Murray River Organics
Group Limited
Annual Report
2016/17
ABN 46 614 651 473
A sustainable source of
healthy food for current
and future generations
Contents
3
4
Chairman’s Letter
Managing Director’s Letter
Financial statements for the year ended 30 June 2017
8
Directors’ Report
26
Auditor’s declaration of independence
27
Independent auditor’s report
32
Directors’ declaration
Consolidated statement of profit or loss and other comprehensive income 34
35
Consolidated statement of financial position
36
Consolidated statement of changes in equity
Consolidated statement of cash flows
37
38 - 69
Notes to the financial statements
70
ASX Additional Information
Murray River Organics Group Limited | Annual Report 2016/17
2
Chairman’s
Letter
A strong platform has been created from
which future growth for the company
and its shareholders will be delivered.
• Converted 476 acres from wine
grapes to certified organic dried
vine fruit and prepared 468 acres
of greenfield planting to certified
organic dried vine fruit at the
Colignan vineyard;
• Continued its consolidation and
improvements of the Sunraysia
processing facility;
• Implemented a Company-wide
single-solution ERP; and
• Continued to deepen and broaden
its customer relationships
domestically and globally with
key retailers and to wholesale
and industrial customers.
The Company invested $48.2 million
in FY17. The investments have
cemented the Company’s position
as the world’s largest vertically
integrated producer of certified
organic dried vine fruit, and a
leading manufacturer, marketer and
seller of certified organic, natural
and better-for-you food products.
With a maturity profile of planted
acreage which is expected to see the
Company’s production of certified
organic dried vine fruit nearly
doubling in the coming four years,
coupled with owning significant
farmland to cater for future growth,
the Company is now uniquely
positioned to take advantage of
the continuing global trend of
consumers demanding more
organic, healthy and better-for-you
food products.
As this planned significant capital
expenditure program is now at the
final phase, the Company’s 12,253
acres of high-quality farmland,
along with organically certified
world-class processing and
packing facilities, a strong
platform has been created from
which future growth for the
Company and its shareholders
will be delivered.
On 28 August, MRG announced
a $12.1 million capital raise which
was supported by both existing and
new shareholders. The capital
raised strengthens MRG’s balance
sheet by reducing debt and
provides more working capital
flexibility.
MRG also announced in August
that one of the two co-founders,
Chief Operating Officer and
Executive Director, Jamie Nemtsas,
left the business. At the same time
a review of MRG’s organisational
structure led to the creation of
two new key positions and the
promotion of two key appointments
to fill these positions; James
Tudehope as Head of Packing
& Processing Operations and
Daniel Turner as Head of Farming
Operations. James and Daniel have
many years of directly relevant
operational leadership experience
and will be crucial in delivering
efficiencies and driving consistency
of processes through the operations
of the Company. The Board is
confident that this revised structure
will improve MRG’s operational
performance and deliver on the
Company’s operational goals.
To further strengthen, broaden
and complement the skillset of
the Board, we have commenced
a search for an additional non-
executive Director with a deeper
background in farming,
agriculture or food production
and distribution. We expect to
make further announcements
in this respect in the near term.
With the new leadership team,
a high-quality asset base and
improved processes in place, I am
confident that MRG is well-placed
to capitalise on its investments and
will deliver sustainable shareholder
value for the long term. I would
like to thank my fellow Board
members, the leadership team
and all employees at MRG for
their commitment this year and
I look forward to building on these
foundations in FY18.
Lastly, I would like to thank
you, our shareholders, for your
continued support.
Craig Farrow
Chairman
Dear Shareholder,
On behalf of the Board of Directors
of Murray River Organics Group
Limited (MRG), I present you the
Company’s inaugural Annual
Report for the year ended 30 June
2017 (FY17).
This first year of being an ASX
listed company was a challenging
one for MRG. Dried vine fruit
yields were lower than usual
across the Sunraysia region,
including at MRG’s vineyards,
being impacted by an unusually
wet spring. Poor weather and
operational challenges, impacted
negatively on harvest outcomes,
and consequently financial
performance. Project management
issues resulted in delays of the
refurbishment and consolidation
of the Sunraysia processing facility
and of the commissioning of the
packing facility in Dandenong.
FY17 was also a milestone year for
MRG. Since the listing on the ASX
in December 2016, the Company has:
• Commissioned its organically
certified consumer packaged
goods facility in Dandenong;
• Fully integrated the businesses,
customers, suppliers and brands
of Food Source International and
Australian Organic Holdings,
both of which were acquired in
Q2 FY17;
• Acquired and integrated Fifth
Street vineyard and gained control
of the Nangiloc property;
Murray River Organics Group Limited | Annual Report 2016/17 3
Managing
Director’s
Letter
negatively affecting the vines
ability to perform photosynthesis,
which in turn generates the
energy for the vine to grow.
The anaerobic soil and the
reduced ability of the vines to
perform photosynthesis resulted
in acid levels in the fruit to not
accumulate to normal levels.
The conversion of acid to sugar,
post veraison, is a significant
and important contributor to
the weight of the fruit.
With the lack of acid in the fruit
MRG’s harvest results, similarly
to those of other growers in the
region, was significantly below our
expectations. The reduced crop size
had a significant negative impact
on our financial result.
• Limited visibility of fruit
ripening progress and delayed
harvest led to further negative
impact on harvest results and
consequently financial result.
• Project management issues and
unanticipated delays caused by
local councils and regulatory
approvals led to delays in the
completion and commissioning
of our new Packaging Facility
in Dandenong, the exit of
warehousing capacity acquired
through Australian Organic
Holdings and the refurbishment
and consolidation of the
Company’s Processing Facilities
in Sunraysia.
• Having to write off inventory
which was deemed to be of
substandard quality and
unsuitable for the markets
for which it was intended.
We have worked extensively
on addressing matters that are
within our control, including those
operational matters listed above.
With the leadership team structure
in place that was announced in
August, there is a heightened
focus and discipline throughout
the Company on process, cost and
quality together with a tangible
drive, energy and passion to deliver
on the Company’s objectives.
Financial performance
and capital raise
MRG’s pro forma revenue of
$63 million was $15.4 million
lower than our Prospectus
Forecast, attributed to:
• Approximately $4 million due
to the poor growing conditions,
and the resultant lower than
anticipated crop size;
• Approximately $10 million due
to the delay in harvest and
slower than anticipated uptake
in sales following delays of the
refurbishment of the Sunraysia
Processing Facility; and
• A write-down of Clusters
of approximately $1.8 million.
We anticipate that approximately
$8 million of the revenue missed due
to harvest and operational delays
in FY17 will be picked up in FY18.
To strengthen MRG’s balance sheet
and provide the company more
working capital flexibility, MRG
completed a $12.1 million
Entitlement Offer in September
which was strongly supported by
existing shareholders and new
investors.
Operational update
During the year we invested $48.2
million through several significant
acquisitions and undertook major
capital projects. All investments
were made with the objective of
strengthening MRG’s ability to
continue servicing the growing
number of consumers globally
who are demanding more organic,
healthy and better-for-you food
products, and thereby delivering
growth and robust returns to our
shareholders while providing a
safe, sustainable, fun and exciting
workplace for our employees.
MRG now owns or controls 12,253
acres of high quality farmland in
the Sunraysia region. Of the
farmland held, 4,760 acres are
already planted (or planned to be
planted). Having substantially
completed the growth capital
expenditure program for our planted
acreage, the maturity profile of
this acreage is expected to see us
Dear Shareholder,
FY17 was a year of significant
transformation for Murray River
Organics Group Limited.
The Company listed on the ASX,
undertook several strategic
investments and continued its
progress of implementing
significant projects - all with
the objective of cementing MRG’s
position as the world’s largest
vertically integrated producer of
certified organic dried vine fruit,
and a leading manufacturer,
marketer and seller of certified
organic, natural and better-for-you
food products.
It was not a year without
challenges, the key ones being:
• The Sunraysia region, where
our vineyards are located,
experienced a very warm
Autumn resulting in continuous
growth of the vines at our
vineyards during the Autumn.
In doing so they used up
carbohydrates rather than going
into dormancy and storing these
carbohydrates, as would be the
case in more normal weather
conditions with colder Autumn.
The warm Autumn was followed
by one of the wettest Winter
periods since the early 1900’s.
The wet weather led to soil
temperatures remaining elevated
resulting in root zones of the
vines being water logged and
turning the surrounding soil
into an anaerobic state.
Anaerobic soil in turn leads to
a reduction in nutrient uptake.
The wet weather further led
to reduced sunlight hours,
Murray River Organics Group Limited | Annual Report 2016/17 4
nearly doubling our production of
certified organic dried vine fruit in
the coming four years. Meanwhile,
we hold more than 5,000 acres of
high-quality land which is available
for development, providing the
Company with additional optionality.
Safety is everyone’s responsibility
at MRG. I am immensely proud
that the ownership and seriousness
with which all employees approach
staying safe is paying off, with our
Lost Time Injury Frequency Rate
improving by 30% from FY16. We
will not stop there. Our goal is for
zero incidents for people and product.
Farming Operations
MRG has fully integrated the Fifth
Street vineyard acquired in December
2016. This property is planted with
grape varieties that are in high
demand, servicing both domestic
and high-growth international
markets in Asia as either fresh
table grapes or as Clusters.
In Q4 MRG gained control of the
Nangiloc property, the acquisition
of which was completed at the
end of July for consideration of
$7.2 million. While predominantly
planted with 157 acres of highly
sought after citrus varieties, all sold
to premium Asian markets, the
scale of this property provides MRG
future optionality. The 5,980 acres
of vacant arable land is suitable
for planting tree nuts, citrus, vines,
grains, ancient grains and high
protein beans and legumes. We look
to commence harvesting our first
crop of chick peas from this property
during the month of November.
We will also be exploring value
creation opportunities for the
approximately 1,100 acres of
non-arable land on the property.
The two significant growth projects
at the Colignan vineyard are well
progressed. Conversion of the 476
acres of vines from wine to dried
vine fruit varieties took place
during Q2 and we have just
completed the second pass to ensure
the grafts have taken as required.
We plan to commence installing
trellis systems on this acreage in
July 2018 and commence harvest
from this acreage in 2019.
Having substantially completed the growth
capital expenditure program for our planted
acreage, the maturity profile of this acreage
is expected to see us nearly doubling our
production of certified organic dried vine
fruit in the coming four years.
The planting out of 468 vacant
acres with dried vine fruit varieties
is well progressed and tracking
according to budget on cost and
time. The irrigation system is in
place, planting of all vines will
be completed by end November
and approximately 50% of posts
required have been rammed.
Harvest from this acreage is
on track for 2020.
The strength of our farming
operations was bolstered with the
appointment in August of Daniel
Turner who, as a key member of
our Leadership Team, now oversees
all MRG’s farming activities.
Daniel’s leadership and commitment
to instilling disciplined farming
processes is expected to result in
improved vine-health monitoring,
cost reductions, increased yield and
enhancement of product quality.
Processing and Packaging
Operations
The processing facilities in
Sunraysia have undergone a
significant upgrade over the past
year to deliver increased
productivity, improved product
quality and reduction in costs.
Four key sites are being consolidated
to one, to simplify operations and
reduce costs. The entire project
is expected to be completed by the
end of 2017 at which point the
previously used and owned facilities
will be offered for sale.
Our Dandenong packing facility
is now fully operational. While
delayed, as referred to above,
it is still with immense pride that
we in less than nine months have
managed to establish a new
corporate office and an organically
certified 4,219 sqm facility,
accredited to high food safety
standards with its six packaging
rooms and warehouse space fully
operational. The facility offers
MRG the ability to service our
large and growing global customer
base with a variety of food products
packed in multiple consumer-
packaged goods formats. A new
packaging line is planned to being
installed by end of the year. This
line will significantly increase
our ability to efficiently provide
innovative solutions and in demand
products to the high-growth
healthy convenience snacking
markets globally.
Murray River Organics Group Limited | Annual Report 2016/17 5 We are on track to achieve our target of
$3 million run-rate in synergies at end of
FY18, we have recently launched a web-based
consumer portal, we are firming up our
Branding strategy and we are continuously
increasing our global sales efforts on key
products, such as our Clusters.
The businesses we acquired during
Q2, Food Source International and
Australian Organic Holdings, as
well as their customers, suppliers
and brands, have been fully
integrated with all packaging
previously performed by these
businesses now done at our
Dandenong facility. Our
engagement with the customers
of these businesses is strong and
has grown, both in terms of the
customers we service and in the
products we supply to them. We
are also well progressed in bringing
parts of this product portfolio to
customers in overseas markets.
Pleasingly, the activities previously
performed by these businesses are
trading approximately 25% ahead
of the same time last year.
Leading all our Processing and
Packing Operation since his
appointment in August is James
Tudehope. He is a key member
of our Leadership Team and since
his appointment we have seen
significant improvements across
the areas of cost management,
project management, process
implementation and productivity.
Implementation of group-wide
single-solution ERP – “SAP”
MRG consolidated its four
previously utilised systems and
successfully integrated in SAP
across the Group. While
implementing this system placed
the team involved under immense
pressure, they did a fantastic job to
complete it in the short time they
did, and the system now enables
improved reporting and analysis
to assist management drive
efficiencies across the business.
I am excited by the significant,
unique and very high quality
asset base with significant
embedded production growth that
MRG now controls. We look
forward to maximising the returns
from the investments made to
secure this position.
Outlook
The FY17 financial results were
extremely disappointing. The key
issues that impacted the results
have been identified and dealt with.
With the new Leadership Team
in place and the significant
investments and activities
undertaken in the year gone by,
I believe the foundations are in
place for MRG to deliver strong and
sustainable returns to our investors.
With a significant growth phase
behind us, we are now focused
on driving profits and efficiencies
throughout the Company. We are
on track to achieve our target of
$3 million run-rate in synergies
at end of FY18, we have recently
launched a web-based consumer
portal, we are firming up our
Branding strategy and we are
continuously increasing our global
sales efforts on key products, such
as our Clusters. In this respect, some
of the key goals I have set for the
Company, that the Leadership Team
and I will be working diligently
towards achieving include:
Zero Incidents
• People
• Food products
Customers
• Grow number of customers
• Increase sales per customer
EBITDA Margin
• target of 25% by end 2025
Grow own Brand sales
• target of 33% of sales by 2025
Geographical Orientation
• target more than 50% of sales
from export by 2020
The experience of a very light crop
in FY2017 appears not to have been
isolated to MRG and Australian
agricultural companies. A key
driver of global dried vine fruit
pricing and the largest competitor
to MRG is California who typically
complete the harvest of their dried
vine fruit in the month of October.
This year, early in the season,
following an extremely hot Spring
and Summer, dried vine fruit
growers in California experienced
unusually low bunch counts,
pointing to the possibility of
a lighter-than-usual harvest.
Significant and late rain encouraged
growth of mould on the drying
fruit, resulting in an estimated
loss of approximately 10% of the
crop and will likely lead to extra
processing or reconditioning of
the remaining crop.
The extreme heat, low bunch
counts, rain and a continuous
significant reduction in acreage
planted with dried vine fruit has
led to the Raisin Administrative
Committee in California expecting
for the 2017 crop to be the lowest
since 1998, and approximately
20% lower than 2016.
As at 7 Oct, of the 27,395 tonnes
that had been delivered to packers
from growers (down from 59,012
tonnes same time last year) only
1,286 tonnes were organic. We are
experiencing increased demand for
our certified organic dried vine
fruit. As we have already committed
all our 2017 loose berry crop we
have commenced customer
engagements for our 2018 crop
with the first significant orders in
place from customers in the USA.
Finally, I would like to thank our
customers, our employees and
our investors who have supported
MRG during this challenging
and transformational year. I am
extremely pleased, humbled and
proud to be surrounded by our team
of dedicated, skilful, passionate and
honest people. I am confident that
we have the right structure in place
to create value for our shareholders.
I look forward to FY18 with
confidence in being able to deliver
returns on the investments we
have made, and capitalising on
the many growth opportunities
available to us.
Erling Sorensen
Managing Director
Murray River Organics Group Limited | Annual Report 2016/17 6
Financial
Statements
for the year ended 30 June 2017
Murray River Organics Group Limited | Annual Report 2016/17 7 Directors’
Report
The directors of Murray River Organics Group Limited submit herewith the annual report of the Company for
the financial year ended 30 June 2017. In order to comply with the provisions of the Corporations Act 2001, the
Directors’ Report as follows:
Murray River Organics Group Limited was incorporated on 6 September 2016 and became the parent of the
consolidated group following a group restructure on 9 November 2016. Prior to this the parent entity was
Murray River Organics Limited.
1. Information about the Directors
The names and particulars of the Directors of Murray River Organics Group Limited during or since the end of
the financial year are:
Name
Craig Farrow
Lisa Hennessy
Don Brumley
Erling Sorensen
Jamie Nemtsas
Board member since
6 September 2016
6 September 2016
6 September 2016
6 September 2016
6 September 2016
Special Responsibilities / Particulars
Board Chair
Chair – Nomination and Remuneration Committee
Chair – Audit and Risk Committee
Managing Director
Chief Operating Officer
The above-named Directors held office since incorporation unless otherwise stated.
Ian Sinclair was appointed the secretary of the Group on 6 September 2016 and has remained so since the end
of the financial year.
2. Directorships of other listed companies
Directorships of listed companies held by directors in the three years immediately before the end of the
financial year are as follows:
Director
Craig Farrow
Company
Vocus Group Ltd
M2 Group Ltd (merged with Vocus)
Bulletproof Group Ltd
Period of directorship
Since February 2016
December 1999 – February 2016
Since August 2016
3. Directors’ meetings
The following table sets out the number of Directors’ meetings held during the financial year and the number
of meetings attended by each Director.
Directors
Directors’
Meetings
Audit and Risk
Committee
Erling Sorensen
Jamie Nemtsas
Craig Farrow
Lisa Hennessy
Don Brumley
Eligible to
attend
12
12
11
11
11
Meetings
attended
Eligible to
attend
Meetings
attended
12
12
11
11
11
1
1
3
3
3
1
1
3
3
3
Nomination and
Remuneration Committee
Meetings
Eligible to
attended
attend
1
1
2
2
2
1
1
2
2
2
4. Directors’ shareholdings (no. of shares)
Name
Craig Farrow
Lisa Hennessy
Don Brumley
Erling Sorensen
Jamie Nemtsas
Total
Shares vested as remuneration Shareholding at 30 June 2017
65,595
39,356
58,586
-
-
163,537
168,672
39,356
443,586
7,847,179
9,597,179
18,095,972
Murray River Organics Group Limited | Annual Report 2016/17 8
5. Principal activities
Murray River Organics is an
Australian producer,
manufacturer, marketer, and
seller of certified organic, natural
and better-for-you food products.
The Company’s mission is to
anticipate and exceed consumer
expectations globally in healthy
food by providing quality,
innovation, value and convenience.
Current agricultural operations
focus mainly on organic dried vine
fruit where the company is fully
vertically integrated across the
entire value chain, and citrus fruit.
The business has expanded into a
number of other organic, natural
and “better-for-you” food products.
It has a growing portfolio of
certified organic products, which
are sold into 26 countries. Its
products include dried vine fruit,
table grapes, nuts, seeds, dried
berries, chia seeds, prunes, dried
ginger, dried mango, quinoa,
coconut products and rice. The
Group’s product range is targeted
at the rising consumer demand
globally for natural, healthy and
organic foods, and is an important
part of the Group’s strategy. The
Group’s customers include
industrial customers (such as
cereal manufacturers, bakeries and
confectionary manufacturers),
retail customers (such as
supermarkets, organic food stores,
mass-market, e-commerce retailers
and convenience stores) and food
service channels (such as speciality
and natural food distributors).
6. Operating review
Business acquisitions
During the financial year 2017
(FY17) the Group completed the
acquisitions of Food Source
International, Australian Organic
Holdings, the property assets of
Fifth Street vineyard, and gained
control of the Nangiloc property.
These acquisitions were completed
to provide the Group with a broader
range of healthy food products with
which to service and expand its
domestic and global customer base.
The businesses, operations, assets
and brands of Food Source
International and Australian
Organic Holdings been fully
integrated into the Murray River
Organics Dandenong facility. The
two warehouse facilities located in
Sydney that were occupied by
Australian Organic Holdings have
both been sub-leased, after the move
of the operations to the Dandenong
facility.
Fifth Street vineyard acquisition
The Fifth Street Vineyard,
including its fully equipped
pack-out facility with chill and cool
rooms, became part of the farm
operating platform in December
2016 and the fresh table grape crop
acquired from the vineyard was
harvested and sold, and the
remaining crop has been harvested
for sale as Clusters.
Nangiloc acquisition
During FY17 the Group gained
control of a 7,516 acre property,
referred to as Nangiloc, located
adjacent to its Colignan vineyard in
Victoria. The scale of the property,
its location relative to the Murray
River, locational access to labour and
Murray River Organics’ other
farming assets, coupled with the
versatile high-quality soil, existing
plantings and existing
infrastructure provides the Group
with significant optionality for
future growth.
