For abetter
future
ANNUAL REPORT 2018
Contents
Chairman’s review
Directors’ report
Corporate governance statement
Auditor’s declaration of independence
Independent auditor’s report
Directors’ declaration
Consolidated statement of profit or loss and
other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
14
15
42
50
51
58
59
60
61
62
63
Additional Australian securities exchange information 102
Better for you. Better for farmers. Better for the planet.I2018 Annual Report2018 Annual Report1 Business overview
$68.5MILL IO N
$49.1MI LLION
total revenue
retail sales
13 farms in the
Mildura &
Sunraysia
region
*Includes 1,085 hectares of leased land & 3,844 hectares of arable land.
4,935 hectares of land*
$14.8MILL ION
$34.8MILLIO N
67%
land available
for planting
dried vine
fruit sales
value of owned
farms
2,606
TONNES
Dried
Vine Fruit
FY18
Harvest
2
3
2018 Annual Report2018 Annual Report Business
model
Leveraging supply to grow a value added products business
Murray River Organics operates farms, sources products from third parties and then processes and
packages products to service the organic, natural and healthy food markets.
3rd party supply
of dried vine fruit
3rd party products sourced
locally & internationally
Sunraysia
Mourquong
Dandenong
Farming
Processing
Dried vine
fruit
Value Add
Packaging
& mixing
Sales
Wholesale
Citrus, table
& wine grapes
Domestic & export
~
Retail & wholesale
~
Bulk dried vine fruit
loose and clusters
Grocery majors
~
Independent retail
~
Speciality retail
~
Wholesale
~
Export
42018 Annual Report2018 Annual Report5 Revenue breakdown % of 2018 sales
Farmed
10%
SOURCED
DRIED VINE
FRUIT
12%
FARMED
DRIED VINE
FRUIT
6%
FRESH
PRODUCE
Dried Vine Fruit
• Raisins
• Sultanas
• Currants
Fresh Produce
• Citrus
• Wine &
table grapes
3rd Party
Sourced
Dried Vine Fruit
• Raisins
• Sultanas
• Currants
Other Key
Categories
• Nuts
• Dried
Fruit
• Coconut
• Seeds
• Flour
• Grains
• Rice
• Oil
• Dried
Berries
SOURCED
OTHER
PRODUCTS
72%
6
7
2018 Annual Report2018 Annual Report Supplying export markets
Leveraging brands to capture market
Bulk brands
Retail brands
Export
markets deliver
strong margins and
will continue to be
an opportunity
for further
growth
Export destinations
NORTH AMERICA
ASIA PACIFIC
United States
EMEA
Germany
Denmark
Netherlands
UK
China
Vietnam
Hong Kong
Singapore
Japan
South Korea
New Zealand
Fresh
Murray River Organic's unique
Australian organic dried vine
fruit enables it to build its
brand across 100+ SKUs in the
bulk and retail channels
2018 Annual Report
9
Certified organic and conventional clusters packed for retailCertified organic wholefoodsCertified organic & conventional dried vine clustersCitrusWine & table grapesCertified organic food products & ingredientsDried vine fruit packed in re-sealable snack bagsPremium dry fruit mix for snacking Conventional food products & processed ingredients82018 Annual Report Vine development
As vines are developed and mature,
they will deliver higher yield and earnings
Farm assets
Current maturity
of dried vine
fruit plantings
60%
MATURE
A typical yield profile for
conventional dried vine fruit
Maturity
profile
Average
tonnes per
planted
hectare*
% of
current
harvest
Maturity
4.7 – 6.8
60%
*Organic yields expected to be
20% less than conventional vines.
Gol Gol
140 ha
~
Owned
~
Organic dried vine fruit
+ conventional citrus
NOT YET
MATURE*
40%
*All existing
plantings
expected to
mature by
2022.
Fifth Street
118 ha
~
Owned
~
Conventional fresh
table grapes
Nangiloc
3,042 ha
~
Owned
~
In conversion to organic
(excluding citrus and wine grapes)
expected fully organic by Jan ‘19
subject to audit
~
Conventional wine grape
+ citrus
of owned farms(i), and
$35M
$22M
long term farming
lease
Merbein
~
Owned – 8 smaller farms
~
Largely in-conversion to organic
~
In-conversion and
conventional
dried vine fruit
Yatpool
383 ha
~
Owned
~
Organic dried vine fruit
+ wine grapes
(i) Farms include; land, bearer plants, farm buildings and
improvements, including those farms held for sale
Colignan
1,085 ha
~
Long term lease until 2042
+ 2x10 year options thereafter
~
Organic dried vine fruit
+ conventional citrus
~
$22m value of lease
10
2018 Annual Report
11
2018 Annual Report The initial transformation
Turnaround progress well underway
The business is being stabilised & positioned for growth
People
• New management forming – led
by FMCG and turn-around expert
• Building capability in farms,
processing, grocery, and
distribution
• Right sizing teams at processing
plants
Balance sheet
efficiency
• Sell non core assets
• Excess warehouses
• Excess machinery &
equipment
• Move away from table grape
farming and sell non-core
farms
Capital
• Aligning the balance
sheet with our long
dated agricultural assets
and short term working
capital needs
• Additional $6.6m debt
support from bank since
June 2018
• Targeting raising
~$30million of equity
Product focus
Supply dried vine fruit
• Company owned farms
provide certainty of supply
• Validate organic demand
through own supply – which
is expected to encourage 3rd
party supply
• Leverage core organic dried vine fruit
supply
• Build on customer demand for organic
and better-for-you products
• Grow basket size
• Domestic sales build on strong export
margins
Short Term
Progress
Status
Medium Term
Progress
Status
• Reset operating cost base
in Dandenong
• Improve efficiency and fulfillment
• Implement warehouse
management system
• Reconfigure warehouse footprint
Operations
Customers
Farms
3rd party
suppliers
• Restructure sales team
• New product development
• Full category range architecture
• Brand development and planning
& pricing review
• Improve customer management
• Entering new markets
• Complete Farm Operational
• Improve nutrition and irrigation
Review
• Work with agronomy partner
to build farm plans
• Implement centralised
“farm services” model
• Build confidence in MRG
as processor
• Reset strategic
partnerships
• Adopt best practice
farming methods
• Partnering with growers
• Enhance strategic buying
• Reset SGARA
• Continuous improvement
• Implement standard costing
system
• Improve stock & purchasing
controls
Systems
• Improved sales and
operational reporting
• Leadership structure reset
• Culture of values & performance
• Focus on OH&S
People
& culture
• Build KPI, outcome-based
performance
• Embed safety first culture
• Develop our people
& leadership
12
2018 Annual Report
2018 Annual Report
2018 Annual Report13 Chairman’s Review
Directors’ Report
On behalf of the Directors of Murray River Organics Group Limited,
I present the 2018 Financial Report.
“…. The turnaround is underway …”
Following extensive and intensive review and restructuring of Murray River Organics Group (“MRG”) by
your new board, executives and our advisors since the appointment of the new Board on 24 January
2018, we have implemented a pragmatic and achievable plan to deliver value for our shareholders.
Our goal is to deliver operational performance to allow the latent value in our assets to be realised.
We have worked hard to ensure a committed alignment of the share register, board and executive,
during a very trying time in MRG’s history.
Under the leadership of our new CEO, Valentina Tripp, we now have a highly motivated, experienced
and competent management team, with the appropriate mix of skills, for our unique Australian agri-
food business. Our goal is to realise the value of our long dated agricultural assets, and our significant
organic and better-for-you product range.
Having assessed various options for shareholders, we are moving ahead with a plan to restructure
the balance sheet through a $30 million equity raising. This equity raising will be used to support the
needs for this growing business. We are also reporting proactively and frankly to our shareholders and
the market, and attracting the capability needed to execute the plan, whilst establishing new systems
of accountability and performance monitoring.
FY18, like FY17 has not been a good year for shareholders of MRG, but the turnaround is underway
with early benefits being realised.
Our focus is now on completing the equity raising and securing long term debt support from our
financier, which will allow the team to fully execute the plan. We expect to have more to announce on
this matter in the short term.
We thank and acknowledge our shareholders, staff, suppliers and customers for their support, patience
and investment as we execute the turnaround and return the business to sustainable growth.
Andrew Monk
Chairman
The Directors of Murray River Organics Group Limited (the “Company”) and its controlled subsidiaries (the “Group”) submit
herewith the annual financial report of the Company for the year ended 30 June 2018. In order to comply with the provisions of
the Corporations Act 2001, the Directors report as follows:
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:
Andrew Monk
Non-Executive Independent Chairman
BSc, PhD, GAICD
Andrew has owned and/or managed organic SMEs in horticulture, food processing and waste management. He also has
extensive technical experience in organic regulations and intimate working knowledge of this multi-sector industry domestically
and internationally. Chairman of Australian Organic Ltd, a not for profit industry services group with over 2,000 organic
businesses. Chairman of Australian renewable energy company Enervest Pty Ltd.
Appointed Director and Chairperson on 24 January 2018.
Appointed Chairperson of the Audit and Risk Committee on 11 June 2018.
Member of Remuneration and Nomination Committee.
Keith Mentiplay
Non-Executive Independent Director
MBA, Dip Dairy Tech, AICD
Keith has worked at Murray Goulburn, National Foods / Lion, Nestle and other global names, with responsibility for markets in
Australia, New Zealand, Indonesia, Malaysia, Singapore, Hong Kong and Philippines. With over 40 years in the food industry,
he has taken on diverse roles including General & Executive management, operations & supply chain, international business,
operational excellence, business transformation and business expansion. Keith has also held multiple food industry board
positions such as Canberra Milk, Queensland Butter Board, Danone / Murray Goulburn and Vitasoy.
Appointed Director on 24 January 2018.
Chairperson of Remuneration and Nomination Committee and Member of the Audit and Risk Committee.
Michael Porter
Non-Executive Independent Director
BBS (Enterprise Development), Grad Cert (Change Management), GAICD
Michael has extensive experience in the Agricultural sector where he was the CEO of SQP Co-operative for almost four years.
He owns dry land farming interests in Victoria’s Western District near Ballarat. He has particular interest in soil re-generation and
making the best use of our limited resources, such as water. Other Board positions include being a past Chairman and current
Non-Executive Director of ASX listed Angel Seafood Holdings Ltd, Board Member of the Wimmera Catchment Management
Authority (a Victorian State Government appointment), Chairman of the Audit Advisory Committee for the City of Ballarat.
Michael is also an Active Reservist where he holds the rank of Commander in the Royal Australian Naval Reserve.
Appointed Director on 2 April 2018.
Member of the Audit and Risk Committee and Member of the Remuneration and Nomination Committee.
Valentina Tripp
CEO and Managing Director
Bachelor of Commerce (Melb), MBA, CPA, AICD
Valentina has extensive experience in FMCG, agribusiness and retail across Asia and global markets; most recently working for
Simplot as Executive Director – Transformation and Top Cut Group. Prior to Simplot, Valentina was Senior Director with KPMG
leading transformation, strategy, customer growth, supply chain, operational and financial turnarounds. Valentina is a Non-
Executive Director at Capilano Honey Limited, is the Non-Executive Chairman of Fairtrade Australia & New Zealand and Non-
Executive Director of Fairtrade International based in Bonn, Germany.
Appointed Managing Director and Chief Executive Officer on 16 April 2018.
Steven Si
Non-Executive Independent Director
Steven is Chairman and Managing Director of the Shanghai Yi Yuan Group of companies, established in 1994. Based in
Shanghai, the group has various companies specialising in manufacturing and distribution. Steven is also the Managing
Director of Moran Furniture and a Director of Kadac food distribution business. He is member of the China General Chamber of
Commerce. Steven brings a wealth of knowledge and connections into the Chinese market.
Appointed Director on 24 January 2018.
Member of the Remuneration and Nomination Committee and Chairperson of the Audit and Risk Committee until 8 May 2018.
Mr Si resigned as a Director on 10 August 2018.
142018 Annual Report2018 Annual Report15 The following Directors held office during the financial year until their removal or resignation:
Company Secretary
Alan Fisher
Non-Executive
Independent Director
FICA, AICD
Alan was with a world-leading accounting firm Coopers & Lybrand where he spent 24 years and headed up and grew the
Melbourne Corporate Finance Division. Following this tenure Alan developed his own corporate advisory business. He is
also managing Director of DMC Corporate and Fisher Corporate Advisory. Alan has previously held the position of CEO of
Pental Limited where he was instrumental in its successful restructuring. Alan is currently a non-executive Director and chair
of IDT Australia Limited (ASX: IDT), and is a Non-executive Director and chair of the audit and risk committee of Thorney
Technologies Ltd (ASX: TEK) and Bionomics Limited (ASX: BNO)
Appointed Director on 8 May 2018.
Chairperson of the Audit and Risk Committee and member of the Remuneration and Nomination Committee until his
resignation on 31 May 2018.
Craig Farrow
Non-Executive
Independent Director
B. Ec, FCA, FAICD
Craig has 25 years’ experience in the accounting and advisory services with deep knowledge of the agribusiness sector. He
currently sits on several farm advisory boards and is currently Chair of Australian Independent Rural Retailers. Craig also serves
on a number of boards and is currently Deputy Chair of Vocus Communications Ltd, Chair / Partner of Brentnalls SA Chartered
Accountants, Chair of Tonkin Consulting Pty Ltd, Doctors Health SA Limited, General Practice SA and Non-Executive Director of
Bulletproof Group Ltd, Centre State Exports Pty Ltd, Petrosys Pty Ltd.
Appointed as Director and Board Chair on 6 September 2016.
Member of the Audit and Risk Committee and Remuneration and Nomination Committee until his resignation on 24 January 2018.
Donald Brumley
Non-Executive
Independent Director
FCA, AICD
Donald was a former senior partner of Ernst & Young with 29 years’ experience in IPO’s, transactions and audit. Donald
was the Oceania IPO Leader at Ernst & Young and worked with clients listing on the Australian, US, UK and key Asian stock
exchanges. Donald has also held positions as Biotech Markets Leader and National Leader of Strategic Growth Markets of
Ernst & Young.
Appointed as Director on 6 September 2016.
Chair of the Audit and Risk Committee and Member of the Remuneration and Nomination Committee until his resignation
on 22 November 2017.
Lisa Hennessy
Non-Executive
Independent Director
MBA (Harvard)
Bachelor of Sci. Elec.
Eng. (Hons), AICD
Kenneth Carr
Non-Executive
Independent Director
MBA, FAIC
Lisa has over 25 years of experience in complex international organisations, with significant experience in areas of corporate
strategy, acquisitions, and operations. Lisa has held executive roles within Del Monte Foods, General Electric, and Bain &
Co. Lisa is currently a Non-Executive Director of The Gawler Cancer Foundation and FirstStep Financial Investments Pty Ltd.
Appointed as Director on 6 September 2016.
Chair of the Remuneration and Nomination Committee and Member of the Audit and Risk Committee until her resignation
on 24 January 2018.
Kenneth has been CEO/MD of five ASX listed companies primarily in the banking, health, and technology industries.
He is currently Chair of Field Solutions Holdings Limited (ASX: FSG) and on the boards of Bulletproof Limited (ASX:BPF)
Automotive Solutions Group Limited (ASX:4WD) and Wakenby Limited (ASX:WAK). His previous executive roles were
primarily in recovery positions of public companies.
Appointed as Director on 23 November 2017.
Member of Remuneration and Nomination Committee and Member of the Audit and Risk Committee until his resignation on
24 January 2018.
Erling Sorensen
Executive Director
FAICD
Erling is a co-founder of Murray River Organics. Erling has a diverse skillset with significant international experience in
management, sales, operations, corporate finance, strategy, mergers & acquisitions, commodity trading, risk management,
investing and transport. He has worked for and managed international industrial and transport companies in Oslo, Singapore,
Melbourne and London. Erling was previously the Chief Commercial Officer of Nyrstar Nv, operating out of London and has
held a number of non-executive directorships for publicly listed companies both in Australia and the United Kingdom.
Appointed as Managing Director on 6 September 2016.
Member of the Audit and Risk Committee and Member of the Remuneration and Nomination Committee until his
resignation on 9 November 2017.
Jamie Nemtsas
Executive Director
Bachelor of Business
Jamie has significant experience in farming operations, having been involved in such operations for the most of his life and
also has significant experience in wealth and asset management, predominately with high net worth individuals, families and
corporations. Jamie currently serves on a number of private company Boards and also has a strong interest in serving the
community and is the pro bono Director of the Greenlight Foundation and the Willow Foundation. Jamie is also is a Certified
Financial Planner and is a fellow of the Securities Institute of Australasia.
Appointed as Director and on 6 September 2016.
Member of the Audit and Risk Committee and Member of the Remuneration and Nomination Committee until his
resignation on 28 August 2017.
Ms Carlie Hodges is a lawyer with Coghlan Duffy & Co, who is experienced in corporate and commercial law, property law and
mergers and acquisitions. Ms Hodges was appointed the secretary of the Group on 14 May 2018.
Ian Sinclair was appointed the secretary of the Group on 6 September 2016 and remained in the role until his resignation on 14
May 2018.
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
Andrew Monk
Keith Mentiplay
Michael Porter
Steven Si
Valentina Tripp
Alan Fisher
Erling Sorensen
Jamie Nemtsas
Craig Farrow
Lisa Hennessy
Kenneth Carr
Donald Brumley
Directors’ Meetings
Remuneration and
Nomination Committee
Audit and Risk Committee
Eligible to attend Meetings attended Eligible to attend Meetings attended Eligible to attend Meetings attended
7
7
6
7
5
1
8
3
11
11
2
9
7
7
5
7
5
1
8
2
10
11
2
9
2
2
-
2
-
-
-
-
-
-
-
-
2
2
-
2
-
-
-
-
-
-
-
-
1
1
-
1
-
-
-
-
2
2
-
2
1
1
-
1
-
-
-
-
1
2
-
2
Directors’ shareholdings
The following table sets out each Director’s relevant interest in shares, debentures, and rights or options in shares or debentures of
the company or a related body corporate as at the date of this report.
Name
Andrew Monk
Keith Mentiplay
Michael Porter
Steven Si
Valentina Tripp
Fully paid ordinary shares number
Share Option Number
30,000
125,000
-
-
-
-
-
-
-
-
162018 Annual Report2018 Annual Report17 NANCIAL PERFORMANCE
Principal activities
Murray River Organics is an Australian producer, manufacturer,
marketer, and seller of certified organic, natural and better-for-
you food products.
Company Overview
Murray River Organics is a leading Australian grower,
processor, manufacturer and seller of organic and better-
for-you food products. Our aim is to make organic, healthy
and sustainable food choices a reality for our consumers in
Australia and around the world.
Murray River Organics began in 2010 on a single 28-hectare
farm in Merbein, Victoria. It now operates over 4,900 hectares
of farmland in the Sunraysia region, including the largest organic dried vine fruit properties in Australia.
In addition to our farming assets and processing plant in Mourquong NSW, Murray River Organics operates a food manufacturing
and distribution facility in Dandenong South, Victoria. From this site it packs and distributes an extensive range of organic and
better-for-you food products under its own brands and for other retailers.
The Group’s customers include domestic retail (sold in supermarkets and specialty retail under both Murray River Organics own
brands and private label), wholesale and industrial (bulk product to wholesalers providing supply to other third parties (including
retailers) and customers who use dried vine fruit in their products (for example bakery products, cereal products, confectionery),
export to a variety of export channels across Asia, the US and Europe, and fresh fruit (citrus, wine grape and table grapes to
processors and wine makers).
Review of operations
FINANCIAL PERFORMANCE
Net sales revenue
Underlying EBITDA excluding SGARA(ii)
Underlying EBITDA excl. SGARA(ii) to Sales
Depreciation
Underlying EBIT excluding SGARA(iii)
Underlying EBIT excl. SGARA(ii) to Sales
Finance Costs
Reported loss after tax
Net Tangible Assets (cents) per share
Net bank debt (iv )
Gearing - Bank Debt (v )
FY18 (i)
$’000
FY17 (i)
$’000
$’000
%
Change
68,539
(14,280)
-20.83%
(6,198)
(20,478)
-29.88%
(3,337)
(59,607)
16
44,868
224.6%
48,522
(11,185)
-23.05%
(4,276)
(15,461)
-31.86%
(2,296)
(5,927)
65
28,607
43.2%
20,017
(3,095)
(1,922)
(5,017)
(1,041)
(53,680)
(49)
16,261
41.3%
27.7%
2.2%
44.9%
32.4%
2.0%
45.3%
NMF
-75.5%
56.8%
(i) Unaudited non-IFRS f inancial table
(ii) EBITDA (Earnings Before Interest, Tax, Depreciation and Impairment)
(iii) EBIT (Earnings Before Interest and Tax)
(iv) Net borrow ings less Colignan vineyard finance lease
(v) Net bank debt divided by total equity
NMF means Not a Meaningful Figure
SGARA means fair value revaluation of Self -Generating and Regenerating Assets (agricultural produce) Reconciliation of
Underlying EBIT and EBITA provided on next page.
• Net sales of $68.539 million were up 41.3% or $20.017
million on last year, mainly due to the prior year
acquisitions of the business assets of Food Source
International on 12 September 2016 and Australian
Organic Holdings on 26 November 2016. The Group
serves customers via four key channels - National Retail;
Wholesale and Industrial; Export; and Fresh Fruit (table
grapes and citrus).
- Sales with major retailers continue to be healthy,
albeit affected by inconsistent fill rates arising
from out of stocks and inability to supply sufficient
stock due to the delay in delivery of a new high-
speed Yeaman snack box packing line. In July
2018, the high-speed line was commissioned
and is progressively ramping up to the expected
production speed for our various snack box
products.
- Wholesale and Industrial sales were below
expectation predominately due to poor order fill
rates caused by inventory accuracy issues in our
systems causing out of stocks and significant staff
reductions in the sales team implemented by
previous management in early 2018. The Company
is in the process of rebuilding its sales team and
a number of new team members have joined
the business since July 2018 with the right mix
of experience. Raw materials and finished goods
inventory levels in Dandenong have been reset
and more effective working capital management
processes have been introduced. These continue
to be refined to ensure that our capital is used
efficiently whilst customer service is improved and
maintained.
- Export sales of dried fruit increased 38.4% on last
year, however these sales were affected by quality
issues from the 2017 harvest. Demand in this
channel continues to be strong. Whilst “Cluster”
product sales increased 77% (from 67 tonnes in
FY17 to 119 tonnes for FY18) this was significantly
less than previous estimates used in the FY17 Profit
Sales by channel
National
Retail
71%
Wholesale &
Industrial
13%
Export
9%
Fresh
7%
and Loss as “Fair Value Gain from Agricultural
Produce”. The market for the “Cluster” products is
relatively new and significant category development
work is now underway to develop this category
both domestically and internationally.
- Disappointingly, due to poor farm operating
practices, fresh table grape yields were both below
expectations and last year’s levels, compounded
by the business being late in engaging with fresh
table grape customers and marketers, and as a
result missed critical timeframes within which many
of the stronger sales channels for organic and
conventional grapes were confirmed.
