More annual reports from Midway Limited:
2023 ReportPeers and competitors of Midway Limited:
Papyrus AustraliaA Greener
Future
Annual Report
2023
ANNUAL REPORT 2023
Contents
Chairman’s Report
Managing Director’s Report
Lifting Operating Performance
Leveraging New Growth Opportunities
Carbon Management Opportunities
Port and Processing Facilities
Continued Progress Against Our Commitments
Sustainability
02
04
06
08
10
12
13
14
Directors’ Report
Auditor’s Independence Declaration
Remuneration Report (Audited)
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
Corporate Directory
18
28
29
39
79
80
84
87
MIDWAY LIMITED ABN 44 005 616 044
ANNUAL REPORT 2023MIDWAY LIMITED Our Strategy
ANNUAL REPORT 2023
Midway was founded in 1980 by a collective of Victorian sawmillers seeking a
valuable market for their sawmill residue waste that was otherwise being burned.
Today Midway is one of Australia’s largest woodfibre
processors and exporters, with a strong and growing
plantation and carbon management business.
Our fibre goes into recyclable paper and packaging,
plastic replacement products and coal replacing
energy generation.
Our Strategy is to maximise shareholder returns
and focusses on three key areas:
• Lifting the operating performance of the Group
• Leveraging capabilities and maximising the value
of assets
• Pursuing and developing our carbon growth strategy
We provide solutions for carbon abatement and
emissions offsets using natural processes and
our expertise.
Maximising Shareholder Returns
1
3
5
7
2
4
6
8
Partnerships
Plantation
Management
Haul
Stockpile
Planning and
Establishment
Harvest
Processing
Marketing and
Export Sales
Carbon Sequestration and Abatement
01
01
MIDWAY LIMITED
MIDWAY LIMITED Chairman’s Report
I am very pleased with the work of the management team
over the last 12 months to successfully implement
a range of initiatives to improve business performance
and develop a range of other options that will maximise
long-term shareholder returns.
Gordon Davis
Chairman
When I became Midway Chairman in March 2022, I implemented
a strategic review of the Company, and the Board of Directors has
actively supported efforts by the management team to develop
and implement an action plan that will positively position Midway
for future growth.
Financial Performance
Midway recorded sales revenue of $187.8 million across the
full financial year, which was effectively flat on the previous
corresponding period after Midway Logistics is removed as
a discontinued business.
I am very pleased with the work of the management team over
the last 12 months to successfully implement a range of initiatives
to improve business performance and develop a range of other
options that will maximise long-term shareholder returns.
The Company also achieved a positive underlying EBITDA for
FY23 of $2.9 million, a $4.7 million turnaround on an underlying
EBITDA loss of $1.8 million in the previous corresponding period.
Unfortunately, the underlying improvement in business
performance by Midway in FY23 has been masked by the
deterioration in woodfibre trading conditions in China during the
second half of the financial year.
Trading Conditions
The Japanese economy bounced back from its COVID-19
shutdown and our major customers in that country committed
to a 10 per cent increase in the export price to US$198.75
per bone dry tonne.
However, new pulp paper mill capacity coming on stream in
China, at a time of prolonged weakness of the Chinese economy
following the end of their COVID-19 shutdown, resulted in
higher pulp and paper stocks and Chinese customers deferring
woodfibre export contracts.
The management team responded quickly to these external
developments outside our control by implementing a range
of remedial measures; these mitigated the impact on Midway
earnings and cash flow, including deferral of harvest plans
and production at various mill sites.
The full year accounts have several significant items including a
pre-tax $7.8 million provision for the value of an aged receivable
held by PMP on the Tiwi Islands. The decision to write off the
aged receivable was due to a deterioration in trading conditions
in China in the second half of the financial year.
The net impact of these significant items meant that
Midway recorded a Statutory net loss after significant
items from continuing operations of $2.2 million in FY23.
This followed a Statutory net loss after tax and significant
items from continuing operations of $9.1 million in the previous
corresponding period in FY22.
Capital Management
Given the increasingly uncertain trading outlook during the year,
the Board of Directors applied a prudent approach to capital
management. As a result, the Company used the proceeds from
the sale of surplus land and the Victorian plantation assets to
repay all long-term corporate debt, substantially repay the legacy
Strategy financial liability and manage through the unexpected
working capital build in the second half of FY23.
02
ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023
This prudent approach to capital management saw Company
net debt fall from $41.9 million in FY22 to only $3.9 million as
at 30 June 2023 and Midway build a very strong balance sheet,
with Net Tangible Assets (NTA) of $1.43 cents per share.
Midway expects further cash injections in the next few years,
including another $33.6 million in net proceeds from the sale
of its Victorian plantation estate to MEAG in FY24 and FY25
subject to completion of all remaining transactions.
The Midway Board will consider a return to annual dividend
payments when trading conditions and operating cash
flow improve.
Board Renewal
The size and composition of the Midway Board of Directors
has changed significantly in the last few years as the Company
sought to broaden its skill set and expertise to understand and
facilitate our new growth strategy.
With the retirement of former Chairman and founder shareholder
Greg McCormack, and Independent Non-Executive Director
Tom Keene in November 2022, Midway appointed Kellie Benda
to the Board as an independent Non-Executive Director. Kellie
Benda brings a wealth of experience in energy markets and
logistics as well as forest products to the Board.
Midway expects to receive another
$33.6 million in net proceeds from the sale
of its Victorian plantation estate to MEAG,
a subsidiary of Munich Re, in FY24 and FY25.
The Midway Board now comprises three Independent
Non-Executive Directors, including myself as Chair, Kellie Benda
and Leanne Heywood, two shareholder Non-Executive
Directors, Tom and Nils Gunnersen, and the Managing Director,
Tony McKenna.
The Board is working well together with the management
team to achieve one objective – to positively position Midway
for future growth that will extract greater value for shareholders.
We will continue to explore all options to reach that objective.
Gordon Davis
Chairman
03
MIDWAY LIMITED Managing Director’s Report
A number of important strategic review initiatives were
completed in the last 12 months that positively repositioned
Midway for future improvement regardless of short-term
global woodfibre trading conditions.
A comprehensive action plan to positively reposition Midway
for future growth and maximise shareholders returns has been
the central focus of the Midway management team over the last
12 months.
The management team implemented a range of initiatives to
improve business performance, maximise asset utilisation and
leverage our capabilities despite the sudden deterioration in
trading conditions in China during the second half of the
financial year.
Trading Conditions
In April, the benchmark E. Globulus price was settled for the
calendar year with Japanese customers, securing a 10 per cent
increase. However, as the Chairman has reported, the benefit of
the price increase was largely offset by a slowdown in the global
pulp market and the deferral of woodfibre contracts by major
customers in China.
When the full extent of the China contract deferrals became
evident, Midway immediately advised shareholders, and the
management team rapidly implemented a range of remedial
actions to limit the impact on our FY23 financial performance.
We visited our major customers and a range of prospective
customers in Japan and China to secure existing and future
contracts, both for pulp and the emerging biomass markets.
Management also took the hard decision to defer harvest plans
and reduce woodfibre processing at some of our major production
sites to reduce our operating costs and working capital exposures.
Anthony McKenna
Managing Director
Financial Performance
The FY23 results demonstrate that Midway is improving
underlying business performance and is successfully
implementing its strategic plan despite difficult trading
conditions in China in the second half of the year.
I am pleased to report that Midway recorded solid sales
revenue of $187.8 million, which was flat on last year, and a
positive underlying EBIDTA of $2.9 million in FY23, compared
to an underlying EBITDA loss of $1.8 million in the previous
corresponding period.
The Company used the proceeds from the sale of surplus
land and the Victorian plantation assets to repay all long-term
corporate debt, substantially repay the AFF/Strategy financial
liability and manage through the unexpected working capital
build in the second half of FY23.
With the sale of the Victorian plantation assets, Midway’s balance
sheet has been transformed. The plantation estate has been
removed as an asset, both long and short-term bank debt has
been largely repaid, the AFF/Strategy liability materially reduced,
and the future settlement tranches appear as receivables.
The balance sheet remains very strong, with Net Tangible Assets
(NTA) of $1.43 per share, very low levels of debt and a strong
current asset position that has been utilised to sustain the
Company during short-term cyclical downturns in the market.
Midway has reduced net debt to just $3.9 million at 30 June
2023, down from $41.9 million at 30 June 2022. Midway
had bank borrowings of $6.6 million at 30 June 2023, with
$5.6 million of this debt in hire purchase arrangements and
$1.0 million for working capital.
Midway expects to receive another $33.6 million in net proceeds
from the sale of its Victorian plantation estate over the course of
FY24 and FY25, subject to completion of all remaining transactions.
04
ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023
Strategic Initiatives
A number of important strategic review initiatives were completed
in the last 12 months that will positively reposition Midway for
future improvement regardless of short-term global woodfibre
trading conditions.
As a part of the transaction, MEAG also agreed to invest at least
A$200 million in greenfield expansion of the plantation estate,
which will bring Midway’s plantation and carbon assets under
management to over $350 million when fully invested. During
FY23 the first greenfield acquisitions have been completed and
the first carbon projects for MEAG have been registered.
Lifting Operating Performance
The Midway management team had several priority areas
across the business that we targeted to lift operating
performance in FY23.
The first priority was to exit the loss-making Midway Logistics
business in Western Australia. In 2023 the operations were
closed and the impact on earnings was immediate.
The second priority was to get the Bell Bay facility in Tasmania
up and running. In 2023 the Company established processing
and export infrastructure, secured supply volumes, established
contractor teams and has received strong customer enquiries
for the regrowth thinnings product.
Our new processing site at Norfolk Street, Bell Bay, was opened in
October 2022 and the first softwood exports were made from the
port facility in July 2023. The first shipment of Midway’s Tasmanian
regrowth thinnings product was exported in August 2023.
The Company remains confident that Midway Tasmania will
play an important part in growing export operations, despite
a difficult year.
The third priority was to address under-performance of PMP
on the Tiwi Islands. During 2023, the Company had issues
with some customers and has since been targeting increased
biomass shipments.
The key to the Tiwi project is the second rotation, which is
progressing well. The second rotation will have even greater
active participation from Tiwi traditional owners and on
completion, it will be Australia’s largest plantation carbon project.
A fourth priority was to address declining volume through the
Geelong operation. While the market constrained export volumes
in 2023, future sources of export volumes were established
with a new softwood line commissioned and arrangements
initiated with new sources of plantation hardwood. Other export
commodities, such as grain, have also been progressed.
Maximising the value of assets
In the strategic review the Midway management team
assessed natural ownership of Company assets to maximise
value to shareholders.
In October 2022, Midway settled the first tranche of the sale
of its Victorian plantation estate to MEAG, a wholly owned
subsidiary of Munich Re. Midway entered into management
and offtake agreements that secured future woodfibre supply
for the North Shore processing and export site. Further tranches
were settled in November and December 2022.
Leveraging Capabilities
The Midway management team also spent considerable time
over the last 12 months commencing and progressing projects
that leverage our capabilities in other commodities
and adjacent sectors.
The Company is continuing to progress plans for a grain storage
and export terminal on surplus land at its North Shore site in
Geelong. The negotiations with various counterparties have
been complex.
However, Midway remains confident that a satisfactory
commercial solution will be found that enables a grain trading
company to own and operate the terminal and contribute to
Midway’s take-or-pay contract with GeelongPort.
Carbon
Midway is also building on its dedicated carbon management
capabilities in the business and progressing aggregation
opportunities with private landholders in Tasmania and Victoria
as part of our carbon management strategy. These activities
complement the large-scale Tiwi carbon project and the fee
for service carbon management for MEAG.
Midway is now a Corporate Authorised Representative under
a carbon endorsed AFSL, enabling the company to pursue a
range of carbon projects and opportunities. The first contracts
in the Tasmanian carbon aggregation project have been signed
and planting is scheduled for August/ September.
Staff and Safety
Given the difficult operating environment in the last 12 months,
I would particularly like to recognise the efforts of all Midway
staff and our contractor partners who work tirelessly to keep the
business running and work diligently to avoid safety incidents
in what can be a hazardous operating environment. Safety is
the number one priority at Midway, and we are always looking
to improve how we do things to reduce the risk of incidents and
harm to staff and contractors.
Tony McKenna
Managing Director
05
MIDWAY LIMITED ANNUAL REPORT 2023
Lifting Operating Performance
We continue to transform our operations and turn around
under-performing divisions. FY23 earnings showed signs of
improvement despite the market slowdown, with underlying
EBITDA improving by $4.7 million to $2.9 million.
We are taking action to improve our operating performance
of the business including a strong focus on the key drivers
at each of our operating sites. Increased pricing achieved in
the second half allowed improvement in gross margin from
6 per cent to 11 percent in the year. We continue to focus
on controlling costs.
Progress in FY23
Geelong
As part of our strategy to maximise asset utilisation, we have
commenced production of softwood from Gippsland and other
locations and are actively seeking additional long-term supply
sources to build our capabilities in this product line. Our team
is continually working to expand contracted hardwood volume
by exploring new sources.
MEAG has invested $21 million of the $200 million committed
to expand the plantation estate, which will provide an additional
source of hardwood in the future. The MEAG deal also generates
management income from the estate with assets currently valued
at $122 million, set to increase to $350 million on completion
of the investment commitment.
Our team is also progressing complementary uses of the
Geelong site, including export of grain through the Geelong
site. This will generate value for the Group from otherwise
underutilised land at the Geelong site.
Tasmania
As part of our strategy to expand our core business we were
pleased to commission the new mill at Bell Bay during the
year, with production of the new regrowth thinnings product
commencing and the first shipment being made in FY24.
We have received positive market response for the Thinnings
product, with opportunities existing for the Group to market
the product to a range of customers in Japan and China.
Additionally, the increase of our key supply agreement with
Sustainable Timber Tasmania has been achieved, which places
the Tasmania operation in a position to produce and sell strong
volumes in the coming years.
Tiwi Islands
In a difficult market, we have been successful in increasing
shipped volume from the Tiwi Islands, delivering four shipments
in FY23 compared to two in FY22. We have expanded the
customer base with biomass sales into the Japanese market,
which positions the business to meet the needs of several
customers as part of the ongoing rotation one wood supply.