This property has 205 acres planted
to citrus, 65 acres planted to wine,
314 acres serviced by centre pivots
and 5,787 acres vacant arable land
suited to crops such as tree nuts,
citrus, vines, grains, ancient grains
and high protein beans and
legumes. The balance of 1,145 acres
is non-arable land although value
creation opportunities for this
acreage, for instance in the form of
solar panelling, will be explored.
Control and working possession of
the property occurred from May
2017, and settlement with transfer
of title to the Company took place on
25 July 2017.
Dandenong packing facility
In September 2016, the Group
commenced a lease of a warehouse
facility located in Dandenong South,
Victoria for 10 years with options to
extend. The purpose of the lease was
to establish a new organically
certified consumer goods packaging,
value-add and pick-pack facility
enabling the Group to service
customers globally with certified
organic, healthy and better-for-you
food products in a variety of
consumer packaged goods formats,
without having to rely on external
parties to undertake the packaging.
During its establishment of the
Dandenong facility, some
unanticipated delays were
experienced in obtaining
accreditations and certifications
required to satisfy our customer
base. This led to the Company
having to operate the two warehouse
facilities previously controlled by
Australian Organic Holdings for
longer than planned. Another area
of delay was in the installation and
commissioning of some of the
packing equipment acquired which
fell behind schedule. This resulted in
a delay in realisation of efficiencies
from packaging at the facility. The
final area of delays experienced was
in obtaining the relevant local
council approvals related to the
fit-out of the Dandenong facility.
Despite the challenges faced from
the delays, the commissioning of the
facility was completed during
second half of FY17, whereby all six
packaging rooms became
operational and cool room, freezing
and palletised storage was installed
plus the required certifications to
service all existing customers.
The corporate office of the Group
has also been relocated to this
location. The Group has invested
approximately $5.7m into this
facility.
Sunraysia packing and processing
During the year, the Group
invested approximately $5.4
million upgrading its Mourquong
dried fruit storage and processing
facility including installing
additional metal detection units,
installing an additional digital
laser sorter, put in place elevated
walk ways, cat walks, and other
pieces of processing equipment to
facilitate more efficient processing
and storage of dried vine fruit.
The Group has been seeking to
consolidate its Sunraysia
processing and storage facilities
that relates to its dried vine fruit
and Cluster products. The
processing and storage facilities
that are and have historically been
used include the fully owned
warehouse at Walnut Avenue
Mildura, the fully owned freezer
and cool-room facility at Benetook
Avenue Mildura, and the existing
fully owned processing and storage
facility at Mourquong.
Murray River Organics Group Limited | Annual Report 2016/17 9 Directors’ Report
The purpose of consolidating these
sites to one, is to allow for dried
vine fruit and Clusters, after
having been harvested at a
vineyard, to be stored, dried (if
required), pre-cleaned, colour
sorted, processed and stored all in
the same location.
Murray River Organics’ processing
and storage facility at Mourquong is
the most significant of the Sunraysia
processing and storage facilities.
The processing at this facility
involves the fruit passing through
magnets, several visual inspection
points, two laser sorters and
sensitive metal detectors, before
being packed into plastic lined
cartons undergoing atmospheric
treatment before finally being sealed.
The Mourquong facility has the
capacity to process approx. 15,000
tons of dried vine fruit in bulk and
approx. 1,000 ton of Clusters per
year. This site is equipped with
solar panels, servicing the
operations with low cost renewable
energy. As the site is also
beneficially located relative to all
agricultural properties,
consolidation of the Company’s dried
vine fruit storage and processing
activities has been sought to take
place around this facility.
Activities undertaken to facilitate
the consolidation has involved
negotiating a contract to acquire a
6.8 acre property adjacent to the
Mourquong facility, designing and
contracting the build of 4950
square meter concrete floor
warehouse, sourcing and acquiring
pre-cleaning equipment, sourcing
and acquiring drying equipment
including a biomass boiler acting as
heat source for the drying
equipment and sourcing, acquiring
colour sorting equipment,
upgrading the electricity supply to
the site by 1,185 Kva and ensuring
all permits required for the
consolidated site with to the new
equipment being compliant.
The consolidated site is expected to be
operative from mid-September 2017.
The sale process of the facilities at
Walnut Avenue and at Benetook
Avenue has commenced.
The Company’s mission is to anticipate and
exceed consumer expectations globally in
healthy food by providing quality, innovation,
value and convenience.
The wet and cold Spring led to a
delay of some four to six weeks in
the maturation of the grapes,
which in turn led to a delay in the
Group being able to cut the
growing canes to commence the
drying process of its dried vine
fruit. The delay has resulted in an
increased requirement to dehydrate
dried vine fruit to preserve the
integrity of the fruit.
Corporate integration
The following additional corporate
integration activities have also
been undertaken:
• Implementation of uniform
operational, marketing, sales and
distribution strategies;
• Broadening the range of certified
organic, healthy and better-for-
you food products;
• Strengthening of relationships
with key Australian domestic
retailers;
• Company-wide implementation of
a single-solution ERP, thereby
eliminating the use of four
previously utilized systems; and
• The planning for an online
domestic consumer shopping
portal intended to go live in
September 2017.
Vineyard operations
As at 30 June 2017 the Group
controlled over 12,000 acres of
farmland (2016: over 4,300 acres).
During the year approximately
7,500 tonnes of fruit was produced
from the Group’s controlled
vineyards (2016: approximately
3,000 tonnes of dried fruit).
FY17 saw weather having a
significant negative impact on a
range of crops across the nation.
Sunraysia and Murray River
Organics were not spared. Severe
hail and storms swept across key
growing areas in Sunraysia in late
2016 although our properties were
not impacted by hail. Coupled with
an unusual wet and cold Spring led
to a reduction in the expected dried
vine fruit yield. The weight of the
Company’s sultana crop was
significantly impacted by the
inclement weather. While the
number of bunches counted on the
Group’s fruit bearing acreage
planted to Sultana indicated a yield
per mature acre that would
typically be expected and was in
line with Murray River Organics’
experience from previous harvest
seasons, the actual bunch weight
at harvest was found to be
materially lower than what would
typically be expected.
The matter was not isolated to
Murray River Organics and the yield
per mature acre achieved by Murray
River Organics in the 2016-2017
crop season was consistent with
what has been reported across the
Sunraysia region.
Murray River Organics Group Limited | Annual Report 2016/17 10 7. Financial results
The Group’s loss after tax for the year ended 30 June 2017 was $ 5,927,320 (2016: profit of $2,594,111).
Revenue has increased by 306% compared with FY16, predominately due to the acquisitions of the business of
Food Source International, and Australian Organic Holdings and the Fifth Street vineyard. These acquisitions
were completed to provide the Group with a broader range of healthy food products with which to service and
expand its domestic and global customer base.
FY2017 was a year of significant investments and consolidation for the Group. The investments made and the
consolidation efforts were specific and important steps in the execution of the Company’s strategy to become a
globally leading producer, marketer, manufacturer and seller of certified organic, natural and better-for-you
food products. The execution of the Company’s strategy can be further improved, which has partially
contributed to the weaker than expected financial result for the year. We have implemented a number of
internal changes in the way we operate to strengthen and improve future results.
The loss after tax was impacted by one-off IPO and acquisition costs of approximately $3.0m (including stamp
duty). Given the significant growth and organisational transformation over the year ended 30 June 2017,
Proforma results are provided to allow shareholders to view the results with the following adjustments:
• One-off IPO and acquisition costs excluded;
• The inclusion of pre-acquisition earnings of acquired businesses;
• The exclusion of IPO related share-based payments; and
• The inclusion of fair value gains that would have been recognised if the acquired farms were in place
from 1 July 2016.
Proforma Results
Revenue
Other income
Fair value of agricultural produce
Raw materials, finished goods
consumed and change in finished
goods and work in progress
Employee benefits expense
Other operating expenses
EBITDA
Depreciation
EBIT
Finance costs
Profit / (loss) before tax
Tax
Net profit / (loss) after tax
Proforma FY17
$m
Proforma FY16
$m
62.6
1.2
14.7
(60.6)
(5.9)
(5.7)
6.4
(4.3)
2.1
(2.3)
(0.2)
0.2
(0.0)
51.9
0.9
6.4
(38.2)
(5.4)
(7.1)
8.5
(2.1)
6.4
(1.6)
4.8
(1.4)
3.4
Change
10.7
0.3
8.3
(22.4)
(0.4)
1.4
(2.1)
(2.2)
(4.3)
(0.7)
(5.0)
1.6
(3.4)
A reconciliation of the proforma results to the statutory results is provided below.
Murray River Organics Group Limited | Annual Report 2016/17 11
Directors’ Report
Reconciliation of FY17 proforma results to statutory results ($m)
Statutory
30 June
2017
One-off
costs
(i)
FSI
(ii)
AOH
(ii)
Fifth
Street
(iii)
Stamp
Duty
(iv)
Performance
Rights
(v)
Nangiloc
(vi)
Proforma
30 June
2017
Revenue
Other income
Fair value of
agricultural produce
Raw materials, finished
goods consumed and
change in finished
goods and work in
progress
Employee benefits
expense
Other operating
expenses
EBITDA
Depreciation
EBIT
Finance costs
Profit / (loss) before tax
Tax
Net profit / (loss) after tax
Balance sheet ($m)
48.5
1.4
13.2
4.9
-
-
9.2
(0.2)
-
1.2
0.3
(49.9)
(4.2)
(6.4)
(5.8)
(0.1)
(0.6)
(8.1)
2.0
(0.0)
(0.7)
(0.6)
(4.3)
(4.9)
(2.3)
(7.2)
1.2
(6.0)
2.0
-
2.0
-
2.0
(0.1)
2.0
0.6
-
0.6
(0.1)
0.5
(0.2)
0.4
1.3
-
1.3
(0.1)
1.3
(0.4)
0.9
1.2
-
1.1
-
1.2
(0.4)
0.8
1.0
1.0
-
1.0
-
1.0
-
1.0
0.6
0.6
-
0.6
-
0.6
-
0.6
0.3
-
0.3
-
0.3
(0.1)
0.2
62.6
1.2
14.7
(60.6)
(5.8)
(5.7)
6.4
(4.3)
2.1
(2.3)
(0.2)
0.2
(0.0)
Statutory
30 June
2017
Statutory
30 June
2016
Change
($m)
Total current assets
Total non-current
assets
Total assets
Total current
liabilities
Total non-current
liabilities
Total liabilities
Net assets
49.3
94.8
144.1
41.0
36.8
77.8
66.3
19.5
49.5
69.0
8.0
31.1
39.1
29.9
29.8
45.3
75.1
33.0
5.7
38.7
36.4
The Group’s net assets have increased by over $36m compared with the previous year which is largely
attributable to:
• Investment in acquired business resulting in goodwill of $10.7m.
• Increase in inventory as a result of the growing business of $16.2m.
• Investment in property, plant, and equipment including the farm acquisitions, upgrade of the Sunraysia
processing facility, the fit-out of the Dandenong facility and associated equipment, and continued
development of new and immature vineyards, of $33.8m.
• Increases and offsets in other working capital, including trade and other receivables, agricultural produce,
and trade and other payables.
• Offset by increases in borrowings of $17.9m (inclusive of leases).
Murray River Organics Group Limited | Annual Report 2016/17 12
Net debt
Net debt (including leases)
Net debt (excluding leases)
Net debt / equity (including leases)
Net debt / equity (excluding leases)
Net tangible assets
Shares on issue (m)
NTA per share
Statutory
30 June 2017
($m)
Statutory
30 June 2016
($m)
47.8
28.6
72%
43%
55.5
87.1
$0.64
30.4
12.9
102%
43%
29.9
N/A
N/A
• Net debt facilities (excluding leases) has increased by $15.7m predominately due to the increase in trade finance
facility (used to fund inventory purchases) of $10.6m, and the increase in property and equipment debt of $5.3m.
• Lease liabilities have increased by $1.7m due to the expansion of our leased property “Colignan”
The Group’s debt (excluding finance lease) is made up the following:
• Property related loans of $15.1m (the group owns $45.5m of property, inclusive of Nangiloc of which $7.2m
was debt funded post 30 June 2017)
• Trade finance facilities of $11.9m (the group’s inventory and trade receivables, offset by trade payables, is $17.8m)
• Equipment loans of $4.3m (the Group owns $14.6m of equipment)
8. Quality and food
safety
All suppliers to Murray River
Organics are formally approved
prior to commencing supply.
Approval to supply product that
directly impacts food safety and
quality must be carried out in
accordance with the Group’s
internal procedure ‘P-245-A
Incoming Goods and Services’. This
procedure documents the
requirement that any food or
primary packaging supplier must
have a certified food safety
management system in place.
Technical specifications for all
purchased inputs are to be
approved prior to supply, with the
technical specification to detail the
parameters relevant to each
product.
Upon delivery, all food products are
required to be accompanied by a
Certificate of Analysis confirming
that the supplied goods conform
with the approved technical
specification.
Third party growers supplying
raw material to the Group are
contracted to grow product to
specifications and in accordance
with our agronomy programme.
9. Corporate social
responsibility and
OH&S
The wellbeing of the Company’s
people, and providing a safe,
supportive working environment,
is integral to our business.
The Company in October 2016
embarked on a five-year Health,
Safety and Wellbeing Strategy that
will provide direction and guidance
for the company to achieve best
practice OHS management and
performance within the Rural and
Food Manufacturing Sectors.
The five-year Strategy promotes a
systems approach to improving
and strengthening OHS
management and culture with a
focus on leadership and
participation. The Health, Safety
and Wellness Strategy comprises
five key initiatives, with each
underpinning the next and
providing the foundation for an
integrated approach:
1. Strengthening OHS
management system
• Aligning Safety Management
System with Australian AS/NZS
4801 and international OHSAS
18001 standards;
• Increasing employee and
management knowledge of OHS;
• Focusing on areas such as
managing hazards, workplace
inspections;
• Improving work practices for
managers engaging and
supervising contractors; and
• Online enabled access to all OHS
Policies, Standards, processes,
procedures, forms and check lists.
2. Cultural change – gaining
employee perspectives and
priorities on OHS:
• Developing a broader employee
engagement program through
newly formed Regional OHS
Committees;
• Regional Health Safety and
Wellness Plans to document and
record progress;
• Additional face-to-face on-the-job
OHS training for Managers;
• Dedicated OHS resources for
major Site construction and
major redevelopments – Factory
Consolidation Project Sunraysia,
Factory Commissioning
Dandenong South;
Murray River Organics Group Limited | Annual Report 2016/17 13
Directors’ Report
• Online OHS training for all Farm
Managers, Farm Hand and Farm
Contractors; and
• Improved Bullying policies,
procedures and investigation
processes.
3. Targeting key injury prevention
areas – working together and
focusing on a systems approach
to reduce the risk of:
• Manual handling;
• Slips, trips and falls;
• Factory Machine Guarding
Protection Program – e.g.
conveyors, elevators;
• Farm Equipment Guarding
Protection Program e.g. tractors
PTOs, quad bikes;
• Electrical Safety;
• Regular Tool box meetings to
ensure all workers understand
risks associated with Low
probability - High Consequence
events e.g. Falls from heights,
Construction upgrade Operator
and Contractor incidents; and
• Continuing to train employees to
recognise report and mitigate
workplace risks through site
hazard team meetings and
workplace inspections.
4. Injury management – developing
standardised best practice early
intervention and safe return to
work approaches to care for
injured employees:
• Automated Incident reporting
and Workers compensation
claims management; and
• Streamlined local medical access
for injured workers.
5. Workplace wellness – enable
employees, contractors together
with their families and friends
to access wellbeing information:
• Better manage health and make
positive lifestyle choices aligned
to public awareness campaigns
e.g. men’s and women’s health
issues, cancer awareness and
diabetes.
10. OHS monitoring
performance
Murray River Organics is
introducing Lead (Incident
prevention) OHS KPIs and Lag
(Incident outcome) measures to
provide all Sites and Departments
with current performance. Once
the improved monitoring measures
have been introduced performance
targets will be set and reviewed
every year by our Board.
The aim of the strategy is to
improve OHS performance and
ensure that the safety is embedded
in everything Murray River
organics does.
It demonstrates in a simple,
practical way that: Safety is
everyone’s responsibility. It starts
with me!
11. Sustainability
We believe in working with nature,
not against it. Murray River
Organics is certified organic by
Australian Certified Organic across
its operations. This means utilizing
lower levels of pesticides, not
applying manufactured herbicides
or artificial fertilisers and
operating by environmentally
sustainable management of the
land and natural environment.
Murray River Organics believes in
the benefits of certified organic
management and food products,
and the Company’s ability to
contribute to a more sustainable
future.
12. Sustainable farming
Agriculture plays a big part in
climate change and is responsible
for around 14% of total green-
house gas emissions worldwide.
Adopting organic farming
methods can offset some of these
emissions by reducing soil and
water contamination. Murray
River Organics sustainable
farming practices utilize organic
farming methods combined with
scientific knowledge of soil ecology
and modern technology. The
traditional farming practices
employed are based on the
naturally occurring biological
processes.
The fundamental difference
between Murray River Organics
certified organic farming and
conventional farming practices is
that conventional farming use
highly soluble synthetic based
fertilisers whereas we use organic
carbon based and recycled
aquaculture waste stream
fertilisers. Organic pest and
disease programs use certified
biological natural pest control
methods and products.
Conventional farming use
synthetic pesticides and
fungicides.
13. Sustainable
manufacturing
Food processing is typically the
second largest source of
environmental impact from food
products. It is an area the Group
has focused its sustainability
efforts on. Solar panels have been
installed on some of the Company’s
facilities in Sunraysia and supply
35%-65% of the energy used. LED
lighting is fitted in all
manufacturing areas and provides
an estimated energy efficiency of
80%-90% compared to traditional
lighting.
A biomass boiler is being
commissioned and will act as a
heat source for drying
requirements. The biomass boiler
will run on waste from the farms
own operations along with waste
generated by growers of other
produce in the Sunraysia region.
Murray River Organics’ waste
streams are recycled were possible,
this includes recycling of all
cardboard waste across all sites
and the segregation of non-
recyclable material. The cardboard
used as part of our packaging is
made using 45% recycled material.
Murray River Organics continue to
look at ways to further improve the
impact the business has on the
environment and always strive to
deliver sustainable, healthy food
for current and future generations.
Murray River Organics Group Limited | Annual Report 2016/17 14
14. Significant change
in state of affairs
Group restructure
The Group recently undertook a
restructure to simplify its
corporate structure and to
facilitate the IPO (Restructure).
The Restructure was a mechanism
by which existing securityholders
of the Group exchanged their
Existing Securities in Murray
River Organics Limited and the
Murray River Organics Property
Trust, for Shares in Murray River
Organics Group Limited (MROGL).
The Restructure completed on 9
November 2016.
Sornem Group Pty Ltd, Sornem
Capital Pty Ltd and MRO Property
2 (formerly Sornem Asset
Management Advisors Pty Ltd),
(collectively “The Sornem Entities)
are non-operating entities, and
were acquired by Murray River
Organics Group Limited from
entities associated with founding
directors Erling Sorensen and
Jamie Nemtsas (the Founders) as
part of the Restructure. As part of
the Restructure, the Founders
agreed to indemnify Murray River
Organics Group Limited for any
liabilities of the Sornem Entities
prior to the Restructure and for
any tax liability or obligation of the
Sornem Entities to the extent that
such tax liability or obligation
relates to any period prior to the
completion of the Restructure or
relates to (or results from) the
Restructure.
15. Subsequent events
Settlement of the Nangiloc
property with transfer of title to
the Company took place on 25 July
2017 (although working
possession occurred prior to year
end) and owned or controlled
acreage in the Sunraysia region
now totals 12,242 acres.
On 22 August 2017, the Group
renegotiated their banking
facilities with their lender.
Resultant changes include:
• Banking covenants were revised
– Interest Cover to be greater
than 3.6x and be tested six-
monthly at 31 December and 30
June each year; and
– Stock, Debtor and Inventory
Cover Ratio to be greater than
1.25x and be tested six-
monthly at 31 December and 30
June each year.
• The trade finance facility limit
has been increased from $12m to
$18m, but will reduce back to
$16m via reallocation to
equipment finance facility in
November 2017.
• $3m of property debt is to be
repaid by the Group by 31
October 2017.
16. Future developments
The Group will continue to explore
further opportunities that meet the
Group’s long term growth and
development goals. The goal is to
provide a superior sustainable
increase in profits. Further
information about likely
developments in the operations of
the Group and the expected results
of those operations in future
financial years has not been
included in this report because
disclosure of the information
would be likely to result in
unreasonable prejudice to the
Group. Accordingly, this
information has not been disclosed
in this report.
17. Environmental
regulation
The entity’s operations are not
regulated by any significant
environmental regulation under a
law of the Commonwealth or of a
State or Territory.
Murray River Organics is
regulated by Australian Certified
Organic (certificate number
11486),
18. Company dividends
No dividends were paid or declared
during the period.