- Citrus sales of $3.097 million in FY18 from the
Nangiloc, Colligan and Gol Gol farms increased
by $1.778 million from prior financial year,
predominately from the additional volume arising
following the acquisition of the Nangiloc property
in June 2017.
182018 Annual Report2018 Annual Report19
FY18 (i)
$’000
FY17 (i)
$’000
$’000
%
Change
As a result of this change in accounting estimate, the fair
value gain reported in the Profit and Loss Statement was
$0.158 million (2017: $13.185 million).
A revaluation loss on property, plant and equipment and
assets held for sale through the statement of profit and
loss of $7.030 million, comprising of:
Reported loss after tax
(59,607)
(5,927)
(53,680)
NMF
Income tax benefit
Finance costs
EBIT (loss)
Significant items
Impairment of non-current assets
Inventory write down
Revaluation of properties & assets held for sale
Business restructuring costs
Change in contigent consideration
Reversal of provision for group reorganisation
IPO and acquisition related costs
Underlying EBIT (loss)
Less SGARA gain
Underlying EBIT (loss) excluding SGARA
Depreciation and amortisation
Underlying EBITDA (loss) excluding SGARA
(i) Unaudited non-IFRS financial table
NMF means Not a Meaningful Figure
1,896
(3,337)
1,229
(2,296)
667
(1,041)
(58,166)
(4,860)
(53,306)
NMF
(21,169)
(8,344)
(7,030)
(2,343)
-
1,040
-
-
-
-
-
474
(1,064)
(1,994)
(21,169)
(8,344)
(7,030)
(2,343)
(474)
2,104
1,994
(20,320)
(2,276)
(18,044)
NMF
158
13,185
(13,027)
-98.8%
(20,478)
(15,461)
(6,198)
(4,276)
(14,280)
(11,185)
(5,017)
(1,922)
(3,095)
32.4%
44.9%
27.7%
• Although sales increased significantly from the
acquisitions of business assets, underlying earnings were
below last year predominately due to:
- Lower Wholesale and Industrial sales and reduced
margins, as a result of the sales team being significantly
reduced by prior management and stock supply issues.
Furthermore, due to operational challenges with the
third-party storage facility (leased in late 2017) and
excess stock purchases, the Group has had to accelerate
the exit of some stock lines into lower grade markets at a
lower margin;
- Lower yields and margins from fresh table grapes;
- Increased freight and distribution costs arising from
higher sales volume, and additional logistics costs such
as the additional third-party storage facility, and hire of
warehouse equipment and pallets to support the new
facilities;
- Slower than anticipated commissioning of the
Dandenong manufacturing facility, together with poor
integration of the Food Source International and Pacific
Organics businesses acquired. The commissioning of
the new Yeaman high-speed snack box packing line
was commissioned in July 2018, more than nine months
behind plan; and
- Slower than anticipated commissioning of the new
Sunraysia processing facility (including dehydrator
and biomass equipment) which resulted in the Group
incurring additional cost in third party dehydration
and dried vine fruit processing services. The Group is
currently resolving the issues with the dehydrator and
biomass equipment.
On review of the operations in May 2018 by the new
management team, a cost reduction program, Project
Muscat, commenced with the benefits expected to be
realised in FY19. Further cost savings are expected
throughout the supply chain as the business continues
to relentlessly review and eliminate poor operational
practices as well as, rebuilding relationships with our
strategic supply partners and growers.
• As part of the review of its operations and in
consideration of the new and changing markets it
operates in (such as export and the developing Cluster
market) the Group has realigned the valuation of its total
dried fruit crop to a fair value less costs to sell based on
the farm gate price of loose dried fruit (which reflects the
pre-processed third party grower price at the point of
harvest) in accordance with “AASB 141 Agriculture” and
consistent with other agricultural growers. This approach
has also been applied to fresh tables grapes and citrus.
• Revaluation loss on land, buildings and bearer
plants of $6.383 million (including those transferred
to “assets held for sale” during the year ended 30
June 2018), including (but not limited to):
- Revaluation loss on Fifth Street, Walnut and
Pomona properties which are classified as
“assets held for sale” at 30 June 2018 of
$2.644 million.
- Revaluation loss on bearer plants as a result
of the performance of the farms being below
previous valuation estimations of $4.386
million.
• Revaluation loss on assets held for sale from the
previous year of $0.279 million.
• Revaluation loss on agricultural produce transferred
to “assets held for sale” during the year ended 30
June 2018 of $0.368 million
A net revaluation gain on property, plant and equipment and
assets held for sale through other comprehensive income
(revaluation reserve) of $2.057 million, comprising of:
• Net revaluation gain on land, buildings and bearer
plants of $2.141 million.
• Net revaluation loss on assets held for sale from the
previous year of $0.084 million.
The net change in farm properties (excluding assets held for
sale) was $1.427 million (from $34.1 million to $32.6 million, a
change of 4.2%)
- Restructuring costs of $2.343 million, comprising the
costs associated with holding an Extraordinary General
Meeting in January 2018 leading to the change of
the Board of Directors and consequential changes to
the business; redundancy costs of senior executives;
consultancy work to reorganise the Group’s tax affairs,
banking arrangements and activities to undertake the
sale of non-core assets of the Group; provisioning for
make good costs in relation to previous leased premised
of the Australian Organic Holdings (Pacific Organics)
business acquired during FY17; and preliminary work
undertaken to recapitalise the Group; and
- Reversal of prior year provision of $1.040 million for
group reorganisation in relation to stamp duty savings.
• The business has also modified its SAP (B1) reporting
systems, whereby internal operational margins will be
reported using a “standard costing” methodology, which
will significantly enhance how it monitors and drives
margin improvement across the supply chain and its
operations. As a result, going forward key focus for the
business will be on EBIT before SGARA and EBITDA
before SGARA (fair value revaluation of Self-Generating
and Regenerating Assets).
• Underlying EBITDA loss before SGARA was $14.280
million compared to last year’s loss of $11.185 million.
• Underlying EBIT loss before SGARA was $20.478
million compared to last year’s loss of $15.461 million.
Deprecation increased by $1.922 million arising from the
increased capital investment following the completion of
the Group’s new processing facilities in Dandenong and
Mourquong, acquisition of the Nangiloc farm in June
2017 and ongoing vineyard development.
• Reported consolidated Net Loss After Tax (NLAT) after
SGARA for the year ended 30 June 2018 was $59.607
million compared to a 2017 NLAT of $5.927 million. The
NLAT includes a number of one off/significant items
associated with:
- The Group’s review of the carrying value of tangible
and intangible assets under the Accounting
Standards, resulted in an impairment of non-current
assets of $21.169 million, comprising $10.749
million write down of goodwill and $10.420 million
impairment of leasehold improvements, and plant
and equipment. As the operational performance
turns around, the impaired tangible assets of
$10.420 million can be written back up in future
periods.
- Inventory write downs of $8.344 million
predominately related to the quality of the 2017
harvest which was affected by a combination of
weather events and poor operating practices
across its operations. In May/June 2018 the first
stage of modifying the warehouse management,
planning and production processes was
completed, which has enabled more efficient
and cost effective operations at our Dandenong
and Mourquong facilities. Further processes and
systems improvements (including implementation
of the warehouse management system) will
be undertaken in FY19 as new key middle
management positions are filled to support these
operational changes.
- Following the revaluation of the Group’s properties,
there has been the following adjustments to
property values comprised of:
202018 Annual Report2018 Annual Report21
WORKING CAPITAL, CASH FLOW AND NET BANK DEBT
• Net bank debt, excluding the Colignan finance lease, increased from $28.607 million to $44.872 million, with gearing (net
bank debt divided by total equity) at 224.6% (2017: 43.2%). During the second half of the FY18 non-core property assets,
Walnut Avenue and Benetook Avenue were sold to release proceeds equal to $1.625 million before selling costs, noting that
Walnut Avenue settled in July 2018. The Group’s main fresh table grape property (Fifth Street), which is considered by the
Board to be a non-core asset, is currently being actively marketed for sale. To support the ongoing funding requirements of
the business, the Group intends to undertake a $30 million capital raising to recapitalise the Group. The Board is continuing
to work with its advisers and financier to finalise the terms of the proposed capital raising.
Working Capital
Trade and other receivables
Inventories
Trade and other payables (ii)
Total Working Capital
FY18 (i)
$’000
FY17 (i)
$’000
$’000
%
Change
6,729
16,194
(11,825)
11,098
8,891
27,069
(10,950)
25,010
(2,162)
(10,875)
(875)
(13,912)
-24.3%
-40.2%
8.0%
-55.6%
(i) Unaudited non-IFRS financial table
(ii) Trade and other payables excludes Nangiloc payable in FY17
• Working capital (receivables, inventories and trade and other payables) decreased by $13.912 million, principally due to the
change in accounting estimate in relation to SGARA fair value. Last year’s inventory included a significant portion of Clusters
($11.054 million) which were accounted for at a post-processing fair value. Approximately 618 tonnes of Clusters ($9.269
million) were written off (or converted to loose fruit) during FY18 due to poor quality of the stock. In FY18, the Group reviewed
its fair value estimation methodology under SGARA to value its crop (as described in Note 9), which has reduced the value
of agricultural produce and inventory. Furthermore, stock provisioning has increased as the business continues to exit slow
moving lines or product not satisfying Murray River Organics’ quality standards.
• At 30 June 2018, cash reserves and funding facilities were substantially utilised, as a result debtors and creditors were both
tightly managed – creditors, net of debtors, was $5.096 million compared to last year ($2.059 million). As detailed in the
going concern basis in Note 2, Murray River Organics’ financier (NAB) has provided additional funding of $6.6 million in July
2018 and the Group is at an advanced stage of renegotiating its debt facilities.
• Cash flows from “operating activities” for the year was negative $13.248 million, $1.986 million higher than prior year
negative cash flows of $11.262 million. The increase was driven by increase in interest cost of $1.591 million and tax payment
relating to the pre-IPO restructure (refer to Note 30 for Related Party Transactions).
Quality and Food Safety
Murray River Organics operates a quality management system in line with the SQF program which is recognised by the Global
Food Safety Initiative (GFSI). The program meets the needs of our customers around the world, who require their suppliers to
operate a rigorous food safety management system. Both Murray River Organics manufacturing sites are certified to the highest
level of the SQF program and have maintained good to excellent ratings since initial certification.
Our farming operations are certified to the Freshcare scheme, which is an Australian farm assurance programme. The programs
approach assures produce is safe to eat and sustainably grown.
Australian Certified Organic certify Murray River Organics operations against various national and international organic standards.
This enables us to service the organic markets with retail and wholesale products around the world.
Food safety is of paramount importance to our business, strict systems are in place to ensure the safety of the products we
produce during all stages of our process, from supplier approval to finished goods production. The technical team across both
sites implement systems to ensure due diligence is demonstrated at all times.
for-you products in its target markets. The new leadership
team has been successfully instated and the transformation
program is well underway, with benefits currently being
realised. The Company’s mission is to anticipate and exceed
consumer expectations globally in healthy food by providing
quality, innovation, value and convenience. To this end, the
transformation effort can be categorised into four key areas:
• Operational uplift across processing facilities and
warehousing, aiming for both a delivered in full on time
(DIFOT) of over 90% and increase in output per labour
hour of 20%;
• A customer centric approach which involves restructuring
the sales team, a full range architecture and pricing
review, new product development appealing to shifting
consumer trends, and branching out into foreign markets
with strong organic demand such as Asia, USA and
Europe;
• Farming operation standardisation and centralisation,
leveraging expert agronomy partners to improve nutrition,
irrigation and pioneering best practice organic farming
methods, coupled with building confidence in growers to
enhance strategic buying; and
• A growth strategy focused on taking advantage of
increasing demand for organic foods, healthy snacking
and the Company’s own branded products.
Sustainability
Murray River Organics is certified organic by the Australian
Organic body across a number of farm sites. This means
utilising 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 Group’s ability to contribute to a more sustainable
future.
SUSTAINABLE FARMING
Murray River Organics sustainable farming practices utilise
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.
Health and Safety
Our commitment to improving physical safety and mental
health is unparalleled and will continue to be a key focus
throughout the year. We have and will continue to invest in
programs and systems to improve safety governance, address
our critical risks and develop a culture of care across the
Murray River Organics business. With support from newly
appointed HR Manager and OH&S Coordinator, a heavy focus
has been placed on ingraining a safety culture amongst all our
employees. The workplace health, well-being and safety of
our employees, contractors and visitors and the preservation
of the environment in which our farms operate are at the
forefront of our transformation strategy and day to day
operations. Our objectives include:
• Establishing measurable Workplace
Health Safety objectives and targets, and recognising and
celebrating their achievement;
• Adopting a proactive approach that will strive to
eliminate or reduce the risk to an acceptable level;
• Identifying, implementing, monitoring and reinforcing the
safe behaviours we expect in our business to eliminate
unsafe acts and practices across the Supply Chain
lifecycle
• Consulting and communicating with employees and
external stakeholders to continually improve the health,
well-being, safety and environmental performance across
all our workplaces.
Our safety principles are also underpinned by our policies
ensuring that employees and suppliers maintain a high standard
of ethics, integrity and professional conduct which does not just
meet compliance with the law; but extends to honesty, equity,
social and environmental responsibility in all dealings.
Strategic Objective
Following a strategic review completed earlier this year, the
Company initiated a transformational turnaround strategy
to realise the potential of Murray River Organics’ assets and
to capitalise on growing demand for its organic and better-
222018 Annual Report2018 Annual Report23 SUSTAINABLE MANUFACTURING
CUSTOMER RISK AND COMPETITION
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 Group’s facilities in
Sunraysia and LED lighting is fitted in all manufacturing areas
which continues to provide energy savings compared to
traditional energy sources and lighting.
A biomass boiler is used to power the dehydration plant
utilised in drying loose berries from the vineyards. The
biomass boiler is powered by waste olive pips sourced from
other producers 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 46%
recycled material.
Murray River Organics continues to look at ways to further
minimise the impact the business has on the environment and
always strive to deliver sustainable, healthy food for current
and future generations.
Operational Risks
There are a number of operational risks, both specific
to Murray River Organics Group (MRG) and of a general
nature, which may impact the future operating and financial
performance of the Group. There can be no guarantee that
Murray River Organics will achieve its objectives or that
forward-looking statements will be realised. The specific
material business risks faced by the Group and how the Group
manages these risks are set out below.
TURNAROUND STRATEGY
Murray River Organics Group announced a strategic review
of the MRG business in February 2018 and following the
completion of that strategic review, has announced the key
areas of focus in its strategy to turnaround the MRG business.
The transformation strategy is focused on five key areas,
being people; capital; product focus; supply dried vine fruit;
and improving balance sheet efficiency. The Company has
announced that work has commenced in each of the key areas
of the turnaround strategy. However, there is no guarantee as
to the benefits that the turnaround strategy will realise, nor
the time that may be required to realise these benefits. Delays
or failure to efficiently implement the turnaround strategy
could have a material adverse effect on MRG’s future financial
performance.
Murray River Organics top ten customers comprised
approximately 80% of FY18 sales. The Group’s customer
contracts are short term (and typical of the sector it operates
in), with supply periods typically for one season or one year
(which may depend on the product’s seasonality), and the
prices at which its products are sold are subject to fluctuation
depending on the level of supply and demand at the time
the products are sold. In addition, a significant proportion
of these customer contracts do not have fixed or minimum
volume requirements. The Group also operates in highly
competitive geographic and product markets with other
organic and natural packaged food brands and companies,
which may be more innovative and able to bring new products
to market faster and better able to quickly exploit and serve
niche markets, this could have a material adverse impact on
the financial performance and prospects of the Group. Murray
River Organics believes it can continue to successfully operate
in these markets through strong product innovation and
managing its product sourcing and manufacturing costs.
HORTICULTURAL RISK
As with any viticultural crop, there are a number of factors
that may affect yield. While Murray River Organics takes
steps to minimise annual variations in yields and production,
yields may vary from vine to vine and from harvest to harvest,
which may impact Murray River Organics’ performance. For
example, as an agricultural producer, weather, diseases and
climatic conditions directly affect the business operations of
the Group. Climate change or prolonged periods of adverse
weather and climatic conditions may have a negative effect
on agricultural productivity, which may result in decreased
availability or less favourable pricing for certain commodities
that are necessary for its products.
If the Group’s organic crop is reduced, Murray River Organics
may not be able to find sufficient supply sources on
favourable terms, which could impact the Group’s ability to
supply product to customers and adversely affect the Group.
Murray River Organics is continually building and refining its
third party sourcing arrangements and seeks to reducing this
risk where possible.
WATER SUPPLY
An adequate supply of suitable water is crucial to the
success of Murray River Organics’ ability to grow crop on its
properties. While the irrigation water from both the Murray
River and the Darling River is currently suitable for dried vine
fruit production, having particular regard to its salinity, there
is a risk that Murray River Organics could be exposed to a
number of natural events, many of which are beyond Murray
River Organics’ control. Changes to the availability of water or
water quality may impact Murray River Organics’ operations.
Whilst Murray River Organics has ongoing leases for water
entitlements and has an option to extend these rights,
unexpected changes in climatic conditions may affect future
allocation or availability of permanent water entitlements.
LOSS OF ORGANIC CERTIFICATION
ADVERSE MOVEMENT IN EXCHANGE RATE
Murray River Organics is exposed to foreign exchange risk
from the importation of commodities and export of produce
to various customers. Unfavourable movements in the foreign
exchange rates between the Australian dollar and other
currencies such as the US dollar can have a material adverse
impact on the overall financial performance of the Group.
The Group hedges a proportion of anticipated purchase
commitments and sale commitments denominated in foreign
currencies to manage its exposure to foreign currency
exchange rate fluctuations.
LOSS OF KEY PERSONNEL
Murray River Organics’ success depends to a significant
extent on its ability to attract and retain suitably qualified key
personnel. The loss of key management personnel, or any
delay in their replacement could have a significant adverse
effect on the management of the Murray River Organics
and its financial performance. The Board has reviewed the
organisational structure of the business and will continue to
do so to ensure the best people are retained, whilst investing
in developing other key people in the business.
The Group relies on independent certification, such as
certifications of some of its products as “organic” to
differentiate the Group’s products from others. Quality control
issues in respect of raw materials and ingredients may result
in the loss of any independent certifications could adversely
affect the Group’s market position as a certified organic and
natural products company and result in a loss of consumer
confidence in the brands of Murray River Organics. The
Group is continually monitoring and auditing its operations to
minimise such risks.
ACCESS TO RAW ORGANIC INGREDIENTS AND OTHER
PRODUCT SOURCING
Murray River Organics’ ability to ensure a continuing supply
of organic ingredients not grown by the Group at competitive
prices depends on many factors beyond the Group’s control,
such as the number and size of farms that grow organic crops,
climate conditions, changes in national and world economic
conditions, currency fluctuations and forecasting adequate
need of seasonal ingredients. For certain products, Murray
River Organics also competes with other manufacturers in the
procurement of organic product ingredients, which may be
less plentiful in the open market than conventional product
ingredients. This could cause the expenses of the Group to
increase or could limit the amount of product that Murray
River Organics is able to manufacture and sell. The inability
of any supplier of raw materials, or other service provider to
Murray River Organics to deliver products or perform their
obligations in a timely or cost-effective manner could cause
the Group’s operating costs to increase and profit margins
to decrease. Murray River Organics is continually refining its
sourcing arrangements in order to reduce this risk.
242018 Annual Report2018 Annual Report25 The Directors are of the opinion that the services as disclosed
in Note 25 to the financial repot do not compromise the
external auditor’s independence, based on advice received
from the Risk and Audit Management 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.
Auditor’s independence declaration
The auditor’s independence declaration is included on page
50 of the financial report.
Rounding off of amounts
The Company is a company of the kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 and in accordance with that Instrument
amounts in the Directors’ report and the financial report are
rounded off to the nearest thousand dollars, unless otherwise
indicated.
ACCESS TO FUNDING
Environmental regulation
For the Group to continue as a going concern, the Company
must complete the proposed $30 million equity raise and
agree an extension to its debt facility. Completion of the
capital raising is contingent on reaching acceptable terms
for debt funding which itself is contingent on completion of
the capital raising. To date NAB has been supportive of the
Company’s efforts to turnaround the business and the Board
is working towards finalising both the debt facility and the
capital raising.
The Company may require further funding in the future to
complete the current turnaround strategy or to fund growth
strategies. There is a risk that the Group may be unable to
access debt or equity funding from the capital markets or its
existing lenders on favourable terms, or at all.
Changes in the state of affairs
During the financial year there were no significant changes in
the state of affairs of the Group, other than as referred to in
this Annual Report.
Future developments
Information regarding likely developments in the operations
of the Group in future financial years is set out in the Review
of operations and elsewhere in the Annual Report.
Subsequent events
There has not been any matter or circumstance occurring
subsequent to the end of financial year that has significantly
affected, or may affect, the operations of the Group, the
results of those operations, or the state of affairs of the Group
in future financial years, except for:
In July 2018, the Group increased its bank overdraft facility by
an additional $6.6 million. This takes the Group’s total bank
debt facilities (including bank guarantees) to $53.913 million.
On completion of the 31 July 2018 annual review, the Group’s
financier (NAB) has also agreed to extend the maturity date of
$26.130 million of debt facilities (related to the trade facility
$14.000 million, bank overdraft $10.600 million and bank
guarantees $1.530 million, and other working capital facilities
such as foreign exchange, unused leasing facility and letters
of credit) to 30 November 2018. This gives the Group time to
conduct the proposed equity raising of $30.000 million, which
is currently in progress, to fund the cashflow needs of the
business and support the balance sheet. As part of the capital
raising, the Group expects to put in place new longer term
banking arrangements.
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 certified by Australian Certified
Organic (certificate number 11486).
Company Dividends
No dividends were paid or declared during the period.
Indemnification of directors and officers
During the financial year, the Company paid a premium in
respect of a contract insuring the Directors of the Company,
the Company Secretary, 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 a Director or officer of the
Company or of any related body corporate against a liability
incurred as such a Director and officer.
Indemnification of auditors
To the extent permitted by the law, the Company has agreed
to indemnify its auditors, Ernst and Young, as part of the terms
of its audit engagement agreement against claims by a third
party arising from the audit (for an unspecified amount). No
payment has been made to indemnify Ernst and Young during
or since the financial year.
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.
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 25 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.
262018 Annual Report2018 Annual Report27 Remuneration Report (Audited)
This Remuneration Report details the nature and amount of remuneration for each Director and senior management personnel of
Murray River Organics Group Limited (“Murray River Organics” or the “Company”) and its controlled subsidiaries (the “Group”).
For the purpose of the Remuneration Report, key management personnel (“KMP”) include all Directors of the Board (executive
and non-executive) and other senior executives of the Group.
