets At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit or loss and other comprehensive income immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised in income. 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. Financial Liabilities Financial liabilities are classified as other financial liabilities. Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. 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 through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. The group derecognises financial liabilities when, and only when, the group’s obligations are discharged, cancelled or they expire. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 42 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES, CONT. Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible notes using the effective interest method. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. 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 thousand dollars, or in certain cases, 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. COVID-19 pandemic Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the consolidated entity based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the COVID-19 pandemic. Goodwill and other indefinite life intangible assets The consolidated entity 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 12. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. 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 consolidated entity’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 consolidated entity 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. No options to extend or terminate lease terms have been included in the measurement of right-of-use assets and lease liabilities. Business combinations As discussed in note 32, the business combinations in the current year have been accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202143 NOTE 4. OPERATING SEGMENTS Identification of reportable operating segments AASB 8 requires operating segments to be identified on the basis of internal reports about components of the consolidated entity that are regularly reviewed by the Chief Executive Officer (‘CEO’) in order to allocate resources to the segment and to assess its performance. There are currently four operating segments under the criteria set out in AASB 8, being B.-d Farm Paris Creek Pty Ltd (“Paris Creek Farms”), St David Dairy Pty Ltd (“St David Dairy”), Maggie Beer Products Pty Ltd (“MBP”), Hampers and Gifts Australia Pty Ltd (“HGA”) and other corporate costs. Information regarding these segments is set out below. All operations were in Australia for both current and comparative period. Operating segment information Consolidated - 2021 Revenue Paris Creek Farms $’000 St David Dairy $’000 Maggie Beer Products $’000 Hampers & Gifts Australia $’000 Other segments $’000 Sales to external customers 16,254 8,997 25,646 2,169 Intersegment sales Total sales revenue Other revenue Total revenue (187) - - - 16,067 8,997 25,646 2,169 54 50 77 - 16,121 9,047 25,723 2,169 - - - 744 744 Total $’000 53,066 (187) 52,879 925 53,804 Profit/(loss) before income tax expense, impairment and fair value gain Profit/(loss) before income tax benefit Income tax benefit Profit after income tax benefit (1,233) (1,233) 531 531 2,841 2,841 450 450 (5,018) (2,429) (5,018) (2,429) 4,290 1,861 Assets Segment assets Intersegment eliminations Total assets Liabilities Segment liabilities Intersegment eliminations Total liabilities 17,447 18,336 27,913 60,606 15,769 140,071 (10,415) 129,656 20,107 1,841 4,973 2,875 1,346 31,142 (4,270) 26,872 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202144 NOTE 4. OPERATING SEGMENTS, CONT. Consolidated - 2020 Revenue Sales to external customers Intersegment sales Total sales revenue Other revenue Total revenue Profit/(loss) before income tax expense, impairment and fair value gain Impairment expense Profit/(loss) before income tax expense Income tax expense Loss after income tax expense Assets Segment assets Intersegment eliminations Total assets Liabilities Segment liabilities Intersegment eliminations Total liabilities NOTE 5. SIGNIFICANT ITEMS Paris Creek Farms $’000 St David Dairy $’000 Maggie Beer Products Other segments $’000 $’000 16,043 (513) 15,530 55 15,585 (1,917) (12,068) (13,985) 8,190 20,783 - 20,783 174 20,957 - 8,190 85 8,275 302 - 302 - - - 738 738 1,847 (2,918) (2,686) - - 1,847 (2,918) 19,099 19,278 25,897 9,504 20,749 1,668 3,828 2,099 Total $’000 45,016 (513) 44,503 1,052 45,555 (12,068) (14,754) - (14,754) 73,778 (9,752) 64,026 28,344 (14,917) 13,427 Significant items relate to significant changes in the business during the past financial year and are identified due to their nature and magnitude on the assessment of business performance. The following significant items are included in Other income, Raw materials and consumables used, Employee benefits expense, Professional expenses and Other expenses: Government grants Claim settlement Restructure costs Abandoned project Litigation costs Other Share Based Payments (Note 35) Acquisition Costs (Note 30 ii) Total significant items Consolidated 2021 $’000 200 692 (114) - (97) (85) (1,633) (843) (1,880) 2020 $’000 393 500 (946) (135) (61) (109) 87 - (271) MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021NOTE 6. INCOME TAX BENEFIT Income tax benefit Current tax Recognition of deferred tax asset Recognition of deferred tax asset* Deferred tax expense Amounts not brought to account as a Deferred Tax Asset in the current year Aggregate income tax benefit 45 Consolidated 2021 $’000 114 (114) (4,290) - (4,290) 2020 $’000 (602) - - 602 - Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax benefit (2,429) (14,754) Tax at the statutory tax rate of 30% (729) (4,426) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Non-deductible expenses Non-assessable non-operating income Amounts not brought to account as a Deferred Tax Asset in the current year Recognition of deferred tax asset* Recognition of deferred tax asset* Income tax benefit 1,065 (222) - (4,290) (4,176) (114) (4,290) 3,884 (60) 602 - - - - * A deferred tax asset of $4,290 thousand attributed to carried forward tax losses was recognised to offset the equivalent deferred tax liability arising from the intangible assets acquired through the business combination. Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised 5,945 19,967 Potential tax benefit @ 30% 1,784 5,990 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. Consolidated 2021 $’000 2020 $’000 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 46 NOTE 7. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES Trade receivables Lease receivable (sub-lease) Other receivable GST receivable Consolidated 2021 $’000 6,774 367 640 220 8,001 2020 $’000 7,135 532 90 265 8,022 Accounting policy for trade and other receivables Trade receivables and other receivables are all classified as financial assets held at amortised cost. Trade receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method, less a loss allowance provision. The carrying value of trade and other receivables, less loss allowance provisions, is considered to approximate fair value, due to the short term nature of the receivables. The collectability of trade and other receivables is reviewed on an ongoing basis with a further focus in this financial year on collection risk following the impact of the COVID-19 pandemic. Individual debts which are known to be uncollectable are written off when identified. The group recognises a loss allowance provision based upon anticipated lifetime losses of trade receivables. The anticipated losses are determined with reference to historical loss experience adjusted to reflect current and forward-looking information and is regularly reviewed and updated. This includes general macroeconomic indicators such as RBA cash rate and GDP growth. Trade receivables are generally due for settlement between 30 and 60 days. The COVID-19 pandemic has not resulted in any additional receivables write-offs. Credit risks related to receivables Refer to note 23 for additional information. NOTE 8. CURRENT ASSETS - INVENTORIES Raw materials Work in progress Finished goods Stock in transit Consolidated 2021 $’000 1,971 205 5,403 935 8,514 2020 $’000 1,801 271 1,428 - 3,500 The total amount of inventory recognised as an expense during the year is $33.7 million. Accounting policy for inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a ‘first in first out’ basis. 