annual report
2019
1
2019 annual reportcontentsChairman’s reviewManaging Director’s reportDirectors' reportCorporate governance statementAuditor’s declaration of independenceIndependent auditor's reportDirectors' declarationConsolidated statement of profit or loss and other comprehensive income Consolidated statement of financial positionConsolidated statement of changes in equityConsolidated statement of cash flowsNotes to the financial statementsAdditional Australian securities exchange information11 I12 I17 I40 I50 I51 I57 I58 I 59 I60 I61 I62 I 102 I business overview.
We are a grower, processor and distributor of organic dried
vine fruit and better-for-you products.
2,081
tonnes
DRIED VINE FRUIT
FY19 HARVEST
+5,000
tonnes
TARGET FROM
OWNED DRIED
VINE FRUIT
BY 20225
Largest dried
vine fruit grower
in Australia with
significant capacity
29%
of Sales
Grown
ON MURRAY RIVER
,
S FARMS
ORGANIC
67%
of land
AVAILABLE
FOR PLANTING4
$60.1
million
REVENUE1
68%
RETAIL SALES1
24%
AUSTRALIAN DRIED
VINE FRUIT SALES1
1 FY19
2 Includes 1,085 hectares of leased land and 3,810 hectares of owned land.
3 Farms includes land, bearer plants, buildings and improvements, including those farms
held for sale and under lease.
4 Total planted land 1,263 ha and available plantable land – 2,557 ha.
5Based on theoretical organic DVF yields from existing plantings.
4,895 hectares of land
OVER 12 FARMS IN
SUNRAYSIA REGION
2
$59
million
VALUE OF OWNED
& LEASED FARMS3
3
2019 annual report our vision.
Leader in organic and better for you
brands and ingredients.
our
purpose.
We make organic and better for you
products by farming and sourcing
world class ingredients, because
we believe everybody deserves
sustainable and clean food.
5
2019 annual report we choose
organic.
We vote for the world we want with
the choices we make, we choose
organic. We believe every body has
the right to access healthy and tasty,
nutritious, clean food. Better for you
and the planet.
our door is
always open.
We have nothing to hide. Being
organic ensures we can guarantee
quality and traceability at every point
of our vertically integrated ecosystem,
offering our customer assurance that
the highest environmental and organic
standards are consistently met.
our
beliefs.
A philosophy to inform our values and influence our actions internally.
Ensuring we remain authentic to our audience externally.
we innovate
to regenerate.
We are constantly striving to do better by people
and planet. Innovation is driven to improve taste,
nutrition and the natural environment helping us
move towards a sustainable future for everyone.
we believe
size matters.
Being big isn’t necessarily a bad thing. Bigger means we
can make a better impact. As Australia’s largest producer of
organic fruit we endeavour to use our size and scale for good.
we put
nature first.
We believe nature has the power to provide. We
endeavour to work with her not against. By harnessing
her power we are able to keep our environmental
footprint small and our ingredient lists clean.
we’re stronger
together.
We strive to understand the land where each of our
products are grown. Working with our farmers and
growers to champion the organic movement. Global
or local we are stronger together, come join us.
7
2019 annual report our
strategy.
Our five strategic pillars form our
transformation roadmap to become a truly
iconic and peerless Australian organic
agri-food company. These strategies will
drive the Group's performance over the
next 5 years and will be achieved
through a set of key initiatives.
1
2
3
4
5
Leverage our
agricultural
footprint and
flexible processing
capabilities
Build a global organic
and better for you
ingredients business
Develop market
leading, purpose
driven brands
with exceptional
product innovation
Disrupt the food market
via strong relationships
with customers and leading
edge thinking
Drive process excellence
to develop best-in-class
operating model
• Leverage our vertical
integration and utilise
existing farming
assets fully
• Ultimately extend
footprint through
collaboration and
partnerships
• Expand our global
supply chain for
organic ingredients
• Create an ecosystem
which promotes the
development of
organic supply
• Become the go-to
organic brand
• Deliver leading
customer and
consumer experience
• Create leading
organic product
innovation
• Organify and transform whole
• Invest in technology and
retail categories in the Australian
and international markets
• Partner with retailers and
distributers to drive
the organic markets
process which improve the
quality of products, our
efficiency and ability to supply
9
2019 annual report chairman’s
review.
+$10.7m
turnaround in underlying¹
EBITDA-S² performance
2.5times
gross material margin³
improvement to 22.7%
17%
reduction in
operating costs
1 Excludes one off costs / signficant items relating to June 2018
2 EBITDA-S means Earning Before Interest, Tax, Depreciation and Impairment, less
SGARA (fair value revaluation of Self-Generating and Regenerating Assets (agricultural
produce)) Unaudited non-IFRS term
3 Gross Material Margin means Revenue less Change in Finished Goods less Raw
Materials, Consumables Used and Farming Input costs - Unaudited non-IFRS term
Welcome to Murray River
Organics Group Limited
2019 Annual Report.
driving growth and profit and getting
on with the business of creating a
truly iconic and peerless Australian
organic agri-food company.
On behalf of the Board and MRG
I wish to recognise and thank our
supporting shareholders as we
have charted a pivotal year in the
life of this Company that you are
invested in.
Andrew Monk
Chairman
Dear shareholder,
Welcome to Murray River Organics
Group Limited 2019 Annual Report,
reporting on year one of our
turnaround in which we have taken
considerable steps towards future
growth and success.
This past year has seen strategically
planned change to MRG, with farms,
factories and people now engaged
and focussed on delivering returns in
the forward years.
Significant work has been put into
a thorough review of our strategic
positioning in the market. We have
the teams and leadership in place to
deliver on this strategy, and the core
values outlined in this report, that will
drive this transformation.
Shareholders will note in this report,
the year has brought a number of
challenges which have had an impact
on our vines for this and next year’s
harvests. These matters are outlined
in this report.
Investment decisions made this year
have been focused on returning the
Company and its farms to a growth
trajectory over the forward years,
consistent with our aim of being a
major player in organic and better-
for-you offerings to the market.
MRG is well positioned in these
high value-added growing market
segments, with diverse and valuable
assets, augmented by the vertically
integrated supply chain advantages
we possess along with a developing,
innovative branding strategy.
FY19 saw new teams and culture
developed under our management
leadership to unleash this value,
along with new strategic supply
and customer partnerships both
domestically and internationally.
We continue to work to deliver on
what we promised: to realise the
potential in MRG’s latent
assets, products and brands. We
will continue to assess our ongoing
capital requirements to support
11
2019 annual report
managing
director’s report.
It has been my honour to lead MRG
over the last 16 months through a major
turnaround. Our goal is to see our
Company emerge as a strong, purpose
driven business in the emerging, high
growth organics market.
Whilst we faced some significant
challenges, the support of our
shareholders, our bankers, customers
and our teams has enabled us to
re-set the business.
The market thematic for organics
continues to build across Asia, USA,
Europe and now Australia. Our vision
is to lead the growth of organics in
Australia and throughout the Asian
region. We now have the business
model, the capability and the
demand to accelerate our growth.
Size matters – and we will continue
to build scale and product reach as
we bring organics and better-for-you
food to mainstream consumers.
Developing new products is key to
our growth. Our “Taking Australia to
Asia” growth strategy has seen the
launch of nine new branded products
as well as new partnerships in China.
Partnerships and collaboration across
our value chains that are aligned with
our values, are critically important,
from our growers to our retail and
industrial partners in Australia, Asia
and beyond. We are particularly
proud of our Growers’ Program
which is delivering more equitable
pricing for Sunraysia farmers and has
resulted in a 15% increase in third
party fruit intake.
I am enormously grateful to my
team, many of whom have joined
me in the Company in the last 16
months and have stepped up to
re-build our business. We were
fortunate to attract some of the
best talent in Australia to lead our
farming, processing, manufacturing,
marketing, sourcing and support
functions and now have a strong
operating backbone in place. We
are all here because we believe in
the MRG vision, building a
culture and new way of working,
and creating an eco-system of
collaboration right across our value
chain. This investment in people,
systems and product innovation is
driving our turnaround, as well as
the re-birth of the dried vine fruit
industry in Australia.
The investment in people has been
possible through a singular focus on
leadership and culture across the
entire team – from executives, middle
management, functional specialists,
through to the shop floor and our
farming staff. We live and breathe
transparency, trust and integrity in
everything we do, every day. I am
confident that our people and our
culture will continue to be key to our
enduring success.
FY19 saw the launch of our five-year
strategy to bring our vision and
purpose to life. We are delighted to
report the following results;
• +$10 million turnaround in
EBITDA1 before SGARA2
• Significant gross material margin3
improvement achieved in the
value-add business which will
be further accelerated with new
product innovation
• Establishment of a solid
operating backbone
• Re-set relationships with our
customers
• $5 million reduction in costs
through Project Muscat
• Implementation of a new
corporate farming model
Re-set
relationships
WITH OUR CUSTOMERS
IMPLEMENTATION OF A
new corporate
farming model
Cultural
transformation
ACROSS THE COMPANY
$5m
REDUCTION IN COSTS THROUGH
PROJECT MUSCAT
ESTABLISHMENT OF A
solid operating
backbone
REBUILDING OUR
REPUTATION WITH AND
confidence of
our growers
• Re-building our reputation with
and confidence of our growers
• Cultural transformation across the
company
• Successful $30.6 million capital
raising and $63.9 million debt
facility
Our relationships with our major retail
customers, our specialty retailers and
wholesalers were reset. New pricing
and costing disciplines were
established, resulting in improved
commercial returns on sourced and
own grown branded product, as we
exited non-profitable lines. This has
resulted in a significant improvement
in gross material margins, which is
the foundation to our improved
EBITDA result.
A new Five-Year Strategy was
developed and 10 Year Model to
accelerate our broader growth
agenda and position MRG as a
leader in our hero category of
organic DVF with a total category
transformation program to deliver
on this plan.
The Wholesale and Industrial
business was reset, and the
“Ingredients Business”launched
with a goal to grow our organic
product supply ranges for
Australian food manufacturers.
The leadership and capability of our
farming team was restructured to
enable deliver of targeted returns on
our farming assets. Project Magnum
was commissioned to create a
vision for the future of Nangiloc our
certified organic property. Phase 1 is
commencing in the first half of FY20
with hemp (‘low-THC cannabis”) to
be planted as an annual rotational
crop under the existing pivot
infrastructure at Nangiloc.
Our relationship was strengthened
with our bankers and shareholders/
investors, completing a major re-
capitalisation and securing a three-
year banking facility.
Significant additional investments
have also been made in vine
remediation, nutrition and water
management to deliver enhanced
value and productivity to the farms
in future seasons over the next
2 to 3 years. However, we also
experienced hot summer conditions
(hotter and drier than usual) that
significantly impacted dried vine fruit
yields, which were 18 % below the
previous season’s harvest. This yield
shortfall was compounded with the
replacement of the irrigation system
by the landlord at the Colignan farm
throughout the season.
Overall we have seen a significant
improvement in our reputation, as
well as our position in the markets in
which we operate across Australia,
Mildura and internationally.
The support of our shareholders
has been critical during the
transformation and we are
enormously grateful for their belief in
us and their ongoing backing.
But we have only just begun. Thank
you for coming on the journey with
us and supporting our vision.
Valentina Tripp
CEO and Managing Director
(1) EBITDA means Earnings Before Interest, Tax, Depreciation and Impairment - Unaudited non-IFRS term.
