ANNUAL REPORT 2021
Meeting global demand
for sustainable products
Contents
Chairman’s Report
Managing Director’s Report
Overview of Business Activities
Port and Processing Facilities
Sustainability
Board of Directors
Senior Management
Directors’ Report
02
04
09
10
12
16
18
20
Auditor’s Independence Declaration 30
Remuneration Report (Audited)
Financial Report
Directors’ Declaration
Independent Auditor’s Report
31
40
79
80
Additional Shareholder Information 86
Corporate Directory
89
MIDWAY LIMITED
ABN 44 005 616 044
ANNUAL REPORT 2021 We are one of Australia’s largest high-quality
woodfibre processors and exporters. Founded in
1980, Midway is involved in the production and
export of high-quality woodfibre. Midway’s primary
business is the purchasing, processing, marketing
and exporting of woodfibre. Our operating
environment consists of plantation and land
ownership, the procurement of timber resources
within Australia, processing, materials handling
and exporting of woodfibre, to the international
woodfibre market.
$280.2m
Revenue
$14.6m
EBITDA–S
$22.3m
Operating cash flow
$31.5m
Net debt
0101
MIDWAY LIMITED
MIDWAY LIMITEDANNUAL REPORT 2021 Chairman’s Report
Greg McCormack
Chairman
As part of the Company’s strategy to
diversify its footprint and grow future
earnings, the Board authorised Midway
investments in new export projects.
The Board of Directors is pleased that shareholders have started
to see a turnaround in Midway’s financial performance over the
last 12 months as global demand recovered following the first
wave of the COVID-19 pandemic.
The Board would like to recognise the hard work of the
management team and staff of Midway to improve
performance of the business while remaining safe through
the COVID-19 pandemic.
In the last 12 months, Midway generated revenue of
$280.2 million, an 8.7 per cent increase on the previous year
due to improved global market conditions for woodfibre,
especially in our key markets of China and Japan.
Midway recorded underlying EBITDA of $14.6 million, up from
$13.8 million in the previous year. Unfortunately, Midway recorded
a statutory net loss after tax of $5.2 million, but this was a better
result than the previous year of a statutory net loss after tax of
$11.7 million.
The three biggest contributors to the net loss after tax included
a non-cash interest expense of $1.77 million incurred under
AASB 15 relating to trees held off balance sheet, a $1.6 million
depreciation of the value of biological assets, and a $1.75 million
impairment of the bio-fuels marketing business, Bio Growth
Partners (BGP).
The Midway Board of Directors decided not to pay a final
dividend in respect of FY21 in order to preserve cash to fund
growth projects.
Midway recorded improved operating cash flow of $22.3 million,
up from $11.1 million in the previous 12 months. After investing
and financing activities, net debt at the end of the financial year
was $31.5 million, down from $39.4 million in the previous
financial year.
Midway continues to operate within its banking covenants and
National Australia Bank has extended the Company’s term debt
maturity to September 2024.
While most Midway business units performed better in the last
12 months, our woodfibre business in the Tiwi Islands, Plantation
Management Partners (PMP), continued to run at a loss.
The Board shares the disappointment of shareholders in the
short-term performance of PMP and Midway Logistics as a result
of the COVID-19 downturn and will continue to do everything in
our control to improve the performance of these businesses.
The Board is very pleased that Midway recently signed contracts
with a new Chinese customer to export woodfibre from the
Tiwi Islands commencing in early 2022.
The Board has also decided to acquire the remaining 60 per cent
interest in BGP for a nominal amount so that Midway will have
total control over that business in future and we will intensify
efforts to grow domestic sales.
As part of the Company’s strategy to diversify its footprint and
grow future earnings, the Board authorised Midway investments
in new export projects.
The first project, a woodfibre processing operation at Bell Bay
has the potential to provide material earnings growth over the
next few years and we are well progressed with the approvals
and development of a grain handling and export facility at the
Geelong site.
02
MIDWAY LIMITEDANNUAL REPORT 2021 The Board has also authorised engagement of an agent to
market the divestment of surplus land north of Melbourne.
Once the trees have been harvested on surplus land north of
Melbourne, the sale proceeds will be used to reduce debt and
invest in projects such as Bell Bay and Geelong Grain.
The Board looks forward to our new Managing Director and
Chief Executive Officer, Mr Tony McKenna, joining Midway
following the decision of the current MD and CEO, Mr Tony Price,
to step down to pursue non-executive roles.
The Board believes that Mr McKenna has the right combination
of skills and experience to lead Midway into a new phase of
growth. He has extensive international experience in delivering
growth strategies and major investment projects.
Mr McKenna also has a deep understanding of Australian
agribusiness. He has been CEO and Managing Director of Ruyi
Australia for the last five years. Before that he was an Executive
Director of AgCap and Managing Director of Lempriere Capital.
Directors would like to thank Mr Price
for his contribution to Company growth
over the last six years, including the
listing of Midway on the Australian
Stock Exchange and domestic
and international expansion.
The Board remains optimistic about the opportunities that
Midway can take advantage of in the next few years under
the leadership of Mr McKenna, and we continue to aspire
to sustainable returns that will justify shareholder faith in
the Company.
Directors would like to thank Mr Price for his contribution to
Company growth over the last six years, including the listing
of Midway on the Australian Stock Exchange and domestic
and international expansion.
Greg McCormack
Chairman
Mr Price is highly regarded for his extensive forest industry
experience and after he steps down, Mr Price has agreed to
continue as an adviser to Midway on our forestry expansion
plans in Tasmania.
03
MIDWAY LIMITEDANNUAL REPORT 2021 Earnings Drivers
The key drivers of increased revenue and improved underlying
EBITDA in FY21 were increased woodfibre export volumes and
lower input prices, but there were several factors that partially
offset the improved results, including:
• lower woodfibre export prices as woodfibre prices lagged
the recovery in paper pulp prices over the last 12 months;
• a lower bone-dry content of woodfibre exports due to La
Nina weather patterns across eastern Australia over the
last 12 months; and
• a slightly higher Australian dollar on woodfibre export sales
to China and Japan over the last 12 months.
Business Performance
Woodfibre Processing and Sales
The woodfibre processing and export business experienced
mixed fortunes during the last 12 months. Higher export
volumes of woodfibre from Geelong, QCE in Brisbane and
at Midway Tasmania were partly offset by lower export sales
by South West Fibre (SWF) and from the Tiwi Islands.
Overall, woodfibre processing and export revenue fell 11 per cent
from $223.0 million in 2020 to $198.3 million in 2021 as a result
of the SWF and Tiwi Island COVID-19 shutdowns in 2021.
The woodfibre and processing business, excluding SWF, recorded
a 34 per cent increase in underlying EBITDA of $21.1 million
in FY21 from $15.8 million in the previous year as a result of
increased export sales volumes, including increased volumes
of higher quality woodfibre, E Globulus. After proportional
consolidation of the SWF joint venture, underlying EBITDA for
the segment fell 3.2 per cent to $21.5 million from $22.2 million.
SWF is now back in production and recently signed a new
supply agreement with Australian Bluegum Plantations.
In addition, Midway recently signed contracts with a new
Chinese customer for woodfibre sales from the Tiwi Islands,
commencing in the first half of calendar 2022.
Midway also expects to realise the full benefits of higher prices
with its major customers in FY22, The Japanese price for
E. Globulus has been set at US$180 for the first half of FY22.
Managing Director’s Report
Anthony Price
Managing Director
As global economic conditions rebounded
following the first wave of the COVID-19
pandemic, Midway recorded a positive
underlying EBITDA contribution of
$14.6 million in FY21 from increased demand
for woodfibre volumes from customers in
China and Japan.
The last 12 months have been very challenging for the
management team and the staff of Midway Limited, but I am
pleased to report that there are encouraging signs of a turnaround
in performance.
The physical disruption, health concerns and mental anxiety
caused by the COVID-19 pandemic have presented many
hurdles for the business, but the team has managed to clear all
of them without any safety concerns.
Our major customers in China and Japan also faced serious
challenges to their businesses as a result of the COVID-19
pandemic, but they are now starting to support our recovery.
The Chairman’s letter has referred to the subsequent
improvement in overall financial performance in the last 12
months, so my report will focus on operational performance.
FY21 Operating Performance
The highlights of the FY21 results include:
• an 8.7 per cent increase in revenue to $280.2 million;
• a 5.8 per cent increase in underlying EBITDA to
$14.6 million;
• improved operating cash flow of $22.3 million; and
• lower net debt of $31.5 million.
04
MIDWAY LIMITEDANNUAL REPORT 2021 Plantation Management
Plantation management generated a 59 per cent increase in
revenue of $12.4 million in 2021 from $7.8 million in the previous
year from higher inter-company sales to Midway Geelong.
However, the increased revenue was offset by the revaluation of
the plantation estate based on lower US dollar prices. As a result,
the plantation management business recorded a statutory EBITDA
loss of $4.5 million in 2021. This was 36 per cent lower than the
statutory EBITDA loss of $7.0 million in the previous year.
PMP stopped managing timber estates in Asia. As a result,
plantation management became solely focused on managing
estates in Australia during FY21.
Forestry Logistics
Ongoing timber supply constraints and unplanned customer
shutdowns in Western Australia as a result of the
COVID-19 pandemic resulted in reduced domestic business
by Midway Logistics.
Revenue fell 42 per cent to $4.8 million in 2021 from $8.3 million
in the previous year. As a result, Midway Logistics recorded
an underlying EBITDA loss of $2.7 million in 2021. This was
9 per cent higher than the $2.5 million underlying EBITDA
loss in the previous year.
Midway subsequently decided to acquire the remaining
60 per cent interest in BGP for a nominal price. The buy-out
provides Midway with total control over that business
and its customer contracts in Western Australia.
The woodfibre processing and export
business experienced mixed fortunes
during the last 12 months. Higher export
volumes for woodfibre from Geelong,
QCE in Brisbane and at Midway
Tasmania were partly offset by lower
export sales by South West Fibre (SWF)
and from the Tiwi Islands.
05
MIDWAY LIMITEDANNUAL REPORT 2021 Managing Director’s Report continued
It is now the right time for a new Managing Director and Chief
Executive Officer to lead the business into the next exciting
phase of growth, and I am confident that Tony McKenna has
the right skills and experience to do that.
I therefore leave Midway in good hands and hope that loyal
shareholders will stick with the Company as it comes through
the tough times of the global pandemic and starts to reap the
rewards of its growth strategy.
Tony Price
Managing Director
Business Development
I am pleased to report that there has been substantive progress
on implementation of the Midway strategy to grow and diversify
our footprint and develop new businesses that will generate
future earnings.
The Board has approved expansion plans for Midway Tasmania
and the management team has commenced a range of projects
on storage and loading facilities at Bell Bay.
I believe Midway Tasmania will generate the next phase of
earnings growth for the Company over the next few years and
I look forward to helping that part of the business grow.
We are well progressed with the authorisations required for
the construction of a grain storage and handling facility at the
Geelong site. The management team has reached agreement
with GeelongPort to upgrade the shiploader converyors and
are well progressed in planning to build storage silos. There is
strong interest from a number of large grain exporters to utilise
this facility, including our joint venture partner.
It was difficult during the COVID-19 pandemic to advance some
of our strategic projects, but Midway has now progressed plans
to establish a plantation investment vehicle.
I strongly believe that emerging technologies such as carbon
storage and capture also offer exciting new growth opportunities
for Midway and its shareholders.
It is with some regret therefore that I have decided to leave the
business to start the next phase of my career as a Non-Executive
Director. However, I am pleased to have had the opportunity
to lead Midway over the last six years, in particular taking the
Company through the ASX listing process.
06
MIDWAY LIMITEDANNUAL REPORT 2021 ANNUAL REPORT 2021
07
MIDWAY LIMITED
MIDWAY LIMITED
08
ANNUAL REPORT 2021 Overview of Business Activities
Midway is an Australian forestry company based in Geelong,
Victoria, with majority shareholdings in South West Fibre Pty
Ltd (SWF) based in the Green Triangle (south-west Victoria),
Queensland Commodity Exports Pty Ltd (QCE) based in
Brisbane, Plantation Management Partners (PMP) based in
the Tiwi Islands, Midway Tasmania based in Tasmania and
Midway Logistics based in Western Australia.
Midway’s core business is the production and marketing of
woodfibre for supply to producers of pulp, paper and associated
products in the Asian region. Woodfibre is primarily produced
from plantation hardwood, which represents the majority of the
Company’s export sales, with the balance comprising woodfibre
produced from plantation softwood logs and hardwood
timber residues generated from the harvest of sawlogs from
natural hardwood forests. The Company has interests in three
processing and export facilities in mainland Australia.
Midway has diversified since it commenced exporting 32 years
ago in terms of geographical representation, product range,
supply source and customer base. Growing from one export
facility, one product, one customer and one supplier in 1986,
today Midway:
• provides estate management, harvesting and transport
and forestry consulting services;
• has well-developed processing and export facilities
in three locations;
• supplies a diverse range of products in terms of species,
quality and certification levels;
• sources timber supply from numerous major timber
suppliers; and
• has strong relationships with key customers in the two
major importing countries of Japan and China.
Midway staff and contractors conduct harvesting of logs in
plantations, which are then transported to processing mills.
Woodfibre is produced by both fixed chippers and mobile
chippers, and is stockpiled at export facilities.
Woodfibre is used in the production of pulp, which is primarily
used for the production of paper products such as writing and
printing paper, newsprint, cardboard and tissue. Some hardwood
woodfibre is also used for the production of dissolving pulp and
chemi-thermomechanical pulp. Dissolving pulp is produced by
additional chemical refinement and is used in textile manufacture
such as rayon. The pulp and paper industry consumes the
majority of the total traded woodfibre volume, with the balance
being used in the production of reconstituted boards, speciality
pulps and, more recently, Biomass.
The primary use of internationally traded woodfibre is for the
production of Kraft pulp. The Kraft process involves the chemical
breakdown of the woodfibre into lignin (usually used as a fuel
in the pulp mill) and cellulose fibre used for the production of a
wide range of paper products. The uses of hardwood Kraft pulp
are printing and writing papers, and in tissue products, whereas
softwood Kraft pulp is mainly used in packaging, but also in
tissue and to add strength to other paper grades.
1
3
5
7
2
4
6
8
Partnerships
Partner with local
landowners and
communities to
grow sustainable
woodfibre.
Plantations
Pulpwood is grown
and managed on
freehold, leasehold
and private land.
Haul
Haulage contractors
transport product
from plantations to
the mill.
Stockpile
Chip stockpiles
located at mills
and ports.
Planning and
Establishment
Site selection using
known and disciplined
parameters to plant
and grow the highest
quality woodfibre.
Harvest
Contractors harvest
pulpwood sourced
from Company-
managed plantations
or third party suppliers
using mechanical
harvesters.
09
Processing
Mills located at Geelong,
Myamyn, Brisbane, Bell
Bay as well as infield
processing on Melville
Island convert pulplogs
to woodfibre.
Marketing and
Export
Ships carry woodfibre
for export from
GeelongPort, Port
of Portland, Port of
Brisbane, Port Melville
and Bell Bay.
MIDWAY LIMITEDANNUAL REPORT 2021 Port and Processing Facilities
Midway Geelong
• 19 hectares of freehold land adjacent to GeelongPort.
• Two woodfibre mills (separate plantation and native
processing facilities).
• Three stockpiles including three reclaimers with
200,000 green metric tonnes (GMT) total capacity.
• Capacity to process and export up to 1.8 million GMT
per annum of woodfibre.
QCE Brisbane
• Sole woodfibre exporter from Port of Brisbane –
provides geographic and marketing diversity.
• Lease on a four hectare site with the Port
of Brisbane for producing, storing and loading.
• GrainCorp provides toll ship loading.
• 300,000 GMT per annum softwood export capacity.
Midway Geelong (Head Office)
QCE Brisbane
• Hardwood exports commenced in 2016. Capacity
South West Fibre/Portland
of 300,000 GMT per annum.
• Stockpile capacity: 100,000 GMT of softwood
and/or hardwood.
South West Fibre Portland
South West Fibre is the first plantation hardwood processing
and marketing operation in the Green Triangle – provides
geographic and future market diversity.
Midway Tasmania
Midway Logistics
Plantation Management Partners
• Myamyn – 1.2 million GMT per annum current site capacity
plus in-field chipping and ‘upstream’ chip and log storage.
Midway Tasmania
• Marketing and sales.
• Supply agreement with Australian Bluegum Plantations.
• Hardwood shipments commenced September 2017 from
• 51 per cent owned joint venture with Mitsui.
• Portside woodfibre receival, storage and loading facilities
contracted with GrainCorp.
• 80,000 GMT woodfibre stockpile capacity.
• Woodfibre receival capacity of 1.8 million GMT per annum.
Plantation Management Partners
Melville Island
• Plantation Management Partners Pty Ltd (PMP)
provides exclusive forestry management services to the
35,000 hectare Tiwi Islands’ forestry plantation project,
and provides woodchip marketing services to the project.
• Acacia mangium woodchip exports commenced
in November 2015 out of Port Melville.
• Stockpile capacity 60,000 tonnes.
• 400,000 GMT per annum export capacity.
a chipping, stockpiling and loading facility at Bell Bay.
• 450,000 GMT per annum export capacity.
Midway Logistics
• Midway Logistics was previously known as Softwood
Logging Services Pty Ltd, which was established in
1988 after being awarded a 30,000m3/pa contract with
the Forest Products Commission (WA). Midway recently
acquired the remaining 60% of Bio Growth Partners for
a nominal amount.
• The head office is based in Bunbury, Western Australia,
with an expansive range of operational locations all
through the south-west of Western Australia. The
Company offers a range of forestry services, including
infield chipping, conventional harvesting (cut to length),
roadside processing, bio-energy production, stump pulling,
woodchip screening, forestry consulting, transport/haulage
(forest products) and low loader hire.
10
MIDWAY LIMITEDANNUAL REPORT 2021 ANNUAL REPORT 2021
Woodfibre
end uses
Printer and specialty stock
Magazines and brochures
Tissue, towel and toilet paper
High-end product packaging
Clothing and textiles
11
15
MIDWAY LIMITED
Sustainability
Midway is an industry leader in the
sustainable growth of forest products.
Midway works closely with the communities
in which it operates to provide employment,
income and growth opportunities.
The nature of Midway’s activities provides significant
opportunities for advancement of sustainability objectives.
Certifications
Underpinning Midway’s sustainability credentials it holds and
maintains certification for:
• Sustainable Forest Management: AS 4708-2013.
• Chain of custody for forest products AS 4707:2014.
• Occupational health and safety management systems
AS/NZS 4801:2001.
• Quality management systems – requirements AS/NZS ISO
9001:2008.
• Chain of Custody Certification FSC-STD-40-004 V3-0.
• Requirements for Sourcing FSC® Controlled Wood
FSC-STD-40-005 V3-1.
External audits for each certification held are conducted on an
annual basis.
Safety
(AS4801)
Quality
(ISO9001)
Forestry
(AS4708)
AFS CoC
(AS4707)
(PEFC)
FSC® CW,
CoC
Tiwi Is.
Midway
SWF
QCE
PMP
Midway
Logistics
Midway
Tasmania
Employment and Safety
The COVID-19 pandemic continued to present challenges during
the reporting period, particularly in Victoria where extended
lockdowns and office restrictions required non-essential staff
to work from home. To support this, Midway reviewed and
updated the ‘CovidSafe’ COVID-19 response plan to support
staff work arrangements, business continuity planning, and
prevention management and response. In addition, the Geelong
site conducted a COVID-19 drill to simulate incident response
scenarios for a suspected and positive COVID-19 result from
a member of Midway staff, family member, and site visitors.
Over the reporting period a total of 12 new full-time and 27
casual employees were recruited, representing 29 per cent of
the total workforce. Staff turnover was lower than the previous
year with a total of 61 during the 2020-2021 financial year, or
41 per cent of the workforce. Midway recognises the importance
of developing managerial and leadership capability across the
business. Retention and development of talented employees
is a key initiative in the Company’s strategic plan and has
been identified as a means of being able to ensure that the
organisation is more effective through people.
Midway Governance Bodies and Employee Diversity Summary
Board Members
Senior Managers
Managers
Professionals
Technicians and
Trade Workers
Clerical and
Administrative Workers
Machinery Operators
and Drivers
Labourers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Female
Male
< 30 years old
30 – 50 years old
> 50 years old
Aboriginal or Torres Strait Islander
12
MIDWAY LIMITEDANNUAL REPORT 2021 Midway recorded a total of two Lost Time Injuries (LTIs) during
the reporting period and the same number as the previous year.
Due to a reduction in the number of hours worked during the
reporting period, the Lost Time Injury Frequency Rate (LTIFR)
increased from 1.9 in the previous year to 2.6 in the current
reporting period.
To support continuous improvement of a safety work environment
culture for both staff and contractors, Midway undertook
initiatives such as mental health first aid training, and completion
of a job dictionary, which details functional and/or physical
requirements of tasks to assist return to work requirements.
In the last quarter of the financial year certification audits for
the ISO45001 Occupational Health and Safety were conducted
for Midway Limited, Midway Tasmania, Midway Logistics and
Queensland Commodity Exports, which will replace the AS4801
Safety Management System certifications already held.