19. Indemnification of
officers and auditors
During the financial year, the
company paid a premium in
respect of a contract insuring the
directors of the company, the
company secretary, Ian Sinclair,
and all executive officers of the
company against a liability
incurred as such a director,
secretary or executive officer to the
extent permitted by the
Corporations Act 2001. The
contract of insurance prohibits
disclosure of the nature of the
liability and the amount of the
premium.
The company has not otherwise,
during or since the end of the
financial year, except to the extent
permitted by law, indemnified or
agreed to indemnify an officer or
auditor of the company or of any
related body corporate against a
liability incurred as such an officer
or auditor.
20. Proceedings on
behalf of company
No person has applied for leave of
Court to bring proceedings on
behalf of the company or intervene
in any proceedings to which the
company is party for the purpose
of taking responsibility on behalf
of the company for all or any part
of those proceedings. The
company was not a party to any
such proceedings during the
financial year.
Murray River Organics Group Limited | Annual Report 2016/17 15 Directors’ Report
21. Remuneration Report (audited)
The Board presents the 2017 Remuneration Report for our first financial year as a listed entity. A key focus of
this year’s report is to demonstrate how our remuneration framework will be linked to the Company’s
performance moving forward.
The FY2017 Remuneration Framework was set in the lead up to the listing with reference to benchmark data and
comparisons to other available market information and general advice. Both the Short Term Incentive Scheme
(STI) and Performance Rights offered under the Long Term Incentive Scheme (LTI) set performance conditions to
focus executives on achieving the performance objectives of the Company and to build sustainable growth.
Following the listing and the integration of the acquisition businesses, the Remuneration and Nomination
Committee reviewed the existing remuneration framework. The Committee has refined the STI framework to
reflect a Company of its increased complexity and growth. Looking forward to FY2018, the Board has
incorporated a more balanced set of performance indicators to focus the Company on achieving the financial
objectives of the business but also ensure the long-term success of the business.
For 2017, the board determined no STI entitlements arise for executives. The Board has also determined, upon
recommendation from the Remuneration and Nomination Committee, that a performance hurdle be applied to a
key component of the executive total Remuneration Package being the One-off Retention Payment. These
shares were modified subsequent to year end to include a hurdle whereby the share price must have returned to
the IPO price by the end of the modified Performance Period for eligibility to vest.
As a result of these changes, the executives’ Total Remuneration Package (as outlined in section 4) puts a
significant portion of the executives’ remuneration at-risk against targets linked to the Company’s short term
and long term performance objectives and therefore supports the alignment between the interests of the
executive, the Company and our shareholders.
The remuneration report details the key management personnel remuneration arrangements for the
consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations
The Remuneration Report is divided into the following sections:
No
A.
B.
C.
D.
D.1.
D.2
D.3
D.4
D.5
D.6
E.
F.
G.
H.
I.
J.
K.
L.
M.
Section
Page Number
Details of key management personnel
Role of the Nominations and Remuneration Committee
Engagement of Remuneration Consultants
Remuneration Policy and Strategic Direction
Executive Remuneration Structure
Fixed Remuneration
Short-term Incentive Arrangements
Long-term Incentive Arrangements
Once-off Retention Payment
Modification Once-off Retention Payment
Executive Contracts
Non-executive Directors’ Remuneration Structure
Relationship between Remuneration Policy and Company Performance
Details of Key Management Personnel Remuneration
Key Management Personnel’s Share-based Compensation
Key Management Personnel’s Equity Holdings
Loans to Key Management Personnel
Other Transactions with Key Management Personnel
Voting and Comments made at the Company’s 2016 Annual General
Meeting (AGM)
17
17
18
18
18
18
18
19
20
20
20
20
21
22
23
23
24
25
25
Murray River Organics Group Limited | Annual Report 2016/17 16
A. Details of Key Management Personnel
The key management personnel of the consolidated entity are individuals who have the authority and
responsibility for planning, controlling and directing the activities of the Company, directly or indirectly, and
comprise the Directors and the executives of the Company, as listed below:
Period of Responsibility
Position
Non-Executive Directors
Craig Farrow
Appointed 26 August 2016
Lisa Hennessy
Appointed 19 August 2016
Donald Brumley
Appointed 19 August 2016
Joanne Bessler
Josef Czyzewksi
Neil Kearney
Appointed 7 May 2016
Resigned 8 August 2016
Appointed 1 March 2016
Resigned 3 August 2016
Appointed 23 March 2016
Resigned 8 August 2016
Executive Directors
Erling Sorensen
Appointed 18 June 2012
Jamie Nemtsas
Appointed 18 June 2012
Other Key Management
Personnel
Independent Non-Executive Director
and Chairman
Independent Non-Executive Director
and Chair of the Nominations and
Remuneration Committee
Independent Non-Executive Director
and Chair of the Audit and Risk
Management Committee
Independent Non-Executive Director
and Chair of the Nominations and
Remuneration Committee
Independent Non-Executive Director
and Chairman
Independent Non-Executive Director
and Chair of the Audit and Risk
Management Committee
Managing Director and Chief
Executive Officer
Executive Director and Chief
Operating Officer
Matthew O’Brien
Appointed March 2016
Chief Financial Officer
B. Role of the Nominations and Remuneration Committee
Composition
Consistent with the Nominations and Remuneration Committee Charter Murray River Organics has established
a Remuneration and Nomination Committee consisting of at least three members, a majority of whom must be
independent with an independent Chairperson whom is nominated by the Board. The Remuneration and
Nomination Committee is currently comprised solely of non-executive directors:
• Lisa Hennessy (Chair);
• Donald Brumley;
• Craig Farrow;
• Erling Sorensen (resigned 2 November 2016); and
• Jamie Nemtsas (resigned 2 November 2016).
Functions
The role of the Remuneration and Nomination Committee is to assist the Board by ensuring that Murray River
Organics:
• Has coherent remuneration policies and practices which enable the company to attract and retain executives and
directors who will create value for shareholders, including succession planning for the Board and executives;
• Fairly and responsibly remunerate directors and executives, having regard to the performance of the
company, the performance of the executives and the general remuneration environment;
• Has policies to evaluate the performance of the Board, individual Directors and executives on (at least) an
annual basis;
Murray River Organics Group Limited | Annual Report 2016/17 17
Directors’ Report
• Has effective policies and procedures to attract, motivate and retain appropriately skilled and diverse persons
to meet the company’s needs; and
• Has adequate succession plans for the CEO, senior executives and executive Directors.
Further information about remuneration structures and the relationship between remuneration policy and
company performance is set out below.
The Remuneration and Nomination Committee Charter, which outlines the terms of reference under which it
operates, is available online at www.murrayriverorganicsinvestors.com.au.
C. Engagement of Remuneration Consultants
A remuneration consultant has not made a recommendation in relation to any of the key management
personnel for the 2017 financial year. The Remuneration and Nomination Committee will in future, from time
to time, use the services of remuneration consultants.
Agility HR have provided advice to the committee post 30 June 2017 regarding future remuneration.
D. Remuneration Policy and Strategic Direction
D.1 Executive Remuneration Structure
Total Remuneration for CEO, COO and CFO includes both
fixed and ‘at risk’ rewards including short term and long term
incentives which are based on company’s performance and
individual contribution. The total remuneration package was
set with regard to its appropriateness against a comparator
group. The CEO, COO and CFO received fixed remuneration as
outlined in section 4.2 together with ‘at risk’ components:
• short-term incentive (STI), as outlined in section 4.3;
• long-term incentive (LTI), as outlined in section 4.4; and
• once-off retention grant in the form of performance rights
granted at the time of listing, as outlined in section 4.5.
The mix of fixed versus ‘At Risk’ remuneration available for
the 30 June 2017 financial year for the executive KMP was
as follows:
Figure 1: 2017 Target Mix
CEO
COO
CFO
53%
53%
51%
47%
47%
49%
0%
20%
40%
60%
80%
100%
Total Fixed Remuneration
At Risk
D.2 Fixed Remuneration
The fixed remuneration consists of a base salary and superannuation. The fixed remuneration was set to take
into account the size and complexity of the role, individual’s responsibilities, skills, capabilities and experience.
During the 30 June 2017 financial year, as a once off payment, the Board approved a bonus of up to $30,000 for
the CFO in recognition of significant additional work performed during the listing process.
As part of an annual review of Fixed Remuneration of the Executive Team, the Board has approved for FY18 an
increase in Fixed Remuneration for the CFO of $30,000 (excluding superannuation). In approving this
increase, the board was satisfied that this increase was necessary to ensure that the CFOs remuneration levels
take into account the complexity of the role. This review was informed by benchmarking exercises. No
increases have been approved for the CEO and the COO.
D.3 Short-term Incentive (STI) Arrangements
2017 Short Term Incentive Plan
The STI plan put in place prior to the time of the Company’s Listing and applied during the 2017 financial year.
The plan enabled the CEO, COO and CFO to receive an incentive payment in an amount equal to up to 40% of
their base salary conditional on achieving qualified EBITDA hurdles as well as individual contributions. The
board, in its discretion, may determine that amounts not be payable to executives, irrespective of whether
performance conditions other than the FY2017 EBITDA Performance Condition has been met. The Board has
determined that no STIs are to be paid to the Executives of 2016/2017
KMP
CEO
COO
CFO
Target STI
% achieved in the year
$100,000
$100,000
$60,000
0%
0%
0%
Murray River Organics Group Limited | Annual Report 2016/17 18
2018 Short Term Incentive Plan
The table below outlines the key features of the STI plan for the 30 June 2018 financial year as it will apply to
the CEO, COO and CFO:
Objective
Participants
Performance Period
Opportunity
Performance Conditions
To reward participants for achieving goals directly linked with the
Company’s business objectives and strategy
CEO, CFO, COO and other non-KMP as determined by the Board and CEO
Financial year ending 30 June 2018
CEO – Target STI of up to 40% of fixed remuneration
COO – Target STI of up to 40% of fixed remuneration
CFO – Target STI of up to 40% of fixed remuneration
STI will be assessed against both financial and non-financial measures,
and will be weighted as follows:
Measure
Financial
Basis
EBITDA, Return on Assets, Sales
Revenue, Gross Margin
Weighting
40% CEO, COO
Cash Flow
Individual
20% CFO
30% CEO, COO
50% CFO
30% CEO,COO,
CFO
Operating Cash, Working Capital
Project goals and KPIs relevant to the
individual’s role as part of the broader
performance review process for
executives
Payment Method
Conditions
Cash – 100% will be paid in cash following the end of the performance period
A performance gateway has been set for payment to participants of the
STI. Up to 50% of entitlements under the STI will only be paid if the
Company meets or exceeds it budgeted EBITDA targets
D.4 Long-term Incentive (LTI) Arrangements
In the 2017 financial year, the grant of performance rights is subject to vesting conditions outlined below.
Purpose
Instrument
Eligibility
Performance Conditions
Reward achievement of long term business objectives and sustain value
creation for shareholders
Performance Rights
CEO, COO, CFO
Continuing service
50% Earnings per share growth targets (compounded annual growth of
the company’s EPS over a three year period ending 30 June 2019)
50% Share Price growth targets (compounded annual growth of the
company’s share price over the period of the listing to 30 June 2019).
Rights to Vest
Measure
EPS
Below 10%
10%
Above 10% but less than 20%
At or above 20%
Share Price Growth
Less than 10%
10%
Above 10% but less than 20%
At or above 20%
EPS represents a strong measure of overall business performance.
Nil
20%
Pro-rata vesting from 20%-100%
100%
Nil
20%
Pro-rata vesting from 20% -100%
100%
Share Price Growth provides a shareholder and market-based perspective
of the Company’s performance.
The Board has discretion to reduce the percentage and number of
performance rights that vest (if any) in circumstances where Board-approved
budgets have not been achieved throughout the Performance Period.
Why were these chosen
Considerations
Murray River Organics Group Limited | Annual Report 2016/17 19 Directors’ Report
The CEO, COO and CFO will not be granted additional shares under the LTI plan for 2018 due to the Once-off
Retention Payments that were issued to the executives in FY2017 prior to the Company’s Listing (as described
in section 4.5 below). It is intended that issuing of Performance Rights grants under the LTI plan in FY2019
and ongoing will be determined following a review of FY18 performance. Any new grants issued under the LTI
plan will vest subject to performance measures to be determined by the Board, in its discretion.
D.5 Once-off Retention Payment
Following listing, the CEO, COO and CFO received 1,153,845 performance rights (in aggregate) as a one-off
retention payment (valued (in aggregate) at $1,500,000 consistent with the offer price). As at 30 June 2016,
performance rights issued as part of this once-off retention payment will vest in one tranche on 30 June 2019,
provided that the relevant executive has remained in continuous employment with the Group from the date of
the grant until the date of vesting.
D.6 Modification to Once-off Retention Payments
The Board has approved a modification to 1,153,845 performance rights (in aggregate) granted under the
Once-off Retention Payments to include a share price hurdle such that the volume-weighted average price of
the Company’s shares on ASX, calculated over the 20 trading day period commencing from and including the
date which is two weeks after the date on which Company lodged its preliminary full year report with ASX for
FY2019, being equal to or greater than $1.30. This modification does not result in an incremental increase in
fair value. This modification extends the vesting of the entitlement date to 4 October 4 2019. The modification
took place on 24 August. The share price on that date was $0.35.
E. Executive Contracts
Murray River Organics has entered into service agreements with the following key management personnel:
Erling Sorensen
Expiry date
Notice period
Termination/redundancy
payment
Restraint of trade period
Jamie Nemtsas
Expiry date
Notice period
Termination/redundancy
payment
Restraint of trade period
Matthew O’Brien
Expiry date
Notice period
Termination/redundancy
payment
Restraint of trade period
Managing Director
N.A.
6 months
Erling’s employment may be terminated by either Erling or the company
by providing six months’ notice in writing before the proposed date of
termination, or in the company’s case, payment in lieu of notice at its
discretion.
12 months
Chief Operating Officer
N.A.
6 months
Jamie’s employment may be terminated by either Jamie or the company by
providing six months’ notice in writing before the proposed date of
termination, or in the company’s case, payment in lieu of notice at its
discretion.
12 months
Chief Financial Officer
N.A.
3 months
Matthew’s employment may be terminated by either Matthew or the
company by providing three months’ notice in writing before the proposed
date of termination, or in the company’s case, payment in lieu of notice at
its discretion.
12 months
F. Non-executive Directors’ Remuneration Structure
The Table below outlines the fees structure for Non-Executive Directors in FY2017. The annual aggregate fee
pools are $500,000 per annum and any change to the aggregate sum will need to be approved in a general
meeting of shareholders. The fixed remuneration in FY2017 for Non-executive Directors was:
Murray River Organics Group Limited | Annual Report 2016/17 20 Board/Committee
Board based fee
Chairman Fee ($)
$75,000
(inclusive of committee work)
$5,000
Remuneration and Nomination
Committee
Risk and Audit Committee
Notes: 50% of fees where paid in shares until the company’s listing
$5,000
Director/Member Fee ($)
$40,000
Nil
Nil
In addition to the fees above, each Non-executive director received a one-off payment on the completion of the
Company’s listing in recognition for the additional work undertaken by the non-executive Directors to achieve a
listing.
The value of the shares issued reflected 100% of the Director’s fees payable to each Non-executive Director. In
addition, Donald Brumley received a further one-off payment (valued at $25,000, at the offer price) in
recognition for his extra work on the due diligence committee.
As previously communicated to the market, it was the Board’s intention to increase the fees payable to Directors
within 12 months of listing to at least the 50% percentile of the range of Directors fees paid by Companies of
comparable size and engaged in similar or related businesses. In setting the level of Non-executive Director’s
fees, the following factors are taken into account:
1. The risk and responsibility of the role;
2. Complexity of the business;
3. Director’s skills and expertise; and
4. Publicly available benchmark data.
Therefore, the Board has approved the following fees to Directors:
Board/Committee
Board based fee
Remuneration and Nomination
Committee
Risk and Audit Committee
Chairman Fee ($)
$150,000
(inclusive of committee work)
$10,000
$10,000
These fees remain within the approved levels and reflect a cash equivalent fixed remuneration to that of
2016/2017.
G. Relationship between Remuneration Policy and Company Performance
EBITDA (Statutory) ($’000)
% change in EBITDA - Statutory
EBITDA (Proforma) ($’000)
% change in EBITDA - Proforma
Earnings per share - Statutory
% change in earnings per share - Statutory
Change in share price (%)
Total remuneration of KMP ($’000)
Total performance based remuneration ($’000)
2017
(585)
2016
6,945
(108%)
2,317%
6,487
(24%)
($0.08)
(229%)
(75%) (i)
1,500
427
8,506
$0.04
N.A.
N.A.
617
-
2015
287
(74%)
459
N.A.
N.A.
N.A.
376
2014
1,085
(281%)
(3,208)
N.A.
N.A.
N.A.
N.A.
337
-
-
-
1,753%
(114%)
(i) Refers to the change in share price since IPO to 30 June 2017.
Director/Member Fee ($)
$65,000
$5,000
$5,000
2013
(600)
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
356
Murray River Organics Group Limited | Annual Report 2016/17 21 Directors’ Report
H. Details of Key Management Personnel Remuneration
The following two tables of benefits and payments represents the components of the current year and
comparative year remuneration expenses for each member of the key management personnel of the
consolidated group. Such amounts have been calculated in accordance with Australian Accounting Standards.
2017
Josef
Czyzewksi
Neil
Kearney
Craig
Farrow
Lisa
Hennessy
Donald
Brumley
Erling
Sorensen
Jamie
Nemtsas
Matthew
O’Brien
Short-term
Salary, fees
and leave
Profit
share and
bonuses
Post-
employment
Superannuation
Long-term
Incentive
plans
Long
service
leave
$
$
$
$
$
3,125
1,875
47,522
29,881
29,881
259,615
254,808
-
-
-
-
-
-
-
150,685 28,931 (i)
777,392
28,931
297
178
4,515
2,839
2,851
23,750
23,750
14,315
72,495
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,167
4,167
2,469
Equity-settled share
based payments
Shares
Performance
rights
TOTAL
Total
performance
related
Fixed
remuneration
$
-
-
85,273
51,163
76,162
-
-
-
$
$
%
-
-
-
-
-
3,422
2,053
137,310
83,883
108,894
-
-
-
-
-
136,716
424,248
32%
136,716
419,441
33%
124,447
320,847
48%
%
100
100
100
100
100
68%
67%
52%
10,803
212,598
397,879 1,500,098
(i) During the year ended 30 June 2017, the CFO was granted a bonus of $28,931. This was awarded outside of
the STI plan in connection with the Company’s listing.
Short-term
Post-
employment
Long-term
Equity-settled share
based payments
2016
Salary, fees and
leave
Superannuation
Incentive
plans
Long service
leave
Shares
Options or
rights
TOTAL
Total
performance
related
Fixed
remuneration
Josef
Czyzewksi
Neil
Kearney
Erling
Sorensen
Jamie
Nemtsas
Matthew
O’Brien
$
$
$
12,500
1,188
5,353
509
254,808
23,750
254,808
23,750
29,622
557,091
2,613
51,810
-
-
-
-
-
-
$
-
-
4,167
4,167
490
8,824
$
-
-
-
-
-
-
$
%
-
-
-
-
-
-
13,688
5,862
282,725
282,725
32,725
617,725
-
-
-
-
-
-
%
100
100
100
100
100
-
Murray River Organics Group Limited | Annual Report 2016/17 22
I. Key Management Personnel’s Share-based Compensation
Shares issued on exercise of compensation performance rights
Tranche
Grant date
Number
granted
Fair value
per
performance
right at
grant date
Number
vested
during the
year
Year
in which
option may
be vested
Vested %
Fair value
of exercised
performance
rights during
the year
Number
lapsed during
the year
Year lapsed
performance
rights were
granted
Amount paid
or payable
for exercised
performance
rights
Terms and conditions for each grant
Exercise
price $
Expiry date
First
exercise
date
Last
exercise
date
One-off
Retention
Erling
Sorensen
LTI – EPS
16
December
2016
LTI – SPG
One-off
Retention
Jamie
Nemtsas
LTI – EPS
16
December
2016
LTI – SPG
One-off
Retention
Matthew
O’Brien
LTI – EPS
16
December
2016
384,615
$1.30
96,154
$1.30
96,154
$0.65
384,615
$1.30
96,154
$1.30
96,154
$0.65
384,615
$1.30
57,956
$1.30
LTI – SPG
57,956
$0.65
Total
1,654,373
-
-
-
-
-
-
-
-
-
2019
2019
2019
2019
2019
2019
2019
2019
2019
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30 June
2019 (i)
30 June
2019 (i)
30 June
2019 (i)
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019 (i)
30 June
2019 (i)
30 June
2019 (i)
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019 (i)
30 June
2019 (i)
30 June
2019 (i)
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
30 June
2019
(i) The terms and conditions for the one-off retention is as at 30 June 2017. Subsequent to year end there has
been a modification to 1,153,845 performance rights (in aggregate) granted under the Once-off Retention
Payment (refer to section 4.6), the expiry date is changed to 4 October 2019.
Shares issued on exercise of compensation performance rights
There were no shares issued on exercise of compensation performance rights.