The KMP of the Group during the year ended 30 June 2018 were as follows:
Period of Responsibility
KMP Position
Non-Executives
Andrew Monk
Appointed 24 January 2018
Non-Executive Independent Chairman
Keith Mentiplay
Appointed 24 January 2018
Non-Executive Independent Director
Michael Porter
Appointed 2 April 2018
Non-Executive Independent Director
Steven Si
Alan Fisher
Appointed 24 January 2018
Resigned 10 August 2018
Appointed 8 May 2018
Resigned 31 May 2018
Non-Executive Independent Director
Non-Executive Independent Director
Craig Farrow
Appointed 6 September 2016
Non-Executive Independent Chairman
Resigned 24 January 2018
Kenneth Carr
Appointed 23 November 2017
Non-Executive Independent Director
Resigned 24 January 2018
Lisa Hennessy
Appointed 6 September 2016
Non-Executive Independent Director
Donald Brumley
Executives
Resigned 24 January 2018
Appointed 6 September 2016
Resigned 22 November 2017
Non-Executive Independent Director
Valentina Tripp
Appointed 16 April 2018
Managing Director and
Chief Executive Officer (CEO)
Albert Zago
Appointed 15 January 2018
Chief Financial Officer (CFO)
George Haggar
Erling Sorensen
Jamie Nemtsas
Matthew O’Brien
Appointed 9 November 2017
Resigned as CEO on 16 April 2018 (ceased as KMP)
Chief Executive Officer (CEO)
Appointed as CEO 18 June 2012
Appointed as Director 6 September 2016
Resigned 9 November 2017
Appointed as COO 18 June 2012
Appointed as Director 6 September 2016
Resigned 28 August 2017
Appointed March 2016
Resigned as CFO on 15 January 2018
(ceased as KMP)
Managing Director and
Chief Executive Officer (CEO)
Executive Director and
Chief Operating Officer (COO)
Chief Financial Officer (CFO)
282018 Annual Report
The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the Group
is as follows:
The remuneration policy, setting the terms and conditions for the executive Directors and other senior executives, was developed
and approved by the Board. Executive packages have been reviewed by reference to the Group’s performance, executive
performance and comparable information from industry sectors and other listed companies in similar industries. The performance
of executives is measured against agreed criteria and is based predominantly on the forecast growth of the Group’s profits and
shareholders’ value. All bonuses and incentives are linked to predetermined operational and financial performance criteria.
The Board is currently reviewing both the STI and LTI plans for executives and other employees. The Directors and executives
receive a superannuation guarantee contribution required by the law, and do not receive any other retirement benefits.
The Board policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and
responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually, based on
market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to Non-executive Directors is
subject to approval by shareholders at the annual general meeting. The maximum aggregate amount of fees that can be paid to
non-executive Directors as per last approval is $500,000. Fees for Non-executive Directors are not linked to the performance of the
Group. In FY18, no shares or options were issued to Non-executive Directors as remuneration.
Short Term Incentive (“STI”) Plan
VALENTINA TRIPP AND ALBERT ZAGO
The Board is currently developing new STI plans for executives and other employees, which will become effective for the 2019
financial year. Valentina Tripp is eligible to receive an STI for services provided from 1 July 2018. Albert Zago received an STI
for performance during the year ended 30 June 2018 based on project goals and KPIs relevant to his role as part of the broader
restructure of the Group.
GEORGE HAGGAR
George Haggar was entitled to a STI amount equal to $300,000 (50% of the fixed renumeration). In FY18 he was eligible for a
pro-rata amount from the date of appointment to 30 June 2018, however no STI was payable following his resignation and under a
deed of separation agreement.
ERLING SORENSEN, JAMIE NEMTSAS AND MATTHEW O’BRIEN
The table below outlines the key features of the STI plan for the year ended 30 June 2018, which applied to the previous CEO
(Erling Sorensen), COO (Jamie Nemtsas) and CFO (Matthew O’Brien). No STI has been paid to the previous CEO, COO and CFO
under this plan.
Objective
Participants
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
Role of the Remuneration and Nomination Committee
COMPOSITION
In accordance with the Remuneration and Nomination Committee Charter, the Group 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 of Murray River Organics Group Limited. The Remuneration and Nomination
Committee is currently comprised solely of Non-executive Directors.
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;
• Has effective policies and procedures to attract, motivate and retain appropriately skilled and diverse persons to meet the
company’s needs; and
Performance Period
Financial year ending 30 June 2018
• Has adequate succession plans for the CEO, senior executives and Executive Directors.
Opportunity
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.
Remuneration Policy
The remuneration policy of Murray River Organics Group Limited has been designed to align Director and executive objectives
with shareholder and business objectives by providing a fixed remuneration component and offering specific short-term incentives
(STI) and long-term incentives (LTI) based upon key performance areas affecting the Group’s financial results. The Board of Murray
River Organics Group Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the
best executives and Directors to run and manage the Group, as well as create goal congruence between Directors, executives and
shareholders.
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
Performance Conditions
STI will be assessed against both financial and non-financial measures, and will be weighted as follows:
Measure
Financial
Cash Flow
Weighting
Basis
40% CEO, COO
20% CFO
30% CEO,COO
50% CFO
EBITDA, Return on Assets, Sales Revenue, Gross Margin
Operating Cash, Working Capital
Individual
30% CEO,COO, CFO
Project goals and KPIs relevant to the individual’s role
as part of the broader performance review process for
executives
Payment Method
Cash – 100% will be paid in cash following the end of the performance period
Conditions
A performance gateway has been set for payment to participants of the STI. Up to 50% of entitlement is weighted
on the Group meeting or exceeding the budgeted EBITDA targets and the balance (50%) is based on other
internal performance measures detailed above.
302018 Annual Report2018 Annual Report31 Long-term Incentive (“LTI”) Plan
The Board is currently developing a new LTI plan for executives and other employees.
GEORGE HAGGAR
George Haggar was entitled to performance rights with a total fair value at grant date equal to $300,000 per annum. The vesting
of the performance rights was subject to satisfying three year key performance indicators, which were to be determined by the
Board. However, no LTI was implemented following his resignation and under the deed of separation agreement.
ERLING SORENSEN, JAMIE NEMTSAS AND MATTHEW O’BRIEN
Details of the performance rights applicable to previous key management personal (comprising Erling Sorensen, Jamie Nemtsas,
Matthew O’Brien), subject to vesting conditions outlined below, were as follows:
Purpose
Instrument
Eligibility
Reward achievement of long term business objectives and sustain value creation for shareholders
Performance Rights
CEO, COO, CFO
Performance Conditions
Continuing service with the Group.
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).
Measure
EPS
Below 10%
10%
Rights to Vest
Nil
20%
Above 10% but less than 20%
Pro-rata vesting from 20% -100%
At or above 20%
Share Price Growth
Less than 10%
10%
100%
Nil
20%
Above 10% but less than 20%
Pro-rata vesting from 20%-100%
At or above 20%
100%
Why were these chosen
EPS represents a strong measure of overall business performance.
Share Price Growth provides a shareholder and market-based perspective of the Company’s performance.
Considerations
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.
On 24 August 2017, the Board approved a modification to the 1,153,845 one-off retention performance rights issued during the
year ended 30 June 2017 to include a share price hurdle performance condition that the volume-weighted average price of the
Company’s share on the Australian Securities Exchange, calculated over the 20 day trading period commencing from and including
the date which is two weeks after the date on which the Company lodged its preliminary annual report with the Australian
Securities Exchange for the year ended 30 June 2019, being equal to or greater than $1.30. This modification did not result in an
increase in fair value of the performance rights. This modification extends the vesting of the date of the performance rights to 4
October 2019. The Company’s share price at the date of modification was $0.35.
Key Terms of Employment contracts
Prior to the election of a newly constituted Board on 24 January 2018, the previous Board had indicated to shareholders and the
market that the Non-Executive Directors’ fees were to be increased as outlined in the FY2017 annual report. However, the current
Board has resolved that it will maintain the original fees outlined in the FY2017 annual report until 30 June 2018, as detailed below
and Directors have been paid accordingly.
Board/Committee
Board based fee
Chairman Fee* ($)
Director/Member Fee* ($)
$75,000 (inclusive of committee work)
$40,000
Remuneration and Nomination Committee
Risk and Audit Committee
$5,000
$5,000
-
-
*The base fees detailed above excluded superannuation.
Valentina Tripp
Managing Director and Chief Executive Officer
Expiry date
Not applicable
Fixed Remuneration
$500,000 (including superannuation)
Short Term Incentive
Maximum yearly cash bonus of $300,000, commencing 1 July 2018.
Retention Incentive
Subject to obtaining all necessary shareholder approvals, Ms Tripp will be granted:
2 million options over ordinary shares in MRG (“Options”) with an exercise price of $0.60 cents vesting one (1)
year after commencement of Ms Tripp’s employment (being 16 April 18) (“Commencement Date”) and expiring
three (3) years after the Commencement Date.
2 million Options, with an exercise price of $0.70 cents vesting two (2) years after the Commencement Date
and expiring four (4) years after the Commencement Date.
2 million Options, with an exercise price of $0.80 cents vesting three (3) years after the Commencement Date
and expiring five (5) years after the Commencement Date
Long Term Incentive
Entitled to participate in the Company’s LTI scheme, which is yet to be determined by the Board.
Notice period
6 months
Termination/redundancy payment
Valentina’s employment may be terminated by either party 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.
Restraint of trade period
3 months if termination is less than 1 year from the Commencement Date of the contract, thereafter 6 months.
Albert Zago
Expiry date
Chief Financial Officer
Not applicable
Fixed Remuneration
$280,000 (including superannuation)
Short Term Incentive
Maximum value of $28,000 for 2018 financial year, thereafter maximum yearly bonus of 20% of total
remuneration (base salary plus superannuation), with potential of the STI rate to increase from 2020 financial
year and onwards.
Long Term Incentive
Entitled to participate in the Company’s LTI scheme, which is yet to be determined by the Board, with LTI to
represent 20% of total remuneration.
Notice period
4 months
Termination/redundancy payment
Albert’s employment may be terminated by either party by providing four months’ notice in writing before the
proposed date of termination, or in the company’s case, payment in lieu of notice at its discretion.
Restraint of trade period
Up to 12 months subject to location of employment or trade
322018 Annual Report2018 Annual Report33 Relationship between Remuneration Policy and Group Performance
Details of Key Management Personnel Remuneration
Revenue
EBITDA (statutory) (ii)
EBITDA (pro-forma) (ii)
Net profit/(loss) after tax
Share price at start of year
Share price at end of year
Basic earnings (cents) per share
Diluted earnings (cents) per
share
Interim and final dividend
2018
$’000
68,539
(51,968)
N/A
(59,607)
2018
$0.32
$0.31
(49)
(49)
-
2017
$’000
48,522
(584)
6,487
(5,927)
2017
$1.30 (i)
$0.32
(8)
(8)
-
2016
$’000
11,958
6,945
8,506
2,229
2016
N/A
N/A
4
4
-
2015
$’000
7,814
288
500
(1,369)
2015
N/A
N/A
N/A
N/A
-
2014
$’000
2,277
1,085
3200
1,005
2014
N/A
N/A
N/A
N/A
-
(i) The Company listed on the ASX on 20 December 2016 at an opening share price of $1.30 per share.
(ii) Statutory and pro-forma EBITDA results are non-IFRS financial measures referring to earnings before interest, tax, depreciation
and amortisation. The pro-forma results are removing the impact of the Company’s listing on the ASX on 20 December 2016.
34
2018 Annual Report
The compensation of each member of the key management personnel of the Group for the current year is set out below:
Short-term
Post-
employment
Long-term
benefits
Equity-settled share based
payments
2018
Salary, fees
and leave
$
Bonus
$
Super-
annuation
Long service
leave
$
$
Share
$
Performance
rights/Options
$
Termination
Total
Total
performance
related
Fixed
remuneration
$
$
%
%
Non – Executive Directors
Andrew Monk
Keith Mentiplay
Michael Porter
Steven Si
Alan Fisher
Craig Farrow
Lisa Hennessy
Kenneth Carr
Donald Brumley
32,880
19,728
6,508
18,986
2,935
79,909
42,618
13,837
30,441
-
-
-
-
-
-
-
-
-
3,124
-
1,874
-
-
618
1,804
-
-
279
7,591
-
4,049
-
1,315
-
2,892
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,004
21,602
7,126
20,790
3,214
87,500
46,667
15,152
33,333
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
Sub-total
247,842
-
23,546
-
-
-
-
271,388
Executives
Valentina Tripp
100,942
Erling Sorensen
97,844
George Haggar
276,795
Jamie Nemtsas
Albert Zago
41,932
112,820
-
-
-
-
4,217
-
20,421
-
30,023
-
15,489
-
20,000
8,701
-
Matthew O’Brien
105,000
-
9,975
-
Sub-total
735,333
20,000
88,826
-
Total
983,175
20,000
112,372
-
-
-
-
-
-
-
-
-
55,575
-
160,734
35%
65%
(136,716)
125,000
106,549
182,648
489,467
-
(136,716)
153,846
74,551
111%
63%
77%
-
-
-
-
130,371
-
-
141,521
14%
86%
245,346
53%
47%
(87,486)
461,494
1,218,168
(87,486)
461,494 1,489,556
Details of appointment and resignation of key management personal during the year ended 30 June 2018 are detailed within the
Remuneration Report on page 28.
2018 Annual Report35
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Michael Porter was appointed as the Interim Senior Corporate Farms Manager effective 6 June 2018 at a daily rate of $1,600 plus
GST, travel and accommodation expenses. As at 30 June 2018, $28,800 (excluding GST) was incurred in relation to consultancy
services provided to the Group. This is not included in amounts provided to Mr Porter in his capacity as a KMP. Following the
appointment of a full time farms manager, Michael Porter ceased to provide these interim services on 10 September 2018.
The compensation of each member of the key management personnel of the Group for the prior year is set out below:
Short-term
Post-
employment
Long-term
benefits
Equity-settled share based
payments
2017
Salary, fees
and leave
$
Bonus
$
Super-
annuation
Long service
leave
$
$
Shares
$
Performance
rights
$
Termination
Total
$
$
Total
performance
related
%
Fixed remun-
eration
%
Non-Executive Directors
Craig Farrow (i)
47,522
Lisa Hennessy (ii)
29,881
Donald Brumley (iii)
29,881
Josef Czyzewksi (iv)
3,125
Neil Kearney (v)
1,875
Sub-total
112,284
Executives
Erling Sorensen (vi)
259,615
Jamie Nemtsas (vii)
254,808
-
-
-
-
-
-
-
-
4,515
-
85,273
-
-
137,310
-
100%
-
51,163
-
-
83,883
-
100%
2,839
2,851
-
76,162
-
-
108,894
-
100%
297
-
178
-
-
-
-
-
3,422
-
100%
-
-
2,053
-
100%
10,680
-
212,598
-
-
335,562
23,750
23,750
4,167
4,167
-
136,716
-
-
136,716
124,447
Matthew O’Brien (viii)
150,685
28,931
14,315
2,469
Sub-total
Total
665,108
28,931
61,815
10,803
-
397,879
777,392
28,931
72,495
10,803
212,598
397,879
(i) Craig Farrow - appointed 6 September 2016
(ii) Lisa Hennessy - appointed 6 September 2016
(iii) Donald Brumley - appointed 6 September 2016
(iv) Josef Czyzewksi - Appointed 1 March 2016 and resigned 3 August 2016
(v) Neil Kearney - appointed 23 March 2016 and resigned 8 August 2016
(vi) Erling Sorensen - appointed 18 June 2012
(vii) Jamie Nemtsas - appointed 18 June 2012
(viii) Matthew O’Brien - appointed March 2016
-
-
-
-
-
424,248
32%
68%
419,441
33%
320,847
48%
67%
52%
1,164,536
1,500,098
During the year ended 30 June 2017, the Matthew O’Brien was granted a bonus of $28,931. This was awarded outside of the
STI plan in connection with the Company’s listing.
Key Management Personnel’s Share-based Compensation
PERFORMANCE RIGHTS ISSUED TO KEY MANAGEMENT PERSONNEL
KMP
Tranche
Grant
date
Number
granted
Fair
value per
performance
right at
grant date
Number
vested
during
the year
Year in
which
option
may
vest
Vested
%
Fair value
of exercised
performance
rights during
the year
Number
forfeited
during the
year
Year forfeited
performance
rights were
granted
Erling
Sorensen
Jamie
Nemtsas
One-off
Retention
16 Dec
2016
384,615
$1.30
-
2019
0%
-
384,615
2017
LTI – EPS
LTI – SPG
96,154
96,154
$1.30
$0.65
-
-
2019
2019
0%
0%
-
-
96,154
96,154
2017
2017
One-off
Retention
16 Dec
2016
384,615
$1.30
-
2019
0%
-
384,615
2017
LTI – EPS
LTI – SPG
96,154
96,154
$1.30
$0.65
-
-
2019
2019
0%
0%
Matthew
O’Brien
One-off
Retention
16 Dec
2016
LTI – EPS
LTI – SPG
George
Haggar
LTI
9 Nov
2017
384,615
$1.30
-
2019
0%
57,956
57,956
$1.30
$0.65
681,818
$0.418
-
-
-
2019
2019
2019
0%
0%
0%
-
-
-
-
-
96,154
96,154
2017
2017
-
-
-
-
-
-
- 681,818
2018
Amount
paid or
payable
for
exercised
perform-
ance
rights
Terms and conditions for each grant
Exercise
price $
Expiry
date
First
exercise
date
Last
exercise
date
-
-
-
-
-
-
-
-
-
-
-
30/06/19(i)
30/06/19(i)
30/06/19(i)
-
-
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
-
30/06/19(i)
30/06/19(i)
30/06/19(i)
-
-
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
30/06/19(i)
-
30/06/19
30/06/19
30/06/19
-
-
-
30/06/19
30/06/19
30/06/19
30/06/19
30/06/19
30/06/19
09/11/20
09/11/20
09/11/20
Total
2,336,191
1,835,664
(i) The terms and conditions for the One-off Retention related to Erling Sorensen and Jamie Nemtsas were modified during the
year ended 30 June 2018 to change the expiry date of the performance rights to 4 October 2019. The related performance
rights were forfeited by both Mr Sorensen and Mr Nemtsas upon cessing to be an employee of the Group during the year
ended 30 June 2018.
The following factors were used in determining the fair value of the performance rights granted during the year ended 30 June 2018:
KMP
Tranche
Grant Date
Price of shares
on grant date
Estimated
volatility
Risk free Interest
Rate
Dividend Yield
George Haggar
LTI
9 Nov 2017
$0.44
47.5%
1.91%
0%
362018 Annual Report2018 Annual Report37
Options issued to key management personnel
KMP
Tranche
Grant
date
Number
granted
Fair
value per
Option
at grant
date
Number
vested
during the
year
Year in
which
option
may be
vested
Vested
%
Fair value
of option
during the
year
Number
forfeited
during the
year
Year
forfeited
options
were
granted
Amount
paid or
payable for
exercised
options
Terms and conditions for each grant
Exercise
price
Expiry
date
First
exercise
date
Last
exercise
date
Valentina
Tripp (i)
George
Haggar
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
2,000,000
$0.0702
16 Apr
2018
2,000,000
$0.0764
2,000,000
$0.0830
2,000,000
$0.1244
9 Nov
2017
2,000,000
$0.1354
2,000,000
$0.4180
-
-
-
-
-
-
2019
2020
2021
2018
2019
2020
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
2,000,000
-
-
-
2018
2018
2018
-
-
-
-
-
-
$0.60
16/04/21
16/04/19
16/04/21
$0.70
16/04/22
16/04/20
16/04/22
$0.80
16/04/23
16/04/21
16/04/23
(i) The Retention Incentive options are subject to shareholder approval at the 2018 Annual General Meeting and the fair value of
the options will be reassessed at the approval date.
The following factors were used in determining the fair value of the options granted during the year ended 30 June 2018:
KMP
Tranche
Grant Date
Price of shares
on grant date
Estimated
volatility
Risk free Interest
Rate
Dividend Yield
Valentina Tripp
George Haggar
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
16 Apr 2018
9 Nov 2017
$0.44
$0.44
$0.44
$0.44
$0.44
$0.44
47.5%
47.5%
47.5%
47.5%
47.5%
47.5%
2.21%
2.26%
2.35%
1.91%
2.08%
2.21%
0%
0%
0%
0%
0%
0%
$0.50
9/11/20
9/11/18
9/11/20
Total
1,654,373
$0.55
9/11/21
9/11/19
9/11/21
$0.60
9/11/22
9/11/20
9/11/22
(i) Relates to removal of performance of rights from the above disclosure issued to Matthew O’Brien due to him ceasing to be a KMP
on 15 January 2018.
Number of performance rights held by key management personnel
The number of performance rights in Murray River Organics Group Limited held by each KMP:
Erling Sorensen
Jamie Nemtsas
Matthew O’Brien
George Haggar
Balance at
01/07/17
576,923
576,923
500,527
-
Granted
Exercised
Forfeited
Other (i)
Balance at
30/06/18
-
-
-
681,818
681,818
-
-
-
-
-
(576,923)
(576,923)
-
-
-
(500,527)
(681,818)
-
(1,835,664)
(500,527)
-
-
-
-
-
Number of Options held by key management personnel
The number of options in Murray River Organics Group Limited held by each KMP:
Balance at
01/07/17
Granted
Exercised
Forfeited
Balance at
30/06/18
Valentina Tripp (i)
George Haggar
Total
-
-
-
6,000,000
6,000,000
12,000,000
-
-
-
-
6,000,000
(6,000,000)
-
(6,000,000)
6,000,000
(i) The Retention Incentive options are subject to shareholder approval at the 2018 Annual General Meeting.
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 at
30/06/17
Options Exercised
Net Change Other
Andrew Monk (i)
Keith Mentiplay (i)
Michael Porter
Steven Si
Alan Fisher
Craig Farrow (ii)
Lisa Hennessy (ii)
Donald Brumley (ii)
Erling Sorensen (ii)
Valentina Tripp
George Haggar
Jamie Nemtsas (ii)
Albert Zago
Matthew O’Brien
Total
-
-
-
-
-
168,672
39,356
443,586
7,847,179
-
-
9,597,179
-
-
18,095,972
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
30/06/2018 (iii)
30,000
125,000
-
-
-
-
-
-
-
-
-
-
-
-
30,000
125,000
-
-
-
(168,672)
(39,356)
(443,586)
(7,847,179)
-
-
(9,597,179)
-
-
(17,940,972)
155,000
(i) ‘Net Change Other’ relates to shares purchased and sold during the financial year.
(ii) ‘Net Change Other’ relates to the removal of shareholdings from the above disclosure for the KMP following their resignation.
(iii) There has been no change in shareholdings from 30 June 2018 to the date of this report.
382018 Annual Report2018 Annual Report39
First strike at 2017 Annual General Meeting
Aggregate of loans made
At the 2017 AGM more than 25% of shareholders voted against the adoption of the Remuneration Report. An impact of this
is that, in the following year, the Board must report in the annual report on any proposed action in response to that vote or
explain why it does not propose any response. The Board advises that in its view the 2017 AGM vote was a protest vote by the
shareholders given the poor financial performance of the Group and the fall in the Company’s share price since listing on the ASX
in December 2016.
The Board acknowledges the vote at the 2017 AGM. Accordingly, having regard to the comments made at the 2017 AGM and
after election of the newly constituted Board on 24 January 2018, the Board adjusted the Directors’ remuneration downwards
to FY17 levels and has restructured the management team. Further, the Board continues to closely monitor remuneration of key
management personnel to ensure that it is appropriate given the size and operations of the Group.