An ISO45001 audit for South West Fibre is scheduled early in
the 2021-2022 financial year. The scope of Midway’s safety
management system is dependent on business unit operations,
however broadly covers forest management and harvesting
activities, logistics, mill operations and offices.
Port Melville Acacia mangium shipment.
Midway Work Health and Safety Performance Summary
Measure
Total number recordable work-related injuries
Total number high consequence work-related injuries
Total number Lost Time Injuries
Total number of fatalities
Total recordable injury frequency rate
High consequence injury frequency rate
Lost Time Injury Frequency Rate (LTIFR)
Fatal accident frequency rate
Note: All frequency rates shown above are based on rate per 1,000,000 hours worked.
Midway
Employees
3
Midway
Contractors
-
Midway
All
3
-
2
-
9.8
-
6.5
-
-
-
-
-
-
-
-
-
2
-
3.9
-
2.6
-
Environmental Performance
Managing our environmental compliance obligations and
community expectations remains a high priority across the
Group. Midway conducts annual stakeholder consultations
for both interested and affected parties in accordance with
requirements of the Responsible Wood Standard AS4708,
and the FSC® Controlled Wood Standard (FSC-STD-40-005).
During the reporting period Plantation Management Partners
(PMP) recorded two separate incidents that were notified to the
federal Department of Agriculture, Water and the Environment
in relation to overflow events following periods of significant
rainfall. Incident investigation reports and corrective actions
were subsequently submitted to the Department.
An external forestry audit of a completed harvesting operation
in the Otways was conducted during the reporting period in
response to a community complaint received by Colac Otway
Shire Council. The audit findings showed the harvesting
operation conformed with all requirements of the Code of
Practice for Timber Harvesting in Victoria.
Annual ambient air quality monitoring was conducted for Geelong
and Myamyn sites early in 2021. Results from both sites were
compliant with the EPA Victoria air quality guideline limit of
4 g/m2/month as a monthly average.
13
Midway Environmental Performance Summary
Non-compliance with environmental
laws and regulations
1
2
2
2018/
2019
2019/
2020
2020/
2021
Energy and Climate
Group energy consumption and greenhouse gas emissions has
been calculated for the 2020-2021 financial year for operations
where Midway has financial control using the National
Greenhouse Accounts Factors 2020, Australian Government
Department of Industry, Science, Energy and Resources.
Energy consumption across the companies is primarily attributed
to fuel consumption of mobile and stationary equipment for
mill operations, Company vehicle fleet, and onsite electricity
production for the Yapilika camp. A total of 103,225 gigajoules of
energy was consumed during the 2020-2021 financial year, with
electricity purchased from the grid accounting for 14 per cent of
total energy consumption. A total of 3,929,246 kWh of electricity
was purchased during the financial year. All energy consumed
was sourced from non-renewable sources.
MIDWAY LIMITEDANNUAL REPORT 2021 Sustainability continued
Energy intensity was calculated for mill operations as a measure
of green metric tonnes (GMT) of chips produced based on total
energy consumption. Woodchips received from outside sources
were included as part of the total chip produced. Energy intensity
for QCE’s Brisbane mill was noted to be lower than Midway’s
Geelong mill due to use of a third party contractor for operation
of the chipper onsite. This was also reflected in the greenhouse
gas emissions intensity comparison.
Our greenhouse gas calculation includes scope 1 and 2
emissions and contributed to a total 10,044 tCO₂-e (scope 1
and 2 emissions) during the 2020-2021 financial year with
Midway’s energy portion accounting for 44 per cent.
The current carbon storage of plantation trees within Midway’s
defined forest area is estimated to be 6.20 million tonnes of
CO₂ equivalents. This includes 1.21 million tonnes managed
by Midway Plantations, 3.75 million tonnes managed by PMP
and 1.24 million tonnes of CO₂ equivalents managed by
Midway Tasmania.
PMP continued its annual savannah-burning program to prevent
the risk of wildfires impacting plantation assets. The program is
run in conjunction with the Tiwi Land Rangers and traditional
owners and contributes to the Tiwi Islands Savannah Burning
for Greenhouse Abatement project, which aims to reduce carbon
emissions by conducting cool, mosaic burning to minimise the
occurrence of hot, late season fires. PMP has also worked closely
with the Tiwi Land Rangers and researchers on studying the
impact of burning practices on the island.
Midway Energy and Greenhouse Gas Emissions Summary
FY20/21
Energy
Total energy consumption within
the organisation
Midway
MWT
MWL
QCE
PMP
Total
GJ/year
26,922
800
39,038
7,314
29,151
103,225
Total electricity purchased from the grid
kWh/year
3,602,140
-
75,406
251,700
- 3,929,246
Total fuel consumption within the organisation GJ/year
Energy intensity
MJ/GMT
13,954
31.3
Greenhouse Gas (GHG) emissions
Direct (scope 1) GHG emissions
Indirect (scope 2) GHG emissions
Indirect (scope 2) GHG emissions
Figures are not audited.
tCO2-e/year
tCO2-e/year
kgCO2-e/GMT
979
3,530
5.6
800
38,767
-
56
-
-
-
2,727
51.3
-
6,408
26.9
29,151
63,878
-
33.6
450
204
2.4
2,046
-
-
6,258
3,785
5.1
Biodiversity
Midway owns or manages more than 62,000 hectares of land
covering a broad geographical range including Victoria, Tasmania,
and the Tiwi Islands, and includes both plantation and native
forests and vegetation. These areas provide habitat for a wide
range of terrestrial and aquatic organisms including species
listed as rare, threatened, or endemic. Midway is committed to
maintenance of biodiversity values within owned or managed
estate in line with third party certification schemes and standards.
Midway continued water quality monitoring in key waterways
in the Otways near planned, active or completed activities in line
with its biodiversity monitoring program. PMP also continued to
monitor and record sightings of key threatened species such as
Red Goshawk, Tiwi Island Masked Owl and Partridge Pigeon
in line with EPBC approval requirements.
Updated regulatory guidance for management of koalas in blue
gum plantations in Victoria was issued by the Conservation
Regulator in March 2021. Midway conducted a comprehensive
review of its Koala Management Plan and associated
management procedures in accordance with the requirements
of the guidance, including expert review from a koala ecologist.
The updated Koala Management Plan and associated procedures
have been submitted to the Department of Environment, Land,
Water and Planning, and adopted for Midway forestry operations.
Midway values the opportunity to work with Greening Australia (GA) on projects
such as the revegetation works at Yuulong near the Gellibrand River pictured
14
MIDWAY LIMITEDANNUAL REPORT 2021 ANNUAL REPORT 2021
PMP are engaged with the schools on Tiwi Islands in a Vocational Education
(VET) project. At Xavier college (on Bathurst Island) our PMP staff gave a
presentation to the senior students.
This material references Disclosure 405-1 from GRI 405:
Diversity and Equal Opportunity 2016, Disclosures 403-1 and
403-9 from GRI 403: Occupational Health and Safety 2018,
Disclosures 302-1 and 302-3 from GRI 302: Energy 2016
Emissions, and Disclosures 305-1, 305-2 and 305-4 from
GRI 305: Emissions 2016.
Community Initiatives
Midway engages with key stakeholders in the communities in
which we operate to manage our activities and mitigate adverse
impacts on those communities. We also invite stakeholders to
communicate concerns regarding high conservation values and
other environmental and community values associated with
Midway’s wood supply area.
The Midway Group is a significant employer in regional
communities, through direct employees and indirect contractor
employees. Our policy is to support communities in the areas
where we conduct our business and where our employees and
contractors live. In addition to our direct economic support for
employment and the local economy, we provide sponsorship
to a range of community organisations in these areas.
Midway freehold land and forestry activities are centred around
the Geelong region of Victoria, including the Otway Ranges
and Heytesbury regions. Midway is a major sponsor of many
community organisations including residents’ groups, charity
clubs and events, car, truck and bike shows, business clubs,
peak industry organisations, industry awards, local schools,
scouts’ groups and local festivals.
Midway is particularly proud of our association with the Tiwi
people and the employment and training opportunities the
Tiwi Island Forestry Project provides to local communities.
During the reporting period, PMP worked with the Northern
Territory Department of Education to support a conservation
and land management training program for year 10-12 students
from Tiwi College and Xavier College. The program provides
students with an opportunity to learn about forestry and potential
pathways for work experience or interest in employment in the
Tiwi Island Forestry Project.
15
MIDWAY LIMITED
Board of Directors
Gregory McCormack
B.Bus
Non-Executive Chairman
Greg has spent his entire
career in the forest products
industries. He was the
Managing Director of
McCormack Timbers, a
timber milling and wholesale
business, and was a founding
Director of Midway in 1980.
He has held senior positions
with both the National and
the Victorian Association
of Forest industries (having
served as President of
both associations). Greg
is the current President
of the Australian Forest
Products Association. Greg
was appointed a Director in
November 1997.
Anthony Price
B.Sc (Forestry), Grad. Dip.
Bus Mgt, GAICD
Managing Director and
Chief Executive Officer
Tony has spent most of his
career in the forestry sector,
but spent some years
working in the mining industry.
He has held several senior
management positions in the
hardwood plantation sector
and has also run his own
consultancy business. He has
attended the International
Executive Programme
at INSEAD in France. He
is currently Chairman
of Forestworks Ltd, an
organisation which provides
training packages to the
forest industry. Tony was
appointed Managing Director
and Chief Executive Officer
in November 2015.
Gordon Davis
B.Sc (Forestry), M.Sc (Ag),
MBA
Nils Gunnersen
B.Bus (Agricultural
Commerce)
Independent Non-
Executive Director
Gordon has spent most of
his career in the forestry
and commodities industries.
He was Managing Director
of AWB Limited from
2006 to 2011, and Chair
of VicForests from 2011
to 2016. He has been a
Director of Nufarm Limited
(ASX: NUF) since 2011, and
Healius Limited (ASX: HLS)
since 2015. Gordon is the
Chair of the Remuneration
and Nomination Committee,
and a member of the Audit
and Risk Management and
the Work Health Safety and
Sustainability Committees,
and was appointed a Director
in April 2016.
Non-Executive Director
Nils has over 25 years’
experience across the forests
and wood products industry.
He is a graduate of the
Australian Rural Leadership
Programme. He was Executive
Director of Operations and
then Managing Director of
Gunnersen Pty Ltd, a large
independent wood products
importer and distributor in
Australia and New Zealand
(2008-2019). He is a Trustee
of the JW Gottstein Trust,
a charitable trust which
supports education in the
forest products industry.
Nils is a Director of Chebmont
Pty Ltd, which is a substantial
holder of Midway shares.
Nils is Chair of the
Work Health Safety and
Sustainability Committee,
and was appointed a Director
in October 2012.
16
MIDWAY LIMITEDANNUAL REPORT 2021 Tom Gunnersen
B.A (Melb), MBA (Finance)
(Bond)
Non-Executive Director
Tom has 20 years of corporate,
investment and capital markets
experience in Australia and
Asia. He is a co-founder and
current Director of boutique
corporate advisory firm KG
Capital Partners and is a
Director of Chebmont Pty Ltd,
which is a substantial holder
of Midway shares. Previously,
Tom was a Director of Equities
for global investment bank
Canaccord Genuity Limited
during which time he was
based in Hong Kong for
several years. Tom is a
member of the Remuneration
and Nomination Committee,
and was appointed a Director
in February 2018.
Thomas Keene
B.Ec, FAICD
Independent Non-
Executive Director
Tom has a commercial and
agribusiness background,
having held the position
of Managing Director of
GrainCorp Ltd between
1993 and 2008. In 2007,
Tom was awarded the
NAB Agribusiness Leader
of the Year. He is a former
Chairman of Allied Mills Ltd
and Grain Trade Australia and
a former Director of Cotton
Seed Distributors Ltd. He has
been a Director of Australian
Agricultural Company Limited
(ASX: AAC) since 2011.
Tom is a member of the
Audit and Risk Management
and the Remuneration and
Nomination Committees,
and was appointed a Director
in August 2008.
Leanne Heywood
OAM, B.Bus (Acc), MBA,
FCPA, GAICD
Independent Non-
Executive Director
Leanne has broad general
management experience
gained through an
international career in the
mining sector, including 10
years with Rio Tinto. Her
experience includes strategic
marketing, business finance
and compliance and she has
led organisational restructures,
disposals and acquisitions.
She has been a Director
of Orocobre Limited (ASX:
ORE) since 2016, Quickstep
Holdings Limited (ASX: QHL)
since February 2019, and she
is also a Director of Australian
Meat Processor Corporation
Ltd. Leanne is Chair of the
Audit and Risk Management
Committee and a member of
the Work Health Safety and
Sustainability Committee, and
was appointed a Director in
March 2019.
17
MIDWAY LIMITEDANNUAL REPORT 2021 Senior Management
Stephen Roffey
General Manager
– Marketing and
Development
Stephen joined Midway in
1994 and holds forestry
qualifications and is currently
Marketing and Development
Manager. Mr Roffey has
formerly held management
roles in resource supply,
operations and plantation
estate management and has
29 years’ experience in forest
management and operations.
Ashley Merrett
Chief Financial Officer
Ash joined Midway in 1993
and is responsible for all
accounting, tax, Group
forecasting and capital
management (including debt
facilities). He is the Company
Secretary for SWF and
QCE. He holds a Bachelor
of Commerce and has over
20 years of experience in
finance, accounting and office
management.
Malcolm Hatcher
General Manager –
Technical Services
Mal joined Midway in 2004
and is responsible for
technical services. He has
formerly held management
roles in operations and
business analysis. He has
a forestry degree, with
over 30 years’ experience
in forest management,
forest harvesting, plantation
establishment, processing,
forest certification and
management systems.
Tony Price
Managing Director and
Chief Executive Officer
Tony has spent most of his
career in the forestry sector,
but spent some years
working in the mining industry.
He has held several senior
management positions in the
hardwood plantation sector
and has also run his own
consultancy business. He has
attended the International
Executive Programme
at INSEAD in France. He
is currently Chairman
of Forestworks Ltd, an
organisation which provides
training packages to the
forest industry. Tony was
appointed Managing Director
and Chief Executive Officer
in November 2015.
18
MIDWAY LIMITEDANNUAL REPORT 2021 Glen Samsa
Bradley Winthrop
Mitch Morison
General Manager –
Plantations
General Manager –
Operations
General Manager –
Business Development
Glen brings over 20 years of
industry expertise and is the
Chief Executive Officer of the
recently acquired Plantation
Management Partners. He
has extensive knowledge and
skills in forestry analysis and
valuation, project development,
technical management, and
financial management and
reporting. Glen is a member
of the Institute of Foresters of
Australia, and the Australian
Institute of Company Directors.
Brad joined Midway in 2018.
He holds qualifications in
forestry, occupational health
and safety and project
management, with 28
years’ forestry management
experience in Australia
and internationally. Prior to
joining Midway he held senior
executive, operational and
strategic planning roles.
Mitch joined Midway in 2020
and has over 25 years’
experience working in the
agribusiness sector trading
in various agricultural
commodities, particularly in
the grain industry. He has a
deep knowledge of global
commodity markets and
has extensive international
experience. Mr Morison also
has an extensive background
in developing and facilitating
business growth strategies for
natural resource businesses
across Australia.
19
MIDWAY LIMITEDANNUAL REPORT 2021 Directors’ Report
The Directors present their report together with the consolidated financial statements of the Group comprising of Midway Limited
(the Company) and its subsidiaries for the financial year ended 30 June 2021 and the auditor’s report thereon.
Directors
The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows:
Name
Directors
Position Held
Employment Status
Gregory McCormack
Non-Executive Chairman
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Bennett
Anthony Price
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Retired 1 December 2020
Managing Director and CEO
All of the Directors have been in office for the entire period unless otherwise stated.
Gregory McCormack B.Bus
Non-Executive Chairman
Greg has spent his entire career in the forest products industries. He was the Managing Director of McCormack Timbers, a timber
milling and wholesale business, and was a founding Director of Midway in 1980. He has held senior positions with both the National
and the Victorian Association of Forest industries (having served as President of both associations). Greg is the current President of
the Australian Forest Products Association. Greg was appointed a Director in November 1997.
Nils Gunnersen B.Bus (Agricultural Commerce)
Non-Executive Director
Nils has over 25 years’ experience across the forests and wood products industry. He is a graduate of the Australian Rural Leadership
Programme. He was Executive Director of Operations and then Managing Director of Gunnersen Pty Ltd, a large independent wood
products importer and distributor in Australia and New Zealand (2008-2019). He is a Trustee of the JW Gottstein Trust, a charitable
trust which supports education in the forest products industry. Nils is a Director of Chebmont Pty Ltd, which is a substantial holder of
Midway shares. Nils is Chair of the Work Health Safety and Sustainability Committee, and was appointed a Director in October 2012.
Tom Gunnersen B.A (Melb), MBA (Finance) (Bond)
Non-Executive Director
Tom has 20 years of corporate, investment and capital markets experience in Australia and Asia. He is a co-founder and current Director
of boutique corporate advisory firm KG Capital Partners and is a Director of Chebmont Pty Ltd, which is a substantial holder of Midway
shares. Previously, Tom was a Director of Equities for global investment bank Canaccord Genuity Limited during which time he was based
in Hong Kong for several years. Tom is a member of the Remuneration and Nomination Committee, and was appointed a Director in
February 2018.
Gordon Davis B.Sc (Forestry), M.Sc (Ag), MBA
Independent Non-Executive Director
Gordon has spent most of his career in the forestry and commodities industries. He was Managing Director of AWB Limited from 2006
to 2011, and Chair of VicForests from 2011 to 2016. He has been a Director of Nufarm Limited (ASX: NUF) since 2011, and Healius
Limited (ASX: HLS) since 2015. Gordon is the Chair of the Remuneration and Nomination Committee, and a member of the Audit
and Risk Management and the Work Health Safety and Sustainability Committees, and was appointed a Director in April 2016.
20
MIDWAY LIMITEDANNUAL REPORT 2021
Leanne Heywood OAM, B.Bus (Acc), MBA, FCPA, GAICD
Independent Non-Executive Director
Leanne has broad general management experience gained through an international career in the mining sector, including 10 years with
Rio Tinto. Her experience includes strategic marketing, business finance and compliance and she has led organisational restructures,
disposals and acquisitions. She has been a Director of Orocobre Limited (ASX: ORE) since 2016, Quickstep Holdings Limited (ASX: QHL)
since February 2019, and she is also a Director of Australian Meat Processor Corporation Ltd. Leanne is Chair of the Audit and Risk
Management Committee and a member of the Work Health Safety and Sustainability Committee, and was appointed a Director in
March 2019.
Thomas Keene B.Ec, FAICD
Independent Non-Executive Director
Tom has a commercial and agribusiness background, having held the position of Managing Director of GrainCorp Ltd between 1993
and 2008. In 2007, Tom was awarded the NAB Agribusiness Leader of the Year. He is a former Chairman of Allied Mills Ltd and Grain
Trade Australia and a former Director of Cotton Seed Distributors Ltd. He has been a Director of Australian Agricultural Company Limited
(ASX: AAC) since 2011. Tom is a member of the Audit and Risk Management and the Remuneration and Nomination Committees,
and was appointed a Director in August 2008.
Anthony Price B.Sc (Forestry), Grad. Dip. Bus Mgt, GAICD
Managing Director and Chief Executive Officer
Tony has spent most of his career in the forestry sector, but spent some years working in the mining industry. He has held several
senior management positions in the hardwood plantation sector and has also run his own consultancy business. He has attended the
International Executive Programme at INSEAD in France. He is currently Chairman of Forestworks Ltd, an organisation which provides
training packages to the forest industry. Tony was appointed Managing Director and Chief Executive Officer in November 2015.
Anthony Bennett Dip Eng, Grad Dip Ind Mgt
Independent Non-Executive Director
Tony’s background is in production management, particularly in the manufacture of high volume/low margin products for use in civil
engineering construction. His executive experience was gained in both public companies as well as operating his own construction
materials business for some 25 years. Tony was a member of the Work Health Safety and Sustainability Committee, was appointed a
Director in November 2013 and retired from the Board on 1 December 2020.
Company Secretary
Robert Bennett B.Com, CA, FGIA
Rob has many years’ company secretarial and governance experience with Coles Group Limited, AWB Limited, and Medibank
Private Limited.
Committee Membership
As at the date of this report, the Company has an Audit & Risk Management Committee (ARMC), a Remuneration & Nomination
Committee (RNC) and an Work Health Safety and Sustainability Committees (WHSSC) of the Board of Directors.