Our team is also focussed on progression of rotation two, which
will be transformational for the Tiwi Islands operations and be
a significant step in the Group’s carbon strategy.
06
MIDWAY LIMITED Our team is continually working
to expand contracted hardwood
volume by exploring new sources.
Queensland
Our Queensland operations delivered another satisfactory
performance in FY23, on the back of favourable margins in the
softwood market. We have also successfully renewed our port
lease to secure export capability well into the future and have
also renewed key supply agreements during the year.
Plantations and Carbon Segment
The MEAG transaction supports the turnaround and growth
strategy for the Group’s operating performance. In conjunction
with the MEAG plantation estate, from which we are generating
management income, we are actively pursuing other plantation
management opportunities.
Portland
Our Portland site had an improved year with shipped volume
of 721,000 GMT, a 33 per cent uplift on the prior year.
We continue to focus on renewing existing and securing
new long-term wood supply arrangements to position the
operation for success in the future.
Development of our plantation management activities will also
allow us to drive our carbon strategy forward.
Logistics
In addition to the above progress made, we have successfully
exited the loss-making logistics business during the year,
delivering an immediate improvement in the Group’s performance.
07
ANNUAL REPORT 2023MIDWAY LIMITED Leveraging New Growth Opportunities
A key part of delivering our strategy
is our pursuit of growth opportunities.
We are pleased to report good
progress on the following key areas:
Geelong Land and Grain Opportunity
We are actively progressing the grain opportunity at the
Geelong site. This will involve a grain storage and export
terminal to be developed on underutilised land in Geelong,
and potentially include a sale of a portion of land owned
by the Group.
Plantation Management
The sale of the plantation estate to MEAG has boosted
operating performance by generating revenue from plantation
management activities. The MEAG land portfolio is set to
increase from its $122 million value today to $350 million
over the next few years, further increasing management
revenue recognized by the Group.
We are also exploring other opportunities to leverage our
expertise and geographic footprint in this area.
Carbon Opportunities
We are leveraging our core plantation and carbon skill
set to enter new markets to support our three-pronged
carbon growth strategy, with growth opportunities arising
for the Group in the form of plantation owner / lessor,
carbon aggregator and a combined plantation and carbon
manager role.
08
ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023
The MEAG land portfolio is set
to increase from its $122 million
value today to $350 million over
the next several years, further
increasing management revenue
recognised by the Group.
09
MIDWAY LIMITED
Carbon Management Opportunities
We are a provider of nature-based solutions to reduce and mitigate carbon emissions.
We are using all business units to access and deliver carbon opportunities covering our
three-pronged carbon strategy.
Plantation Owner / Lessor
• Negotiations on the second rotation on the Tiwi Islands is
progressing well with a joint Midway and Tiwi ownership
structure proposed.
• We could potentially generate approximately 6.5 million
Australian Carbon Credit Units (ACCUs), which could be
utilised to fund the project.
• We are excited to be involved with what would be the
largest carbon plantation project with Traditional Owner
involvement in Australia.
Carbon Aggregator
• We have arranged to be a Corporate Authorised
• Our first properties in Tasmania have been agreed for FY23,
with carbon earnings to commence in FY24.
• Our pipeline of future properties is very strong heading into
the next financial year.
Plantation and Carbon Manager
• We are developing further carbon opportunities in Tasmania
and Victoria for forestry-based projects.
• Large-scale properties in the Northern Territory are also being
explored for further carbon expansion.
• We are also leveraging our strong relationship with
MEAG to develop further carbon and plantation
management opportunities.
Representative under a carbon Australian Financial Services
Licence (AFSL), allowing us to progress carbon projects.
• Our carbon and plantation expertise is also being leveraged
for other related project opportunities such as bio diesel.
Strong Carbon Market Economics
Forecasted Demand for ACCUs (millions)
)
s
n
o
i
l
l
i
M
(
s
U
C
C
A
60
50
40
30
20
10
0
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Low Case
Central Case
High Case
ACCU Market Pricing Expectations (A$)
75
54
48
43
77
57
51
48
78
59
53
48
61
56
45
68
57
51
50
34
29
93
69
59
96
77
59
93
82
58
81
63
55
Central Case
High Case
Low Case
Cost Containment
+2% (no inflation)
Feb 24
Mar 25
Mar 26
Mar 27
Mar 28
Mar 29
Mar 30
Mar 31
Mar 32
Mar 33
Source: RepuTex Energy, 2023
MIDWAY LIMITED
10
ANNUAL REPORT 2023MIDWAY LIMITED
ANNUAL REPORT 2023
In the Tiwi Islands, we are
excited to be involved with
what will be the largest
carbon plantation project
with Traditional Owner
involvement in Australia.
11
MIDWAY LIMITED
ANNUAL REPORT 2023 ANNUAL REPORT 2023
Port and Processing Facilities
Plantation Management
Partners
QCE Brisbane
South West Fibre/
Portland
Midway Geelong
(Head Office)
Midway
Tasmania
Midway Geelong
• 19 hectares of freehold land adjacent to GeelongPort.
• Two woodfibre mills (separate plantation and native
processing facilities).
• Mobile debarking and chipping line (allowing for
processing of softwood product).
• 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.
• Hardwood exports commenced in 2016. Capacity 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.
• Myamyn – 1.2 million GMT per annum current site capacity
plus in-field chipping and ‘upstream’ chip and log storage.
• Supply agreement with Australian Bluegum Plantations.
• 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.
Midway Tasmania
• New mill site at Bell Bay commenced production in
October 2022 with an 80,000 tonne stockpile capacity.
• Marketing and sales activities ongoing.
• Total export capacity > 600,000 tonnes
12
MIDWAY LIMITED Continued Progress Against Our Commitments
ANNUAL REPORT 2023
• Midway has FSC (Forestry Stewardship Council) certification
across all our established operations including recent FSC
certification being awarded to Midway Tasmania.
• 27 per cent of Midway’s employees on the Tiwi project are
Tiwi people and the Group is committed to ongoing skills
and development training.
• Midway has PEFC (Programme for the Endorsement of
Forest Certification) – Sustainable Wood certifications
across all our operations.
• The team planted 1.07 million seedlings in FY23.
• There is 4.22 million tonnes CO2 equivalent stored in
Midways “Defined Forest Area”. The Group is focussed on
increasing that figure as more forestry land is developed
with our partners.
• Midway built a team committed to registering and managing
carbon sequestering plantation projects.
• Over the last four years Midway has spent $3.6 million
maintaining public roads on Melville Island.
• Safety – 2023 LTIFR was 5.7, below industry average of 14.5.
• Our products contributed to the Circular Bioeconomy for:
recyclable and biodegradable packaging, hygiene products
and print materials; plastic replacement packaging; and coal
replacement energy generation.
Certification
Status
Geelong
SWF
QCE
PMP
Midway Tasmania
AFS CoC
(AS4707) (PEFC)
FSC
FSC-STD-40-004
FSC
FSC-STD-40-005
Implementation
planned FY24
Implementation
planned FY24
FSC
FSC-STD-
AUS-01-2018
Implementation
planned FY24
–
–
–
–
13
MIDWAY LIMITED
Sustainability
Midway (MWY) is an industry leader in the sustainable growth,
harvest and sales of forest products, as well as an emerging
leader in the carbon sequestration and abatement management
sector. MWY continues to work closely with the communities in
which it operates to provide employment, income and growth
opportunities. This is particularly evident within our Tiwi Islands
project managed by Plantation Management Partners.
The nature of MWY’s activities provide significant opportunities
for advancement of sustainability objectives, providing a
pathway for further growth for the Company particularly in the
Carbon sector.
Midway reports annually to the Workplace Gender Equality
Agency (WGEA). Midway’s Modern Slavery Statement for the
2020/2021 financial year was submitted at the end of December
2021. Copies of the WEGA report and Modern Slavery
Statement can be found on Midway’s website.
Midway Governance Bodies and
Employee Diversity Summary
Male
Female
Board/
Senior
Manager
Manager
Professional
Technicians
and Trades
Worker
Clerical and
Administrative
Worker
Machinery
Operations
and Driver
Labourer
-25% -20% -15% -10% -5%
0%
5% 10% 15% 20% 25%
Percentage of Employees (%)
< 30 years old
30-50 years old
> 50 years old
Certifications
Underpinning MWY’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
(AS45001)
Quality
(ISO9001)
Midway
SWF
QCE
PMP
Forestry
(AS4708)
AFS CoC
(AS4707)
(PEFC)
FSC® CW,
CoC
Midway
Logistics
Midway
Tasmania
Employment and Safety
Over the reporting period a total of 23 new full-time, three
part-time and 31 casual employees were recruited, representing
38 per cent of the total workforce including Board members.
Female representation within the Midway Group marginally
increased from 20 per cent to 22 per cent of total workforce
including Board members, with 23 per cent of females in
managerial roles. Staff turnover increased by 2 per cent compared
to the previous year. A total of 149 staff and Board members
were directly employed by the Group by the end of FY23.
Midway continued its commitment to employ emerging talent,
with two graduate foresters being recruited in the Midway
Geelong business. This commitment will be broadened into other
parts of the business.
14
ANNUAL REPORT 2023MIDWAY LIMITED Midway Job Type and Indigenous
Employee Summary
5%
6%
4%
23%
19%
5%
11%
13%
14%
Senior Manager
Manager
Professionals
Technicians and Trades Workers
Clerical and Administrative Worker
Machinery Operations
and Drivers
Machinery Operators and
Drivers – Indigenous
Labourers
Labourers – Indigenous
MWY recorded a total of 5 Lost Time Injuries (LTIs) during the
reporting period, a decrease from nine the previous year. Due to
an increase in the number of hours worked and decrease in LTIs,
the Lost Time Injury Frequency Rate (LTIFR) decreased from 13.5
in the previous year to 5.7 in the current reporting period. The
Lost Time Injury Severity Rate (LTISR) also decreased from 33.1
last year to 23.0 this year. Safety initiatives undertaken include
but are not limited to:
• Active consultation with workers to identify, report and rectify
site safety hazards. Increasing use of RiskTalk, an efficient
mobile app for voice recording risk assessments, reporting
hazards and incidents.
• Critical risk review conducted across business units and
standardisation of controls. Midway participating in AFPA
(Australian Forest Products Association) industry critical
risk review.
• Safety alerts posted including unannounced entry to harvest
sites, incident reporting and notification – high potential
consequence and LTIs, Log Truck rollover, runaway vehicles,
bullying and harassment, slips trips falls, and guarding.
• Safety calendar introduced for FY23 with focus on a safety
topic each month across entire organisation and at Board level.
• FY23 training completed included drone use, OHS for
Managers and Supervisor, HSR rep, Chemwatch, FIB training,
Risk Assessment and Hazard Id, RiskTalk, Working at Heights,
Elevated Work Platforms, Emergency and Fire Warden, Forklift
and Front-end Loader, 4WD Driver Training, HV Electrical
operator, First aid and CPR refresher, Confined Space and
Chainsaw use.
• Safety champions nominated for each site to help support and
drive safety strategy and improvements.
15
MIDWAY LIMITED
ANNUAL REPORT 2023 Sustainability continued
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
Midway Employees Midway Contractors
Midway All
FY22
5
FY23
13
FY22
9
1
1
-
0
1
-
22.4
44.8
4.5
4.5
-
0
6.9
-
1
8
-
20.3
2.3
18.1
-
FY23
8
1
4
-
13.8
1.7
5.2
-
FY22
14
FY23
21
2
9
-
21.0
3.0
13.5
-
1
5
-
24.1
1.1
5.7
-
Note: All frequency rates shown in the table above are based on rate per 1,000,000 hours worked.
Midway Tasmania continued partnering with private landowners
across Tasmania to deliver forestry carbon projects, providing
landowners with the opportunity to generate sources of income
through enhancing agricultural production, replanting failed or
harvested plantations which would otherwise be converted to
non-forest use and the creation of Australian Carbon Credit Units
(ACCUs).
Through these partnerships a total of 235 hectares of land
will be planted and managed by Midway Tasmania as part of
the 2022-2023 aggregated carbon project. The 2022-2023
aggregated project is forecast to generate approximately
65,000 ACCUs each representing one tonne of carbon dioxide
equivalent (tCO2-e) stored. An additional 1,200 hectares of land
is under consideration for the 2024 aggregated project.
Environmental Performance
Managing our environmental compliance obligations and
community expectations remains a high priority across the
Group. Midway observed improvement across the Group in
relation to compliance with environmental laws and regulation.
MWY continue to conduct 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).
Midway continued to actively engage with several stakeholders
and environmental non-governmental organisations during the
reporting period and will continue to build relationships with
these and other stakeholders in the future.
Midway Environmental Performance Summary
2018/
2019
2019/
2020
2020/
2021
2021/
2022
2022/
2023
1
2
2
-
-
Non-compliance with
environmental laws
and regulations
Energy and Climate
Group energy consumption and greenhouse gas emissions
have been calculated for the 2022/2023 financial year for Midway
operations. Total energy consumption decreased across the
Group by 62 per cent compared to the previous year with a
66 per cent decrease in electricity use and a 34 per cent decrease
in fuel consumption observed. Decreased fuel consumption was
driven by the closure of Midway Logistics, with the Geelong mill
responsible for the decrease in electricity consumption.
Greenhouse gas emissions totalled 6,283 tonnes of CO2
equivalent (Scope 1 and 2 emissions) during the 2022/2023
financial year and represented a 50 per cent decrease on the
previous financial year.
The current carbon storage of plantation trees within MWY’s
defined forest area is estimated to be 4.217 million tonnes of
CO2 equivalents. This includes 1.213 million tonnes managed by
Midway Plantations, 2.328 million tonnes managed by PMP, and
0.676 million tonnes managed by Midway Tasmania.