J. Key management personnel’s equity holdings
Number of performance rights held by key management personnel
The number of performance rights in Murray River Organics Group Limited held by each key management
personnel of the group during the financial year is as follows:
Erling Sorensen
Jamie Nemtsas
Matthew O’Brien
Balance
01/07/16
-
-
-
-
Granted as
remuneration
576,923
576,923
500,527
1,654,373
Performance
rights
exercised
-
-
-
-
Lapsed
-
-
-
-
Balance
30/06/17
576,923
576,923
500,527
1,654,373
Vested
30/6/2017
-
-
-
-
Unvested
30/6/2017
576,923
576,923
500,527
1,654,373
Number of shares held by key management personnel
The number of ordinary shares in Murray River Organics Group Limited held by each key management
personnel of the group during the financial year is as follows:
Balance
1/07/16
(stapled
securities)*
Off market
transactions
(Pre-IPO)
Pre-IPO group
reorganisation
/ restructure*
Sell down at
IPO
Received as
Remuneration
Purchases
Total balance
at 30/06/17
Craig Farrow
Lisa Hennessy
Donald Brumley
-
-
-
-
-
-
-
-
-
-
-
-
Erling Sorensen
5,583,333 (1,818,889)
7,528,888 (3,846,154)
Jamie Nemtsas
5,583,333 (1,818,889)
7,528,888 (3,846,154)
Matthew O’Brien
-
-
-
65,595
39,356
58,586
-
-
-
103,077
168,672
-
39,356
385,000
443,586
400,001
7,847,179
2,150,001
9,597,179
-
-
11,166,666 (3,637,778) 15,057,776 (7,692,308)
163,537
3,038,079 18,095,972
Murray River Organics Group Limited | Annual Report 2016/17 23
Directors’ Report
* As at 30 June 2016, the units in Murray River Organics Property Trust were stapled to the shares in Murray
River Organics Limited. The stapled securities were on a one-to-one basis so that one Murray River Organics
Property Trust unit and one Murray River Organics Limited share formed a single stapled security. Murray
River Organics Group Limited was incorporated on 6 September 2016. On 9 November 2016, the
shareholders of the Company, the Directors and management undertook a group reorganisation whereby the
stapled securities were unstapled via resolutions in accordance with the relevant Company constitution and
Trust Deed at which time Murray River Organics Group Limited became the legal parent following the
acquisition of all units in the Murray River Organics Property Trust and all the shares in Murray River
Organics Limited held by each existing shareholder. The impact of the pre-IPO group reorganisation had the
effect of splitting one stapled security into three shares in Murray River Organics Group Limited.
As at their resignation dates, former Directors Josef Czyzewksi and Joanne Bessler, held 33,333 and 33,340
stapled securities respectively.
Other equity-related key management personnel transactions
There have been no other transactions involving equity instruments apart from those described in the tables
above relating to options, rights and shareholdings.
K. Loans to Key Management Personnel
The loans to key management personnel relates to a receivable from the founding shareholders relating to the
indemnification of legacy income tax obligations of the Sornem Entities (refer below) that became wholly owned
subsidiaries of the Group as part of the pre-IPO restructure.These tax obligations are not due to be paid by the
Group to the ATO until December 2017.
The Sornem Entities are non-operating entities, and were acquired by the Company from the Founders as part
of the Restructure. The Founders previously held their interests in the Group through the Sornem Entities and
this aspect of the Restructure enabled the Founders to own Shares in the Company individually (rather than
through a jointly held company), to provide the Founders with commercial and legal flexibility in respect of
their shareholding in the Company. As part of the Restructure, the Founders agreed to indemnify the Company
for any liabilities of the Sornem Entities prior to the Restructure and for any tax liability or obligation of the
Sornem Entities Sornem Group and Sornem Capital to the extent that such tax liability or obligation relates to
any period prior to the completion of the Restructure or relates to (or results from) the Restructure.
Aggregate of loans made
The following table sets out the details of the aggregate of loans made, guaranteed or secured, directly or
indirectly, by the group and any of its subsidiaries, in the financial year to all key management personnel, their
close family members and entities over which the key management personnel or their close family members
have, directly or indirectly, control, joint control or significant influence:
Balance 1/7/2016
Loans advanced
Loan repayment received
Provision for impairment
Balance 30/6/2017
Interest that would have been charged had loan been at arm’s length
Number of KMP with loans outstanding at 30/6/2017
$
-
1,371,909
(392,716)
979,193
-
979,193
N.A.
2
As explained above, these tax obligations are not due to be paid by the Group to the ATO until December 2017
and therefore no interest is currently applicable. The above loan balances relate 50% to Jamie Nemtsas and 50%
to Erling Sorensen.
Aggregate of loans made is greater than $100,000
Refer to above for all loans over $100,000.
Murray River Organics Group Limited | Annual Report 2016/17 24
L. Other Transactions with Key Management Personnel
During the year, the Group received $1,853,557 from Arrow Primary Infrastructure Fund (Arrow) as funding
for capital expenditure incurred on the Colignan vineyard (2016: nil). Arrow also paid $160,385 directly to
suppliers in respect to the capital expenditure at the Colignan vineyard. The total $2,013,943 funding received
from Arrow will be repaid in full by the Group by way of higher finance lease repayments as required under
the lease agreement. Arrow Primary Infrastructure Fund is the lessor of the Colignan vineyard. During the
year, the Group paid $1,757,566 (2016: $869,678) in relation to lease payments as lessee of the Colignan
vineyard. The Directors, Erling Sorensen and Jamie Nemtsas hold units in the Arrow Primary Infrastructure
Fund. The lease has been entered into on an arm’s length terms and neither interest held represents a
controlling interest in Arrow Primary Infrastructure Fund.
As at 30 June 2017, $87,764 was receivable from Sornem Asset Management for shared services relating to
shared offices. Sornem Asset Management is a related entity to Jamie Nemtsas and Erling Sorensen.
M. Voting and Comments Made at the Company’s 2016 Annual General Meeting (AGM)
This is the first remuneration report prepared by Murray River Organics and therefore a remuneration report
was not put to vote at Murray River Organics’ most recent AGM.
22. Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor
are outlined in note 24 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by
another person or firm on the auditor’s behalf) is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 24 to the financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit Committee, for the
following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES
110 ‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
23. Corporate governance
A copy of the Company’s Corporate Governance Statement is available at http://www.
murrayriverorganicsinvestors.com.au/
24. Auditor’s independence declaration
The auditor’s independence declaration is included on page 26 of the financial report.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the
Corporations Act 2001.
On behalf of the Directors
Director
Director
Craig Farrow
Chairman
Erling Sorensen
Managing Director
Melbourne, 26 August 2017
Murray River Organics Group Limited | Annual Report 2016/17 25
Auditor’s declaration of independence
Deloitte. The Board of Directors Murray River Organics Group Limited 32 Crompton Way DANDENONG SOUTH VIC 3175 26 August 2017 Dear Board Members Murray River Organics Group Limited Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 9671 7001 www.deloitte.com.au In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Murray River Organics Group Limited. As lead audit partner for the audit of the financial statements of Murray River Organics Group Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i)the auditor independence requirements of the Corporations Act 2001 in relation to theaudit; and(ii)any applicable code of professional conduct in relation to the audit.Yours sincerely DELOITTE TOUCHE TOHMATSU Peter Glynn Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 29 Murray River Organics Group Limited | Annual Report 2016/17 26 Independent Auditor’s Report
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Deloitte. Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 9671 7001 www.deloitte.com.au Independent Auditor's Report to the members of Murray River Organics Group Limited Report on the Audit of the Financial Report Opinion We have audited the consolidated financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (the Group) which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i)giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financialperformance for the year then ended; and(ii)complying with Australian Accounting Standards and the Corporations Regulations 2001.Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be on the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 30 Murray River Organics Group Limited | Annual Report 2016/17 27 Independent Auditor’s Report
Deloitte. 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. Key Audit Matters How the scope of our audit responded to the Key Audit Matters Capitalisation of bearer plant expenditure As disclosed in note 12.1, expenditure of $3,486,299 was capitalised in the current financial year in respect of developing vines. The capitalisation of these costs is a key audit matter due to the significant judgement required to determine: • The proportion of vineyards whichare considered to be 'developing'versus 'mature'; and• The nature of costs to becapitalised. Measurement of the 2017 Crop As disclosed in note 4(c), management have determined the fair value less cost to sell of the 2017 Crop at the point of harvest to be $18,465,479. As outlined in note 2(c) and 3(a), the 2017 Crop at the point of harvest is measured at fair value less processing and selling costs. The fair value of the 2017 Crop is a key audit matter as it is subject to significant management judgment given the assumptions used, the most significant of which include: • Forecast sale price per class of fruit• Wastage discount rate• Estimated yield for unharvestedproduce.Our procedures included but were not limited to: Obtaining an understanding of the key controls and processes that management have in place to determine which expenditure to capitalise for developing vines; Attending meetings with key operational and finance personnel to obtain an understanding as to how management determined the sections of vineyards considered developing bearer plants versus mature bearer plants; Critically evaluating management's determination of the proportion of developing vineyards including sighting documentation to support the year of grafting or planting of the developing vines, Challenging management's determination as to when vines become available-for-use; Testing on a sample basis, expenditure capitalised to establish that they relate to developing vines and the nature of cost is appropriate to capitalise; and Assess the appropriateness of the related disclosures in Note 12.1 of the consolidated financial statements. Our audit procedures, performed in conjunction with our valuation expert, included but were not limited to: Obtaining an understanding of management's process to measure fair value less harvest, processing and selling costs; Evaluating management's methodology and their documented basis for key assumptions used in their fair value model; • Attending meetings with the company agronomist and key operational and finance personnel to obtain anunderstanding as to the quality and yield of the 2017 Crop; • Challenging the key assumptions used as follows o (i) forecast sale prices for each class of fruitproduced by comparing them to contracted customer orders and the historical and current selling prices,o (ii) estimated wastage rates compared to actual wastage and actual dehydration losses; and o (iii) estimated yield for unharvested produce compared to the actual yield of the already harvested produce; and Assess the appropriateness of the related disclosures in Notes 2(c), 3(a) and 4(c) of the consolidated financial statements. 31 Murray River Organics Group Limited | Annual Report 2016/17 28 Deloitte. I Key Audit Matters How the scope of our audit responded to the Key Audit Matters Group pre IPO reorganisation As disclosed in Note 1, Murray River Organics Group Limited was incorporated on 6 September 2016 and on 9 November 2016, the shareholders of the Company, the Directors and management undertook a group reorganisation whereby the existing stapled securities were unstapled via resolutions in accordance with the relevant Company constitution and Trust Deed at which time Murray River Organics Group Limited became the legal parent following the acquisition of all units in Murray River Organics Property Trust and all the shares in Murray River Organics Limited held by each existing shareholder. As disclosed in Note 1, this group reorganisation did not represent a business combination in accordance with AASB 3 Business Combinations. Instead, the Directors have treated this as a form of group reorganisation. As there are no accounting standards which govern the treatment of the transaction, the Directors have had to exercise significant judgment in accounting for this reorganisation. The group reorganisation is a key audit matter as a result of the complexity in the steps involved affecting the reorganisation, the significant related party transactions involved and the judgement exercised in determining the accounting treatment for this transaction. Other Information Our procedures included but were not limited to: Obtaining an understanding of the structure of the Group from review of contracts, registration documents and legal documents provided in connection with the Transaction; Obtaining an understanding of the terms and business purpose of the reorganisation, relationships and transactions with related parties and equity balances to affect the group reorganisation; Assessing and challenging the application of the relevant accounting standards, approaches and guidance for the transaction and to ensure the appropriateness of the group reorganisation reserve; and Assessing the appropriateness of the related disclosures in Note 1 of the consolidated financial statements. The directors are responsible for other information disclosed. The other information comprises the information included in the Directors' Report which we obtained prior to the date of this auditor's report, the other information also includes the following documents which will be included in the annual report (but does not include the financial report and our auditor's report thereon): Company Description and Results in Brief which are expected to be made available to us after that date. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. When we read the Company Description and Results in Brief, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. 32 Murray River Organics Group Limited | Annual Report 2016/17 29 Independent Auditor’s Report
Deloitte. Directors' Responsibilities for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: •Identify and assess the risks of material misstatement of the financial report, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.•Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Group's internal control.•Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the directors.•Conclude on the appropriateness of the director's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group's ability to continue as a goingconcern. If we conclude that a material uncertainty exists, we are required to draw attention inour auditor's report to the related disclosures in the financial report or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtainedup to the date of our auditor's report. However, future events or conditions may cause the Groupto cease to continue as a going concern.•Evaluate the overall presentation, structure and content of the financial report, including thedisclosures, and whether the financial report represents the underlying transactions and eventsin a manner that achieves fair presentation.33 Murray River Organics Group Limited | Annual Report 2016/17 30 Deloitte. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 16 to 25 of the directors' report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Murray River Organics Group Limited for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITIE TOUCHE TOHMATSU Peter Glynn Partner Chartered Accountants Melbourne, 26 August 2017 34 Murray River Organics Group Limited | Annual Report 2016/17 31 Directors’
declaration
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements are in compliance with international Financial
Reporting Standards, as stated in note 2 to the financial statements;
(c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
financial position and performance of the consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order
98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed
guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which
the ASIC Class Order applies, as detailed in note 32 to the financial statements will, as a group, be able to meet
any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the Directors
Director
Director
Craig Farrow
Chairman
Erling Sorensen
Managing Director
Melbourne, 26 August 2017
Murray River Organics Group Limited | Annual Report 2016/17 32
Murray River Organics Group Limited | Annual Report 2016/17 33 Consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2017
Revenue
Other income
Fair value gain from agricultural produce
Change in finished goods and work in progress
Raw materials and finished goods consumed
Administration expense
Selling expenses
Employee benefits expense
Depreciation expense
Repairs & maintenance
Motor vehicle expense
Utility expense
Professional fees
Other expense
Loss on revaluation of assets
Finance costs
(Loss) / profit before tax
Income tax benefit / (expense)
(Loss) / profit for the year
Attributed to:
Equity holders of the parent
Murray River Organics Property Trust
(non-controlling interests)
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss:
Recognition of deferred tax liability
(Loss) on revaluation of assets
Total other comprehensive (loss)
Total comprehensive (loss) / income for the year
Attributed to:
Equity holders of the parent
Murray River Organics Property Trust (non-controlling interests)
Notes
4a
4b
4c
5
5
5
12
5
21
20
12
Basic earnings per share/stapled security (cents per share)
Diluted earnings per share/stapled security (cents per share)
27
27
Notes to the financial statements are included on pages 38 to 69.
2017
$
48,521,720
1,354,947
13,185,216
4,941,432
(54,805,858)
(736,660)
(488,009)
(5,753,032)
(4,275,874)
(47,725)
(92,378)
(59,838)
(3,366,931)
(3,237,618)
-
(2,296,036)
(7,156,644)
1,229,324
(5,927,320)
2016
$
11,957,553
1,874,490
6,397,600
1,842,015
(7,747,734)
(354,983)
(144,087)
(3,993,023)
(1,951,990)
(296,688)
(58,252)
(854,943)
(518,890)
(910,660)
(247,800)
(1,355,288)
3,637,320
(1,043,209)
2,594,111
(5,538,340)
(388,980)
5,860,368
(3,266,257)
(5,927,320)
2,594,111
(2,289,013)
-
(2,289,013)
(8,216,333)
(7,827,353)
(388,980)
(8,216,333)
(0.08)
(0.08)
-
(364,432)
(364,432)
2,229,679
5,860,368
(3,630,689)
2,229,679
0.04
0.04
Murray River Organics Group Limited | Annual Report 2016/17 34
Consolidated statement
of financial position
at 30 June 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Agricultural produce
Other assets
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Other financial liability
Income tax payable
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity holders of the parent
Contributed equity
Reserves
(Accumulated losses) / Retained earnings
Parent entity interest
Equity Holders of Murray River Organics Property
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Non-controlling interest
Equity Holders of the parent
Equity Holders of Murray River Organics Property Trust
(non-controlling interests)
Total equity
Notes to the financial statements are included on pages 38 to 69.
Notes
2017
$
2016
$
6
7
8
9
11
10
12
13
21
14
15
16
17
15
21
16
19
20
20
2,723,818
8,891,091
27,068,584
4,406,864
4,187,245
47,277,602
2,068,751
49,346,353
82,240,620
10,749,272
1,784,396
94,774,288
144,120,641
18,122,157
17,287,642
4,136,076
546,952
946,141
41,038,968
33,228,053
3,129,211
445,906
36,803,170
77,842,138
66,278,503
2,249,108
4,235,160
10,894,400
624,108
1,040,791
19,043,567
411,880
19,455,447
48,486,749
-
1,057,313
49,544,062
68,999,509
4,285,026
3,546,987
177,197
-
-
8,009,210
29,096,780
1,997,388
30,663
31,124,831
39,134,041
29,865,468
112,001,963
(41,600,954)
(4,122,506)
9,692,878
-
5,071,070
66,278,503
14,763,948
-
-
-
-
66,278,503
-
10,737,734
7,630,042
(3,266,256)
15,101,520
14,763,948
15,101,520
66,278,503
29,865,468
Murray River Organics Group Limited | Annual Report 2016/17 35
Consolidated statement
of changes in equity
for the year ended 30 June 2016
Balance at 1 July 2015
Issue of units
Issue of shares
Equity raising costs
(net of tax)
Profit / (loss) for the year
Other comprehensive loss
Total comprehensive income /
(loss) for the year
Balance at 30 June 2016
Contributed
equity
$
12
-
10,036,788
(Accumulated
losses) / Retained
earnings
$
(789,298)
-
-
Non-controlling
interest
$
13,713,815
5,018,394
-
(343,922)
-
-
-
9,692,878
-
5,860,368
-
5,860,368
5,071,070
-
(3,266,257)
(364,432)
(3,630,689)
15,101,520
Total
equity
$
12,924,529
5,018,394
10,036,788
(343,922)
2,594,111
(364,432)
2,229,679
29,865,468
Notes to the financial statements are included on pages 38 to 69.
Consolidated statement
of changes in equity
for the year ended 30 June 2017
Contributed
equity
$
Retained
earnings /
(Accumulated
losses)
$
Corporate
re-organisation
reserve
$
Share-based
payments
reserve
$
Asset
revaluation
reserve
$
Non-
controlling
interest
$
Total equity
$
Balance at
1 July 2016
9,692,878
5,071,070
Issue of units
-
-
-
-
Reclassification of
non-controlling
interest
29,333,305
(3,655,236)
(11,890,084)
Issue of shares
73,973,734
Equity raising
costs (net of tax)
(1,210,552)
Share-based
payments
212,598
-
-
-
Loss for the year
Other
comprehensive
loss
Total
comprehensive
loss for the year
Balance at 30
June 2017
-
-
-
(5,538,340)
-
(5,538,340)
(35,562,760)
-
-
-
-
-
Notes to the financial statements are included on pages 38 to 69.
-
-
-
-
-
510,861
-
-
-
-
-
15,101,520
29,865,468
6,705,487
6,705,487
7,630,042
(21,418,027)
-
-
-
-
-
-
-
38,410,974
(1,210,552)
723,459
-
(388,980)
(5,927,320)
(2,289,013)
-
(2,289,013)
(2,289,013)
(388,980)
(8,216,333)
112,001,963
(4,122,506)
(47,452,844)
510,861
5,341,029
-
66,278,503
Murray River Organics Group Limited | Annual Report 2016/17 36
Consolidated statement
of cash flows
for the year ended 30 June 2017
Notes
2017
$
2016
$
Cash flows from operating activities
Receipts from customers
Receipts from insurance proceeds
Payments to suppliers and employees
Interest received
Tax paid
Interest paid
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant & equipment
Payments for business acquisitions
Proceeds from sale of water rights
Proceeds from sale of property, plant & equipment
Payment to escrow account in relation to business
acquisitions
Net cash used in investing activities
Cash flows from financing activities
(Payments to) / proceeds from related party borrowings
Proceeds from borrowings
Repayment of borrowings
Proceeds from hire purchase liabilities
Repayment of equipment financing
Proceeds from issue of share capital and trust units
Transaction costs on issue of securities
Net cash generated by financing activities
18(b)
13
11
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
18(a)
Notes to the financial statements are included on pages 38 to 69.
45,575,727
-
(53,444,966)
49,020
(452,689)
(2,989,314)
(11,262,222)
9,336,279
1,484,095
(13,163,751)
45,384
-
(1,355,288)
(3,653,281)
(31,497,514)
(14,951,783)
435,875
-
(2,204,481)
(12,841,643)
-
308,550
460,000
-
(48,217,903)
(12,073,093)
413,503
37,961,150
(22,078,905)
1,001,597
(732,811)
45,119,671
(1,729,370)
59,954,835
474,710
2,249,108
2,723,818
(4,909,387)
7,523,555
(1,259,250)
2,192,575
(349,855)
15,202,577
(491,316)
17,908,899
2,182,525
66,583
2,249,108
Murray River Organics Group Limited | Annual Report 2016/17 37 Notes to the Financial Statements
for the year ended 30 June 2017
1. General information
and group
reorganisation
These are the financial statements of
Murray River Organics Group Ltd.