Name
Directors
Gregory McCormack
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Price
ARMC
WHSSC
RNC
Comments
a
a
a
a
a
a
a
a
a
Chair WHSSC
Chair RNC
Chair ARMC
CEO
21
MIDWAY LIMITEDANNUAL REPORT 2021
Directors’ Report continued
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board committee held during the year and the number
of meetings attended by each Director were as follows:
Directors
Gregory McCormack
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Bennett
Anthony Price
Board
ARMC
RNC
WHSSC
Other Committees
Held
15
15
15
15
15
15
7
15
Attended
15
15
15
15
14
15
7
15
Held
–
–
–
6
6
6
–
–
Attended
–
–
–
6
5
6
–
–
Held
–
–
4
4
–
4
–
–
Attended
–
–
4
4
–
4
–
–
Held
–
3
–
–
1
–
2
–
Attended
–
3
–
–
1
–
2
–
Held
1
–
–
2
2
–
–
2
Attended
1
–
–
2
2
–
–
2
Principal Activities
The principal activities of the Group during the 2021 financial year are based on the reportable segments of the Group as below:
Reportable Segments
Products/Services
Woodfibre
Includes primary operations whereby the Group purchases and sells both own and third party
wood. SWF is also proportionally consolidated at 51 per cent for segment reporting, which
reflects how management views and makes decisions of its operations.
Forestry Logistics
Forestry Logistics provides support services to third parties engaged in growing woodfibre
including harvest and haul.
Plantation Management
Plantation management is the provision of silviculture services including on Group-owned trees.
The segment also holds any Group-owned plantation land and trees.
Ancillary
Other aggregated costs which are not individually significant.
Operating and Finance Review
Financial Results
Full Year Results Impacted by Market Forces and More Recently COVID-19
• The Group achieved underlying earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items
of $14.6 million (2020: $13.8 million).
• Underlying net profit/(loss) before tax was $1.1 million and net profit/(loss) after tax was ($0.6 million).
• No dividend will be paid in respect of full year FY21 results.
Segment Performance
• The Woodfibre segment was impacted by the lag effect of lower pricing in the prior corresponding period. In addition
lower dry fibre as a result of the La Nina event in the eastern states contributed to lower EBITDA. These impacts were
offset by additional volume shipped particularly out of Geelong. One of the largest impacts to the segment against the prior
corresponding period was the performance of the Group’s joint venture South West Fibre (SWF), which was adversely
impacted by limited sales on the back of the adverse market conditions in FY20, resulting in an EBITDA loss of $1.5 million,
which is $4.3 million lower than the corresponding period.
• SWF resumed operations and signed a new supply contract with Australian Bluegum Plantations.
• Midway recently signed contracts with a new Chinese customer for woodfibre sales from the Tiwi Islands in the next two
financial years.
• In the plantation management segment, primarily as a result of appreciation of the AUD against the USD impacting log
prices, a net decrement on the treecrop was recorded of ($2.3 million).
• Ongoing timber supply constraints and unplanned customer shutdowns in Western Australia as a result of the COVID-19
pandemic resulted in reduced domestic business by the Forestry Logistics segment.
22
MIDWAY LIMITEDANNUAL REPORT 2021 A summary of the financials has been provided below to the previous corresponding period:
$’000
Revenue and other income
Sales revenue
Other income
Less: expenses
Changes in inventories of finished goods and work in progress
Raw materials, consumables and other procurement expenses
Employee benefits expense
Plantation management expenses
Freight and shipment costs
Repairs and maintenance costs
Other operating expenses
Share of profit/(loss) of equity accounted investments
EBITDA – S (underlying)
Depreciation and amortisation
EBIT – S (underlying)
Net finance expense
Net profit/(loss) before tax – S (underlying)
Income tax (expense)/benefit
Net profit/(loss) after tax – S (underlying)
EBITDA – SL
Net profit/(loss) after tax – SL
2021
2020
Change
280,197
257,760
2,155
6,487
282,352
264,247
22,437
(4,332)
18,105
(12,654)
6,066
(179,675)
(164,106)
(19,369)
(26,249)
(199)
(840)
(40,161)
(50,702)
(6,438)
(7,749)
(1,475)
14,632
(11,271)
3,361
(2,188)
1,173
(1,834)
(661)
12,518
(637)
(8,001)
(9,343)
2,764
13,836
(13,094)
742
(2,153)
(1,411)
884
(527)
11,993
(430)
(18,720)
(15,569)
6,880
641
10,541
1,563
1,594
(4,239)
796
1,823
2,619
(35)
2,584
(2,718)
(134)
525
(207)
Non-IFRS Measures
Throughout this report the Group has used certain non-IFRS measures, predominately EBIT and EBITDA. The non-IFRS measures have
been deemed useful for recipients in measuring the underlying performance of the Group. The non-IFRS measures have not been audited.
Non-IFRS Measure
Description
EBIT
EBITDA
Underlying NPAT – S
Underlying EBITDA – S
Underlying NPAT – SL
Underlying EBITDA – SL
Earnings, before interest and tax
Earnings, before interest, tax, depreciation and amortisation
Statutory net profit after tax adjusted to remove impact of one-off or non-recurring items
and the net fair value gain/(loss) on biological assets
Earnings, before interest, tax, depreciation and amortisation adjusted to remove impact
of one-off or non-recurring items and the net fair value gain/(loss) on biological assets
Underlying NPAT – S adjusted for the impact of AASB 16. It includes operating lease expense
as it was pre AASB 16 adoption and excludes right of use (ROU) asset depreciation and interest
expenses on lease liability
Underlying EBITDA – S adjusted for the impact of AASB 16. It includes operating lease expense
as it was pre AASB 16 adoption and excludes ROU asset depreciation and interest expenses
on lease liability
23
MIDWAY LIMITEDANNUAL REPORT 2021
Directors’ Report continued
Operating and Finance Review continued
Reconciliation of Underlying Net Profit/(Loss) After Tax to Statutory Net Profit After Tax (NPAT)
Net profit/(loss) after tax – SL
Lease expense (AASB16 adjustments)
Net profit/(loss) after tax – S
Net fair value decrease on biological assets
Non-cash interest expense (AASB 15 strategy impact)1
JobKeeper
Impairment loss on non-current assets (Plantation Management Partners Pty Ltd)
Impairment loss on non-current assets (Bio Growth Partners Pty Ltd)
Impairment loss on non-current assets (ADDCO Fibre Pty Ltd)
Restructuring cost
Transaction costs incurred
Net profit/(loss) after tax – statutory
2021
$’000
(637)
(24)
(661)
(1,583)
(1,767)
1,410
–
(1,749)
–
(105)
(723)
2020
$’000
(430)
(97)
(527)
(3,421)
(2,342)
726
(4,266)
–
(1,446)
(169)
(288)
(5,178)
(11,733)
Change
(207)
73
(134)
1,838
575
684
4,266
(1,749)
1,446
64
(435)
6,555
1. Non-cash interest expense is incurred on the liability created on 1 July 2018 to repurchase trees under the Strategy arrangement, which was deemed a financing
arrangement upon the adoption of AASB 15 Revenue from Contracts with Customers. The Strategy arrangement is a contractual obligation to repurchase
hardwood trees the Group sold in February 2016.
Reconciliation of Underlying Earnings, Before Interest, Tax, Depreciation and Amortisation to Statutory
Earnings, Before Interest, Tax, Depreciation and Amortisation (EBITDA)
EBITDA – SL
Lease expense (AASB16 adjustments)
EBITDA – S
Net fair value increment/(decrement) on biological assets
JobKeeper
Impairment loss on non-current assets (Plantation Management Partners Pty Ltd)
Impairment loss on non-current assets (Bio Growth Partners Pty Ltd)
Impairment loss on non-current assets (ADDCO Fibre Pty Ltd)
Restructuring cost
Transaction costs incurred
EBITDA
Performance Against Prior Corresponding Period
Woodfibre
Revenue
EBITDA – S
EBITDA
2021
$’000
12,518
2,114
14,632
(2,261)
2,014
–
(2,269)
2020
$’000
11,993
1,843
13,836
(4,887)
1,037
(6,516)
–
–
(2,066)
(149)
(1,034)
10,933
(240)
(412)
752
Change
525
271
796
2,626
977
6,516
(2,269)
2,066
91
(622)
10,181
2021
$’000
198,259
21,488
22,851
2020
$’000
223,013
22,212
16,733
Δ
-11%
-3%
37%
24
MIDWAY LIMITEDANNUAL REPORT 2021
The reduced EBITDA-S is attributable to the adverse market conditions. Key metrics as follows:
• Volume is up 32 per cent across the segment across Geelong, QCE and Midway Tasmania.
• This positive result was offset by our joint venture operations (South West Fibre), which had a volume decrease of 65 per cent
leading to a lower NPAT contribution of $4.3 million to the Group over the prior corresponding period.
• Additionally, Plantation Management Partners only shipped one log vessel for the year leading to a $3.7 million negative
EBITDA contribution. The Group recently signed contracts with a new Chinese customer for woodfibre sales from the
Tiwi Islands in the next two financial years.
• Other key movements include:
– a 1 per cent decrease in Bone Dry percentage due to the La Nina weather event throughout the eastern states; and
– price decreases due to the lag effect of lower prices in FY20 offset by lower supply costs. More recently the Japanese price
has been set at US$180/BDMT for the first half of FY22, which will lead to a positive impact for FY22.
Forestry Logistics
Revenue
EBITDA – S
EBITDA
2021
$’000
4,823
(2,705)
(4,473)
2020
$’000
8,264
(2,473)
(4,780)
Δ
-42%
-9%
6%
In FY21, timber supply constraints and unplanned customer shutdowns in Western Australia as a result of the COVID-19 pandemic
resulted in reduced domestic business by the Forestry Logistics segment. Additionally, operations in the last quarter were significantly
impacted by wet weather in Western Australia impacting site access to produce forecast volumes.
Plantation Management
Revenue
EBITDA – S
EBITDA
2021
$’000
12,053
(2,226)
(4,487)
2020
$’000
6,844
(2,152)
(7,039)
Δ
76%
-3%
36%
The reduced result is driven by the revaluation of the Group’s treecrop, which resulted in a $2.3 million decrement primarily due to the
appreciation of the AUD against the USD impacting log prices.
Revenue is up 76 per cent on the prior corresponding period due to more volume produced from the estate and sold to the Woodfibre
segment (intra segment sales).
Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2021
$’000
59,290
203,605
262,895
46,367
84,287
130,654
132,241
2020
$’000
54,769
205,835
260,604
41,375
89,110
130,485
130,119
Highlights
• Improved cash flow for the year (operating +$22.2 million) – A strong operating cash flow conversion from EBITDA
as a result of normalised stockpile levels.
• $139.8 million of plantation land and trees on the balance sheet, valued at fair value.
• No dividend declared in order to preserve cash to fund growth projects in FY22.
25
MIDWAY LIMITEDANNUAL REPORT 2021
Directors’ Report continued
Operating and Finance Review continued
Financial Position continued
Net Debt
Borrowings – current
Borrowings – non-current
Less cash
Cash and cash equivalents
Net debt
2021
$’000
9,552
34,882
44,434
2020
$’000
11,610
38,868
50,478
(12,956)
31,478
(11,049)
39,429
Highlights
• Refinancing and extension of term debt maturity to 30 September 2024.
• As at 30 June 2021 the Group was within its covenant limits.
Outlook
The Directors firmly believe that the long-term outlook for woodfibre exports into Asia, especially China and Japan, remains positive.
Increased investment in pulp manufacturing in China, tied to rising gross domestic product and higher middle-class incomes, will drive
import demand while woodfibre supply capacity in the pacific rim is expected to become increasingly constrained.
The COVID-19 pandemic is currently disrupting production and supply chains and reducing demand for paper used in offices, but there
are off-setting positive trends emerging with the increased emphasis on hygiene driving demand for paper-based tissues and personal
protection equipment such as facemasks, and increased online sales increasing demand for pulp used in packaging.
These global trading issues may take some time to play out, so your Directors are prudently looking at additional cost reduction initiatives
and diversification strategies that may generate future revenue and earnings streams. We remain confident that there are many growth
opportunities for Midway that will benefit shareholders in the longer term.
Key Risks and Business Challenges
The principal risks and business challenges for the Group are:
• Security of supply – There is a risk that Midway may not be able to secure sufficient timber supply necessary to meet growing
customer demand.
• Risk that the COVID-19 pandemic that is currently disrupting production and supply chains continues for an extended period.
• Customer demand – As most sales are achieved on a short-term contractual basis, there can be no guarantee that these
relationships will continue.
• Exposure to foreign exchange rates – As most sales are denominated in USD whilst costs are in AUD, any adverse exchange
rate fluctuations would have an adverse effect on its future financial performance and position.
• Banking facilities – There is a risk that Midway may not be able to refinance its existing or future bank facilities as and when
they fall due, or that the terms available to Midway on refinancing may not be as favourable as the terms of its existing or
future bank facilities. In addition, Midway has a debt facility which is subject to various covenants. Factors such as a decline
in Midway’s operations and financial performance (including any decline arising from any adverse foreign exchange rate
fluctuations) could lead to a breach of its banking covenants. If a breach occurs, Midway’s financier may seek to exercise
enforcement rights under the debt facility, including requiring immediate repayment, which may have a materially adverse
effect on Midway’s future financial performance and position.
• Excess system capacity – Midway is subject to a number of contracts which contain minimum annual volume commitments.
Financial costs are imposed if these volume commitments are not met.
• Contamination of product – woodfibre export contracts all contain similar contamination requirements. There is a risk of
financial recourse in the event of a breach of contract.
26
MIDWAY LIMITEDANNUAL REPORT 2021
• Costs – Midway’s profitability could be materially and adversely affected by changes in costs which are in many respects
beyond its reasonable control.
• Sale of freehold plantation land – In the event freehold plantation land is sold after harvest of the current rotation of trees,
there is a risk Midway may not be able to achieve sales for some or all of the estate within its optimal timeframe at or in
excess of book value.
• Vessel chartering – An increasing proportion of Midway’s export sales are executed on a cost, insurance and freight (CIF)
basis, there is a risk that Midway may not be able to finalise an export sale contract rendering the vessel idle.
• Employee recruitment and retention risk – There is a risk the Group may not be able to attract and retain key staff,
particularly in remote regions.
• Port of Brisbane tenure – There is a risk that QCE will be unable to renew the lease expiring in 2022 and, therefore,
would need to seek access to an alternative export facility.
• Risk of fire affecting timber supply – Loss of plantation resource and therefore supply due to fire is an ever-present
industry risk.
• Risk of extreme weather events occurring in remote regions such as the Tiwi Islands.
• Other risks facing the Company include: Failure to comply with laws, regulations and industry standards generally
(and environmental matters and industry accreditations specifically), risk of litigation, claims and disputes, bribery and
corruption in foreign jurisdictions.
In order to manage these challenges, the Company hedges a significant proportion of its forward sales through foreign exchange
hedging contracts and continues to maintain and strengthen its business relationships including entering into strategic alliances with
key suppliers. Additionally, imposing a strong control environment focusing on preventative controls acts to further manage these
business challenges.
Dividends
There were no dividends declared during the 2021 financial year.
Corporate Governance
The Group has adopted a range of charters and policies aimed at ensuring that the Group’s business is conducted in an ethical manner
and in accordance with the highest standards of corporate governance.
Significant Changes in the State of Affairs
Impairment of Non-financial Assets
The Group suffered from timber supply constraints and unplanned customer shutdowns in Western Australia as a result of the
COVID-19 pandemic, which resulted in reduced domestic business that impacted our equity accounted investment Bio Growth Partners
(BGP). Additionally, operations in the last quarter were significantly impacted by wet weather in Western Australia impacting site
access to produce forecast volumes. The tough economic conditions lead to the write off the Group’s 40 per cent investment in BGP for
$2.2 million. Subsequent to year end, the Group purchased the remaining 60 per cent share in BGP for $1 per share. The Group is in
negotiation with a major corporate customer in Western Australia in order to have security of supply (Biomass) moving forward, which
would allow BGP to become a profitable business.
Significant Events Subsequent to the End of the Financial Year
The Group announced the appointment of Mr Tony McKenna as its next Managing Director and CEO on 20 July 2021. Mr McKenna
has extensive international experience in delivering growth strategies and major investment projects that will directly assist Midway
with its future growth plans. Mr McKenna is currently the CEO and Managing Director of Ruyi Australia. Mr McKenna will commence
with Midway once he finalises his exit arrangements with his current employer.
Other than noted in this report, the Directors are not aware of any matter or circumstance which has arisen since 30 June 2021 that
has significantly affected or may significantly affect the operations of the Group in subsequent financial years, the results of those
operations, or the state of affairs of the Group in future financial years.
27
MIDWAY LIMITEDANNUAL REPORT 2021 Directors’ Report continued
Likely Developments and Expected Results of Operations
Midway will continue to pursue further growth opportunities through:
• securing additional supply to meet expected unfulfilled demand from existing and potential customers, including through
strategic supply arrangements with large plantation managers and collaboration with other interested parties;
• proactively seeking new opportunities to utilise spare capacity at the three processing and export facilities utilised by Midway;
• continuing to evaluate the potential acquisition of existing Australian woodfibre production and exporting businesses; and
• exploring complementary business opportunities which utilise our marketing, plantation management, processing and supply
chain management skills.
Environmental Regulation
The Chief Executive Officer reports to the Board on any environmental and regulatory issues at each Directors meeting, if required.
During the year, no significant incidents occurred.
Greenhouse Gas and Energy Data Reporting Requirements
The Company is not subject to the reporting requirements of either the Energy Efficiency Opportunities Act 2006 or the National
Greenhouse and Energy Reporting Act 2007.
Share Option Plan
The Company has adopted a Long Term Incentive Plan (LTIP) under which it has issued 771,283 performance rights to senior
executives in the current financial year. The rights vest over a performance period ending 30 June 2023, subject to satisfaction of
vesting conditions such as comparator measure of Total Shareholder Return benchmarked against the top ASX 300 companies.
Refer to the Remuneration Report for details on the rights issued to KMP.
Indemnification and Insurance of Directors and Officers
Indemnification
The Company has indemnified the Directors and officeholders of the Company for costs incurred, in their capacity as a Director
or officeholder, for which they may be held personally liable, except where there is a lack of good faith.
Insurance of Directors and Officers
During the year the Company paid a premium for a Directors and Officers Liability Insurance Policy. This policy covers Directors
and Officers of the Company and the Company. In accordance with normal commercial practices under the terms of the insurance
contracts, the nature of the liabilities insured against and the amount of the premiums are confidential.
Insurance of Auditor
No payment has been made to indemnify the Company’s auditor during or since the financial year.
Proceedings on Behalf of the Company
There are no legal proceedings currently outstanding.
28
MIDWAY LIMITEDANNUAL REPORT 2021 Non-audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Company are important.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Management
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out
below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the
impartiality and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management
or a decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
KPMG Australia
Audit and assurance services
Statutory audit fees
Other services
- Non-assurance services – other advisory services
2021
$
2020
$
210,000
242,819
20,420
8,000
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit
for the financial year is set out on page 30 and forms part of this report.
Rounding Off
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance
with that Instrument, amounts in the consolidated financial statements and Directors’ Report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the Directors.
Greg McCormack
Chairman
Melbourne,
26 August 2021
29
MIDWAY LIMITEDANNUAL REPORT 2021
Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Midway Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Midway Limited for the
financial year ended 30 June 2021 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
Vicky Carlson
Partner
Melbourne
26 August 2021
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are
trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
30
MIDWAY LIMITEDANNUAL REPORT 2021
Remuneration Report (Audited)
Introduction
The Directors are pleased to present the FY21 Remuneration Report, which forms part of the Midway Limited (Company) Directors’
Report. It outlines the Board’s remuneration philosophy and remuneration information for the Company’s Non-Executive Directors,
Executive Directors and other key management personnel (KMP) in accordance with the requirements of the Corporations Act 2001
and its regulations.
For the purposes of this report, KMP is defined as those persons having authority and responsibility for planning, directing and controlling
the major activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company.
Executive remuneration represents remuneration for the Executive KMP and other members of senior management. This report
discloses remuneration as it relates to Executive KMP; however, the framework is applied more broadly to other members of
senior management.
The information provided in this Remuneration Report, which forms part of the Directors’ Report, has been audited as required
by section 308(3C) of the Corporations Act 2001.
Key Management Personnel Disclosed in this Report
Name
Directors
Position Held
Employment Status
Gregory McCormack
Non-Executive Chairman
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Bennett
Executives
Anthony Price
Ashley Merrett
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director and CEO
Chief Financial Officer
Retired 1 December 2020
Principles Used to Determine Nature and Amount of Remuneration
The performance of the Group depends upon the quality and performance of its Directors and executives. To this end, the Company
embodies the following principles in its remuneration framework:
• provide competitive rewards to attract high performing executives;
• link executive rewards to shareholder value;
• have a portion of executive remuneration variable, dependent upon meeting performance benchmarks; and
• establish appropriate and demanding performance benchmarks in relation to variable executive remuneration.
This section of the Remuneration Report outlines the Company’s remuneration framework and philosophy, which is designed
to attract, motivate and retain highly skilled Directors and executives.
31
MIDWAY LIMITEDANNUAL REPORT 2021
Remuneration Report (Audited) continued
Remuneration and Nomination Committee
The Board has established a Remuneration and Nomination Committee to assist the Board in reviewing and making recommendations
to the Board in relation to the Company’s remuneration policy, and remuneration arrangements for the Directors and executives.
The Remuneration and Nomination Committee assesses the appropriateness of the nature and amount of remuneration of executives
on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of high quality, high performing Directors and executives.