(2) SGARA means fair value revaluation of Self-Generating and Regenerating Assets (agricultural produce) - Unaudited non-IFRS term.
(3) Gross Material Margin means Revenue less Change in Finished Goods minus Raw Materials, Consumables Used and Farming Input
Costs disclosed on the Consolidated Statement of Profit or Loss and other Comprehensive Income - Unaudited non-IFRS term.arming
Input Costs disclosed on the Consolidated Statement of Profit or Loss and Other Comprehensive Income - Unaudited non-IFRS term.
13
2019 annual report Building on a strong organics position
across a range of categories
Establishing a strong global network
of sourcing partners
8%
DVF: GROWER
SUPPLIED
farmed
DRIED VINE
FRUIT (DVF)
RAISINS
SULTANAS
CURRANTS
FRESH PRODUCE
CITRUS
WINE GRAPES
TABLE GRAPES
16%
DVF FARMED
13%
FRESH
PRODUCE
63%
SOURCED
PRODUCTS
strategic
sourcing
DRIED VINE
FRUIT (DVF)
RAISINS
SULTANAS
CURRANTS
KEY CATEGORIES
NUTS
DRIED FRUIT
COCONUT
SEEDS
DRIED BERRIES
FLOUR
GRAINS
RICE
OIL
% of FY19 Sales
Broad local customer base and strong focus
on growing exports
8%
11%
13%
FY19 Revenue
Wholesale & industrial
Export
Fresh fruit
National retail
~75% of fresh table grapes and citrus
was exported through MRO marketing
and packing partners
68%
14
13%
7%
15%
27%
38%
Volume by region FY19
North America
Nuts, dried fruit, maple syrup, pulses
South America
Ancient grains, dried fruit, sweeteners
Asia
Nuts, dried fruit, coconut, seeds, rice
Australia
Rice, oats, nuts, dried fruit, seeds
Europe
Nuts, dried fruit, seeds
Other
Target organic dried vine fruit yield growth
from FY19 vines planted on MRO farms ~2000
tonnes today to over ~5000 tonnes in 2022*
Theoretical Organic Dried Vine Fruit Harvest Volumes*
Basis: Progressive increase to an average of 5.85 tonnes per hectare by FY25
)
s
e
n
n
o
t
(
e
m
u
o
V
l
7000
6000
5000
4000
3000
2000
1000
0
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
0
0
0
0
’
$
*
*
s
e
a
S
l
l
a
i
t
n
e
t
o
P
e
v
i
i
t
a
r
t
s
u
l
l
I
FY18
(Actual)
FY19
(Actual)
FY20
FY21
FY22
FY23
FY24
FY25
FY26
FY27
FY28
Total DVF yield
Potential Sales
*Based on June 2019 estimates from DFA and in consultation with industry specialists, assuming normal growing conditions and
excluding other extreme factors that may impact yields.
**Potential sales information is provided for illustrative purposes only and is an extrapolation of theoretical harvest volumes based on an
assumed market price of $6/kg. This information is not a forecast of MRG sales. DVF crop assumed to be available for sale in the year
after harvest e.g. FY19 DVF crop sold in FY20
.
15
2019 annual report
$59+
million
invested across
4,895 ha
in farming properties
(owned & leased)
Directors’ Report
The Directors of Murray River Organics Group Limited (the “Company”) and its controlled subsidiaries (the “Group”,
“MRG” or “Murray River Organics”) submit herewith the annual financial report of the Company for the year ended 30 June
2019. 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:
Name & Qualifications
Experience and Responsibilities
Andrew Monk
Non-Executive Independent
Chairman BSc, PhD, GAICD
farming
assets.
Nangiloc
3,042 ha total area
96 hectares planted
2,327 hectares available
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. Past Chairman of organic
industry group 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 and Chairman of
pharmaceutical sector company Xerion Ltd.
Appointed Director and Chairperson on 24 January 2018.
Appointed Chairperson of the Audit and Risk Committee on 11 June 2018 and resigned on 18 March 2019.
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), and past 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.
17
Yatpool
383 ha total area
198 hectares planted
128 hectares available
Colignan
1,085 ha total area
681 hectares planted
57 hectares available
Meribein
127 ha
total area
Gol Gol
140 ha
total area
114 hectares
planted
0 hectares
available
95 hectares
planted
15 hectares
available
Fifth St
118 ha
total area
79 hectares
planted
31 hectares
available
16
*Aerial image of undeveloped and organic accrediated Nangiloc property
2019 annual report Name & Qualifications
Experience and Responsibilities
Tony Dynon
Non-Executive Independent Director
CPA
The following Director held office during the financial year until his resignation:
Name & Qualifications
Experience and Responsibilities
Steven Si
Non-Executive Independent Director
Tony has extensive leadership and finance experience gained largely in food, beverage and stockfeed
businesses with senior roles in international and ASX listed companies. Tony had a 20 year career was
with the international food company H J Heinz, where he was Chief Financial Officer for Heinz Australia
for 6 years and then Joint Managing Director for his last 3 years. He was also Managing Director of Farm
Pride Foods Ltd and Executive Chairman of Palm Springs Ltd both ASX listed companies. Tony has had
leadership roles in privately owned stockfeed businesses based in Australia, New Zealand and the UK.
Tony was also a non-executive director for ASX listed Colorpak Ltd and is currently a non-executive
director of ASX listed Huon Aquaculture Group Ltd.
Appointed Director on 18 March 2019.
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.
Member of the Remuneration and Nomination Committee and Chairperson of the Audit and Risk Committee.
Mr Si resigned as a Director on 10 August 2018.
Valentina Tripp
CEO and Managing Director
Bachelor of Commerce (Melb),
MBA, CPA, AICD
Valentina has over 25 years executive, professional services and non-executive experience in FMCG,
agribusiness and retail across Asia and global markets; previously as Executive Director, Business
Transformation & Corporate Development for Simplot Australia and Executive Director for the Top Cut
Foods Group (owned by JR Simplot USA). Prior to Simplot, Valentina was Senior Director with KPMG
leading transformation, strategy, customer growth, supply chain, operational and financial turnarounds
and was the Management Consulting National Lead for the Consumer & Industrial Sector and lead the
national food industry policy, competitiveness and growth agenda.
Valentina is a Non-Executive Director for the Marine Stewardship Council International Board (UK), Board
Member Dried Fruits Australia and former Non-Executive Director Capilano Honey Limited (ASX listed),
Non-Executive Chair of Fairtrade Australia & New Zealand and Non-Executive Director of Fairtrade
International (Bonn, Germany).
Appointed Managing Director and Chief Executive Officer on 16 April 2018.
COMPANY SECRETARY
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.
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
Tony Dynon
Steven Si
Valentina Tripp
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
14
14
14
4
2
14
14
14
14
4
2
14
3
3
3
-
-
-
3
4
4
3
4
4
3
4
4
-
-
-
1
-
-
1
-
-
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.
Directors
Andrew Monk
Keith Mentiplay
Michael Porter
Tony Dynon
Valentina Tripp
Fully paid ordinary shares
number
Share Option Number
Share Option Number
1,535,333
625,000
1,400,000
-
2,200,000
1,000,000
1,000,000
1,000,000
-
18,000,000
-
-
-
-
2,325,451
PRINCIPAL ACTIVITIES
The Group is an Australian producer, manufacturer, marketer, and seller of certified organic, natural and better-for-you
food products.
18
19
2019 annual report
BUSINESS MODEL
Leveraging supply to grow a value-added product business
Sunraysia Growers
supply of dried vine
fruit
Organic and
Conventional products
sourced locally &
internationally
SUNRAYSIA
FARMING
Dried Vine Fruit
Grapes
Hemp
MOURQUONG
PROCESSING
Dried Vine Fruit
DANDENONG
VALUE ADD
Packaging/Mixing
Facility & Distribution
Centre
S
E
L
A
S
Wholesale (Citrus,table
& wine grapes)
Domestic & Export, Retail &
wholesale: Bulk Dried Vine
Fruit (loose and clusters)
Grocery majors, Independent
retail, Speciality retail,
Wholesale & Export
COMPANY OVERVIEW
The Group 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.
The Group began in 2010 on a single 28-hectare farm in
Merbein, Victoria. It now operates circa 4,895 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, the Group 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
The Managing Director’s Report on the operations forms
part of this Directors’ Report.
Finance Performance
FY19 (i)
$‘000
FY18 (i)
$‘000
Change
$‘000
%
Net Sales revenue
60,072
68,539
(8,467)
-12.4%
Underlying EBITDA excluding SGARA (ii)
(3,568)
(14,280)
10,712
75.0%
Underlying EBITDA excl. SGARA (ii) to Sales %
-5.94%
-20.83%
14.9%
Depreciation
(4,457)
(6,198)
1,741
28.1%
Underlying EBITDA excluding SGARA (iii)
(8,025)
(20,478)
12,453
60.8%
Underlying EBIT excl. SGARA (ii) to Sales %
-13.36% -29.88%
16.5%
Finance Costs
Reported loss after tax
Working capital (iv)
Net bank debt (v)
Gearing - Bank Debt (vi)
(3,837)
(3,337)
(500)
-15.0%
(12,036)
(59,607)
47,571
79.8%
24,046
11,098
12,948
116.7%
41,982
44,868
(2,886)
-6.4%
118.5%
224.6%
(i) Unaudited non-IFRS financial table
(ii) EBITDA (Earnings Before Interest, Tax, Depreciation and Impairment)
(iii) EBIT (Earnings Before Interest and Tax)
(iv) Receivables and inventory less trade and other payables
(v) Net borrowings less Colignan vineyard finance lease
(vi) Net bank debt divided by total equity
20
SGARA means fair value revaluation of Self -Generating and
Regenerating Assets (agricultural produce)
Reconciliation of Underlying EBIT and EBITDA provided in
Directors' Report
• During this year of turnaround and transition, the
- Wholesale and Industrial business was also rebuilt
with a new sales and strategic sourcing team during
the financial year. The team’s immediate focus was
to move away from a speculative buying based
business (in several stock lines), reset the stock
holding mix in the business, strategically focus
on high demand lines and rebuild key customer
relationships. Pleasing sales traction was achieved
in the fourth quarter of FY19 and is expected
to continue.
- Export sales were marginally above last year, where
demand remains solid, but was constrained by
the quality of loose and cluster dried fruit, and
inadequate supply of key dried fruit varieties from
the 2018 harvest. In addition, the late harvest of the
2019 crop delayed May and June 2019 exports sales.
Going forward, the fundamentals of demand remain
strong with the Global Dried Vine Fruit Market
experiencing significant growth in demand. More
than 80% of MRO’s dried vine fruit
is exported.
- Fresh table grapes sales of $2.477 million were up
165% on the prior year, despite challenging summer
conditions and poor yields from two patches. The
investment in the turnaround program at the Fifth
Street farm was the catalyst for the yields increasing
by 74% to 868 tonnes, with further improvement
expected over the next growing season.
- Citrus sales of $4.925 million (from the Nangiloc,
Colligan and Gol Gol farms) were up 61% on the
prior year due to additional crop harvested in
May/June 2019 and higher sales from one of our
marketing and packing partners, but at lower net
margin. As reported at 31 December 2018, the
first half’s margin outcome (from an agreement
negotiated by the previous management) was
extremely disappointing. The net price after their
marketing, commission and distribution costs
resulted in the net returns being significantly below
expectations. Improved margins have been achieved
through our current marketing and packing partners.
key sales focus was to reinvigorate major customer
relationships and reset the business base by way of
targeting both branded and private label sales that
generate an appropriate commercial return. This
required the sales, marketing and procurement teams to
be rebuilt (as previously management had unfortunately
reduced the local and overseas sales team), to enable
the business to achieve its growth targets over the
coming years. For the financial year, net sales of
$60.072 million were down 12.4% or $8.467 million
down on last year.