The Board is also developing new STI Plans and LTI Plans to ensure a balance between shareholder expectations, business strategy
considerations and appropriate market comparable remuneration to attract, motivate and retain the Group’s executives.
The Directors’ remuneration reinstated to FY17 levels as follows:
Opening balance at commencement of the financial year
Loans advanced
Loan repayment received
Closing Balance at end of the financial year
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:
Board/Committee
Board based fee
Chairman Fee* ($)
Director/Member Fee* ($)
$75,000 (inclusive of committee work)
$40,000
As detailed above, these tax obligations were not due to be paid by the Group to the ATO until
March 2018. The above loan balances relate 50% to Jamie Nemtsas and 50% to Erling Sorensen.
Remuneration and Nomination Committee
$5,000
Risk and Audit Committee
$5,000
*The base fees detail above excluded superannuation.
-
-
Board renumeration approved by a previous Board (prior to 24 January 2018), has now been superseded, which was as follows:
Interest that would have been charged had loan been at arm’s length
Number of KMP with loans outstanding at end of financial year
(i) Due to the timing between the funds being paid by the Founders to the Company (in August 2017) and the tax obligation
settled with the ATO (March 2018), interest of $13,817 and $14,055 at a rate of 4.44% was respectively paid to Erling Sorensen
and Jamie Nemtsas. There was no interest payable as at 30 June 2017.
Board/Committee
Board based fee
$150,000 (inclusive of committee work)
$65,000
Chairman Fee ($)
Director/Member Fee ($)
Other Transactions with Key Management Personnel
2018
$
979,193
-
(979,193)
-
(i)
-
2017
$
-
1,371,909
(392,716)
979,193
N/A
2
Remuneration and Nomination Committee
$10,000
Risk and Audit Committee
$10,000
-
-
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.
Loans to Key Management Personnel
In the prior year, the loans to key management personnel relate 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. During FY18 these tax obligations had been paid by the Group to the ATO.
The Sornem Entities are non-operating entities, and were acquired by the Company from the Founders (being Erling Sorensen and
Jamie Nemtsas), and entities associated with each of them, as applicable, as part of the FY17 Restructure (being the restructure
of the applicable Founder entities to facilitate the initial public offering/listing of the Group). 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.
During the year, the Group received $4,429,108 from Arrow Primary Infrastructure Fund (Arrow) as funding for capital expenditure
incurred on the Colignan vineyard (2017: $1,853,557). The total $4,429,108 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 ended 30 June 2018, the Group paid $2,142,232 (2017: $1,757,566) in
relation to lease payments as lessee of the Colignan vineyard. The former Directors, Erling Sorensen and Jamie Nemtsas, hold
units in the Arrow Primary Infrastructure Fund. The lease has been entered into under terms and conditions as described in Note
16(b) of the Financial Statements and neither interest held represents a controlling interest in Arrow Primary Infrastructure Fund.
As at 30 June 2018, no amount was receivable from Sornem Asset Management for shared services relating to shared offices
(2017: $87,764). The prior year balance has been written off. Sornem Asset Management is a related entity to Jamie Nemtsas and
Erling Sorensen.
During the year ended 30 June 2018, the Group paid $69,631 (at a rate of $400.00 per megalitre) (2017: Nil) to a related party of
former Director Jamie Nemtsas to access water in relation to the Alkira property. The Group does not have access to water other
than through this arrangement. 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
Andrew Monk
Chairman
28 September 2018
Director
Valentina Tripp
Managing Director
402018 Annual Report2018 Annual Report41 Corporate Governance Statement
This Corporate Governance Statement sets out the Company’s current compliance with the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (Recommendations) in respect of the reporting period ended 30 June
2018 (“Reporting Period”).
The Company currently has in place corporate governance policies and charters which have been posted in a dedicated corporate
governance information section on the Company’s website at www.murrayriverorganicsinvestors.com.au. This provides public
access to all the information relevant to the Company meeting its corporate governance obligations.
RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
1.
1.1
Lay solid foundations for management and oversight
A listed entity should disclose:
Yes
the respective roles and responsibilities of its board and
management; and
those matters expressly reserved to the board and those
delegated to management.
1.2
A listed entity should:
Yes
undertake appropriate checks before appointing
a person, or putting forward to security holders a
candidate for election, as a director; and
provide security holders with all material information in
its possession relevant to a decision on whether or not
to elect or re-elect a director.
1.3
1.4
A listed entity should have a written agreement with
each director and senior executive setting out the terms
of their appointment.
The company secretary of a listed entity should be
accountable directly to the board, through the chair,
on all matters to do with the proper functioning of the
board.
Yes
Yes
The Company’s Board Charter discloses the specific
responsibilities of the Board and provides that the Board shall
delegate responsibility for the day-to-day operations and
administration of the Company to the Managing Director and
management.
The Board Charter sets out the role and responsibilities of
the Board and, in particular, for the long term growth and
profitability of the Company and its strategies, policies and
financial objectives.
Please refer to the Board Charter (available via the Company’s
website, www.murrayriverorganicsinvestors.com.au) for
information about the respective roles and responsibilities of
the Board and Management (including those matters expressly
reserved to the Board and those delegated to Management).
The Remuneration and Nomination Committee Charter
delegates responsibility to the Remuneration and Nomination
Committee to identify and nominate, for the approval of
the Board, candidates to fill Board vacancies as and when
they arise, having regard to the desired composition of the
Board, and undertake appropriate checks before appointing a
person or putting forward to shareholders a new candidate for
election, as a director.
In accordance with the Communications Policy, the Company
provides security holders with all material information in its
possession concerning the appointment or re-appointment of
a director in the Notice of Shareholder Meeting concerning
that appointment or re-appointment. A recommendation of
the disinterested Directors concerning that appointment or re-
appointment is also given.
Please refer to the Remuneration and Nomination Committee
Charter and Communications Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
The Company has a written agreement with each director and
senior executive setting out the terms of their appointment.
The Company Secretary is accountable directly to the Board,
through the Chair, on all matters to do with the proper
functioning of the Board, unless delegated by the Board to
another appropriate person. The current Company Secretary
has direct contact with all directors as and when required.
Please refer to the Board Charter (available via the Company’s
website, www.murrayriverorganicsinvestors.com.au) for further
details.
RECOMMENDATION
1.5
A listed entity should:
COMPLY
(Yes/No)
Yes
(a) have a diversity policy which includes requirements
for the board or a relevant committee of the board
to set measurable objectives for achieving gender
diversity and to assess annually both the objectives
and the entity’s progress in achieving them;
(b) disclose that policy or a summary of it; and
(c) disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity
set by the board or a relevant committee of the
board in accordance with the entity’s diversity policy
and its progress towards achieving them and either:
(1) the respective proportions of men and women on
the board, in senior executive positions and across
the whole organisation (including how the entity has
defined “senior executive” for these purposes); or
(2) if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s most
recent “Gender Equality Indicators”, as defined in
and published under that Act.
1.6
A listed entity should:
Partially
(a) have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and
(b) disclose, in relation to each reporting period,
whether a performance evaluation was undertaken in
the reporting period in accordance with that process.
COMMENT
The Board is committed to improving its workplace diversity
throughout the Company. The Company has adopted a
Diversity Policy which includes requirements for the Board
to set measurable objectives for achieving gender diversity
goals and review the entity’s progress in achieving them.
Management will monitor, review and report to the Board
(including via the Remuneration and Nomination Committee)
on the Company’s progress towards achieving its measurable
objectives on an annual basis and conducting a review of the
status of diversity within the Company.
The Policy is supported by other policies, including a Code of
Conduct, which have been adopted by the Board to enhance
its operations through a diverse workforce. The Company
values having a diverse workforce from a wide variety of
cultural, religious or ethnic backgrounds as well as addressing
age, physical and gender matters.
The Company recognises that gender diversity amongst its
Personnel broadens the pool of high-quality directors and
employees, is likely to support employee retention, is likely
to encourage greater innovation by drawing on different
perspectives, is a socially and economically responsible
governance practice, and will improve the Company’s
corporate reputation.
The Board recognises the importance of diversity in the
workplace and is focused on achieving and improving
representation of women on the Board and in senior positions.
The Board assessed the gender diversity of the Company
during the Reporting Period and discloses the following
proportions of men and women:
whole organisation: 71 men and 51 women
senior management: 3 men and 1 woman
board: 4 men* and 2 women**
* Steven Si subsequently resigned as Director of the Company
and, accordingly, the board now consists of 3 men
** including the company secretary
The Board considers ‘senior executives’ to be those who report
to the Chief Executive Officer or the Board. Please refer to the
Diversity Policy (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Board, with the advice and assistance of the Remuneration
and Nomination Committee, is required to self-evaluate its
performance and effectiveness, and the performance of its
Committees and individual Directors on an annual basis. Each
Committee is also required to self-evaluate its performance
and effectiveness, and the performance of its members on an
annual basis.
The Remuneration and Nomination Committee is also
responsible for recognising and analysing any gaps in the skills
and experience of the current Board.
During the Reporting Period, the Board underwent significant
changes in respect of its composition and, accordingly, did not
undertake a formal board performance evaluation. Since the
appointment of the current Board, the Board has informally
considered the skills present on the Board and identified gaps
required to be filled. The Board has also implemented a Board
evaluation process as a standing agenda item at each Board
Meeting.
The Board expects to conduct a fulsome performance
evaluation upon completion of the current strategic and
operational review of the Company’s business.
Please refer to the Remuneration and Nomination Committee
Charter and the Board Charter (available via the Company’s
website, www.murrayriverorganicsinvestors.com.au) for further
details.
422018 Annual Report2018 Annual Report43
COMMENT
RECOMMENDATION
RECOMMENDATION
1.7
A listed entity should:
COMPLY
(Yes/No)
Yes
(a) have and disclose a process for periodically
evaluating the performance of its senior executives;
and
(b) disclose, in relation to each reporting period,
whether a performance evaluation was undertaken in
the reporting period in accordance with that process.
2.
2.1
Structure the board to add value
The board of a listed entity should:
Yes
(a) have a nomination committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b) if it does not have a nomination committee, disclose
that fact and the processes it employs to address
board succession issues and to ensure that the board
has the appropriate balance of skills, knowledge,
experience, independence and diversity to enable it
to discharge its duties and responsibilities effectively.
2.2
A listed entity should have and disclose a board skills
matrix setting out the mix of skills and diversity that
the board currently has or is looking to achieve in its
membership.
With the advice and assistance of the Remuneration and
Nomination Committee, the Board is responsible for
periodically assessing the performance of the Chief Executive
Officer. The Chief Executive Officer is responsible for
periodically assessing the performance of the senior executives
within the Company, in conjunction with the Board.
The Remuneration and Nomination is also responsible for
annually evaluating the senior executives to evaluate the
individual’s performance regarding skills, knowledge and
experience.
During the Reporting Period, the Company conducted formal
performance evaluations of its senior executives in respect of
their skills, knowledge and experience.
Please refer the Remuneration and Nomination Committee
Charter and the Board Charter (available via the Company’s
website, www.murrayriverorganicsinvestors.com.au) for further
details.
The Company has established the Remuneration and
Nomination Committee, and adopted the Remuneration and
Nomination Committee Charter. During the Reporting Period,
the Remuneration and Nomination Committee was comprised
of:
Keith Mentiplay (Committee Chair and Independent Non-
Executive Director);
Andrew Monk (Board Chair and Independent Non-Executive
Director); and
Steven Si (Independent Non-Executive Director).
Details of meetings held during the period, are contained in the
Directors’ Report section of this Annual Report.
Since the end of the Reporting Period, Steven Si has resigned
as Director of the Company. Accordingly, the Board considered
the composition of the Remuneration and Nomination
Committee and appointed Michael Porter (Independent
Non-Executive Director) to the Remuneration & Nomination
Committee effective on and from 23 August 2018.
Please refer the Remuneration and Nomination Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
Yes
The Remuneration and Nomination Committee is responsible
for setting out the mix of skills and diversity that the Board
currently has or is looking to achieve in its membership.
The Board Skills Matrix details the collective skills, knowledge,
experience, personal attributes and other criteria of the Board
of Directors. The Board will assess all future candidates for
Board positions, and the performance of its current members,
against the criteria set out in the Board Skills Matrix.
Please refer to the Board Skills Matrix at the end of Section
8.1 of this Corporate Governance Statement, and the
Remuneration and Nomination Committee Charter (available
via the Company’s website, www.murrayriverorganicsinvestors.
com.au) for further details.
2.3
A listed entity should disclose:
(a) the names of the directors considered by the board
to be independent directors;
(b) if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the
board is of the opinion that it does not compromise
the independence of the director, the nature of
the interest, position, association or relationship in
question and an explanation of why the board is of
that opinion; and
(c) the length of service of each director.
2.4
2.5
2.6
3.
3.1
4.
4.1
A majority of the board of a listed entity should be
independent directors.
The chair of the board of a listed entity should be an
independent director and, in particular, should not be
the same person as the CEO of the entity.
A listed entity should have a program for inducting
new directors and provide appropriate professional
development opportunities for directors to develop and
maintain the skills and knowledge needed to perform
their role as directors effectively.
Promote ethical and responsible decision-making
A listed entity should:
(a) have a code of conduct for its directors, senior
executives and employees; and
(b) disclose that code or a summary of it.
Safeguard integrity in financial reporting
The board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
(2) is chaired by an independent director, who is not the
chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) if it does not have an audit committee, disclose that
fact and the processes it employs that independently
verify and safeguard the integrity of its corporate
reporting, including the processes for the
appointment and removal of the external auditor and
the rotation of the audit engagement partner.
COMPLY
(Yes/No)
Yes
Yes
Yes
Yes
Yes
COMMENT
The Board consists of four Directors, three of which are
Independent Non-Executive Directors – Andrew Monk, Keith
Mentiplay and Michael Porter.
Michael Porter was engaged by the Group until 10 September
2018 as an independent contractor in the position of interim
Regional Corporate Farms Manager. Despite the services
provided by Michael to the Group, given the short, finite term
of Michael’s interim appointment, the disinterested Directors
are satisfied that Michael’s interim position does not interfere
with his capacity to bring an independent judgement to bear
on issues before the Board and to act in the best interests of
the Company and its shareholders.
The date of appointment of each Director is set out in the
Directors’ Report Section of this Annual Report.
As at the date of this Corporate Governance Statement, a
majority of directors are Independent Directors.
Andrew Monk, the Chair of the Board, is an Independent Non-
Executive Director and is not the Chief Executive Officer of the
Company.
The Company’s Remuneration and Nomination Committee
is responsible for establishing and facilitating an induction
program for new directors with all such information and advice
which may be considered necessary or desirable for the
director to commence their appointment to the Board.
Please refer to the Company’s Remuneration and Nomination
Committee Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Company has adopted a Code of Conduct to be followed
by all personnel of the Company, including any director,
employee, contractor, secondees and consultant of the
Company. Please refer to the Code of Conduct (available via
the Company’s website, www.murrayriverorganicsinvestors.
com.au) for further details.
Partially
The Board has established an Audit and Risk Management
Committee which is governed by the Audit and Risk
Management Committee Charter.
The Audit and Risk Management Committee is currently
comprised of:
Andrew Monk (Committee Chair, Board Chair and Independent
Non-Executive Director);
Michael Porter (Independent Non-Executive Director); and
Keith Mentiplay (Independent Non-Executive Director).
While the Audit and Risk Management Committee comprises
all independent non-executive directors (including the Chair),
the Committee Chair is also the Chair of the Board. The Board
believes that, given the current circumstances of the Company
and the duties of the other independent directors, the Company
cannot justify the appointment of an additional independent
director to meet this requirement of Recommendation 4.1.
The names of the members of the Audit and Risk Management
Committee, details of their qualifications and experience and
details of the number of meetings held during the Reporting
Period, are contained in the Directors’ Report section of this
Annual Report.
Details of meetings held during the Reporting Period, are
contained in the Directors’ Report section of this Annual Report.
Please refer to the Audit and Risk Management Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
442018 Annual Report2018 Annual Report45 4.2
4.3
5.
5.1
6.
6.1
6.2
6.3
6.4
COMPLY
(Yes/No)
Yes
RECOMMENDATION
The board of a listed entity should, before it approves
the entity’s financial statements for a financial period,
receive from its CEO and CFO a declaration that,
in their opinion, the financial records of the entity
have been properly maintained and that the financial
statements comply with the appropriate accounting
standards and give a true and fair view of the financial
position and performance of the entity and that the
opinion has been formed on the basis of a sound
system of risk management and internal control which is
operating effectively.
A listed entity that has an AGM should ensure that its
external auditor attends its AGM and is available to
answer questions from security holders relevant to the
audit.
Make timely and balanced disclosure
A listed entity should:
(a) have a written policy for complying with its
continuous disclosure obligations under the Listing
Rules; and
(b) disclose that policy or a summary of it.
Respect the rights of shareholders
A listed entity should provide information about itself
and its governance to investors via its website.
A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors.
A listed entity should disclose the policies and
processes it has in place to facilitate and encourage
participation at meetings of security holders.
A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security registry
electronically.
Yes
Yes
Yes
Yes
Yes
Yes
COMMENT
As set out in the Audit and Risk Management Committee
Charter, the Audit and Risk Management Committee ensures
that the Company complies with its legal obligations, including
to assist the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO) to provide declarations in relation to the
Company’s financial reports required by both section 295A of
the Corporations Act 2001 (Cth) and this Recommendation 4.2.
The CFO and CEO declarations for the Reporting Period were
delivered prior to the Board making its declaration under
section 295A of the Corporations Act.
Please refer to the Audit and Risk Management Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Audit and Risk Management Committee is responsible for
ensuring that the external auditor attends the annual general
meeting of the Company and is available to answer questions
from shareholders of the Company relevant to the audit.
Pease refer to the Audit and Risk Management Committee
Charter and the Communications Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
The Company has adopted a Continuous Disclosure Policy to
ensure compliance with its continuous disclosure obligations
under the ASX Listing Rules. The Policy establishes procedures
that seek to ensure that Directors and Management are aware
of, and fulfil, their obligations in relation to the timely disclosure
of material price-sensitive information.
Please refer to the Continuous Disclosure Policy (available via
the Company’s website, www.murrayriverorganicsinvestors.
com.au) for further details.
The Company provides information about itself, its
business and its governance on its website, www.
murrayriverorganicsinvestors.com.au. All policies and charters
concerning governance issues are located on a dedicated
section headed Corporate Governance.
The Company’s Communications Policy establishes procedures
to ensure that Shareholders are provided with sufficient
information to assess the performance of the Company and are
informed of all major developments affecting the affairs of the
Company in accordance with all applicable laws.
Please refer to the Communications Policy and the Investor
Relations ` (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Company’s Communication Policy establishes procedures
to encourage effective participation at general meetings of the
Company.
Please refer to the Communications Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
The Company’s Communication Policy ensures that
Shareholders are able to access information relevant to their
shareholding in the Company via periodic mail-outs or (on
election) to receive email communications. Shareholders are
also granted access to it’s the Company’s share registry.
Please refer to the Communications Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
RECOMMENDATION
Recognise and manage risk
COMPLY
(Yes/No)
COMMENT
7.
7.1
The board of a listed entity should:
Yes
(a) have a committee or committees to oversee risk,
each of which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b) if it does not have a risk committee or committees
that satisfy (a) above, disclose that fact and the
processes it employs for overseeing the entity’s risk
management framework.
7.2
The board or a committee of the board should:
Yes
(a) review the entity’s risk management framework at
least annually to satisfy itself that it continues to be
sound; and
(b) disclose, in relation to each reporting period,
whether such a review has taken place.
7.3
A listed entity should disclose:
Yes
(a) if it has an internal audit function, how the function is
structured and what role it performs; or
(b) if it does not have an internal audit function, that
fact and the processes it employs for evaluating and
continually improving the effectiveness of its risk
management and internal control processes.
The Company has established an Audit and Risk Management
Committee which is governed by the Audit and Risk
Management Committee Charter. The Company has also
adopted a Risk Management Policy.
The Audit and Risk Management Committee is currently
comprised of:
Andrew Monk (Committee Chair, Board Chair and Independent
Non-Executive Director);
Michael Porter (Independent Non-Executive Director); and
Keith Mentiplay (Independent Non-Executive Director).
Details of meetings held during the Reporting Period, are
contained in the Directors’ Report section of this Annual
Report.
Please refer to the Audit and Risk Management Committee
Charter and Risk Management Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
In accordance with the Company’s Audit and Risk Management
Committee Charter, the Audit and Risk Management
Committee is responsible for ensuring that the Company’s risk
management framework is reviewed at least annually.
During the Reporting Period, the Audit and Risk Management
Committee engaged an external third party to conduct an
annual review of the Company’s risk management framework.
However, this review was undertaken by the previous Audit and
Risk Management Committee prior to the various changes to
the Board’s membership. Accordingly, the current Board and
Audit and Risk Management Committee expect to conduct
a fulsome review of the risk management framework upon
completion of the current strategic and operational review
of the Company’s business to ensure that identified risks
and associated management processes are relevant to the
Company’s business and long-term strategy.
Please refer to the Audit and Risk Management Committee
Charter and the Risk Management Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
The Company does not have an internal audit function.
The Board considers that the Audit and Risk Management
Committee and financial control function, in conjunction
with its Risk Management Policy, are sufficient processes for
evaluating and continually improving the effectiveness of its risk
management and internal control processes for a company of
its size and complexity.
Please refer to the Company’s Audit and Risk Management
Committee Charter and the Risk Management Policy (available
via the Company’s website, www.murrayriverorganicsinvestors.
com.au) for further details.
7.4
A listed entity should disclose whether it has any
material exposure to economic, environmental and
social sustainability risks and, if it does, how it manages
or intends to manage those risks.
Yes
Currently, the Company has no material exposure to any
economic, environmental and social sustainability risks to
disclose.
The Audit and Risk Management Committee is responsible for
reviewing whether the Company has any material exposure to
any economic, environmental and social sustainability risks and,
if so, developing strategies to manage such risks.
Please refer to the Audit & Risk Management Committee
Charter and the Risk Management Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
462018 Annual Report2018 Annual Report47 RECOMMENDATION
Remunerate fairly and responsibly
COMPLY
(Yes/No)
COMMENT
8.
8.1
The board of a listed entity should:
Yes
(a) have a remuneration committee which:
(1) has at least three members, a majority of whom
are independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings; or
(b) if it does not have a remuneration committee,
disclose that fact and the processes it employs for
setting the level and composition of remuneration
for directors and senior executives and ensuring that
such remuneration is appropriate and not excessive.
8.2
A listed entity should separately disclose its policies and
practices regarding the remuneration of non-executive
directors and the remuneration of executive directors
and other senior executives.
Yes
8.3
A listed entity which has an equity-based remuneration
scheme should:
Yes
(a) have a policy on whether participants are permitted
to enter into transactions (whether through the use
of derivatives or otherwise) which limit the economic
risk of participating in the scheme; and
(b) disclose that policy or a summary of it.