The Remuneration and Nomination Committee is comprised of Non-Executive Directors, the majority of whom are independent in
accordance with the Remuneration and Nomination Committee Charter. The Board considers that having a separate remuneration
committee serves as an efficient and effective mechanism to bring the transparency, focus and independent judgement needed on
remuneration decisions.
The Board has also adopted a number of key policies to support the Company’s remuneration framework. The Company’s policies
and the Remuneration and Nomination Committee Charter, which sets out the functions and responsibilities of that committee,
are available at www.midwaylimited.com.au.
Remuneration Framework
In accordance with best practice corporate governance standards, the Company’s remuneration policies and practices regarding the
remuneration of Non-Executive Directors are separate and distinct from the remuneration of Executive Directors and other senior executives.
These policies and practices appropriately reflect the different roles and responsibilities of Non-Executive Directors compared with
Executive Directors and other senior executives of the Company.
Use of Remuneration Consultants
The Remuneration and Nomination Committee may, from time to time, engage external remuneration consultants to provide it with
advice, information on current market practices, and other matters to assist the Committee in the performance of its duties.
The Remuneration and Nomination Committee did not engage any remuneration consultants throughout the financial year.
Non-Executive Director Remuneration
Objective
Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors.
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors
of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
Framework
Under the Company’s Constitution, the Non-Executive Directors as a whole may be paid or remunerated for their services a total
amount or value not exceeding $1.2 million per annum or such other maximum amount fixed by the Company in general meeting.
An amount not exceeding the amount determined is then divided between the Non-Executive Directors as approved by the Board
upon recommendation from the Remuneration and Nomination Committee.
The remuneration may be by way of salary or commission or participation in profits or by all or any of these modes, but may not be
by commission on, or a percentage of, operating revenue.
Non-Executive Directors’ fees and payments are reviewed periodically by the Remuneration and Nomination Committee.
Directors may also be reimbursed for expenses properly incurred by the Directors in connection with the affairs of the Company including
travel and other expenses in attending to the Company’s affairs.
32
MIDWAY LIMITEDANNUAL REPORT 2021 Current Structure
The current structure of fees paid to Non-Executive Directors includes:
Non-Executive Director
Chairman
Chairman – Audit and Risk Management Committee
Chairman – Remuneration and Nomination Committee
Board Base
Fee $
120,000
220,000
Additional
Fee $
11,000
11,000
The aggregate remuneration of Non-Executive Directors for the year ended 30 June 2021 was $878,195.
Executive Remuneration
In determining the level and make-up of executive remuneration, the Remuneration and Nomination Committee uses a combination
of business experience, comparisons with executive remuneration of comparable companies and comparative remuneration in the
market and makes its recommendations to the Board.
The executive remuneration and reward framework includes both fixed and ‘at risk’ reward components. ‘At risk’ reward includes
short and long-term incentives which are based on performance outcomes. The structure has four components:
• base pay and non-monetary benefits;
• short-term performance incentives;
• long-term share-based performance incentives; and
• other remuneration such as superannuation and long service leave.
From time to time the Remuneration and Nomination Committee may consider “one-off” payments to executives, as part of their
remuneration, in relation to specific events.
The combination of these comprises each executive’s total remuneration.
Fixed Remuneration
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the Remuneration
and Nomination Committee, based on individual and business unit performance, the overall performance of the Company, relevant
comparative remuneration externally and internally and, where appropriate, external advice on policies and practices.
The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is
competitive in the market.
Variable Remuneration
Objective
The objective of the variable remuneration component of executive remuneration, comprising short-term performance incentives and
share-based performance incentives, is to link the achievement of the Company’s targets with the remuneration received by the executives
charged with meeting those targets, and to reward executives in a manner which is consistent with the interests of shareholders.
The total potential variable component is set at a level so as to provide sufficient incentive to the executive to achieve the targets
and such that the cost to the Company is reasonable in the circumstances.
Structure
Actual variable incentives granted to each executive depend on the extent to which specific targets set at the beginning of the financial
year are met. The targets consist of a number of key performance indicators (KPIs) covering both financial and non-financial measures of
performance. Typically included are measures such as contribution to operational profit, occupational health and safety and risk management,
leadership and team contribution. The Company has predetermined benchmarks which must be met in order to trigger payments.
The type of variable incentives and performance against KPIs of the Company and the individual performance of each executive are
taken into account when determining the amount, if any, of the variable incentive that is to be awarded to each executive. Any variable
incentives to be awarded to executives across the Company are subject to the approval of the Remuneration and Nomination Committee.
33
MIDWAY LIMITEDANNUAL REPORT 2021
Remuneration Report (Audited) continued
2021 Executive Remuneration
Total remuneration for the CEO and CFO includes a combination of fixed remuneration, short-term incentives and long-term incentives
in the form of issued performance rights.
In assessing whether the KPIs for each variable component have been met, the Company measures actual results against internal targets.
A summary of contractual arrangements is provided below:
Base
Salary1
$
512,192
341,453
Maximum
STI
$
256,096
112,680
Eligibility
LTIP
a
Termination
Notice
3 months
Restraint
of Trade
Provisions
a
a
3 months
a
Chief Executive Officer
Chief Financial Officer
1. Includes superannuation and car allowances.
The remuneration mix is outlined below:
63%
37%
73%
27%
CEO
CFO
Fixed
At risk
Short Term Incentive Plan
The Company’s KMP and other members of senior management are eligible to participate in the Company’s Short Term Incentive Plan
(STI Plan).
Participants in the STI Plan have a maximum cash payment which is set as a percentage of their total fixed remuneration (TFR). Actual
short-term incentive payments in any given year are dependent on the achievement of financial and non-financial criteria as set by the
Remuneration and Nomination Committee. No incentive payment is payable if the threshold performance target is not met.
FY21 Short-term Incentives
In FY21, an offer to participate in the STI Plan was made to the Company’s executives including Executive KMP and other senior
managers. Under the offer, employees will receive a STI payment calculated as a percentage of their TFR conditional on achieving
performance measures including:
• Board-approved underlying Earnings Before Interest, Tax, Depreciation and Amortisation [EBITDA] Actual vs Budget
measured annually;
• Lost Time Injury Frequency Rate (LTIFR) Actual vs Previous Year measured annually; and
• agreed and documented objectives specific to each executive’s position measured annually.
EBITDA represents how the Company monitors its performance against budget, including achieving its strategic goals. Achieving the
targeted EBITDA has a linkage to shareholder returns and therefore is an appropriate measure to incentivise executive performance.
34
MIDWAY LIMITEDANNUAL REPORT 2021
LTIFR is an appropriate operational performance target as it is critical to the Company on two fronts: (1) It ensures the occupational
health and safety measures implemented by the Company are first class to ensure employees are appropriately protected from any
hazards in the workplace; and (2) By having limited downtime due to workplace injuries ensures maximum operational time of the
Company’s equipment.
A summary of the key terms of the Company’s FY21 STI Plan is set out as follows:
Term
Objective
Description
To reward participants for achieving targets linked to the Company’s business strategy
Participants
All Executive key management personnel and selected senior management members
Performance period
Financial year ended 30 June 2021
Performance measures
STI is assessed against both financial and non-financial measures with the following weighting:
Measure
EBITDA1
LTIFR
Individual performance measures
Weighting
[CEO]
40%
Weighting
[CFO]
40%
20%
40%
20%
40%
Payment
Upon final endorsement by Board
A sliding scale exists for each KPI target in relation to percentage of STI paid as set out below:
EBITDA CEO
EBITDA CFO
LTIFR CEO
LTIFR CFO
% of Target KPI [Maximum STI]
120% [max. $102,438]
120% [max. $45,072]
200% [max. $76,829]
200% [max. $33,804]
% of Target KPI [Minimum STI]
100%1
100%1
100%1
100%1
1. No incentive will be paid if the minimum percentage of the KPI target is not met.
FY21 Short-term Incentive outcomes
The following is a breakdown of the short-term incentive outcomes achieved by key management personnel at the end of the 2021
financial year:
KMP
CEO
CFO
Maximum STI
256,096
112,680
% of Maximum STI Achieved
25%
25%
35
MIDWAY LIMITEDANNUAL REPORT 2021
Remuneration Report (Audited) continued
2021 Executive Remuneration continued
Long Term Incentive Plan
Objective
The Company has established and adopted a Long Term Incentive Plan (LTIP), which is intended to assist in the motivation,
retention and reward of certain executives. The LTIP is designed to align the interests of executives more closely with the interests
of shareholders by providing an opportunity for senior executives to receive an equity interest in Midway through the granting of
awards including shares, options and performance rights, subject to satisfaction of certain conditions.
In FY21, the Group issued performance rights to the Chief Executive Officer and Senior Executive Team. In total, 771,283 rights were
issued based on the conditions set out in section (a).
Structure
The key terms of the LTIP are summarised below.
Term
Administration
Description
The Board has the discretion to determine which Directors and employees of Midway or any related
Company are eligible to participate in the LTIP (Eligible Employees).
Eligibility
The awards (Awards) that may be issued under the LTIP currently include:
• shares;
• options; and
• performance rights.
Awards
The Board may determine that the Awards will be subject to performance, service or other conditions
(Vesting Conditions) and, if so, will specify those Vesting Conditions in the offer. Vesting Conditions may
include conditions relating to continuous employment, performance of the participant or the occurrence
of particular events.
Vesting Conditions
Subject to the satisfaction of any applicable Vesting Conditions, Awards held by a participant will vest
on the date specified in the terms of the offer for those Awards, which are to be determined by the
Board at the time of offer and advised to the participant in individual offer documents.
Vesting date
Shares allocated on vesting of an Award carry the same rights and entitlements as other issued Shares,
including dividend and voting rights.
Shares as an Award, or on
vesting of an Award
Depending on the terms issued, the Shares may be subject to disposal and/or forfeiture restrictions,
which means that they may not be disposed of or dealt with for a period of time and/or may be forfeited
if certain further conditions are not satisfied.
Dividend and voting
entitlements
Change of control
Awards, other than Shares, are not entitled to dividend or voting rights.
Upon the occurrence of a change of control of Midway, the Board may at its discretion and subject
to such terms and conditions as it determines, resolve that the Vesting Conditions applicable to any
unvested Awards be waived.
Restrictions
Without the prior approval of the Board or as expressly provided in the LTIP:
Loans
Amendments
Other terms
• options and performance rights may not be disposed of, transferred or encumbered; and
• unvested Shares may not be disposed of, dealt with or encumbered or transferred in any way
whatsoever until the first to occur of the following: (i) the satisfaction of the applicable Vesting
Conditions; and (ii) the time when the Participant is no longer employed by the Company or a
related Company.
At the direction of the Board, the Company or a related Company may offer a participant a loan for the
purpose of acquiring any Shares offered to the participant under the LTIP.
To the extent permitted by the Listing Rules, Midway may amend all or any of the provisions of the
LTIP rules.
The LTIP also contains customary and usual terms having regard to Australian law for dealing with the
administration, variation, suspension and termination of the LTIP.
36
MIDWAY LIMITEDANNUAL REPORT 2021 2021 Long-term Incentives
The LTIP offered to Midway’s Executive KMP and other senior executives, is summarised below:
(a) Performance Rights
In FY21, the Board granted the Chief Executive Officer and members of the Senior Executive Team 771,283 performance rights,
subject to vesting conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the
underlying shares will be issued. The performance period is until 30 June 2023.
Term
Eligibility
Description
Chief Executive Officer, Chief Financial Officer and members of the Senior Executive Team.
Consideration for grant
Nil.
Instrument
2020 plan: Performance rights issued on 15 November 2019 and 6 March 2020 respectively.
2021 plan: Performance rights issued on 18 December 20211.
Number of rights granted
2020 plan: CEO 73,197; other senior executives 125,806.
2021 plan: CEO 281,920; other senior executives 489,363.
Service conditions
Participant must maintain continuous employment over the performance period.
Performance period
2020 plan: 1 July 2019 to 30 June 2022.
2021 plan: 1 July 2020 to 30 June 2023.
Performance measure
Entitlement
Restrictions
The percentage of performance rights that will vest will depend on the Midway’s total
shareholder return (TSR) over the performance period, relative to the comparator company
(companies in the S&P/ASX 300 Index excluding mining and energy companies). Performance
rights will only vest on the following conditions:
• less than median of the comparator company, no performance rights will vest;
• at median of the comparator company, 50 per cent of the performance rights will vest;
• between median and the 75th percentile of the comparator Company, a straight-line
pro rata vesting between 50 per cent and 100 per cent of the performance rights will
occur; and
• greater than 75th percentile of the comparator company, 100 per cent of the
performance rights will vest.
Each performance right entitles the participant, on vesting of the performance right, to receive
(at the discretion of the Board, other than as provided in the Plan Rules) by issue or transfer,
one fully paid ordinary share in the capital of the Company (Share).
Performance rights are subject to the restrictions set out in the Plan Rules. In particular
the participants must not:
• dispose of any performance rights without the prior consent of the Board or otherwise
in connections with the Plan Rules; or
• enter into any arrangement for the purpose of hedging, or otherwise affecting the
participants’ economic exposure to the Performance Rights.
Fair value at grant date
2020 plan: Rights issued 15 November 2019 ($0.41 cents);
Rights issued 6 March 2020 ($0.17 cents).
2021 plan: Rights issued 18 December 2020 ($0.53 cents).
1. Represents the fair value as calculated using a Monte Carlo Simulation model which incorporates the TSR performance conditions.
37
MIDWAY LIMITEDANNUAL REPORT 2021 Remuneration Report (Audited) continued
2021 Executive Remuneration continued
Relationships Between Company Remuneration Policy and Company Performance
The relationship between remuneration policy and Company performance is assessed for the current financial year and the prior four
comparative periods. Measures set out below are not necessarily consistent with the measures used in determining variable amounts
of remuneration to be awarded to KMP. As a consequence, there may not always be a direct correlation between the statutory key
performance measures and the variable remuneration awarded.
Key Performance Indicator
Net profit/(loss) after tax
EBITDA
Underlying EBITDA-SL1
Dividend paid (cents per share)
1. Underlying figures have not been audited.
FY21
Actual
$’000
(5,178)
10,933
12,518
–
FY20
Actual
$’000
(11,733)
752
11,993
–
FY19
Actual
$’000
26,158
50,669
37,075
18
FY18
Actual
$’000
18,397
31,308
28,693
18
FY17
Actual
$’000
14,921
24,916
28,367
18
Other non financial measures such as Lost Time Injury Frequency Rate (LTIFR) Actual vs Previous Year are also taken into account
when assessing the variable remuneration awarded.
Key Management Personnel Remuneration
As a result of the Group’s performance, Directors and senior staff agreed to take a 20 per cent pay reduction during the three months
beginning 1 May 2020. The statutory remuneration disclosures for the year ended 30 June 2021 are detailed below and are prepared
in accordance with Australian Accounting Standards (AASBs).
Short-term Benefits
Post-
employment
Long-term
Benefits
Share-based
Payments
Total
Salary
and Fees
Non-
STI
monetary1
Super-
annuation
Other2
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
197,915
195,605
107,954
106,694
107,954
106,694
126,432
119,175
117,850
113,163
107,954
110,005
44,526
106,694
428,420
423,419
289,082
285,982
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64,024
–
28,170
–
52,704
52,704
23,000
23,000
18,802
19,168
10,256
10,455
10,256
10,455
2,614
8,713
11,196
11,070
10,256
10,799
4,230
10,455
25,010
25,873
25,010
25,873
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
216,717
214,773
118,210
117,149
118,210
117,149
129,046
127,888
129,046
124,233
118,210
120,804
48,756
117,149
425
24,563
20,551
4,335
42,253
7,142
14,475
674
612,836
533,701
400,288
339,864
Directors
Greg McCormack
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Bennett
Executives
Anthony Price
Ashley Merrett
1. Relates to vehicle allowance paid by the Group.
2. Includes the movement in annual leave and long service leave provisions.
38
MIDWAY LIMITEDANNUAL REPORT 2021
Equity Instruments
KMP
Gregory McCormack
Nils Gunnersen
Tom Gunnersen
Gordon Davis
Leanne Heywood
Thomas Keene
Anthony Bennett
Anthony Price
Ashley Merrett
Held at
1 July 2020
9,604,599
Shares
Acquired Shares Sold
–
–
Other
Changes
–
Held at
30 June 2021
9,604,599
9,829
–
90,000
5,000
229,378
2,760,356
180,329
19,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,760,356)*
10,000
–
–
–
–
–
9,829
–
90,000
5,000
229,378
–
190,329
19,000
* Held at resignation date and retired 1 December 2020.
Details of Equity Incentives Affecting Current and Future Remuneration
The table below outlines each KMP’s unvested performance rights at the end of the reporting period. Details of vesting profiles of the
performance rights held by each KMP are detailed below:
Anthony Price
Ashley Merrett
Anthony Price
Ashley Merrett
Instrument
Performance rights
Performance rights
Performance rights
Performance rights
Grant Date
Number
73,197 15/11/2019
29,278
06/3/2020
281,920 18/12/2020
112,765
18/12/2020
% Vested
in Year
0%
% Forfeited
in Year
–
Financial Year
in Which
Grant Vests
2023
0%
0%
0%
–
–
–
2023
2024
2024
Other Transactions with KMP
There are no other transactions between any of the KMP with any of the companies which are related to or provide services to the
Company unless disclosed in this Remuneration Report
39
MIDWAY LIMITEDANNUAL REPORT 2021
Financial Report
Introduction
This is the Financial Report of Midway Limited
(the Company) and its subsidiaries (the Group).
The Company is a for-profit entity for the
purposes of preparing a Financial Report.
Accounting policies and critical accounting
judgements applied to the preparation of the
Financial Report are included throughout the
Financial Report with the related accounting
balance or financial statement matters to allow
them to be easily understood by the users of
this report.