16
ANNUAL REPORT 2023MIDWAY LIMITED Midway Energy and Greenhouse Gas Emissions Summary
MWP
MWG
MWL
MWT
QCE
PMP
TOTAL
ENERGY
Total energy consumption
within the organisation
GJ/yr
FY21/22
FY22/23
20
15
19,161
6,847
367
63
0
18
1,057
885
0
0
20,604
7,828
Total electricity purchased
from the grid
kWh/yr
Total fuel consumption
within the organisation
GJ/yr
Direct (Scope 1) GHG
emissions
tCO2-e/yr
Indirect (Scope 2) GHG
emissions
tCO2-e/yr
FY21/22
5,470 5,322,505 103,143
0 293,511
0 5,724,629
FY22/23
4,081 1,901,969
17,488
4,938 245,888
0 2,174,365
FY21/22
FY22/23
FY21/22
FY22/23
FY21/22
FY22/23
712
886
56
70
5
3
11,245
33,105
1,271
4,428
35,883
86,654
12,896
2
4,771
3,473
34,444
56,473
888
2,643
1,019
5,110
1,617
0
54
9
101
378
0
1
399
275
187
179
2,842
2,730
0
0
6,292
4,474
5,356
1,809
Biodiversity
MWY manages more than 57,000 hectares of land covering
a broad geographical range including Victoria, Tasmania and
the Tiwi Islands, and include 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. MWY is committed to maintenance of
biodiversity values within owned or managed estate in line with
third party certification schemes and standards.
MWY continued water quality monitoring in key waterways
in the Otways near planned, active or completed activities
to ensure these activities continue to have minimal effect on
the local environmental receptors 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 Pidgeon to ensure harvesting
and haulage activities were managed to minimise disturbance in
line with EPBC approval requirements.
Community Initiatives
MWY 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
MWY’s wood supply area.
The MWY 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.
During the reporting period MWY provided in kind contributions
to multiple community groups and organisations including the
North Shore Football and Netball Club, Otway District Football
and Netball Club, 1st Modewarre Scout Group and Variety
Club of Victoria. These community groups are fundamental
to the regions in which Midway operates, providing not only
social benefits for the local people, but often word of mouth
opportunities for Midway’s business groups including access
to staff and contractors, land opportunities and local
business support.
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.
17
ANNUAL REPORT 2023MIDWAY LIMITED 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 2023 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
Gordon Davis
Kellie Benda
Nils Gunnersen
Tom Gunnersen
Leanne Heywood
Anthony McKenna
Gregory McCormack
Thomas Keene
Position Held
Employment Status
Independent Non-Executive Chair
Independent Non-Executive Director
Appointed 5 October 2022
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Managing Director and CEO
Non-Executive Director
Independent Non-Executive Director
Retired 28 November 2022
Retired 28 November 2022
All of the Directors have been in office for the entire period unless otherwise stated.
Gordon Davis B.Sc (Forestry), M.Sc (Ag), MBA
Independent Non-Executive Chairman
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 was also the Chair of Greening Australia between 2014 and 2019, and was appointed
Chairman of the Company from 1 May 2022. Gordon was appointed a Director in April 2016.
Kellie Benda LLB, BA (Industrial Relations), MAppFin, Harvard AMP, FAICD
Independent Non-Executive Director (appointed 5 October 2022)
Kellie commenced her career with Mallesons (now King & Wood Mallesons) as a corporate lawyer and then moved into investment
banking. She held senior executive positions as Chief Risk Officer, Chief Operating Officer and Executive General Manager in organisations
including AGL Limited, Origin Energy Limited, Emeco Holdings Limited and Aurizon Limited. She has served as a Non-Executive Director
of the WA Forests Products Commission and IMX Resources Limited, including a period as Chair. She is a Director of PSMA Australia
Limited (Geoscape Australia) and several not-for-profit entities. Kellie is a member of the Safety and Sustainability Committee, Audit and
Risk Committee and People and Remuneration Committee. She was appointed a Director on 5 October 2022.
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 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 People and Remuneration Committee, and was appointed
a Director in February 2018.
18
ANNUAL REPORT 2023MIDWAY LIMITED
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 Allkem Limited (ASK:AKE) since 2016, Snowy Hydro Limited since March 2022,
Symbio Limited (ASX:SYM) since March 2022, Quickstep Holdings Limited (ASX:QHL) since February 2019 and is a Graduate member
of the Charles Sturt University Council. Leanne is Chair of the Audit and Risk Committee and the People and Remuneration Committee.
She was appointed a Director in March 2019.
Anthony McKenna BA, MBA, CFA, GAICD
Managing Director and Chief Executive Officer (appointed 24 January 2022)
Tony has broad experience in private investment, M&A, and agribusiness. He was Managing Director of Ruyi Australia Group, part of
Shandong Ruyi Technology, a Chinese multinational group, from 2016 to 2022. During that time, he was responsible for the operations
of Cubbie Station, Australia’s largest cotton farm, and Lempriere Wool, an international wool processing and trading business. Prior to
2016, Tony was CEO of Lempriere Capital, a private investment group specialising in agribusiness, and Executive Director of agri funds
manager AgCAP. Tony was appointed Managing Director and Chief Executive Officer on 24 January 2022.
Gregory McCormack B.Bus
Non-Executive Director (retired 28 November 2022)
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 and is a member of the People and Remuneration
Committee. Greg stood down as Chair of the Board on 1 May 2022.
Thomas Keene B.Ec, FAICD
Independent Non-Executive Director (retired 28 November 2022)
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 People and Remuneration Committees, and was
appointed a Director in August 2008.
Company Secretary
Robert Bennett B.Com, CA, FGIA
Rob has many years of 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 and Risk Committee (ARC) (previously Audit and Risk Management
Committee), a People and Remuneration Committee (PRC) (previously Remuneration and Nomination Committee) and a Safety and
Sustainability Committee (SSC) (previously Workplace Health Safety and Sustainability Committee) of the Board of Directors.
Name
Directors
Gordon Davis
Kellie Benda
Nils Gunnersen
Tom Gunnersen
Leanne Heywood
Anthony McKenna
ARC
SSC
PRC
Comments
Chair
Chair SSC
Chair ARC | Chair PRC
CEO
19
ANNUAL REPORT 2023MIDWAY LIMITED
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:
Board
ARC
PRC
SSC
Other Committees
Directors
Gordon Davis
Kellie Benda
Nils Gunnersen
Tom Gunnersen
Leanne Heywood
Anthony McKenna
Thomas Keene
Gregory McCormack
Held Attended Held Attended Held Attended Held Attended Held Attended
11
11
3
3
–
–
–
–
–
–
9
11
11
11
11
3
3
9
11
11
11
11
2
3
4
–
6
6
–
2
–
4
6
6
–
2
–
3
3
4
–
1
1
3
3
4
–
1
1
1
3
3
2
–
–
–
1
3
3
2
–
–
–
–
–
–
3
1
–
–
–
–
3
1
–
–
Principal Activities
The principal activities of the Group during the 2023 financial year are based on the reportable segments of the Group as below:
Reportable Segments
Woodfibre
Forestry Logistics1
Plantation and Carbon
Management
Products/Services
Includes primary operations whereby the Group purchases and sells both own and third party wood.
SWF is also proportionally consolidated at 51per cent for segment reporting, which reflects how
management views and makes decisions of its operations.
Forestry logistics provides support services to third parties engaged in growing woodfibre including
harvest and haul.
Plantation management is the provision of silviculture services including on group owned trees
combined with carbon management activities. The segment also holds any Group owned plantation
land and trees.
Ancillary
Other aggregated costs which are not individually significant.
1. Discontinued operation, refer to Note 1.3 for details.
Operating and Finance Review
Financial Results
Full Year Results Impacted by Recent Pulp and Paper Market Developments and Residual Supply Chain Disruption
• The Group achieved positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing
operations and before significant items of $2.9M (2022: $1.1M).
• The Group’s balance sheet remains strong with Net Tangible Assets of $1.43 cents per share.
• The Group recognised a gain of $12.5M arising from the sale of the plantation estate during the half, with proceeds used
to repay the Group’s long-term debt, resulting in a reduction in the Group’s net debt position to $3.9M (2022: $41.9M).
• No dividend will be paid in respect of full year FY23 results.
Group Performance
• The Group secured an improved benchmark Eucalyptus Globulus sales price of US$198.75/BDMT for major Japanese customers for
calendar year 2023.
• The Group utilised long-standing FX contracts in the first half, set at a rate of 0.75, which adversely impacted margins.
• The Group’s share of profit from SWF is $2.4M in FY23 (FY22: profit of $1.0M), an improvement of $1.4M.
• The loss-making Logistics segment has been exited.
• In the second half, a weak international pulp and paper market, at a time when new pulp paper mill capacity was coming on stream,
resulted in high inventories and a slow-down in production. Chinese customers subsequently responded by deferring the majority
of their 2023 contracted woodfibre shipments, ongoing pressure on volumes and margins in the woodfibre segment.
• This compounded the challenges experienced in the first half, with labour cost pressure, ongoing elevated fuel prices and wet weather
impacting access to plantations, particularly in Midway Tasmania.
20
ANNUAL REPORT 2023MIDWAY LIMITED
A summary of the financials has been provided below to the previous corresponding period:
Revenue and other income
Sales revenue
Other income
Notes
1.1
4.8
2023
$’000
2022
$’000
Change
187,808
198,480
(10,672)
6,668
2,845
194,476
201,325
3,823
(6,849)
Less: expenses
Changes in inventories of finished goods and work in progress
Materials, consumables and other procurement expenses
14,156
5,353
(137,564)
(133,563)
Employee benefits expense
Plantation management expenses
Freight and shipping expense
Repairs and maintenance expense
Other expenses
Share of net profits from equity accounted investments
EBITDA – S
Depreciation and amortisation
EBIT – S
Net finance expense
Net loss before tax – S
Income tax expense
Net loss after tax – S
Less: Net loss after tax – Statutory (discontinued operations)
Net profit/(loss) after tax – S (underlying, continued operations)
(20,620)
(3,995)
(24,897)
(9,865)
(11,222)
2,386
2,855
(6,318)
(3,463)
(2,132)
(5,595)
2,478
(3,117)
(191)
(2,926)
8,803
(4,001)
(1,462)
(3,915)
(19,158)
(80)
(40,945)
16,048
(7,680)
(8,050)
1,036
(1,762)
(8,544)
(10,306)
(2,430)
(12,736)
4,177
(8,559)
(3,809)
(4,750)
(2,185)
(3,172)
1,350
4,617
2,226
6,843
298
7,141
(1,699)
5,442
3,618
1,824
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
EBIT
EBITDA
Underlying NPAT – S
Description
Earnings, before interest and tax
Earnings, before interest, tax, depreciation and amortisation
Statutory net profit after tax adjusted to remove the impact of one-off or non-recurring items
and the net fair value gain/(loss) on biological assets
Underlying EBITDA – S
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
21
ANNUAL REPORT 2023MIDWAY LIMITED
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 – S (consolidated)
Net fair value increment on biological assets
Non-cash interest expense (AASB 15 Strategy impact)1
Insurance costs, net of proceeds received2
Midway Logistics wind-down costs, net
Impairment loss on non-current assets
Impairment loss on current assets
Interest received3
Profit on sale of non-current assets
Transaction costs incurred
Net profit/(loss) after tax statutory (consolidated)
Less: Net loss after tax – statutory (discontinued operations)
Net profit/(loss) after tax – statutory (continuing operations)
2023
$’000
(3,117)
105
(3,218)
65
–
(5,489)
(245)
1,374
8,726
(580)
(2,379)
(191)
(2,188)
2022
$’000
(8,559)
4,543
(7,997)
–
(500)
(98)
–
–
1,361
(1,628)
Change
5,442
(4,438)
4,779
65
500
(5,391)
(245)
1,374
7,365
1,048
(12,878)
10,499
(3,809)
(9,069)
3,618
6,881
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.
2. Costs related to insurance works, and reimbursements received from the Group’s insurers, are presented gross under the Consolidated Statement
of Comprehensive Income.
3. Includes interest received by the Group on cash deposits relating to proceeds received from the sale of the plantation estate.
Reconciliation of Underlying Earnings, Before Interest, Tax, Depreciation and Amortisation to Statutory
Earnings, Before Interest, Tax, Depreciation and Amortisation (EBITDA)
EBITDA – S – continuing operations
EBITDA – S – discontinued operations
EBITDA – S – (underlying) – consolidated
Net fair value increment/(decrement) on biological assets
Insurance costs, net of proceeds received
Profit/loss on sale of assets – Midway Plantations
Impairment loss on non-current assets
Impairment loss on current assets
MWL wind-down
Transaction costs incurred
EBITDA – statutory – consolidated
Less: EBITDA gain/(loss) – discontinued operations
EBITDA – continuing operations
2023
$’000
2,858
(3)
2,855
151
93
12,465
(7,842)
(350)
–
(829)
6,543
(3)
6,546
2022
$’000
1,089
(2,851)
(1,762)
Change
1,769
2,848
4,617
6,490
(6,339)
–
1,943
(98)
–
(714)
(2,326)
3,533
(3,565)
7,098
93
10,522
(7,744)
(350)
714
1,497
3,010
3,562
(552)
22
ANNUAL REPORT 2023MIDWAY LIMITED
Performance Against Prior Corresponding Period
Woodfibre
Revenue1
EBITDA – S
EBITDA2
Export sales volume in Green Metric Tonnes (GMT) achieved by site
Geelong
Portland1
Brisbane
Melville Island
Tasmania
Total
2023
Actual
225,182
8,237
139
2022
Actual
186,185
6,080
5,982
GMT ’000s
GMT ’000s
597
721
237
143
295
613
541
276
77
450
1,993
1,957
21%
35%
-98%
(16)
180
(39)
66
(155)
36
1. Includes the Group’s 51% share of SWF’s revenue, which is eliminated per Note 1.1.
2. Woodfibre EBITDA includes a total of $8.2M of impairment losses recognised in PMP. Refer to Note 1.7 for details.
Improved EBITDA-S is due to more favourable export pricing obtained in the second half combined with more favourable FX rates
following usage of the legacy hedging contracts in the first half, providing benefits to margin achieved. Key points include:
• Volume increased at PMP and our joint venture operations in Portland (South West Fibre) by 66k GMT and 180k GMT respectively.
The Group’s share of profit recorded from SWF increased by $1.4M to $2.9M (FY22: $1.0M).
• In Geelong and Brisbane, volumes reduced in FY23; however, margins on E. Globulus and softwood improved in the second half.