The Board has established a Remuneration and Nomination
Committee which is governed by the Remuneration and
Nomination Committee Charter.
Membership of the Remuneration and Nomination Committee,
and details of meetings held during the Reporting Period, are
contained in the Directors’ Report section.
Since the end of the Reporting Period, Steven Si has resigned
as Director of the Company. Accordingly, the Board considered
the composition of the Remuneration and Nomination
Committee and appointed Michael Porter (Independent
Non-Executive Director) to the Remuneration & Nomination
Committee effective on and from 23 August 2018.
Please refer the Remuneration and Nomination Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Company’s Remuneration Policy and the Remuneration
and Nomination Committee Charter disclose its policies
and practices regarding the remuneration of Non-Executive
Directors and the remuneration of Executive Directors and
other senior executives.
Please refer the Remuneration and Nomination Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
The Company has adopted a long term incentive performance
rights plan (LTI) to reward, retain and attract certain employees,
consultants and directors of the Company.
The Company’s Security Trading Policy prohibits Participants
from entering into transactions (whether through the use
of derivatives or otherwise) which limit the economic risk of
participating in the LTI.
Refer to the Securities Trading Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
BOARD SKILLS MATRIX
(In relation to Corporate Governance Statement - Recommendation 2.2)
This Board Skills Matrix details the collective skills, knowledge, experience, personal attributes and other criteria the Board of
Directors of Murray River Organics Group Limited currently believes are required for the good governance of MRG. The Board will
assess all future candidates for Board positions, and the performance of its current members, against these criteria in accordance
with the ASX Corporate Governance Principles and Recommendations.
SKILL, EXPERIENCE AND ATTRIBUTE
Industry Knowledge / Experience
Technical / Professional Skills
Farming Operations
Capital Raising
Fast Moving Consumer Goods
Commercial & Business Development
Investor Relations
Diversity
Manufacturing Knowledge (Food)
Executive & HR Management
Organic Sector
Information & Communication Technology
Sales (Domestic Market)
Investment Management
Sales (Export International Market)
Marketing / Advertising, Media, PR, Digital
Supply Chain (Manufacturing/Retail)
Mergers & Acquisitions
Water Licensing
Other Sector Specific
Senior Management Position (past & present)
Strategy - FMCG Brand Marketing
Qualifications / Certifications
Strategy - Business Plan
AICD Company Director Qualifications
Risk, Governance & Compliance
Business Qualifications
ASX Regulations & Obligations
Corporate Qualifications
Governance & Compliance Knowledge
Financial Qualifications
Public Company
GIA Governance Certifications
Representation & Stakeholder Relations
Legal Qualifications
Risk Management
482018 Annual Report2018 Annual Report49 A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auAuditor’s Independence Declaration to the Directors of Murray River Organics Group Limited As lead auditor for the audit of Murray River Organics Group Limited for the financial year ended 30 June 2018, I declare to the best of my knowledge and belief, there have been: a)no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b)no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Murray River Organics Group Limited and the entities it controlled during the financial year. Ernst & Young David Petersen Partner 28 September 2018 4444A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auAuditor’s Independence Declaration to the Directors of Murray River Organics Group Limited As lead auditor for the audit of Murray River Organics Group Limited for the financial year ended 30 June 2018, I declare to the best of my knowledge and belief, there have been: a)no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b)no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Murray River Organics Group Limited and the entities it controlled during the financial year. Ernst & Young David Petersen Partner 28 September 2018 4444A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545502018 Annual Report2018 Annual Report51 2. Measurement of the 2018 Crop
Why significant
How our audit addressed the key audit matter
The 2018 Crop consists of vine (grape) and citrus
fruit, a portion of which remains unharvested at 30
June 2018.
As disclosed in Note 2(f) and Note 9 of the financial
report, the Group has measured the fair value less
cost to sell of the 2018 Crop at the point of harvest to
be $10.742 million.
The measurement of the 2018 Crop was a key audit
matter as the fair value less cost to sell estimate is
subject to significant judgement given the nature of
assumptions applied, including:
Principal market for the category of fruit
Forecast selling price for the category of fruit
Estimated yield of unharvested fruit
Note 9 of the financial report discloses the key
changes in accounting estimates applied to measure
the 2018 Crop in comparison to the 2017 Crop.
Our audit procedures included the following:
Assessed the appropriateness of the methodology
applied by the Group to measure the 2018 Crop with
reference to Australian Accounting Standards.
Assessed the Group’s judgement of the principal
market or, where relevant, the most advantageous
market for the 2018 Crop.
Assessed the key assumptions within the fair value
less cost to sell calculation for the 2018 Crop by
comparing the assumptions to historical trends and,
where possible, actual outcomes in subsequent
periods.
Assessed the actual yields and estimates of yields on
unharvested fruit for the 2018 Crop by testing a
sample of inputs to historical data and actual
outcomes in subsequent periods.
Assessed the adequacy of the related disclosures
made in the financial report, including those related to
a change in accounting estimates, as required by
Australian Accounting Standards.
3. Existence and measurement of inventories
Why significant
How our audit addressed the key audit matter
At 30 June 2018, the Group held $16.194 million in
inventories representing 16% of total assets. The
Group’s inventories comprise raw materials harvested
from the Group’s fruit crops and purchased finished
goods and packaging.
As detailed in Note 2(e) of the financial report:
Own grown dried fruit and citrus inventories are
measured at fair value less costs to sell at the
point of harvest.
Purchased inventories are valued at the lower of
cost and net realisable value.
The Group stores its inventories at various farm,
processing and warehouse locations. Given the
perishable nature of the Group’s inventories, certain
inventory items are subject to changes to quality and
weight over time, as well as demand from customers.
The existence and measurement of inventories was a
key audit matter given the Group exercises judgement
with respect to these considerations in measuring
inventory volumes and recording inventory costs and
provisions in accordance with the Group’s accounting
policies.
Our audit procedures included the following:
Attended stocktakes performed by the Group at
selected inventory locations and performed a sample
of inventory counts and reconciliations of physical
inventory item quantities to accounting records. A
sample of inventories recorded based on weight were
weighed as part of our inventory count procedures.
Assessed whether the cost of a sample of inventory
items agreed to supplier invoices for purchased
inventories and transfer value from agricultural
produce for own grown produce.
Selected a sample of the key inputs to the Group’s
process for capitalising manufacturing overheads into
finished goods inventories to assess whether actual
costs incurred had been capitalised.
Assessed management’s process for identifying
excess, obsolete and unsaleable inventory items,
including reviewing aged inventory listings, product
gross margins and management’s analysis of expected
future sales for inventory items.
Assessed the appropriateness of Group’s assumptions
in calculating inventory provisions and tested a sample
of items for consistency with the Group’s policies.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
4747
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1.Impairment of goodwill and other non-current assets Why significant How our audit addressed the key audit matter The Group assesses non-current assets for impairment which includes goodwill at least annually and other non-current assets when indicators are identified. Where the carrying value of a non-current asset is higher than its recoverable amount, Australian Accounting Standards require the carrying value of the non-current asset to be impaired. The Group has exercised judgement to determine that there is a single cash generating unit (“CGU”) consistent with the identification of operating segments. The Group’s single CGU has been the basis for assessing goodwill and other non-current assets for impairment. The Group performed an impairment test at 31 December 2017 and recorded an impairment charge. Following ongoing significantly below budget operating results, the Group performed an impairment test of the CGU at 30 June 2018 and recorded a further impairment charge. The total impairment charge for the year ended 30 June 2018 was $21.169 million. The impairment charge was allocated to goodwill ($10.749 million), plant and equipment ($5.899 million) and leasehold improvements ($4.521 million). As outlined in Note 14 of the financial report, the range of judgements and assumptions in the Group’s impairment assessment resulted in this matter being considered a key audit matter. Our audit procedures involved our valuation specialists where necessary and included the following: Tested the mathematical accuracy of the CGU value-in-use impairment model. Assessed the Group’s determination that there is a single CGU of the Group. Assessed the Group’s judgement in applying cash flow forecasts extending over a 10 year period in the value-in-use impairment model. Assessed whether the cash flows from the Board approved 2019 budget were used in the CGU impairment model. Assessed the key assumptions contained within the cash flow forecasts prepared by the Group and considered their support and external data where available, including revenue growth rates, profit margins, capital expenditure estimates and terminal growth rates. Assessed the appropriateness of the discount rate applied to the CGU by comparison to external market data of comparable companies. Performed sensitivity analysis on key assumptions to ascertain to the extent to which changes in those assumptions would either individually or collectively impact the impairment assessment. Considered the net assets of the Group at 30 June 2018 compared to the market capitalisation implied by the potential future equity transactions being considered by the Board as a valuation cross-check. Assessed the adequacy of the related disclosures made in the financial report as required by Australian Accounting Standards. 46A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545522018 Annual Report2018 Annual Report53
4. Revaluations of property, plant and equipment – including assets held for sale
Other Information
Why significant
How our audit addressed the key audit matter
Our audit procedures involved our valuation specialists
where necessary and included the following:
Assessed the competence, capabilities and objectivity
of the Group’s independent valuation expert, and
appropriateness of the scope and methodology of
valuations commissioned for the purposes of the
financial report.
Assessed the appropriateness of the Group’s
recognition of the revaluation gain or loss either
through profit or loss or other comprehensive income.
Assessed the appropriateness of judgements applied
by the Group in classifying relevant properties as
‘assets held for sale’ in accordance with Australian
Accounting Standards.
Assessed the fair value less costs to sell applied to a
sample of ‘assets held for sale’ with reference to offers
received by the Group from market participants or
actual selling prices realised in subsequent periods.
As disclosed in Note 2(g) and Note 13.1 of the
financial report, the Group applies the revaluation
method in measuring the following classes of
property, plant and equipment:
Freehold land
Bearer plants
Buildings and property improvements
The Group owns a portfolio of agricultural assets of
which those classes of property, plant and equipment
applying the revaluation method represent 32% of
total assets of the Group at 30 June 2018.
The Group has determined the fair value of the
relevant properties at 30 June 2018 based on
valuations performed by an independent valuation
expert. The valuation methodologies applied are
described in Note 13.1 of the financial report.
The Group also holds certain properties as ‘assets
held for sale’ and classified as ‘current assets’ at 30
June 2018. The Group has applied judgement in
determining the fair value less costs to sell in
accordance with Australian Accounting Standards
with reference to recent offers from market
participants or actual selling prices realised in
subsequent periods.
5. Capitalisation of bearer plant expenditure
Why significant
How our audit addressed the key audit matter
The total bearer plant expenditure capitalised by the
Group for the year ended 30 June 2018 was $5.074
million.
As disclosed in Note 2(g) and Note 13.1 of the
financial report, the Group capitalises operating costs
relating to the development of bearer plants in
existing or new vineyards. The Group exercises
judgement to consider developing bearer plants as
vines that are yet to deliver commercial quantities of
produce which are those less than three years of age.
The capitalisation of operating costs as bearer plant
expenditure was a key audit matter due to the
significant judgement required to determine:
Proportion of vineyards which are considered
‘developing’ in comparison those that are
‘mature’.
Nature of operating costs for capitalisation.
Our audit procedures included the following:
Assessed the proportion of vineyards determined by
the Group to be ‘developing’ with reference to a
sample of historical planting records.
Assessed the measurement of operating costs
capitalised as bearer plant expenditure by selecting a
sample of transaction amounts and agreeing details to
supporting documentation such as supplier invoices.
Assessed the nature and appropriateness of operating
costs capitalised as bearer plant expenditure with
reference to Australian Accounting Standards.
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2018 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Chairman’s Review, Directors’ Report, Corporate
Governance Statement and Additional Australian Securities Exchange Information that are to be
included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the
remaining sections of the Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating 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 to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
4848
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
4949
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545542018 Annual Report2018 Annual Report55
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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 to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
5050
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Report on the Audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 28 to 41 of the Directors' Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Murray River Organics Group Limited for the year ended 30 June 2018, 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. Ernst & Young David Petersen Partner Melbourne 28 September 2018 5151A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent 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 financial report of Murray River Organics Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and b)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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial report, which describes the events and conditions that cast significant doubt about the Group’s ability to continue as a going concern. It indicates that the Group incurred a net loss of $59.607 million for the year ended 30 June 2018 and, as of that date, the Group’s current liabilities exceeded its current assets by $25.062 million. The Group needs to raise additional funding imminently and the Group’s ability to continue as a going concern is dependent upon a successful fund raising and the banks support in the form of continued current facilities and any further facilities required until the fund raising can be achieved as well as the renegotiation of ongoing banking facilities. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 4545562018 Annual Report2018 Annual Report57
Directors’ Declaration
Consolidated statement of profit or loss
and other comprehensive income for the
year ended 30 June 2018
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;
Revenue
Other income
(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 Section 295A of the Corporations
Act 2001.
Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the
Corporations Act 2001.
On behalf of the Directors
Andrew Monk
Chairman
28 September 2018
Valentina Tripp
Managing Director
Fair value gain from agricultural produce
Change in finished goods
Raw materials, consumables used and farming input costs
Administration expense
Selling expenses
Employee benefits expense
Depreciation expense
Freight out and distribution expenses
Other expense
Finance costs
Impairment of non-current assets
Revaluation loss on properties and assets held for sale
Business restructuring costs
Reversal of / (provision for) group reorganisation costs
IPO and acquisition related costs
Loss before tax
Income tax benefit
Loss 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:
Gain on revaluation of assets
Income tax effect of other comprehensive income
Recognition of deferred tax liability
Items that may be reclassified subsequently to profit or loss:
Net movement in cash flow hedges
Income tax effect of other comprehensive income
Total other comprehensive income / (loss)
Total comprehensive loss for the year
Attributed to:
Equity holders of the parent
Murray River Organics Property Trust (non-controlling interests)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes to the financial statements are included on pages 63 to 101.
Note
2018
$’000
2017
$’000
4
4
9
5
5
5
14
5
5
17
6
20(a)
20(a)
20(a)
28
28
68,539
222
158
(994)
(69,613)
(2,347)
(811)
(10,361)
(6,198)
(4,047)
(3,212)
(3,337)
(21,169)
(7,030)
(2,343)
1,040
-
(61,503)
1,896
(59,607)
(59,607)
-
(59,607)
2,056
(617)
-
169
(51)
1,557
(58,050)
(58,050)
-
(58,050)
(49)
(49)
48,522
1,355
13,185
4,941
(53,092)
(1,998)
(488)
(5,753)
(4,276)
(1,824)
(2,374)
(2,296)
-
-
-
(1,064)
(1,994)
(7,156)
1,229
(5,927)
(5,538)
(389)
(5,927)
-
-
(2,289)
-
-
(2,289)
(8,216)
(7,827)
(389)
(8,216)
(8)
(8)
582018 Annual Report2018 Annual Report59 Consolidated statement of financial
position at 30 June 2018
Consolidated statement of changes in
equity for the year ended 30 June 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Agricultural produce
Other financial assets
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 liabilities
Income tax payable
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Notes to the financial statements are included on pages 63 to 101.
Note
22(a)
7
8
9
10
11
12
13
14
6
15
16
17
18
16
6
17
19
20
2018
$’000
2017
$’000
4
6,729
16,194
2,621
169
1,320
27,037
7,642
34,679
67,610
-
-
67,610
102,289
11,825
47,161
755
-
-
59,741
22,133
-
440
22,573
82,314
19,975
123,832
(40,127)
(63,730)
19,975
2,724
8,891
27,069
4,407
-
4,187
47,278
2,069
49,347
82,241
10,749
1,784
94,774
144,121
18,122
17,288
4,136
547
946
41,039
33,228
3,129
446
36,803
77,842
66,279
112,002
(41,600)
(4,123)
66,279
Contributed
equity
$‘000
Retained
earnings/
(Accumulated
losses)
$‘000
Corporate
reorganisation
reserve
$‘000
Share-based
payments
reserve
$‘000
Asset
revaluation
reserve
$‘000
Hedging
Reserve
$‘000
Non-
controlling
interest
$‘000
Total equity
$‘000
Balance at 1 July 2016
9,692
5,071
Loss for the year
Other comprehensive loss
Total comprehensive loss for year
Issue of units
-
-
-
-
(5,538)
-
(5,538)
-
-
-
-
-
-
Reclassification of non-controlling interest
29,333
(3,656)
(11,890)
Issue of shares
Equity raising costs (net of tax)
Share-based payments
73,974
(1,210)
213
-
-
-
(35,563)
-
-
Balance at 30 June 2017
112,002
(4,123)
(47,453)
-
-
-
-
-
-
-
-
511
511
Balance at 1 July 2017
112,002
(4,123)
(47,453)
511
5,342
Loss for the year
-
(59,607)
-
-
-
-
Other comprehensive income
-
-
-
-
1,439
118
Total comprehensive loss for year
-
(59,607)
-
-
1,439
118
Issue of shares
Equity raising costs (net of tax)
Share-based payments
12,106
(456)
180
-
-
-
-
-
-
-
-
(84)
427
-
-
-
-
-
-
6,781
118
Balance at 30 June 2018
123,832
(63,730)
(47,453)
Notes to the financial statements are included on pages 63 to 101.
-
-
(2,289)
-
-
-
15,102
29,865
(389)
(5,927)
-
(2,289)
(2,289)
-
(389)
(8,216)
-
-
6,705
6,705
7,631
-
(21,418)
-
-
-
-
5,342
-
-
-
-
-
-
-
-
38,411
(1,210)
724
-
66,279
-
66,279
-
-
-
-
-
-
-
(59,607)
1,557
(58,050)
12,106
(456)
96
19,975
602018 Annual Report2018 Annual Report61
Consolidated statement of cash flows
for the year ended 30 June 2018
Notes to the financial statements
Note
2018
$‘000
2017
$‘000
1. General information and group
reorganisation
2. Significant accounting policies
STATEMENT OF COMPLIANCE
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Tax paid
Interest paid
Interest paid – Colignan property lease
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for business acquisitions
Proceeds from sale of water rights
Proceeds from sale of property, plant and equipment
Payment to escrow account in relation to business acquisitions
Net cash used in investing activities
Cash flows from financing activities
Proceeds from related party borrowings
Proceeds from borrowings
Repayment of borrowings
Proceeds from equipment financing
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
Net (decrease) / 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
Notes to the financial statements are included on pages 63 to 101.
77,887
45,576
(85,701)
(53,445)
14
49
(868)
(453)
(2,092)
(1,042)
(2,488)
(1,947)
22(b)
(13,248)
(11,262)
(13,586)
(31,498)
14
(2,626)
(14,952)
-
436
717
-
-
(2,204)
(15,495)
(48,218)
979
414
56,337
37,960
(48,205)
(22,079)
2,456
1,002
(805)
(733)
12,106
45,120
(651)
(1,729)
22,217
59,955
(6,526)
475
2,724
2,249
(3,802)
2,724
These are the consolidated financial statements of Murray
River Organics Group Limited (the “Company”), comprising of
the Company and its controlled entities (the “Group”).
The Company is a for-profit entity limited by shares
incorporated in Australia whose shares are publicly traded on
the Australian Securities Exchange.
The financial statements were authorised for issue by the
directors on 28 September 2018.
Prior year 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 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 was
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.
These consolidated 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.
These consolidated financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations. Compliance with Australian Accounting
Standards and Interpretations ensures that the consolidated
financial statements and notes of the Group comply with
International Financial Reporting Standards (‘IFRS’).
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 company is a company of the kind referred to in
ASIC Class Order 2016/191, dated 24 March 2016, and in
accordance with that Class Order amounts in the financial
report are rounded off to the nearest thousand dollars, unless
otherwise indicated.
GOING CONCERN BASIS
The financial report has been prepared on a going concern
basis, which assumes continuity of normal business activities
and the realisation of assets and the settlement of liabilities
in the ordinary course of business. For the reasons described
below, there is significant uncertainty whether the Group will
continue as a going concern:
• The Group incurred a loss after tax for the year ended 30
June 2018 of $59.607 million which was largely due to:
- significant write down of FY17 dried fruit inventory
which was impact by a combination of weather events
and deficient past operating practices;
- weak sales and margins from a) commodity and bulk
channels and b) low quality and volume of dried fruit
from its FY17 harvest;
- slower than anticipated efficiencies being realised from
its new Dandenong manufacturing site, new Sunraysia
processing facilities and additional farming costs
incurred from its enlarged farming footprint, where
yield have been comparable to the prior year, but
below expectations;
622018 Annual Report2018 Annual Report63
- a number of significant costs arising from the change of
Board of Directors and restructure of Group operations;
- impairment of goodwill and property, plant and
equipment; and
- revaluation of property assets.
• At 30 June 2018, the Group has:
- Net assets of $19.975 million (2017: $66.279 million);
- Net current liabilities (current assets less current
liabilities) of $25.062 million, which includes the
reclassification of all bank borrowings to ‘current’ (2017:
net current assets $8.308 million); and
- Total bank borrowings of $44.872 million (2017:
$31.331 million).
• The Group’s farming assets are long term agricultural
assets, which require significant upfront capital
requirements to realise their operating potential. The
realisation of these benefits in the medium term is
dependent on the Group’s ability to generate sufficient
funds from its operating activities, additional banking
support from its banker and the raising of additional
equity funds.
At the date of this report, the Directors have considered the
above factors and are of the opinion that the Group will be
able to continue as a going concern for the following reasons:
• The Group obtained additional bank support of
$6.600 million subsequent to 30 June 2018 with bank
forbearance that at least $4.000 million from the net sales
proceeds from the sale of assets to be applied against
repayment and permanent reduction of bank facilities
and undertake an equity raising by 31 December 2018.
The Group may require further interim funding until a
capital raising is complete which it is discussing with its
banker. To date, the Group is actively marketing the sale
of its Fifth Street property and is also considering the sale
of other non-core assets. The Group is confident that it
has the continuing support of its banker and that it will
comply with the above undertakings.
• Management has prepared, and Directors have reviewed
and approved, detailed financial forecasts for the year
ending 30 June 2019. These forecasts include improved
sales and margins arising from FY18 dried fruit that has
been assessed as “good” across the portfolio with fruit
harvested close to or at the required moisture levels
desired for processing compared to last year’s harvest
where the moisture was high; solid demand from its
customers; supported with a cost out programme,
“Project Muscat”, with an estimate of $5.000 million
per annum of annualised savings, which is projected to
reduce ongoing losses.
• Management’s forecasts indicate that the Group will
require additional funding imminently. The Group is
currently progressing a range of potential fund raising
opportunities and debt renegotiation which it expects
to complete during October and November 2018. The
Group is reliant on the ongoing support of its bankers
to renegotiate their financing facilities and provide any
necessary financing until the fund raising process is
completed.
• The Directors believe there are reasonable grounds to
consider the Group can continue as a going concern
based on; the Group’s trading and cash flow forecasts,
reasonable confidence of raising sufficient additional
funding, confidence of support from the Group’s banker
in providing any necessary further debt financing until
fund raising completion and successfully renegotiating
the ongoing banking facilities.