Sales by channel
National
Retail
68%
Wholesale &
Industrial
8%
Export
11%
Fresh
13%
Sales in the first half for National Retail and Wholesale
& Industrial channels were impacted by inconsistent
fill rates where cash constraints restricted the Group’s
ability to efficiently build adequate stock levels on time,
to meet customer demands. Since completion of the
capital raising in October 2018 stock levels have been
progressively rebuilt to match customer demands which
has seen customer fill rates gradually improve. This
continues to be a key focus for the business.
- With the rebuild of the retail sales and marketing
team, a significant amount of work has been
undertaken to increase branded product
development which will enable the Group to grow
its national retail business and other channels going
forward, rather than driving non value-added sales
at unsustainable low margins. As a result, private
label retail sales have declined in FY19 and sales
momentum is progressively building through the
Murray River Organics and Pacific Organics brands.
21
2019 annual report
FY19 (i)
$‘000
FY18 (i)
$‘000
(12,036)
(59,607)
Change
$‘000
%
• The prior year NLAT included a number of one
off/significant items associated with:
Reported loss after tax
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
Reversal of provision for group reorganisation
Underlying EBIT (loss)
Less SGARA loss (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
-
3,837
(8,199)
-
-
-
-
-
(8,199)
174
(8,025)
4,457
(3,568)
(1,896)
3,337
(58,166)
47,571
1,896
(500)
49,967
(21,169)
21,169
(8,344)
(7,030)
(2,343)
1,040
(20,320)
(158)
(20,478)
6,198
(14,280)
8,344
7,030
2,343
(1,040)
12,121
332
12,453
(1,741)
10,712
79.8%
-15.0%
85.9%
59.7%
NMF
60.8%
28.1%
75.0%
• Underlying EBITDA loss before SGARA was $3.568
million compared to last year’s loss of $14.280 million.
• Underlying EBIT loss before SGARA was $8.025
million compared to last year’s loss of $20.478 million.
Deprecation decreased by $1.741 million predominately
arising from the impairment of plant, equipment and
lease hold improvements in the prior year of
$10.420 million.
• Finance cost increased by $0.500 million on last year,
as the Group continues to invest in completing the
development of its vineyards and funding its
turnaround plans.
• Reported consolidated Net Loss After Tax (NLAT) after
SGARA for the year ended 30 June 2019 was $12.036
million compared to a 2018 NLAT of $59.607 million.
• Despite the decrease in sales and the slower than
expected level of farm dried vine fruit yields, the
turnaround plan has delivered a $10.712 million
improvement on the underlying EBITDA loss
predominately due to:
- Significant gross margin improvement by focusing
on a reduced number of product lines (SKUs)
supported by the new strategic sourcing team that
has reinvigorated competitive purchasing of raw
materials; new pricing and costing disciplines which
resulted in improved commercial returns on sourced
and own grown branded products; and the exit of
non-profitable lines.
- Improved yields and margins from fresh table
grapes, and higher citrus margins arising from the
earlier harvest of citrus in May/June 19 compared
to the prior year.
- Costing savings initiated as part of Project Muscat,
have eliminated several inefficient production
processes, reduced raw material wastage, logistics
and corporate overhead costs. Whilst there is
a continued focus on reducing operational costs
and improving efficiencies of the Dandenong and
Mourquong sites, the Group has also invested in
upskilling its operational teams and refocused
marketing investment to drive branded sales in
the coming years.
- 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.
- A revaluation loss on property, plant and equipment
and assets held for sale through the statement of
profit and loss of $7.030 million. The net decrease 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; and
- Reversal of prior year provision of $1.040 million
for group reorganisation in relation to stamp
duty savings.
- Working capital (receivables, inventories and trade
and other payables) increased by $12.948 million due
to increased sales in May/June 2019 compared to the
prior year, timing of customer receipts and increased
supplier payments following tight management of
suppliers’ payments in prior periods. The increase in
inventory reflects the additional volume of dried vine
fruit obtained from third party growers, refreshed
stock holdings required to support future sales and
the increased value of additional own grown dried
vine fruit from the late harvest in FY2019. Over
the last 12 months a significant amount of excess
stock or lower grade stock was also cleared.group
reorganisation in relation to stamp duty savings.
• Cash flows from “operating activities” for the year was
negative $20.484 million, $7.236 million higher than
prior year negative cash flows of $13.248 million. The
increase was principally driven by an increase in
working capital.
• Net bank debt, excluding the Colignan property
finance lease was $41.982 million (2018: $44.868
million), with gearing down to 118.5% compared to
June 2018 at 224.6%, following the successful capital
raising (24 October 2018) of $27.136 million (net of
costs). During the year the Group has continued to
draw on its facilities to execute its turnaround plans,
vineyard development investment, farm remedial works,
operational capital works and support its working
capital needs.
• The three-year multi option banking facility with NAB
(expiring 30 November 2021) of $63.700 million
with multiple drawdowns, is expected to be utilised
to continue with the Group’s existing vineyard
development, and ongoing execution of the its
turnaround and future growth plans. As at 30 June 2019
$17.003 million was available for future drawdowns
at agreed dates from its overall $55.000 million bank
loan facility (excluding the equipment finance, bank
guarantees and credit card facilities).
Cash Flow and Capital Management
Working Capital
Trade and other receivables
Inventories
Trade and other payables
Working Capital
Agricultural produce
Working Capital incl Agricultural produce
(i) Unaudited non-IFRS financial table
FY19 (i)
$‘000
FY18 (i)
$‘000
Change
$‘000
%
10,518
22,269
(8,741)
24,046
2,054
26,100
6,729
16,164
(11,825)
11,098
2,621
13,719
3,789
6,075
3,084
12,948
(567)
12,381
56.3%
37.5%
-26.1%
116.7%
-21.6%
90.2%
22
23
2019 annual report
QUALITY AND FOOD SAFETY
Over the last 12 months the Group has:
Murray River Organics is committed to providing our
customers with safe food, produced to the highest
standards. Food quality is a powerful driver when
consumers make foods choices, so delivering product of
the highest quality is at the forefront of what we do.
All factories and farms where Murray River Organics
products are produced are regularly audited by external
auditors to confirm compliance with quality and food
safety standards. A total of 12 individual schemes are
maintained across the operations with 24 days of audits
carried out during FY19.
As a leading producer of organic dried vine fruit, grown
on our own farms, we benefit from having growers with
expertise and a long history of growing. This guarantees
we can deliver the highest quality fruit to our customers.
With a global raw material supply chain ensuring our
suppliers meet our standards is key. A robust supplier
approval system is maintained to ensure raw materials
purchased meet our quality standards. During 2019
financial year, we carried out 3700 tests covering pesticide
residue, authenticity, allergens, and microbiology to ensure
ongoing verification of product integrity and safety.
To stay at the forefront of product quality we regularly
review and improve our own-brand product ranges,
whilst developing new and innovative products for
our customers.
SAFETY, HEALTH AND WELLBEING
Murray River Organics is committed to improving the
physical safety and mental well-being of our employees
and embed a safety mindset and culture through the
whole business. This takes time, effort and patience, and
the goal over the last 12 months is to keep it “front of
mind” and avoiding complacency.
In FY19 a Safety Road Map has been developed, which
enabled the Group to understand the links between
safety performance and key drivers of safety. Further the
Group has been building the organisational capability
and employee engagement in identifying and managing
safety, health and wellness risks. The Safety Road Map has
focused the business on key transformational and tactical
activities that will ensure Murray River Organics continues
its safety journey.
• Increased reporting of hazards and incident notification
• Undertaken in-house and external training (Manual
handling/Fire Equipment/Chemical Handling)
• Focused on engaging the complete workforce and
rolled out Employee Assistance Program with a focus on
employee “emotional well-being”
• Conducted internal and external audits for an
evaluation of the effectiveness of the health
and safety management systems currently
in place
• Reviewed each site including
farms, to ensure we have
emergency preparedness
procedures and tools in place
• Participated in Certificate III in
Horticulture with a dedicated
module on OH&S for farm staff
• Re-invigorated OH&S committee
with increased participation and
input from shop floor staff
• Made safety a key requirement in every
position description and the first agenda item in
operational and management meetings
With strong support from the senior leadership team
and the Board, the Group continues to drive a safety-first
culture and compliance as part of the ‘MRG Ways
of Working’.
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.
Sustainable Manufacturing
Food processing is typically the second largest source of
environmental impact from food products. It is an area the
Group has focused its sustainability efforts on. Solar panels
have been installed on some of the 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 will be 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 as a minimum at 27% and on average using 62%
recycled material.
Murray River Organics continues to look at ways to further
minimise the impact the business has on the environment
and always strives to deliver sustainable, healthy food for
current and future generations.
OPERATIONAL RISKS
There are a number of operational risks, both specific to
the Group and of a general nature, which may impact the
future operating and financial performance of the Group.
There can be no guarantee that the Group 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 Plan
Following a strategic review of the business in June
2018, the turnaround strategy was announced which
focused on; operations, customer, farms, 3rd party supply,
system, people & culture. In FY19 significant progress
was undertaken in each of these areas and further work is
ongoing. 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.
Customer Risk and Competition
Murray River Organics top ten customers comprised
approximately 75% of FY19 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 reduce this risk where possible.
24
25
2019 annual report 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
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
which 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.
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.
Access to funding
During FY19 the Group successfully completed its capital
raising of $30.6 million and renegotiation of a new three-
year multi option banking facility with NAB expiring 30
November 2021 to support its turnaround strategy. The
Group is in its first year of its three-year turnaround plan,
as a result there may be some variability in the amount
and timing of operating cash flows to enable the Group to
successfully execute its turnaround
plan. The Group is likely to
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
Other than the renegotiation of the banking facilities as described in Note 16
– Borrowings, there has not been any other 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.
ENVIRONMENTAL REGULATION
The entity’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or
of a State or Territory.
Murray River Organics is 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.
26
27
2019 annual report • 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.
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 24 to the financial statements.
The Directors are satisfied that the provision of non-audit
services, during the year, by the auditor (or by another
person or firm on the auditor’s behalf) is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as
disclosed in Note 24 to the financial 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
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 2019 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
Tony Dynon
Appointed 18 March 2019
Non-Executive Independent Director
Steven Si
Executives
Appointed 24 January 2018
Resigned 10 August 2018
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)
ROLE OF THE REMUNERATION AND
NOMINATION COMMITTEE
company, the performance of the executives and the
general remuneration environment;
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
• 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
• Has adequate succession plans for the CEO, senior
executives and Executive Directors.
Further information about remuneration structures and the
relationship between remuneration policy and company
performance is set out below.
The Remuneration and Nomination Committee Charter,
which outlines the terms of reference under which it
operates, is available online at
www.murrayriverorganicsinvestors.com.au.
28
29
2019 annual report 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.
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 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 FY19 share options were
issued to Non-executive Directors as remuneration for
additional work undertaken as part of the capital raise
dated 24 October 2018.
Use of Remuneration Advisors
During FY19 the Remuneration and Nomination
Committee approved the engagement of Crichton
& Associates Pty Ltd to provide remuneration
recommendations regarding remuneration mix and
quantum for executives and Non-executive Directors.