Contents
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Section 1: Our Performance
1.1 Segment Reporting
1.2 Individually Significant Items
1.3 Income Tax
1.4 Earnings Per Share
1.5 Dividends
1.6 Impairment of Non-financial Assets
Section 2: Our Asset Base
2.1 Property, Plant and Equipment
2.2 Asset Held-for-sale
2.3 Biological Assets
2.4 Commitments
2.5 Leases
2.6 Working Capital
2.7 Intangible Assets
Section 3: Funding Structures
3.1 Net Debt
3.2 Financial Risk Management
3.3 Contributed Equity
Section 4: Other Disclosures
4.1 Subsidiaries
4.2 Interest in Joint Ventures
4.3 Midway Limited – Parent Entity
4.4 Share-based Payments
4.5 Related Parties
4.6 Contingent Liabilities
4.7 Remuneration of Auditors
4.8 Other Income
4.9 Deed of Cross Guarantee
4.10 Subsequent Events
4.11 Basis of Preparation
Directors’ Declaration
Independent Auditor’s Report
40
41
42
43
44
45
45
47
48
49
49
50
51
51
54
54
56
57
58
59
60
60
62
67
69
69
69
71
71
73
74
74
74
75
77
77
79
80
MIDWAY LIMITEDANNUAL REPORT 2021 Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE
Revenue and other income
Sales revenue
Other income
Less: expenses
Changes in inventories of finished goods and work in progress
Materials, consumables and other procurement expenses
Depreciation and amortisation expense
Employee benefits expense
Biological assets net fair value increment/(decrease)
Plantation management expenses
Freight and shipping expense
Repairs and maintenance expense
Impairment loss on non-current assets
Other expenses
Finance expense
Finance income
Net finance expense
Share of net profit/(loss) from equity accounted investments
Profit/(loss) before income tax expense
Income tax expense benefit/(expense)
Profit/(loss) for the period
Items that will not be reclassified to profit and loss
Revaluation of land fair value adjustment, net of tax
Items that may be reclassified subsequently to profit and loss
Notes
1.1
4.8
2.1|2.7
3.1
4.2
1.3
2021
$’000
2020
$’000
280,197
257,760
4,169
7,524
284,366
265,284
(12,654)
6,066
(179,675)
(164,106)
(11,271)
(19,369)
(2,261)
(199)
(13,094)
(26,249)
(4,887)
(840)
(40,161)
(50,702)
(6,438)
(2,269)
(8,932)
(8,001)
(8,582)
(9,995)
(283,229)
(280,390)
(5,123)
410
(4,713)
(1,475)
(5,051)
(127)
(5,178)
(6,114)
615
(5,499)
2,764
(17,841)
6,108
(11,733)
2.1
11,707
4,495
Cash flow hedges effective portion of changes in fair value, net of tax
(3,487)
2,350
Foreign operations – foreign currency translation differences
Equity accounted investees – share of OCI
Other comprehensive income for the period
Total comprehensive income for the period
Profit/(loss) is attributable to:
– Owners of Midway Limited
– Non-controlling interests
Total comprehensive income is attributable to:
– Owners of Midway Limited
– Non-controlling interests
Earnings per share for profit attributable to equity holders:
Basic earnings per share
Diluted earnings per share
(90)
(95)
8,035
2,857
5
26
6,876
(4,857)
(5,363)
(12,019)
185
286
(5,178)
(11,733)
2,678
179
2,857
(5,155)
298
(4,857)
($0.06)
($0.06)
($0.14)
($0.14)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
41
MIDWAY LIMITEDANNUAL REPORT 2021
Consolidated Balance Sheet
AS AT 30 JUNE
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Current tax receivable
Other assets
Assets held for sale
Derivative assets
Total current assets
Non-current assets
Biological assets
Other receivables
Investments accounted for using the equity method
Intangible assets
Loan receivables
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Strategy financial liability
Derivative financial liability
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Strategy financial liability
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Contributed equity
Share capital
Reserves
Accumulated losses
Equity attributable to owners of Midway Limited
Equity attributable to non-controlling interests
Total equity
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
42
Notes
2021
$’000
2020
$’000
3.1
2.6
2.6
2.3
2.2
2.3
4.2
2.7
2.1
2.6
3.1
3.1
1.3
3.3
3.3
12,956
17,329
15,645
2,501
1,301
6,561
2,997
–
59,290
41,589
5,873
9,978
1,971
3,127
141,067
203,605
262,895
22,354
9,552
8,202
2,165
4,094
46,367
34,882
31,850
176
17,379
84,287
130,654
132,241
64,888
81,939
(15,768)
131,059
1,182
11,049
3,564
29,210
1,483
451
6,187
–
2,825
54,769
48,322
5,460
13,816
1,971
3,129
133,137
205,835
260,604
20,090
11,610
5,523
–
4,152
41,375
38,868
37,675
125
12,442
89,110
130,485
130,119
64,888
73,793
(10,405)
128,276
1,843
132,241
130,119
MIDWAY LIMITEDANNUAL REPORT 2021
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE
$’000
Balance as at 1 July 2019
Adjustment on adoption of AASB 16 (note 4.11)
Share
Capital
64,791
–
Reserves
74,710
166
Restated total equity at the beginning of the financial period
64,791
74,876
Retained
Earnings
1,614
–
1,614
Non-
controlling
Interests Total Equity
142,660
1,545
–
166
1,545
142,826
Profit/(loss) for the year
Revaluation of land, net of tax
Cash flow hedges effective portion of changes in fair value,
net of tax
Foreign operations – foreign currency translation differences
Total comprehensive income for the year
Other transactions:
Issuance of ordinary shares, net of transaction costs
Issuance of performance rights
Share-based payments expense
Transfers to profits reserve
Transactions with owners in their capacity as owners:
Dividends
Total other transactions
Balance as at 30 June 2020
Balance as at 1 July 2020
Profit/(loss) for the year
Revaluation of land, net of tax
Cash flow hedges effective portion of changes in fair value,
net of tax
Foreign operations – foreign currency translation differences
Total comprehensive income for the year
Other transactions:
Issuance of ordinary shares, net of transaction costs
Issuance of performance rights
Share-based payments expense
Transfers to profits reserve
Transactions with owners in their capacity as owners:
Dividends
Total other transactions
Balance as at 30 June 2021
–
–
–
–
–
–
97
–
–
–
97
64,888
64,888
–
–
–
–
–
–
–
–
–
–
–
–
(12,019)
4,495
2,364
5
–
–
–
6,864
(12,019)
–
–
–
–
–
–
–
(97)
10
–
(7,860)
(7,947)
73,793
73,793
286
–
12
–
298
–
–
–
–
–
–
(10,405)
(10,405)
1,843
1,843
–
(5,363)
11,707
(3,576)
(90)
8,041
–
–
–
(5,363)
–
–
105
–
–
105
–
–
–
–
–
185
–
(6)
–
179
–
–
–
–
(840)
(840)
(11,733)
4,495
2,376
5
(4,857)
–
–
10
–
(7,860)
(7,850)
130,119
130,119
(5,178)
11,707
(3,582)
(90)
2,857
–
–
105
–
(840)
(735)
64,888
81,939
(15,768)
1,182
132,241
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
43
MIDWAY LIMITEDANNUAL REPORT 2021
Notes
2021
$’000
2020
$’000
268,764
281,589
(247,511)
(269,874)
–
(1,777)
440
2,354
22,270
(3,427)
332
(2,122)
–
–
–
(5,217)
(6,081)
(5,255)
(840)
–
(3,465)
495
26
(1,914)
578
697
11,102
(3,230)
906
(3,754)
(10)
2,550
(105)
(3,643)
(1,133)
(6,290)
(7,860)
5,500
(2,658)
513
(15,146)
(11,928)
11,049
1,907
12,956
15,518
(4,469)
11,049
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax received
JobKeeper
Net cash provided by operating activities
3.1
Cash flow from investing activities
Payment for property, plant and equipment
Proceeds from sale of fixed assets
Payment for non-current biological assets
Acquisition of equity accounted investees
Dividends received from associates
Payment of deferred consideration Plantation Management Partners
Net cash used in investing activities
Cash flow from financing activities
Repayment of Strategy financial liability
Principal repayment of lease liabilities
Dividends paid
Proceeds from bank borrowings
Repayment of bank borrowings
Proceeds from loan receivable
Net cash used in financing activities
Reconciliation of cash
Cash at beginning of the financial period
Net increase/(decrease) in cash held
Cash at end of financial period (net of overdrafts)
The above Consolidated Statement of Cashflows should be read in conjunction with the accompanying notes.
44
MIDWAY LIMITEDANNUAL REPORT 2021
Notes to the Consolidated Financial Statements
Section 1: Our Performance
This section provides an insight into the performance of Midway and its subsidiaries including :
• The Woodfibre segment was impacted by the lag effect of lower pricing in the prior corresponding period, along with
COVID-19 impacts to the Midway Logistics business in Western Australia (supply constraints). Pulp pricing has begun
to improve leading into FY22, with higher Japanese prices settled.
• The Group achieved an underlying EBITDA of $14.6 million (2020: $13.8 million).
• The Board has elected to not declare a dividend in light of the current performance.
1.1 Segment Reporting
(a) Description of Segments
The Group reports segment information based on the internal reporting used by management for making decisions and assessing
performance. The operating segments are reported in a manner consistent with internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, is the Chief Executive Officer.
Reportable Segments
Products/Services
Woodfibre
Includes primary operations whereby the Group purchases and sells both own and third party wood.
SWF is also proportionally consolidated at 51 per cent for segment reporting, which reflects how
management views and makes decisions of its operations.
In the current year, income earned from marketing third party woodfibre has been reallocated to this
category, as this is how the chief operating decision maker reviews the financial information.
Forestry Logistics
Forestry logistics provides support services to third parties engaged in growing woodfibre including
harvest, infield chipping and haulage.
Plantation Management
Plantation management is the provision of silviculture services including on Group-owned trees.
The segment also holds any Group-owned plantation land and trees.
Ancillary
Represents any one-off, transactional and other non-recurring costs.
The Group evaluates the performance of its operating segments based on net sales (net of insurance and freight costs). Net sales for
geographic segments are generally based on the location of customers. Earnings before interest, tax, depreciation and amortisation
(EBITDA) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the
segment. EBITDA for each segment excludes other income and expense and certain expenses managed outside the operating segments.
Key adjustment items relate to the gross up of revenue and operating and other expenses to reflect cost, insurance and freight (CIF)
sales and principal sales. Management accounts are prepared on a segment basis with 51 per cent share of SWF joint venture
included in Woodfibre processing. For statutory accounts SWF is equity accounted with revenue and expenses of SWF eliminated.
Prior period comparative information has been restated to reflect the revised structure.
45
MIDWAY LIMITEDANNUAL REPORT 2021 Section 1: Our Performance continued
1.1 Segment Reporting continued
(b) Segment Information Provided to Senior Management
2021
($’000)
Sales revenue
Inter segment sales
Other income
Total revenue and other income
Share of equity accounted profits/(loss)
EBITDA – S1
Significant items
Fair value gain/(loss) on biological assets
EBITDA
Depreciation and amortisation
EBIT
Net finance expense
Net profit/(loss) before tax
Income tax benefit/(expense)
Net profit/(loss) after tax
Segment assets
Equity accounted investees
Capital expenditure
Segment liabilities
2020
($’000)
Sales revenue
Inter segment sales
Other income
Total revenue and other income
Share of equity accounted profits
EBITDA – S
Significant items
Fair value gain/(loss) on biological assets
EBITDA
Depreciation and amortisation
EBIT
Net finance expense
Net profit/(loss) before tax
Income tax benefit/(expense)
Net profit/(loss) after tax
Segment assets
Equity accounted investees
Capital expenditure
Segment liabilities
Woodfibre
198,084
174
8,190
206,448
–
21,488
1,363
–
22,851
(9,855)
12,996
(2,205)
10,791
(3,412)
7,379
Forestry
Logistics
Plantation
Management
Ancillary Eliminations
4,823
–
355
5,178
23
(2,705)
(1,768)
–
(4,473)
(2,228)
(6,701)
(51)
(6,752)
1,359
(5,393)
476
11,577
320
12,373
–
(2,226)
–
(2,261)
(4,487)
(1,486)
(5,973)
(2,646)
(8,619)
2,548
(6,071)
–
–
–
–
–
(50)
(1,033)
–
(1,083)
(17)
(1,100)
–
(1,100)
20
(1,080)
76,814
(11,751)
(4,696)
60,367
(1,498)
(1,875)
–
–
(1,875)
2,315
440
189
629
(642)
(13)
Total
280,197
–
4,169
284,366
(1,475)
14,632
(1,438)
(2,261)
10,933
(11,271)
(338)
(4,713)
(5,051)
(127)
(5,178)
187,165
2,980
154,372
4,864
(86,486)
262,895
9,938
(2,591)
40
(489)
–
(615)
–
–
–
–
9,978
(3,695)
(74,090)
(9,929)
(88,611)
(3,268)
45,244
(130,654)
Woodfibre
223,013
Forestry
Logistics
8,264
Plantation
Management
2,695
Ancillary Eliminations
23,788
–
–
7,893
230,906
11
22,212
(5,479)
–
16,733
(10,955)
5,778
(2,185)
3,593
(2,141)
1,452
149,754
11,556
(3,537)
(67,411)
–
423
8,687
55
(2,473)
(2,307)
–
(4,780)
(2,031)
(6,811)
(80)
(6,891)
1,419
(5,472)
3,744
2,260
(524)
(7,521)
4,149
995
7,839
–
(2,152)
–
(4,887)
(7,039)
(1,724)
(8,763)
(3,448)
(12,211)
3,782
(8,429)
–
–
–
–
(47)
(411)
–
(458)
(714)
(1,172)
–
(1,172)
1,888
716
(4,149)
(1,787)
17,852
2,698
(3,704)
–
–
(3,704)
2,330
(1,374)
214
(1,160)
1,160
–
Total
257,760
–
7,524
265,284
2,764
13,836
(8,197)
(4,887)
752
(13,094)
(12,342)
(5,499)
(17,841)
6,108
(11,733)
144,564
4,881
(42,339)
260,604
–
(1,966)
(83,809)
–
–
–
324
13,816
(5,703)
(3,238)
31,494
(130,485)
1. EBITDA – S: Earnings before interest, tax, depreciation and amortisation, significant items and net fair value gain/(loss) on biological assets.
46
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021 (c) Revenue by Geographic Region
The presentation of geographical revenue is based on the geographical location of customers.
2021
Revenue by Geographic Region
Australia
China
Japan
South East Asia
2020
Revenue by Geographic Region
Australia
China
Japan
South East Asia
Woodfibre
2,079
115,424
78,891
1,864
198,258
Woodfibre
8,584
141,044
73,385
–
Forestry
Logistics
Plantation
Management
4,823
12,038
–
–
–
–
–
15
4,823
12,053
Ancillary Eliminations
(11,751)
95,435
(18,621)
–
–
–
–
–
–
65,063
280,197
Forestry
Logistics
8,264
Plantation
Management
5,370
Ancillary Eliminations
(4,409)
–
–
–
–
–
–
1,474
6,844
–
–
–
–
41,447
(17,399)
–
223,013
8,264
19,639
257,760
Total
7,189
210,859
60,270
1,879
Total
17,809
182,491
55,986
1,474
For the financial year ending 30 June 2021 there were three (2020: three) customers in China and Japan that individually made up
10 per cent or above total sales for the Group.
Policy
Revenue
Sales revenue is recognised on settlement of each performance obligation. Export woodfibre sales are generally on CIF or FOB shipping
terms, with revenue recognised when last goods are loaded on board at the point when the performance obligation is settled under
the shipping terms. All other sales are generally recognised as revenue at the time of delivery of the goods to the customer.
The Group also arranges the insurance and freight for CIF vessels, which is deemed a separate performance obligation. The performance
obligation is satisfied over time until the shipment arrives at the destination port. Therefore, the component of revenue relating to
freight and insurance should also be recognised over time (i.e. as performance obligation settled).
Revenue from the rendering of services is recognised over time as the performance obligations within each contract are settled.
1.2 Individually Significant Items
Individually Significant Items Before Tax
Impairment loss on non-current assets (ADDCO Pty Ltd)
Impairment loss on non-current assets (Bio Growth Partners Pty Ltd)
Impairment of loss on non-current assets (Plantation Management Partners Pty Ltd)
JobKeeper payments1
Notes
1.6
1.6
1.6
Restructuring cost
Transaction costs
Impact of individually significant items
2021
$’000
–
(2,269)
–
2,014
(149)
(1,034)
(1,438)
2020
$’000
(2,066)
–
(6,516)
1,037
(240)
(412)
(8,197)
1. The Group has elected to account for JobKeeper payments received from the Federal Government as a grant income recorded in other income once reasonable
assurance has been obtained regarding eligibility to receive the subsidy.
47
MIDWAY LIMITEDANNUAL REPORT 2021
Section 1: Our Performance continued
1.3 Income Tax
(a) Current Tax Reconciliation
Current tax
Deferred tax
Over provision in prior years
(b) Prima Facie Tax Payable
The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows:
Prima facie income tax payable on profit before income tax at 30.0% (2020: 30.0%)
– Effect of taxes in foreign jurisdictions
Add tax effect of:
– Write-off of goodwill
– Unfranked dividend
– Impairment on non-current assets (Bio Growth Partners)
– Under provision of income tax in prior years
– Other non-allowable items
Less tax effect of:
– Over provision for income tax in prior years
– Share of profits/(losses) from joint ventures
– Capital loss on ADDCO
– Other
Income tax expense/(benefit) attributable to profit
(c) Deferred Tax
Deferred tax assets
Payables
Biological assets
Blackhole expenditure
Capital losses carried forward
Hedge reserve
Tax losses carried forward
Other
Deferred tax liabilities
Biological assets
Property, plant and equipment
Hedge reserve
Other
Net deferred tax liabilities
2021
$’000
1,644
(1,543)
26
127
(1,515)
25
–
839
165
26
144
(316)
–
(443)
–
–
(443)
127
884
642
385
2,046
623
–
521
5,101
–
22,480
–
–
22,480
17,379
2020
$’000
(2,521)
(3,744)
157
(6,108)
(5,352)
(71)
295
–
–
–
–
(5,128)
31
829
81
39
980
(6,108)
872
–
565
2,046
–
2,986
–
6,469
482
17,415
848
140
18,885
12,416
(e) Deferred Income Tax (Revenue)/Expense Included in Income Tax Expense Comprises
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
(f) Deferred income tax related to items charged or credited directly to equity
Increase in deferred tax liabilities
(1,618)
75
(1,543)
416
(4,160)
(3,744)
3,520
2,973
48
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
Policy
Current income tax expense or benefit is the tax payable on the current period’s taxable income based on the applicable income tax
rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets
and liabilities and their carrying amounts in the financial statements.
A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for temporary differences at the
applicable tax rates when the assets are recovered or liabilities are settled. No deferred tax asset or liability is recognised in relation
to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not
affect either accounting profit or taxable profit or loss.
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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax Consolidation
The parent entity Midway Limited and its subsidiaries have implemented the tax consolidation legislation and have formed a tax
consolidated group from 1 July 2002. The parent entity and subsidiaries in the tax consolidated group have entered into a tax funding
agreement such that each entity in the tax consolidated group recognises the assets, liabilities, expenses and revenues in relation to
its own transactions, events and balances only.
Key Estimates and Judgements
From time to time the Group takes tax positions that require consideration, including an assessment of the recoverability of Deferred
Tax Assets (DTA). The Group only recognises DTA to the extent it is probable they will be realised in the foreseeable future.
1.4 Earnings Per Share
(a) Earnings Per Share
Earnings per share
Diluted earnings per share*
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Performance rights1
2021
($0.06)
($0.06)
2020
($0.14)
($0.14)
2021
Number
2020
Number
87,336,222 87,325,715
–
–
87,336,222 87,325,715
* Diluted earnings per share is basic earnings per share adjusted for the effects of all dilutive potential ordinary shares.
1. As at 30 June 2021, 970,286 performance rights (2020: 199,003) were excluded from the diluted weighed-average number of ordinary shares calculation
because their effect would have been anti-dilutive.
Basic earnings per share is calculated on the profit attributable to ordinary shareholders and weighted-average number of ordinary
shares outstanding.
1.5 Dividends
Fully franked at 30% (2020: 30%)
2021
$’000
–
2020
$’000
7,860
The balance of the franking account at 30 June 2021 is $6,781,369 (2020: $5,701,956).
49
MIDWAY LIMITEDANNUAL REPORT 2021
Section 1: Our Performance continued
1.6 Impairment of Non-financial Assets
Impairment tests for all assets are performed when there is an indicator of impairment, although goodwill is tested at least annually.
If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired, and an impairment loss is charged to the
income statement.
The Groups’ CGUs consist of individual business units at the lowest level at which cash inflows are made including:
• Midway Geelong
• Queensland Commodity Exports
• Midway Logistics
• Midway Tasmania
• Plantation Management Partners
• South West Fibre
• Bio Growth Partners
Key Assumptions and Estimates
Key assumptions and estimates used in the impairment analysis consist of:
Projected Cash Flows
The recoverable amount of a CGU is based on value in use calculations that are based on detailed management prepared forecasts
for five years through to FY26, unless the timing of tree crop rotation profiles justifies a longer period. In the case of Plantation
Management Partners, the timeframes were modelled out to 2056, reflecting the likely timeframes for the next two rotations.
Long-term Average Growth Rate
A terminal growth rate of 2.2 per cent has been used and only applied to CGUs whereby it is likely they will exceed into perpetuity
and there is a reasonable chance of sourcing woodfibre in each catchment whereby a CGU resides.
Discount Rate
The Group used a post-tax discount rate of between 8.6 per cent and 11.3 per cent for all CGUs (2020: 8.6 per cent – 11.7 per cent).
Sensitivity Analysis
The Group believes any reasonable possible change in the key assumptions would not cause the carrying value of the CGUs to exceed
their recoverable amount.
Other Assumptions
The impact of COVID-19 on global markets is an area of uncertainty, along with future potential impacts from climate change.
Impairment of Bio Growth Partners (40 per cent Equity Accounted Investee)
The Group has taken a writedown on carrying value in its investment in Bio Growth Partners for $2.2 million. The Group suffered
from timber supply constraints and unplanned customer shutdowns in Western Australia as a result of the COVID-19 pandemic,
which resulted in reduced domestic business that impacted our equity accounted investee Bio Growth Partners (BGP). Subsequent to
year end, the Group purchased the remaining 60 per cent share in BGP for $1 per share. The Group is in negotiation with a major
corporate customer in Western Australia in order to have security of supply (Biomass) moving forward, which would allow BGP to
become a profitable business.
FY20
Plantation Management Partners Pty Ltd (PMP)
Due to the market downturn in FY20, the Group had been unable to market budgeted quantities of woodfibre from Plantation
Management Partners, on the Tiwi Islands. As a result, the recoverable value did not exceed the carrying amount of the CGU and the
Group wrote off the previously recognised goodwill on acquisition of PMP of $1.0 million and unamortised portion of the customer
contract intangible asset for $5.5 million.
Impairment of ADDCO (25 per cent Equity Accounted Investee)
As a result of the adverse external market conditions, ADDCO entered voluntary administration during FY20. The Group took a
writedown on the full amount of its carrying value of its investment in ADDCO of $1.7 million and a further writedown of current
receivables from ADDCO of $0.3 million.
50
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021 Section 2: Our Asset Base
This section provides an insight into the asset base the Group requires to operate a forestry business.
• The Group sources wood supply from owned and third party plantation land, which is used to grow hardwood trees.
• The Group’s plantation land portfolio increased in value by $16.7 million (before tax) in the current year, primarily due
to increased prices for forestry land.
• The Group holds biological assets for harvest of which $8.1 million relates to seedlings and $36.0M is plantation hardwood.
• The Group has low credit risk due to the nature and size of customers and use of letters of credit in the majority
of cases.
• Plantation land ($95.7 million) and biological assets ($44.1 million) are held on the balance sheet at fair value. As a
result, any impacts from COVID-19 have been reflected in the independent valuations performed of these assets.