Notwithstanding the above, in the event that the Group is not
able to:
• meet its trading and cash flow forecasts;
• raise sufficient additional funding;
• receive any necessary additional debt financing until
fundraising is complete; and
• renegotiate its ongoing banking facilities
there is material uncertainty whether the Group will be able
to continue as a going concern and, therefore, whether it
will realise its assets and discharge its liabilities in the normal
course of business and at the amounts stated in the financial
report. The financial report does not include any adjustments
relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities
that might be necessary should the Group not continue as a
going concern.
CLASSIFICATIONS
Certain classifications have been made in the financial report
to ensure that prior year comparative information conforms to
the current year presentations.
ACCOUNTING POLICIES
The following significant accounting policies have been
adopted in the preparation and presentation of the financial
statements:
(a) Basis of consolidation
The consolidated financial statements are prepared by
combining the financial statements of all the entities that
comprise the consolidated entity, being the Company (the
“parent entity”) and its subsidiaries (referred to as “the
Group” in these financial statements) as defined in Accounting
Standard AASB 10 Consolidated Financial Statements. A list
of subsidiaries appears in Note 31 to the financial statements.
Consistent accounting policies are employed in the preparation
and presentation of the consolidated financial statements.
On acquisition, the assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date of
acquisition. Any excess of the cost of acquisition over the fair
values of the identifiable net assets acquired is recognised
as goodwill. If, after reassessment, the fair values of the
identifiable net assets acquired exceed the cost of acquisition,
the deficiency is credited to profit and loss in the period of
acquisition.
In preparing the consolidated financial statements, all
intercompany balances and transactions, and unrealised
profits arising within the Group are eliminated in full.
(b) Business Combinations
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The consideration for each
acquisition is measured as the aggregate of the fair values
(at the date of exchange) of assets given, liabilities incurred
or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition related costs
are recognised in profit and 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 acquiree or share-based
payment arrangements of the Group entered into to
replace share-based payment arrangements of the
acquire are measured in accordance with AASB 2 Share-
based 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 arising on acquisition is recognised as an asset
and initially measured at cost, being the excess of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of acquirer’s
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the Group’s interest in the net fair value of the acquiree’s
identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in
the acquiree and the fair value of the acquirer’s previously
held equity interest in the acquiree, the excess is recognised
immediately in profit or loss as a bargain purchase gain.
(c) Revenue recognition
Revenues are recognised at fair value of the consideration
received net of the amount of goods and services tax (GST)
payable to the taxation authority.
SALE OF GOODS
Revenue from the sale of goods is recognised (net of returns,
rebates, discounts and allowances) when the Group has
transferred to the buyer control and the significant risks and
rewards of ownership of the goods.
INTEREST REVENUE
Interest revenue is recognised on a time proportionate basis
that takes into account the effective yield on the financial
asset.
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash in
banks that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in
value.
(e) 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 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 costs (depending on the stage of
production).
(f) Agricultural produce
Agricultural produce represents any unharvested produce
valued in accordance with AASB 141 Agriculture. Agricultural
produce is measured at their fair value less harvesting and
selling costs on initial recognition and at each reporting date.
The fair valuation takes into account selling prices and current
growing costs, harvest costs, packing costs (if applicable), 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.
642018 Annual Report2018 Annual Report65 • 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(g).
(g) 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 13.1.
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.
Any revaluation increase arising on the revaluation of freehold
land, buildings and property improvements 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.
When an item of property, plant and equipment is revalued,
any accumulated depreciation at the date of the revaluation is
eliminated against the gross carrying amount of the asset and
the net amount restated to the revalued amount of the asset.
Depreciation on revalued assets is charged to profit or loss.
On the subsequent sale or retirement of a revalued asset,
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
3-10 years
• Bearer plants
• Equipment under finance lease
25 years
3-5 years
• Buildings and property improvements
50 years
• Office equipment
• Motor vehicles
• Leasehold improvements and leased assets
3-5 years
3-5 years
10-25 years
(or lesser of
lease term)
(h) Intangible assets
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.
(i) 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. Intangible assets with indefinite useful lives are
tested for impairment at least 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 (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised in the
profit or loss immediately, unless the relevant asset is carried
at fair value, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or 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 (or cash-
generating unit) in prior years. A reversal of an impairment
loss is recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the reversal
of the impairment loss is treated as a revaluation increase.
(j) 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.
(k) Financial assets
Loans and receivables (and investments in subsidiaries within
the Company’s financial statements in Note 32) are recognised
and derecognised on trade date where purchase or sale of
an investment or a loan and receivable is under a contract
whose terms require delivery of the asset within the timeframe
established by the market concerned, and are initially
measured at fair value, net of transaction costs. Subsequent to
initial recognition, investments are measured at cost.
LOANS AND RECEIVABLES
Trade receivables, loans, and other receivables are recorded
at amortised cost less impairment.
OTHER FINANCIAL ASSETS
For the accounting policy on derivatives – refer Note 2(s) and
Note 23.
(l) 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.
(m) 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
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where 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.
662018 Annual Report2018 Annual Report67
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the 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.
(n) Financial Liabilities
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.
(o) 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.
DEFERRED TAX
(p) Goods and services tax
(s) Derivative financial instruments
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.
TAX CONSOLIDATED GROUP
Murray River Organics Group Limited and its wholly owned
entities formed an income tax consolidated group on 1 July
2017, with Murray River Organics Group Limited as the head
entity. However, as at 30 June 2017, the entities in the Group
were not members of an income tax consolidated group and,
as a consequence, the consolidated income tax balances are
a summation of the individual income tax balances of each
entity within the Group.
The tax consolidated group has not implemented a
tax funding agreement between the entities of the tax
consolidated group. Assets or liabilities arising with the
entities within tax consolidated group are recognised as
amounts receivable from or payable to other entities of the
tax consolidated group.
The tax consolidated group has applied the group allocation
approach in determining the appropriate amount of current
taxes and deferred taxes to allocate to members of the tax
consolidated group.
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (“GST”), except:
• 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
• 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 statement of cash flows 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 within operating
cash flows.
(q) 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.
(r) Foreign currency
The presentation and functional currency of the Group is
Australian dollars.
FOREIGN CURRENCY TRANSACTIONS
All foreign currency transactions during the financial year are
brought to account using the exchange rate in effect at the
date of the transaction. Foreign currency monetary items at
reporting date are translated at the exchange rate existing at
reporting date.
Exchange differences are recognised in profit or loss in the
period in which they arise except that:
• exchange differences on transactions entered into in
order to hedge certain foreign currency risks (refer Note
23); and
• exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement is
neither planned or likely to occur, which form part of the
net investment in a foreign operation, are recognised in
the foreign currency translation reserve and recognised in
profit or loss on disposal of the net investment.
The Group is exposed to changes in foreign exchange rates
from its activities. The Group uses forward foreign exchange
contracts to hedge these risks. Derivative financial instruments
are not held for speculative purposes.
The Group uses derivative financial instruments, being options
and forward foreign currency contracts to hedge the risk
associated with foreign currency fluctuations. Such derivatives
are stated at fair value. The fair value of forward exchange
contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles.
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. For
derivatives that do not qualify for hedge accounting, any gains
or losses arising from changes in fair value are taken directly
to profit or loss for the year.
For derivatives that qualify for hedge accounting, the method
for recognising gains and losses on changes in fair value
depends on whether the derivative is classified as a fair value
hedge or a cash flow hedge. Derivatives are classified as fair
value hedges when they hedge the exposure to changes in
the fair value of a recognised asset or liability and as cash flow
hedges when they hedge exposure to variability in cash flows
that are attributable to either a particular risk associated with
a recognised asset or liability or to a forecast transaction. The
Group documents at inception of the hedge the relationship
between the hedging instruments (derivatives) and the
hedged items, as well as the risk management objective and
strategy for undertaking the hedge transaction.
The Group also documents, both at inception of the hedge
and on an ongoing basis whether the derivatives that are used
in the hedging transactions have been, and will continue to
be, highly effective in offsetting changes in fair values or cash
flows of hedged items.
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve and transferred
to profit or loss when the hedged item affects profit or
loss. The gain or loss relating to the ineffective portion is
recognised immediately in the profit or loss. However, when
the cash flow hedge relates to a forward foreign exchange
contract to hedge a highly probable forecast transaction or
firm commitment that results in a non-financial asset (e.g.
inventory) or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity
and included in the initial measurement of the initial cost or
carrying amount of the asset or liability.
682018 Annual Report2018 Annual Report69 Hedge accounting is discontinued when the hedging
instrument expires, or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that point in time,
any cumulative gains or losses on the hedging instrument
recognised in equity is kept in equity until the forecast
transaction occurs. If the forecast transaction is no longer
expected to occur, the net cumulative gain or loss recognised
in equity is transferred to the statement of comprehensive
income and recognised in net profit or loss for the year.
Specifically, government grants whose primary condition
is that the Group 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.
(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 21.
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.
(u) 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.
(v) 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.
(w) Changes in accounting policy, accounting standards
and interpretations
(I) NEW AND AMENDED STANDARDS AND
INTERPRETATIONS
(a) AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses
This Standard makes amendments to AASB 112 Income
Taxes to clarify the accounting for deferred tax assets for
unrealised losses on debt instruments measured at fair
value.
The adoption of this amendment had no material impact
on the financial position or performance of the Group.
(b) AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to AASB
107
The amendments to AASB 107 Statement of Cash Flows
are part of the IASB’s Disclosure Initiative and help users
of financial statements better understand changes in an
entity’s debt. The amendments require entities to provide
disclosures about changes in their liabilities arising
from financing activities, including both changes arising
from cash flows and non-cash changes (such as foreign
exchange gains or losses).
The disclosure related to this amendment is detailed in
Note 22(c).
(c) AASB 2017-2 Amendments to Australian Accounting
Standards – Further Annual Improvements 2014-2016 Cycle
This Standard clarifies the scope of AASB 12 Disclosure of
Interests in Other Entities by specifying that the disclosure
requirements apply to an entity’s interests in other
entities that are classified as held for sale or discontinued
operations in accordance with AASB 5 Non-current Assets
Held for Sale and Discontinued Operations.
The adoption of this amendment had no material impact
on the financial position or performance of the Group.
(II) ACCOUNTING STANDARDS AND INTERPRETATIONS
ISSUED BUT NOT YET EFFECTIVE
(a) AASB 9 Financial Instruments – Effective date: 1 January
2018 (Application date: 1 July 2018)
AASB 9 replaces AASB 139 Financial Instruments:
Recognition and Measurement.
AASB 9 includes a single approach for the classification
and measurement of financial assets, based on cash
flow characteristics and the business model used for the
management of the financial instruments. It introduces
the expected credit loss model for impairment of financial
assets which replaces the incurred loss model used in
AASB 139. The standard also amends the rules on hedge
accounting to align the accounting treatment with the risk
management practices of the Group.
The Group is currently assessing the impact of the
application of the new standard.
(b) AASB 15 Revenue from Contracts with Customers –
Effective date: 1 January 2018 (Application date: 1 July 2018)
AASB 15 replaces all existing revenue requirements in
Australian Accounting Standards (AASB 111 Construction
Contracts, AASB 118 Revenue, AASB Interpretation 13
Customer Loyalty Programmes, AASB Interpretation 15
Agreements for the Construction of Real Estate, AASB
Interpretation 18 Transfers of Assets from Customers and
AASB Interpretation 131 Revenue – Barter Transactions
Involving Advertising Services) and applies to all revenue
arising from contracts with customers, unless the contracts
are in the scope of other standards, such as AASB 117
Leases (or AASB 16 Leases, once applied).
The core principle of AASB 15 is that an entity recognises
revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the
consideration to which an entity expects to be entitled in
exchange for those goods or services. An entity recognises
revenue in accordance with the core principle by applying
the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance
obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
The Group is currently assessing the impact of adopting
AASB 15. The assessment is aimed at identifying key areas
of the business that may have potential risk of impact
and may require a greater level of work effort to quantify
the financial impact of AASB 15. This includes identifying
changes to accounting policies, reporting requirements,
business processes and associated internal controls with the
objective of quantifying the expected first-time adoption
impacts as well as supporting ongoing compliance with the
new accounting requirements.
(c) AASB 2016-5 Amendments to Australian Accounting
Standards – Classification and Measurement of Share-
based Payment Transactions – Effective date: 1 January
2018 (Application date: 1 July 2018)
This Standard amends AASB 2 Share-based Payment,
clarifying how to account for certain types of share-
based payment transactions. The amendments provide
requirements on the accounting for:
• The effects of vesting and non-vesting conditions
on the measurement of cash-settled share-based
payments.
• Share-based payment transactions with a net
settlement feature for withholding tax obligations.
• A modification to the terms and conditions of a share-
based payment that changes the classification of the
transaction from cash-settled to equity-settled.
The Group is currently assessing the impact of the
application of the new standard.
(d) AASB 16 Leases – Effective date: 1 January 2019
(Application date: 1 July 2019)
AASB 16 replaces existing lease requirements in Australian
Accounting Standards (AASB 117 Leases, Interpretation 4
Determining whether an Arrangement contains a Lease,
SIC – 15 Operating Leases – Incentives, SIC – 27 Evaluating
the Substance of Transactions Involving the Legal Form of
a Lease).
AASB 16 requires lessees to account for all leases under a
single on-balance sheet model in a similar way to finance
leases under AASB 117. The standard includes two
recognition exemptions for lessees – leases of ’low-value’
assets (e.g., personal computers) and short-term leases
(i.e., leases with a lease term of 12 months or less). At the
commencement date of a lease, a lessee will recognise a
liability to make lease payments (i.e., the lease liability) and an
asset representing the right to use the underlying asset during
the lease term (i.e., the right-of-use asset). In determining the
lease liability, the Group must consider the lease term and the
expected exercise of renewal options available.
Lessees will be required to separately recognise the interest
expense on the lease liability and the depreciation expense
on the right-of-use asset. Lessees will be required to
remeasure the lease liability upon the occurrence of certain
events (e.g., a change in the lease term, a change in future
lease payments resulting from a change in an index or
rate used to determine those payments). The lessee will
generally recognise the amount of the remeasurement of
the lease liability as an adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged from today’s
accounting under AASB 117. Lessors will continue to
classify all leases using the same classification principle as
in AASB 117 and distinguish between two types of leases:
operating and finance leases.
702018 Annual Report2018 Annual Report71
The Group is currently assessing the impact of the change
in standard which it expects to be material. The new
standard is expected to result in an increase in assets and
liabilities, change in the timing in which lease expenses are
recognised, a classification shift in earnings categories from
operating expense to depreciation and interest expense,
and an increase in gearing levels.
(e) AASB Interpretation 23 Uncertainty over Income Tax
Treatments – Effective date: 1 January 2019 (Application date:
1 July 2019)
The Interpretation clarifies the application of the
recognition and measurement criteria in AASB 12 Income
Taxes when there is uncertainty over income tax treatments.
The Interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments
separately.
• The assumptions an entity makes about the
examination of tax treatments by taxation authorities.
• How an entity determines taxable profit (tax loss), tax
bases, unused tax losses, unused tax credits and tax rates.
• How an entity considers changes in facts and
circumstances.
The Group is currently assessing the impact of the
application of the new interpretation.
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 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 the reporting date as the selling price
of the crop can only be estimated and the actual crop yield
or produce not harvested at the reporting date will not be
known until it is completely processed and sold. Refer to
Note 9 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 13.1 for further details
regarding the fair value hierarchy.
4. Revenues
Sales Revenue
Other income
Change in assessment of contingent consideration (refer Note 14)
Interest income
Insurance proceeds
Government grants
Rental income
Other
5. Expenses
Loss before tax includes the following specific expenses:
Depreciation expense of non-current assets:
Bearer plants
Buildings and property improvements
Plant and equipment
Leased asset
Leasehold improvements
Total depreciation of non-current assets
2018
$‘000
2017
$‘000
68,539
48,522
-
14
47
105
19
37
222
2018
$‘000
2017
$‘000
1,125
187
3,732
781
373
6,198
474
49
71
483
42
236
1,355
779
127
2,539
741
90
4,276
(b) Net realisable value of inventory
Inventories are valued at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in
the ordinary course of business. Management has recorded a
provision based on the value of inventory that is likely to be
sold below cost using past experience and judgement of the
age (including expiry dates) and likely sell through rates of
specific inventory items. Refer to Note 8 for further details.
(c) Colignan property lease
The property leases of the Group include an approximate
1,052 hectare lease from Arrow Funds Management in
which the Group has the right to harvest the vine fruit and
citrus from the trees owned by the lessor for the term of
the agreement. The Group 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.
Management have determined using judgement that this
transaction constitutes a finance lease and accordingly has
recognised the leased asset and corresponding liability in
the statement of financial position. 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.
(d) 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. Refer to Note 14 for further details.
(e) 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.
(f) Developing vine capital expenditure
Refer to Note 13.1 for further details.
(g) Land, buildings and bearer plants at revalued amounts
Refer to Note 13.1 for further details.
722018 Annual Report2018 Annual Report73 5. Expenses (Continued)
Employee benefits expense:
Employee expenses
Superannuation benefits
Share-based payments expense
Employee expenses capitalised to biological assets and bearer plants
Total employee benefits expense
Business restructuring costs:
Redundancies (i)
Professional fees (ii)
Provision for make good expense
Other
Total business restructuring costs
2018
$‘000
2017
$‘000
11,577
948
96
(2,260)
10,361
803
1,034
250
256
2,343
6,423
643
723
(2,036)
5,753
-
-
-
-
-
(i) Redundancies relates to restructure of the executive and operations teams. These items are excluded from the ‘employee
benefits expense’.
(ii) Professional fees comprise of costs associated with holding an Extraordinary General Meeting in January 2018 leading to
the change of the Board of Directors and consequential changes to the business; as well as consultancy work to reorganise
the Group’s tax affairs, banking arrangements and preliminary work undertaken to sell the non-core assets of the Group and
recapitalise the Group.
2018
$‘000
2017
$‘000
Finance costs:
Interest on loans
Interest on finance lease – Colignan property
Capitalised interest relating to qualifying assets
Total finance costs
Revaluation loss on properties and assets held for sale:
Land, bearer plants and properties
Assets held for sale at commencement of the year
Agricultural produce
Total revaluation loss on properties and assets held for sale
Profit/(loss) on sale of property, plant and equipment
Net foreign currency (gains) / losses
Net bad and doubtful debts
Operating lease minimum lease payments
2,135
2,488
(1,286)
3,337
6,383
279
368
7,030
51
(54)
265
2,061
1,042
1,947
(693)
2,296
-
-
-
-
(24)
276
256
1,274
6. Income tax
Income tax expense
Statement of profit or loss
Current income tax
Current income tax charge
Adjustments of current income tax of previous year
Deferred income tax
Origination and reversal of temporary differences
Income tax benefit reported in the statement of profit or loss
Statement of comprehensive income
Origination and reversal of temporary differences
Income tax expense reported in other comprehensive income
Reconciliation of tax benefit and the accounting loss:
Loss before tax
Income tax benefit calculated at 30% (2017: 30%)
Non-deductible expenses for income tax purposes
Non-assessable income for income tax purposes
Other
Tax losses not brought to account
Adjustments of current income tax of previous year
Income tax benefit recognised in profit or loss
Deferred tax liabilities
Inventories
Biological Assets
Property, plant and equipment
Foreign exchange derivatives
2018
$‘000
2017
$‘000
-
(79)
(1,817)
(1,896)
668
668
(61,504)
(18,451)
8,454
(312)
(40)
8,532
(79)
-
(5)
(1,224)
(1,229)
2,289
2,289
(7,157)
(2,147)
1,146
(142)
(81)
-
(5)
(1,896)
(1,229)
-
(786)
(3,472)
(58)
(4,316)
(303)
(548)
(2,278)
-
(3,129)
742018 Annual Report2018 Annual Report75
6. Income tax (Continued)
7. Trade and other receivables
2018
$‘000
2017
$‘000
2018
$‘000
2017
$‘000
Deferred tax assets
Inventories
Employee entitlements
Accrued expenses
Deferred revenue
Deductible lease payments (Colignan property)
Foreign exchange derivatives
Expenditure incurred but deductible over time
Income tax losses
Other
Net deferred tax liability
Reconciliation of deferred taxes
Opening balance at 1 July
Recognised in profit or loss
Recognised in other comprehensive income
Recognised directly in equity
Arising through business combinations
Other
Closing balance at 30 June
CARRY FORWARD INCOME TAX LOSSES:
602
164
665
188
770
-
602
1,264
61
4,316
-
(1,345)
1,817
(668)
196
-
-
-
-
155
139
117
431
164
552
166
60
1,784
(1,345)
(940)
1,224
(2,289)
519
136
5
(1,345)
The Group has recognised a deferred tax asset at 30 June 2018 in relation to available carry forward tax losses to the extent that
a net deferred tax liability is reduced to nil. The Group has not recognised a deferred tax asset in relation to all available carry
forward tax losses it has generated. As a result the following gross tax losses (not tax effected at the statutory income tax rate)
have not been brought to account.
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+
6,711
(212)
6,499
230
-
6,729
4,856
1,330
132
181
6,499
170
265
(223)
212
8
57
5
142
212
7,252
(170)
7,082
742
1,067
8,891
6,062
774
116
130
7,082
360
256
(446)
170
-
54
78
38
170
Gross income tax losses
2018
$‘000
2017
$‘000
28,237
-
Trade receivables are non-interest bearing with credit terms generally settled within 30 days depending on the nature of the
sales transaction. An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of
goods, determined by reference to specific customers where receipt is in doubt. During the current financial year, any doubtful
debt movements were recognised in profit or loss for the year.
The ability of the Group to utilise the carry forward income tax losses in the future years when taxable profit is generated will
be subject to satisfaction of Australian statutory recoupment tests – the ‘Continuity of Ownership Test’, or failing this, the ‘Same
Business Test’.
8. Inventories
Packaging stock (at cost)
Raw materials (at cost or fair value less costs to sell at the point of harvest)
Finished goods (at lower of cost and net realisable value)
Provision for stock obsolescence
2018
$‘000
2017
$‘000
1,081
12,711
6,583
(4,181)
16,194
617
19,835
7,309
(692)
27,069
2018 Annual Report
77
762018 Annual Report
9. Agricultural produce
Dried fruit unharvested – at fair value less costs to sell
Citrus unharvested – at fair value less costs to sell
New season crop – at cost
Total
Reconciliation of changes in carrying amount
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
Revaluation loss on amounts transferred to assets held for sale
Decreases due to harvest (transferred to inventory)
Closing balance
Product - Yields (tonnes)
Harvested pre 30 June
Estimated hanging fruit at 30 June
Total
Total crop value
Assumption
2018
$‘000
2017
$‘000
9. Agricultural produce (Continued)
Valuation techniques and significant unobservable inputs
-
1,728
893
2,621
4,407
158
10,584
-
(368)
(12,160)
2,621
2,682
1,365
360
4,407
624
13,185
4,829
2,531
-
(16,762)
4,407
2018
Tonnes
2017
Tonnes
4,675
3,200
7,875
4,966
2,586
7,552
2018
$‘000
2017
$‘000
10,742
18,465
Wine
grapes
($/kg)
0.34
Nil
Type
Description
Valuation technique
Significant Unobservable
inputs
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:
Inclusive of:
The valuation model
considers the present
value of the net cash flows
expected to be generated
by the crop
• 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).