Both Crichton & Associates Pty Ltd and the Committee are
satisfied the advice received from Crichton & Associates
Pty Ltd is free from undue influence from the KMP to
whom the remuneration recommendations apply.
The remuneration recommendations were provided to the
Committee as an input into the decision making only. The
Remuneration and Nomination Committee considered the
recommendations, along with other factors, in making its
remuneration decisions.
The fee paid to Crichton & Associates Pty Ltd for the
remuneration recommendations was $10,547.
Short Term Incentive (“STI”) Plan
Valentina Tripp and Albert Zago
For FY2019, Valentina Tripp, Albert Zago and certain other
employees as determined by the Board were entitled to
participate in a cash-based STI Plan under the terms of
their employment contracts, and in accordance with the
terms of the STI Plan in place for FY2019. The maximum
amount that an Executive KMP is entitled to under the STI
Plan is as follows:
• Valentina Tripp, up to 60% of Valentina's total
remuneration (base salary plus superannuation); and
• Albert Zago, up to 25% of Albert's total remuneration
(base salary plus superannuation).
The table below sets out, in respect of Valentina Tripp
and Albert Zago's entitlement, the percentage of their
entitlement that will be paid on satisfaction of certain key
performance indicators.
Measure
EBITDA before SGARA
Operational performance (additional customer service and labour productivity)
Deliver a 3-5 year strategic plan, to be approved by the Board
People and systems
Risk and compliance
Entitlement to be paid
50%*
20%
10%
10%
10%
* With additional payment opportunities for an additional 10% and 15% weighting if performance measure is exceeded by
specified amounts. This could result in them receiving up to 125% of their total STI Plan entitlement for FY2019.
In FY18 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.
Long-term Incentive (“LTI”) Plan
In conjunction with the capital raise dated 24 October 2018 the Board reinstated the Group’s LTI Plan with new vesting
conditions. The LTI Plan offers eligible employees (including KMP executives) selected by the Board rights to subscribe for,
or be granted, Performance Rights. In FY19 Performance Rights were granted to Valentina Tripp and Albert Zago under
the FY19 LTI Plan at nil consideration and vest 3 years from the date of grant, provided that the relevant employee is still
employed by the Group at that time and subject to performance related vesting conditions. In FY20 the Board will consider
extending the LTI plan to other senior employees of the Group. An overview of the LTI plan is as follows:
• Participants in the LTI Plan do not pay any consideration for the grant of the Performance Rights. On vesting, one
performance right is exercisable into or entitles the holder to one share.
• Performance Rights are not be listed on ASX and does not entitle its holder to dividends nor rights to vote at meetings
of shareholders of the Company.
• Performance Rights will only vest where the performance conditions and any other relevant conditions advised
have been satisfied unless otherwise determined by the Board. An unvested performance right will lapse in certain
circumstances, including where performance conditions are not satisfied within the relevant time period, where the
participant deals with the performance right in breach of the rules of the LTI Plan or where, in the opinion of the Board,
a participant has acted fraudulently or dishonestly.
• If a participant's employment or engagement with the Company (or its subsidiaries) terminates before the Performance
Rights have vested, the Performance Rights will lapse, unless the invitation provides otherwise, or the Board resolves
otherwise.
• Where there is a takeover bid made for Shares in the Company, the Directors may determine that all or part of the
participant's unvested Performance Rights, will become vested Performance Rights.
• If there are certain variations in the share capital of the Company, including a capitalisation or rights issue, subdivision,
consolidation or reduction in share capital, the Directors may make such adjustments as they consider appropriate under
the LTI Plan.
The vesting condition is based on Total Shareholder Return Compound Annual Growth Return and in accordance with the
following vesting schedule:
TSR CAGR
Less than 10% p.a.
10% p.a.
12.5% p.a.
15% p.a.
% of Performance Rights that
vest
Comment
0%
25%
50%
100%
Straight line interpolation between 10% and 12.5%
Straight line interpolation between 10% and 12.5%
30
31
2019 annual report George Haggar (Previous KMP)
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 (Previous KMP)
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
Performance
Conditions
Reward achievement of long term business objectives and sustain value creation for shareholders
Performance Rights
CEO, COO, CFO
Continuing service with the Group.
KEY TERMS OF EMPLOYMENT CONTRACTS
Valentina Tripp
Managing Director and Chief Executive Officer
Expiry date
Not applicable
Fixed Remuneration
$500,000 (including superannuation)
Short Term Incentive
Retention Incentive
Maximum yearly cash bonus of $300,000, representing 60% of total remuneration (base salary plus
superannuation).
6 million options over ordinary shares in MRG with an exercise price of $0.10 cents vesting 16 April 2019 and
expiring 16 April 2021.
6 million options over ordinary shares in MRG with an exercise price of $0.18 cents vesting 16 April 20 and
expiring 16 April 2022.
6 million options over ordinary shares in MRG with an exercise price of $0.27 cents vesting 16 April 21 and
expiring 16 April 2023.
Long Term Incentive
Entitled to participate and included in the Company’s LTI scheme.
50% Earnings per share growth targets (compounded annual growth of the company’s EPS over a three year period
ending 30 June 2019).
Notice period
6 months
50% Share Price growth targets (compounded annual growth of the company’s share price over the period of the listing
to 30 June 2019).
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.
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%
Restraint of trade period
6 months
Albert Zago
Expiry date
Chief Financial Officer
Not applicable
Fixed Remuneration
$310,000 (including superannuation)
Short Term Incentive
Maximum yearly bonus of 25% of total remuneration (base salary plus superannuation).
Long Term Incentive
Entitled to participate and included in the Company’s LTI scheme.
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.
Above 10% but less than 20%
Pro-rata vesting from 20%-100%
Restraint of trade period
Up to 12 months subject to location of employment or trade.
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 $0.35.
During FY19 the Remuneration and Nomination Committee engaged an independent remuneration advisor - Crichton
& Associates Pty Ltd to undertake a benchmark review of Non-Executive Directors’ fees of comparable companies. The
Remuneration and Nomination Committee considered the recommendations, along with other factors and determined that
remuneration fees needed to be aligned to current market rates and the appropriate time, commitment and responsibilities
of the director roles. Effective 1 December 2018 Non-Executive Directors’ fees increased and are summarised as follows:
Board/Committee
Board based fee
From 1 December 2018
Prior to 1 December 2018
Chairman Fee* ($)
Director/Member
Fee* ($)
Chairman Fee* ($)
Director/Member
Fee* ($)
$120,000 (inclusive
of committee work)
$70,000
$75,000 (inclusive of
committee work)
$40,000
Remuneration and Nomination Committee
$10,000
Risk and Audit Committee
$10,000
-
-
$5,000
$5,000
*The base fees detailed above exclude superannuation.
32
33
2019 annual report RELATIONSHIP BETWEEN REMUNERATION POLICY
AND GROUP PERFORMANCE
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
Revenue
EBITDA (statutory) (ii)
EBITDA (pro-forma) (ii)
Net profit/(loss) after tax
60,072
(3,568)
N/A
(12,036)
68,539
(51,968)
N/A
(59,607)
48,522
(584)
6,487
(5,927)
11,958
6,945
8,506
2,229
2019
2018
2017
2016
2015
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
$0.31
$0.079
(4)
(4)
$0.32
$0.31
(49)
(49)
-
$1.30 (i)
$0.32
(8)
(8)
-
N/A
N/A
0.04
0.04
-
7,814
288
500
(1,369)
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.
DETAILS OF KEY MANAGEMENT PERSONNEL REMUNERATION
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
2019
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
101,250
Keith Mentiplay
65,417
Michael Porter
57,500
Tony Dynon
23,174
Steven Si (i)
6,758
Sub-total
254,099
Executives
-
-
-
-
-
-
9,619
6,125
5,463
2,202
642
24,051
Valentina Tripp
479,469
90,000
20,531
Albert Zago
289,470
23,250
20,531
Sub-total
768,939
113,250
41,062
Total
1,023,038
113,250
65,113
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,602
9,587
9,587
-
-
28,776
109,472
12,312
121,784
---
150,560
8%
12%
13%
-
-
29%
10%
92%
88%
87%
100%
100%
71%
90%
-
-
-
-
-
-
-
-
-
-
120,471
81,129
72,550
25,376
7,400
306,926
699,472
345,563
1,045,035
1,351,961
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 2019, $ 83,200 (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.
34
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
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 (i)
Alan Fisher (ii)
32,880
19,728
6,508
18,986
2,935
Craig Farrow (iii)
79,909
Lisa Hennessy (iv)
42,618
Kenneth Carr (v)
13,837
Donald Brumley (vi)
30,441
Sub-total
247,842
Executives
Valentina Tripp
100,942
Erling Sorensen (vii)
97,844
George Haggar (viii)
276,795
Jamie Nemtsas (ix)
41,932
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,124
1,874
618
1,804
279
7,591
4,049
1,315
2,892
23,546
4,217
20,421
30,023
15,489
Albert Zago
112,820
20,000
8,701
Matthew O’Brien (x)
105,000
-
9,975
Sub-total
735,333
20,000
88,826
Total
983,175
20,000
112,372
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,575
-
-
-
-
-
-
-
-
-
-
-
36,004
21,602
7,126
20,790
3,214
87,500
46,667
15,152
33,333
271,388
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
160,734
35%
65%
(136,716)
125,000
106,549
-
182,648
489,467
(136,716)
153,846
74,551
-
-
-
-
130,371
-
-
141,521
245,346
14%
53%
111%
63%
77%
86%
47%
(87,486)
461,494
1,218,168
(87,486)
461,494
1,489,556
Details of resignation of key management personal during the year ended 30 June 2018 are detailed below and new appointments are detailed
within the Remuneration Report on page 19.