2.1 Property, Plant and Equipment
Each class of property, plant and equipment is set out below:
Plantation
land
$’000
Freehold
Land
$’000
Leased Land
$’000
Buildings
$’000
2.5-27%
Plant and
Equipment
$’000
3-25%
Roading
$’000
5-15%
Total
$’000
Depreciation policy
Year ended 30 June 2020
Opening net book amount
74,635
12,670
2,769
30,169
7,126
127,369
Adoption of AASB 16
Additions
Disposals
Depreciation
Revaluation
Closing carrying amount
Year ended 30 June 2021
–
886
(645)
–
7,067
81,943
–
–
–
–
–
12,670
4,807
1,329
–
(1,620)
–
4,516
247
116
–
(379)
–
–
3,893
(402)
(9,296)
–
–
810
–
5,054
7,034
(1,047)
(1,045)
(12,340)
–
7,067
2,753
24,364
6,891
133,137
Opening net book amount
81,943
12,670
4,516
Additions
Disposals
Depreciation
Reclassification to asset
held for sale
Revaluation
Closing carrying amount
–
–
–
(2,997)
16,724
95,670
–
–
–
–
–
978
(59)
(1,653)
–
–
2,753
723
(12)
(411)
–
–
24,364
3,554
(273)
(8,303)
–
–
6,891
563
133,137
5,818
(344)
(904)
(11,271)
–
–
(2,997)
16,724
12,670
3,782
3,053
19,342
6,550
141,067
Right of use assets are now included within each category of property, plant and equipment above. Refer to note 2.4 for a full breakdown
of right of use assets.
51
MIDWAY LIMITEDANNUAL REPORT 2021
Section 2: Our Asset Base continued
2.1 Property, Plant and Equipment continued
(a) Key Estimates and Judgements – Fair Value
2021
Fair Value
$’000
Valuation
Technique
Freehold land
12,670 Market approach1
Plantation
land
98,667 Market approach/
net present value
approach1
Description of Valuation Technique
The Company’s freehold land is stated at fair value. The fair value measurements
of the Company’s land as at 30 June 2021 were performed by an independent
valuer. The valuation was performed using a direct market comparison approach.
A change to inputs to the market approach assessment would result in differing
valuation results.
The Company’s plantation land is stated at revalued amounts, being the fair value
for its highest and best use at the date of revaluation. The highest and best use
is subjective and judgemental given potential alternate uses. It requires careful
analysis and detailed knowledge of the local market conditions and recent sales
trends. The Group engaged an independent valuer to provide an independent
valuation on an unencumbered basis as at 30 June 2021.
The independent valuation is adjusted by the Directors using a discounted cash
flow (DCF) methodology to estimate the fair value on an encumbered basis.
Assumptions about clear fall period and reversion costs have been included
where/as appropriate. In some instances, the valuations highest and best use
is lifestyle differing from actual use, forestry. A change to inputs to the valuer’s
and/or the Directors’ assessment would result in differing valuation results.
1. The same valuation technique was used in 2020.
Freehold and forest plantation land have been classified as level three on the fair value hierarchy. Level three represents inputs that
are not based on observable market data. No transfers in and out of level three occurred during the period.
The potential future impacts of COVID-19 remain uncertain and could impact the key estimates and judgements noted above.
2021 Plantation Land Measurement
The unencumbered value of the plantation land is $113.0 million (2020: $99.0 million). The Directors have subsequently valued the
land on an encumbered basis (i.e. in recognition of the existing tree crops being grown on the land which are legally owned by third
parties), taking into account where appropriate reversionary costs and utilising a discounted cash flow analysis from the highest
and best use determined by the independent valuation expert.
The key assumptions used in determining the encumbered land valuation are:
Assumption
Discount rate
Growth rate
Reversionary costs
Clearfall period
Variable
6.75% (2020: 7.25%)
2% to 5%
$0-$1,550 per hectare
2021 – 2028
52
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021 (b) Sensitivity Analysis
As at the balance date, the impact of a change of certain assumptions on the plantation land of the Group (all other things being equal)
would have resulted in the following impacts on other comprehensive income (OCI):
Plantation Land at Fair Value
Discount rate +/- 1%
Growth rate +/- 1%
Reversionary costs +/- 10%
2021
2020
Increase
$’000
Decrease
$’000
(3,397)
3,651
(173)
3,606
(3,499)
173
Increase
$’000
(3,198)
3,515
(181)
Decrease
$’000
3,416
(3,346)
180
A change in assumptions for the following variables may have a significant impact on the value of the portfolio dependent on the
assumptions utilised, as there is significant judgement involved:
• highest and best use classification of each block within the portfolio;
• clearfall period of when trees harvested; and
• rate per hectare applied to each individual block based on individual characteristics of that block.
Freehold Land
A 1 per cent change in assumptions to the $ rate per ha applied will increase the value by $0.1 million (2020: $0.1 million), or decrease
by $0.1 million (2020: $0.1 million). Based on current and prior valuations of the land, a 1 per cent rate change is considered reasonable.
(c) Policy
Freehold and Plantation Land
Freehold and plantation land is measured at fair value. At each balance date the carrying amount of each asset is reviewed to ensure
that it does not differ materially from the asset’s fair value at reporting date.
Increases in the carrying amounts arising on revaluation of land are recognised in other comprehensive income and accumulated in equity
in the asset revaluation reserve. To the extent that the increase reverses a decrease of the same asset previously recognised in profit
or loss, the increase is recognised in profit or loss. Decreases that offset previous increases of the same asset are recognised in other
comprehensive income with a corresponding decrease to the asset revaluation reserve; all other decreases are charged to the statement
of profit or loss.
Other Items of Property, Plant and Equipment
Other items of property, plant and equipment are measured on a cost basis and are a separate asset class to land assets.
Where roading is capitalised on third party or leased blocks, it is classified as an other asset if it is expected to be utilised within
12 months or an item of property, plant and equipment if it will be used for a period greater than 12 months.
Depreciation
The depreciable amount of all property, plant and equipment is depreciated over their estimated useful lives commencing from the time
the asset is held ready for use.
Roading which has been built on land owned by Midway is amortised on a straight-line basis over the period of one harvest. Roading
which is built on third party properties is amortised using the unit production method at the earliest of the lease agreement with the
supplier or the wood supply running out for a particular operation to which the roading relates.
53
MIDWAY LIMITEDANNUAL REPORT 2021
Section 2: Our Asset Base continued
2.2 Asset Held-for-sale
Opening balance
Plantation land at fair value
Closing balance
2021
$’000
–
2,997
2,997
2020
$’000
–
–
–
In December 2020, the Group entered into a contract to sell plantation land from Upper Goulburn. Accordingly, the plantation land
is reclassed from property, plant and equipment to assets held-for-sale and is due for settlement within 12 months.
Policy
Assets held-for-sale are measured at the lower of carrying amount and fair value less costs to sell.
2.3 Biological Assets
Current
Plantation hardwood at fair value
Non-current
Plantation hardwood at fair value
Plantation hardwood at fair value (new plantings)
(a) Reconciliation of Carrying Amount
At 1 July 2020
Harvested timber
New plantings
Purchase of standing timber
Change in fair value less estimated point of sale costs – due to:
Change in discount rate
Change in volumes and prices
Balance at 30 June 2021
2021
$’000
2020
$’000
2,501
1,483
33,501
8,088
44,090
40,838
7,484
49,805
Biological Assets
$’000
49,805
(5,576)
2,122
–
–
967
(3,228)
44,090
Policy
Biological assets are held at fair value, with exception of new plantings (see below).
Biological assets are classified as current if it is anticipated they will be harvested within 12 months from balance date.
The fair value net increase or decrease to the carrying value of the standing timber revaluation is recognised in the statement of profit
or loss and other comprehensive income.
Biological assets are classified as level three on the fair value hierarchy. There were no transfers between level 1, 2 or 3 on the fair
value hierarchy.
New Plantings
Fair value is unable to be reliably measured until year three; however, cost is considered to approximate fair value up until this point.
Once the trees are three years old they are measured at fair value and remeasured each year after via an independent valuation if the
carrying amount is significant.
Site preparation costs are capitalised into the cost of the asset. Where there are no plantings, these costs are expensed.
54
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
(b) Key Estimates and Judgements – Fair Value (Level Three)
Significant
Unobservable Inputs1
• Estimated future timber
market prices per tonne
(weighed average
USD/BDMT $205.3
2020: $192.7).
• Estimated yields per hectare
(weighed average gmt/ha
209 2020: 246).
• Estimated harvest and
transportation costs
(weighted average $45.7/gmt
2020: $45.3/gmt).
• Risk-adjusted discount rate
7.5% (2020: 8%).
Inter-relationship Between
Key Unobservable Inputs
and Fair Value Measurement
The estimated fair value would
increase/(decrease) if the:
• estimated timber prices
per tonne were higher/
(lower);
• estimated yield per
hectare or estimated
timber projections
were higher/(lower);
• estimated average direct
and indirect costs were
lower/(higher); and/or
• discount rate was lower/
(higher).
The potential future impacts of
COVID-19 and climate change
remain uncertain and could
impact the key estimates and
judgements noted above.
Valuation
Technique
Net present
value approach
Description of Valuation Technique
An independent market valuation is
performed based on a net present value
calculation (NPV) calculation. NPV is
calculated as the net of the future cash
inflows and outflows associated with forest
production activities discounted back to
current values at the appropriate discount
rate. Key assumptions underpinning the
NPV calculation include:
• Forest valuations are based on the
expected volumes of merchantable
timber that will be realised from existing
stands, given current management
strategies and forecast timber
recovery rates.
• Only the current crop (standing timber)
is valued. The cash flow analysis
is based on the optimised timing of
the harvest of existing stands, which
has been developed in the context
of sustained yield management.
• Volume increments/decrements
are determined both by periodic
re-measurement of forest samples
and by modelling growth from the
date of the most recent measurement
to date of harvest.
• Ancillary income earned from activities
such as the leasing of land for grazing
and other occupancy rights is added
to the net harvest revenues.
(c) Sensitivity Analysis
As at the balance date, the impact of key assumptions on the biological assets of the Group (all other things being equal) would have
resulted in the following impacts in income statement:
Biological Assets
Discount rate +/- 1%
Expected future sales prices +/- 10%
Expected future harvest and transportation costs +/- 10%
Expected future changes in volume +/- 10%
2021
2020
Increase
$’000
Decrease
$’000
(1,728)
11,070
(6,560)
5,100
1,839
(11,070)
6,560
(5,100)
Increase
$’000
(1,838)
12,700
(7,500)
5,700
Decrease
$’000
1,960
(12,700)
7,800
(5,700)
55
MIDWAY LIMITEDANNUAL REPORT 2021
Section 2: Our Asset Base continued
2.3 Biological Assets continued
(d) Strategy Agreement
In February 2016, the majority of the Group’s standing trees were sold to Strategy Timber Pty Ltd as trustee for the Strategy Timber
Trust (Strategy), an investment trust managed by GMO Renewable Resources, LLC (Renewable Resources), a Timber Investment
Management Organisation (TIMO).
The sale resulted in a gain of $615,713 being recognised in 2016 and trees being derecognised from the balance sheet.
Set out below is a summary of the key features of the agreements between Midway and Strategy:
• Midway Plantations Pty Ltd (Midway Plantations) and Strategy entered into a Sale Agreement on 5 February 2016 pursuant
to which Midway Plantations sold substantially all of the Pinus radiata plantation trees (Softwood Trees) and Eucalyptus
plantation trees (Eucalypt Trees) standing on Midway Plantations’ freehold and leasehold land in Victoria (Strategy Trees).
The sale of those trees was completed on 29 February 2016.
• Midway and Strategy entered into a Forest Management Agreement on 29 February 2016 pursuant to which Midway
is contractually engaged to manage the Strategy Trees on behalf of Strategy on commercial terms.
• Midway Plantations and Strategy entered into a Stumpage Sale Agreement on 29 February 2016 pursuant to which Midway
Plantations agrees to acquire back from Strategy the Eucalypt Trees. The agreement requires Midway Plantations to acquire
the Eucalypt Trees by the end of specified five-year harvest windows in respect of those trees for a price that is determined
in accordance with the agreement. The amount payable by Midway Plantations for each compartment of Eucalypt Trees
repurchased under the agreement is based on a fixed quantity of timber, which will be deemed to be derived from the
compartment regardless of the actual yield from or quantity of timber standing within the compartment when repurchased.
The price per GMT of such fixed quantity payable by Midway Plantations is a price initially specified in the agreement as varied
in accordance with a review mechanism, which takes into account changes in the prevailing market FOB export pricing for
E. globulus from the Port of Geelong and movements in the consumer price index.
• Midway Plantations and Strategy entered into a Softwood Harvest and Marketing Agreement on 29 February 2016 pursuant
to which Midway Plantations is contractually engaged to provide various services on commercial terms to Strategy in relation
to the harvesting, marketing and ultimate sale of the Softwood Trees.
• To facilitate the arrangements set out above, Midway Plantations granted to Strategy forestry rights registrable on title under
the Climate Change Act (Vic) 2010 (in respect of the freehold land owned by Midway Plantations on which the Strategy Trees
stand) and a forestry licence agreement (in respect of the leasehold land on which the Strategy Trees stand). The documents,
amongst other things, grant Strategy the right to access, maintain, manage, protect and harvest the Strategy Trees on the land.
• To secure the repurchase obligations of Midway Plantations under the Stumpage Sale Agreement, Midway Plantations has
granted to Strategy a mortgage over its freehold land on which the Strategy Trees stand.
Risk management strategy in relation to biological assets
Midway manages its own plantation estate and estates of third parties using well equipped, trained forestry staff to achieve production
wood flow consistent with the business plan and to mitigate against the risk of damage (including holding insurance against catastrophic
events such as fire).
1. During the prior period, Strategy Timber Pty Ltd, sold its investment in the treecrop to another third party, Hancock Natural Resource Group (HNRG), who acquired
the Strategy hardwood plantation trees in Victoria on behalf of its investment clients. The existing agreements in place concerning Midway’s commitment to
repurchase the hardwood treecrop have been novated as a part of the sales process and as such the sale does not have any ramifications for the Group.
2.4 Commitments
– not later than one year
– later than one year and not later than five years
– later than five years
2021
$’000
18,884
68,431
59,584
2020
$’000
20,045
84,662
66,740
146,899
171,447
Commitments relate to the minimum charges under the Port of Geelong bulk loader agreement and various supply agreements for
the supply of timber to be used in production for which the Group is required to purchase minimum quantities. In addition, the Group
has also secured a significant proportion of its long-term supply of woodfibre through a number of executory contracts, which allow
for the Group to purchase woodfibre at market prices. Commitments are entered into by Midway Limited, parent entity.
56
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
2.5 Leases
(a) Right of Use Assets
Right of Use Assets by Category
Balance at 1 July 2019
Additions
Disposal
Depreciation
Closing carrying amount
Balance at 1 July 2020
Additions
Disposal
Depreciation
Closing carrying amount
(b) Amounts Recognised in Profit or Loss
Interest on lease liabilities
Expenses relating to short-term leases
(c) Amounts Recognised in the Statement of Cash Flows
Total cash outflows for leases
Leased
Land
$’000
Leased
Building
$’000
Leased
Property,
Plant and
Equipment
$’000
4,807
1,329
–
(1,620)
4,516
4,516
978
(59)
(1,653)
3,782
247
2
–
(172)
77
77
633
(12)
(199)
499
12,796
2,415
(486)
(4,777)
9,948
9,948
780
(226)
(3,446)
7,056
2021
$’000
210
88
2021
$’000
5,255
Total
$’000
17,850
3,746
(486)
(6,659)
14,541
14,541
2,391
(297)
(5,298)
11,337
2020
$’000
625
94
2020
$’000
6,675
Extension Options
Some property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract
period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension
options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is
reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.
Policy
The Group recognises a right to use asset for a lease whereby there is right to control the use of an identified asset for a period of time
in exchange for consideration. At the commencement date, a right to use asset is measured at cost and a corresponding lease liability
is created to reflect the present value of the lease payments that are not paid at that date, discounted using the incremental borrowing
rate specific to that lease.
Subsequently, the right to use assets are depreciated on a straight-line basis over the shorter of the asset’s useful life and the asset’s
lease term. Lease liability is measured at amortised cost using the effective interest method.
The Group will not recognise a right to use asset for any short-term or insignificant leases.
57
MIDWAY LIMITEDANNUAL REPORT 2021
Section 2: Our Asset Base continued
2.6 Working Capital
Working Capital
Cash and cash equivalents
Inventories
Trade and other receivables
Trade and other payables
Provisions
(a) Inventories
At cost
Finished goods
Work in progress
Section
a
b
c
2021
$’000
12,956
15,645
17,329
(22,353)
(4,270)
19,307
2020
$’000
11,049
29,210
3,564
(20,090)
(4,277)
19,456
2021
$’000
2020
$’000
15,645
29,210
–
–
15,645
29,210
Policy
Inventories are measured at the lower of cost and net realisable value. The cost of woodfibre includes direct material, direct labour
and a proportion of manufacturing overheads based on normal operating capacity.
COVID-19 impacted USD FOB sale prices for woodfibre during the period. At each balance date, the Group measures inventory to
ensure it is held at the lower of cost and net realisable value. No write-downs occurred as a result of this test, albeit lower prices than
the previous corresponding period were used.
A write-off of $0.5 million during the period occurred on the chip stack on the Tiwi Islands.
Key Estimates and Judgements
Woodfibre is purchased in Green Metric Tonnes (GMTs), (fibre inclusive of moisture) and is sold in Bone Dry Metric Tonnes (BDMTs),
being fibre exclusive of moisture. Cost is determined on an actual cost basis. Moisture content and production losses are applied
to the GMT values. Factors vary depending on the timber species and variations in moisture content.
Volumetric chip stack surveys are used in determining inventory volumes at year end. Conversion from M3 to GMT ranges from
2.2 to 2.9 – the range depends upon factors such as timber species type and seasonal factors.
(b) Trade and Other Receivables
Trade debtors
Accrued income1
GST receivable
2021
$’000
9,755
5,105
2,469
17,329
2020
$’000
1,358
808
1,398
3,564
1. Accrued income refers to vessel shipped in late June but not invoiced.
Policy
Trade and other receivables are measured at fair value and subsequently measured at amortised cost using the effective interest method.
58
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
(c) Trade and other payables
Unsecured liabilities
Trade creditors
Sundry creditors and accruals
2021
$’000
2020
$’000
9,553
12,800
22,353
8,556
11,534
20,090
Policy
Financial liabilities include trade payables, other creditors and loans from third parties.
Non-derivative financial liabilities are subsequently measured at amortised cost, comprising original debt less principal payments
and amortisation.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
2.7 Intangible Assets
The reconciliation of the carrying amount is set out below:
Notes
Goodwill
$’000
Year ended 30 June 2020
Opening net book amount
Impairment loss on non-current assets
1.6
Amortisation
Closing carrying amount
Year ended 30 June 2021
Opening net book amount
Impairment loss on non-current assets
Amortisation
Closing carrying amount
2,955
(984)
–
1,971
1,971
–
–
1,971
Customer
Contracts
$’000
6,286
(5,532)
(754)
–
–
–
–
–
Total
$’000
9,241
(6,516)
(754)
1,971
1,971
–
–
1,971
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. The customer contract
intangible asset was written off in FY20.
59
MIDWAY LIMITEDANNUAL REPORT 2021
Section 3: Funding Structures
The Group has a disciplined approach applying key principles in capital management and maximising shareholder returns.
This includes:
• Forward cover taken out against the USD currency fluctuations on USD denominated sales in accordance with the
Group’s hedging policy to safeguard against volatility and maximise profits (see section 3.2).
• Maintaining a gearing ratio which, allows flexibility in the balance sheet (<0.3).
3.1 Net Debt
Bank loans – current
Bank loans – non-current
Hire purchase liabilities – current
Hire purchase liabilities – non-current
Other finance arrangements
AASB 16 lease liabilities
Cash and cash equivalents
2021
$’000
4,725
29,175
3,327
2,848
–
4,359
(12,956)
31,478
2020
$’000
7,000
30,150
3,006
5,867
215
4,240
(11,049)
39,429
i. Assets Pledged as Security
The Midway facilities are secured by the following:
• A fixed and floating charge granted by Midway Limited and Midway Plantations Pty Ltd.
A property mortgage over:
• the property situated at 150-190 Corio Quay Road, North Shore, VIC, granted by Midway Limited;
• the property situated at 10 The Esplanade, North Shore, VIC, granted by Midway Properties Pty Ltd; and the property
situated at 1A The Esplanade, North Shore, VIC, granted by Midway Limited; and
• a number of plantation blocks in south-west Victoria.
ii. Refinancing
The following amounts represent the Group’s outstanding liabilities with external financiers:
Type
Term debt
Working capital, asset finance (NAB)
Asset finance (ANZ)
Acquisition debt facility – tranche 2
Acquisition debt facility – Bell Bay
Utilised
$’000
29,175
4,474
5,201
1,225
–
Total
$’000
29,175
Maturity
30-Sep-24
31,200
31-May-22
10,000
30-Sep-21
1,550
3,000
30-Jun-22
30-Sep-24
The Group has the ability to enter into purchase arrangements under the asset finance facility until it expires on 31 May 2022 (NAB)
and 30 September 2021 (ANZ). Each outstanding finance arrangement will then be repaid within a five-year period.
Policy
Borrowings are initially recognised at fair value, net of transactions costs incurred. Borrowings are subsequently measured at amortised
cost using the effective interest method.
Borrowings are classified as current unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
following the reporting period.