• Favourable pricing was obtained for calendar year 2023 across most products, benefitting the margin realised in the second half.
• Tasmania noted a 155k GMT fall in volume, driven by recent market volatility impacting demand in the second half, combined with
adverse weather experienced in the first half that impacted access to plantations.
• Other key movements include a 1.5% decrease in dry fibre % in the first half of the year particularly in Tasmania and Victoria.
Plantation and Carbon Management
Plantation Management
Revenue
EBITDA – S
EBITDA
2023
Actual
9,943
(1,625)
10,991
2022
Actual
10,634
(2,406)
6,027
-6%
32%
82%
The increase in EBITDA in the year was due to a combination of the gain recognised from the sale of the plantation estate combined
with increased management fees arising from plantation estate management activities.
Now the estate has been sold and earnings are being generated from management of the estate along with carbon solutions being
developed for third parties, this segment is expected to return to profitability.
Forestry Logistics
Forestry Logistics (Discontinued)
Revenue
EBITDA-S
EBITDA
Midway Logistics has been exited within FY23.
2023
Actual
315
(3)
(3)
2022
Actual
4,883
(2,851)
(3,565)
-94%
100%
100%
23
ANNUAL REPORT 2023MIDWAY LIMITED
Directors’ Report continued
Operating and Finance Review continued
Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2023
$’000
75,147
107,452
182,599
37,645
17,977
55,622
126,977
2022
$’000
46,109
211,066
257,175
62,930
69,447
132,377
124,798
Highlights
• The ongoing challenging trading environment was reflected in reduced operating cash flows (from continuing operations) of negative
$12.3M (FY22: negative $3.2M). This is principally due to working capital influences, with inventory of $35.0M being held (2022: $20.8M).
• The Group’s net debt profile has improved, with long-term debt facilities being repaid and a net debt position of $3.9M (2022: $41.9M).
• No dividend declared in FY23.
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
Term deposit
Net debt
2023
$’000
1,000
–
2,027
3,599
–
4,888
(5,606)
(2,009)
3,899
2022
$’000
16,950
20,675
2,354
1,922
–
4,990
(2,969)
(2,000)
41,922
Highlights
• Net debt decreased following the sale of the plantation estate with repayments made to long and short-term borrowings.
Outlook
The Directors believe that the long-term outlook for woodfibre exports into Asia, specifically China and Japan, remains positive.
The Group has positioned itself for success in FY24 by completing the building of the new processing site at Bell Bay in Tasmania
and exiting the loss-making logistics business in the year. The Group also achieved a 10% increase in the headline FOB pricing to
our major customers and saw an increase in underlying EBITDA (consolidated) of $4.7M to $2.9M (FY22: $1.8M loss).
Global trading conditions remain challenging for many businesses, including Midway. During the first half of FY24 Midway will closely
watching global pulp and paper stocks for signs that woodfibre demand will return to normal levels in calendar year 2024. In the interim,
Midway continues to progress its strategic initiatives to improve the business and maximise returns to shareholders.
The timing of the market turnaround remains uncertain; however, the Directors are looking at additional performance improvement
initiatives and diversification strategies that may generate future revenue and earnings streams. We remain confident that there are
potential growth opportunities for Midway that will benefit shareholders in the longer term.
24
ANNUAL REPORT 2023MIDWAY LIMITED
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 customer demand.
• 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 Midway’s 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.
• Costs – Midway’s profitability could be materially and adversely affected by changes in costs which are in many respects beyond
its reasonable control.
• Australian Carbon Credit Units (ACCUs) – The Group is exposed to volatility in future ACCU price and demand movements as it is
now entering carbon management activities. The Group’s future profit could be impacted if demand or pricing falls.
• Vessel chartering – There is a risk that Midway may not be able to finalise an export sale contract rendering a vessel idle, or that
a vessel cannot be chartered when needed, causing a potential shipment to be adversely impacted.
• 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.
• Fire – The loss of plantation resource and therefore supply due to fire is an ever-present industry risk.
• Extreme weather events – There is a risk of extreme weather events occurring.
• Geopolitical conditions – There is a risk that global political developments may adversely affect market conditions.
• 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 2023 financial year, or since the end of the 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 expected standards of corporate governance.
Significant Changes in the State of Affairs
Wind-down of Midway Logistics
On 1 April 2022 the Group announced its intention to exit Midway Logistics, which was completed within the first half of this financial year.
25
ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report continued
Significant Changes in the State of Affairs continued
Plantation Management Partners
During the year, Northern Territory Port and Marine Pty Ltd, operator of the Port Melville facility in the Tiwi Islands, entered administration.
The port is utilised by PMP to ship the woodfibre processed by the operation. While the administration creates some uncertainty around
the port, the administrator has advised that the Port operations will continue through the administration.
Sale of Plantation Estate
• In 2022 Midway signed contracts for the sale of 17,000 hectares of its existing plantation estate in the central and south-west regions
of Victoria to a special purpose vehicle (SPV) owned by clients of MEAG, Munich Re’s asset manager, for $154.1M.
• Settlement of the remaining two tranches is due to occur in September 2023 and September 2024.
• Proceeds received to-date have been used to improve the Group’s balance sheet position, with net debt substantially improving
to $3.9M (from $41.9M in FY22). Other usage includes $27.4M to repay a proportion of the Strategy liability, $8.0M in net capital
gains tax paid, $4.6M in capital expenditure, $5.1M to purchase pine, and support of the Group’s $14.2M inventory build in FY23.
• The SPV has also committed to invest $200M in land acquisition for new hardwood ‘greenfield’ plantations in south-west Victoria
over the next five years under Midway’s management, with several land purchases being completed this financial year.
Significant Events Subsequent to the End of the Financial Year
In August 2023 the Group renewed its lease agreement with Port of Brisbane for a period of ten years, with two five-year option
periods. The result is the recognition of a right of use asset and lease liability of $14.5M on the Group’s consolidated balance sheet.
Other than this item and as noted in this report, the Directors are not aware of any matter or circumstance which has arisen since
30 June 2023 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.
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 in at least four processing and export facilities utilised by Midway;
• continuing to evaluate potential adjacent growth opportunities, particularly in three fields of carbon emissions offsets and carbon
abatement; 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 953,519 shares to senior executives in the
current financial year. The rights and options vest over a performance period ending 30 June 2025, subject to satisfaction of vesting
conditions such as a comparator measure of total shareholder return (TSR) benchmarked against the top ASX 300 companies.
• Refer to the Remuneration Report for details on the rights issued to key management personnel (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.
26
ANNUAL REPORT 2023MIDWAY LIMITED 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 end of the financial year.
Proceedings on Behalf of the Company
There are no legal proceedings currently outstanding.
Non-Audit Services
The Company may decide to employ the auditor on assignments additional to its 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 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 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
2023
$
2022
$
224,675
228,000
21,228
88,717
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 28 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.
Gordon Davis
Chairman
Melbourne,
24 August 2023
27
ANNUAL REPORT 2023MIDWAY LIMITED
Auditor’s Independence Declaration
28
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. 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 2023 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Simon Dubois Partner Melbourne 24 August 2023 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited)
Introduction
The Directors are pleased to present the FY23 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 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 KMPs and other members of senior management. This report
discloses remuneration as it relates to Executive KMP’s; 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
Gordon Davis
Kellie Benda
Nils Gunnersen
Tom Gunnersen
Leanne Heywood
Gregory McCormack
Thomas Keene
Executives
Anthony McKenna
Anthony Price
Michael McKenzie
Ashley Merrett
Position Held
Employment Status
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director and CEO
Managing Director and CEO
Chief Financial Officer
Chief Financial Officer
Appointed 5 October 2022
Retired 28 November 2022
Retired 28 November 2022
Retired 24 January 2022
Retired 1 July 2022
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.
29
ANNUAL REPORT 2023MIDWAY LIMITED
Remuneration Report (Audited) continued
People and Remuneration Committee
The Board has established a People and Remuneration 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 People and Remuneration 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 People and Remuneration Committee is comprised of Non-Executive Directors, the majority of whom are independent in accordance
with the People and Remuneration 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 People and Remuneration 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 People and Remuneration 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.
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 $1.2M 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 People and Remuneration Committee.
Non-Executive Directors’ fees and payments are reviewed periodically by the People and Remuneration 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.
30
ANNUAL REPORT 2023MIDWAY LIMITED Table 1.1 Non-Executive Director Fee Structure
Non-Executive Director
Chair
Chair – Audit and Risk Committee
Chair – People and Remuneration Committee
Chair – Work, Health, Safety and Sustainability Committee
Committee member
Board Base
Fee
$
90,000
180,000
–
–
–
–
Additional
Fee
$
–
–
15,000
15,000
15,000
7,500
The aggregate remuneration of Non-Executive Directors for the year ended 30 June 2023 was $680,836.
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, are reviewed annually by the People
and Remuneration 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.
31
ANNUAL REPORT 2023MIDWAY LIMITED
Remuneration Report (Audited) continued
2023 Executive Remuneration
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 Board.
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:
Chief Executive Officer
Chief Financial Officer
1. Includes superannuation and car allowances.
The remuneration mix is outlined below:
Base Salary1
$
561,290
Maximum
STI
$
167,888
Eligibility
LTIP
Termination
Notice
6 months
Restraint
of Trade
Provisions
290,214
95,700
3 months
59%
41%
72%
28%
CEO
CFO
Fixed
At risk
Short Term Incentive Plan
The Company’s executive 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 approved by the Board. No incentive payment is payable if the threshold performance target is not met.
32
ANNUAL REPORT 2023MIDWAY LIMITED
FY23 Short-term Incentives
In FY23, an offer to participate in the short-term incentive (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.
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 FY23 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 2023
STI is assessed against both financial and non-financial measures with the following weighting:
Performance
measures
Measure
EBITDA
LTIFR
Individual performance measures
Payment
Upon final endorsement by Board
Weighting
CEO
40%
Weighting
CFO
40%
20%
40%
20%
40%
A sliding scale exists for each KPI target in relation to % of STI paid as set out below:
EBITDA CEO
EBITDA CFO
LTIFR CEO
LTIFR CFO
% of Target KPI (Maximum STI)
100% (max. $67,155)
100% (max. $38,280)
150% (max. $50,366)
150% (max. $28,710)
% of Target KPI (Minimum STI)
100%1
100%1
100%1
100%1
1. No incentive will be paid if the minimum % of the KPI target is not met.
FY23 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 2023
financial year:
KMP
CEO
CFO
Maximum STI
167,888
95,700
% of Maximum STI Achieved
–
–
33
ANNUAL REPORT 2023MIDWAY LIMITED
Remuneration Report (Audited) continued
2023 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 FY23, the Group issued performance rights to the Chief Executive Officer and Senior Executive Team. In total, 953,519 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 executive 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
Vesting conditions
Vesting date
Shares as an Award,
or on vesting of
an Award
Dividend and voting
entitlements
Change of control
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.
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.
Shares allocated on vesting of an Award carry the same rights and entitlements as other issued Shares,
including dividend and voting rights.
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.
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:
• 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.
Loans
Amendments
Other terms
34
ANNUAL REPORT 2023MIDWAY LIMITED 2023 Long-term Incentives
The LTIP offered to Midway’s Executive KMP and other senior executives is summarised below:
(a) Performance Rights
In FY23, the Board granted the Chief Executive Officer and members of the Senior Executive Team 953,519 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 2025.
Term
Eligibility
Description
Chief Executive Officer, Chief Financial Officer and members of the Senior Executive Team.
Consideration for grant
Nil.
Instrument
2023 plan: Performance rights issued on 9 December 2022 and 13 April 2023.
Number of
rights granted
Additional cash
settlement performance
rights to CEO
2022 plan: Performance rights issued on 1 December 2021 and 24 January 2022 (CEO only) respectively.
2023 plan: CEO 349,940; CFO 132,950; other Senior Executives 470,629.
2022 plan: CEO 89,227; CFO nil; other Senior Executives 471,659.
Due to an error in the 2022 Notice of Annual General Meeting, it may have been unclear whether
shareholders approved 489,916 performance rights or the 349,940 performance rights issued and shown
above. Both numbers appeared in the notice, but the intended number of performance rights was 489,916.
To correct the situation, the Board approved a cash settlement equivalent to 489,916-349,940 = 139,976
performance rights on 11 January 2023. A cash amount equivalent to the fair value of 139,976 performance
rights (or a proportionate number) will be paid to the CEO at around the same time that any of the
349,940 performance rights vest.
Service conditions
Participant must maintain continuous employment over the performance period.
Performance period
Performance measure
2023 plan: 1 July 2022 to 30 June 2025
The percentage of performance rights that will vest will depend on 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:
2022 plan: 1 July 2021 to 30 June 2024
Entitlement
Restrictions
• less than median of the comparator company, no performance rights will vest;
• at median of the comparator company, 50% of the performance rights will vest;
• between median and the 75th percentile of the comparator company, a straight-line pro rata vesting
between 50% and 100% of the performance rights will occur; and
• greater than 75th percentile of the comparator company, 100% 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 date1
2023 plan: Rights issued 9 December 2022 ($0.65 cents); Rights issued 13 April 2023 ($0.54 cents).
2022 plan: Rights issued 1 December 2021 ($0.89 cents); Rights issued 24 January 2022 ($0.74 cents.
1. Represents the fair value as calculated using a Monte Carlo Simulation model which incorporates the TSR performance conditions.
35
ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued
2023 Long Term Incentives continued
(b) FY21 LTI Plan
The performance period ended on 30 June 2023 was subject to the performance measures outlined in the LTI Plan described in section
(a) performance rights. Midway’s total shareholder return over the performance period between 1 July 2020 and 30 June 2023 was
less than median of the comparator company’s and as a result 344,944 performance rights issues will not vest.
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’s. 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-S2
Dividend paid (cents per share)
1. Consolidated figures shown.
2. Underlying figures have not been audited.
FY231
Actual
$’000
(2,379)
6,543
2,855
–
FY221
Actual
$’000
(12,878)
3,533
(1,762)
–
FY21
Actual
$’000
(5,178)
10,933
14,632
–
FY20
Actual
$’000
(11,733)
752
13,836
–
FY19
Actual
$’000
26,158
50,669
37,075
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.