(ii) Steven Si – appointed 24 January 2018
(iii) Alan Fisher - appointed 8 May 2018 and resigned 31 May 2018
(iv) Craig Farrow - appointed 6 September 2016 and resigned 24 January 2018
(v) Lisa Hennessy - appointed 6 September 2016 and resigned 24 January 2018
(vi) Kenneth Carr - appointed 23 November 2017 and resigned 24 January 2018
(vii) Donald Brumley - appointed 6 September 2016 and resigned 22 November 2017
(viii) Erling Sorensen - appointed 18 June 2012 and resigned 9 November 2017
(ix) George Haggar - appointed 9 November 2017 and resigned as CEO on 16 April 2018 (ceased as KMP)
(x) Jamie Nemtsas - appointed 18 June 2012 and Resigned 28 August 2017
(xi) Matthew O’Brien - appointed March 2016 and resigned as CFO on 15 January 2018 (ceased as KMP)
35
2019 annual report
KEY MANAGMENT PERSONNEL’S SHARE-BASED COMPENSATION
The following factors were used in determining the fair value of the options granted during the year ended 30 June 2019:
Performance rights issued to key management personnel
KMP
Tranche
Grant Date
Price of shares
on grant date
Estimated
volatility
Risk free
Interest Rate
Dividend Yield
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
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
Andrew Monk
Keith Mentiplay
Valentina
Tripp
LTI
Albert
Zago
LTI
22
Nov
18
1 Nov
18
2,325,451
$0.054
901,112
$0.062
-
-
2021
0%
2021
0%
-
-
-
-
-
-
-
-
-
-
21/11/21
21/11/21
21/11/21
Michael Porter
21/11/21
21/11/21
21/11/21
Valentina Tripp
Total
3,226,563
Capital Raise
2018
Capital Raise
2018
Capital Raise
2018
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
22 Nov 18
22 Nov 18
22 Nov 18
22 Nov 18
$0.09
$0.09
$0.09
$0.09
$0.09
$0.09
90%
90%
90%
90%
90%
90%
2.12%
2.12%
2.12%
2.08%
2.17%
2.27%
0%
0%
0%
0%
0%
0%
The following factors were used in determining the fair value of the performance rights granted during the year ended
30 June 2019:
KMP
Tranche
Grant Date
Price of shares
on grant date
Estimated
volatility
Risk free Interest
Rate
Dividend Yield
Valentina Tripp
Albert Zago
LTI
LTI
22 Nov 18
1 Nov 18
$0.087
$0.100
90%
90%
2.12%
2.12%
0%
0%
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
NUMBER OF PERFORMANCE RIGHTS HELD BY
KEY MANAGEMENT PERSONNEL
The number of performance rights in Murray River Organics Group Limited held by each KM
Balance at
01/07/18
Granted
Exercised
Forfeited
Valentina Tripp
Albert Zago
Total
-
-
-
2,325,451
901,112
3,226,563
-
-
-
Balance at
30/06/19
2,325,451
901,112
3,226,563
-
-
-
NUMBER OF OPTIONS HELD BY KEY MANAGEMENT PERSONNEL
$0.10
22/11/21
22/11/19
22/11/21
The number of options in Murray River Organics Group Limited held by each KMP:
Andrew
Monk
Capital
Raise 2018
22 Nov
2018
Keith
Mentiplay
Capital
Raise 2018
22 Nov
2018
Michael
Porter
Capital
Raise 2018
22 Nov
2018
1,000,000
$0.0478
2021
0%
1,000,000
$0.0478
2021
0%
1,000,000
$0.0478
2021
0%
Valentina
Tripp (i)
Valentina
Tripp (i)
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
Retention
Incentive A
Retention
Incentive B
Retention
Incentive C
6,000,000
$0.0429
22 Nov
2018
6,000,000
$0.0397
6,000,000
$0.0401
2,000,000
$0.0702
16 Apr
2018
2,000,000
$0.0764
2,000,000
$0.0830
-
-
-
-
-
-
2019
2020
2021
2019
2020
2021
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
2,000,000
2018
2018
2018
-
-
-
-
-
-
-
-
-
$0.10
22/11/21
22/11/19
22/11/21
$0.10
22/11/21
22/11/19
22/11/21
$0.10
16/04/21
16/04/19
16/04/21
$0.18
16/04/22
16/04/20
16/04/22
$0.27
16/04/23
16/041/21
16/04/23
$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
Balance at
01/07/18
Granted
Exercised
Forfeited (i)
Andrew Monk
Keith Mentiplay
Michael Porter
-
-
-
1,000,000
1,000,000
1,000,000
Valentina Tripp (i)
6,000,000
18,000,000
Total
6,000,000
21,000,000
-
-
-
-
-
Balance at
30/06/19
1,000,000
1,000,000
1,000,000
-
-
-
(6,000,000)
18,000,000
(6,000,000)
21,000,000
(i) The Retention Incentives options included in the FY18 annual report, which were subject to shareholder approval at the 2018
Annual General Meeting were not issued and were replaced with new Retention Incentive options, which were approved and
granted at the 2018 Annual General Meeting.
(i) The Retention Incentive options with a grant dated of 16 April 2018 were not issued and were replaced with new Retention
Incentive options (grant date 22 November 2018) following the capital raised dated 24 October 2018. The options were
approved and granted at the 2018 Annual General Meeting.
36
37
2019 annual report
NUMBER OF SHARES HELD BY KEY MANAGEMENT PERSONNEL
OTHER TRANSACTIONS WITH 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 1/07/18
Options Exercised
Net Change Other (i)
Balance at 30/06/2019
(ii)
Andrew Monk
Keith Mentiplay
Michael Porter
Tony Dynon
Steven Si (ii)
Valentina Tripp
Albert Zago
30,000
125,000
-
-
-
-
-
Total
155,000
-
-
-
-
-
-
-
-
1,505,333
500,000
1,400,000
-
-
2,200,000
-
1,535,333
625,000
1,400,000
-
-
2,200,000
-
5,605,333
5,760,333
(i) ‘Net Change Other’ relates to shares purchased and sold during the financial year.
(ii) There has been no change in shareholdings from 30 June 2019 to the date of this report.
(iii) Based on securities held by those entities in which Steven Si held a relevant interest as at the date of his resignation as a
director of the Company, being 10 August 2018.
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
There have been no loans to management personnel (2018: Nil).
AGGREGATE OF LOANS MADE
The following table sets out the details of the aggregate of loans made, guaranteed or secured, directly or indirectly, by the
Group and any of its subsidiaries, in the financial year to all key management personnel, their close family members and
entities over which the key management personnel or their close family members have, directly or indirectly, control, joint
control or significant influence:
Opening balance at commencement of the financial year
Loans advanced
Loan repayment received
Closing Balance at end of the financial year
Interest that would have been charged had loan been at arm’s length
Number of KMP with loans outstanding at end of financial year
2019
$
2018
$
-
-
-
-
-
-
979,193
-
(979,193)
(i)
-
The 2018 loans to prior period key management personnel relate to a receivable from the founding shareholders relating to
the indemnification of legacy income tax obligations of the Sornem Entities 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. 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.
(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.
38
In the 2018 financial year former Directors, Erling Sorensen and Jamie Nemtsas, hold units in the Arrow Primary
Infrastructure Fund and were considered a related party. In the 2018 financial year the Group received $4,429,108 from
Arrow Primary Infrastructure Fund (Arrow) as funding for capital expenditure incurred on the Colignan vineyard. 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. In the 2018
financial year, the Group paid $2,142,232 in relation to lease payments as lessee of the Colignan vineyard. 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. Former Directors, Erling Sorensen and Jamie
Nemtsas are no longer considered a related party in relation to the 2019 financial year.
In the 2018 financial year, the Group paid $69,631 (at a rate of $400.00 per megalitre) 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. Former Director Jamie Nemtsas is no longer considered a related party in relation to the 2019
financial year.
This Directors’ report is signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations
Act 2001.
On behalf of the Directors
Director
Director
Andrew Monk
Chairman
30 August 2019
Valentina Tripp
Managing Director
39
2019 annual report Corporate Governance Statement
This Corporate Governance Statement sets out the Company’s current compliance with the 3rd Edition of the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations (Recommendations) in respect
of the reporting period ended 30 June 2019 (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
1.3
1.4
1.
Lay solid foundations for management and oversight
1.1
A listed entity should disclose:
Yes
(a) the respective roles and responsibilities of
its board and management; and
(b) those matters expressly reserved to
the board and those delegated to
management.
1.2
A listed entity should:
Yes
(a) undertake appropriate checks before
appointing a person, or putting forward to
security holders a candidate for election, as
a director; and
(b) 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.
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.
RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
A listed entity should have a written agreement
with each director and senior executive setting
out the terms of their appointment.
Yes
The Company has 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
1.5
A listed entity should:
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.
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.
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 conduct 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:
40
41
2019 annual report RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
- whole organisation: 67 men and 47 women
- senior management: 5 men and 3 women
- board: 4 men and 2 women*
* 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 undertook an internal
in-depth review of the Board’s skills matrix for the purposes of
determining any additional skills that may be required on the
Board. From this process, the Board then underwent a fulsome
non-executive director recruitment process, resulting in the
appointment of Tony Dynon.
The Board has also implemented a Board and Meeting evaluation
process as a standing agenda item at each Board Meeting.
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.
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 Committee is also
responsible for assisting the Chief Executive Officer in annually
evaluating the senior executives to evaluate the individual’s
performance regarding skills, knowledge and experience.
1.6
A listed entity should:
Yes
(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.
1.7
A listed entity should:
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.
Structure the board to add value
2.1
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.
Yes
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
• Michael Porter (Independent Non-Executive Director)
• Tony Dynon (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 the Remuneration and Nomination Committee
Charter (available via the Company’s website,
www.murrayriverorganicsinvestors.com.au) for further details.
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 8.3
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.
42
43
2019 annual report RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
2.3
A listed entity should disclose:
Yes
(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
A majority of the board of a listed entity
should be independent directors.
2.5
2.5
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.
Yes
Yes
Yes
The Board consists of five Directors, four of which are
Independent Non-Executive Directors – Andrew Monk, Keith
Mentiplay, Michael Porter and Tony Dynon.
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.
3.
Promote ethical and responsible decision-making
3.1
A listed entity should:
Yes
(a) have a code of conduct for its directors,
senior executives and employees; and
(b) disclose that code or a summary of it.
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.
4.
Safeguard integrity in financial reporting
4.1
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
Yes
The Board has established an Audit and Risk Management
Committee which is governed by the Audit and Risk
Management Committee Charter.
RECOMMENDATION
directors and a majority of whom
are independent directors; and
COMPLY
(Yes/No)
Yes
(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.
COMMENT
The Audit and Risk Management Committee is currently
comprised of:
• Tony Dynon (Committee Chair and Independent
Non-Executive Director)*;
• Andrew Monk (Board Chair and Independent
Non-Executive Director)**;
• Michael Porter (Independent Non-Executive Director); and
• Keith Mentiplay (Independent Non-Executive Director).
* Tony was appointed as Committee Chair on
18 March 2019.
** Andrew was Committee Chair until 18 March 2019.
The Audit and Risk Management Committee comprises all
independent non-executive directors (including the Chair).
Details of the members’ 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.
Please refer to the Audit and Risk Management Committee
Charter (available via the Company’s website, www.
murrayriverorganicsinvestors.com.au) for further details.
4.2
Yes
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.
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.
4.3
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.
Yes
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.
Please 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.
44
45
2019 annual report RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
5.
Make timely and balanced disclosure
7.
Recognise and manage risk
5.1
A listed entity should:
Yes
(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.
6.
Respect the rights of shareholders
6.1
A listed entity should provide information
about itself and its governance to investors via
its website.
Yes
6.2
A listed entity should design and implement an
investor relations program to facilitate effective
two-way communication with investors.
Yes
6.3
A listed entity should disclose the policies
and processes it has in place to facilitate
and encourage participation at meetings of
security holders.
Yes
6.4
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
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 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 page (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 the
Company’s share registry.
Please refer to the Communications Policy (available via the
Company’s website, www.murrayriverorganicsinvestors.com.au)
for further details.
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:
• Tony Dynon (Committee Chair and Independent
Non-Executive Director)*;
• Andrew Monk (Board Chair and Independent
Non-Executive Director)**;
• Michael Porter (Independent Non-Executive Director); and
• Keith Mentiplay (Independent Non-Executive Director).
* Tony was appointed as Committee Chair on
18 March 2019.
** Andrew was Committee Chair until 18 March 2019.
The Audit and Risk Management Committee comprises all
independent non-executive directors (including the Chair).
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 and management conducted an internal review of the
Company’s risk register reporting framework in order to identify
the Company’s key risks and prioritise them accordingly.
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.
46
47
2019 annual report COMMENT
RECOMMENDATION
COMPLY
(Yes/No)
COMMENT
RECOMMENDATION
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.
COMPLY
(Yes/No)
Yes
8.
Remunerate fairly and responsibly
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.
Refer to “Operational Risks” section in the Directors’ Report as
part of the Annual Report in respect of the Company’s exposure to
economic, environmental and social sustainability risks.
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.