Stapling transaction in
comparative period
In the comparative period and
effective 18 December 2015, the
units in Murray River Organics
Property Trust were stapled to the
shares in Murray River Organics
Limited. The stapled securities
were on a one-to-one basis so that
one Murray River Organics
Property Trust unit and one
Murray River Organics Limited
share formed a single stapled
security.
Australian Accounting Standards
required one of the stapled entities
to be identified as the parent entity
for the purposes of preparing a
consolidated financial report. In
accordance with this requirement,
Murray River Organics Limited
was deemed to be the parent entity.
The results and equity attributable
to the Murray River Organics
Property Trust, being the other
stapled entity which was not
directly or indirectly held by
Murray River Organics Limited
have been shown separately in the
financial statements as non-
controlling interests.
The stapling transaction was
accounted for as a common-control
transaction by contract alone on
the basis that the combined entity
was ultimately controlled by the
same parties both before and after
the stapling transaction and
common-control was not transitory.
Murray River Organics Limited
was at this time identified as the
parent entity. No purchase
considered was transferred. This
common-control transaction was
accounted for via the ‘pooling of
interests-type’ method which
required:
• assets and liabilities of the Trust
were measured at book value
using consistent accounting
policies to that of the Parent
• the comparative figures included
both the Company and the Trust
from the date on which the
combining entities first came
under common control
• non-controlling interests were
shown as a separate item in the
consolidated financial statements
• any expenses incurred on the
combination were expensed in
profit or loss when incurred.
The results and equity of Murray
River Organics Property Trust
(which was not directly owned by
Murray River Organics Limited)
was treated and disclosed as a
non-controlling interest. Whilst
the results and equity of Murray
River Organics Property Trust
were disclosed as a non-controlling
interest, the stapled security
holders of Murray River Organics
Limited were the same as the
stapled security holders of Murray
River Organics Property Trust.
Group reorganisation
Murray River Organics Group
Limited was incorporated on 6
September 2016. On 9 November
2016, the shareholders of the
Company, the Directors and
management undertook a group
reorganisation whereby the stapled
securities were unstapled via
resolutions in accordance with the
relevant Company constitution and
Trust Deed at which time Murray
River Organics Group Limited
became the legal parent following
the acquisition of all units in the
Murray River Organics Property
Trust and all the shares in Murray
River Organics Limited held by
each existing shareholder.
The reorganisation was made in
connection with the initial public
offering which was successfully
completed on 16 December 2016.
The Directors have elected to
account for the restructure as a
capital reorganisation, whereby
Murray River Organics Group
Limited was imposed above the
existing stapled structure with the
same shareholders having the same
relative interests, rather than a
business combination. In the
Director’s judgment, the
continuation of existing accounting
values is consistent with the
accounting which would have
occurred if the assets and liabilities
had already been in a structure
suitable for the IPO and most
appropriately reflects the substance
of the internal restructure.
Accordingly the consolidated
financial report of Murray River
Organics Group Limited for the
year ended 30 June 2017 has been
presented as a continuation of the
pre-existing accounting values of
assets and liabilities in the Murray
River Organics Limited
consolidated financial statements
and includes the financial results
for the consolidated group under
Murray River Organics Limited for
the period from 1 July 2016 to 9
November 2016 and the
consolidated group under Murray
River Organics Group Limited
from 10 November 2016 to 30 June
2017. The comparative information
presented in the financial report
represents the financial position
and financial performance of
Murray River Organics Limited
and Murray River Organics
Property Trust. The difference
between the cost of the investment
and the pre-existing contributed
equity of Murray River Organics
Limited and Murray River
Organics Property Trust at the
date of the restructure of
$47,452,844 has been accounted
for as a Corporate Reorganisation
Reserve. Due to the unstapling of
the existing securities, and the
transfer of all units in the Murray
River Organics Property Trust to
the parent, all non-controlling
interests have been reclassified to
the parent within shareholders
equity.
Murray River Organics Group Limited | Annual Report 2016/17 38 2. Significant
(a) Revenue recognition
(c) Agricultural produce
accounting policies
Sale of goods
Statement of compliance
These financial statements are
general purpose financial statements
which have been prepared in
accordance with the Corporations
Act 2001, Accounting Standards
and Interpretations, and comply
with other requirements of the law.
The financial statements comprise
the financial statements of the
Group. For the purposes of
preparing the consolidated financial
statements, the Group is a for-profit
entity.
Accounting Standards include
Australian Accounting Standards.
Compliance with Australian
Accounting Standards ensures that
the financial statements and notes of
the Group comply with International
Financial Reporting Standards
(‘IFRS’).
The financial statements were
authorised for issue by the directors
on 26 August 2017.
Basis of preparation
The financial statements have been
prepared on the basis of historical
cost, except for agricultural
produce, certain non-current assets
and financial instruments that are
measured at revalued amounts or
fair values, as explained in the
accounting policies below.
Historical cost is generally based
on the fair values of the
consideration given in exchange
for assets. All amounts are
presented in Australian dollars,
unless otherwise noted.
The following significant
accounting policies have been
adopted in the preparation and
presentation of the financial
statements:
Revenue from the sale of goods is
recognised when the goods are
delivered and title has passed, at
which time all the following
conditions are satisfied:
a) the Group has transferred to the
buyer the significant risks and
rewards of ownership of the
goods;
b) the Group retains neither
continuing managerial
involvement to the degree usually
associated with ownership nor
effective control over the goods
sold;
c) the amount of revenue can be
measured reliably;
d) it is probable that the economic
benefits associated with the
transaction will flow to the Group;
and
e) the costs incurred or to be
incurred in respect of the
transaction can be measured
reliably.
Revenue from the sale of goods is
measured at the fair value of the
consideration received or receivable
net of estimated customer returns,
rebates, discounts and similar
allowances.
Interest revenue
Interest revenue is recognised on a
time proportionate basis that takes
into account the effective yield on
the financial asset.
(b) Inventories
Inventories purchased from
suppliers are valued at the lower of
cost and net realisable value. Own
grown dried fruit and citrus stocks
are measured at fair value less
estimated costs to sell and
processing costs at the point of
harvest. A fair value adjustment is
recognised in profit and loss at the
point of harvest. Once harvested,
this fruit is measured under AASB
102 Inventories at the lower of its
fair value at point of harvest less
costs to sell and net realisable value.
Finished goods include the cost of
raw materials, processing and
packaging costs and an allocation of
overhead (depending on the stage of
production).
Agricultural produce represents any
unharvested produce and citrus crop
valued in accordance with AASB 141
Agriculture. Agricultural produce is
measured at their fair value less
harvesting, processing and selling
costs on initial recognition and at
each reporting date. The current
year fair valuation takes into
account current citrus and vine fruit
selling prices and current growing,
processing, and selling costs.
Net increments and decrements in
the fair value of the growing assets
are recognised as income or
expense in profit or loss,
determined as:
• The difference between the total
fair value of the biological assets
recognised at the beginning of the
reporting period and the total fair
value of the biological assets
recognised at reporting date.
• Costs incurred in maintaining or
enhancing the biological assets.
• The fair value of agricultural
produce harvested during the
reporting period is measured at
their fair value less estimated
costs to be incurred up until the
time of harvest.
The aggregate gain or loss arising
on initial recognition and from
changes in fair value less estimated
point of sale costs is recognised as
income or expense of the period.
All the group’s citrus trees and
vines are classified as bearer plants
as outlined in Note 2(d).
(d) Property, plant and equipment
Freehold land, buildings and
bearer plants are measured at their
revalued amounts being fair value
at the date of valuation. Fair value
is determined on the basis of a
Directors valuation which is
regularly supported by an
independent valuation prepared by
external valuation experts. The
valuation approach adopted is a
direct comparison and discounted
cash flow method. The valuation
approach adopted is outlined in
note 12.1.
The group’s citrus trees and vines
qualify as bearer plants. Bearer
plants are solely used to grow
produce over their productive lives.
Agricultural produce growing on
bearer plants will remain within
the scope of AASB 141 Agriculture
and continue to be measured at fair
value less cost to sell at the point of
harvest.
Murray River Organics Group Limited | Annual Report 2016/17 39
Notes to the Financial Statements
for the year ended 30 June 2017
Any revaluation increase arising
on the revaluation of freehold land,
buildings and bearer plants is
credited to the asset revaluation
reserve, except to the extent that it
reverses a revaluation decrease for
the same asset previously
recognised as an expense in profit
or loss, in which case the increase
is credited to profit or loss to the
extent of the decrease previously
charged. A decrease in carrying
amount arising on the revaluation
of land, buildings and bearer
plants is charged as an expense in
profit or loss to the extent that it
exceeds the balance, if any, held in
the asset revaluation reserve
relating to a previous revaluation
of that asset.
Depreciation on revalued buildings
and bearer plants is charged to
profit or loss. On the subsequent
sale or retirement of a revalued
property, the attributable
revaluation surplus remaining in
the asset revaluation reserve, net of
any deferred taxes, is transferred
directly to retained earnings.
Plant and equipment, leasehold
improvements and assets under
finance lease are stated at cost less
accumulated depreciation and
impairment. Cost includes
expenditure that is directly
attributable to the acquisition of
the item. In the event that
settlement of all or part of the
purchase consideration is deferred,
cost is determined by discounting
the amounts payable in the future
to their present value as at the date
of acquisition.
Depreciation is provided on
property, plant and equipment.
Depreciation is calculated on a
straight line basis so as to write off
the net cost of each asset over its
expected useful life to its estimated
residual value. The estimated
useful lives, residual values and
depreciation method are reviewed
at the end of each annual reporting
period. All leased assets are
depreciated over their useful life,
or if shorter, the period of the
lease.
The following estimated useful
lives are used in the calculation of
depreciation:
Plant and
equipment and
tooling
Bearer plants
Equipment under
finance lease
Buildings &
freehold
improvements
3-10 years
25 years
3-5 years
50 years
Office equipment
3-5 years
Motor vehicles
3-5 years
Leasehold
improvements and
leased assets
10 - 25 years
(or lesser of
lease term)
(e) Impairment of assets
At each reporting date, the Group
reviews the carrying amounts of
its tangible and intangible assets to
determine whether there is any
indication that those assets have
suffered an impairment loss. If any
such indication exists, the
recoverable amount of the asset is
estimated in order to determine the
extent of the impairment loss (if
any). Where the asset does not
generate cash flows that are
independent from other assets, the
Group estimates the recoverable
amount of the cash-generating unit
to which the asset belongs. Where
a reasonable and consistent basis of
allocation can be identified,
corporate assets are also allocated
to individual cash-generating
units, or otherwise they are
allocated to the smallest group of
cash-generating units for which a
reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite
useful lives and intangible assets
not yet available for use are tested
for impairment annually and
whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher
of fair value less costs to sell and
value in use. In assessing value in
use, the estimated future cash
flows are discounted to their
present value using a pre-tax
discount rate that reflects current
market assessments of the time
value of money and the risks
specific to the asset for which the
estimates of future cash flows have
not been adjusted.
If the recoverable amount of an
asset (or cash-generating unit) is
estimated to be less than its
carrying amount, the carrying
amount of the asset (cash-
generating unit) is reduced to its
recoverable amount. An
impairment loss is recognised
immediately in profit or loss,
unless the relevant asset is carried
at revalued amount, in which case
the impairment loss is treated as a
revaluation decrease.
Where an impairment loss
subsequently reverses, the
carrying amount of the asset
(cash-generating unit) is increased
to the revised estimate of its
recoverable amount, but only to the
extent that the increased carrying
amount does not exceed the
carrying amount that would have
been determined had no
impairment loss been recognised
for the asset (cash-generating unit)
in prior years. A reversal of an
impairment loss is recognised
immediately in profit or loss,
unless the relevant asset is carried
at fair value, in which case the
reversal of the impairment loss is
treated as a revaluation increase.
(f) Leased assets
Leases are classified as finance
leases whenever the terms of the
lease transfer substantially all the
risks and rewards of ownership to
the lessee. All other leases are
classified as operating leases.
Group as lessee
Assets held under finance leases
are initially recognised at their fair
value or, if lower, at amounts equal
to the present value of the
minimum lease payments, each
determined at the inception of the
lease. The corresponding liability
to the lessor is included in the
statement of financial position as a
finance lease obligation.
Lease payments are apportioned
between finance charges and
reduction of the lease obligation so
as to achieve a constant rate of
interest on the remaining balance
of the liability. Finance charges are
charged directly against profit or
loss, unless they are directly
attributable to qualifying assets.
Finance leased assets are amortised
on a straight line basis over the
estimated useful life of the asset.
Operating lease payments are
recognised as an expense on a
straight-line basis over the lease
term.
Murray River Organics Group Limited | Annual Report 2016/17 40
(g) Intangible assets
(j) Financial Liabilities
Goodwill
Goodwill represents the excess of
the cost of an acquisition over the
fair value of the Group’s share of
the net identifiable assets of the
acquired business at the date of
acquisition. Goodwill is not
amortised. Instead, goodwill is
tested for impairment annually or
more frequently if events or
changes in circumstances indicate
that it might be impaired, and is
carried at cost less any
accumulated impairment losses.
Goodwill is allocated to cash-
generating units for the purpose of
impairment testing, for which the
Group has identified one cash
generating unit in line with its
determination of operating
segments.
(h) Cash and cash equivalents
Cash and cash equivalents
comprise cash on hand, cash in
banks and investments in money
market instruments that are
readily convertible to known
amounts of cash and which are
subject to an insignificant risk of
changes in value.
(i) Employee benefits
A liability is recognised for benefits
accruing to employees in respect of
wages and salaries, annual leave,
and long service leave when it is
probable that settlement will be
required and they are capable of
being measured reliably.
Liabilities recognised in respect of
employee benefits expected to be
settled within 12 months, are
measured at their nominal values
using the remuneration rate
expected to apply at the time of
settlement.
Liabilities recognised in respect of
employee benefits which are not
expected to be settled within 12
months are measured at the
present value of the estimated
future cash outflows to be made by
the Group in respect of services
provided by employees up to
reporting date.
Payments for superannuation
benefits are recognised as an
expense when employees have
rendered service entitling them to
the contributions.
Classification as debt or equity
Debt and equity instruments are
classified as either financial
liabilities or as equity in accordance
with the substance of the contractual
arrangement. Costs directly
attributable to the issue of shares
are recognised as a deduction of
equity, net of tax effect.
Other financial liabilities
Other financial liabilities,
including borrowings and trade
and other payables, are initially
measured at fair value, net of
transaction costs.
Other financial liabilities are
subsequently measured at
amortised cost using the effective
interest method, with interest
expense recognised on an effective
yield basis.
The effective interest method is a
method of calculating the
amortised cost of a financial
liability and of allocating interest
expense over the relevant period.
The effective interest rate is the
rate that exactly discounts
estimated future cash payments
through the expected life of the
financial liability, or (where
appropriate) a shorter period, to
the net carrying amount on initial
recognition.
Derecognition of financial liabilities
The Group derecognises financial
liabilities when, and only when,
the Group’s obligations are
discharged, cancelled or they
expire. The difference between the
carrying amount of the financial
liability derecognised and the
consideration paid and payable is
recognised in profit or loss.
(k) Financial liabilities at FVTPL
Financial liabilities are classified as
at fair value through profit or loss
(FVTPL) when the financial
liability is i) contingent
consideration that may be paid by
an acquirer as part of a business
combination to which AASB 3
applies, (ii) held for trading, or (iii)
it is designated as at FVTPL.
A financial liability is classified as
held for trading if:
• it has been incurred principally
for the purpose of repurchasing it
in the near term;
• on initial recognition it is part
of a portfolio of identified financial
instruments that the Group
manages together and has a
recent actual pattern of short-term
profit-taking; or
• it is a derivative that is not
designated and effective as a
hedging instrument.
A financial liability other than a
financial liability held for trading
or contingent consideration that
may be paid by an acquirer as part
of a business combination may be
designated as at FVTPL upon
initial recognition if:
• such designation eliminates or
significantly reduces a
measurement or recognition
inconsistency that would
otherwise arise;
• the financial liability forms part
of a group of financial assets or
financial liabilities or both, which
is managed and its performance
is evaluated on a fair value basis,
in accordance with the Group’s
documented risk management or
investment strategy, and
information about the grouping
is provided internally on that
basis; or
• it forms part of a contract
containing one or more embedded
derivatives, and AASB 139
‘Financial Instruments:
Recognition and Measurement’
permits the entire combined
contract to be designated as at
FVTPL.
Financial liabilities at FVTPL are
stated at fair value, with any gains
or losses arising on
remeasurement recognised in
profit or loss. The net gain or loss
recognised in profit or loss
incorporates any interest paid on
the financial liability and is
included in the ‘other gains and
losses’ line item.
(l) Income tax
Income tax expense represents the
sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based
on taxable profit for the year.
Taxable profit differs from ‘profit
before tax’ as reported in the
consolidated statement of profit
or loss and other comprehensive
income/ statement of profit or
loss because of items of income
or expense that are taxable or
deductible in other years and
items that are never taxable or
deductible. The Group’s current
tax is calculated using tax rates
that have been enacted or
substantively enacted by the end
of the reporting period.
Murray River Organics Group Limited | Annual Report 2016/17 41 Notes to the Financial Statements
for the year ended 30 June 2017
Deferred tax
Deferred tax is recognised on
temporary differences between the
carrying amounts of assets and
liabilities in the consolidated
financial statements and the
corresponding tax bases used in
the computation of taxable profit.
Deferred tax liabilities are
generally recognised for all taxable
temporary differences. Deferred
tax assets are generally recognised
for all deductible temporary
differences to the extent that it is
probable that taxable profits will be
available against which those
deductible temporary differences
can be utilised. Such deferred tax
assets and liabilities are not
recognised if the temporary
difference arises from the initial
recognition (other than in a
business combination) of assets
and liabilities in a transaction that
affects neither the taxable profit
nor the accounting profit. In
addition, deferred tax liabilities are
not recognised if the temporary
difference arises from the initial
recognition of goodwill.
The carrying amount of deferred
tax assets is reviewed at the end of
each reporting period and reduced
to the extent that it is no longer
probable that sufficient taxable
profits will be available to allow all
or part of the asset to be recovered.
Deferred tax liabilities and assets
are measured at the tax rates that
are expected to apply in the period
in which the liability is settled or
the asset realised, based on tax
rates (and tax laws) that have been
enacted or substantively enacted by
the end of the reporting period.
The measurement of deferred tax
liabilities and assets reflects the tax
consequences that would follow
from the manner in which the
Group expects, at the end of the
reporting period, to recover or
settle the carrying amount of its
assets and liabilities.
For the purposes of measuring
deferred tax liabilities and deferred
tax assets for properties that are
measured using the fair value
model, the carrying amounts of
such properties are presumed to be
recovered entirely through sale,
unless the presumption is rebutted.
The presumption is rebutted when
the investment property is
depreciable and is held within a
business model whose objective is
to consume substantially all of the
economic benefits embodied in the
investment property over time,
rather than through sale. The
directors of the Company reviewed
the Group’s investment property
portfolios and concluded that none
of the Group’s investment
properties are held under a
business model whose objective is
to consume substantially all of the
economic benefits embodied in the
investment properties over time,
rather than through sale.
Therefore, the directors have
determined that the ‘sale’
presumption set out in the
amendments to IAS 12 is not
rebutted. As a result, the Group
has not recognised any deferred
taxes on changes in fair value of
the investment properties as the
Group is not subject to any income
taxes on the fair value changes of
the investment properties on
disposal.
Tax consolidated group
As at 30 June 2017, Murray River
Organics Group Limited and its
wholly owned entities are not
members of an income tax
consolidated group. As a
consequence, the consolidated tax
balances are a summation of the
individual tax balances of each
entity. Management are
continuing to analyse the relative
advantages and disadvantages of
forming an income tax
consolidated group.
(m) Goods and services tax
Revenues, expenses and assets are
recognised net of the amount of
goods and services tax (GST),
except:
i. where the amount of GST
incurred is not recoverable from
the taxation authority, it is
recognised as part of the cost of
acquisition of an asset or as part
of an item of expense; or
ii. for receivables and payables which
are recognised inclusive of GST.
The net amount of GST recoverable
from, or payable to, the taxation
authority is included as part of
receivables or payables.
Cash flows are included in the cash
flow statement on a gross basis.
The GST component of cash flows
arising from investing and
financing activities which is
recoverable from, or payable to, the
taxation authority is classified as
operating cash flows.
(n) Government Grants
Government grants are not
recognised until there is reasonable
assurance that the Group will
comply with the conditions
attaching to them and that the
grants will be received.
Government grants are recognised
in profit or loss on a systematic
basis over the periods in which the
Group recognises as expenses the
related costs for which the grants
are intended to compensate.
Specifically, government grants
whose primary condition is that
the Murray River Organics Limited
should purchase, construct or
otherwise acquire non-current
assets are recognised as deferred
revenue in the statement of
financial position and transferred
to profit or loss on a systematic
and rational basis over the useful
lives of the related assets.