60
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
(a) Cash and cash equivalents
Cash at the end of the financial year as shown in the Consolidated Statement of Cash Flows is reconciled to the related items in the
Consolidated Balance Sheet as follows:
Cash on hand
Cash at bank
Reconciliation of cash flow from operations with profit after income tax
Profit from ordinary activities after income tax
Adjustments and non-cash items
Depreciation and amortisation
Net (gain)/loss on disposal of property, plant and equipment
Sundry movements
Share of equity accounted investees profit
Fair value (increment)/decrement on revaluation of biological assets
Impairment of non-current assets
Non-cash interest expense
Changes in operating assets and liabilities
(Increase)/decrease in receivables
(Increase)/decrease in other assets
(Increase)/decrease in inventories
Increase in biological assets (net of revaluation increment/decrement)
Increase/(decrease) in payables
(Increase)/decrease in deferred taxes
Increase/(decrease) in tax provision
Increase/(decrease) in provisions
2021
$’000
1
12,955
12,956
2020
$’000
1
11,048
11,049
(5,178)
(11,733)
11,271
13,094
(59)
132
1,475
2,261
2,269
2,734
(8,810)
(5,852)
13,565
5,576
2,325
(1,569)
2,136
(6)
(426)
3
(2,764)
4,887
8,582
3,921
13,910
(182)
(6,521)
1,089
(7,192)
(7,277)
1,456
245
Cash flows provided from operating activities
22,270
11,102
Policy
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less
held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the
consolidated balance sheet.
(b) Finance Expense
Interest expenses
Strategy finance expenses
Bank charges
Interest expense on lease liabilities
2021
$’000
1,503
2,935
176
509
5,123
2020
$’000
1,532
3,686
271
625
6,114
61
MIDWAY LIMITEDANNUAL REPORT 2021
Section 3: Funding Structures continued
3.1 Net Debt continued
(c) Reconciliation of Liabilities Arising from Financing Activities
Balance at 1 July 2020
Cash changes
Repayment of borrowings
Total cash flows
Non-cash changes
Lease additions
Interest
Transfer
Balance at 30 June 2021
Borrowings –
Current
$’000
11,610
Borrowings –
Non-current
$’000
38,868
Strategy
Financial
Liability
Current
$’000
5,523
Strategy
Financial
Liability –
Non-current
$’000
37,675
(7,206)
(7,206)
(1,514)
(1,514)
(5,523)
(5,523)
(558)
(558)
780
210
4,158
9,552
1,686
–
(4,158)
34,882
–
–
8,202
8,202
–
2,935
(8,202)
31,850
3.2 Financial Risk Management
Capital Risk Management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and to maintain an optimal
capital structure to reduce the cost of capital, so that it can provide returns to the shareholders and benefits for other stakeholders.
This is achieved through the monitoring of historical and forecast performance and cash flows.
Risk Management Framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Board of Directors has established the Audit and Risk Management Committee, which is responsible for developing and
monitoring the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market
conditions and the Group’s activities.
The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control
environment in which all employees understand their roles and obligations.
The Board of Directors has overall responsibility for identifying and managing operational and financial risks.
The Group is exposed to a variety of financial risks comprising:
(a) market risk;
(b) credit risk; and
(c) liquidity risk.
62
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Receivables
Other receivables
Derivatives
Financial liabilities
Bank and other loans
Creditors
AASB 16 lease liabilities
Finance lease liability
Other payables
Derivatives
2021
$’000
2020
$’000
12,956
15,628
7,574
–
11,049
6,818
2,206
2,825
36,158
22,898
33,900
37,365
9,553
4,359
6,175
12,800
2,165
68,952
8,556
4,240
8,873
11,534
–
70,568
(a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices
such as foreign exchange rates, interest rates and equity prices. The Group’s financial instruments consist mainly of deposits with
banks, accounts receivable and payable, bills, leases and derivatives. The objective of market risk management is to maintain and
control market risk exposures within acceptable parameters, while optimising the return.
i. Currency Risk
The Group has an Australian Dollar (AUD) presentation currency, which is also the functional currency of its Australian entities.
The Group is exposed to currency risk as below:
What is the Risk?
How Does Midway Manage the Risk?
Impact at 30 June 2021
If transactions are denominated
in currencies other than AUD.
There is a risk of an unfavourable
financial impact if there is an adverse
movement in foreign currency.
Export sales are denominated in
US Dollars (USD), with one of the
Group’s bank accounts being in USD.
The Group mitigates currency risk by entering into
forward exchange/swap contracts and fX options to
sell specified amounts of USD usually within 12 months
at stipulated exchange rates in accordance with the
Group’s hedging policy. The objective in entering the
contracts is to protect the Group against unfavourable
exchange rate movements for contracted and anticipated
future sales undertaken in USD.
At balance date the notional
amount of outstanding forward
exchange contracts was
$157.8 million (2020: $45.3 million),
and USD options was $0 million
(2020: $88.3 million).
Sensitivity analysis has been
performed below.
Derivative assets/(liabilities) held on the balance sheet representing the fair value of cash flow hedges at balance date are as follows:
Derivative assets
Derivative financial liability
2021
$’000
–
(2,165)
2020
$’000
2,825
–
During the period there was no (2020: $0) hedge ineffectiveness resulting in a transfer to the income statement.
63
MIDWAY LIMITEDANNUAL REPORT 2021
Section 3: Funding Structures continued
3.2 Financial Risk Management continued
Policy
Certain derivatives are designated as hedging instruments and are further classified as either fair value hedges or cash flow hedges.
At the inception of each hedging transaction, the Group documents the relationship between the hedging instruments and hedged
items, its risk management objective and its strategy for undertaking the hedge transaction. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will
continue to be highly effective in offsetting changes in fair value or cash flows of hedged items. The Group determines the existence
of an economic relationship between the hedging instrument and hedge items based on the currency, amount of timing of their
respective cash flows.
The Group designates the spot element of forward exchange contracts to hedge its currency risk and applies a hedge ratio of 1:1.
The effective portion of changes in the fair value of the derivatives that are designated and qualify as cash flow hedges is recognised
in other comprehensive income and accumulated in the cash flow hedge reserve in equity. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss. The Group does not speculate in the trading of derivative instruments.
In these hedge relationships the main sources of ineffectiveness are:
• the effect of the counterparties and the Group’s own credit risk on the fair value of the forward exchange contracts, which
is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and
• changes in timing of the hedged transactions.
All exchange differences arising on settlement or revaluation are recognised as income or expenses for the financial year.
Cash
Trade receivables
2021
USD $’000
85
36
2020
USD $’000
502
91
The forward exchange and swap contracts in place are to hedge cash flows associated with the above mentioned trade receivables
and highly probable future sales.
Sensitivity
If foreign exchange rates were to change by 10 per cent from USD rates used to determine fair values as at the reporting date,
assuming all other variables that might impact on fair value remain constant, including effective hedging, then the impact on profit for
the year and equity is as follows:
USD movement impact [+/- 10%]
Impact on profit after tax
Impact on equity
2021
2020
Increase
$’000
Decrease
$’000
Increase
$’000
Decrease
$’000
(10)
8,663
11
(47)
51
(12,711)
17,620
(19,629)
A 10 per cent change is deemed reasonable given recent historical trends in the AUD/USD.
64
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
i. Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of changes in market
interest rates.
What is the Risk?
How Does Midway Manage the Risk?
Impact at 30 June 2021
The Group has variable interest rate
debt, and therefore if interest rates
increase, the amount of interest
the Group is required to pay will
also increase.
Monitoring of announcements from the central
banking authority and other sources which may
impact movements in the variable rate.
Effective interest rate monitored by Audit and Risk
Management Committee.
No swaps are currently taken out.
If interest rates were to increase/
decrease by 100 basis points from
rates applicable at the reporting
date, assuming all other variables
that might impact on fair value
remain constant, the impact on
profit for the year and equity is
not significant.
The Group’s exposure to interest rate risk in relation to future cash flows and the effective weighted average interest rates on classes
of financial assets and financial liabilities is as follows:
No other financial assets or financial liabilities are expected to be exposed to interest rate risk.
2020
Financial assets
Cash
Trade receivables
Other receivables
Derivatives
Financial liabilities
Bank and other loans
Creditors
AASB 16 lease liability
Finance lease liability
Sundry creditors and accruals
2021
Financial assets
Cash
Trade receivables
Other receivables
Financial liabilities
Bank and other loans
Creditors
AASB 16 lease liability
Finance lease liability
Sundry creditors and accruals
Derivatives
Interest
Bearing
$’000
Non-interest
Bearing
$’000
Total
Carrying
Amount
$’000
Weighted Average
Effective Interest Rate
11,048
1
11,049
0.00%
Floating
–
–
–
6,818
2,206
2,825
6,818
2,206
2,825
11,048
11,850
22,898
37,150
–
4,240
8,873
–
50,263
215
8,556
–
–
11,534
20,305
37,365
2.51%
Floating
8,556
4,240
8,873
11,534
70,568
3.54%
3.91%
Fixed
Fixed
12,955
1
12,956
0.00%
Floating
–
–
9,755
7,574
9,755
7,574
12,955
17,330
30,285
–
33,900
2.61%
Floating
9,553
–
–
12,800
2,165
24,518
9,553
4,359
6,175
12,800
2,165
68,952
3.98%
3.78%
Fixed
Fixed
33,900
–
4,359
6,175
–
–
44,434
65
MIDWAY LIMITEDANNUAL REPORT 2021
Section 3: Funding Structures continued
3.2 Financial Risk Management continued
(b) Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge
an obligation.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial
assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in the Consolidated
Balance Sheet and notes to financial statements.
Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations.
The credit risk exposure of forward exchange and swap contracts is the net fair value of these contracts.
What is the Risk?
The Group has significant exposure
to export customers in China,
as they represent a significant
portion of the Group’s annual sales.
How Does Midway Manage the Risk?
Letters of credit with reputable financial institutions
are used to mitigate credit risk with all Chinese
customers which comprises the majority of the
Group’s annual woodfibre sales.
Impact at 30 June 2021
As at 30 June 2021, there are only
receivables for one vessel outstanding,
of which the cash was subsequently
collected within 10 days as expected.
The Group is exposed to credit
risk on plantation management
activities in addition to the sale of
woodfibre to customers in China.
The balance of woodfibre sales are made to
long-standing Japanese customers with the short
trading terms applicable to these customers, being
payment within seven business days of invoicing.
The Group produces and markets woodfibre on
the Tiwi Islands on behalf of the wood owners.
Receiving outstanding receivables is contingent on
the Group performing its obligations successfully
in terms of producing and marketing woodfibre.
This limits the Group’s credit risk to a certain
extent given receipt of the debt is linked to the
Group’s performance in producing and marketing
the woodfibre.
Based on management’s assessment of
its exposure, the Group has low credit risk.
$5.9 million is outstanding over 90 days
relating to trade receivables from the wood
owners, in addition to a $2.2 million
non-current loan receivable.
Given the impacts of COVID-19 and
adverse market conditions, it is not
expected to recover the receivables for at
least 12 months. The Group is expecting
to be able to market woodfibre from the
Tiwi Islands once the market recovers
and therefore no expected credit loss
provision has been recorded, as the
Group will be able to recover it directly
from the proceeds of woodfibre sales,
of which the Group is responsible for
marketing the wood.
As at 30 June 2021, the ageing of trade and other receivables that were not impaired was as follows:
Neither past due nor impaired
Past due 1–30 days
Past due 31–60 days
Past due 61–90 days
Over 90 days
2021
$’000
9,119
7,913
3
179
5,988
23,202
2020
$’000
3,362
721
150
83
4,708
9,024
(c) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities
are maintained.
66
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
Maturity analysis
The table below represents the undiscounted contractual settlement terms for financial assets and liabilities and management’s
expectation for settlement of undiscounted maturities.
< 6 Months
$’000
6-12 Months
$’000
1-5 Years
$’000
>5 Years
$’000
Total
Contractual
Cash Flows
$’000
12,956
209
17,329
(2,165)
(22,353)
(4,462)
(3,971)
(795)
(3,252)
11,049
256
3,564
2,825
(20,090)
(3,005)
(2,573)
(1,591)
(9,565)
–
209
–
–
–
(4,462)
(2,634)
(4,220)
(11,107)
–
256
–
–
–
(3,005)
(2,244)
(6,765)
(11,758)
–
3,376
5,873
–
–
(51,225)
(7,288)
(29,194)
(78,458)
–
3,471
5,460
–
–
(42,095)
(8,233)
(30,885)
(72,282)
–
–
–
–
–
(13,950)
(2,198)
–
12,956
3,794
23,202
(2,165)
(22,353)
(74,099)
(16,091)
(34,209)
(16,148)
(108,965)
–
324
–
–
–
(37,426)
(1,153)
–
4,307
9,024
2,825
(20,090)
(85,531)
(14,203)
(39,241)
(38,255)
(131,860)
Carrying
Amount
$’000
12,956
3,514
23,202
(2,165)
(22,353)
(40,052)
(10,534)
(33,900)
(69,332)
3,129
9,024
2,825
(20,090)
(43,198)
(13,113)
(37,365)
(87,739)
11,049
11,049
2021
Cash and cash equivalents
Loan receivables
Receivables
Derivatives
Payables
Strategy financial liability
Finance lease
Borrowings
Net maturities
2020
Cash and cash equivalents
Loan receivables
Receivables
Derivatives
Payables
Strategy financial liability
Finance lease
Borrowings
Net maturities
3.3 Contributed Equity
(a) Ordinary share capital
Share Capital
Ordinary shares
Opening balance – 1 July
Performance rights vested
Issued during the year
Number of Shares
Company
2021
2020
2021
$’000
2020
$’000
87,336,222 87,271,222
65,000
–
–
–
–
–
64,888
64,791
–
–
–
97
–
–
Capital raising costs incurred net of recognised tax benefit
Closing balance 30 June 2021
87,336,222 87,336,222
64,888
64,888
Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general
meetings of the Company.
67
MIDWAY LIMITEDANNUAL REPORT 2021
Section 3: Funding Structures continued
3.3 Contributed Equity continued
(b) Reserves
Reserves
Movements:
Cash flow hedge reserve1
Opening balance
Cash flow hedges – effective portion
Deferred tax
Balance 30 June
Share-based payments reserve2
Opening balance
Share rights granted
Share rights issued/vested
Balance 30 June
Asset revaluation reserve3
Opening balance
Revaluation of land
Asset disposals
Deferred tax
Balance 30 June
Profit reserve4
Opening balance
Adjustment on adoption of AASB 16
Restated opening balance
Transfers of current year profits
Dividends paid
Balance 30 June
Foreign currency translation reserve
Opening balance
Foreign currency translation differences
Balance 30 June
1. Cash flow hedge reserve
2021
$’000
2020
$’000
1,977
(5,109)
1,533
(1,599)
12
105
–
117
36,919
16,724
–
(5,017)
48,626
34,875
–
34,875
–
–
34,875
10
(90)
(80)
(387)
3,377
(1,013)
1,977
99
10
(97)
12
32,424
7,025
(604)
(1,926)
36,919
42,569
166
42,735
–
(7,860)
34,875
5
5
10
The hedging reserve is used to record the effective portion of gains and losses on cash flow hedges that are recognised in other comprehensive income
as described in section 3.2. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss.
2. Share-based payment reserve
The shared-based payment reserve is used to recognise the expense over the vesting period.
3. Asset revaluation reserve
The asset revaluation reserve is used to record increments and decrements on the revaluation of land and reclassified to retained earnings on disposal. Movements
in the year relate to revaluation of plantation land.
4. Profit reserve
The profits reserve is used to record transfers of profits that would otherwise be offset against accumulated losses. The balance of the profits reserve is available
for distribution as a dividend in future periods. Movements in the current year relate to transfers to retained earnings for dividend payments and transfers in of
current year profits.
68
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
Section 4: Other Disclosures
This section includes additional financial information that is required by the accounting standards and the Corporations Act 2001.
4.1 Subsidiaries
Subsidiaries of Midway Limited and controlled entities:
Queensland Commodity Exports Pty Ltd
Midway Plantations Pty Ltd
Midway Properties Pty Ltd
Midway Tasmania Pty Ltd
Plantation Management Partners Pty Ltd
Resource Management Partners Pty Ltd
Plantation Management Partners Pte Ltd1
Midway Logistics Pty Ltd
Midway Logistics Unit Trust
Ownership Interest
Held by the Company
Ownership Interest
Held by NCI
2021
%
2020
%
2021
%
2020
%
90
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
10
–
–
–
–
–
–
–
10
–
–
–
–
–
–
–
1. 50 per cent held in Trust by an independent party; however, all risks and benefits of ownership of the share are held by the Group. Entered into liquidation during
the period.
Policy
The consolidated financial statements are those of the Company, comprising the financial statements of the parent entity and all of
the entities the parent controls. The Company controls an entity where it has the power, for which the parent has exposure or rights to
variable returns from its involvement with the entity, and for which the parent has the ability to use its power over the entities to affect
the amount of its returns.
4.2 Interest in Joint Ventures
(a) Carrying amount
South West Fibre Pty Ltd
Bio Growth Partners (BGP)1
Plantation Export Group (PEG)
Nature of Relationship
Ordinary shares
Ordinary shares
Ordinary shares
Ownership Interest
Carrying Amount
2021
%
51
40
50
2020
%
51
40
50
2021
$’000
9,888
40
50
2020
$’000
11,481
2,260
75
9,978
13,816
1. Subsequent to year end, Midway Limited acquired the remaining 60 per cent of shares in Bio Growth Partners and as such will become a subsidiary from
acquisition date.
Policy
Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions
about the relevant activities are required. Joint arrangements are classified as either joint operations or joint ventures based on the
rights and obligations of the parties to the arrangement.
The Company’s interest in joint ventures is brought to account using the equity method after initially being recognised at cost. Under the
equity method, the profits or losses of the joint venture are recognised in the Company’s profit or loss and the Company’s share of the
joint venture’s other comprehensive income is recognised in the Company’s other comprehensive income.
69
MIDWAY LIMITEDANNUAL REPORT 2021
Section 4: Other Disclosures continued
4.2 Interest in Joint Ventures continued
Key Estimates and Judgements
1. South West Fibre Pty Ltd
South West Fibre Pty Ltd (SWF) is a joint venture in which the Company has a 51 per cent ownership interest. Voting rights are
proportionately in line with share ownership. The Company has joint but not ultimate control over the venture as the shareholder
agreement requires a special resolution when making key decisions.
SWF is structured as a separate vehicle and the Company has a residual interest in the net assets of SWF. Accordingly, the Company
has classified the interest in SWF as a joint venture as the Company does not have control over the entity.
(b) South West Fibre Pty Ltd Financial Information
Cash and cash equivalents
Other current assets
Total current assets
Property, plant and equipment
Total non-current assets
Total current liabilities
Total non-current liabilities
Net assets
Revenue
Interest income
Depreciation and amortisation
Income tax benefit/(expense)
Total comprehensive income
Reconciliation to carrying amount of interest in joint venture:
Opening net assets
Add: Current year profit/(loss)
Less: Dividends paid
Hedge revaluation reserve
Closing net assets
Company’s 51% share of net assets
Carrying amount of investment
2021
$’000
3,215
12,798
16,013
16,978
18,236
(6,929)
(7,931)
19,389
38,875
–
(4,537)
1,259
(3,123)
22,512
(2,937)
–
(186)
19,389
9,888
9,888
2020
$’000
10,585
8,245
18,830
21,515
21,515
(8,047)
(9,786)
22,512
125,636
24
(4,567)
(2,273)
5,291
22,171
5,291
5,000
50
22,512
11,481
11,481
70
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
4.3 Midway Limited – Parent Entity
Summarised Balance Sheet
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Reserves
Total equity
Summarised Statement of Profit or Loss and Other Comprehensive Income
Profit for the year after income tax
Total comprehensive income
2021
$’000
2020
$’000
94,966
75,336
85,372
80,153
170,302
165,525
23,054
27,569
50,623
24,527
27,465
51,992
119,679
113,533
64,888
1,614
53,177
64,888
1,614
47,031
119,679
113,533
9,672
6,146
8,029
5,769
4.4 Share-based Payments
The Board has established a Long Term Incentive Plan (LTIP) under which Directors and employees of Midway may be invited
by the Board to participate. The awards which may be issued under the LTIP include:
• shares;
• options; and
• performance rights.
Currently the following share-based payment arrangements are in effect under the LTIP:
(a) Long-term Incentive Rights (Equity Settled)
In FY21, the Board granted the Chief Executive Officer and members of the Senior Executive Team 771,283 performance rights,
subject to vesting conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the
underlying shares will be issued. The performance period is until 30 June 2023.
71
MIDWAY LIMITEDANNUAL REPORT 2021
Section 4: Other Disclosures continued
4.4 Share-based Payments continued
(a) Long-term Incentive Rights (Equity Settled) continued
2021 Plan
Assumption
No. of shares
Fair value at grant date1
Share price
Risk free rate
Dividend yield
Volatility
Initial TSR
Vesting Conditions
• Participant must maintain continuous employment over the
performance period, which ends 30 June 2023.
• The percentage of performance rights that will vest at the
end of the performance period will depend on Midway’s total
shareholder return (TSR) over the performance period, relative
to a comparator group of companies in the S&P/ASX 300 Index.