36
ANNUAL REPORT 2023MIDWAY LIMITED Key Management Personnel Remuneration
The statutory remuneration disclosures for the year ended 30 June 2023 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-
monetary1
STI
Super-
annuation
Other2
Directors
Gordon Davis
Kellie Benda3
Nils Gunnersen
Tom Gunnersen
2023
2022
2023
2022
2023
2022
2023
2022
Leanne Heywood
2023
2022
Gregory McCormack4 2023
2022
Thomas Keene4
Current Executives
Anthony McKenna5
Michael McKenzie6
Former Executives
Anthony Price7
Ashley Merrett6
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
180,074
142,691
72,350
–
99,091
107,984
95,058
107,984
111,396
123,058
36,185
183,022
38,968
107,984
533,684
229,481
262,608
54,837
–
287,094
–
230,585
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,000
–
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31,045
–
17,896
1. Relates to vehicle allowance paid by the Group.
2. Includes the movement in annual leave and long service leave provisions.
3. Appointed 5 October 2022.
4. Retired 28 November 2022.
5. Anthony McKenna was appointed as Managing Director and CEO from 24 January 2022.
6. Ashley Merrett retired on 1 July 2022. Michael McKenzie was appointed as CFO on 1 July 2022.
7. Anthony Price was Managing Director and CEO until 24 January 2022.
–
–
7,623
–
10,332
10,838
10,019
10,838
11,741
12,345
3,851
18,367
4,148
10,838
27,606
12,058
27,606
5,775
–
16,192
–
21,410
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,915
6,902
7,215
6,566
–
–
–
11,255
224,610
75,348
18,732
–
–
41,194
–
45,334
180,074
142,691
79,973
–
109,423
118,822
105,077
118,822
123,137
135,406
40,036
201,389
43,116
118,822
800,815
341,789
316,161
77,178
–
375,525
–
326,480
37
ANNUAL REPORT 2023MIDWAY LIMITED
Remuneration Report (Audited) continued
Key Management Personnel Remuneration continued
Equity Instruments
KMP
Gordon Davis
Kellie Benda
Nils Gunnersen
Tom Gunnersen
Leanne Heywood
Anthony McKenna
Michael McKenzie
Gregory McCormack1
Thomas Keene1
1. Held at retirement date.
Held at
1 July 2022
90,000
Shares
Acquired
–
Shares
Sold
–
Other
Changes
–
–
9,829
–
5,000
–
–
9,604,599
229,378
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9,604,599)
(229,378)
Held at
30 June 2023
90,000
–
9,829
–
5,000
–
–
–
–
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 McKenna
Anthony McKenna
Anthony McKenna
Anthony McKenna
Michael McKenzie
Instrument
Performance Rights
Options
Options
Performance Rights
Performance Rights
Number
Grant Date
89,227 24/01/2022
360,718
24/01/2022
360,718
24/01/2022
349,940
09/12/2022
132,950
09/12/2022
1. Options vested and remain uncalled at 30 June 2023.
% Vested
in Year
0%
100%1
0%
0%
0%
% Forfeited
in Year
–
Financial Year
in Which
Grant Vests
2024
–
–
–
–
2023
2024
2025
2025
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.
38
ANNUAL REPORT 2023MIDWAY LIMITED
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
Notes to the Consolidated Financial Statements
Section 1: Our Performance
1.1 Segment Reporting
1.2 Individually Significant Items
1.3 Discontinued Operation
1.4 Income Tax
1.5 Earnings Per Share
1.6 Dividends
1.7 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
39
40
41
42
43
44
44
44
46
47
48
49
50
50
51
51
53
54
56
57
58
59
60
60
62
67
69
69
69
71
71
73
73
74
74
75
77
77
79
80
ANNUAL REPORT 2023MIDWAY LIMITED Consolidated Statement of Comprehensive Income
For the year ended 30 June
Continuing operations
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
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 from continuing operations
Discontinued operations
Profit/(loss) for the period from discontinued operation
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
Cash flow hedges effective portion of changes in fair value, net of tax
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 (loss)/earnings per share
Diluted (loss)/earnings per share
Earnings per share for profit attributable to equity holders – continuing operations:
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Notes
1.1
4.8
2.1|2.7
1.2|1.7
3.1
4.2
1.4
2023
$’000
2022*
$’000
187,493
18,337
205,830
193,597
4,129
197,726
14,156
(137,133)
(6,041)
(20,561)
151
(3,995)
(24,897)
(9,648)
(8,192)
(11,551)
(207,711)
(6,470)
1,716
(4,754)
2,386
(4,249)
2,061
(2,188)
5,379
(130,602)
(6,803)
(15,926)
6,490
(80)
(40,945)
(5,334)
(98)
(10,548)
(198,467)
(13,731)
(8)
(13,739)
1,036
(13,444)
4,375
(9,069)
(191)
(2,379)
(3,809)
(12,878)
2.1
–
9,832
4,492
–
–
4,492
2,113
(2,803)
424
(2,379)
1,689
424
2,113
($0.03)
($0.03)
($0.03)
($0.03)
(4,749)
–
95
5,178
(7,700)
(12,973)
95
(12,878)
(7,801)
101
(7,700)
($0.15)
($0.15)
($0.10)
($0.10)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
* The comparative information has been re-presented due to a discontinued operation.
40
ANNUAL REPORT 2023MIDWAY LIMITED
Consolidated Balance Sheet
As at 30 June
Current assets
Cash and cash equivalents
Receivables
Inventories
Biological assets
Other assets
Assets held for sale
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
Current tax payable
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
Notes
3.1
2.6
2.6
2.3
2.2
2.3
4.2
2.7
2.1
2.6
3.1
3.1
1.4
3.3
3.3
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.
41
2023
$’000
5,606
27,567
34,996
1,744
5,234
–
2022
$’000
2,969
10,774
20,772
2,697
8,583
314
75,147
46,109
6,730
33,459
13,405
1,971
17
51,870
107,452
182,599
16,707
1,246
3,567
9,151
2,523
4,451
45,238
7,395
11,019
1,971
604
144,839
211,066
257,175
20,653
1,698
21,029
6,908
8,940
3,702
37,645
62,930
7,947
7,146
139
2,745
17,977
55,622
126,977
64,888
91,926
(31,544)
125,270
1,707
25,862
32,717
151
10,717
69,447
132,377
124,798
64,888
87,368
(28,741)
123,515
1,283
126,977
124,798
ANNUAL REPORT 2023MIDWAY LIMITED
Consolidated Statement of Changes in Equity
For the year ended 30 June
$’000
Balance as at 1 July 2021
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
Transfer from asset revaluation reserve
Transfer from profit reserve
Transactions with owners in their capacity as owners:
Dividends
Total other transactions
Balance as at 30 June 2022
Total
Equity
132,241
(12,878)
9,832
(4,654)
–
Share
Capital
64,888
Reserves
81,939
Retained
Earnings
(15,768)
Non-
controlling
Interests
1,182
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,973)
9,832
(4,660)
–
–
–
–
95
–
6
–
5,172
(12,973)
101
(7,700)
–
–
257
(11,238)
11,238
–
257
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
257
(11,238)
11,238
–
257
64,888
87,368
(28,741)
1,283
124,798
Balance as at 1 July 2022
64,888
87,368
(28,741)
1,283
124,798
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
Transfer from asset revaluation reserve
Transfers to profits reserve
Transactions with owners in their capacity as owners:
Dividends
Total other transactions
Balance as at 30 June 2023
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,492
–
4,492
–
–
66
37,337
(37,337)
–
66
(2,803)
424
(2,379)
–
–
–
–
–
–
(2,803)
424
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,492
–
2,113
–
–
66
37,337
(37,337)
–
66
64,888
91,926
(31,544)
1,707
126,977
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
42
ANNUAL REPORT 2023MIDWAY LIMITED
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 (paid)/received
Net cash flow – operating activities
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
Income tax paid
Cash flows from discontinued operation
Net cash flow – investing activities
Cash flow from financing activities
Repayment of Strategy financial liability
Principal repayment of lease liabilities
Proceeds from bank borrowings
Repayment of bank borrowings
Proceeds from loan receivable
Investment in term deposit
Net cash flow – 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)
Notes
2023
$’000
2022*
$’000
200,034
199,772
(210,507)
(201,901)
3.1
493
(2,025)
(252)
(12,257)
(4,104)
97,776
(6,094)
–
(7,958)
374
79,994
(27,395)
(4,068)
2,415
(36,289)
237
–
–
(1,944)
846
(3,227)
(8,618)
19,939
(1,922)
448
–
197
10,044
(11,833)
(4,660)
10,041
(10,975)
2,623
(2,000)
(65,100)
(16,804)
2,969
2,637
5,606
12,956
(9,987)
2,969
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
* The comparative information has been re-presented due to a discontinued operation.
43
ANNUAL REPORT 2023MIDWAY LIMITED
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 performance improved in FY23, driven mainly by favourable pricing negotiations with customers for
calendar year 2023, and also due to the Group’s legacy unfavourable hedging arrangements being utilised. Offsetting this was
continued supply cost increase and the impacts of global market volatility in the second half, which adversely impacted demand.
• The Group achieved an underlying consolidated EBITDA from continuing operations of $2.9M (2022: -$1.8M).
• The Board has elected to not declare a dividend in light of the current market uncertainty.
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
Woodfibre
Forestry Logistics
(discontinued operation;
refer Note 1.3)
Products/Services
Includes primary operations whereby the Group purchases and sells both own and third party wood.
SWF is also proportionally consolidated at 51% for segment reporting, which reflects how management
views and makes decisions of its operations.
Forestry logistics provides support services to third parties engaged in growing woodfibre including harvest
and haulage.
Forestry logistics also provides harvesting, processing and delivery service to BioGrowth Partners (100%
owned by Midway Ltd), which supplies biomass woodchips and sawdust to domestic customers in WA.
Plantation and Carbon
Management
Plantation management is the provision of silviculture services including on Group and third party owned
trees, including carbon-related services. 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 cost of goods sold transactions relating to chip trading activities performed
within the woodfibre segment. Management accounts are prepared on a segment basis with 51% share of SWF joint venture included
in Woodfibre processing. For statutory accounts SWF is equity accounted with revenue and expenses of SWF eliminated.
44
ANNUAL REPORT 2023MIDWAY LIMITED (b) Segment Information Provided to Senior Management
2023
($’000)
Sales revenue
Inter segment sales
Other income
Total revenue and other income
Share of equity accounted profits
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
2022
($’000)
Sales revenue
Inter segment sales
Other income
Ancillary Eliminations
Continuing
Operations
Forestry
Logistics*
(44,407)
187,493
(3,225)
12,104
–
18,337
315
–
889
(35,528)
205,830
1,204
207,034
Total
187,808
–
19,226
Woodfibre
225,182
–
5,519
Plantation
Management
6,718
3,225
714
230,701
10,657
–
8,237
(8,098)
–
139
(6,207)
(6,068)
(2,295)
(8,363)
2,782
(5,581)
–
(1,625)
12,465
151
10,991
(1,161)
9,830
(2,591)
7,239
(2,172)
5,067
–
–
–
–
–
(60)
(830)
–
(890)
–
(890)
–
(890)
18
(872)
2,386
(3,694)
–
–
(3,694)
1,327
(2,367)
132
(2,235)
1,433
(802)
2,386
2,858
3,537
151
6,546
(6,041)
505
(4,754)
(4,249)
2,061
(2,188)
132,179
13,405
9,093
67,768
6,259
(24,495)
181,711
–
215
–
–
–
(316)
13,405
8,992
(35,646)
(27,958)
(3,787)
23,816
(43,575)
(12,047)
(55,622)
Woodfibre
186,185
Plantation
Management
2
Ancillary Eliminations
7,410
–
Continuing
Operations
193,597
Forestry
Logistics*
4,883
–
4,363
Total revenue and other income
190,548
Share of equity accounted profits
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
–
6,080
(98)
–
5,982
(7,170)
(1,188)
(2,389)
(3,577)
1,819
(1,758)
10,632
2,008
12,642
–
(2,406)
1,943
6,490
6,027
(1,544)
4,483
(11,510)
(7,027)
2,091
(4,936)
–
–
–
–
(52)
(2,326)
–
(2,378)
(17)
(2,395)
–
(2,395)
20
(2,375)
(10,632)
(2,242)
(5,464)
1,036
(2,533)
–
–
(2,533)
1,929
(604)
160
(444)
444
–
–
4,129
197,726
1,036
1,089
(481)
6,490
7,098
(6,802)
296
(13,739)
(13,443)
4,374
(9,069)
–
(3)
–
–
(3)
(277)
(280)
(12)
(292)
101
(191)
888
–
177
2,386
2,855
3,537
151
6,543
(6,318)
225
(4,766)
(4,541)
2,162
(2,379)
182,599
13,405
9,169
Total
198,480
–
4,789
–
660
5,543
203,269
–
(2,851)
(714)
–
(3,565)
(1,742)
(5,307)
(115)
(5,422)
1,613
(3,809)
1,036
(1,762)
(1,195)
6,490
3,533
(8,544)
(5,011)
(13,854)
(18,865)
5,987
(12,878)
Segment assets
Equity accounted investees
Capital expenditure
Segment liabilities
171,685
151,069
6,254
(74,697)
254,311
2,864
257,175
11,019
(10,254)
(76,701)
–
(541)
–
–
–
428
11,019
(10,367)
–
(1,870)
11,019
(12,237)
(84,427)
(3,741)
46,245
(118,624)
(13,753)
(132,377)
1. EBITDA – S: Earnings before interest, tax, depreciation and amortisation, significant items and net fair value gain/(loss) on biological assets.
* Discontinued; refer Note 1.3.
45
ANNUAL REPORT 2023MIDWAY LIMITED Section 1: Our Performance continued
1.1 Segment Reporting continued
(c) Revenue by Geographic Region
The presentation of geographical revenue is based on the geographical location of customers.