10. Other financial assets
Foreign currency forward contracts
11. Other assets
Prepayments and other
Amounts held in escrow
12. Assets held for sale
Property assets
2018
$‘000
2017
$‘000
169
-
2018
$‘000
2017
$‘000
1,320
-
1,320
1,983
2,204
4,187
2018
$‘000
2017
$‘000
7,642
2,069
Loose
Organic
($/kg)
Loose
Conventional
($/kg)
Clusters
($/kg)
Fresh
($/kg)
Citrus
($/kg)
Fair value less costs to sell at point of harvest - 2018
Fair value less costs to sell at point of harvest - 2017
2.79
2.64
1.99
1.72
N/A
15.00
2.69
3.77
0.60
0.59
During the year ended 30 June 2018, the Group has changed its approach to estimating the fair value of agricultural produce.
Specifically, it has valued its dried fruit harvest at a fair value that approximates the farmgate ‘selling prices less costs to sell’ based
on prices paid to third parties for equivalent produce and in the case of organic produce including a premium based on end
product pricing relative to conventional. Previously the Group estimated fair value by reference to post processing selling prices
less costs to harvest, process and sell. The Group identified that the principal market for all of its agricultural produce was as loose
dried fruit in food products and consequently valued all produce on this basis. Previously the Group separately valued produce
intended for its Clusters product separately however in the current year has assessed this is not the principal market.
Whilst this change in accounting estimate has led to a lower crop value in 2018 compared to 2017, the overall tonnes produced
from the Group’s farms has increased by 4%.
•
If the Group were to adopt the same pricing assumptions applied in the FY17 year against the FY18 yields, the total crop
value would be $14.163 million, resulting in a fair value gain of $3.579 million.
Property assets (comprising property, plant and equipment and biological assets) held for sale at 30 June 2018 include Fifth Street,
Pomona farms, Cowanna house and Walnut Avenue warehouse, which are considered non-core assets. Walnut Avenue was settled
on 17 July 2018.
The property assets held for sale at 30 June 2017 related to Walnut Avenue and Benetook Avenue as a result of the consolidation
of the facilities at Mourquong.
The assets held for sale are measured at the lower of existing carrying value and fair value less costs to sell. Assets held for sale at
fair value less costs to sell are classified as Level 3 with reference to the fair value hierarchy (refer to hierarchy detailed in Note 13).
782018 Annual Report2018 Annual Report79 13. Property, plant and equipment
Freehold land
at revalued
amount
$‘000
Bearer plants
at revalued
amount
$‘000
Buildings
and property
improvements
at revalued
amount
$‘000
Leasehold
improvements
at cost
$‘000
Leased asset
at cost
$‘000
Plant and
equipment
at cost
$‘000
Total
$‘000
3,209
3,847
-
(1,204)
5,852
1,374
(31)
-
(877)
(1,241)
5,192
(51)
(127)
-
-
806
17,400
10,001
51,728
9,068
2,014
8,750
40,088
-
-
-
-
(26)
(4)
(26)
(2,069)
9,874
19,414
18,721
89,721
914
4,429
3,690
12,887
-
-
-
-
-
-
-
-
-
-
-
-
(41)
-
(148)
(6,383)
(2)
(26)
(668)
(7,386)
10,788
23,843
21,593
88,772
-
(53)
-
-
(365)
(741)
-
-
(2,356)
(3,242)
(2,539)
(4,239)
-
-
-
-
Gross Carrying amount
Balance at 1 July 2016
Additions
Disposals
Reclassified as held for sale
5,085
4,073
-
(861)
15,227
12,336
-
-
Balance at 30 June 2017
8,297
27,563
Additions
Disposals
Transfer of assets
Revaluation decrement through
profit and loss
Revaluation increment/
(decrement) through asset
revaluation reserve
516
(10)
1,724
(340)
1,964
-
(1,724)
(5,018)
5,628
(5,767)
115
Reclassified as held for sale
(771)
(4,706)
Balance at 30 June 2018
15,044
12,312
(470)
(779)
-
-
Accumulated depreciation
and impairment losses
Balance at 1 July 2016
Depreciation expense
Disposal
Reclassified as held for sale
Balance at 30 June 2017
Depreciation expense
Impairment expense
Disposal
Reclassified as held for sale
Write-back of depreciation on
revaluation
Balance at 30 June 2018
-
-
-
-
-
-
-
-
-
-
-
(1,249)
(178)
(53)
(1,106)
(4,895)
(7,481)
(1,125)
(187)
-
-
508
1,866
-
4
61
300
(373)
(4,521)
-
-
-
(781)
(3,732)
(6,198)
-
-
-
-
(5,899)
(10,420)
-
197
1
4
766
2,167
Land
Irrigation infrastructure
Vineyard infrastructure
Bearer plants
Net book value as at 30 June 2017
8,297
26,314
Net book value as at 30 June 2018
15,044
12,312
5,674
5,192
9,821
18,308
13,826
82,240
5,841
21,956
7,265
67,610
Buildings
Equipment
Total fair value
-
-
(4,947)
(1,887)
(14,328)
(21,162)
Biological assets - growing crop
13. Property, plant and equipment (Continued)
13.1 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 2018 were determined via independent
valuation performed by CIVAS (Vic) Pty Limited known as Colliers International. Colliers is a member 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.
As at 30 June 2017, the fair values were determined via Directors valuations, which from time to time are reconfirmed via
independent external valuations, previously completed by CBRE in June 2016. All other acquisitions were recorded at cost.
The valuation methodology adopted was direct comparison and summation approaches.
During the year, the Group capitalised $5.074 million (2017: $3.486 million) 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. 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.
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.
13.2 Prior financial year significant property transactions
On 16 December 2016, the Group acquired 113 hectares of land called the “Fifth Street” Vineyard, which includes 72 hectares of
mature table grape on fresh fruit trellis, in Victoria, for $10.424 million cash consideration.
The consideration has been allocated to the assets acquired as follows:
Carrying value
$‘000
942
475
838
4,446
1,802
1,480
441
10,424
802018 Annual Report2018 Annual Report81
13. Property, plant and equipment (Continued)
13.2 Prior financial year significant property transactions (Continued)
On 11 May 2017, the Group acquired 3,142 hectares of land called the “Nangiloc” Vineyard, which includes 64 hectares planted
to citrus and 72 hectares planted to wine where both are drip-irrigated, in Victoria, for $7.922 million cash consideration.
The consideration has been allocated to the assets acquired as follows:
Carrying value
$‘000
Land
Irrigation infrastructure
Vineyard infrastructure
Biological assets - growing crop
Buildings
Total fair value
14. Intangible assets
Goodwill - balance at start of year
Impairment expense recognised in the year
Additions
Goodwill – balance at end of the year
3,131
196
3,817
729
49
7,922
-
-
10,749
10,749
2018
$‘000
2017
$‘000
10,749
(10,749)
-
-
The Group operates as a single Cash Generating Unit (“CGU”) and has incurred a loss before tax of $59.607 million as a result of
the factors including those described in Note 2.
The Group undertook an impairment assessment of the CGU and identified an impairment expense of $21.169 million which has
been recorded in profit and loss as per the below table:
Goodwill
Plant and equipment – at cost (Note 13)
Leasehold improvements – at cost (Note 13)
Total impairment expense
Carrying amount
30 June 2018
$’000
Impairment
expense
$’000
Recoverable
Amount
30 June 2018
$’000
10,749
13,164
10,362
(10,749)
(5,899)
(4,521)
(21,169)
-
7,265
5,841
14. Intangible assets (Continued)
The recoverable amount of the CGU has been determined based on a Value in Use methodology which requires the use of
assumptions. This methodology uses cash flow forecasts based on financial projections by management covering a 10 year period.
Management believe use of a 10 year period is appropriate to reflect: 1) the turnaround performance of the Group from its current
position; 2) the key assets are long term in nature and cash flows from those assets are achieved over time; and 3) the organic and
better-for-you food industry is forecast to grow at a rate in excess of inflation for an extended period.
KEY ASSUMPTIONS:
• Sales growth: Sales are forecast to grow at a compound annual growth rate of approximately 13% per annum for FY19
to FY23 and then 7% per annum for FY24 to FY28 reflecting management’s assessment of growth in demand, additional
availability of product from its farms and additional supply from third party producers.
• Operating costs: A significant proportion of the Group’s farm, processing and administrative costs are considered to be
relatively fixed in nature and forecast to increase by an inflationary indexation.
• Yields: Yields per hectare are based on Group forecasts for FY19 and then remain constant in future years.
• Capital expenditure: Significant capital expenditure is forecast over FY19, FY20, FY21 and FY22 to complete the Group’s
current vine development program after which capital expenditure is expected to remain at modest levels reflecting the
Group’s recently acquired infrastructure which is currently underutilised.
• Long term growth rate: 2.5%
• Discount rate: A pre-tax discount rate of 19.3% (2017: 17.2%) has been used reflecting the extended period of the forecast
and inherent risks.
In the absence of a current market share price due to its voluntary suspension, the Group has assessed the recoverable amount
compared with the market capitalisation of the Group implied by the anticipated equity raise.
An adverse change in any of the above key assumptions would likely result in the carrying value of the CGU exceeding its
recoverable amount.
Prior year business combinations
(a) Acquisition of the Food Source International business assets
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:
$‘000
4,652
900
5,552
The Group had agreed to pay the sellers additional consideration of $0.900 million (maximum) if the trading income of FSI was at
least $22.000 million for the year ending 30 June 2017 (inclusive of pre-acquisition revenue). If the trading income was less than
$22.000 million a discount would be applied to the contingent consideration. The full contingent consideration of $0.900 million
was paid on 22 August 2017 and is part of investing activities in the statement of cash flows.
822018 Annual Report2018 Annual Report83
14. Intangible assets (Continued)
IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
14. Intangible assets (Continued)
IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
The fair values of the identifiable assets and liabilities of FSI as at the date of acquisition were:
The fair values of the identifiable assets and liabilities 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
Fair value
$‘000
2,926
40
(7)
(125)
2,834
$‘000
5,552
(2,834)
2,718
Transaction costs of $0.136 million were expensed and included in Professional fees in the statement of profit or loss, and were
part of operating cash flows in the statement of cash flows for the year ended 30 June 2017.
(b) 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:
$‘000
10,300
2,200
12,500
The Group was required to pay the sellers additional consideration of $2.200 million (maximum) if the trading income of Australian
Organic Holdings was at least $25.000 million for the year ending 30 June 2017 (inclusive of pre-acquisition revenue). If the trading
income was less than $25.000 million a discount would be applied to the contingent consideration. Management determined that
the full earnout was not likely payable and the contingent consideration was reduced by $0.474 million which was reflected in
‘other income’ for the year ending 30 June 2017. The remaining contingent consideration balance of $1.726 million was paid in full
on 14 September 2017 and is part of investing activities in the statement of cash flows.
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
Fair value
$‘000
$‘000
4,373
322
97
(45)
(278)
4,469
12,500
(4,469)
8,031
Transaction costs of $0.147 million were expensed and included in Professional fees in the statement of profit or loss, and were
part of operating cash flows in the statement of cash flows for the year ended 30 June 2017.
IMPACT OF ACQUISITIONS ON THE PRIOR YEAR RESULTS OF THE GROUP
Had these business combinations been in affect at 1 July 2016, the revenue of the Group would have been $62.600 million and
the loss would have been reduced by $1.300 million in the prior year.
Financial assets/
financial liabilities
Contingent consideration
in a business combination
Fair value as at
30/06/18
$’000
Liabilities
Nil
30/06/17
$’000
Liabilities
$2,626 (i)
(i) This reflects the reduced value of contingent consideration.
Fair value hierarchy
Valuation techniques and key inputs
Level 2
Contingent consideration was 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.
842018 Annual Report2018 Annual Report85
15. Trade and other payables
16 (a) Banking facilities
Trade payables
Other accruals and payables
Deferred income
Amount due under contract (Nangiloc property)
Total
16. Borrowings
Current
Secured borrowings:
Bank overdraft (i)
Bank and trade finance loans (i)
Lease liabilities – equipment loans (ii)
Lease liabilities – Colignan property (iii - refer to 16(b))
Total
Non-current
Secured borrowings:
Bank loans (i)
Lease liabilities – equipment loans (ii)
Lease liabilities – Colignan property (iii - refer to 16(b))
Total
2018
$‘000
2017
$‘000
6,059
5,603
163
-
8,364
2,534
52
7,172
Summary of financing arrangements
Debt Facilities Limit at reporting date:
Bank overdraft
Trade finance loan
11,825
18,122
Equipment loans & leases*
2018
$‘000
2017
$‘000
3,806
35,122
5,944
2,289
47,161
-
-
22,133
22,133
-
14,920
980
1,388
17,288
12,117
3,314
17,797
33,228
Bank loans
Bank guarantee
Facilities utilised at reporting date:
Bank overdraft
Trade finance loan
Equipment loans & leases*
Bank loans
Bank guarantee
Facilities not utilised at reporting date:
Bank overdraft
Trade finance loan
Equipment loans & leases*
Bank loans
Bank guarantee
2018
$’000
2017
$’000
4,000
14,000
8,500
19,583
1,530
47,613
3,806
13,950
7,629
19,487
1,514
46,386
194
50
871
96
16
1,227
-
12,000
4,580
19,583
1,530
37,693
-
11,873
4,294
15,117
1,514
32,798
-
127
286
4,466
16
4,895
(i) The bank financing arrangements (comprising a bank overdraft, trade finance loans and other loans) are secured by the
Group’s assets by registered mortgage freeholds over the land and buildings, and first ranking fixed and floating charges over
the Company and its subsidiaries (with corresponding cross guarantee). The loans without a fixed term are subject to annual
review facility by 31 July each year.
The Group has classified its entire bank financing as a ‘current’ liability at 30 June 2018, until it renegotiates its banking
facilities as part of a proposed capital raising which is expected to include a revision to financial covenants.
The Group has the following fixed term loans included as part of its bank financing arrangements, which have been reclassified
as a current liability:
a) $8.187 million expiring 31 March 2020
b) $8.300 million expiring 30 June 2020
c) $3.000 million expiring 24 April 2019
The weighted average of fixed and floating rates detailed in Note 23.
(ii) Finance lease liabilities representing equipment loans are secured over the assets under the financing arrangements. $4.455
million included in lease liabilities are due for repayment after 30 June 2019, however have been classified as current due to
matters noted above in (i).
(iii) The Colignan property lease liability is secured by the underlying leased asset which had a carrying value of $21.957 million at
30 June 2018 (2017: $21.820 million). The leased asset to which the leased liability relates is summarised in Note 3(c).
Subsequent to year end the Group increased its banking facilitites. Refer to Note 33 for details of events subsequent to the
reporting date.
* Includes an interim $2.000 million loan facility (taken out as trade finance) to fund progress payment made on capital equipment,
which will be converted to a finance lease once the equipment has been fully commissioned and final instalment paid to the supplier.
16 (b) Obligations under finance leases
The Group’s finance lease arrangements are as follows:
(a) Equipment finance leases with lease terms up to 5 years; and
(b) The Colignan vineyard lease is a non-cancellable lease with an implicit interest rate of 11.64% (2017: 11.33%) and has a
remaining term of 23 years (2017: 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 lease liabilities recognised at 30 June
2018
$‘000
2017
$‘000
4,040
14,549
62,994
81,583
(51,217)
30,366
2,368
11,099
47,841
61,308
(37,829)
23,479
862018 Annual Report2018 Annual Report87 17. Provisions
Current
Employee entitlements
Stamp duty payable
Contingent consideration
Make good of property leases
Total
Non-Current
Employee entitlements
Make good of property leases
Total
18. Other financial liabilities
2018
$‘000
2017
$‘000
505
-
-
250
755
42
398
440
470
1,040
2,626
-
4,136
48
398
446
2018
$‘000
2017
$‘000
Foreign currency contracts – fair value through profit or loss
-
547
19. Contributed equity
Refer to Note “1. General Information and group reorganisation” for details of the Group reorganisation which occurred during the
year ended 30 June 2017.
Equity securities issued
Year ended 30 June 2018
Year ended 30 June 2017
Number
‘000
$‘000
Number
‘000
$‘000
Opening balance at 1 July
87,087
112,002
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 on capital raising
Issue of shares to other employees
Issue of shares to non-executive directors
Equity raising costs (net of tax)
Closing balance at 30 June
-
-
-
-
40,352
138
-
-
-
-
-
-
12,106
180
-
(456)
16,976
5,588
22,564
22,564
19,231
-
-
164
-
9,693
13,411
29,333
35,563
25,000
-
-
213
(1,211)
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
127,577
123,832
87,087
112,002
20. Reserves
Reserves comprise:
Asset revaluation reserve
Share based payment reserve
Foreign exchange reserve
Group reorganisation reserve
(a) Asset revaluation reserve
Balance at the beginning of the year
Net revaluation gain – property, plant and equipment
Net revaluation loss – assets held for sale at the commencement of the year
Net tax impact of revaluation gain or loss
Reclassification of non-controlling interests
Balance at the end of the financial year
(a)
(b)
2018
$‘000
2017
$‘000
6,781
427
118
(47,453)
(40,127)
5,342
2,141
(85)
(617)
-
6,781
5,342
511
-
(47,453)
(41,600)
-
-
-
(2,289)
7,631
5,341
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
losses. 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 are taxed in Murray River Organics Group Limited. Consequently, the deferred tax impact in respect of prior period
gains on the revaluation of property, plant and equipment is required to be recognised in accordance with AASB 112 Income Tax.
The deferred tax impact of $2.289 million on prior period revaluation gains has therefore been recognised in other comprehensive
income during the year ended 30 June 2017.
(b) 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
Refer to Note 1, for information regarding the corporate reorganisation reserve.
2018
$‘000
2017
$‘000
(47,453)
-
(47,453)
-
(47,453)
(47,453)
882018 Annual Report2018 Annual Report89 21. Share based payments
The Group provides benefits to its employees in the form of share-based payment transactions, whereby services are rendered in
exchange for ordinary shares, performance rights or share options (“equity-settled transactions”).
The fair value of ordinary shares, performance rights or share options 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.
ORDINARY SHARES
During the year ended 30 June 2017, Non-executive Directors received a one-off issue of 163,537 (in total) ordinary shares in the
Company on the completion of the Company’s listing on the Australian Securities Exchange in recognition of the additional work
undertaken by the Non-executive Directors. The fair value of the ordinary shares issued on the grant date was $1.30 per ordinary share.
There were no issuances of ordinary shares by the Company to any employees of the Company during the year ended 30 June 2018.
PERFORMANCE RIGHTS
Previous key management personnel
Following the listing of the Company on the Australian Securities Exchange in December 2016, certain key management personnel
were granted 1,153,845 performance rights for nil consideration as a ‘one-off retention payment’. The performance rights will vest
on 30 June 2019 provided that the relevant employees satisfy a service condition to remain in continuous employment with the
Group from grant date until 30 June 2019. There are no performance conditions or other vesting conditions attached to the one-
off retention payment performance rights.
On 24 August 2017, the Board approved a modification to the 1,153,845 one-off retention performance rights to include a share
price hurdle performance condition that the volume-weighted average price of the Company’s shares on the Australian Securities
Exchange, calculated over the 20 day trading period commencing from and including the date which is two weeks after the date
on which the Company lodged its preliminary annual report with the Australian Securities Exchange for the year ended 30 June
2019, is equal to or greater than $1.30. This modification did not result in an increase in fair value of the performance rights. This
modification extends the vesting date of the performance rights to 4 October 2019. The Company’s share price at the date of
modification was $0.35.
Certain key management personnel were also issued separate tranches of performance rights for nil consideration. The
performance rights vest if the service and performance conditions are met. The service condition requires the relevant employees
to remain in continuous employment with the Group from grant date until 30 June 2019. Performance rights subject to an earnings
per share (“EPS”) performance condition are not subject to any market based vesting conditions. Performance rights subject to a
share-price growth (“SPG”) performance condition, is a market based vesting condition. The SPG performance 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 initial public offering ($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.
• 250,264 performance rights were granted subject to an EPS performance condition.
• 250,264 performance rights were granted subject to a SPG performance condition.
During the year ended 30 June 2018, certain employees previously granted performance rights forfeited 192,308 (EPS
performance condition) and 192,308 (SPG performance condition) performance rights upon resigning as an employee of the Group.
OTHER EMPLOYEES
Following the listing of the Company on the Australian Securities Exchange in December 2016, certain other employees were
granted 153,845 performance rights for nil consideration as a ‘one-off retention payment’. These performance rights vested on 15
December 2017 provided that the relevant employees satisfied a service condition to remain in continuous employment with the
Group from grant date until 15 December 2017. There are no performance conditions or other vesting conditions attached to the
one-off retention payment performance rights. During the year ended 30 June 2018, certain employees previously granted one-off
retention payment performance rights forfeited 15,384 performance rights upon resigning as an employee of the Group. During
the year ended 30 June 2018, 138,461 performance rights vested and were exercised by the relevant employees.
21. Share based payments (Continued)
FORMER CHIEF EXECUTIVE OFFICER – GEORGE HAGGAR
Upon employment with the Group in November 2017, former Chief Executive Officer, Mr George Haggar, was granted 681,818
performance rights for nil consideration in accordance with the Group’s Long Term Incentive (“LTI”) Plan. The performance rights
vest if the service and performance conditions are met. The service condition requires the participants to be employed on a
continuous basis by the Group the grant date until 9 November 2020. During the year ended 30 June 2018, George Haggar
forfeited all 681,818 performance rights upon resigning as an employee of the Group.
The fair value of each performance right is estimated at the grant date by taking into account the terms and conditions upon which
the performance rights were granted. The fair value of the performance rights granted were estimated on the grant date using the
following assumptions:
Previous KMP
One-off
retention
EPS
SPG
Other
employees
One-off
retention
George Haggar
LTI
Binomial
Binomial
Binomial
Binomial
Binomial
0.0%
47.5%
1.85%
0.0%
47.5%
1.85%
0.0%
47.5%
1.85%
0.0%
47.5%
1.85%
0.0%
47.5%
1.91%
Valuation model
Dividend yield
Expected volatility
Risk-free interest rate
Expected life of performance rights
2.54 years
2.54 years
2.54 years
1.0 years
3.0 years
Exercise share price
Nil
Nil
Nil
Nil
Nil
Fair value of performance rights at
grant date (per performance right)
$1.30
$1.30
$0.65
$1.30
$0.418
Information with respect to the number of performance rights granted is as follows:
2018
Number
2017
Number
1,808,218
681,818
(1,851,048)
(138,461)
-
-
1,808,218
-
-
-
- Granted
- Forfeited
- Exercised
- Expired
Outstanding balance at the end of the year
500,527
1,808,218
The weighted average fair value of the performance rights granted during the year ended 30 June 2018 was $0.418 (2017: $1.21).
The weighted average remaining contractual life of performance rights outstanding as at 30 June 2018 was 1.00 year (2017: 1.87 years).