771,283
$0.53
$0.90
0.11%
3.0%
46.0%
8.4%
The Group recorded a share-based payments expense of $0.1 million in 2021 (2020: $0.01 million).
2020 Plan
Assumption
Tranche 1
No. of shares
Fair value at grant date1
Share price
Risk free rate
Dividend yield
Volatility
Initial TSR
Tranche 2
No. of shares
Fair value at grant date1
Share price
Risk free rate
Dividend yield
Volatility
Initial TSR
73,197
$0.41
$1.95
0.76%
5.4%
35.0%
-41.5%
125,806
$0.17
$1.41
0.38%
5.4%
37.0%
-57.7%
Vesting Conditions
• Participant must maintain continuous employment over
the performance period which ends 30 June 2022.
• The percentage of performance rights that will vest at the
end of the performance period will depend on Midway’s TSR
over the performance period, relative to a comparator group
of companies in the S&P/ASX 300 Index.
1. The fair value at grant date was derived using the Monte Carlo Simulation model, which incorporates the total shareholder return (TSR) performance conditions.
72
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021 4.5 Related Parties
KMP of the Group represent the Directors, CEO and CFO in line with their ability to influence strategy and decision making.
(a) Remuneration of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long-term incentives
Total KMP remuneration expense
2021
$’000
1,696
118
–
21
2020
$’000
1,643
133
8
29
1,835
1,813
Transactions between related parties are on normal commercial terms no more favourable than those available to other parties unless
otherwise stated. An accrual for Directors’ fees was recorded for eight days to year end to 30 June 2021.
The aggregate shareholdings of KMP at 30 June 2021 are 10,148,135 (2020: 12,898,491).
(b) Transactions with South West Fibre Pty Ltd
Nature
Operator fee income
Reimbursement of costs
Dividends received
Sale of wood products (at cost)
2021
$’000
548
291
–
5,225
6,064
2020
$’000
1,911
1,302
2,550
12,962
18,725
The outstanding receivable balance from South West Fibre Pty Ltd at 30 June 2021 is $0.6 million (2020: $0.2 million payable).
(c) Transactions with ADDCO Fibre Group Limited
Nature
Loan provided to ADDCO
Harvesting service received
Logging service received
The outstanding receivable balance from ADDCO Fibre Group Ltd at 30 June 2021 is $0k (2020: $0k).
(d) Transactions with Bio Growth Partners
Nature
Production and cartage income
Loan repayment
Equipment hire
2021
$’000
–
–
–
–
2021
$’000
1,239
(215)
–
1,024
2020
$’000
–
2,075
–
2,075
2020
$’000
2,585
–
200
3,785
The outstanding receivable balance from Bio Growth Partners at 30 June 2021 is $534k (2020: $534k) and no loan payable (2020: $215k).
73
MIDWAY LIMITEDANNUAL REPORT 2021
Section 4: Other Disclosures continued
4.6 Contingent Liabilities
(a) Outstanding Matters
As at the date of this report there are no claims or contingent liabilities that are expected to materially impact, either individually
or in aggregate, the Company’s financial position or results from operations.
(b) Bank Guarantees
Consolidated group
Limit
Amount utilised
Parent entity
Limit
Amount utilised
4.7 Remuneration of Auditors
KPMG Australia
Audit and assurance services
Statutory audit fees
Other services
2021
$’000
5,200
2,276
4,250
2,051
2020
$’000
5,200
3,321
4,250
3,096
2021
$
2020
$
210,000
242,819
– Non- assurance services – other advisory services
20,420
8,000
4.8 Other Income
Plantation management fees
SWF operating fee
Third party chip tolling
JobKeeper
Other
Policy
2021
$’000
48
548
–
2,014
1,559
4,169
2020
$’000
455
1,911
2,269
1,037
1,852
7,524
Dividend Income
Dividend income is recognised when the right to receive a dividend has been established. Dividends received from joint venture entities
are accounted for in accordance with the equity method of accounting.
Other Income
Rental income is recognised on a straight-line basis over the rental term.
If the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount
of commissions made by the Group.
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreement when it is probable
that the royalty will be received, which is normally when the event has occurred.
All income is measured net of the amount of goods and services tax (GST).
74
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
4.9 Deed of Cross Guarantee
The parent entity, Midway Limited, and certain subsidiaries (Midway Plantations Pty Ltd, Resource Management Partners Pty Ltd,
Plantation Management Partners Pty Ltd, Midway Tasmania Pty Ltd and Midway Properties Pty Ltd) are subject to a Deed of Cross
Guarantee (Deed) under which each company guarantees the debts of the others.
By entering into the Deed, the wholly owned subsidiaries have been relieved from the requirement to prepare a Financial Report
and Directors’ Report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
A summarised consolidated statement of comprehensive income, retained earnings reconciliation and a consolidated balance sheet,
comprising the Company and those controlled entities which are a party to the Deed of Cross Guarantee, after eliminating all transactions
between parties to the Deed, at 30 June 2021 are set out below:
Summarised Consolidated Statement of Comprehensive Income
Sales revenue
Other income
Expenses
Share of net profits from equity accounted investments
Profit before income tax expense
Income tax expense
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Retained earnings at the beginning of the financial year
Profit/(Loss) for the year
Transfers to/(from) reserves
Retained profits at the end of the financial year
2021
$’000
243,679
11,364
255,043
2020
$’000
208,636
7,064
215,700
(248,432)
(235,936)
(1,475)
5,136
(694)
4,442
8,131
12,573
(9,675)
4,442
–
2,764
(17,472)
6,183
(11,289)
6,859
(4,430)
1,614
(11,289)
–
(5,233)
(9,675)
75
MIDWAY LIMITEDANNUAL REPORT 2021
Section 4: Other Disclosures continued
4.9 Deed of Cross Guarantee continued
Consolidated Balance Sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Other assets
Asset held for sale
Derivative assets
Current tax receivable
Total current assets
Non-current assets
Biological assets
Other receivables
Investments
Intangible assets
Property, plant and equipment
Loan receivables – NC
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liabilities
Derivative financial liability
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Contributed equity
Share capital
Reserves
Retained earnings
Total equity
76
2021
$’000
2020
$’000
11,823
16,406
10,475
2,500
14,585
2,997
–
2,027
60,813
41,589
5,873
17,753
–
8,740
1,949
23,505
1,483
12,009
–
2,825
940
51,451
48,322
5,460
21,591
–
135,934
125,621
3,127
204,276
265,089
3,129
204,123
255,574
19,407
8,664
3,770
8,202
2,076
21,347
10,247
3,793
5,523
–
42,119
40,910
34,128
159
16,427
31,850
82,564
124,683
140,406
37,749
102
11,460
37,675
86,986
127,896
127,678
64,888
85,193
(9,675)
64,888
72,465
(9,675)
140,406
127,678
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021
4.10 Subsequent Events
There have been no other matters or circumstances which have arisen since 30 June 2021 that have significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2021, of the Group; or
(b) the results of those operations; or
(c) the state of affairs, in financial years subsequent to 30 June 2021 of the Group.
4.11 Basis of Preparation
This Financial Report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards,
Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board and the Corporations
Act 2001.
The Financial Report was approved by the Board of Directors as at the date of the Directors’ Report.
The Financial Report is for Midway Limited and its consolidated entities. Midway Limited is a company limited by shares, incorporated
and domiciled in Australia. Midway Limited is a for profit entity for the purpose of preparing financial statements.
Unless explicitly highlighted in the Financial Report, cost approximates fair value for the carrying amounts of assets and liabilities held
on the balance sheet.
Compliance with IFRS
The consolidated financial statements of the Company also comply with the International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB).
Historical Cost Convention
The Financial Report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain
classes of assets and liabilities as described in the accounting policies.
Significant Accounting Estimates and Judgements
The preparation of the Financial Report requires the use of certain estimates and judgements in applying the Company’s accounting
policies. Those estimates and judgements significant to the Financial Report are disclosed throughout the Financial Report.
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures.
Accounting policies for subsidiaries are consistently applied. Adjustments are made to bring into line any dissimilar accounting policies
which may exist.
All intercompany balances and transactions, including any unrealised profits or losses, have been eliminated on consolidation.
Subsidiaries are consolidated from the date on which control is transferred to the Company and are derecognised from the date that
control ceases.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Company are presented as non-controlling interests.
Non-controlling interests in the result of subsidiaries are shown separately in the consolidated statement of profit or loss and other
comprehensive income and consolidated statement of financial position respectively.
Functional and Presentation Currency
The financial statements of each entity within the Group are measured using the currency of the primary economic environment in
which that entity operates (the functional currency). The consolidated financial statements are presented in Australian Dollars (AUD)
which is the parent entity’s functional and presentation currency.
77
MIDWAY LIMITEDANNUAL REPORT 2021 Section 4: Other Disclosures continued
4.11 Basis of Preparation continued
Transactions and Balances
Transactions in foreign currencies of entities within the Group are translated into functional currency at the rate of exchange ruling
at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency
contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the
financial year.
A monetary item arising under a foreign currency contract outstanding at the reporting date where the exchange rate for the monetary
item is fixed in the contract is translated at the exchange rate fixed in the contract.
Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or restatement are recognised
as revenues and expenses for the financial year.
Impairment of Non-financial Assets
Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired.
For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash
flows (‘cash generating units’). Accordingly, most assets are tested for impairment at the cash generating unit level. Because it does not
generate cash flows independently of other assets or groups of assets, goodwill is allocated to the cash generating unit or units that
are expected to benefit from the synergies arising from the business combination that gave rise to the goodwill.
Assets other than goodwill are assessed for impairment whenever events or circumstances arise that indicate the asset may be impaired.
An impairment loss is recognised when the carrying amount of an asset or cash generating unit exceeds the asset’s or cash generating
unit’s recoverable amount. The recoverable amount of an asset or cash generating unit is defined as the higher of its fair value less costs
to sell and value in use.
Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued
amount such as property, in which case the impairment loss is treated as a revaluation decrease in accordance with the applicable
standard. Impairment losses in respect of cash generating units are allocated first against the carrying amount of any goodwill attributed
to the cash generating unit with any remaining impairment loss allocated on a pro rata basis to the other assets comprising the relevant
cash generating unit.
New Standards Not Yet Effective
There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
78
Notes to the Consolidated Financial Statements continuedMIDWAY LIMITEDANNUAL REPORT 2021 Directors’ Declaration
The Directors of the Company declare that:
1. The consolidated financial statements and notes, as set out on pages 40 to 78 are in accordance with the Corporations Act 2001
including;
(a) comply with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) as stated in Section 4.11, the consolidated financial statements also comply with International Financial Reporting Standards; and
give a true and fair view of the financial position of the Company and the Group as at 30 June 2021 and its performance for the
year ended on that date.
2. There are reasonable grounds to believe that the Company and the group entities identified in Note 4.9 will be able to meet any
obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company
and those group entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required by S 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Chairman:
G H McCormack
26 August 2021
79
MIDWAY LIMITEDANNUAL REPORT 2021 Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Midway Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Midway Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Group’s financial position as at 30
June 2021 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
Consolidated Balance Sheet as at 30 June 2021;
Consolidated statement of comprehensive income,
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
then ended
Notes including a summary of significant accounting
policies; and
Directors’ Declaration.
The Group consists of Midway Limited (the Company)
and the entities it controlled at the year-end or from
time to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and 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 fulfilled our other ethical responsibilities in
accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
80
MIDWAY LIMITEDANNUAL REPORT 2021
Key Audit Matters
The Key Audit Matters we identified are:
• Valuation of Plantation Land; and
• Valuation of Biological assets.
Valuation of Plantation Land ($95.7m)
Refer to Note 2.1 to the Financial Report
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit
of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate
opinion on these matters.
The key audit matter
How the matter was addressed in our audit
The Group’s plantation land is measured at fair
value. This was a key audit matter given the size
of the balance (being 36% of total assets) and
due to the complexity and judgment involved by
us in assessing the Group’s fair value of
plantation land.
The Group engaged an external expert to
perform a valuation of the unencumbered
market value of the Group’s plantation land
assets. The Group adjust this valuation using a
discounted cashflow model to determine the
encumbered land valuation as at balance date.
Working with our valuation specialists, our
procedures included:
assessing the appropriateness of the Group’s
accounting policies against the requirements
of the accounting standards;
reading the external expert’s report and
making inquiries of the Group and the external
expert;
assessing the objectivity, competence and
scope of work of the external expert;
We spent considerable time and effort assessing
the Group’s external expert’s work and their
discounted cashflow model. We focused our
procedures on
significant
assumptions impacting the valuation:
following
the
comparability of the Group’s land valuation
rates to observable market transactions;
highest and best use of the land;
forecast growth rates; and
discount rate.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
considering
the appropriateness of
the
discounted cashflow methodology applied by
the Group to determine the encumbered
valuation against the requirements of the
accounting standards;
assessing the integrity of the discounted
cashflow model used, including the accuracy
of the underlying calculation formulas;
considering the sensitivity of the discounted
cashflow model by varying key assumptions,
such as discount rate and forecast growth
rates, within a reasonably possible range to
focus our further procedures;
checking
the consistency of significant
assumptions used in the discounted cashflow
model, such as, highest and best use of land,
forecast growth rates, discount rate and land
valuation rates to those in the external expert
81
MIDWAY LIMITEDANNUAL REPORT 2021
Independent Auditor’s Report continued
valuation report and other information used by
the Group, and tested by us, including the
biological assets valuations;
using our industry knowledge and experience
to assess the data and significant assumptions
in the external expert report and their
discounted cashflow model. This included
checking significant assumptions and a
sample of data to underlying documentation,
such as, the Group’s plantation records,
historical
trends and observable market
transactions; and
assessing the disclosure in the financial report
using our understanding obtained from our
testing and against the requirements of the
accounting standards.
Valuation of Biological Assets ($44.1m)
Refer to Note 2.3 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Biological assets consist of unharvested
plantation trees and are recorded at their fair
value.
This was a key audit matter given the size of
the balance (17% of total assets) and judgment
required by us in considering the significant
assumptions in the Group’s biological assets
valuation model.
The Group engaged an external expert to
perform an assessment of the fair value of the
biological assets.
We spent considerable
time and effort
assessing the work performed by the external
expert and underlying biological assets
valuation model
inputs. The significant
assumptions we focused on were:
expected yields and volumes (yield
tables), and harvest profile,
discount rates, forecast harvesting costs
and expectations of future market pricing
for woodfibre.
Our audit procedures included:
assessing the appropriateness of the Group’s
accounting policies and methodology applied
to fair value the biological assets against the
requirements of the accounting standards;
assessing the design and implementation of
key controls over the preparation of inputs and
evaluation of outputs of the biological asset
valuations;
reading the external expert’s report and
making inquiries of the Group and their
external expert to inform our understanding;
assessing the objectivity, competence and
scope of the external expert;
considering the sensitivity of the model by
varying key assumptions such as discount
rate and harvest profile, within a reasonably
further
possible
procedures;
focus our
range,
to
using our industry knowledge and experience
inputs and significant
to assess
the
82
MIDWAY LIMITEDANNUAL REPORT 2021
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
assumptions in the biological asset valuation,
tables, harvest profiles,
including yield
forecasting harvesting costs, and woodfibre
prices. This included comparing significant
to underlying
inputs and assumptions
documentation, such as
the Group’s
plantation records, published reports of
industry commentators, historical trends and
performance and other information used by
the Group, and tested by us, including the
land valuations;
working with our valuation specialists, we
analysed the Group’s discount rate against
comparable companies and biological assets;
and
assessing the disclosure in the financial report
using our understanding obtained from our
testing and against the requirements of the
accounting standards.
Other Information
Other Information is financial and non-financial information in Midway Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible
for the Other Information.
The Other Information we obtained prior to the date of this Audit’s Report was the Director’s report
including the Operating and Financial Review and the Remuneration Report. The Letter from the
Chairman, Managing Director’s Review, Midway Operational Review, Sustainability Report,
Shareholder Information and Corporate Directory are expected to be made available to us after the date
of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
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MIDWAY LIMITEDANNUAL REPORT 2021
Independent Auditor’s Report continued
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s ability to continue as a going concern and whether the use
of the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
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 Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They 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.
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MIDWAY LIMITEDANNUAL REPORT 2021
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Midway Limited for the year ended 30
June 2021, complies with Section 300A of
the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 17 to 25 of the Directors’ report for the year ended
30 June 2021.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Vicky Carlson
Partner
Melbourne
26 August 2021
85
MIDWAY LIMITEDANNUAL REPORT 2021
Additional Shareholder Information
FOR THE YEAR ENDED 30 JUNE 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 26 August 2021 (Reporting Date).
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 that 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.midwaylimited.com.au/investor-center/), 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.midwaylimited.com.au/
investor-center/.
Substantial Shareholders
The substantial holders in the Company as at the Reporting Date were:
Substantial Holders
CHEBMONT PTY LTD
GREGORY MCCORMACK AND MCCORMACK TIMBERS
Number of
Shares Held
20,798,294
9,604,599
% of Total Issued
Share Capital
23.81
11.00
Voting Rights
At a general meeting of the Company, every holder of ordinary shares present in person or by proxy, attorney or representative has one
vote on a show of hands, and on a poll one vote for each ordinary share held.
The performance rights, which are unquoted, have no voting rights.
86
MIDWAY LIMITEDANNUAL REPORT 2021 Distribution of Holders of Equity Securities
The distribution of holders of equity securities on issue in the Company as at the Reporting Date is as follows:
Distribution of Ordinary Shareholders
Holdings Ranges
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Number of Holders
322
Total Ordinary Shares
162,105
462
296
427
72
1,579
1,364,091
2,296,306
12,247,507
71,266,213
87,336,222
Distribution of Performance Rights
Holdings Ranges
10,001 to 100,000
100,001 and over
Total
Number of Holders
4
Total Performance Rights
336,471
3
7
633,815
970,286
%
0.19
1.56
2.63
14.02
81.60
100.00
%
34.68
65.32
100.00
Less Than Marketable Parcels of Ordinary Shares
The number of holders of less than a marketable parcel of ordinary shares as at the Reporting Date is as follows:
Unmarketable Parcels
Minimum $500.00 parcel at $1.0300 per unit
Minimum Parcel Size
486
Holders
143
Units
24,254
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MIDWAY LIMITEDANNUAL REPORT 2021 Additional Shareholder Information continued
FOR THE YEAR ENDED 30 JUNE 2021
Twenty Largest Shareholders
The names of the 20 largest security holders of quoted equity securities (being ordinary shares) as at the reporting date are listed below:
Ordinary Shares
Rank Name
1
CHEBMONT PTY LTD
2
3
4
5
6
7
7
9
10
11
12
13
14
15
16
17
18
19
20
MCCORMACK TIMBER HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
MCCORMACK TIMBERS PTY LTD
W.H. BENNETT & SONS PTY LTD
LUSHERI FARMING PTY LTD
M & M MURNANE HOLDINGS PTY LTD
NATIONAL NOMINEES LIMITED
JR MICAH PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BRISPOT NOMINEES PTY LTD
J & J CORRIGAN NOMINEES PTY LTD
MCCORMACK TIMBERS PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MS ESMA CLARA THIELE + MR MURRAY EDWARD THIELE
EMINENT ASSET MANAGEMENT PTY LTD
CS FOURTH NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JANAKIS PTY LTD
Number
of Shares
20,798,294
%
23.81
5,193,036
4,180,388
3,323,653
2,913,152
2,560,356
2,344,263
2,344,263
2,265,141
1,968,000
1,640,604
1,635,584
1,513,530
1,338,411
931,716
916,843
861,500
747,825
732,676
650,215
5.95
4.79
3.81
3.34
2.93
2.68
2.68
2.59
2.25
1.88
1.87
1.73
1.53
1.07
1.05
0.99
0.86
0.84
0.74
Total
Balance of register
Grand total
58,859,450
28,476,772
87,336,222
67.39
32.61
100.00
Stock Exchange Listing
The Company’s ordinary shares are quoted on the Australian Securities Exchange (ASX) (ASX issuer code: MWY).
On-market Buy-back
The Company is not currently conducting an on-market buy-back.
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MIDWAY LIMITEDANNUAL REPORT 2021 Corporate Directory
Midway Limited
ABN 44 005 616 044
Registered Office
10 The Esplanade
North Shore Victoria 3214
Australia
T +61 3 5277 9255
F +61 3 5277 0667
Website
www.midwaylimited.com.au
Board of Directors
Gregory McCormack (Chairman and Non-Executive Director)
Nils Gunnersen (Non-Executive Director)
Tom Gunnersen (Non-Executive Director)
Gordon Davis (Non-Executive Director)
Leanne Heywood (Non-Executive Director)
Thomas Keene (Non-Executive Director)
Anthony Price (Managing Director and Chief Executive Officer)
Auditor
KPMG Australia
727 Collins Street
Melbourne Victoria 3008
Australia
T +61 3 9288 5555
Solicitors
SBA Law
Level 13, 607 Bourke Street
Melbourne Victoria 3000
Australia
T +61 3 9614 7000
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
Australia
T 1300 850 505 (within Australia) or +61 3 9415 4000 (international)
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MIDWAY LIMITEDANNUAL REPORT 2021 midwaylimited.com.au