Total
8,813
117,118
58,420
3,457
Total
7,089
138,191
53,200
–
2023
Revenue by Geographic Region Woodfibre
Australia
1,780
Plantation
Management
9,943
China
Japan
South-East Asia
132,664
87,281
3,457
–
–
–
225,182
9,943
Ancillary Eliminations
Continuing
Operations
Forestry
Logistics*
(3,225)
(15,546)
(28,861)
–
8,498
117,118
58,420
3,457
315
–
–
–
–
–
–
–
–
(47,632)
187,493
315
187,808
2022
Revenue by Geographic Region Woodfibre
2,204
Australia
Plantation
Management
10,634
Ancillary Eliminations
(10,632)
–
Continuing
Operations
2,206
Forestry
Logistics
4,883
China
Japan
South-East Asia
* Discontinued; refer Note 1.3.
98,203
85,778
–
–
–
–
186,185
10,634
–
–
–
–
39,988
138,191
(32,578)
53,200
–
–
–
–
–
(3,222)
193,597
4,883
198,480
For the financial year ending 30 June 2023 there were four (2022: three) customers in China and Japan that individually made up 10%
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
Profit on sale of assets (plantation land)1
Impairment loss on non-current assets
Impairment loss on current assets
Midway Logistics wind-down costs
Insurance costs, net of recoveries2
Transactions costs3
Impact of individually significant items
Notes
1.7
1.7
2023
$’000
12,465
(7,842)
(350)
–
93
(829)
3,537
2022
$’000
1,943
(98)
–
(714)
–
(2,326)
(1,195)
1. The Group recognised a gain of $12.5M in relation to the disposal of the plantation estate. Refer to Note 2.3.(d) for details.
2. Costs related to insurance works, and reimbursements received from the Group’s insurers, are presented gross under the Consolidated Statement
of Comprehensive Income.
3. Transaction costs of $2.3M were incurred in 2022 relating to the planned sale of the Victorian plantation estate, the sale being contingent upon approval
from the Foreign Investment Review Board (FIRB).
46
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
1.3 Discontinued Operation
General
In August 2022, the Forestry Logistics segment ceased operational activities because of the wind-down commenced in FY22.
The Forestry Logistics segment was not previously classified as held-for-sale or as a discontinued operation. The comparative
consolidated statement of comprehensive income has been represented to show the discontinued operation separately from
continuing operations.
Results of Discontinued Operation
Total revenue and other income
Elimination of intra-segment revenue
Total external revenue and other income
Expenses
Elimination of expenses related to inter-segment sales
External expenses
Results from operating activities, before tax
Income tax
Results from operating activities, net of tax
Gain on sale of discontinued operations
Profit/(loss) from discontinued operations, net of tax
Cash Flow From (and Used in) Discontinued Operation
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
2023
$’000
1,333
(129)
1,204
(1,625)
129
(1,496)
(292)
101
(191)
–
(191)
2023
$’000
(459)
1,951
(1,118)
374
2022
$’000
6,777
(1,234)
5,543
(12,199)
1,234
(10,965)
(5,422)
1,613
(3,809)
–
(3,809)
2022
$’000
(3,234)
(522)
3,953
197
Policy
A discontinued operation is a component of the Group where the operations and cash flows can be clearly distinguished from the rest
of the Group. It represents a separate major line of operations and is part of a single co-ordinated plan to dispose of a separate major
line of operation or business.
When an operation is classified as a discontinued operation, the comparative income statement and statement of comprehensive income
is re-presented as if the operation had been discontinued from the start of the comparative year.
Such disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. Once classified as held
for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
47
ANNUAL REPORT 2023MIDWAY LIMITED
Section 1: Our Performance continued
1.4 Income Tax
(a) Current Tax Reconciliation
Current tax
Deferred tax
Over provision in prior years
2023
$’000
5,927
(7,984)
(4)
2022
$’000
(5,238)
(729)
(20)
(2,061)
(5,987)
(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 receivable on profit before income tax at 30.0% (2022: 30.0%)
(1,275)
(5,660)
Add tax effect of:
– Impairment on non-current assets (BioGrowth Partners)
Less tax effect of:
– Over provision for income tax in prior years
– Share of (profits)/losses from joint ventures
– Other
Income tax expense/(benefit) attributable to profit
(c) Deferred Tax
Deferred tax assets
Payables
Biological assets
Blackhole expenditure
Provision for doubtful debts
Hedge reserve
Tax losses carried forward
Other
Deferred tax liabilities
Biological assets
Property, plant and equipment
Net deferred tax liabilities
(e) Deferred Income Tax (Revenue)/Expense Included in Income Tax Expense Comprises
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
–
(1,275)
30
(5,630)
–
(716)
(70)
(786)
(20)
(311)
(26)
(357)
(2,061)
(5,987)
918
–
222
2,353
757
7,847
105
664
1,432
788
–
2,682
5,934
–
12,202
11,500
1,323
13,624
14,947
2,745
(714)
(7,270)
(7,984)
–
22,217
22,217
10,717
(465)
(264)
(729)
(f) Deferred Income Tax Related to Items Charged or Credited Directly to Equity
Increase in deferred tax liabilities
1,925
(3,514)
48
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
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.
1.5 Earnings Per Share
(a) Earnings Per Share
From continuing operations attributable to ordinary shareholders of Midway Limited
Earnings per share
Diluted earnings per share*
Total attributable to ordinary shareholders of Midway Limited
Earnings per share
Diluted earnings per share*
2023
2022
($0.03)
($0.03)
($0.03)
($0.03)
($0.15)
($0.15)
($0.10)
($0.10)
2023
Number
2022
Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings
per share
87,336,222 87,336,222
Adjustments for calculation of diluted earnings per share:
Performance rights1
–
87,336,222 87,336,222
–
* Diluted earnings per share is basic earnings per share adjusted for the effects of all dilutive potential ordinary shares.
1. As at 30 June 2023, 1,089,171 performance rights and 721,436 options (2022: 1,180,911 performance rights and 721,436 options) were excluded from the diluted
weighted 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.
49
ANNUAL REPORT 2023MIDWAY LIMITED
Section 1: Our Performance continued
1.6 Dividends
Fully franked at 30% (2022: 30%)
2023
$’000
–
2022
$’000
–
The balance of the franking account at 30 June 2023 is $13,083,758 (2022: $5,125,895).
1.7 Impairment of Non-financial Assets
Impairment tests for all assets are performed when there is an indicator of impairment, although goodwill is tested at each reporting
date. 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 Group’s cash generating units (CGUs) consist of individual business units at the lowest level at which cash inflows are made including:
• Midway Geelong
• Queensland Commodity Exports
• Midway Tasmania
• Plantation Management Partners
• South West Fibre
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 FY28, unless the timing of tree crop rotation profiles justifies a longer period. As part of the prepared forecasts,
management has considered ongoing global supply chain challenges on global markets, being an area of uncertainty, along with future
potential impacts from climate change.
Long-term Average Growth Rate
A terminal growth rate of 2.2% 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 pre-tax discount rate of between 11.5% and 13.3% for all CGUs (2022: 12.8% – 14.4%).
Sensitivity Analysis
The South West Fibre CGU is sensitive to variances in the post-tax discount rate used (8.43%) as part of the impairment modelling,
which is an area of judgment. A reasonably possible increase in the discount rate used of 1.3% would result in a break-even result.
Apart from the above items the Group believes any reasonable possible change in the key assumptions would not cause the carrying
value of the CGUs to materially exceed their recoverable amount.
Impairment of Plantation Management Partners Assets
The Group has recognised an impairment expense of $7.8M relating to a provision raised on a long-term trade receivable. The impairment
takes into account the current and prospective conditions in the woodfibre market.
In addition an impairment expense of $0.4M was recognised in relation to a provision against slow-moving spare parts inventory.
50
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
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 primarily from third party plantation land, which is used to grow hardwood trees.
• The Group did not record a change in fair value of its plantation land in FY23 (FY22: $10.3M before tax) due to the majority
of the portfolio being disposed in the year (refer to Note 2.3(d) for details.
• The Group holds $8.5M of biological assets for harvest of which $0.2M relates to seedlings, $4.6M is plantation hardwood
and $3.7M of pine.
• Plantation Land ($0.8M) and Biological Assets ($8.5M) are held on the balance sheet at fair value.
2.1 Property, Plant and Equipment
Each class of property, plant and equipment is set out below:
Depreciation policy
Year ended 30 June 2022
Opening net book amount
Additions
Disposals
Depreciation
Reclassification to asset
held-for-sale
Revaluation
Closing carrying amount
Year ended 30 June 2023
Opening net book amount
Additions
Disposals
Depreciation
Reclassification to asset
held-for-sale
Revaluation
Plantation
Land
$’000
Freehold
Land
$’000
Leased
Land
$’000
Buildings
$’000
2.5-27%
Plant and
Equipment
$’000
3-33%
Roading
$’000
5-15%
Total
$’000
95,670
12,670
–
(14,362)
–
–
–
–
–
–
10,316
91,624
3,730
16,400
91,624
16,400
–
(90,804)
–
–
–
–
–
–
–
3,782
1,950
(84)
(1,502)
–
–
3,053
4,961
–
(496)
–
–
19,342
7,405
(1,522)
(5,682)
(314)
–
6,550
141,067
236
–
(864)
–
–
14,552
(15,968)
(8,544)
(314)
14,046
4,146
7,518
19,229
5,922
144,839
4,146
3,465
(2,020)
(998)
–
–
7,518
1,386
–
(432)
–
–
19,229
7,573
(1,957)
(4,063)
–
5,922
325
(4,896)
(548)
–
–
144,839
12,749
(99,677)
(6,041)
–
–
Closing carrying amount
820
16,400
4,593
8,472
20,782
803
51,870
Right of use assets are included within each category of property, plant and equipment above. Refer to Note 2.5 for a full breakdown
of right of use assets.
51
ANNUAL REPORT 2023MIDWAY LIMITED
Section 2: Our Asset Base continued
2.1 Property, Plant and Equipment continued
(a) Key Estimates and Judgements – Fair Value
Freehold
land
Plantation
land
2023 Fair
Value
$’000
Valuation
Technique
16,400 Market approach1
820 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 2023 were performed internally by the
Group and considered a range of observable and non-observable factors,
and also consideration of the prior period independent valuer report obtained
(as at 30 June 2022).
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. Following the divestment of the plantation estate, plantation land
is not material to the Group’s financial statements, and as such an independent
valuation was not performed as at 30 June 2023.
1. Internal valuations were performed as at 30 June 2023. The stated techniques were used as at 30 June 2022.
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 impact of current global supply chain challenges remain uncertain and could impact the key estimates and
judgements noted above.
2023 Plantation Land Measurement
The unencumbered value of the plantation land is $0.8M (2022: $91.6M). There are no encumbrances on the remaining plantation land
held by the Group.
(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%
2023
2022
Increase
$’000
Decrease
$’000
–
–
–
–
–
–
Increase
$’000
(2,554)
2,757
(176)
Decrease
$’000
2,693
(2,662)
176
The sole remaining plantation land block held by the Group is not subject to any encumbrances, and as such the valuation is not
affected by changes to the above assumptions. A change in the value per hectare used in the valuation of +/1 10% would change
the valuation by $0.8M depending upon the direction of the movement. For the prior period disclosure, 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% change in assumptions to the dollar rate per ha applied will increase the value by $0.2M (2022: $0.2M), or decrease by $0.2M
(2022: $0.2M). Based on current and prior valuations of the land a 1% rate change is considered reasonable.
52
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
(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 is 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.
2.2 Asset Held-For-Sale
Opening balance
Plantation land at fair value
Fixed assets
Closing balance
2023
$’000
314
–
(314)
–
2022
$’000
2,997
(2,997)
314
314
Policy
Assets held-for-sale are measured at the lower of carrying amount and fair value less costs to sell.
53
ANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base continued
2.3 Biological Assets
Current
Plantation hardwood at fair value
Plantation softwood at fair value
Non-current
Plantation hardwood at fair value
Plantation softwood at fair value
Plantation hardwood at fair value (new plantings)
(a) Reconciliation of Carrying Amount
At 1 July 2022
Harvested timber
New plantings
Purchase of standing timber (softwood)
Sale of plantation estate
Change in fair value less estimated point of sale costs – due to:
Change in discount rate
Change in volumes, prices and markets
Balance at 30 June 2023
2023
$’000
–
1,744
4,566
1,951
213
8,474
2022
$’000
2,551
146
38,573
–
6,665
47,935
Biological
Assets
$’000
47,935
(3,146)
1,129
5,100
(42,173)
–
(371)
8,474
Policy
Biological assets are held at fair value, with the 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 3 on the fair value hierarchy. There were no transfers between level 1, 2 or 3 on the
fair value hierarchy.
During the year the Group purchased standing pine plantation for $5.1M. Given the proximity of the transaction to the balance date,
the pine plantation has not been subject to a fair valuation exercise, with the proportional cost base of the remaining standing trees
considered to represent fair value.
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 thereafter 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 continuedANNUAL REPORT 2023MIDWAY LIMITED
Significant
Unobservable Inputs
• Estimated future timber
market prices per tonne
(weighed average USD/
BDMT $216.8 (2022: $212.9)).
• Estimated yields per hectare
(weighed average GMT/ha
196 (2022: 216 GMT/ha)).
• Estimated harvest
and transportation costs
(weighted average $52.2/GMT
(2022: $52.1/GMT)).
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
• Risk-adjusted discount rate
7.0% (2022: 7.0%).
• discount rate was
lower/(higher).
(b) Key Estimates and Judgements – Fair Value (Level 3)
Valuation Technique Description of Valuation Technique
An internally generated valuation is
Net present
performed based on a net present value
value approach
(NPV) calculation. An external expert is
used to provide independent inputs to
the calculation, including price, foreign
exchange and inflation expectations. 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
remeasurement 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%
2023
2022
Increase
$’000
Decrease
$’000
(190)
(1,357)
907
(646)
203
1,603
(413)
645
Increase
$’000
(2,017)
12,905
(7,827)
5,567
Decrease
$’000
2,172
(12,905)
7,827
(5,567)
55
ANNUAL REPORT 2023MIDWAY LIMITED
Section 2: Our Asset Base continued
2.3 Biological Assets continued
(d) Sale of Plantation Estate
On 17 October 2022 following approval from the Foreign Investment Review Board (FIRB) the Group sold 17,000 hectares of existing
brownfield hardwood plantation land in south-west Victoria to a special purpose vehicle managed by MEAG, a wholly owned subsidiary
of Munich Re, for $156.3M. The sale resulted in a gain on disposal of $12.5M being recognised in the period (inclusive of a $0.2M
true-up payment in the second half).