Government assistance which does
not have conditions attached
specifically relating to the
operating activities of the entity is
recognised in accordance with the
accounting policies above.
(o) Non-current asset held for sale
Non-current assets are classified as
held for sale if their carrying
amount will be recovered
principally through a sale
transaction rather than through
continuing use. This condition is
regarded as met only when the
asset (or disposal group) is
available for immediate sale in its
present condition subject only to
terms that are usual and
customary for sales for such asset
(or disposal group) and its sale is
highly probable. Management must
be committed to the sale, which
should be expected to qualify for
recognition as a completed sale
within one year from the date of
classification.
Non-current assets classified as held
for sale are measured at the lower of
their previous carrying amount and
fair value less costs to sell.
(p) Borrowing costs
Borrowing costs incurred for the
construction or development of any
qualifying asset (bearer plants) are
capitalised during the period of
time that is required to complete
and prepare the asset for its
intended use. All other borrowing
costs, inclusive of all facility fees,
bank charges, and interest, are
expensed as incurred.
Murray River Organics Group Limited | Annual Report 2016/17 42 (q) Foreign currency
The financial statements of the
Group are presented in the
currency of the primary economic
environment in which the entity
operates (its functional currency).
For the purpose of the financial
statements, the results and
financial position of the Group are
expressed in Australian dollars
(‘$’), which is the functional
currency of the Group and the
presentation currency for the
financial statements.
In preparing the financial
statements of the Group,
transactions in currencies other
than the entity’s functional
currency (foreign currencies) are
recognised at the rates of exchange
prevailing at the dates of the
transactions. At the end of each
reporting period, monetary items
denominated in foreign currencies
are retranslated at the rates
prevailing at that date. Non-
monetary items carried at fair
value that are denominated in
foreign currencies are retranslated
at the rates prevailing at the date
when the fair value was
determined. Non-monetary items
that are measured in terms of
historical cost in a foreign
currency are not retranslated.
Exchange differences are
recognised in profit or loss in the
period in which they arise except
that exchange differences which
relate to assets under construction
for future productive use are
included in the cost of those assets
where they are regarded as an
adjustment to interest costs on
foreign currency borrowings.
(r) Financial assets
Loans and receivables
Trade receivables, loans, and other
receivables that have fixed or
determinable payments that are
not quoted in an active market are
classified as ‘loans and receivables’.
Loans and receivables are
measured at amortised cost using
the effective interest method, less
any impairment. Interest income is
recognised by applying the
effective interest rate, except for
short-term receivables when the
effect of discounting is immaterial.
Effective interest method
The effective interest method is a
method of calculating the
amortised cost of a debt instrument
and of allocating interest income
over the relevant period. The
effective interest rate is the rate
that exactly discounts estimated
future cash receipts (including all
fees on points paid or received that
form an integral part of the
effective interest rate, transaction
costs and other premiums or
discounts) through the expected
life of the debt instrument, or
(where appropriate) a shorter
period, to the net carrying amount
on initial recognition.
Impairment of financial assets
Financial assets, are assessed for
indicators of impairment at the end
of each reporting period. Financial
assets are considered to be
impaired when there is objective
evidence that, as a result of one or
more events that occurred after the
initial recognition of the financial
asset, the estimated future cash
flows of the investment have been
affected.
For certain categories of financial
assets, such as trade receivables,
assets that are assessed for
impairment on a collective basis
even if they were assessed not to be
impaired individually.
For financial assets carried at
amortised cost, the amount of the
impairment loss recognised is the
difference between the asset’s
carrying amount and the present
value of estimated future cash
flows, discounted at the financial
asset’s original effective interest
rate.
The carrying amount of the
financial asset is reduced by the
impairment loss directly for all
financial assets with the exception
of trade receivables, where the
carrying amount is reduced
through the use of an allowance
account. When a trade receivable is
considered uncollectible, it is
written off against the allowance
account. Subsequent recoveries of
amounts previously written off are
credited against the allowance
account. Changes in the carrying
amount of the allowance account
are recognised in profit or loss.
(s) Provisions
Provisions are recognised when the
Group has a present obligation
(legal or constructive) as a result
of a past event, it is probable that
the Group will be required to settle
the obligation, and a reliable
estimate can be made of the
amount of the obligation.
The amount recognised as a
provision is the best estimate of the
consideration required to settle the
present obligation at the end of the
reporting period, taking into
account the risks and uncertainties
surrounding the obligation. When
a provision is measured using the
cash flows estimated to settle the
present obligation, its carrying
amount is the present value of
those cash flows (where the effect
of the time value of money is
material).
When some or all of the economic
benefits required to settle a
provision are expected to be
recovered from a third party, a
receivable is recognised as an asset
if it is virtually certain that
reimbursement will be received and
the amount of the receivable can be
measured reliably.
(t) Share based payments
Equity-settled share-based
payments to employees and others
providing similar services are
measured at the fair value of the
equity instruments at the grant
date. Details regarding the
determination of the fair value of
equity-settled share-based
transactions are set out in note 20.
The fair value determined at the
grant date of the equity-settled
share-based payments is expensed
on a straight-line basis over the
vesting period, based on the
Group’s estimate of equity
instruments that will eventually
vest, with a corresponding increase
in equity. At the end of each
reporting period, the Group revises
its estimate of the number of
equity instruments expected to
vest. The impact of the revision of
the original estimates, if any, is
recognised in profit or loss such
that the cumulative expense
reflects the revised estimate, with a
corresponding adjustment to the
equity-settled employee benefits
reserve.
Murray River Organics Group Limited | Annual Report 2016/17 43 Where the consideration
transferred by the Group in a
business combination includes
assets or liabilities resulting from a
contingent consideration
arrangement, the contingent
consideration is measured at its
acquisition-date fair value.
Changes in the fair value of the
contingent consideration that
qualify as measurement period
adjustments are adjusted
retrospectively, with corresponding
adjustments against goodwill.
Measurement period adjustments
are adjustments that arise from
additional information obtained
during the ‘measurement period’
(which cannot exceed one year
from the acquisition date) about
facts and circumstances that
existed at the acquisition date.
The subsequent accounting for
changes in the fair value of
contingent consideration that do
not qualify as measurement period
adjustments depends on how the
contingent consideration is
classified. Contingent consideration
that is classified as equity is not
remeasured at subsequent
reporting dates and its subsequent
settlement is accounted for within
equity. Contingent consideration
that is classified as an asset or
liability is remeasured at
subsequent reporting dates in
accordance with AASB 139, or
AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets’,
as appropriate, with the
corresponding gain or loss being
recognised in profit or loss.
Notes to the Financial Statements
for the year ended 30 June 2017
(u) Basis of consolidation
(v) Business Combinations
The consolidated financial
statements incorporate the
financial statements of the
Company and entities controlled by
the Company and its subsidiaries.
Control is achieved when the
Company:
• has power over the investee;
• is exposed, or has rights, to
variable returns from its
involvement with the investee; and
• has the ability to use its power to
affect its returns.
The Company reassesses whether
or not it controls an investee if
facts and circumstances indicate
that there are changes to one or
more of the three elements of
control listed above.
Consolidation of a subsidiary
begins when the Company obtains
control over the subsidiary and
ceases when the Company loses
control of the subsidiary.
Specifically, income and expenses
of a subsidiary acquired or
disposed of during the year are
included in the consolidated
statement of profit or loss and
other comprehensive income from
the date the Company gains control
until the date when the Company
ceases to control the subsidiary
When necessary, adjustments are
made to the financial statements of
subsidiaries to bring their
accounting policies into line with
the Group’s accounting policies. All
intragroup assets and liabilities,
equity, income, expenses and cash
flows relating to transactions
between members of the Group are
eliminated in full on consolidation
Acquisitions of businesses are
accounted for using the acquisition
method. The consideration
transferred in a business
combination is measured at fair
value which is calculated as the
sum of the acquisition-date fair
values of assets transferred by the
Group, liabilities incurred by the
Group to the former owners of the
acquiree and the equity
instruments issued by the Group in
exchange for control of the
acquiree. Acquisition-related costs
are recognised in profit or loss as
incurred.
At the acquisition date, the
identifiable assets acquired and the
liabilities assumed are recognised
at their fair value, except that:
• deferred tax assets or liabilities
and assets or liabilities related to
employee benefit arrangements
are recognised and measured in
accordance with AASB 112
‘Income Taxes’ and AASB 119
‘Employee Benefits’ respectively;
• liabilities or equity instruments
related to share-based payment
arrangements of the acquire or
share-based payment
arrangements of the Group
entered into to replace share-based
payment arrangements of the
acquiree are measured in
accordance with AASB 2
‘Sharebased Payment’ at the
acquisition date; and
• assets (or disposal groups) that
are classified as held for sale in
accordance with AASB 5 ‘Non-
current Assets Held for Sale and
Discontinued Operations’ are
measured in accordance with that
Standard.
Goodwill is measured as the excess
of the sum of the consideration
transferred, the amount of any
non-controlling interests in the
acquiree, and the fair value of the
acquirer’s previously held equity
interest in the acquiree (if any)
over the net of the acquisition-date
amounts of the identifiable assets
acquired and the liabilities
assumed. If, after reassessment,
the net of the acquisition-date
amounts of the identifiable assets
acquired and liabilities assumed
exceeds the sum of the
consideration transferred, the
amount of any non-controlling
interests in the acquiree and the
fair value of the acquirer’s
previously held interest in the
acquiree (if any), the excess is
recognised immediately in profit or
loss as a bargain purchase gain.
Murray River Organics Group Limited | Annual Report 2016/17 44 3. Critical accounting
judgements and key
sources of estimation
uncertainty
In the application of the Group’s
accounting policies, management
is required to make judgements,
estimates and assumptions about
carrying values of assets and
liabilities that are not readily
apparent from other sources.
The estimates and associated
assumptions are based on
historical experience and other
factors that are considered to be
relevant. Actual results may differ
from these estimates.
The estimates and underlying
assumptions are reviewed on an
ongoing basis. Revisions to
accounting estimates are recognised
in the period in which the estimate
is revised if the revision affects only
that period, or in the period of the
revision and future periods if the
revision affects both current and
future periods.
(a) Agricultural produce
The current year unharvested dried
fruit and citrus crop is classified as a
biological asset and valued in
accordance with AASB 141
Agriculture. In applying this
standard, the Group has made
various assumptions at reporting
date as the selling price of the crop
can only be estimated and the actual
crop yield or produce not harvested
at reporting date will not be known
until it is completely processed and
sold. Refer to note 4 (c) for
assumptions pertaining to the
current year crop. Agricultural
produce is measured at fair value
less costs to sell. The fair value
inputs are considered Level 3 with
reference to the fair value hierarchy,
refer to note 12.1 for further details
regarding the fair value hierarchy.
(b) Colignan lease
The property leases of the company
include a ~2,600 acre lease from
Arrow Funds Management in which
the Company has the right to
harvest the vine fruit and citrus
from the trees owned by the lessor
for the term of the agreement. The
Company also has first right of
refusal to purchase the property in
the event that the lessor wished to
sell. The term of the lease is 25
years, which is consistent with the
useful life of the bearer plants. The
present value of the minimum lease
payments is greater than the fair
value of the asset.
Management have determined using
judgement that this transaction
constitutes a finance lease and
accordingly has recognised the
leased asset and corresponding
liability in the balance sheet. A
finance charge at the implied
interest rate of the liability as well as
depreciation of the leased asset is
recognised in the profit and loss.
(c) Impairment of assets
Management’s judgement is applied
in determining the impairment of
assets in accordance with AASB136
Impairment of Assets. If the
recoverable amount (higher of the
value in use and fair value less cost
to sell) is lower than the carrying
value of an asset, the difference is
recognised as impairment in the
profit or loss.
(d) Leased water rights
The Group leases short-term
temporary water rights. These are
treated as operating leases on the
basis that:
- the water rights do not transfer to
the Group at the end of the lease;
- there are no option to purchase
the water rights;
- the rights are temporary and
short-term; and
- settlement of the contracts cannot
be settled in cash on a net basis.
(e) Developing vine capital
expenditure
Refer note 12.1
(f) Land, buildings and bearer
plants at revalued amounts
Refer note 12.1
4. Revenues
a) Revenue from sale of goods
b) Other revenue:
Change in assessment of contingent consideration (refer note 13)
Interest income
Insurance proceeds
Government grants
Rental income
Other
2017
$
48,521,720
2016
$
11,957,553
474,141
49,020
70,825
482,757
42,098
236,106
1,354,947
-
45,384
1,484,095
90,324
25,140
229,547
1,874,490
c) Fair value gain of agricultural produce
13,185,216
6,397,600
The fair value gain of agricultural produce represents the fair value (less cost to sell at the point of harvest) of
both harvested and unharvested produce which has been measured as outlined in Note 2(c).
Murray River Organics Group Limited | Annual Report 2016/17 45 Notes to the Financial Statements
for the year ended 30 June 2017
The key assumption related to the 2017 crops are included in the below table:
Assumption
Fair value less costs to sell at point of
harvest
Loose
Organic
($/kg)
Loose
Conventional
($/kg)
Clusters
($/kg)
2.64
1.72
15.00
Fresh
($/kg)
3.77
Citrus
($/kg)
0.59
‘Loose’ refers to dried vine fruit sold as berries, ‘Clusters’ are dried vine fruit sold in its original bunch
format, ‘Fresh’ refers to table grapes, and ‘citrus’ includes various varieties of oranges.
Yields (tonnes)
Harvested pre 30 June 2017 (tonnes)
Estimated hanging fruit at 30 June
2017 (tonnes)
Total (tonnes)
Total crop value ($)
Total
4,966
2,586
7,552
18,465,479
Valuation Techniques and Significant Unobservable Inputs
Type
Description
Valuation technique
Harvested own
grown inventory;
Hanging crop
(grapes/dried fruit
and citrus)
These are crops
from vines and trees
that have an annual
crop production
cycle and a
reasonably stable
development cycle.
Discounted cash
flows:
The valuation model
considers the
present value of the
net cash flows
expected to be
generated by the
crop
Significant
Unobservable
inputs
Inclusive of:
• Estimated future
crop prices.
• Estimated cash
inflows based on
forecasted sales.
• Estimated yields
per acre.
• Estimated
remaining
farming, harvest,
processing,
transportation,
and selling costs.
• Risk adjustment
factors
Inter-relationship
between key
unobservable
inputs and fair
value measurement
The estimated fair
value would increase
(decrease) if:
• the estimated fruit
prices were higher
(lower);
• the estimated
yields per acre
were higher
(lower);
• the estimated
harvest farming,
harvest,
processing,
transportation,
and selling costs
were lower
(higher); or
• the risk-
adjustment factors
were lower
(higher).
Murray River Organics Group Limited | Annual Report 2016/17 46 5. Expenses
(Loss) / Profit before tax includes the following specific expenses
Depreciation and amortisation of non-current assets:
Bearer plants
Buildings and property improvements
Plant and equipment
Leased asset
Leasehold improvements
Total depreciation of non-current assets
Employee benefits expense:
Employee expenses
Superannuation benefits
Employee expenses capitalised to biological assets and vineyard
development
Total employee benefits expense
Finance costs:
Interest on related party loans
Interest on loans
Interest on obligations under finance leases
Interest on lease liability
Capitalised interest relating to qualifying assets
Total finance costs
Other expenses
Bad debts
Stamp duty on group reorganisation
Insurance expense
Other expense
Rates
Rent expense
Net foreign currency losses / (gains)
Total other expenses
2017
$
2016
$
779,439
126,597
2,539,264
741,056
89,518
4,275,874
503,211
84,459
1,000,112
364,208
-
1,951,990
7,145,890
643,611
(2,036,469)
4,435,877
447,262
(890,116)
5,753,032
3,993,023
-
1,033,703
8,471
1,947,140
(693,278)
2,296,036
255,490
1,064,156
361,939
505,770
78,763
695,268
276,232
3,237,618
212,999
456,575
6,662
982,145
(303,093)
1,355,288
111,218
-
140,986
477,958
86,019
101,993
(7,514)
910,660
Profit / (loss) on sale of property, plant and equipment and intangible
assets
Provision for doubtful debts
Unrealised foreign exchange losses / (gains)
Realised foreign exchange losses / (gains)
Operating lease minimum lease payments
One-off IPO and acquisition costs
-
(370,814)
170,046
546,952
(270,408)
1,273,636
1,993,986
360,424
(1,567)
19,847
653,121
-
Murray River Organics Group Limited | Annual Report 2016/17 47 Notes to the Financial Statements
for the year ended 30 June 2017
6. Cash and cash equivalents
Cash at bank
7. Trade and other receivables
Trade receivables
Provision for doubtful debts and customer returns
GST receivable
Related party receivables (refer note 30)
Aging of trade receivables that are not impaired:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61 days+
Movements in the provision for doubtful debts were:
Opening balance at 1 July
Impairment loss recognised
Amounts written off
Closing balance at 30 June
Aging of provision for doubtful debts at 30 June is as follows:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61 days+
2017
$
2,723,818
2016
$
2,249,108
2017
$
7,252,638
(170,046)
7,082,592
741,541
1,066,958
8,891,091
6,062,216
774,005
116,043
130,328
7,082,592
360,424
255,490
(445,868)
170,046
-
53,821
77,901
38,324
170,046
2016
$
4,036,997
(360,424)
3,676,573
474,032
84,555
4,235,160
2,360,352
1,661,944
14,628
73
4,036,997
2,479
360,424
(2,479)
360,424
347,924
-
-
12,500
360,424
Trade receivables are non-interest bearing with credit terms generally settled within 30 days depending on the
nature of the sales transaction. A provision for doubtful debts is recognised when there is objective evidence
that an individual trade receivable is impaired. Doubtful debt expenses are included within other expenses in
the statement of profit or loss and other comprehensive income. All trade receivables that are not impaired are
expected to be received within credit terms.
Murray River Organics Group Limited | Annual Report 2016/17 48 8. Inventories
Packaging stock
Raw materials
Finished goods
Provision for stock obsolescence
9. Agricultural produce
Dried fruit unharvested – at fair value less costs of harvest, processing
and selling costs
Citrus unharvested – at fair value less cost of harvest, processing and
selling costs
New season crop – at cost
Total
2017
$
617,241
19,834,376
7,308,698
(691,731)
27,068,584
2016
$
129,358
9,696,508
2,367,266
(1,298,732)
10,894,400
2017
$
2016
$
2,681,769
165,880
1,365,276
359,819
4,406,864
458,228
-
624,108
Costs to sell include harvest costs, processing and packing costs (if applicable), and selling costs.
Refer to note 3 (a) and 4 (c) for critical sources of judgement uncertainty relating to agricultural
produce and note 4 (c) for information regarding the FY17 crop.
Reconciliation of changes in carrying amount of agricultural produce
Opening balance
Fair value gain of agricultural produce
Increase due to costs incurred to maintain and enhance the
biological asset
Increases due to property acquisitions or gaining control of leased asset
Decreases due to harvest (transferred to inventory)
Closing balance
624,108
13,185,216
-
6,397,600
4,828,979
2,530,696
(16,762,135)
4,406,864
4,923,019
5,357,162
(16,053,673)
624,108
10. Assets held for sale
Water rights
Property assets
Total
2017
$
-
2,068,751
2,068,751
2016
$
411,880
-
411,880
Murray River Organics has commenced selling its facilities at Walnut Avenue and at Benetook Avenue as a
result of the consolidation project at Mourquong as detailed in the Directors’ report. Assets held for sale are
measured at the lower of existing carrying value and fair value less cost to sell.