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
• Michael Porter (Independent Non-Executive Director)
• Tony Dynon (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 the Remuneration and Nomination Committee
Charter (available via the Company’s website,
www.murrayriverorganicsinvestors.com.au) for further details.
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
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 and the Remuneration Policy (available via the Company’s
website, www.murrayriverorganicsinvestors.com.au) for
further details.
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 Company has adopted a long term incentive performance
rights plan (LTI) to reward, retain and attract certain employees,
consultants and directors of the Company (Participants).
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.
Please see 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
Farming Operations
Fast Moving Consumer Goods
Investor Relations
Technical / Professional Skills
Capital Raising
Commercial & Business Development
Diversity
Manufacturing Knowledge (Food)
Executive & HR Management
Organic Sector
Sales (Domestic Market)
Sales (Export International Market)
Supply Chain (Manufacturing/Retail)
Water Licensing
Other Sector Specific
Qualifications / Certifications
AICD Company Director Qualifications
Business Qualifications
Corporate Qualifications
Financial Qualifications
Information & Communication Technology
Investment Management
Marketing / Advertising, Media, PR, Digital
Mergers & Acquisitions
Senior Management Position (past & present)
Strategy - FMCG Brand Marketing
Strategy - Business Plan
Risk, Governance & Compliance
ASX Regulations & Obligations
Governance & Compliance Knowledge
Public Company
GIA Governance Certifications
Representation & Stakeholder Relations
Legal Qualifications
Risk Management
48
49
2019 annual report
50
51
2019 annual report 52
53
2019 annual report 54
55
2019 annual report Directors’ Declaration
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting
Standards, as stated in Note 2 to the financial statements;
(c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity; and
(d) the directors have been given the declarations required by 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
Director
Director
Andrew Monk
Chairman
30 August 2019
Valentina Tripp
Managing Director
56
57
2019 annual report Consolidated statement of profit or loss and other
comprehensive income for the year ended 30 June 2019
Consolidated statement of financial position
at 30 June 2019
Note
2019
$‘000
2018
$‘000
Revenue
Other income
Fair value loss 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 of group reorganisation 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
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
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes to the financial statements are included on pages 62 to 101.
4
4
9
5
5
5
14
5
5
6
19(a)
19(a)
27
27
60,072
68,539
Current assets
139
(174)
(2,077)
(44,364)
(2,145)
(869)
(9,116)
(4,457)
(2,617)
(2,591)
(3,837)
-
-
-
-
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
(12,036)
(61,503)
-
1,896
(12,036)
(59,607)
(12,036)
(59,607)
-
-
(12,036)
(59,607)
-
-
(71)
-
(71)
(12,107)
2,056
(617)
169
(51)
1,557
(58,050)
(12,107)
(58,050)
(4)
(4)
(49)
(49)
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
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
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 62 to 101.
Note
21(a)
7
8
9
10
11
12
13
14
15
16
17
16
6
17
18
19
2019
$‘000
2018
$‘000
1,214
10,518
22,269
2,054
99
992
37,146
6,361
43,507
4
6,729
16,194
2,621
169
1,320
27,037
7,642
34,679
71,090
67,610
-
-
71,090
67,610
114,597
102,289
8,741
4,160
591
13,492
11,825
47,161
755
59,741
65,104
22,133
-
565
65,669
79,161
35,436
150,888
(39,686)
(75,766)
35,436
-
440
22,573
82,314
19,975
123,832
(40,127)
(63,730)
19,975
58
59
2019 annual report Consolidated statement of changes in equity for the year
ended 30 June 2019
Consolidated statement of cash flows for the
year ended 30 June 2019
Balance at 1 July 2017
Loss for the year
Other comprehensive loss
Total comprehensive loss for year
Issue of shares
Equity raising costs (net of tax)
Share-based payments
Balance at 1 July 2018
Loss for the year
Other comprehensive loss
Total comprehensive loss for year
Issue of shares
Equity raising costs (net of tax)
Share-based payments
Contributed
equity
$‘000
Retained
earnings/
(Accumulated
losses)
$‘000
Corporate
reorganisation
reserve
$‘000
Share-based
payments
reserve
$‘000
Asset
revaluation
reserve
$‘000
Hedging
Reserve
$‘000
Total equity
$‘000
112,002
(4,123)
(47,453)
511
5,342
66,279
-
-
-
(59,607)
-
(1,439)
118
1,557
(1,439)
118
(58,050)
-
(59,607)
-
-
-
(59,607)
12,106
(456)
180
-
-
-
-
-
-
-
-
-
-
(12,036)
-
-
-
(12,036)
30,618
(3,562)
-
-
-
-
-
-
-
-
-
-
-
-
-
(84)
-
-
-
-
206
306
939
-
-
-
-
-
-
-
-
-
-
12,106
-
-
118
118
-
-
(456)
96
19,975
19,975
(12,036)
(71)
(71)
(12,107)
-
-
-
30,618
(3,356)
306
Balance at 30 June 2018
123,832
(63,730)
(47,453)
(427)
(6,781)
123,832
(63,730)
(47,453)
(427)
(6,781)
Balance at 30 June 2019
150,888
(75,766)
(47,453)
Notes to the financial statements are included on pages 62 to 101.
6,781
47
35,436
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 property, plant and equipment
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 62 to 101.
Note
2019
$‘000
2018
$‘000
62,271
(78,244)
-
-
(2,155)
(2,356)
77,887
(85,701)
14
(868)
(2,092)
(2,488)
(20,484)
(13,248)
(5,296)
-
1,617
(3,679)
(13,586)
(2,626)
717
(15,495)
-
979
50,289
56,337
(47,626)
(48,205)
853
2,456
(1,599)
(805)
30,618
12,106
(3,356)
(651)
29,179
22,217
5,016
(3,802)
1,214
(6,526)
2,724
(3,802)
60
61
2019 annual report
At the date of this report, the Directors have reviewed the
Group’s turnaround plan and detailed financial forecasts.
Whilst there may be some variability in the amount and
timing of operating cash flows as expected in the normal
course of business, the Directors are confident that the
Group will be able to continue to successfully execute
its ongoing growth and turnaround plan for the next 12
months.
However, the challenging conditions affecting the FY19
harvest (completed between March and June 2019) have
had an adverse impact on the Group’s cashflow, mainly
due to the FY19 harvest yield being below expectations
following the extreme heat over a challenging summer in
the Sunraysia region, compounded by the delays to the
replacement of the Colignan irrigation system.
As a result, these have affected forward cash flows,
consequently the Group has accelerated the drawdown of
its multi-option banking facility with the National Australia
Bank (“NAB banking facility”) as follows:
• $50 million by 30 November 2019;
• $53 million by 31 January 2020; and
• the full $55 million facility by 30 April 2020.
This new drawdown timing replaces the previous
agreement set out in Note 16.
Notes to the financial
statements
1. General information and
group reorganisation
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 30 August 2019.
2. Significant accounting
policies
Statement of compliance
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
Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Instrument 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.
To ensure the Group continues to effectively execute its
turnaround and growth plans, the Group also expects to
raise additional funding, which is likely to be undertaken
over the course of FY20.
Notwithstanding the above, in the event that the Group
is not able to meet its trading and cash flow forecasts and
raise sufficient additional funding, as required, there is a
material uncertainty as to 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 AASB 10
Consolidated Financial Statements. A list of subsidiaries
appears in Note 30 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 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 Payments 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.
62
63
2019 annual report Net increments and decrements in the fair value of the
growing assets are recognised as income or expense in
profit or loss, determined as:
• The difference between the total fair value of the
biological assets recognised at the beginning of
the reporting period and the total fair value of the
biological assets recognised at reporting date.
• Costs incurred in maintaining or enhancing the
biological assets.
• The fair value of agricultural produce harvested
during the reporting period is measured at their fair
value less estimated costs to be incurred up until
the time of harvest.
The aggregate gain or loss arising on initial recognition
and from changes in fair value less estimated point of
sale costs is recognised as income or expense of the
period. All of the Group’s citrus trees and vines are
classified as bearer plants as outlined in Note 2(g).
The new season crop is initially measured at cost,
being those costs incurred in readying the biological
assets for the future cultivation and harvest. The fair
value less costs to sell of the new season crop is not
reliably measurable given the immaturity of the crop
and uncertainty of the quality and yield of the future
harvest at the reporting date.
(c) Revenue recognition
The Group recognises revenue from the sale of organic
and better-for-you food products, including dried vine
fruit, fresh produce and variety other dried
food products.
Revenue from the sale of goods is recognised when
the performance obligation relating to the sale has
been satisfied; being the point in time at which control
of the goods passes to the customer upon delivery
of the goods consistent with the trading terms of the
contract with the customer. Contract liabilities arising
from revenue received from customers in advance of
recognition are disclosed as ‘deferred income’.
Revenue is measured based on contracted selling
prices, rebates and promotional expenditure. Rebates
and promotional expenditure are deducted from
the selling price in determining reported revenue.
Rebates and promotional expenditure are recognised
concurrently with the sale of the related goods and
can be variable based on estimated customer
purchasing patterns.
Refer to Note 2(w)(i)(a) for details in relation to the
transition to the new standard, AASB 15 Revenue from
Contracts with Customers from 1 July 2018.
(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.
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 25 years
• Equipment under finance lease 3-5 years
• Buildings and property improvements 50 years
• Office equipment 3-5 years
• Motor vehicles 3-5 years
• Leasehold improvements and leased assets 10-25
years (or lesser of lease term)
(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.
(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 remains within the scope of
AASB 141 Agriculture and continues 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.
64
65
2019 annual report (i) Impairment of assets
(j) Leased 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 the fair
value less costs to sell, 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. This further incorporates
information and assumptions that a market participant
would consider when pricing the item under
consideration, the time value of money and the risks
specific to the asset or cash-generating unit. Costs to
dispose are incremental costs directly attributable
to the disposal, excluding finance costs and income
tax expense.
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.
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
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair
value through profit or loss.
The classification of financial assets at initial recognition
depends on the financial asset’s contractual cash
flow characteristics and the Group’s business model
for managing them. With the exception of trade
receivables that do not contain a significant financing
component or for which the Group has applied the
practical expedient, the Group initially measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs. Trade receivables that do not
contain a significant financing component or for
which the Group has applied the practical expedient
are measured at the transaction price determined
under AASB 15.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on
the principal amount outstanding. This assessment
is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial
assets refers to how it manages its financial assets in
order to generate cash flows. The business model
determines whether cash flows will result from
collecting contractual cash flows, selling the financial
assets, or both.
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.
Trade and other receivables
(n) Financial liabilities
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other
payables and bank loans and borrowings including
bank overdrafts.
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.
Loans and borrowings
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost using the effective interest rate (EIR) method.
Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the
EIR amortisation process.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The
EIR amortisation is included as finance costs in the
statement of profit or loss.
Trade and other payables
Trade and other payables are recognised at amortised
cost, comprising the original debt less principal
payments and amortisation.
Trade and other receivables are measured at amortised
cost less impairment, being an allowance for expected
credit losses.
Other financial assets
For the accounting policy on derivatives – refer Note
2(s) and Note 22.
(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. In calculating the present value, the
Group applies the high-quality corporate bond rate in
Australia applicable to the timing of estimated future
cash outflows.
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.
66
67
2019 annual report
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
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 have formed an income tax
consolidated group, with Murray River Organics Group
Limited as the head entity.
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.
(p) Goods and services tax
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.
Directly attributable costs incurred to establish or
renew a debt funding facility are capitalised in the net
amount of loans and borrowings initially measured at
fair value and subsequently measured by applying the
EIR method (refer to Note 2(n)).