At 30 June 2023, three of the five tranches have settled, with the two subsequent tranches expected to settle in September 2023
and 2024 respectively. The Group has determined that as at 17 October 2022, control over the plantation land, trees and roading
assets was relinquished and these assets were derecognised from the balance sheet at that date.
The sale also facilitated repayment of all long-term corporate debt held by the Group, and also a repayment of a significant amount
of the “Strategy” liability (the remainder of which will be repaid as the final two tranches settle).
A summary of the impact of the sale on the Group at the date of settlement with MEAG of the transaction is shown below.
Assets
Property, plant and equipment
Plantation land
Roading assets
Biological assets – current
Biological assets – non-current
Cash and cash equivalents
Receivables – current
Receivables – non-current
Net impact – assets
Liabilities
GST payable
Provisions
Net impact – liabilities
Net gain on disposal recognised
Impact
$’000
(90,804)
(4,896)
(2,697)
(39,476)
64,488
55,824
32,480
14,919
848
1,606
2,454
12,465
Of the cash and cash equivalents balance above, a total of $21.7M was used to repay borrowings.
In addition, prior to the settlement of the second and third tranches, repayment was made to the existing strategy financial liability
totalling $27.4M.
2.4 Commitments
– not later than one year
– later than one year and not later than five years
– later than five years
2023
$’000
23,861
64,682
60,103
2022
$’000
27,993
64,383
54,463
148,646
146,839
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, the parent entity.
56
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
2.5 Leases
(a) Right of Use Assets
Right of Use Assets by Category
Balance at 1 July 2021
Additions
Disposal
Depreciation
Closing carrying amount
Balance at 1 July 2022
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 leases1
1. Continuing operations.
Leased
Land
$’000
3,782
1,950
(84)
(1,502)
4,146
4,146
3,465
(2,020)
(998)
4,593
Leased
Property,
Plant and
Equipment
$’000
7,056
Leased
Building
$’000
499
1
–
(284)
216
216
–
–
(193)
23
2,601
(1,068)
(2,893)
5,696
5,696
169
(935)
(2,230)
2,700
2023
$’000
201
–
2023
$’000
4,068
Total
$’000
11,337
4,552
(1,152)
(4,679)
10,058
10,058
3,634
(2,955)
(3,421)
7,316
2022
$’000
168
74
2022
$’000
4,660
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
ANNUAL REPORT 2023MIDWAY LIMITED
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
2023
$’000
5,606
34,996
27,567
(16,707)
(4,590)
46,872
2023
$’000
34,205
791
34,996
2022
$’000
2,969
20,772
10,774
(20,653)
(3,853)
10,009
2022
$’000
20,772
–
20,772
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.
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.
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 2.20 to 2.60 – the range depends upon factors such as timber species type and seasonal factors.
58
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
(b) Trade and Other Receivables
Trade debtors
Accrued income
Deferred settlement receivable1
GST receivable
2023
$’000
1,028
1,111
23,758
1,670
27,567
2022
$’000
1,118
7,676
–
1,980
10,774
1. Deferred settlement receivable relates to pending settlement of a tranche of the plantation estate.
Policy
Trade and other receivables are measured at fair value and subsequently measured at amortised cost using the effective interest method.
(c) Trade and Other Payables
Unsecured liabilities
Trade creditors
Sundry creditors and accruals
2023
$’000
8,692
8,015
16,707
2022
$’000
9,788
10,865
20,653
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:
Year ended 30 June 2022
Opening net book amount
Amortisation
Closing carrying amount
Year ended 30 June 2023
Opening net book amount
Amortisation
Closing carrying amount
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
Goodwill
$’000
1,971
–
1,971
1,971
–
1,971
Total
$’000
1,971
–
1,971
1,971
–
1,971
59
ANNUAL REPORT 2023MIDWAY LIMITED
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
Term deposit
2023
$’000
1,000
–
2,027
3,599
–
4,888
(5,606)
(2,009)
3,899
2022
$’000
16,950
20,675
2,354
1,922
–
4,990
(2,969)
(2,000)
41,922
(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
– one plantation block in south-west Victoria.
(ii) Refinancing
The following amounts represent the Group’s outstanding liabilities with external financiers:
Type
Working capital
Asset finance
Asset finance
Utilised
$’000
1,000
5,212
414
Total
$’000
24,000
8,000
6,000
Maturity
30-Jun-24
31-Oct-231
30-Sep-23
1. The asset finance facility is repayable on the earlier of settlement of the next tranche of the plantation land sale (expected to complete by 30 September 2023)
or 31 October 2023.
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 continuedANNUAL REPORT 2023MIDWAY LIMITED
(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) 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 recognised
Non-cash interest expense
Impact of discontinued operations
Changes in operating assets and liabilities
(Increase)/decrease in receivables
(Increase) in other assets
(Increase)/decrease in inventories
Increase in biological assets (net of revaluation increment/decrement)
Increase/(decrease) in payables
(Decrease) in deferred taxes
Increase/(decrease) in tax provision
(Decrease) in provisions
Cash flows provided from operating activities from continuing operations
2023
$’000
1
5,605
2022
$’000
1
2,968
(2,379)
(12,878)
6,318
(13,199)
68
(2,386)
(151)
8,192
3,047
456
11,044
(511)
(14,224)
–
(5,997)
(2,050)
(353)
(132)
(12,257)
8,544
(2,413)
326
(1,036)
(6,490)
98
11,580
3,236
7,259
(1,341)
(5,127)
4,566
(3,288)
(8,844)
2,999
(418)
(3,227)
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 Expense1
Interest expenses
Strategy finance expenses
Bank charges
Interest expense on lease liabilities
1. From continuing operations.
2023
$’000
1,744
4,068
197
461
2022
$’000
1,762
11,406
298
265
6,470
13,731
61
ANNUAL REPORT 2023MIDWAY LIMITED
Section 3: Funding Structures continued
3.1 Net Debt continued
(c) Reconciliation of Liabilities Arising from Financing Activities
Balance at 1 July 2022
Cash changes
Proceeds from borrowings
Repayment of borrowings
Total cash flows
Non-cash changes
Lease additions
Interest
Transfer
Balance at 30 June 2023
Borrowings
– Current
$’000
21,029
Borrowings
– Non-Current
$’000
25,862
2,415
(25,095)
(22,680)
–
(20,925)
(20,925)
1,158
201
3,859
3,567
6,869
–
(3,859)
7,947
Strategy
Financial
Liability
Current
$’000
6,908
Strategy
Financial
Liability –
Non-current
$’000
32,717
–
(6,908)
(6,908)
–
–
9,151
9,151
–
(20,488)
(20,488)
–
4,068
(9,151)
7,146
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 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 continuedANNUAL REPORT 2023MIDWAY LIMITED
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Receivables
Other receivables
Term deposit
Non-current receivables
Financial liabilities
Bank and other loans
Creditors
AASB 16 Lease liabilities
Finance lease liability
Other payables
Derivatives
2023
$’000
5,606
1,028
26,539
2,009
33,459
68,641
1,000
8,692
4,888
5,626
8,015
2,523
30,744
2022
$’000
2,969
7,988
2,786
2,000
–
15,743
37,625
9,788
4,990
4,276
10,865
8,940
76,484
(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?
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
U.S. Dollars (USD), with one of the
Group’s bank accounts being in USD.
How Does Midway Manage the Risk?
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.
Impact at 30 June 2023
At balance date the notional amount
of outstanding forward exchange
contracts was $62.5M (2022:
$122.2M), and USD options was
$0.0M (2022: $0.0M).
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
2023
$’000
–
(2,523)
2022
$’000
–
(8,940)
During the period there was no (2022: $0) hedge ineffectiveness resulting in a transfer to the income statement (no transactions were
over-hedged in the year).
63
ANNUAL REPORT 2023MIDWAY LIMITED
Section 3: Funding Structures continued
3.2 Financial Risk Management continued
(i) Currency Risk 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 and 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
2023
USD $’000
131
54
2022
USD $’000
392
52
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% 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
2023
2022
Increase
$’000
Decrease
$’000
(12)
4,199
13
(8,318)
Increase
$’000
(28)
2,089
Decrease
$’000
31
(15,433)
A 10% change is deemed reasonable given recent historical trends in the AUD/USD.
64
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
(ii) 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?
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.
How Does Midway Manage the Risk?
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 Committee.
No swaps are currently taken out.
Impact at 30 June 2023
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:
Interest
Bearing
$’000
Non-interest
Bearing
$’000
2022
Financial assets
Cash
Trade receivables
Other receivables
Term deposit
Derivatives
Financial liabilities
Bank and other loans
Creditors
AASB 16 Lease liability
Finance lease liability
Sundry creditors and accruals
Derivatives
2023
Financial assets
Cash
Trade receivables
Other receivables
Term deposit
Derivatives
Financial liabilities
Bank and other loans
Creditors
AASB 16 Lease liability
Finance lease liability
Sundry creditors and accruals
Derivatives
2,968
–
–
2,000
–
4,968
37,625
–
4,990
4,276
–
–
46,891
5,605
–
–
2,009
–
7,614
1,000
–
4,888
5,626
–
–
Total
Carrying
Amount
$’000
2,969
1,118
9,656
2,000
–
Weighted Average
Effective Interest Rate
0.00%
Floating
0.1%
Fixed
1
7,988
2,786
–
–
10,775
15,743
–
37,625
2.64%
Floating
9,788
–
–
10,865
8,940
29,593
1
1,028
59,998
–
–
9,788
4,990
4,276
10,865
8,940
76,484
5,606
1,028
59,998
2,009
–
61,027
68,641
–
8,692
–
–
8,015
2,523
1,000
8,692
4,888
5,626
8,015
2,523
3.81%
3.83%
Fixed
Fixed
0.00%
Floating
0.10%
Fixed
5.70%
Floating
3.50%
5.71%
Fixed
No other financial assets or financial liabilities are expected to be exposed to interest rate risk.
11,514
19,230
30,744
65
ANNUAL REPORT 2023MIDWAY LIMITED
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 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 some customers where
the Group determines there is sufficient rationale to do
so, which comprise the majority of the Group’s annual
woodfibre sales.
Impact at 30 June 2023
As at 30 June 2023, there were no
vessel-related receivables outstanding.
Based on management’s assessment
of its exposure, the Group has low
credit risk.
The balance of woodfibre sales are made to long-standing
customers with the short trading terms applicable to
these customers, being payment within seven business
days of invoicing.
The Group is exposed to credit risk
on plantation management activities
in addition to the sale of woodfibre
to customers in China.
The Group produces and markets woodfibre on
the Tiwi Islands on behalf of the wood owners.
Receiving outstanding receivables is contingent on
sufficient volumes of woodfibre being sold into the market.
The Group recognised a provision
of $7.8M against aged receivables
from the Tiwi Islands project.
Whilst the Group believes that the
second rotation in the Tiwi Islands
will provide sufficient cash flows to
facilitate recovery of the outstanding
amount, due to current market
uncertainty for the first rotation
and the fact that the second rotation
has not yet been contracted, the
outstanding balance of the aged
debtor has been fully provided for.
As at 30 June 2023, 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
2023
$’000
60,554
384
–
58
30
61,026
2022
$’000
9,767
543
5
126
7,728
18,169
66
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
(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.
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
2023
Cash and cash equivalents
Loan receivables
Receivables
Derivatives
Payables
Strategy financial liability1
Finance lease
Borrowings
Net maturities
2022
Cash and cash equivalents
Loan receivables
Receivables
Derivatives
Payables
Strategy financial liability1
Finance lease
Borrowings
Net maturities
5,606
47
27,567
–
(16,707)
(9,546)
(1,756)
(161)
5,050
2,969
145
10,774
–
(20,653)
(3,758)
(3,569)
(1,071)
(15,163)
–
47
–
–
–
–
(1,248)
(1,160)
(2,361)
–
145
–
–
–
(3,758)
(2,277)
(15,685)
(21,575)
–
20
33,459
–
–
(8,826)
(6,602)
–
–
–
–
–
–
–
(2,419)
–
18,051
(2,419)
–
761
7,395
–
–
(44,975)
(6,970)
(20,753)
(64,542)
–
–
–
–
–
(17,050)
(2,109)
–
Total
Contractual
Cash Flows
$’000
Carrying
Amount
$’000
5,606
114
5,606
108
61,026
61,026
–
(16,707)
(18,372)
(12,025)
(1,321)
18,321
–
(16,707)
(16,297)
(10,514)
(1,000)
22,222
2,969
1,051
2,969
874
18,169
18,169
–
(20,653)
(69,541)
(14,925)
(37,509)
–
(20,653)
(39,625)
(9,267)
(37,625)
(85,158)
(19,159)
(120,439)
1. The face value of the Strategy financial liability will be paid out at the earliest possible point under the contract, which at this stage is expected to be completed
by September 24.