Murray River Organics Group Limited | Annual Report 2016/17 49 Notes to the Financial Statements
for the year ended 30 June 2017
11. Other assets
Prepayments and other
Amounts held in escrow (refer note 13)
12. Property, plant and equipment
Carrying amounts of:
Freehold land at revalued amount
Bearer plants at revalued amount
Accumulated depreciation – bearer plants
Buildings and property improvements at revalued amount
Accumulated depreciation – buildings and property improvements
Leasehold improvements – at cost
Accumulated depreciation – leasehold improvements
Leased assets – at cost
Accumulated depreciation – leased assets
Plant and equipment at cost
Accumulated depreciation – plant and equipment
2017
$
1,982,764
2,204,481
4,187,245
2016
$
1,040,791
-
1,040,791
2017
$
2016
$
8,295,918
27,563,009
(1,249,556)
5,853,736
(178,089)
9,873,628
(53,250)
19,413,942
(1,105,263)
18,721,375
(4,894,830)
82,240,620
5,084,580
15,227,397
(470,117)
3,209,725
(51,493)
805,139
-
17,400,000
(364,208)
10,001,291
(2,355,565)
48,486,749
Property,
plant and
equipment
Balance at
1 July 2015
Additions
Disposals
Depreciation
for the year
Revaluation
decrement
through profit
and loss
Revaluation
increment /
(decrement)
through asset
revaluation
reserve
Balance at
30 June 2016
Additions
Disposals
Depreciation for
the year
Reclassified as
held for sale
Balance at 30
June 2017
Freehold
land at
revalued
amount
Bearer
plants at
revalued
amount
Buildings
and property
improvements
at revalued
amount
Leasehold
improvements
at cost
Leased asset
at cost
Plant and
equipment
at cost
Total
3,376,870
1,410,501
-
11,915,624
3,382,664
-
3,040,202
1,074,134
-
-
805,139
-
-
17,400,000
-
2,824,198
5,840,928
(19,290)
21,156,894
29,913,366
(19,290)
-
(503,211)
(84,459)
(29,938)
-
(217,862)
327,148
(37,797)
(653,782)
-
-
-
(364,208)
(1,000,112)
(1,951,990)
-
-
-
-
(247,800)
(364,432)
5,084,581
4,072,697
-
14,757,280
12,335,612
-
3,158,233
3,847,348
-
805,139
9,104,758
-
17,035,792
2,013,942
-
7,645,724
8,750,374
(26,235)
48,486,749
40,124,731
(26,235)
-
(779,439)
(126,597)
(89,519)
(741,055)
(2,539,264)
(4,275,874)
(861,360)
-
(1,203,337)
-
-
(4,054)
(2,068,751)
8,295,918
26,313,453
5,675,647
9,820,378
18,308,679
13,826,545
82,240,620
Murray River Organics Group Limited | Annual Report 2016/17 50 12.1 Fair value measurement of freehold land, buildings and bearer plants
The Group’s freehold land, buildings and bearer plants are stated at their revalued amounts, being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated
impairment losses. The fair value measurements of the Group’s freehold land and buildings and bearer plants
as at 30 June 2017 are determined via Directors valuations, which from time to time are reconfirmed via
independent external valuations. At 30 June 2016, an independent valuation was performed by CBRE. CBRE
are members of the Institute of Valuers of Australia, and they have appropriate qualifications and recent
experience in the fair value measurement of properties in the relevant locations.
The valuation approach adopted is a direct comparison and discounted cash flow method.
During the 12 months ended 30 June 2017, the Group capitalised $3,486,299 relating to the development of
existing or new vineyards which are determined to still be in development, that is, these vines are yet to deliver
commercial quantities of produce. Management deem vines less than three years of age as developing vines.
After capitalising these costs into the carrying value of the Group’s existing immature vineyards, the Directors
have determined that the new carrying values are materially consistent with fair value.
The nature of these expenses includes; the purchase of young vines, buds, irrigation infrastructure, trellising
systems, and a proportionate allocation of operational vineyard expenses including water, fuels, vehicle costs,
and labour. The proportionate allocation of operational vineyard expenses is based on the number of vineyard
patches that are considered immature versus the total number of patches. Of the Group’s vineyards where this
methodology applied, approximately 33% were considered immature, or in development phase.
The Group’s freehold land, buildings and bearer plants are classified as Level 3 with reference to the fair value
hierarchy.
Fair Value Measurement
The fair value measurements of the Group stated above refer to the fair value hierarchy. These include:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: Inputs other than quoted prices included within level one that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices); and
• Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
There were no transfers between levels during the year.
Had the Group’s freehold and buildings (other than land and buildings classified as held for sale) been
measured on a historical cost basis, their carrying amount would have been as follows
Freehold land
Bearer plants
Buildings and property improvements
Total
2017
$
5,227,227
21,905,545
5,522,204
32,654,976
2016
$
2,015,890
10,349,372
3,004,788
15,370,050
Murray River Organics Group Limited | Annual Report 2016/17 51 Notes to the Financial Statements
for the year ended 30 June 2017
Property Transactions
On 16 December 2016, the Group acquired 279 acres of land called the “Fifth Street” Vineyard, which includes
179 acres of mature table grape on fresh fruit trellis, in Victoria, for $10,424,432 cash consideration.
The consideration has been allocated to the assets acquired as follows:
Land
Irrigation infrastructure
Vineyard infrastructure
Bearer plants
Biological assets - growing crop
Buildings
Equipment
Total fair value
Carrying
value
$
941,600
474,800
838,000
4,446,550
1,801,966
1,480,370
441,146
10,424,432
On 11 May 2017, the Group acquired 7,764 acres of land called the “Nangiloc” Vineyard, which includes 157
acres planted to citrus and 177 acres planted to wine where both are drip-irrigated, in Victoria, for $7,922,000
cash consideration.
The consideration has been allocated to the assets acquired as follows:
Land
Irrigation infrastructure
Vineyard infrastructure
Biological assets - growing crop
Buildings
Total fair value
Other transactions
Carrying
value
$
3,131,098
196,522
3,816,520
728,730
49,130
7,922,000
In addition, during the full year, property, plant and equipment increased in value as a consequence of the
following significant capital expenditure projects:
• $3,486,299 - Conversion and development of vineyards (including vineyard infrastructure and equipment)
• $5,317,649 - Establishment of Dandenong packing facility
• $5,434,369 - Upgrade of Sunraysia processing facility
• $7,071,944 - Other vineyard PPE
• $480,691 - Office equipment and computer software
• $2,008,784 - Colignan leased asset improvements
Murray River Organics Group Limited | Annual Report 2016/17 52 13. Intangible assets
Goodwill - balance at start of year
Additions
Balance at end of the year
2017
$
-
10,749,272
10,749,272
2016
$
-
-
-
Acquisition of the Food Source International business
On 12 September 2016, the Group acquired the Food Source International (“FSI”) business assets.
Consideration transferred
The following table summarises the acquisition date fair value of consideration transferred.
Cash
Contingent consideration (a)
Total consideration transferred
Contingent consideration
Carrying
value
$
4,651,783
900,000
5,551,783
The Group is required to pay the sellers contingent consideration of $900,000 (maximum) if the trading income
of FSI is at least $22,000,000 for the 12 months ended 30 June 2017 (inclusive of pre-acquisition revenue). If
the trading income is less than $22,000,000 a discount is applied to the contingent consideration. At
acquisition date, Management anticipated that the full contingent consideration would be payable. This
assessment did not change at 30 June 2017.
Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of FSI as at the date of acquisition were:
Inventory
Deferred tax asset
Employee liabilities
Foreign currency contracts
Total fair value
Goodwill arising on acquisition
Consideration transferred
Less: fair value of identifiable net assets
Goodwill arising on acquisition
Carrying
value
$
2,926,142
39,612
(7,407)
(124,633)
2,833,714
Carrying
value
$
5,551,783
(2,833,714)
2,718,069
Transaction costs of $136,032 have been expensed and are included in professional fees in the statement of profit
or loss and are part of operating cash flows in the statement of cash flows.
Murray River Organics Group Limited | Annual Report 2016/17 53 Notes to the Financial Statements
for the year ended 30 June 2017
Acquisition of Australian Organic Holdings Pty Ltd business assets
On 16 November 2016, the Group completed the acquisition of the business assets of Australian Organic
Holdings Pty Ltd (“Australian Organic Holdings”).
Consideration transferred
The following table summarises the acquisition date fair value of consideration transferred.
Cash
Contingent consideration (a)
Total consideration transferred
Contingent consideration
Carrying
value
$
10,300,000
2,200,000
12,500,000
The Group is required to pay the sellers additional consideration of $2,200,000 (maximum) if the trading income
of Australian Organic Holdings is at least $25,000,000 for the 12 month ended 30 June 2017 (inclusive of
pre-acquisition revenue). If the trading income is less than $25,000,000 a discount is applied to the contingent
consideration at year-end. Management have now determined that the full earnout is not likely to be payable and
the contingent consideration has been reduced by $474,141 which is reflected in ‘other income’.
Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities as at the date of acquisition were:
Inventory
Plant and equipment
Deferred tax asset
Employee liabilities
Foreign currency contracts
Total fair value
Goodwill arising on acquisition
Consideration transferred
Less: fair value of identifiable net assets
Goodwill arising on acquisition
Carrying
value
$
4,373,298
321,504
96,859
(44,676)
(278,188)
4,468,797
Carrying
value
$
12,500,000
(4,468,797)
8,031,203
Transaction costs of $147,481 have been expensed and are included in professional fees in the statement of profit
or loss and are part of operating cash flows in the statement of cash flows.
Contingent consideration recognised through these business combinations is measured at fair value at the end
of each reporting period. The following table gives this information about how the fair values of these financial
liabilities are determined.
Murray River Organics Group Limited | Annual Report 2016/17 54 Financial assets /
financial liabilities
Fair value as at
30/06/17
30/06/16
Fair value
hierarchy
Contingent
consideration in a
business combination
Liabilities
- $2,625,859
(i)
Nil
Level 2
Valuation techniques and key inputs
Contingent consideration is dependent
on Food Source International and
Pacific Organics meeting revenue
targets (refer above)
The carrying value of the contingent
consideration has been determined
based on actual revenue achieved in
relation to the revenue target for their
performance period which is the 2017
financial year.
(i) This reflects the reduced value of contingent consideration.
Impairment tests for goodwill
Goodwill is allocated to the Company’s single cash-generating unit (CGU) identified according to its operating
segment. The recoverable amount of the Group’s single CGU is determined based on a value-in-use calculation
which require the use of assumptions. This calculation uses cash flow forecast based on financial projections by
management covering a five year period based on growth rates taking into account past performance and its
expectations in the future. Assumptions include; the impact of the maturity profile of developing agricultural
assets, new product development, and the growth in national and global sales teams will improve EBITDA over
the forecast period. Cash flow projections beyond the five-year period are not extrapolated, but a terminal value
is included in the calculation. A real pre-tax weighted average cost of capital of between 16.5% and 17.8% has
been used to discount the cashflow projections.
Other key assumptions include:
• Revenue growth from the full year impact of the acquisition businesses and growth through new customers
• Yields and EBITDA margin increasing over time to reflect long term averages
• Cost indexation
• Long term growth rate of 2%
The recoverable amount of the goodwill exceeds the carrying amount at 30 June 2017.
A change in the underlying assumptions could result in the carrying value of the CGU exceeding its
recoverable amount. The Group experienced a challenging year in FY2017 with regard to crop size, harvest
timing, and crop quality, which has materially impacted earnings. The cash flow projections used in the
valuation of recoverable amount assumes that crop sizes and harvest will normalise to long-term average yields
over time, and that quality issues will improve. Should yields, harvest timing, and quality of the Cluster
product not recover as anticipated, absent any changes in other assumptions the carrying value of the CGU
could exceed its recoverable amount.
Impact of acquisitions on the results of the Group
Had these business combinations have effected at 1 July 2016, the revenue of the Group would have been
$62.6m, and the loss of the year would have been reduced by $1.3m. The directors of the Group consider these
‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on an
annualised basis and to provide a reference point for comparison in future periods.
Murray River Organics Group Limited | Annual Report 2016/17 55 Notes to the Financial Statements
for the year ended 30 June 2017
14. Trade and other payables
Trade payables
Other accruals and payables
Deferred income
Amount due under contract (Nangiloc)
Total
15. (a) Borrowings
Current
Secured borrowings:
Bank loans (i)
Hire purchase liability (ii)
Lease liability (iii - refer to 15 (b))
Total
Non-current
Secured borrowings:
Bank loans (i)
Hire purchase liability (ii)
Lease liability (iii - refer to 15 (b))
Total
2017
$
8,364,318
2,533,518
52,321
7,172,000
18,122,157
2016
$
3,759,807
498,084
27,135
-
4,285,026
2017
$
2016
$
14,919,836
980,010
1,387,796
17,287,642
1,259,250
638,237
1,649,500
3,546,987
12,116,630
3,313,953
17,797,470
33,228,053
11,300,000
1,981,966
15,814,814
29,096,780
(i) Bank loans are secured by registered mortgage freeholds over the land and buildings of the Group. The
carrying value of assets pledged as security is $32,363,018. The maturity date of non-current loans is April
2019 ($3,000,000), October 2019 ($8,300,000), and March 2020 ($816,630).
(ii) Hire purchase liabilities are secured over the assets under hire purchase.
(iii) The leased liability is secured by the underlying leased asset which had a carrying value of $21,819,609 (2016:
$18,308,679). The leased asset to which the leased liability relates is summarised in note 3 (b).
Refer note 22 for the weighted average of fixed and floating interest rates.
Before the end of the financial year ended 30 June 2017, the Group was forecasting to breach its banking covenant
in relation to interest cover ratio. Before a breach occurred, the Group renegotiated its banking covenants which
meant that no interest cover ratio was applicable for the year ended 30 June 2017. Revised covenants are in place
for the year ending 30 June 2018, which the Directors are forecast to be compliant with.
Murray River Organics Group Limited | Annual Report 2016/17 56 15. (b) Finance lease liability
The company has a finance lease for which the future minimum lease payments amounts to $57,014,077 (2016:
$52,878,335). They relate to the lease of the Colignan vineyard. It is a non-cancellable lease with an implicit
interest rate of 11.33% and has a remaining term of 24 years. Reimbursements of eligible capital expenditure
incurred on the vineyard results in an increase to the lease liability (and lease asset).
Not later than one year
Later than one year and not later than five years
Later than five years
Minimum lease payments
Less future finance charges
Total recognised as liability at 30 June
16. Provisions
Current
Employee entitlements
Provision for stamp duty payable (i)
Contingent consideration
Total
Non-Current
Employee entitlements
Make good liability
Total
2017
$
1,387,796
7,785,066
47,841,215
57,014,077
2016
$
1,649,500
8,499,075
42,729,760
52,878,335
(37,828,811)
19,185,266
(35,414,021)
17,464,314
2017
$
469,663
1,040,554
2,625,859
4,136,076
48,367
397,539
445,906
2016
$
177,197
-
-
177,197
30,663
-
30,663
(i) Estimate of stamp duty payable following corporate reorganisation, refer to note 5.
17. Other financial liability
Foreign currency contracts – fair value through profit or loss
Total
2017
$
546,952
546,952
2016
$
-
-
Murray River Organics Group Limited | Annual Report 2016/17 57 Notes to the Financial Statements
for the year ended 30 June 2017
18. Notes to the cash flow statement
(a) Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
includes cash on hand and in banks and investments in money market
instruments, net of outstanding bank overdrafts. Cash and cash
equivalents at the end of the financial year as shown in the cash flow
statement is reconciled to the related items in the statement of financial
position as follows:
Cash at bank
(b) Reconciliation of profit/ (loss) for the year to net cash flows from
operating activities
(Loss) / profit for the year
Adjustment for items not involving the outlay of cash:
Bad and doubtful debts
(Profit)/loss on sale of assets
Fair value gain of agricultural produce
Impairment of property, plant and equipment
Share based payment expense
Unrealised foreign exchange loss
Depreciation and amortisation
Earn out release
Capitalisation of borrowing cost
Changes in net assets and liabilities:
(Increase)/decrease in assets:
Trade and other receivables
Inventories
Other assets
Biological assets
Current tax asset
Increase/(decrease) in liabilities:
Deferred tax liabilities
Trade and other payables
Provisions
Net cash used in operating activities
2017
$
2016
$
1,365,276
458,228
2,723,818
2,249,108
(5,930,523)
2,594,111
(190,378)
(23,995)
(13,185,216)
-
723,458
546,952
4,275,874
(474,141)
(693,278)
(14,951,247)
(3,215,641)
(8,874,744)
(1,209,160)
12,193,414
-
(1,678,810)
4,777,786
1,696,182
(11,262,222)
357,945
(370,820)
(6,397,600)
247,800
-
-
1,951,990
-
(303,093)
(1,919,667)
(3,289,824)
(744,643)
(1,017,350)
-
63,891
1,233,554
2,129,037
(108,279)
(3,653,281)
Murray River Organics Group Limited | Annual Report 2016/17 58 19. Issued capital
Refer to note “1. General Information and group reorganisation” for details of the stapling transaction in the
comparative period and the Group reorganisation which occurred in the current period.
Equity securities issued
Opening balance (1 July)
Share split
Issue of shares
Issue of shares before group reorganisation
Issue of shares to acquire Non-controlling
interest (Murray River Organics Property
Trust)
Issue of shares as part of the group
reorganisation (Murray River Organics
Limited)
Issue of shares at initial public offering
Issue of shares to non-executive directors
Equity raising costs (net of tax)
Closing balance (30 June)
Year ended 30 June 2017
$
9,692,878
-
-
13,410,974
29,333,305
Number
16,976,170
-
-
5,587,922
22,564,076
Year ended 30 June 2016
$
12
-
10,036,788
-
-
Number
12
11,999,988
4,976,170
-
-
22,564,076
35,562,760
-
-
19,230,769
163,537
-
87,086,550
25,000,000
212,598
(1,210,552)
112,001,963
-
-
-
16,976,170
-
-
(343,922)
9,692,878
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
20. Reserves
Reserves comprise:
Asset revaluation reserve
Share based payment reserve
Group reorganisation reserve
(a) Asset revaluation reserve
Balance at the beginning of the year
Revaluation (decrements) / increments
Balance at the end of the financial year
(a)
(b)
(c)
2017
$
5,341,029
510,861
(47,452,844)
(41,600,954)
7,630,042
(2,289,013)
5,341,029
2016
$
7,620,042
-
-
7,620,042
7,994,474
(364,432)
7,630,042
The asset revaluation reserve arises on the revaluation of freehold land, buildings and bearer plants. Where a
revalued asset is sold that portion of the asset revaluation reserve which relates to that asset and is effectively
realised is transferred directly to retained profits. Prior to the reorganisation as outlined in Note 1, no income
tax was payable by Murray River Organics Property Trust, nor by the Trustee of the Trust provided the
unitholders were presently entitled to the income of the trust as determined in accordance with the Trust Deed.
As a result of the reorganisation, all units are held by Murray River Organics Group Limited and all income of
the Trust will be taxed in Murray River Organics Group Limited. Consequently, the deferred tax impact in
respect of prior period gains on the revaluation of property, plant & equipment is required to be recognised in
accordance with AASB 112 Income Tax. The deferred tax impact of $2,289,013 on prior period revaluation
gains has therefore been recognised in Other Comprehensive Income in the current year.
(b) Share-based payments reserve
Balance at the beginning of the year
Share-based payments
Amounts vested and transferred to share capital
Balance at the end of the financial year
2017
$
-
723,459
(212,598)
510,861
2016
$
-
-
Murray River Organics Group Limited | Annual Report 2016/17 59
Notes to the Financial Statements
for the year ended 30 June 2017
The share-based payments reserve is used to record the fair value of shares or equity-settled share-based
payment performance rights issued to employees.
The Group provides benefits to its employees in the form of share-based payment transactions, whereby services
are rendered in exchange for shares or performance rights (‘equity-settled transactions’).
The fair value of shares and performance rights are recognised as an expense with the corresponding increase
in equity (share-based payments reserve). When the share based payments vest, they are transferred to
contributed equity. The fair value is measured at grant date and recognised over the period during which the
holder becomes unconditionally entitled to the options.
Performance Rights for continued employment (‘One-off retention payment’) and performance rights subject to an
earnings per share (‘EPS’) vesting condition are not subject to any market based vesting conditions. Performance
rights that have a share-price growth (‘SPG’) performance condition, is a market based vesting condition. The fair
value of market based performance rights issued was measured using a binomial option pricing model.
The SPG vesting condition is based on the Company’s SPG on a compound basis over the relevant performance
period. The opening share price on which this is to be measured is the offer price under the IPO ($1.30) and the
closing price is the volume weighted average price of the company’s shares over the 30-day period to 30 June 2019.
The following table summarises the equity settled transactions during the year (2016: nil) and the inputs used
in measuring their fair values:
Shares
Number issued
Fair value at grant date
Performance rights
Number issued
Fair value at grant date
Share price at grant date
Expected volatility
Expected dividend yield
Risk-free rate
Vesting date
Non-Executive
Directors
163,537
$1.30
KMP
One-off
retention
Performance
– EPS
Performance
– SPG
1,153,845
-
$1.30
-
$1.30
-
47.5%
-
0.0%
-
-
1.85%
- 30/06/2019 (i)
250,264
$1.30
$1.30
47.5%
0.0%
1.85%
30/06/2019
250,264
$0.65
$1.30
47.5%
0.0%
1.85%
30/06/2019
Other
employees
-
-
One-off
retention
153,845
$1.30
$1.30
47.5%
0.0%
1.85%
15/12/2017
(i) Subsequent to the modification of the 1,153,845 performance rights (in aggregate) granted under the
Once-off Retention Payment (refer to section 4.6 of the Remuneration Report), the expiry date is changed to
4 October 2019.
Volatility is a measure of the degree to which an underlying asset’s market price changes during a period of time.
Murray River Organics Group Limited was listed on the ASX on the valuation date and was not publically traded
prior to this date. As such, the volatilities of a range of appropriate pier group companies are used as a proxy.
Following listing, the CEO, COO and CFO (KMP’s) received approximately 1,153,845 performance rights (in
aggregate) as a ‘one-off retention payment’ (valued (in aggregate) at $1,500,000). Performance rights issued as
part of this once-off retention payment will vest in one tranche on 30 June 2019, provided that the relevant
executive has remained in continuous employment with the Group from the date of the grant until the date of
vesting. These performance rights are not subject to any other vesting conditions.