SHARE OPTIONS
Retention Incentive – Former Chief Executive Officer: George Haggar
Upon employment with the Group in November 2017, George Haggar was granted 6,000,000 share options over three separate
equal tranches for nil consideration. The share options will vest provided George Haggar satisfies a service condition to remain
in continuous employment with the Group from grant date until the vesting date of each tranche being 9 November 2018, 9
November 2019 and 9 November 2020 respectively. There are no performance conditions or other vesting conditions attached to
the share options. During the year ended 30 June 2018, George Haggar forfeited all 6,000,000 share options upon resigning as an
employee of the Group.
Retention Incentive – Current Chief Executive Officer and Managing Director: Valentina Tripp
Upon employment with the Group in April 2018, Valentina Tripp was granted 6,000,000 share options over three separate equal
tranches for nil consideration subject to the approval by shareholders at the Company’s 2018 Annual General Meeting. The share
options will vest provided Ms Tripp satisfies a service condition to remain in continuous employment with the Group until the
vesting date of each tranche being 16 April 2019, 16 April 2020 and 16 April 2021. There are no performance conditions or other
vesting conditions attached to the share options.
During the year ended 30 June 2018, certain employees previously granted one-off retention payment performance rights
forfeited 769,230 performance rights upon resigning as an employee of the Group.
Outstanding balance at the beginning of the year
902018 Annual Report2018 Annual Report91 21. Share based payments (Continued)
The fair value of each share option is estimated at the grant date by taking into account the terms and conditions upon which
the share options were granted. The fair value of the share options granted were estimated on the grant date using the following
assumptions:
22. 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 overdraft. 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:
Valuation model
Dividend yield
Expected volatility
Risk-free interest rate
Valentina Tripp
George Haggar
Tranche A
Tranche B
Tranche C
Tranche A
Tranche B
Tranche C
Binomial
Binomial
Binomial
Binomial
Binomial
Binomial
0.0%
47.5%
2.21%
0.0%
47.5%
2.26%
0.0%
47.5%
2.35%
0.0%
47.5%
1.91%
0.0%
47.5%
2.08%
0.0%
47.5%
2.21%
Expected life of share options
3.0 years
4.0 years
5.0 years
3.0 years
4.0 years
5.0 years
Exercise share price
$0.60
$0.70
$0.80
$0.50
$0.55
$0.60
Cash and cash equivalents
Bank Overdraft
2018
$‘000
2017
$‘000
4
(3,806)
(3,802)
2,724
-
2,724
(B) RECONCILIATION OF PROFIT/ (LOSS) FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Fair value of share options at
grant date (per share option)
$0.0702
$0.0764
$0.0830
$0.1244
$0.1354
$0.1453
Profit for the year
Information with respect to the number of share options granted is as follows:
Outstanding balance at the beginning of the year
- Granted
- Forfeited
- Exercised
- Expired
Outstanding balance at the end of the year
2018
Number
2017
Number
-
12,000,000
(6,000,000)
-
-
6,000,000
-
-
-
-
-
-
The weighted average fair value of the share options granted during the year ended 30 June 2018 was $0.11 (2017: none granted).
The weighted average remaining contractual life of share options outstanding as at 30 June 2018 was 3.79 years (2017: none
outstanding).
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
Revaluation of properties and assets held for sale
Impairment of non-current assets
Share based payment expense
Unrealised foreign exchange loss
Depreciation expense
Reversal of contingent consideration liability
Reversal of provision for group reorganisation costs
Interest accrued
Capitalisation of borrowing costs
Changes in net assets and liabilities:
(Increase) / decrease in assets:
Trade and other receivables
Inventories
Other assets
Biological assets
Increase / (decrease) in liabilities:
Deferred tax liabilities
Trade and other payables
Current tax liability
Provisions
2018
$‘000
2017
$‘000
(59,607)
(5,931)
42
51
(158)
7,030
21,169
96
(547)
6,198
-
(1,040)
43
(1,286)
1,142
10,875
2,867
1,575
(1,817)
852
(946)
213
(190)
(24)
(13,185)
-
-
723
547
4,276
(474)
-
-
(692)
(3,216)
(8,875)
(1,209)
12,193
(1,679)
4,778
-
1,696
Net cash used in operating activities
(13,248)
(11,262)
922018 Annual Report2018 Annual Report93
22. Notes to the cash flow statement (Continued)
(C) RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
2018
1 July 2017
Financing cash
inflows / (outflows)
Non-cash changes
30 June 2018
Borrowings – bank loans
Lease liabilities - equipment loans
Total liabilities from financing activities
27,037
4,294
31,331
8,132
1,651
9,783
(47)
(1)
(48)
35,122
5,944
41,066
2017
1 July 2016
Financing cash
inflows / (outflows)
Non-cash changes
30 June 2017
Borrowings – bank loans
Lease liabilities - equipment loans
Total liabilities from financing activities
12,559
2,620
15,179
14,478
1,674
16,152
-
-
-
27,037
4,294
31,331
23. Financial instruments
(A) CAPITAL RISK MANAGEMENT
The Group manages its capital 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 balance.
The capital structure of the Group consists of net debt (borrowings as detailed in Note 16 offset by cash and cash equivalents) and
equity of the Group (comprising issued capital, reserves and retained earnings/(accumulated losses).
23. Financial instruments (Continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Trade and other payables
Borrowings
2018
$’000
2017
$’000
4
6,729
169
11,825
69,294
2,723
8,891
-
18,122
50,516
(C) FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group’s finance function provides services to the business by monitoring and managing the financial risks relating to the
operations through internal risk reports which analyse exposures by degree and magnitude of risk.
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group enters into
forward foreign currency contracts to manage its exposure to foreign currency exchange rate fluctuations where it has entered into
fixed price contracts.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
The use of financial instruments is governed by the Group’s policies approved by the Board of Directors. The Chief Financial
Officer is responsible for managing the Group’s treasury requirements in accordance with this policy.
Operating cash flows are used to maintain and expand the Group’s assets, as well as to make the routine outflows of payables, tax
and pay for other financial instruments.
(D) MARKET RISK
GEARING RATIO
The Board of Directors reviews the capital structure on an ongoing basis. As a part of this review the Board considers the cost
of capital and the risks associated with each class of capital. Based on recommendations of the Board, the Group will balance
its overall capital structure through new share issues and the issue or repayment of debt to execute its strategic plans and the
payment of dividends.
Key net debt metrics are included in the following table:
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group enters into
derivative financial instruments to manage its exposure to foreign currency risk, including forward foreign currency contracts to
manage its exposure to foreign currency exchange rate fluctuations (refer Notes 23(c) and 23(e).
(E) FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations
arise. Where appropriate, exchange rate exposures are managed within approved policy parameters utilising forward exchange
contracts or by offsetting import and export currency exposures.
2018
$‘000
2017
$‘000
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the
reporting period are as follows:
Net debt (including Colignan property leases)
Net debt (excluding Colignan property leases)
Net debt / equity (including Colignan property leases)
Net debt / equity (excluding Colignan property leases)
Equity
69,290
44,868
347%
225%
19,975
47,792
28,607
72%
43%
66,279
(B) CATEGORIES OF FINANCIAL INSTRUMENTS
At the reporting date there are no significant concentrations of credit risk relating to loans and receivables at amortised cost. The
carrying amount reflected in the statement of financial position represents the Group’s maximum exposure to credit risk for such
loans and receivables.
Currency of USA
Currency of Europe
Currency of Japan
Currency of Canada
Assets
Liabilities
2018
$’000
2017
$’000
2018
$’000
2017
$’000
46
1
-
-
-
1
-
-
1,275
38
-
75
1,148
29
234
-
FORWARD FOREIGN EXCHANGE CONTRACTS
The Group enters into forward foreign exchange contracts to hedge a proportion of anticipated purchase commitments
denominated in foreign currencies, principally US Dollars (“USD”) expected in each month.
The following table sets out the gross contract value to be received/paid under forward foreign currency contracts, the weighted
average contracted exchange rates and settlement periods of outstanding contracts used to hedge highly probable forecast
transactions of the Group.
942018 Annual Report2018 Annual Report95 23. Financial instruments (Continued)
23. Financial instruments (Continued)
Weighted average
exchange rate
Foreign currency
FC’000
Contract value
$’000
Fair value gain/(loss)
$’000
2018
2017
2018
2017
2018
2017
2018
2017
2017
Financial assets
0.7595
-
4,690
-
6,175
-
169
-
Variable interest rate instruments:
Weighted average
interest rate
Less than
1 year $’000
1-5 years
$’000
5+ years
$’000
Total
$’000
Buy USD – less than
one year
As at the reporting date, the aggregate amount of unrealised gains/(losses) under forward foreign currency contracts relating to
highly probably forecast transactions is $0.169 million gain (2017: Nil) - tax effected $0.118 million gain (2017: Nil). During the year
ended 30 June 2018, the unrealised gains / (losses) have been deferred in the hedging reserve to the extent the hedge is effective
(2017: entirely recorded through
profit or loss).
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to USD currency. The following table details the Group’s sensitivity to a 5 cent increase and decrease
in the Australian dollar against the relevant foreign currency. The analysis includes derivative instruments in designated hedge
accounting relationships, all trade receivables and trade payables outstanding at year end.
USD Impact
EUR Impact
CAD Impact
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Profit
Equity
4
109
98
-
4
-
3
-
4
-
-
-
(F) INTEREST RATE RISK MANAGEMENT
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates.
The following table details the Group’s exposure to interest rate and liquidity risk. The table includes both interest and principal
cash flows.
Weighted average
interest rate
Less than
1 year $’000
1-5 years
$’000
5+ years
$’000
Total
$’000
2018
Financial assets
Variable interest rate instruments:-
Cash
Non-interest bearing:
Trade receivables
Financial liabilities
Variable interest rate instruments:
Bank overdraft
Trade finance
Equipment loan and leases
Colignan finance leases
Borrowings
Non-interest bearing:
Trade creditors
Floating
4
-
6,729
6,733
8.07%
4.93%
4.90%
11.64%
4.82%
4,113
14,638
1,751
2,289
3,916
-
-
-
-
-
4,806
9,743
17,190
-
-
-
-
-
-
4
6,729
6,733
4,113
14,638
6,557
21,106
-
-
11,825
-
-
11,825
38,532
31,739
62,994
133,265
Cash
Non-interest bearing:
Trade receivables
Financial liabilities
Variable interest rate instruments:
Trade finance
Equipment loan and leases
Colignan finance leases
Borrowings
Non-interest bearing:
Trade creditors
INTEREST RATE SENSITIVITY
Floating
2,724
-
4.13%
4.87%
11.33%
4.45%
-
7,253
9,977
11,986
1,113
1,388
13,583
18,122
46,192
-
-
-
-
3,718
7,785
3,107
-
-
-
-
-
-
47,841
-
-
14.610
47,841
2,724
7,253
9,977
11,986
4,831
57,014
16,690
18,122
108,643
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non
derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and
held constant throughout the reporting period. At the reporting date, if interest rates had of been 0.5% higher or lower and all
other variables held constant, there would be a $0.195 million (2017: $0.134 million) effect on the Group’s loss for the period.
This is attributable to the Group’s exposure to interest rates on its variable rate borrowings (excluding the Colignan property and
equipment loans). The Group’s sensitivity to interest rates has increased during the year ended 30 June 2018 due to an increase in
outstanding variable rate debt instruments.
(G) CREDIT RISK MANAGEMENT
Credit risk management refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral,
where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of
its counterparties are continuously monitored and the aggregate values of transactions concluded are spread amongst approved
counterparties. The Group measures credit risk on a fair value basis.
Trade accounts receivable consist of a number of customers supplying the retail and wholesale sectors in Australia and
internationally. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate
letters of credit are obtained for international customers.
The Group has significant credit risk exposure with top 10 credit customers representing 82% of the total trade receivables.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-
ratings assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the
Group’s maximum exposure to credit risk without taking accounts of the value of any collateral obtained.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Directors consider that the carrying amounts of financial assets and liabilities recorded in the financial statements approximate
their fair values.
62,994
75,026
(H) LIQUIDITY RISK MANAGEMENT
962018 Annual Report2018 Annual Report97 2018
Cents Per Share
2017
Cents Per Share
(49)
(49)
(8)
(8)
23. Financial instruments (Continued)
The fair values and net fair values of financial assets and liabilities are determined as follows:
28. Earnings per share
(A) BASIC EARNINGS PER SHARE
• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets
are determined with reference to quoted market prices;
• the fair value of other financial assets and liabilities are determined in accordance with generally accepted pricing models
based on discounted cash flow analysis; and
• the fair value of derivative instruments, included in hedging assets and liabilities, are calculated using quoted prices, which is
a Level 2 fair value measurement. Where such prices are not available use is made of discounted cash flow analysis using the
applicable yield curve for the duration of the instruments.
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.
24. Key management personal compensation
The compensation made to Directors and other members of key management personnel of the Group is set out below:
Basic earnings per share
Diluted earnings per share
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Termination payments
Equity settled share-based payments
Total
25. Remuneration of auditor
Audit or review of the financial report
Tax services
Transaction services
Other assurance activities
Total
2018
$
2017
$
1,003,175
112,372
-
461,494
(87,486)
806,323
72,495
10,803
610,477
1,489,556
1,500,098
2018
$
150,000
-
-
-
150,000
2017
$
173,000
105,840
530,000
152,100
960,940
The auditor of Murray River Organics Group Limited is Ernst & Young (2017: Deloitte Touche Tohmatsu). During the year ended 30
June 2017, services other than the ‘audit or review of the financial report’ predominately included due diligence work associated
with business acquisitions and the initial public offering.
26. Contingent liabilities
Contingent liabilities include guarantees totalling $1.514 million (2017: $1.514 million) provided in respect of property leases.
27. 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 89% of the Group’s revenue is attributed to domestic customers, and the
remainder relates to exports to USA (2%), Asia (6%), Europe (2%) and others (1%).
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.
During the year ended 30 June 2018, the Group generated sales revenue of $34.231 million from a single customer that amounts
to 50% of the Group’s total sales revenue.
Earnings used to calculate basic and diluted earnings per share
Loss for the year attributable to equity holders of Murray River Organics Group
(59,607)
(5,927)
Weighted average number of share outstanding during the year used in calculating basic earnings per
share
2018
Number of shares
2017
Number of shares
120,530,282
77,509,645
Weighted average number of performance rights options on issue
1,620,879
888,093
Weighted average number of share outstanding during the year used in calculating dilutive
earnings per share
122,151,161
78,397,738
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
2018
$‘000
2017
$‘000
1,612
3,056
1,696
6,364
1,439
3,862
2,030
7,331
Certain property assets under operating leases contain renewal options.
30. Related party transactions
The compensation to key management personnel of the Group is set out in Note 24 and the Remuneration Report.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Michael Porter was appointed as the Interim Senior Corporate farms manager effective 6 June 2018 at a daily rate of $1,600 plus
GST, travel and accommodation expenses. As at 30 June 2018, $28,800 (including GST) was provided for in relation to consultancy
services provided to the Group. Following the appointment of a full time farms manager, Michael Porter ceased to provide these
interim services on 10 September 2018.
982018 Annual Report2018 Annual Report99 30. Related party transactions (Continued)
The following balances were outstanding at the end of the reporting period:
Amounts owed by related parties
Sornem Asset Management
Sorensen Family Trust
Jamel Family Trust
NOTES
2018
$‘000
2017
$‘000
-
-
-
88
490
490
31. Controlled entities (Continued)
(i) Murray River Organics Group Limited is the head entity of the tax consolidated group after it was established on 1 July 2017.
(ii) These companies are members of the tax consolidation group established on 1 July 2017.
(iii) 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.
32. Parent entity financial information
(1) The Sorensen Family Trust and the Jamel Family Trust are entities associated with former 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 the Company. During FY18, these receivables had been paid. Due to the timing between the funds being
paid by the Founders (Erling Sorensen and Jamie Nemtsas) to the Company (in August 2017) and the tax obligation settled with
the ATO (March 2018), interest of $13,817 and $14,055 at a rate of 4.44% was respectively paid to Erling Sorensen and Jamie
Nemtsas. (2017: Nil)
(2) Sornem Asset Management Pty Ltd is a related entity which used shared services with the Group during FY17.
As at 30 June 2018, no amount was receivable from Sornem Asset Management for shared services relating to shared offices (2017:
$87,764). The prior year balance has been written off. Sornem Asset Management is a related entity to Jamie Nemtsas and Erling Sorensen.
During the year, the Group received $4.429 million from Arrow Primary Infrastructure Fund (Arrow) as funding for capital
expenditure incurred on the Colignan vineyard (2017: $1.854 million). Arrow also paid Nil (2017: $0.160 million) directly to
suppliers in respect to the capital expenditure at the Colignan vineyard. The total $4.429 million (2017: $2.013 million) 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 $2.142
million (2017: $1.758 million) in relation to lease payments as lessee of the Colignan vineyard. The former Directors, Erling
Sorensen and Jamie Nemtsas hold units currently on issue in the Arrow Primary Infrastructure Fund. The lease has been entered
into under terms and conditions as described in Note 16(b) and neither interest held represents a controlling interest in Arrow
Primary Infrastructure Fund.
During the year, the Group paid $69,631 (at a rate of $400.00 per megalitre) (2017: Nil) to a related party of former Director Jamie
Nemtsas to access water in relation to the Alkira property. The Group does not have access to water for the Alkira property other
than through this arrangement.
31. Controlled entities
Parent entity:
Country of incorporation
Percentage owned (%)
2018
2017
Murray River Organics Group Limited (i)
Australia
100
100
Subsidiaries of Murray River Organics Limited (ii) (iii)
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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
2018
$‘000
2017
$‘000
-
18,615
-
-
-
111,902
-
-
18,615
111,902
123,832
427
(105,644)
18,615
(105,033)
-
(105,033)
112,002
511
(611)
111,902
(611)
-
(611)
33. Events subsequent to reporting date
In July 2018, the Group increased its bank overdraft facility by an additional $6.6 million. This takes the Group’s total bank debt
facilities (including bank guarantees) to $53.913 million.
On completion of the 31 July 2018 annual review, the Group’s financier (NAB) has also agreed to extend the maturity date of
$26.130 million of debt facilities (related to the trade facility $14.000 million, bank overdraft $10.600 million and bank guarantees
$1.530 million, and other working capital facilities such as foreign exchange, unused leasing facility and letters of credit) to 30
November 2018. This gives the Group time to conduct the proposed equity raising of $30.000 million, which is currently in
progress, to fund the cashflow needs of the business and support the balance sheet. As part of the capital raising, the Group
expects to put in place new longer term banking arrangements.
1002018 Annual Report2018 Annual Report101 Additional Australian Securities Exchange
information as at 29 August 2018
1. General Information
Principal Registered Office
Share Registry
Murray River Organics Group Limited
Computershare Investor Services Pty Ltd
32 Crompton Way
Dandenong South Victoria 3175
Telephone: 03 8792 8500
www.murrayriverorganics.com.au
452 Johnston Street
Abbotsford Victoria 3067
Telephone Australia 1300 555 159
Telephone Overseas +61 3 9415 4062 www.computershare.com.au
2. Distribution of equity securities
Spread of Holdings
Holders
Securities
%
Holders
Securities
%
Ordinary Shares
Performance Rights
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 over
Totals
145
444
283
617
109
63,812
1,307,206
2,219,032
19,350,646
104,636,007
0.05%
1.02%
1.74%
15.17%
82.02%
1,598
127,576,703
100.00%
-
-
-
-
1
1
-
-
-
-
-
-
-
-
500,527
100.00%
500,527
100.00%
3. Holders of Non-Marketable Parcels
Date
29 August 2018
Closing price of shares
Number of holders
$0.31
218
4. Voting Rights
Securities
Voting Rights
Ordinary Shares
Subject to any rights or restrictions for the time being attached to any class or classes at general meetings of shareholders
or classes of shareholders:
each shareholder is entitled to vote and may vote in person or by proxy, attorney or representative;
on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has
one vote; and
on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect
of each fully paid share held, or in respect of which he/she has appointed a proxy, attorney or representative, is entitled to
one vote per share held.
Performance Rights
Performance Rights do not carry any voting rights.
5. Restricted Securities
There are no shares on issue that are subject to mandatory or voluntary escrow restrictions under ASX Listing Rules Chapter 9.
6. Unquoted Securities
The following unlisted securities are on issue:
Class
Number of securites
Number of
Holders
Unlisted Performance Rights (subject to vesting conditions)
500,527
1
7. Stock exchange listing
The Company’s shares are quoted on the Australian Stock Exchange (ASX).
8. Top 20 Shareholders
Rank
Holder Name
Securities
%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20
TIGA Trading Pty Ltd
Netwealth Investments Limited
SHWL Holdings Pty Ltd
Kim Sorensen
Ms Melanie Alderton
UBS Nominees Pty Ltd
BLBD Pty Ltd
Meredith Nominees Pty Ltd
J P Morgan Nominees Australia Limited
BNP Paribas Noms (NZ) Ltd
Mr Alessandro Luigi Piccinini
Urban Land Nominees Pty Ltd
L J Thomson Pty Ltd
Yabby Capital Pty Ltd
Netwealth Investments Limited
Walbrook Pty Ltd
VBS Exchange Pty Ltd
Miss Roxanne Patricia Peterson
ATG Pty Ltd
Miengrove Pty Ltd
Torres Industries Pty Limited
Total
9. Substantial Shareholders
Holder Name
Date of interest
TIGA Trading Pty Ltd / Thorney Opportunities Ltd
31 January 2018
SHWL Holdings Pty Ltd
14 December 2017
Kim Sorensen as trustee for the Sorensen Family Trust 3
8 February 2018
Meredith Group
19 October 2017
18,772,631
16,097,013
14,771,074
5,931,794
5,524,102
5,457,857
4,120,295
2,752,710
2,479,256
1,883,992
1,552,328
1,269,512
1,000,000
880,723
865,392
708,450
680,000
674,333
624,971
600,000
600,000
14.715%
12.618%
11.578%
4.650%
4.330%
4.278%
3.230%
2.158%
1.943%
1.477%
1.217%
0.995%
0.784%
0.690%
0.678%
0.555%
0.533%
0.529%
0.490%
0.470%
0.470%
87,246,433
68.387%
Number of
ordinary shares 1
% of issued capital
2
24,657,206
14,771,074
7,995,393
6,873,005
19.33%
11.59%
6.27%
5.39%
¹ As disclosed in the last notice lodged with the ASX by the substantial shareholder.
2 The percentage set out in the notice lodged with the ASX is based on the total issued capital of the Company at the date of interest.
3 The Company understands that Kim Sorensen as trustee for the Sorensen Family Trust is no longer a substantial holder, however,
no notice of ceasing to be a substantial holder has been lodged.
10. Share Buy-Backs
There is no current on-market buy-back scheme.
1022018 Annual Report2018 Annual Report103
Murray River Organics Group Limited
ABN 46 614 651 473
HEAD OFFICE
32 Crompton Way, Dandenong South, 3175 VIC Australia
CONTACT
Telephone +61 3 8792 8500
info@murrayriverorganics.com.au
www.murrayriverorganics.com.au