All other borrowing costs, inclusive of all ongoing
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 22); 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.
(s) Derivative financial instruments
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.
68
69
2019 annual report 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.
(t) Share based payments
Equity-settled share-based payments to employees
and others providing similar services are measured at
the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair
value of equity-settled share-based transactions are set
out in Note 20.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that
will eventually vest, with a corresponding increase in
equity. At the end of each reporting period, the Group
revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the
original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the
equity-settled employee benefits reserve.
(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.
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.
(w) Changes in accounting policy, accounting
standards and interpretations
(i) New and amended standards and interpretations
a) AASB 15 Revenue from Contracts with Customers
AASB 118 Revenue and related Interpretations
applied to all revenue arising from contracts with
customers, unless those contracts are in the scope
of other standards. The new standard, AASB 15
Revenue from Contracts with Customers, establishes
a five-step model to account for revenue arising
from contracts with customers. Under AASB 15,
revenue is recognised at an amount that reflects
the consideration to which an entity expects to
be entitled in exchange for transferring goods or
services to a customer.
The adoption of AASB 15, has not impacted the
timing of revenue recognition on the sale of goods,
which continues to be recognised on a point in time
basis. Revenue from the sale of goods is recognised
when the performance obligation relating to the sale
has been satisfied; being the point in time at which
control of the goods passes to the customer upon
delivery of the goods consistent with the trading
terms of the contract with the customer. This is
consistent with the basis under which revenue was
recognised prior to the application of AASB 15.
Revenue is measured based on contracted selling
prices, rebates and promotional expenditure.
Rebates and promotional expenditure are deducted
from the selling price in determining reported
revenue. Rebates and promotional expenditure are
recognised concurrently with the sale of the related
goods and can be variable based on estimated
customer purchasing patterns.
Based on the assessment undertaken by the Group,
there has been no material impact to the statement of
financial position as at 30 June 2019 and statement of
profit or loss and other comprehensive income for the
year ended 30 June 2019, and the comparative period.
• Impairment of financial assets
• Hedge accounting
(a) Classification and measurement
b) AASB 9 Financial Instruments
The Group has adopted AASB 9 Financial
Instruments retrospectively from 1 July 2018
with no change to comparatives, replacing
AASB 139 Financial Instruments: Recognition
and Measurement. AASB 9 introduces new
requirements for:
• Classification and measurement of
financial assets and financial liabilities
Under AASB 9, the Group has determined that there
is no change to classification and measurement to
financial assets and financial liabilities.
The table below outlines the accounting treatment for
financial assets and financial liabilities under AASB 139
as compared to AASB 9:
Asset/Liability
Cash and cash equivalents
Trade and other receivables
Foreign currency forward contracts
Previous Accounting Treatment AASB
139
New Accounting Treatment AASB 9
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Fair value through profit or loss
Fair value through profit or loss
(effective cash flow hedge portion through
other comprehensive income)
(effective cash flow hedge portion through
other comprehensive income)
Borrowings and loans
Amortised cost
Amortised cost
Under AASB 9, the Group has determined that there is no change to classification and measurement to financial assets
and financial liabilities.
(b) Impairment
The adoption of AASB 9 has changed the Group’s accounting for impairment losses for trade and other receivables by
replacing AASB 139’s incurred loss approach with a forward-looking expected credit loss (“ECL”) approach. ECLs are
based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive.
The Group has applied the simplified approach in AASB 9 and has calculated ECLs based on lifetime expected credit
losses. A provision for ECLs is determined based on historic credit loss rates and adjusted for forward looking factors
specific to the debtor and the economic environment, further considering the Group’s limited trading history.
Based on the assessment undertaken by the Group, there has been no material impact to the statement of financial
position and statement of profit or loss and other comprehensive income for the year ended 30 June 2019, and the
comparative period.
(c) Hedge accounting
The Group uses derivative financial instruments such as forward currency contracts to hedge its risk associated with
foreign currency fluctuations.
The Group has applied hedge accounting prospectively under AASB 9. At the date of the initial application, all of the
Group’s existing hedging relationships were eligible to be treated as continuing hedging relationships. Consistent
with prior periods, the Group has continued to designate the change in fair value of the entire forward contract in the
Group’s cash flow hedge relationships.
Based on the assessment undertaken by the Group, there has been no material impact to the statement of
financial position and statement of profit or loss and other comprehensive income for the 30 June 2019, and the
comparative period.
70
71
2019 annual report (ii) Accounting standards and interpretations issued but
not yet effective
a) AASB 16 Leases – Effective date: 1 January 2019
(Application date: 1 July 2019).
b) AASB 16 replaces existing lease requirements
in Australian Accounting Standards (AASB 117
Leases, Interpretation 4 Determining whether an
Arrangement contains a Lease, Interpretation 115
Operating Leases – Incentives, Interpretation 127
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.
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, a change in classification of operating
and financing cash flows, and an increase in
gearing levels.
c) 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.
d) Conceptual Framework AASB 2019-1 Conceptual
Framework for Financial Reporting Amendments to
Australian Accounting Standards – Reference to the
Conceptual Framework — Effective date: 1 January
2020 (Application date: 1 July 2020).
The revised Conceptual Framework includes some
new concepts, provides updated definitions and
recognition criteria for assets and liabilities and
clarifies some important concepts. It is arranged in
eight chapters, as follows:
• Chapter 1 — The objective of financial
reporting
• Chapter 2 — Qualitative characteristics of
useful financial information
• Chapter 3 — Financial statements and the
reporting entity
• Chapter 4 — The elements of financial
statements
• Chapter 5 — Recognition and derecognition
• Chapter 6 — Measurement
• Chapter 7 — Presentation and disclosure
• Chapter 8 — Concepts of capital and capital
maintenance
AASB 2019-1 sets out the amendments to Australian
Accounting Standards, Interpretations and other
pronouncements in order to update references to
the revised Conceptual Framework. The changes
to the Conceptual Framework may affect the
application of accounting standards in situations
where no standard applies to a particular transaction
or event. In addition, relief has been provided
in applying AASB 3 and developing accounting
policies for regulatory account balances using AASB
108, such that entities must continue to apply
the definitions of an asset and a liability (and
supporting concepts) in the Framework for the
Preparation and Presentation of Financial Statements
(July 2004), and not the definitions in the revised
Conceptual Framework.
The Group is currently assessing the impact of the
application of the new Conceptual Framework.
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.
(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 has 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 AASB
136 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.
(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.
72
73
2019 annual report 4. Revenues
5. Expenses (continued)
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
Net bad and doubtful debts expense
Operating lease minimum lease payments
2019
$‘000
2018
$‘000
2,395
2,777
(1,335)
3,837
-
-
-
-
(140)
(308)
4
2,077
2,135
2,488
(1,286)
3,337
6,383
279
368
7,030
51
(54)
265
2,061
Revenue from contracts with customers
Other income
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
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
2019
$‘000
2018
$‘000
60,072
68,539
-
-
7
19
113
139
526
154
2,777
949
51
4,457
14
47
105
19
37
222
1,125
187
3,732
781
373
6,198
10,047
11,577
797
306
(2,034)
9,116
-
-
-
-
-
948
96
(2,260)
10,361
803
1,034
250
256
2,343
(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.
74
75
2019 annual report
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% (2018: 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
2019
$‘000
2018
$‘000
-
-
-
-
-
-
-
(12,036)
(3,611)
46
(42)
-
3,607
-
-
-
(79)
(1,817)
(1,896)
668
668
(61,504)
(18,451)
8,454
(312)
(40)
8,532
(79)
(1,896)
6. Income tax (continued)
Deferred tax liabilities
Biological Assets
Property, plant and equipment
Foreign exchange derivatives
Deferred tax assets
Inventories
Employee entitlements
Accrued expenses
Deferred revenue
Deductible lease payments (Colignan property)
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
Closing balance at 30 June
Carry forward income tax losses:
2019
$‘000
2018
$‘000
(616)
(3,462)
(29)
(4,107)
-
194
507
166
1,181
194
1,811
54
4,107
-
-
-
-
-
-
-
(786)
(3,472)
(58)
(4,316)
602
164
665
188
770
602
1,264
61
4,316
-
(1,345)
1,817
(668)
196
-
The Group has recognised a deferred tax asset at 30 June 2019 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.
Gross income tax losses
2019
$‘000
2018
$‘000
40,194
28,237
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’.
76
77
2019 annual report
7. Trade and other receivables
Trade receivables
Allowance for expected credit losses
GST receivable
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 allowance for expected credit losses were:
Opening balance at 1 July
Impairment loss recognised
Amounts written off
Closing balance at 30 June
Aging of allowance for expected credit losses at 30 June is as follows:
Not past Due
Past due 1-30 days
Past due 31-60 days
Past due 61 days+
2019
$‘000
2018
$‘000
10,478
(181)
10,297
221
10,518
8,144
1,637
252
264
10,298
212
4
(35)
181
-
-
-
181
181
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
Trade receivables are non-interest bearing with credit terms generally settled within 30 days depending on the nature of
the sales transaction.
Following the adoption of AASB 9 Financial Instruments from 1 July 2019, a provision for impairment is made based on the
expected credit losses (“ECL”) for trade and other receivables. The Group has applied the simplified approach in AASB
9 and has calculated ECLs based on lifetime expected credit losses. A provision for ECL is determined based on historic
credit loss rates and adjusted for forward looking factors specific to the debtor and the economic environment, further
considering the Group’s limited trading history.
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
9. Agriculture Produce
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 (loss) / gain of agricultural produce
Increase due to costs incurred to maintain and enhance the biological asset
Revaluation loss on amounts transferred to assets held for sale
Decreases due to harvest (transferred to inventory)
Closing balance
Product - Yields (tonnes)
Harvested prior to 30 June
Estimated hanging fruit at 30 June
Total
Total crop value
2019
$‘000
2018
$‘000
963
18,120
4,506
(1,320)
22,269
1,081
12,711
6,583
(4,181)
16,194
2019
$‘000
2018
$‘000
1,082
972
2,054
2,621
(174)
11,463
-
(11,856)
2,054
1,728
893
2,621
4,407
158
10,584
(368)
(12,160)
2,621
2019
TONNES
2018
TONNES
6,748
1,900
8,648
4,675
3,200
7,875
2019
$‘000
2018
$‘000
11,289
10,742
As permitted by AASB 9, comparatives have not been restated. In the prior year, the impairment of trade receivables was
assessed based on the incurred loss model and a provision raised when there was objective evidence that the Group will
not be able to collect its debts. Bad debts are written off when identified.
Assumption
Loose
Organic
($/kg)
Loose
Conventional
($/kg)
Fresh
($/kg)
Citrus
($/kg)
Further Information about the credit risk exposure on the Group’s trade and other receivables using a provision matrix has
not been disclosed due to the expected credit losses being determined based on forward looking factors specific to the
debtor and the economic environment as at 30 June 2019.
Fair value less costs to sell at point of harvest - 2019
Fair value less costs to sell at point of harvest - 2018
3.09
2.79
2.22
1.99
2.74
2.69
0.58
0.60
The following are key inputs and assumptions used to determine the fair less cost to sell at the point of harvest.
Wine
grapes
($/kg)
0.46
0.34
79
78
2019 annual report
9. Agricultural produce (continued)
Valuation techniques and significant unobservable inputs
The fair valuation of agricultural produce is Level 3 in accordance with the fair value hierarchy, being substantially comprised
of inputs to the agricultural produce that are not based on observable market data.