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. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of 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. 47 NOTE 9. CURRENT ASSETS - OTHER Prepayments Security deposits Other current assets NOTE 10. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT Land Motor vehicles Less: Accumulated depreciation Plant and equipment Less: Accumulated depreciation Building and leasehold improvements Less: Accumulated depreciation Consolidated Consolidated 2020 $’000 185 151 93 429 2020 $’000 460 1,274 (394) 880 13,935 (4,336) 9,599 6,983 (575) 6,408 2021 $’000 1,169 123 59 1,351 2021 $’000 460 474 (164) 310 15,005 (5,226) 9,779 7,007 (788) 6,219 16,768 17,347 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 48 NOTE 10. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT, CONT. 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 1 July 2019 Additions Disposals Transfer out on adoption of AASB 16 Depreciation expense Land $’000 460 - - - - Balance at 30 June 2020 460 Additions Additions through business combinations (note 32) Disposals Transfer out Depreciation expense - - - - - Motor Vehicles $’000 674 551 (21) (204) (120) 880 15 - (10) (513) (62) Building and leasehold improvements $’000 Plant and equipment $’000 6,644 11,353 6 - - (242) 632 (28) (1,427) (931) Total $’000 19,131 1,189 (49) (1,631) (1,293) 6,408 9,599 17,347 41 11 - - 710 362 (9) - 766 373 (19) (513) (241) (883) (1,186) Balance at 30 June 2021 460 310 6,219 9,779 16,768 Refer to note 26 for further information on fair value measurement. Accounting policy for property, plant and equipment Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The depreciable amount of all fixed assets including recognised lease assets is depreciated on a straight line or diminishing value basis over their useful lives to the group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The following estimated useful lives are used in the calculation of depreciation: Motor vehicles Plant and equipment Building and leasehold improvements 5 years 4 to 20 years 10 to 33 years The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 NOTE 11. NON-CURRENT ASSETS - RIGHT-OF-USE ASSETS Consolidated 49 Land and buildings - right-of-use Less: Accumulated depreciation Plant and equipment - right-of-use Less: Accumulated depreciation Motor vehicles - right-of-use Less: Accumulated depreciation 2021 $’000 3,486 (2,214) 1,272 1,871 (599) 1,272 1,122 (600) 522 2020 $’000 2,823 (1,125) 1,698 1,926 (447) 1,479 372 (204) 168 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: 3,066 3,345 Consolidated Balance at 1 July 2020 Adjustments during the year Additions through business combinations (note 32) Depreciation expense Land and buildings $’000 Plant and equipment $’000 1,698 1,479 - - (648) (32) - (174) Motor vehicles $’000 168 577 221 Total $’000 3,345 545 221 (223) (1,045) Balance at 30 June 2021 1,050 1,273 743 3,066 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202150 NOTE 12. NON-CURRENT ASSETS - INTANGIBLES Consolidated Goodwill Brand Less: Accumulated amortisation Customer contracts Less: Accumulated amortisation Software and websites Less: Accumulated amortisation 2021 $’000 56,104 16,278 (1,226) 15,052 7,935 (1,309) 6,626 831 (199) 632 2020 $’000 15,388 6,838 (697) 6,141 3,075 (769) 2,306 416 (113) 303 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: 78,414 24,138 Consolidated Paris Creek $’000 St David Dairy $’000 $’000 $’000 Goodwill - Goodwill - Goodwill - Goodwill - Maggie Beer Products Hampers and Gifts Australia Balance at 1 July 2019 12,067 11,802 3,585 Additions from internal development - Impairment of assets (12,067) Amortisation expense Balance at 30 June 2020 Additions from internal development Additions through business combinations (note 30) Amortisation expense Balance at 30 June 2021 - - - - - - - - - - - - 11,802 3,585 - - - - - - Customer Con- tracts** Other In- tangible $’000 $’000 Brand* $’000 Total $’000 6,546 2,797 58 36,855 - - - - 305 305 - (12,067) (405) (491) (59) (955) 6,141 2,306 - - 40,717 9,440 4,860 304 207 208 24,138 207 55,225 - (529) (540) (87) (1,156) - - - - - - 11,802 3,585 40,717 15,052 6,626 632 78,414 * The cost of the brand intangible asset consists of $2,163 thousand allocated to the St David Dairy CGU, $4,675 thousand allocated to the Maggie Beer Products CGU and $9,440 thousand allocated to the Hampers and Gifts Australia CGU as at 30 June 2021. ** The cost of the customer contract intangible asset consists of $1,515 thousand allocated to the St David Dairy CGU, $1,560 allocated to the Maggie Beer Products CGU and $4,860 thousand allocated to the Hampers and Gifts Australia CGU as at 30 June 2021. Goodwill was acquired as a result of business combinations entered during the year, refer to note 32 for details. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 51 NOTE 12. NON-CURRENT ASSETS - INTANGIBLES, CONT. 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. Accounting policy for goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in the statement of profit or loss and other comprehensive income as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Recoverable amount of goodwill In accordance with AASB 136, impairment testing has been undertaken for all cash generating units (CGUs) with indefinite intangibles or where there is an indication of impairment. These impairment tests have been completed via a multiple scenario approach in response to significant uncertainties in the market. At 30 June 2021, for Maggie Beer Products and St David Dairy, the recoverable amounts have been determined based on value-in-use calculations which uses cash flow projections based on financial forecasts covering a five- year period, including changes in working capital and expenditure for maintenance. Cash flows are extrapolated using estimated growth rates beyond the five-year period. Key assumptions used in the value-in-use calculations for the Maggie Beer Products and St David Dairy CGUs are based on a large range of data, including available independent grocery and dairy reports on the Australian market, overlaid with management’s latest forecast for financial year 2021 and incorporating previous revenue growth, achievable margin, reasonable expense increases, capital expenditure for maintenance and entity specific long-term averages for the latter years. In considering the outlook for Maggie Beer Products and St David Dairy, and the specific impacts of the COVID-19 pandemic, management considered a range of possible scenarios and have applied a probability weighting to each of these in order to determine an estimation of future cash flows which has a reasonable and appropriate basis. Maggie Beer Products Revenue growth Revenue growth over the five-year period is based upon forecasted revenue on a business-as-usual basis and assumes no New Products Development (‘NPD’) or new geographies (in accordance with AASB 136). The starting point is an assessment of the market, leveraging industry reports and overlaying with known sales growth opportunities e.g. additional sales growth from launching new range of finishing sauces and bone broths in Woolworths in FY22. The average revenue growth over the forecast period is assumed at 9.33% per annum (compared with an actual growth rate of 23.39% in FY21). Costs Gross margin in FY22 is expecting to soften