250,264 performance rights were issued to KMP’s subject to EPS hurdles.
250,264 performance rights were issued subject to SPG hurdles.
Performance rights totalling 153,845 were also issued to other employees and will vest if the employees
remain in continuous employment until December 2017.
Non-executive directors received a one-off issue 163,537 shares (in total) on the completion of the Company’s
listing in recognition for the additional work undertaken by the non-executive Directors.
(c) Corporate re-organisation reserve
Balance at the beginning of the year
Arising on group reorganisation (refer to Note 1)
Balance at the end of the financial year
2017
$
-
(47,452,844)
(47,452,844)
2016
$
-
-
-
Refer to Note 1, for information regarding the corporate reorganisation reserve.
Murray River Organics Group Limited | Annual Report 2016/17 60 21. Income tax
The prima facie income tax expense on pre-tax accounting loss from operations of Murray River Organics
Limited reconciles to the income tax expense/(credit) in the financial statements as follows
(Loss) / profit before tax
Income tax expense / (benefit) calculated at 30%
Tax effect of:
Effect of non-deductible share based payment
Effect of non-deductible IPO costs and stamp duty
Effect of expenses that are not deductible in determining taxable profit
Effect of other deductible expenses in determining taxable profit
Effect of non-assessable income in determining taxable profit
Effect of non-recognised trust income tax expense
Adjustments recognised in the current year in relation to prior years
Income tax (benefit)/expense recognised in profit or loss
Deferred tax liabilities
Fair value uplift recognised in cost base of inventory
Biological Assets
Property, plant and equipment
Deferred tax assets
Employee entitlements
Accrued expenses
Deferred revenue
Deductible lease payments (Colignan)
Tax losses
Foreign exchange derivatives
Expenditure incurred but deductible over time
Other
Net deferred tax liability
Reconciliation of deferred taxes
Opening balance 1 July
Recognised in profit or loss
Recognised directly in equity
Acquisitions/ disposals
Tax losses
Other
Closing balance at 30 June
2017
$
(7,156,644)
(2,146,993)
224,328
843,474
78,940
(81,876)
(142,242)
-
(1,224,369)
(4,955)
(1,229,324)
(302,804)
(547,730)
(2,278,677)
(3,129,211)
155,409
138,551
117,143
430,795
165,795
164,086
552,344
60,273
1,784,396
(1,344,815)
(940,427)
1,069,283
(1,770,202)
136,471
155,087
4,973
(1,344,815)
2016
$
3,637,320
1,091,196
-
-
8,103
(49,837)
(13,801)
1,035,661
7,548
1,043,209
(1,732,048)
(187,232)
(78,108)
(1,997,388)
62,358
37,248
8,140
160,482
560,167
-
120,439
108,479
1,057,313
(940,075)
63,874
(1,735,731)
147,395
-
560,167
24,220
(940,075)
Murray River Organics Group Limited | Annual Report 2016/17 61 Notes to the Financial Statements
for the year ended 30 June 2017
22. Financial Risk Management
The Group’s activities expose it to various types of risks. The most important types of financial risks to which
the Group is exposed are market risk, credit risk and liquidity risk. The Company is responsible for
determining objectives and risk policies. The exposure to each of these risks, as well as the Group’s policies and
processes for managing these risks are described below.
(a) Market risk
Market risk embodies the potential for both loss and gains and would normally include currency risk, interest
rate risk and other price risk.
i) Currency risk
Currency risk is the risk of financial loss relating to financial instruments arising from changes in foreign
currencies. The Group has exposure to currency risk as a proportion of purchases are denominated in US
dollars. The Group seeks to take out forward contracts and options in order to mitigate the risk of fluctuating
AUD:USD.
ii) Interest rate risk
The Group has exposure to interest rate risk. Interest-bearing financial assets and liabilities are limited to cash
and cash equivalents, and borrowings which have variable interest rate terms.
The Group’s exposure to interest risk rate at reporting date, including sensitivity to changes in market interest
rates that were reasonably possible, is as follows:
Floating Interest Rate
1 Year or Less
Over 1 to 5 Years
More than 5 Years
Non-Interest Bearing
Fixed Interest Rate Maturing In:
Total Carrying
Amount as per
the Balance Sheet
Weighted Average
Effective
Interest Rate
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
2017
%
2016
%
Financial Instruments
(i) Financial Assets
Cash
2,723,818
2,249,108
Trade Receivables
-
-
Total Financial Assets 2,723,818 2,249,108
-
-
-
-
-
-
-
1,113,003
704,778
3,718,131
2,239,199
- 11,985,953
1,270,556
-
1,387,796
1,649,500
7,785,066
8,499,075 47,841,215 42,729,760
131,100
493,810
3,106,676 12,384,430
-
13,451,973
-
-
-
-
-
- 18,122,157
4,285,026
8,122,157
4,285,026
13,451,973
- 14,617,852
4,118,644 14,609,873 23,122,704 47,841,215 42,729,760 18,122,157
4,285,026 58,637,851 36,928,737
-
-
-
-
-
-
-
2,723,818
2,249,108
7,252,638
4,397,421
7,252,638
4,397,421
7,252,638
4,397,421
9,976,456
6,646,529
-
-
-
-
4,293,962
2,620,147
- 11,919,836
1,259,250
4.87%
4.13%
5.06%
5.29%
- 19,185,266 17,464,314
11.33% 11.33%
- 15,116,630 11,300,000
4.45%
4.37%
-
-
(ii) Financial Liabilities
Equipment Loans
Trade Finance
Colignan Lease Finance
Borrowings
Trade Creditors
Total Financial
Liabilities
(b) Credit risk
Credit risk is the risk that a party to the financial instrument will cause a financial loss to the Group by failing
to discharge an obligation. The Group is exposed to credit risk through the financial assets it holds, the value
of which represents the maximum exposure to credit risk.
The Group manages credit risk and the losses which could arise from default by ensuring that parties to
contractual arrangements are of an appropriate credit rating or do not show a history of defaults. Cash at bank
of $2,723,818 (2016: $2,249,108) is held with reputable financial institutions.
Murray River Organics Group Limited | Annual Report 2016/17 62
(c) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with
financial liabilities. The Group monitors its exposure to liquidity risk by ensuring that there is sufficient cash
on hand to meet the contractual obligations of financial liabilities as they fall due.
There is no material difference between the fair value and the carrying value of financial liabilities. The Group
manages liquidity risk by continuously monitoring forecasts and actual cash flows.
Financing arrangements
The following debt facilities are held with the National Australia Bank. The usage of the facilities in place at 30
June 2017 is below:
30 June 2017
Debt facilities
Term debt
Trade finance
Bank guarantee
Equipment loans
Facility limit ($)
19,583,000
12,000,000
1,530,000
4,500,000
Used ($)
15,116,630
11,873,360 (i)
1,513,670
4,214,202
Unused facility ($)
4,466,370
126,640
16,330
285,798
(i) Excludes accrued interest of $46,477
The following debt facilities are held with other financial institutions:
30 June 2017
Debt facilities
Equipment loans
(d) Fair values
Facility limit ($)
79,760
Used ($)
79,760
Unused facility ($)
-
The aggregate fair values and carrying amount of financial assets and financial liabilities are not materially
different from the book values disclosed in the statement of financial position and in the notes to the financial
statements.
Capital management
The Group manages its banking facilities to ensure that the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of debt and equity. The Group’s overall
strategy remains unchanged from 2016. The capital structure of the Group consists of net debt (borrowings as
detailed in note 15 offset by cash and bank balances) and equity of the Group (comprising issued capital,
reserves and retained earnings as detailed in note 20). The Group is not subject to any externally imposed
capital requirements.
Murray River Organics Group Limited | Annual Report 2016/17 63 Notes to the Financial Statements
for the year ended 30 June 2017
Key net debt metrics are included in the following table:
Net debt (including leases)
Net debt (excluding leases)
Net debt / equity (including leases)
Net debt / equity (excluding leases)
Net tangible assets
Financial risk management objectives
Statutory
30 June 2017
($m)
47.8
28.6
72%
43%
55.4
Statutory
30 June 2016
($m)
30.4
12.9
102%
43%
29.9
Management monitors and manages the financial risks relating to the operations of the Group. These risks
include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk.
The Group seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk
exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of
directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of
financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The
Group does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes.
These derivative financial instruments are measured at fair value at the end of each reporting period. The
following table gives information about how the fair values of these financial liabilities are determined (the
valuation techniques and inputs used).
Financial assets /
financial liabilities
Fair value as at
30/06/17
30/06/16
Fair value
hierarchy
Valuation techniques and key inputs
Foreign currency
contracts
Liabilities
- $546,952
Nil
Level 2
Discounted cash flow.
Future cash flows are estimated based
on forward exchange rates (from
observable forward exchange rates at
the end of the reporting period) and
contract forward rates, discounted at a
rate that reflects the credit risks of
various counterparties.
Murray River Organics Group Limited | Annual Report 2016/17 64 23. Key management personal compensation
The compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Equity settled share-based payments
Total
24. Remuneration of auditor
Audit or review of the financial report
Tax services
Transaction services
Other assurance activities
Total
2017
$
806,323
72,495
10,803
610,477
1,500,098
2017
$
173,000
105,840
530,000
152,100
960,940
2016
$
557,091
51,810
8,824
-
617,725
2016
$
65,850
20,000
-
-
85,850
The auditor of Murray River Organics Group Limited is Deloitte Touche Tohmatsu. ‘Other services’
predominately includes due diligence work associated with the business acquisitions and initial public offering.
25. Contingent liabilities
Contingent liabilities include guarantees totalling $1,513,670 provided in respect of property leases (2016:
$824,750). The Group is currently not liable for these amounts.
26. Segment information
The Group operates in one industry being the production of food and food products within Australia. All of the
Group’s revenue is attributable to this group of products. Approximately 91% of the Group’s revenue is
attributed to domestic customers, and the remainder relates to exports to USA (1%), Asia (4%), Europe (3%) and
others (1%). In 2017, two customers contributed greater than ten percent of the Group’s revenue amounting to
$28,556,423. (2016: one customer amounting to $2,046,576).
The chief operating decision maker (being the Managing Director) regularly reviews entity wide information
that is compliant with Australian Accounting Standards. There is only one segment for segment reporting
purposes and the information reviewed by the chief operating decision maker is the same as the information
presented in the statement of financial position, statement of profit and loss and other comprehensive income
and statement of cash flows.
Murray River Organics Group Limited | Annual Report 2016/17 65 Notes to the Financial Statements
for the year ended 30 June 2017
27. Earnings per share (EPS)
(a) Basic earnings per share
Basic earnings per share (EPS) is determined by dividing profit for the year after income tax attributable to
members of the Group, excluding any costs of servicing equity other than share, by the weighted average
number of share outstanding during the period.
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit attributable to security holders by the weighted
average number of ordinary shares outstanding during the period (adjusted for the effects of performance
rights issued). Prior year earnings per share was adjusted for current year share splits.
Basic earnings per share
Diluted earnings per share
Earnings used to calculate basic and diluted earnings per share
Profit / (Loss) for the year attributable to equity holders of Murray
River Organics Group
Weighted average number of share outstanding during the year used
in calculating basic earnings per share
Weighted average number of performance rights options on issue
Weighted average number of share outstanding during the year used
in calculating dilutive earnings per share
2017
$
(0.08)
(0.08)
2016
$
0.04
0.04
(5,927,320)
2,594,111
Number of share
77,509,645
888,093
58,628,772
-
78,397,738
58,628,772
Weighted average number of shares takes into consideration share splits which occurred and also the change
in capital structure following the group reorganisation as outlined in Note 1.
28. Obligations under finance leases
The Group leases property assets under a finance lease. The lease term is 24 years (2016: 25). Refer to note 15
for further details.
29. Obligations under operating leases
The Group leases property assets and short term temporary water entitlements under operating leases.
Not later than one year
Later than one year and not later than five years
Later than five years
2017
$
1,439,091
3,862,090
2,029,645
7,330,826
2016
$
1,034,453
4,788,300
2,582,218
8,404,971
Murray River Organics Group Limited | Annual Report 2016/17 66 30. Related party transactions
The following balances were outstanding at the end of the reporting period:
Sornem Asset Management
Sorensen Family Trust
Jamel Family Trust
Interest on related party loans 2017 was nil (2016: $212,999).
2017
$
2016
$
Amounts owed by related parties
87,764
489,597
489,597
84,555
-
-
Notes
1) The Sorensen Family Trust and the Jamel Family Trust are entities associated with the Directors, Erling
Sorensen and Jamie Nemtsas respectively. Amounts owed by these Trusts relate to pre-acquisition tax
liabilities of the Sornem Group which they have indemnified MROGL. Post 30 June 2017, these receivables
have been paid.
2) Sornem Asset Management Pty Ltd is a related entity which used shared services with the Group during FY17.
During the year, the Group received $1,853,557 from Arrow Primary Infrastructure Fund (Arrow) as funding
for capital expenditure incurred on the Colignan vineyard (2016: nil). Arrow also paid $160,385 directly to
suppliers in respect to the capital expenditure at the Colignan vineyard. The total $2,013,943 funding received
from Arrow will be repaid in full by the Group by way of higher finance lease repayments as required under
the lease agreement. Arrow Primary Infrastructure Fund is the lessor of the Colignan vineyard. During the
year, the Group paid $1,757,566 (2016: $869,678) in relation to lease payments as lessee of the Colignan
vineyard. The Directors, Erling Sorensen and Jamie Nemtsashold units currently on issue in the Arrow
Primary Infrastructure Fund. The lease has been entered into on an arm’s length terms and neither interest
held represents a controlling interest in Arrow Primary Infrastructure Fund.
31. Events subsequent to reporting date
The settlement of the Nangiloc acquisition (referred to in note 12) was settled on 25 July 2017, funded by bank
debt of approximately $7.5m. This debt was made up of the drawdown of unused available facilities in place at
30 June 2017 and an increase to this facility subsequent to 30 June 2017 of approximately $3m.
On 22 August 2017, the Group renegotiated their banking facilities. Resultant changes include:
• Banking covenants were revised
- Interest Cover to be greater than 3.6x and be tested six-monthly at 31 December and 30 June each year; and
- Stock, Debtor and Inventory Cover Ratio to be greater than 1.25x and be tested six- monthly at 31 December
and 30 June each year.
• The $3m increase to facilities referred to above is to be repaid by the Group by 31 October 2017
• The trade finance facility limit has been increased from $12m to $18m, but will reduce back to $16m via
reallocation to equipment finance facility in November 2017
Murray River Organics Group Limited | Annual Report 2016/17 67 Notes to the Financial Statements
for the year ended 30 June 2017
32. Controlled entities
Parent entity:
Murray River Organics Group Limited
Subsidiaries of Murray River Organics Limited (i)
Murray River Organics Limited
Murray River Organics Property Trust
Murray River Organics Property Trust 2
Murray River Organics Property Pty Ltd (ATF Murray
River Organics Property Trust)
Murray River Organics Property 2 Pty Ltd (ATF Murray
River Organics Property Trust 2)
Sornem Group Pty Ltd
Sornem Capital Pty Ltd
Country of
incorporation
Percentage owned (%)
30 June 2017
30 June 2016
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
-
100
-
-
100
-
-
-
(i) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Murray River Organics
Group Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and
lodge an audited financial report. The consolidated financial position and financial performance of these entities
is the same as the controlled entities within the Group.
Refer to note 1 for information regarding the Group reorganisation.
33. Parent entity financial information
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Loss for the year
Other comprehensive income
Total comprehensive income
MROGL was incorporated on 06/09/2016 and therefore has no comparative period.
2017
$
-
111,901,688
-
-
111,901,688
(112,001,962)
(510,861)
611,135
(111,901,688)
611,135
-
611,135
Murray River Organics Group Limited | Annual Report 2016/17 68 34. Adoption of new and revised Accounting Standards
34.1 Amendments to Accounting Standards that are mandatorily effective for the current reporting period
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to their operations and effective for an accounting
period that begins on or after 1 July 2016.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are
relevant to the entity include:
AASB 1057 Application of Australian Accounting Standards and AASB 2015-9 Amendments to Australian
Accounting Standards – Scope and Application Paragraphs
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of
Depreciation and Amortisation
AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
The above have not had any material impact to the financial statements.
34.2 New and revised Australian Accounting Standards in issue but not yet effective
At the date of authorisation of the financial statements, the Group has not applied the following new and
revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not
yet effective:
Standard/Interpretation
AASB 9 ‘Financial Instruments’, and the relevant amending
standards
AASB 15 ‘AASB 15 ‘Revenue from Contracts with Customers’,
AASB 2014-5 ‘Amendments to Australian Accounting Standards
arising from AASB 15’, AASB 2015-8 ‘Amendments to Australian
Accounting Standards – Effective date of AASB 15’ and AASB
2016-3 ‘Amendments to Australian Accounting Standards –
Clarifications to AASB 15’
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied in
the financial year
ending
1 January 2018
30 June 2019
1 January 2018
30 June 2019
AASB 16 ‘Leases’
1 January 2019
30 June 2020
AASB 2015-10 Amendments to Australian Accounting Standards
– Effective Date of Amendments to AASB 10 and AASB 128
1 January 2018
30 June 2019
AASB 2016-1 Amendments to Australian Accounting Standards
– Recognition of Deferred Tax Assets for Unrealised Losses
(AASB 112)
AASB 2016-5 Amendments to Australian Accounting Standards
– Classification and Measurement of Share-based Payment
Transactions
1 January 2017
30 June 2018
1 January 2018
30 June 2019
AASB 2017-2 Amendments to Australian Accounting Standards
– Further Annual Improvements 2014-2016 Cycle
1 January 2017
30 June 2018
Interpretation 22 Foreign Currency Transactions and Advance
Consideration
1 January 2018
30 June 2019
The Directors are yet to determine whether the above Standards and Interpretations will have a material impact
on the financial statements, however plan to perform an exercise in the 2018 financial year to determine the
impact of adopting AASB9, AASB15 and AASB16.
Murray River Organics Group Limited | Annual Report 2016/17 69 ASX
additional information
Additional information required by the Australian
Stock Exchange Limited and not shown elsewhere in
this report is as follows:
C) Substantial shareholders
The names of substantial shareholders are:
A) Distribution of equity securities
The following information is current as at
25 October 2017.
The number of shareholders, by size of holding, in
each class of share is
Number of ordinary shares
Number of shareholders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
154
557
383
757
110
Number of ordinary shares
TIGA Trading Pty Ltd
Melanie Alderton
Kim Sorensen
Meredith Group
SHWL Holdings Pty Ltd
20,042,143
10,576,688
9,987,319
6,873,005
6,384,656
D) Voting rights
All ordinary shares carry one vote per share
without restriction.
The company is listed on the Australian Stock
Exchange. The home exchange is Melbourne.
The number of shareholders holding less than a
marketable parcel of shares is:
E) Voluntary escrow
As at 25 October 2017, a total of 11,048,202 ordinary
shares were subject to voluntary escrow. These shares
will be released from escrow on the trading day after
the day that is 3 trading days after the Company’s
Appendix 4E report for FY2018.
Number of ordinary shares
Number of shareholders
88,076
163
B) Twenty largest shareholders
The following information is current at 25 October 2017.
The names of the twenty largest registered holders of
quoted shares are:
Number
of shares
Percentage
of shares
1
UBS Nominees Pty Ltd
2 Melanie Alderton
3
4
5
6
7
8
9
Kim Sorensen
HSBC Custody Nominees (Australia)
Limited - A/C 2
BNP Paribas Noms Pty Ltd
ARGO Investments Ltd
SHWL Holdings Pty Ltd
SHWL Holdings Pty Ltd
BLBD Pty Ltd
10
SCALZO Trading Co Pty Ltd
11 Meredith Nominees Pty Ltd
12
J P Morgan Nominees Australia
Limited
13 Mr Alessandro Luigi Piccinini
14
Urban Land Nominees Pty Ltd
15 Morgan Stanley Australia Securities
(Nominee) Pty Limited
16
National Nominees Limited
17 Meredith Nominees Pty Ltd
18
19
20
Citicorp Nominees Pty Limited
Yabby Capital Pty Ltd
H & G Limited
18,918,690
10,286,304
9,987,319
4,898,786
4,479,881
3,834,526
3,213,622
3,171,034
3,132,710
2,850,088
2,752,710
2,244,492
1,553,830
1,269,512
1,254,680
1,000,000
987,585
896,020
880,723
800,000
14.85%
8.07%
7.84%
3.84%
3.52%
3.01%
2.52%
2.49%
2.46%
2.24%
2.16%
1.76%
1.22%
1.00%
0.98%
0.78%
0.77%
0.70%
0.69%
0.63%
Murray River Organics Group Limited | Annual Report 2016/17 70
Murray River Organics Group Limited | Annual Report 2016/17 71 Murray River Organics
Group Limited
Head Office:
Contact
32 Crompton Way
Dandenong South
3175 VIC Australia
Tel +61 3 8792 8500
info@murrayriverorganics.com.au
www.murrayriverorganics.com.au
A sustainable source of
healthy food for current
and future generations