3.3 Contributed Equity
(a) Ordinary Share Capital
Share Capital
Ordinary shares
Opening balance – 1 July
Performance rights vested
Issued during the year
Capital raising costs incurred net of recognised tax benefit
Closing balance 30 June
Number of Shares
Company
2023
2022
2023
$’000
2022
$’000
87,336,222 87,336,222
–
–
–
–
–
87,336,222 87,336,222
–
64,888
64,888
–
–
–
–
–
–
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
ANNUAL REPORT 2023MIDWAY LIMITED
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
Transfers of current year profits
Dividends paid
Balance 30 June
Foreign currency translation reserve
Opening balance
Foreign currency translation differences
Balance 30 June
2023
$’000
2022
$’000
(6,259)
6,417
(1,925)
(1,767)
374
66
–
440
(1,599)
(6,657)
1,997
(6,259)
117
257
–
374
47,220
–
48,626
14,046
(37,337)
(11,238)
–
9,883
46,113
37,337
–
(4,214)
47,220
34,875
11,238
–
83,450
46,113
(80)
–
(80)
(80)
–
(80)
1. Cash flow hedge reserve
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 profit reserve is used to record transfers of profits that would otherwise be offset against accumulated losses. The balance of the profit 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 continuedANNUAL REPORT 2023MIDWAY LIMITED
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
Australian Carbon Products 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
Bio Growth Partners (BGP)
Ownership Interest
Held by the Company
Ownership Interest
Held by NCI
2023
%
2022
%
2023
%
2022
%
90
100
100
100
100
100
100
100
100
100
100
90
100
100
100
–
100
100
100
100
100
100
10
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. 50% held in Trust by an independent party; however, all risks and benefits of ownership of the share are held by the Group. Continued the process of 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
Nature of Relationship
Ordinary shares
Ownership Interest
Carrying Amount
2023
%
51
2021
%
51
2023
$’000
13,405
13,405
2022
$’000
11,019
11,019
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 bought 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
ANNUAL REPORT 2023MIDWAY LIMITED
Section 4: Other Disclosures continued
4.2 Interest in Joint Ventures continued
(a) Carrying Amount 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% 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
2023
$’000
14,260
13,129
27,389
15,197
15,188
(11,761)
(4,532)
26,284
113,703
–
2,601
2,015
4,679
21,605
4,679
–
–
26,284
13,405
13,405
2022
$’000
7,025
11,718
18,743
17,378
17,393
(8,401)
(6,130)
21,605
75,807
–
3,778
871
2,216
19,389
2,031
–
185
21,605
11,019
11,019
70
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
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
2023
$’000
2022
$’000
73,888
80,118
74,638
76,702
154,006
151,340
50,431
(723)
49,708
104,298
64,888
1,614
37,796
104,298
40,526
11,033
51,559
99,781
64,888
1,614
33,279
99,781
(475)
4,017
(17,085)
(19,898)
4.4 Share-based Payments
The Board has established a Long-term Incentive Plan (LTIP) under which Executive 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 FY23, the Board granted the Chief Executive Officer and members of the Senior Executive Team 953,519 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 2025.
71
ANNUAL REPORT 2023MIDWAY LIMITED
Section 4: Other Disclosures continued
4.4 Share-based Payments continued
(a) Long Term Incentive Rights (Equity Settled) continued
2023 Plan
Assumption
No. of shares
Fair value at grant date1
Share price
Risk free rate
Dividend yield
Volatility
Initial TSR
2022 Plan
Assumption
No. of shares
Fair value at grant date1
Share price
Risk free rate
Dividend yield
Volatility
Initial TSR
Performance
Rights Issued
9 December
2022
929,706
Performance
Rights Issued
13 April 2023
23,813
$0.65
$0.98
3.03%
2.0%
57.0%
4.8%
$0.54
$0.90
2.96%
2.0%
55.0%
-3.7%
751,366
$0.89
$1.22
0.77%
3.0%
50.0%
34.3%
Vesting Conditions
Participant must maintain continuous employment over
the performance period, which ends 30 June 2025.
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.
Vesting Conditions
Participant must maintain continuous employment over
the performance period, which ends 30 June 2024.
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.
1. The fair value at grant date was derived using the Monte Carlo Simulation model, which incorporates the total shareholder return (TSR) performance conditions.
Additionally in FY22, the Board granted the Chief Executive Officer 89,227 performance rights and 721,436 options, subject to vesting
conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the underlying shares will
be issued, with a performance period to 30 June 2024. The options will be exercisable for 24 months after the relevant vesting date.
2022 Plan – CEO
Assumption
No. of shares
Fair value at grant date1,2
Share price
Exercise price
Risk free rate
Dividend yield
Volatility
Initial TSR
Options
Vesting
30 June 2023
Options
Vesting
30 June 2024
Performance
Rights
360,718
360,718
89,227
$0.36
$1.06
$0.94
0.99%
3.0%
50.0%
16.6%
$0.39
$1.06
$0.94
0.99%
3.0%
50.0%
16.6%
$0.74
$1.06
N/A
0.99%
3.0%
50.0%
16.6%
Vesting Conditions
Participant must maintain continuous employment
over the performance period, which ends 30 June 2023
(for the initial options granted) and 30 June 2024
(for performance rights and remaining options).
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.
1. The fair value at grant date was derived using the Monte Carlo Simulation model, which incorporates the total shareholder return (TSR) performance conditions.
2. The options have no market-based performance hurdle and therefore they have been valued using the Binomal method.
The Group recorded a share-based payments expense of $0.1M in 2023 (2022: $0.2M).
72
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
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
2023
$’000
1,429
103
243
22
2022
$’000
1,652
125
162
25
1,797
1,964
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 three days to year end to 30 June 2023.
The aggregate shareholdings of KMP at 30 June 2023 are 104,829 (2022: 9,938,806).
(b) Transactions with South West Fibre Pty Ltd
Nature
Operator fee income
Reimbursement of costs
Dividends received
Sale of wood products (at cost)
2023
$’000
1,657
681
–
9,818
12,155
2022
$’000
1,145
1,042
–
9,737
11,924
The outstanding receivable balance from South West Fibre Pty Ltd at 30 June 2023 is $0.2M (2022: $0.4M receivable).
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.
As part of the wind-down of Midway Logistics and BioGrowth Partners, the Group is currently in negotiations with various parties
to reassign or exit existing contracts. At this stage, it is not possible to provide a reasonable or accurate assessment of the Group’s
potential exposure as a result of this process, if any.
(b) Bank Guarantees
Consolidated group
Limit
Amount utilised
Parent entity
Limit
Amount utilised
2023
$’000
5,250
4,125
4,250
3,345
2022
$’000
6,200
2,286
5,250
2,061
73
ANNUAL REPORT 2023MIDWAY LIMITED
Section 4: Other Disclosures continued
4.7 Remuneration of Auditors
KPMG Australia
Audit and assurance services
– Statutory audit fees
Other services
2023
$
2022
$
224,675
228,000
– Non-assurance services – other advisory services
21,228
88,717
4.8 Other Income
Plantation management fees
SWF operating fee
Profit on sale of assets (plantation land)
Other
Policy
2023
$’000
685
1,657
12,465
3,530
18,337
2022
$’000
127
1,145
–
3,517
4,789
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 continuedANNUAL REPORT 2023MIDWAY LIMITED
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 2023 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
2023
$’000
153,190
18,377
171,567
2022
$’000
162,662
4,178
166,840
(183,836)
(195,811)
2,386
(9,883)
3,876
(6,007)
4,492
(1,515)
(28,381)
(6,007)
–
1,036
(27,935)
4,787
(23,148)
5,172
(17,976)
(5,233)
(23,148)
–
Retained profits at the end of the financial year
(34,388)
(28,381)
75
ANNUAL REPORT 2023MIDWAY LIMITED
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
Total current assets
Non-current assets
Biological assets
Other receivables
Investments
Property, plant and equipment
Loan receivables – NC
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Strategy financial liability
Current tax liability
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
2023
$’000
2,659
27,357
25,015
1,744
5,085
–
2022
$’000
1,991
9,953
15,467
2,697
8,222
314
61,860
38,644
6,730
33,459
19,638
50,130
17
109,974
171,834
13,865
4,205
4,387
9,151
–
2,523
34,131
7,947
120
1,639
7,146
16,852
50,983
120,851
64,888
90,379
(34,416)
120,851
45,238
7,395
17,251
140,810
604
211,298
249,942
17,805
20,576
3,547
6,908
1,867
8,940
59,643
25,478
131
9,820
32,717
68,146
127,789
122,153
64,888
51,209
6,056
122,153
Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED
4.10 Subsequent Events
There have been no other matters or circumstances which have arisen since 30 June 2023 that have significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2023, of the Group; or
(b) the results of those operations; or
(c) the state of affairs, in financial years subsequent to 30 June 2023 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.
The financial statements have been prepared on a going concern basis and the Directors consider that there are reasonable grounds
to believe the Group will be able to pay its debts as and when they fall due based on forecast operating cash flows, their debt funding
position and capital management strategy.
Over the course of the year, the Group has paid down all long-term debt and has current assets exceeding current liabilities of $37,502,000
as at 30 June 2023.
The Group has experienced an increased degree of market volatility during FY23 which has been impacted by developments in the
wider global pulp market during the year. This presents the risk that demand for the Group’s products may be impacted and has resulted
in some customers deferring planned vessels. The Group has taken a number of actions in the year to address the cash flow impact
of this risk, including but not limited to paying down all long-term debt and managing production and expense levels.
The Directors have considered forecast cash flow scenarios (including downside scenarios if there are unexpected deferrals of committed
vessels) for at least the 12-month period from the date of approval of these financial statements. As a result, having regard to the current
level of current assets, low debt balance, forecast cash flow sensitivities as well as other capital management strategies available
to the Group if required, the Directors consider that the Group is able to pay its debts as and when they are due and these financial
statements can be prepared on a going concern basis. Further details of the Group’s capital risk management strategy has been
outlined in Note 3.2.
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.
77
ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued
4.11 Basis of Preparation continued
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 inter-company 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.
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 continuedANNUAL REPORT 2023MIDWAY LIMITED 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 2023 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.
Gordon Davis
Chairman
24 August 2023
79
ANNUAL REPORT 2023MIDWAY LIMITED
Independent Auditor’s Report
80
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. 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 theGroup’s financial position as at 30June 2023 and of its financialperformance for the year ended onthat date; and•complying with Australian AccountingStandards and the CorporationsRegulations 2001.The Financial Report comprises: •Consolidated Balance Sheet as at 30 June 2023.•Consolidated Statement of Comprehensive Income,Consolidated Statement of Changes in Equity, andConsolidated Statement of Cashflows for the yearthen ended•Notes including a summary of significant accountingpolicies•Directors’ Declaration.The Group consists of 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 these requirements. ANNUAL REPORT 2023MIDWAY LIMITED 81
Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. VVaalluuaattiioonn ooff nnoonn--ccuurrrreenntt aasssseettss (($$110077..55mm)) Refer to Note 1.7 to the Financial Report. The key audit matter How the matter was addressed in our audit A key audit matter was the Group’s annual testing of the recoverability of non-current assets given the size of the balance (being 59% of total assets) and estimation uncertainty associated with current economic and market conditions. The Group assesses valuation of its Cash Generating Units (CGUs) via detailed value in use (VIU) discounted cash flow modelling, which contains a number of assumptions. The Group’s VIU models are internally developed and use a range of internal and external data as inputs. Forward looking estimates may be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, over key assumptions including forecast cash flows, forecast growth rates over the forecast period and discount rates. In addition to the above, the Group recorded an impairment charge of $7.8 million pre-tax relating to non-current trade receivables relating to the Tiwi Islands project considering the current and prospective conditions in the woodfibre market. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. Our audit procedures included: •assessing the Group’s VIU models andkey assumptions by:-evaluating the appropriateness of the VIU method applied by the Group against accounting standard requirements;-assessing the integrity of the models used, including the accuracy of the underlying calculation formulas;-comparing significant inputs into the relevant cash flow forecasts to the Group’s Board approved budgets;-assessing the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models;-using our knowledge of the Group, its past performance, published studies on industry trends and our industry knowledge to challenge and assess key assumptions including forecast cash flows, forecast growth rates over the forecast period and discount rates; and-working with our valuation specialists, we independently developed a discount rate range using publicly available market data for comparable entities, adjusted by risk factors specific to the Group.•considering the sensitivity of the models by varying key assumptions, such as forecastANNUAL REPORT 2023MIDWAY LIMITED Independent Auditor’s Report continued
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growth rates and discount rates, within a reasonably possible range, to identify those assumptions at higher risk of bias or inconsistency in application. We also assessed the related impairment breakeven points for these assumptions in order to identify those assets at higher risk of impairment and to focus our further procedures; and •assessing the disclosures in the financialreport using our understanding of therecoverability assessment obtained from ourtesting and against the requirements of theaccounting 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 Auditor’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 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. 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 AustralianAccounting Standards and the Corporations Act 2001•implementing necessary internal control to enable the preparation of a Financial Report thatgives a true and fair view and is free from material misstatement, whether due to fraud orerror•assessing the Group and Company’s ability to continue as a going concern and whether theuse of the going concern basis of accounting is appropriate. This includes disclosing, asapplicable, matters related to going concern and using the going concern basis of accountingunless they either intend to liquidate the Group and Company or to cease operations, or haveANNUAL REPORT 2023MIDWAY LIMITED 83
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 frommaterial 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. Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of Midway Limited for the year ended 30 June 2023, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 17 to 26 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Simon Dubois Partner Melbourne 24 August 2023 ANNUAL REPORT 2023MIDWAY LIMITED Additional Shareholder Information
For the year ended 30 June 2023
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 is at 31 August 2023 (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
SANDON CAPITAL PTY LTD
Number of
Shares Held
20,798,294
9,604,599
7,729,697
% of Total Issued
Share Capital
23.81
11.00
8.85
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 and options, which are unquoted, have no voting rights.
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ANNUAL REPORT 2023MIDWAY LIMITED 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
Distribution of Performance Rights
Range
10.001 to 100,000
100,001 and over
Total
Distribution of Options
Holdings Ranges
100,001 and over
Total
Number of Holders
280
Total Ordinary Shares
130,847
336
217
338
74
1,245
970,529
1,685,477
10,415,318
74,134,051
87,336,222
Number of Holders
4
Total Performance Shares
172,295
4
8
856,388
1,028,683
Number of Holders
Total Options
1
1
721,436
721,436
%
0.15
1.11
1.93
11.93
84.88
100.00
%
16.75%
83.25%
100.00%
%
100.00
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 $0.6100 per unit
Minimum Parcel Size
820
Holders
219
Units
71,053
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ANNUAL REPORT 2023MIDWAY LIMITED Additional Shareholder Information continued
For the year ended 30 June 2023
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 Shareholders
Rank Name
1
CHEBMONT PTY LTD
2
3
4
5
6
7
8
8
10
11
12
13
14
15
16
17
18
19
20
PALM BEACH NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
MCCORMACK TIMBERS PTY LTD
MCCORMACK TIMBER HOLDINGS PTY LTD
MR GREGORY HENRY MCCORMACK + MRS JOCELYN LORNA DELAFIELD MCCORMACK
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