slightly from its FY21 levels, due to the increase in 3rd party produced products as a percentage of total sales, and is then assumed to remain flat for the remainder of the model’s period with the sales mix including increased higher margin MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202152 from e-commerce sales. Raw material price increases are minimal and are to be matched by price increases with retailers to offset, as was evidenced in the current year. All fixed costs, including selling, administration and management labour, are modelled to grow at 2.0% a year, in line with the Reserve Bank of Australia’s inflation target range of 2–3 percent, on average, over time. Long-term growth rate The long-term growth rate is the weighted average growth rate used to extrapolate cash flows beyond the modelled period. A long-term growth rate of 2.0% has been used in the value-in-use calculations, which is on the lower end of the long-term Reserve Bank of Australia’s inflation target range of 2–3 percent, on average, over time. Discount rate The discount rate represents the current market assessment of the risks relating to the relevant CGU. In performing the value-in-use calculations for the CGU, the group has applied a pre-tax discount rate of 13.96% per annum (9.77% post tax) for Maggie Beer Products. The discount rate includes a COVID-19 pandemic risk premium of 0.70% to allow for the overall uncertainty in the wider economy even though the Consumer Staples sector has generally experienced limited downside (or even positive) impacts from the COVID-19 pandemic and there is less uncertainty around future earnings expectations. Also included in the discount rate is a specific company risk rate of 2.00% to recognise the abnormally low risk-free rate of 1.49% at 30 June 2021. Review outcome In completing the impairment review based on the aforementioned, the value in use of the Maggie Beer Products business exceeded its carrying value by $16.9 million. Sensitivities A change to revenue growth assuming no sales growth from FY22 onwards would result in a $5.2m impact to the recoverable amount of the CGU compared to the carrying value of goodwill; a change of EBITDA margin by 1.0% over the five-year forecast period would result in a $3.4m impact to the recoverable amount of the CGU compared to the carrying amount of goodwill; a 2.0% drop to the gross margin over the five-year forecast period would result in a $6.9m impact to the recoverable amount of the CGU compared to the carrying amount of goodwill. These sensitivities cover the key possible material impacts to the recoverable amount. All sensitivities still result in significant carrying value of goodwill. St David Dairy Base scenario Revenue growth Revenue growth over the five-year period is based upon forecasted revenue on a business-as-usual basis and assumes no New Products Development (‘NPD’) or new geographies (in accordance with AASB 136). The starting point is an assessment of the market, leveraging dairy industry reports and overlaying with known sales growth opportunities e.g. increased sales in specialty retail stores, alternative milk products. The FY22 budget as approved by the Board assumes a gradual recovery in the first half of the year with an acceleration in the second half of FY22 to reach annual sales growth of 13.2%. The average revenue growth over the remaining forecast period is modelled at 12.5% per annum, compared to 20.7% compounded annual growth rate (CAGR) sales growth achieved in the 5 years from FY17 to FY21, and is underpinned by: n customer base growth in the hospitality and retail sectors with organic sales growth across cafes & restaurants. n further capturing market share of cafes and restaurants in Melbourne initially and continuing to expand into other states of Australia. n increased demand for alternative milk. n continued expansion into premium and specialty grocers where “buy fresh, buy local” continues to gain momentum. Costs Costs have assumed stabilised milk and cream prices with no price increase expected in FY22 and any future increases matched by price increases, continued delivery cost savings seen from the purchase of trucks, along with a now stable and experienced management team. Long-term growth rate The long-term growth rate is the weighted average growth rate used to extrapolate cash flows beyond the modelled period. A long-term growth rate of 2.0% has been used in the value-in-use calculations, which is on the lower end of the long-term Reserve Bank of Australia’s inflation target range of 2–3 percent, on average, over time. Discount rate The discount rate represents the current market assessment of the risks relating to the relevant CGU. In performing the value-in-use calculations for the CGU, the group has applied a pre-tax discount rate of 14.02% per annum (9.82% post tax) for St David Dairy. The discount rate includes a COVID-19 pandemic risk premium of 0.70% to allow for the overall uncertainty in the wider economy even though the Consumer Staples sector has generally experienced limited downside impacts from COVID-19 pandemic and there is less uncertainty around future earnings expectations. Also included in the discount rate is a specific company risk rate of 2.00% to recognise the abnormally low risk-free rate of 1.49% at 30 June 2021. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202153 In addition to the base scenario detailed above, management has included 4 other scenarios, which if they occurred, would be likely to materially impact the carrying value of the CGU. The first scenario is sales in each year from FY22 to FY26 being 10% lower than forecast. The second is milk prices to be 2% higher per year from FY22 to FY26 with no ability to pass onto consumers. The third is delivery cost savings are 1% lower per year from FY22 to FY26. The fourth is for FY22 to have the same sales growth as FY21 which represents trading conditions during the COVID-19 environment following the same pattern of lockdowns and restrictions in Melbourne. Scenarios Base Case Lower Sales Farmgate milk price increase Delivery costs Long term growth rate / CPI Discount rate (post-tax) 2.00% 9.82% 2.00% 9.82% 2.00% 9.82% 2.00% 9.82% FY22 sales growth consistent as FY21 2.00% 9.82% Growth in sales (5-year CAGR) 12.51% 10.16% 12.51% 12.51% 10.26% Milk price increase pa from FY21 Delivery cost savings (as % of sales) 2.0% 1.8pt 2.0% 1.8pt 4.0% 1.8pt 2.0% 2.8pt Probability weighting 50% - estimated most likely outcome 15% - low probability and low impact 10% - medium probability and medium impact 5% - low probability and medium impact 2.0% 1.8pt 20% - medium probability Headroom/(Deficit) ($’000) Probability weighted headroom ($’000) 2,536 1,210 189 62 1,283 (787) Review outcome In completing the impairment review based on the scenarios and their assumptions and the weights above, the value in use of the St David Dairy business exceeds its carrying value of goodwill by $1.2 million. Brand Brands acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life range of 5-20 years. Customer contracts Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life range of 0-10 years. NOTE 13. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES Trade payables Employee related payables Other payables Consolidated 2021 $’000 5,953 560 1,412 2020 $’000 4,922 886 1,075 7,925 6,883 Refer to note 25 for further information on financial instruments. Accounting policy for trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity 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, non-interest bearing and are usually due for payment within 30 to 60 days of issue. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 54 NOTE 14. CURRENT LIABILITIES - CONTRACT LIABILITIES Contract liabilities Accounting policy for contract liabilities Consolidated 2021 $’000 411 2020 $’000 - Contract liabilities represent the consolidated entity’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. NOTE 15. CURRENT LIABILITIES - OTHER CURRENT FINANCIAL LIABILITIES Related party loans Current portion of chattel mortgage loan Lease liability Consolidated 2021 $’000 - - - - 2020 $’000 551 73 (1) 623 Refer to note 25 for further information on financial instruments. In addition to the above, NAB provides an invoice finance facility to a subsidiary of the group, Maggie Beer Products Pty Ltd which is available for $3.0 million. The facility is secured over receivables of Maggie Beer Products, and is subject to the subsidiary complying with its obligations (including financial covenants) under the facility. At 30 June 2021, the aggregate amount outstanding under the facilities was $nil and the subsidiary was in compliance with its obligations under those facilities. NOTE 16. CURRENT LIABILITIES - LEASE LIABILITIES Lease liability Refer to note 25 for further information on financial instruments. NOTE 17. CURRENT LIABILITIES - EMPLOYEE BENEFITS Employee benefits Consolidated Consolidated 2021 $’000 1,644 2021 $’000 1,249 2020 $’000 1,098 2020 $’000 970 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202155 Accounting policy for employee benefits Short-term employee benefits Liabilities for annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Provision is made for the 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. 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. NOTE 18. NON-CURRENT LIABILITIES - OTHER NON-CURRENT FINANCIAL LIABILITIES Bank loans Non-current portion of chattel mortgage Refer to note 25 for further information on financial instruments. Refer to note 30 for further information on related party transactions. Total secured liabilities The total secured lease liabilities are as follows: Consolidated 2021 $’000 - - - 2020 $’000 752 443 1,195 As per note 15, Maggie Beer Products Pty Ltd, a subsidiary of the consolidated entity, has an invoice facility secured over the receivables of the subsidiary. The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial position, revert to the lessor in the event of default. NOTE 19. NON-CURRENT LIABILITIES - LEASE LIABILITIES Lease liability Refer to note 25 for further information on financial instruments. Consolidated 2021 $’000 1,636 2020 $’000 2,505 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202156 NOTE 20. NON-CURRENT LIABILITIES - EMPLOYEE BENEFITS Employee benefits Consolidated 2021 $’000 217 2020 $’000 153 Accounting policy for 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 21. NON-CURRENT LIABILITIES - CONTINGENT CONSIDERATION Contingent Consideration Refer to business combination note 32 for details on contingent consideration. Consolidated 2021 $’000 13,790 2020 $’000 - NOTE 22. EQUITY - ISSUED CAPITAL Ordinary shares - fully paid 351,151,240 207,262,291 2021 Shares 2020 Shares Consolidated 2021 $’000 169,386 2020 $’000 120,695 Movements in ordinary share capital Details Balance Conversion of performance rights to ordinary shares upon vesting Date Shares Issue price 1 July 2019 207,152,292 10 December 2019 109,999 $0.000 Balance 30 June 2020 207,262,291 Conversion of performance rights to ordinary shares upon vesting 05 November 2020 Issue of shares to directors 05 November 2020 Issue of shares to directors 13 January 2021 31,332 282,840 65,544 Issue of shares under entitlement offer 12 April 2021 58,245,174 Issue of shares under entitlement offer 26 April 2021 27,540,318 Issue of shares to vendors Issue of shares to directors Issue of shares under entitlement offer Cost of capital raising Balance 21 May 2021 57,142,858 02 June 2021 29 June 2021 80,883 500,000 - 30 June 2021 351,151,240 $0.000 $0.318 $0.458 $0.350 $0.350 $0.350 $0.371 $0.350 $0.000 $’000 120,695 - 120,695 1 90 30 20,386 9,639 20,000 30 175 (1,660) 169,386 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202157 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. Capital risk management Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. The capital structure of the group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, retained earnings and reserves. Operating cash flows are used to maintain and expand the group’s assets, as well as to make the routine outflows of payables and tax. The capital risk management policy remains unchanged from the 2020 Annual Report. 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. NOTE 23. EQUITY - RESERVES Options reserve Options reserve Consolidated 2021 $’000 3,267 2020 $’000 1,634 Options reserve arises on the grant of share options to directors and employees of the group under the group incentive option scheme. Amounts are transferred out of the reserve and into issued capital when the options are exercised. The company operates an ownership-based remuneration scheme through the Incentive Option Scheme, details of which are provided in note 37 to the financial statements. Other than minimal administration costs, which are expensed when incurred, the plan does not result in any cash outflow from the company. The fair value of equity-settled share-based payments is measured by use of the Black-Scholes model. The expected life used in the models have been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest. At the end of each reporting period, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the statement of comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 58 NOTE 23. EQUITY - RESERVES, CONT. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2019 Share based payment Balance at 30 June 2020 Share based payment Balance at 30 June 2021 NOTE 24. EQUITY - DIVIDENDS Dividends Options reserve $’000 1,721 (87) 1,634 1,633 3,267 There were no dividends paid, recommended or declared during the current or previous financial year. Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% Consolidated 2021 $’000 7,568 2020 $’000 7,568 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: n franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date n franking debits that will arise from the payment of dividends recognised as a liability at the reporting date n franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date NOTE 25. FINANCIAL INSTRUMENTS Financial risk management objectives The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, retained earnings and reserves. Operating cash flows are used to maintain and expand the group’s assets, as well as to make the routine outflows of payables and tax. The consolidated entity’s principal financial instruments comprise receivables, payables, cash and short-term deposits. These activities expose the consolidated entity to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The consolidated entity does not have formal documented policies and procedures for the management of risk associated with financial instruments. However, the Board has responsibility for managing the different types of risks to which the consolidated entity is exposed. These responsibilities include considering risk and monitoring levels of exposure to interest rate risk, and by being aware of market forecasts for interest rate, and commodity prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through general business budgets and forecasts. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202159 Market risk Price risk The group is not exposed to any significant price risk. Interest rate risk The group’s exposure to market interest rates relates primarily to the group’s cash and short-term deposits held. Sensitivity Analysis The following sensitivity analysis is based on the interest rate risk exposures in existence at the statement of financial position date. At 30 June, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax-loss and equity would have been affected as follows: Basis points increase Basis points decrease Effect on profit before tax $’000 135 Effect on equity $’000 135 Basis points change (50) Effect on profit before tax $’000 (68) Basis points change 100 Basis points increase Basis points decrease Effect on profit before tax $’000 72 Effect on equity $’000 72 Basis points change (50) Effect on profit before tax $’000 (36) Basis points change 100 Effect on equity $’000 (68) Effect on equity $’000 (36) Consolidated 2021 Bank deposits Consolidated 2020 Bank deposits Credit risk The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking information that is available. This includes general macroeconomic indicators such as RBA cash rate and GDP growth. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. 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 of those assets, net of any allowance for impairment losses, as disclosed in the statement of financial position and notes to the financial report. The group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the group’s policy to securitise its trade and other receivables. It is the group’s policy to consider the credit worthiness of all customers who wish to trade on credit terms. In addition, receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant. There are no significant concentrations of credit risk. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202160 NOTE 25. FINANCIAL INSTRUMENTS, CONT. Allowance for expected credit losses The loss allowance as at 30 June 2021 was determined as follows for trade receivables: Not past due Past due 0 - 60 days Past due 60+ days Liquidity risk Loss allowance provision 2021 $’000 Loss allowance provision 2020 $’000 Gross amount 2021 Gross amount 2020 $’000 $’000 - 1 133 134 - - 142 142 4,184 2,528 194 6,906 5,108 1,796 373 7,277 The group manages liquidity risk by monitoring cash flow and maturity profiles of financial assets and liabilities. Remaining contractual maturities The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated 2021 Non-derivatives Non-interest bearing Trade payables Interest-bearing - fixed rate Lease liability Total non-derivatives Consolidated 2020 Non-derivatives Non-interest bearing Trade payables Interest-bearing - fixed rate Chattel mortgage Related party loan Lease liability Total non-derivatives Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities % $’000 $’000 $’000 $’000 $’000 - 7,922 4.75% 1,385 9,307 - 998 998 - 638 638 - - - Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years 7,922 3,021 10,943 Remaining contractual maturities % $’000 $’000 $’000 $’000 $’000 - 6,873 20 - 5.99% 2.46% 4.00% 101 579 1,248 8,801 101 167 1,308 1,596 404 475 1,285 2,164 - - 150 - 150 6,893 606 1,371 3,841 12,711 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202161 Fair value of financial instruments The directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair values. There were no financial instruments that are measured subsequent to initial recognition at fair value as at reporting date. The fair values of financial assets and liabilities, together with their carrying amounts in the statement of financial position, for the consolidated entity are as follows: Consolidated Assets Cash and cash equivalents Trade and other receivables Liabilities Trade and other payables Chattel mortgage Lease liability Related party loans 2021 2020 Carrying amount $’000 Fair value $’000 Carrying amount $’000 Fair value $’000 13,542 7,999 21,541 7,922 - 3,280 - 13,542 7,999 21,541 7,922 - 3,280 - 7,245 8,022 15,267 6,893 516 3,602 1,303 7,245 8,022 15,267 6,893 516 3,602 1,303 11,202 11,202 12,314 12,314 NOTE 26. FAIR VALUE MEASUREMENT Accounting policy for fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. NOTE 27. KEY MANAGEMENT PERSONNEL DISCLOSURES Directors The following persons were directors of Maggie Beer Holdings Ltd during the financial year: Reg Weine Hugh Robertson Maggie Beer AM Tom Kiing Non-executive Chairman Non-executive Director Non-executive Director 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 consolidated entity, directly or indirectly, during the financial year: Chantale Millard Eddie Woods Chief Executive Officer Chief Financial Officer (appointed 1 October 2020) MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 62 NOTE 27. KEY MANAGEMENT PERSONNEL DISCLOSURES, CONT. Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Long-term employee benefits Post-employment benefits Share-based payments Consolidated 2021 $ 2020 $ 744,029 1,178,472 13,936 48,441 1,754,930 2,561,336 - 47,772 60,000 1,286,244 NOTE 28. REMUNERATION OF AUDITORS During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the company: Audit services - PricewaterhouseCoopers Audit or review of the financial statements Other services - PricewaterhouseCoopers Other services Tax advisory Consolidated 2021 $ 2020 $ 186,660 148,200 - 22,000 22,000 208,660 100,000 26,000 126,000 274,200 NOTE 29. COMMITMENTS Upon adoption AASB 16 from 1 July 2019, the majority of operating leases are now recognised on the balance sheet. NOTE 30. RELATED PARTY TRANSACTIONS Parent entity Maggie Beer Holdings Ltd (previously Longtable Group Limited) is the parent entity of the consolidated entity. Subsidiaries Interests in subsidiaries are set out in note 33. Key management personnel Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the Directors’ report. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 63 Transactions with related parties During the year, Maggie Beer Products Pty Ltd entered into the following trading transactions with related parties that are not members of the consolidated entity: Sale of goods and services: - To entities with common directorship* Payment for goods and services: - From entities with common directorship* - From key management personnel** Consolidated 2021 $ 2020 $ 220,263 171,913 944,094 157,104 657,804 157,104 * Sales and purchases to entities with common directorship include rent, purchase and sale of products and other expenses to entities associated with Maggie Beer. ** Maggie Beer has continued as a brand ambassador during the year, continuing her association with the Maggie Beer brand, its product development program and customer relationship. Maggie Beer receives fees of $13,092 per month for her services. Maggie Beer received $157,104 for services provided during the year. During the year, the company completed capital raisings amounting to a fair value of approximately $30 million from the issue of 86,285,492 shares at an issue price of $0.35 (35 cents). These capital raisings were fully underwritten by Bell Potter Securities Limited, an entity associated with Hugh Robertson. Bell Potter was paid management and underwriting fees of $1,480,417. Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties entered into by Maggie Beer Products Pty Ltd, with related parties that are not members of the consolidated entity: Consolidated 2021 $ 2020 $ Current receivables: Trade receivables from entities with common directorship 32,936 384 Current payables: Trade payables to entities with common directorship Trade payables to key management personnel 42,868 - 42,158 14,401 The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties. Loans to/from related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Consolidated 2021 $ 2020 $ Total borrowings: Loan from entity with common directorship - 1,303 On 20 August 2020, the company repaid a $400,000 loan (Loan Amount) in full early, together with accrued interest, to the Beer Family Holdings Pty Ltd as trustee for the Beer Family Trust. At the end of June, the loan from the Beer Family Trust was repaid early with accrued interest 5 years earlier than the contractual term saving on future interest costs. The total undiscounted loan value repaid in FY21 was $0.9 million (FY20 balance: $1.0 million). Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202164 NOTE 31. PARENT ENTITY INFORMATION Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Options reserve Accumulated losses Total equity Parent Parent 2021 $’000 (3,933) (3,933) 2021 $’000 2,833 87,082 964 998 169,386 3,268 (86,570) 2020 $’000 (14,982) (14,982) 2020 $’000 9,263 57,393 1,586 2,097 120,695 1,634 (67,033) 86,804 55,296 There were no contingent liabilities of the company (2020: NIL). Capital commitments - Property, plant and equipment There were no commitments for the acquisition of property, plant and equipment by the parent entity during the year (2020: NIL). Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: n Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. NOTE 32. BUSINESS COMBINATIONS Hampers and Gifts Australia On 21 May 2021, Maggie Beer Holdings Ltd acquired 100% of the ordinary shares of Hampers and Gifts Australia Pty Ltd (“HGA”) for a total upfront consideration of $40 million plus contingent consideration (earnout), comprising of cash and shares. HGA is a leading e-commerce gourmet hamper and gift business. At the date of finalisation of the annual year report, the consolidated entity has provisionally analysed on whether all identifiable intangible assets have been recognised and vendor warranties and representations met. Accordingly, the initial accounting for the acquisition of HGA has only been provisionally determined at the end of the reporting period. For tax purposes, the tax values of HGA’s assets are required to be reset based on market values of the assets when admitted into the tax consolidated group. The acquired business contributed revenues of $2.17 million and a profit after tax of $0.45 million to the consolidated entity for the period ending 30 June 2021. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 The provisional fair values of the identifiable net assets acquired are detailed below: Other current assets Other receivables Inventories Leasehold improvements Plant and equipment Right-of-use assets Website Brand Customer contracts Trade and other payables Contract liabilities Deferred tax liability Lease liability Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor MBH shares issued to vendor Value of MBH shares issued at $0.35 (35 cents) per share Contingent consideration* Cash receivable on Working Capital/Net Debt adjustment** 65 Provisional Fair value $000 179 199 3,702 11 362 221 208 9,440 4,860 (1,726) (273) (4,290) (285) 12,608 40,717 53,325 20,000 20,000 13,790 (640) 53,150 i. Consideration transferred The company paid $20 million cash and $20 million worth of shares at an issue price of $0.35 (35 cents) per ordinary share. n 50% of the shares have been escrowed until the earlier of the release of the company’s financial statements for the year ending 30 June 2022 or 31 October 2022; and n as to the remaining 50% of the Vendor Shares: from the issue date until the earlier of the release of the company’s financial statements for the financial year ending 30 June 2023 or 31 October 2023. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 66 NOTE 32. BUSINESS COMBINATIONS, CONT. *Contingent consideration In the event that Hampers and Gifts Australia (“HGA”) achieves no less than $10 million EBITDA for the financial year ending 30 June 2023 (Earnout Period) the vendors will be entitled to a base earnout consideration of $10 million (50% cash and 50% shares). However, in addition to the base earnout amount, the vendors will be entitled to an additional $1 million for every increase of $1 million in EBITDA (up to a maximum of an additional $5 million) during the earnout period in the same portions of cash and shares. For example, if HGA achieves no less than $14 million in EBITDA for the earnout period, then the total earnout amount will be $14 million and if HGA achieves no less than $17 million in EBITDA for the earnout period, then the total earnout will be $15 million. The potential undiscounted amount payable under the agreement is between $0 for EBITDA less than $10 million for the financial year ending 30 June 2023 (earnout period) and $15 million for EBITDA above $15 million. The fair value of the contingent consideration of $13.8 million was estimated by calculating the present value of future expected cash flows. The estimates are based on a discount rate of 8.21% and assumed probability-adjusted sales of HGA of between $13 million and $15 million. **Cash receivable on Working Capital/Net Debt adjustment The share purchase agreement on acquisition of HGA utilised completion accounts where the target working capital amount and net debt amounts were agreed prior to acquisition date. The cash adjustment receivable from the vendors represents the difference between the actual amount of working capital and net debt on completion date compared to target. The cash adjustment was received subsequently from the vendors on 04 August 2021. ii. Acquisition related costs Acquisition-related costs amounting to $0.84 million are not included as part of consideration for the acquisition and have been recognised as transaction costs for the period ended 30 June 2021. 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 consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. 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. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202167 NOTE 33. INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name B D Farm Paris Creek Pty Ltd* St David Dairy Pty Ltd* Maggie Beer Products Pty Ltd* Hampers and Gifts Australia Pty Ltd* Principal place of business / Country of incorporation Australia Australia Australia Australia 2021 % 100.00% 100.00% 100.00% 100.00% 2020 % 100.00% 100.00% 100.00% - Ownership interest * Maggie Beer Holdings Ltd (previously Longtable Group Limited), B.-d Paris Creek Farms Pty Ltd, Maggie Beer Products Pty Ltd, St David Dairy Pty Ltd and Hampers and Gifts Australia Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. NOTE 34. EVENTS AFTER THE REPORTING PERIOD On 2 August 2021, Chantale Millard was appointed as a director of the Board. No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. NOTE 35. RECONCILIATION OF PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH FROM/(USED IN) OPERATING ACTIVITIES Consolidated Profit/(loss) after income tax benefit for the year Adjustments for: Depreciation and amortisation Share-based payments Interest income classified as financing cashflow Interest expense classified as financing cashflow Impairment expense Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories Increase in deferred tax assets Increase/(decrease) in trade and other payables Increase/(decrease) in other provisions Net cash from/(used in) operating activities 2021 $’000 1,861 3,317 1,785 (33) 404 - 118 (1,312) (4,290) (574) 191 1,467 2020 $’000 (14,754) 3,126 (87) - 224 12,067 (558) 128 - 49 (354) (159) Non-cash investing and financing activities consist of shares issued during the year as consideration for business combinations, as disclosed in note 32. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 202168 NOTE 36. EARNINGS PER SHARE Profit/(loss) after income tax attributable to the owners of Maggie Beer Holdings Ltd Consolidated 2021 $’000 1,861 2020 $’000 (14,754) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 231,277,191 207,212,713 Weighted average number of ordinary shares used in calculating diluted earnings per share 231,277,191 207,212,713 Basic earnings per share Diluted earnings per share Accounting policy for earnings per share Basic earnings per share Cents 0.805 0.805 Cents (7.120) (7.120) Basic earnings per share is calculated by dividing the profit attributable to the owners of Maggie Beer Holdings 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 37. SHARE-BASED PAYMENTS Set out below are summaries of options granted under the plan: The options and performance rights hold no voting or dividend rights and are not transferable. Set out below is a summary of options outstanding at reporting date: 2021 Grant date Vesting date 17/12/2013 16/07/2020 16/07/2020 16/07/2020 28/10/2020 28/10/2020 28/10/2020 17/12/2020 16/07/2020 16/07/2020 16/07/2020 01/07/2021 01/07/2022 01/07/2023 Exercise price $1.500 $0.150 $0.180 $0.200 $0.150 $0.180 $0.200 Balance at the start of the year 50,321 - - - - - - - 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 3,000,000 50,321 13,500,000 Granted Exercised Expired/ forfeited/ other (50,321) - - - - - - Balance at the end of the year - 1,500,000 1,500,000 1,500,000 3,000,000 3,000,000 3,000,000 (50,321) 13,500,000 - - - - - - - - MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 69 2020 Grant date Vesting date 17/12/2013 17/12/2013 07/08/2017 28/11/2018 28/11/2018 17/12/2019 17/12/2020 07/08/2017 30/06/2020 30/06/2021 Exercise price $1.500 $1.500 $0.500 $0.750 $0.750 Balance at the start of the year 50,321 50,321 2,800,000 1,132,000 4,528,000 8,560,642 Granted Exercised - - - - - - Expired/ forfeited/ other (50,321) Balance at the end of the year - - 50,321 (2,800,000) (1,132,000) (4,528,000) (8,510,321) - - - 50,321 - - - - - - Set out below is a summary of the performance rights outstanding at reporting date: Grant date 28/11/2018 28/11/2018 Vesting date 30/06/2020 30/06/2021 2021 Number - - - 2020 Number 15,666 31,334 47,000 For the options 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 Vesting date 16/07/2020 16/07/2020 16/07/2020 28/10/2020 28/10/2020 28/10/2020 16/07/2020 16/07/2020 16/07/2020 01/07/2021 01/07/2022 01/07/2023 VWAP Share price at grant date $0.225 $0.225 $0.225 $0.321 $0.321 $0.321 Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date $0.150 $0.180 $0.200 $0.150 $0.180 $0.200 90.00% 90.00% 90.00% 90.00% 90.00% 90.00% - - - - - - 0.26% 0.26% 0.26% 0.11% 0.13% 0.13% $0.131 $0.121 $0.115 $0.220 $0.217 $0.219 There are service period and non-market conditions attached to the options issued on 28 October 2020, which require reaching trading EBITDA targets from $2m to $8m in the respective periods. Management has assessed the probability of these targets being reached as 100% as at 30 June 2021. The EBITDA targets will be re-assessed in light of the recent purchase of Hampers and Gifts Australia Pty Ltd. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2021 70 Directors’ Declaration In the directors’ opinion: n 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; n 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; n the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and n 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 Reg Weine Non-Executive Chairman 19 August 2021 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202171 Independent auditor’s report To the members of Maggie Beer Holdings Ltd Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Maggie Beer Holdings Ltd (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises:       the consolidated statement of financial position as at 30 June 2021 the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the consolidated statement of profit or loss and other comprehensive income for the year then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 72 Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope  Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.  Maggie Beer Holdings Ltd operates across four operating segments with its head office functions based in South Australia, Australia.  For the purpose of our audit we used overall Group materiality of $538,000, which represents approximately 1% of the Group's total revenues.  We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.  We chose Group total revenues because, in our view, it is the benchmark against which the performance of the Group is most commonly measured.  We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit 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. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 73 Key audit matter How our audit addressed the key audit matter Impairment assessment of the St David Dairy Cash Generating Unit (CGU) (Refer to note 14) The Group has allocated goodwill of $11.8 million to the St David Dairy ("SDD") CGU. Under Australian Accounting Standards, the Group is required to assess goodwill for impairment at least annually. The recoverable amounts of the CGU was determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of estimated future cash flows. We considered this to be a key audit matter because of the financial significance of the goodwill allocated to the St David Dairy CGU and the judgements and assumptions made by the Group in determining the recoverable amount, to which it is particularly sensitive, as detailed in note 14 of the financial statements. Our procedures included, amongst others:  Developing an understanding of how the Group identified assumptions and sources of data  Assessing whether the Cash Generating Unit (CGU) identified by the Group and the assets and liabilities allocated to it was consistent with our knowledge of the Group’s operating and internal reporting.  Together with PwC experts, evaluating the appropriateness of significant assumptions in the context of Australian Accounting Standards. This included: o Assessing whether the discount rate used in the model was appropriate by comparing it to market data, comparable companies and industry research o Comparing the forecast cash flows used in the model were consistent with the most up-to-date budget formally approved by the Board o Comparing growth rate assumptions to alternative assumptions used in the industry and/or market o Evaluating the Group’s historical ability to forecast future cash flows by comparing budgets with reported actual results for prior years o Evaluating appropriateness of inputs used to calculate the terminal value  We have also evaluated the reasonableness of the disclosure against the requirements of Australian Accounting Standards MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 74 Key audit matter How our audit addressed the key audit matter Accounting for business combinations (Refer to note 30) On 21 May 2021, Maggie Beer Holdings Limited acquired 100% of the ordinary shares of Hampers & Gifts Australia Pty Ltd ("Hampers & Gifts Australia") for a total upfront consideration of $40 million plus contingent consideration (earnout), comprising of cash and shares. Accounting for the acquisition of Hampers & Gifts Australia has been provisionally determined at the end of the reporting period. We determined that this is a key audit matter due to the financial significance of the transaction, the judgement involved in calculating the fair value of the net assets acquired and the resultant goodwill and intangible assets arising on the acquisition. Our procedures included, amongst others:  assessing the fair values of the acquired assets and liabilities recognised, including; o assessing the competence and capability of management’s expert engaged to value the intangible assets and goodwill o evaluating appropriateness of source data and significant assumptions used  considering the resonableness of the business combination disclosures in light of the requirements of Australian Accounting Standards In relation to the valuation of the contingent consideration, our procedures included, amongst others:  assessing if the calculation of the contingent consideration was in accordance with the contractual arrangements and the requirements of Australian Accounting Standards  developing an understanding of the Group’s perspective on the future growth of the acquired businesses  assessing the Group’s evaluation of whether the conditions required for the contingent consideration to be paid were likely to be met in the future based upon actual performance since acquisition and current Group forecasts  considering the reasonableness of the contingent consideration disclosures in light of the requirements of Australian Accounting Standards MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 75 Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, 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 the 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. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 76 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 24 to 29 of the directors’ report for the year ended 30 June 2021. In our opinion, the remuneration report of Maggie Beer Holdings Ltd for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Brad Peake Partner Melbourne 19 August 2021 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021 77 2021 Additional Securities Exchange Information In accordance with ASX Listing Rule 4.10, the company provides the following information to shareholders not elsewhere disclosed in this Annual Report. The information provided is current as at 11 August 2021 (Reporting Date). 2021 CORPORATE GOVERNANCE STATEMENT The company’s directors and management are committed to conducting the group’s business in an ethical manner and in accordance with the highest standards of corporate governance. The company has adopted and substantially complies with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (Recommendations) to the extent appropriate to the size and nature of the group’s operations. The company has prepared a statement which sets out the corporate governance practices that were in operation throughout the financial year for the company, identifies any Recommendations that have not been followed, and provides reasons for not following such Recommendations (Corporate Governance Statement). In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available for review on the company’s website (https://www.maggiebeer.com.au/investor-info/corporate-governance) and will be lodged together with an Appendix 4G with ASX at the same time that this Annual Report is lodged with ASX. The Appendix 4G will particularise each Recommendation that needs to be reported against by the company, and will provide shareholders with information as to where relevant governance disclosures can be found. The company’s corporate governance policies and charters are all available on its website (https://www.maggiebeer.com.au/ investor-info/corporate-governance). Number of Holdings of Equity Securities As at 11 August 2021 (Reporting Date), the number of holders in each class of equity securities on issue in Maggie Beer Holdings Ltd is as follows: Class of Equity Securities Fully paid ordinary shares Options exercisable at $0.15 and expiring 16 July 2024 Options exercisable at $0.18 and expiring 16 July 2024 Options exercisable at $0.20 and expiring 16 July 2024 Options exercisable at $0.15 and expiring 28 October 2024 Options exercisable at $0.18 and expiring 28 October 2024 Options exercisable at $0.20 and expiring 28 October 2024 Number of holders 2,829 1 1 1 1 1 1 Voting Rights of Equity Securities The only class of equity securities on issue in the company which carry voting rights is ordinary shares. As at the Reporting Date, there were 2,829 holders of a total of 351,151,240 ordinary shares of the company. The voting rights attaching to the ordinary shares as set out in clause 20 of the company’s constitution are that every member who is present at a general meeting and entitled to vote: n on a show of hands, has one vote; n on a poll, has one vote for each fully paid share the member holds; and n in the case of a partly paid share, that fraction of a vote equivalent to the proportion which the amount paid up (excluding any amount credited as paid up) on that partly paid share bears to the total issue price of that share. Amounts paid in advance of a call are ignored when calculating the proportion. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202178 Distribution of Holders of Equity Securities The distribution of holder of equity securities on issue in the company as at the Reporting Date is as follows: Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Unmarketable Parcels Ordinary Fully Paid Shares Total Holders Units % of Issued Capital 939 751 346 680 176 2,829 206,733 1,999,571 2,641,208 21,849,405 243,302,540 351,151,240 0.06 0.57 0.75 6.22 92.40 100 The number of holders of less than a marketable parcel of ordinary shares based on the closing market price as at the Reporting Date is as follows: Unmarketable Parcels Minimum Parcel Size Minimum $500 parcel at $0.42 per unit 1,190 Holders 971 Units 241,187 Substantial Shareholders As at the Reporting Date, the names of the substantial holders of Maggie Beer Holdings Ltd and the number of equity securities in which those substantial holders and their associates have a relevant interest, as disclosed in substantial holding notices given to the company, are as follows: Substantial Shareholder Number of Shares Percentage Emily McWaters Investments Pty Ltd < Emily McWaters Invest A/C> David Morgan Investments Pty Ltd Perennial Value Management Ltd Rubi Holdings Pty Ltd Geoff Wilson Ellerston Capital Limited Ethical Partners Funds Management Pty Ltd 28,571,429 28,571,429 24,149,956 20,160,097 19,494,507 18,887,908 18,191,837 8.137% 8.137% 6.890% 7.252% 6.89% 5.39% 5.18% MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202179 Twenty Largest Holders of Quoted Equity Securities The company only has one class of quoted securities, being ordinary shares. The names of the 20 largest holders of ordinary shares, and the number of ordinary shares and percentage of capital held by each holder is as follows: Ordinary shares DAVID MORGAN INVESTMENTS PTY LTD EMILY MCWATERS INVESTMENTS PTY LTD NATIONAL NOMINEES LIMITED RUBI HOLDINGS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED DYNASTY PEAK PTY LTD BNP PARIBAS NOMS PTY LTD UBS NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD SIEANA PTY LTD JBWERE (NZ) NOMINEES LIMITED <50645 A/C> BEER FAMILY HOLDINGS PTY LTD BUDUVA PTY LTD BICKFORDS (AUSTRALIA) PTY LTD BUNGEELTAP PTY LTD SANDHURST TRUSTEES LTD THIRTY-FIFTH CELEBRATION PTY LTD JBWERE (NZ) NOMINEES LIMITED <56871 A/C> GLOBAL ENTERPRISE AND INVESTMENTS INTERNATIONAL PTY LTD Voluntary Escrow Number held 28,571,429 28,571,429 27,417,360 25,465,386 23,749,157 23,373,975 18,502,402 14,268,534 13,059,328 12,631,426 9,472,100 7,081,142 5,873,685 4,234,428 3,734,462 3,721,129 3,380,187 3,087,317 2,882,095 2,645,713 % total shares issued 8.137% 8.137% 7.808% 7.252% 6.763% 6.656% 5.269% 4.063% 3.719% 3.597% 2.697% 2.017% 1.673% 1.206% 1.063% 1.060% 0.963% 0.879% 0.821% 0.753% Voluntary Escrowed Shares Escrowed until the earlier of the release of the company’s financial statements for the financial year ending 30 June 2022 or 31 October 2022 Escrowed until the earlier of the release of the company’s financial statements for the financial year ending 30 June 2023 or 31 October 2023 TOTAL 28,571,428 28,571,430 57,142,856 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202180 Unquoted Equity Securities The number of each class of unquoted equity securities on issue, and the number of their holders, are as follows: Class of Equity Securities Number of unquoted Equity Securities Number of holders Options 13,500,000 2 There are no persons who hold 20% or more of equity securities in each unquoted class other than under an employee incentive scheme. On Market Buyback There is no current on-market buy-back program in place. Issues of Securities There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act which have not yet been completed. Securities purchased on-market No securities were purchased on-market during the reporting period under or for the purposes of an employee incentive scheme or to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an employee incentive scheme. Stock Exchange Listing Maggie Beer Holdings Ltd’s ordinary shares are quoted on the Australian Securities Exchange (ASX issuer code: MBH). Other Information Registers of securities are held by Boardroom Pty Limited, Level 12,225 George Street Sydney NSW 2000. MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 202181 MAGGIE BEER HOLDINGS LTD | ANNUAL REPORT | 2021ABN 69 092 817 171 maggiebeerholdings.com.au 

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