Type
Description
Valuation technique
Significant Unobservable
inputs
Harvested own grown
inventory; and
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
12. Assets held for sale
Property assets
2019
$‘000
2018
$‘000
99
169
2019
$‘000
2018
$‘000
992
1320
2019
$‘000
2018
$‘000
6,361
7,642
Property assets (comprising property, plant and equipment) held for sale at 30 June 2019 relate to the Fifth Street property,
which is considered a non-core asset.
The property assets held for sale at 30 June 2018 related to Fifth Street, Pomona farms, Cowanna house and Walnut
Avenue warehouse.
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).
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
Gross Carrying amount
Balance at 1 July 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)
5,852
1,374
(31)
-
(877)
5,628
(5,767)
115
Reclassified as held for sale
(771)
(4,706)
Balance at 30 June 2018
15,044
12,312
(1,241)
5,192
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
Additions
Disposals
-
-
1,726
(196)
37
-
4,300
1,391
-
-
679
-
8,133
(196)
Balance at 30 June 2019
15,044
13,842
5,229
15,088
25,234
22,272
96,709
Accumulated depreciation
and impairment losses
Balance at 1 July 2017
-
(1,249)
Depreciation expense
Impairment expense
Disposal
Reclassified as held for sale
Write-back of depreciation on
revaluation
Balance at 30 June 2018
Depreciation expense
Disposal
Balance at 30 June 2019
-
-
-
-
-
-
-
-
-
(1,125)
-
-
508
1,866
(178)
(187)
-
4
61
300
(53)
(373)
(4,521)
-
-
-
(1,106)
(4,895)
(7,481)
(781)
(3,732)
(6,198)
-
-
-
-
(5,899)
(10,420)
-
197
1
4
766
2,167
-
-
(4,947)
(1,887)
(14,328)
(21,162)
(531)
5
(526)
(154)
-
(51)
-
(949)
(2,777)
(4,462)
-
-
5
(154)
(4,998)
(2,836)
(17,105)
(25,619)
Net book value as at 30 June 2018
15,044
12,312
Net book value as at 30 June 2019
15,044
13,316
5,192
5,075
5,841
21,956
10,090
22,398
7,265
5,167
67,610
71,090
The carrying values of property, plant and equipment are assessed for impairment indicators annually, or more frequently if
indicators of impairment are present. Refer to details of the impairment assessment performed for the year ended 30 June
2019 in Note 14.
80
81
2019 annual report
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 2019 were
determined via Director valuations, which are regularly reconfirmed via independent external valuations. As at 30 June
2018 an independent valuation was performed by CIVAS (Vic) Pty Limited known as Colliers International. Colliers
International 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.
14. Intangible assets (continued)
During the prior year ended 30 June 2018, the Group undertook an impairment assessment of the CGU and identified an impairment charge of
$21.169 million which was recorded in profit and loss as per the below table:
Goodwill
Plant and equipment – at cost (Note 13)
Leasehold improvements – at cost (Note 13)
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
The valuation methodology adopted by Colliers International was direct comparison and summation approaches.
Total impairment expense
During the year, the Group capitalised $5.838 million (2018: $5.074 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 ended 30 June 2019 (2018: Nil).
14. Intangible assets
Goodwill - balance at start of year
Impairment expense recognised in the year
Goodwill – balance at end of the year
The Group operates as a single Cash Generating Unit (“CGU”).
2019
$‘000
2018
$‘000
-
-
-
10,749
(10,749)
-
During the current year ended 30 June 2019, the Group incurred a loss before tax of $12.036 million and performed a
further impairment assessment of the CGU (containing non-current assets).
The recoverable amount of the CGU has been determined based on a Fair Value less Costs of Disposal (“FVLCD”)
methodology which requires the use of assumptions. The FVLCD methodology utilises primarily Level 3 inputs within
the fair value hierarchy and applies cash flow forecasts based on financial projections by management covering a
10 year period.
Management believe the use of the FVLCD methodology and 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.
Based on the assessment, no impairment charge was recorded during the year ended 30 June 2019. A summary of key
assumptions and inputs within the impairment assessment are detailed below.
• Sales growth: Sales are forecast to grow at a compound annual growth rate of approximately 20% per annum for
FY20 to FY24 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. Should growth rate
decrease by 1% to approximately 19% per annum for FY20 to FY24 and then decease by 1% to 6% per annum for
FY24 to FY28, this would result in an impairment of $1.174 million.
• 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 FY20 and the expected farm turnarounds over the next 2
to 3 years, and then remain relatively constant in future years. Should the expected yields decrease by 5% each year,
this would result in a potential impairment.
• Capital expenditure: Significant capital expenditure is forecast over 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% (2018: 19.3%) has been used reflecting the extended period of
the forecast and inherent risks. A rise in the pre-tax discount rate to over 20% (i.e. +0.7%) would potentially result
in an impairment.
An adverse change in any of the above key assumptions would likely result in the carrying value of the CGU exceeding its
recoverable amount.
82
83
2019 annual report 15. Trade and other payables
Trade payables
Other accruals and payables
Deferred income
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))
Deferred borrowing costs
Total
Non-current
Secured borrowings:
Bank and trade finance loans (i)
Lease liabilities – equipment loans (ii)
Lease liabilities – Colignan property (iii - refer to 16(b))
Deferred borrowing costs
Total
2019
$‘000
2018
$‘000
3,872
4,782
87
8,741
6,059
5,603
163
11,825
2019
$‘000
2018
$‘000
-
-
1,739
2,492
(71)
3,806
35,122
5,944
2,289
-
4,160
47,161
37,997
3,460
23,741
(94)
65,104
-
22,133
-
22,133
(i) The bank financing facilities (comprising term loans, equipment finance and other facilities) 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 multi-option banking facilities expire on 30
November 2021. The details of the banking facilities are as follows:
(a) a $34.000 million term loan facility, with $6.000 million in additional staged drawdowns;
(b) a $10.500 million working capital facility commencing on 31 July 2019 and increasing to $15.000 million from 31 July
2020 (together with the term loan facility amounting to an overall bank loan facility of $55.000 million); and
(c) equipment finance loan, bank guarantee and card facilities.
In mid-June 2019, due to the impact of the timing of the FY19 harvest and timing of export sales in May/June 2019, the
Group brought forward $3.000 million of its $10.500 million working capital facility, which would have would have been
otherwise available on 31 July 2019. The balance of the $10.500 million facility available from 31 July 2019, being $7.500
million was accessed on 31July 2019.
On 29 August 2019, the Group also renegotiated its financing arrangements with the National Australia Bank by
accelerating the drawdown of its total multi-option banking facility with the total limited under the multi-option facility
available as follows:
• $50.000 million by 30 November 2019;
• $53.000 million by 31 January 2020; and
• the full $55.000 million facility by 30 April 2020.
84
16. Borrowings (continued)
In the prior year, the Group had classified its entire bank financing as a ‘current’ liability at 30 June 2018, until it had
renegotiated its banking facilities as part of its capital raising on 24 October 2018, which was successfully completed.
The weighted average of fixed and floating rates detailed in Note 22.
(ii) Finance lease liabilities representing equipment loans are secured over the assets under the financing arrangements. In
the prior year (as at 30 June 2018), $4.455 million included in lease liabilities was 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 $22.398
million at 30 June 2019 (2018: $21.957 million). The leased asset to which the leased liability relates is summarised in
Note 3(c).
2019
$‘000
2018
$‘000
Summary of financing arrangements
Debt Facilities Limit at reporting date:
Bank overdraft
Trade finance loan
Equipment loans and leases(i)
Bank loans(ii)
Bank guarantee
Facilities utilised at reporting date:
Bank overdraft
Trade finance loan
Equipment loans and leases(i)
Bank loans(ii)
Bank guarantee
Facilities not utilised at reporting date:
Bank overdraft
Trade finance loan
Equipment loans and leases(i)
Bank loans(ii)
Bank guarantee
-
-
7,300
38,000
1,285
46,585
-
-
5,199
37,997
1,285
44,481
-
-
2,101
3
-
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
(i) The balance at 30 June 2018 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.
(ii) The total bank loans facility is $55.000 million, with progressive drawdowns as detailed in Note 16 – Borrowings. Bank
loans facility not utilised at reporting dated also does not include cash at bank of $1.214 million.
2,104
1,227
85
2019 annual report
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 11.63% (2018: 11.64%) and has
a remaining term of 22 years (2018: 23 years). Reimbursements of eligible capital expenditure incurred on the vineyard
results in an increase to the lease liability (and lease asset).
The Group is currently disputing whether it is liable for capital expenditure relating to replacement infrastructure under
the terms of lease. The amounts in dispute have been recognised as a lease asset and liability.
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
17. Provisions
Current
Employee entitlements
Make good of property leases
Total
Non-Current
Employee entitlements
Make good of property leases
Total
2019
$‘000
2018
$‘000
4,460
14,287
64,062
82,809
(51,377)
31,432
4,040
14,549
62,994
81,583
(51,217)
30,366
2019
$‘000
2018
$‘000
591
-
591
57
508
565
505
250
755
42
398
440
18. Contributed equity
Equity securities issued
Year ended 30 June 2018
Year ended 30 June 2017
Opening balance at 1 July
Issue of shares on capital raising
Issue of shares to other employees
Equity raising costs (net of tax)
Closing balance at 30 June
Number
‘000
$‘000
Number
‘000
$‘000
127,557
306,184
-
-
433,761
123,832
30,618
-
(3,562)
150,888
87,087
40,352
138
-
112,002
12,106
180
(456)
127,557
123,832
On 24 October 2018, a 2.4 for 1 accelerated pro-rate renounceable entitlement offer of $30.600 million new fully paid
ordinary shares was completed, raising net proceeds of $30.618 million before taking into account equity raising costs
recorded in equity of $3.562 million for the year ended 30 June 2019.
On 30 August 2017, a placement and entitlement offer of 40,351,692 new fully paid ordinary shares was completed, raising
net proceeds of $12.106 million, before taking into account capital raising costs recorded in equity of $0.456 million (net of
tax) for the year ended 30 June 2018.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
19. Reserves
Reserves comprise:
Asset revaluation reserve (a)
Share based payment reserve
Hedging reserve
Group reorganisation reserve (b)
(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
Balance at the end of the financial year
(b) Corporate re-organisation reserve
Balance at the beginning of the year
Balance at the end of the financial year
2019
$‘000
2018
$‘000
6,781
939
47
(47,453)
(39,686)
6,781
-
-
-
6,781
6,781
427
118
(47,453)
(40,127)
5,342
2,141
(85)
(617)
6,781
(47,453)
(47,453)
(47,453)
(47,453)
86
87
2019 annual report 20. 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 performance rights or share options (“equity-settled transactions”).
The fair value of 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.
Performance rights
The following is a summary of the performance rights granted and on issue during the year ended 30 June 2019.
In conjunction with the capital raise dated 24 October 2018, the Board reinstated the Group’s Long Term Incentive (“LTI”)
Plan with new vesting conditions. The LTI Plan offers eligible employees (including KMP executives) selected by the Board
to subscribe for, or be granted, performance rights.
In FY19, performance rights were granted to Valentina Tripp and Albert Zago under the FY19 LTI Plan at nil consideration.
The performance rights will vest subject to achieving a Total Shareholder Return (“TSR”) Compound Annual Growth Rate
(“CAGR”) over the performance period, which is a 3 year period from the date of grant. The relevant employee is also
required to remain in continuous employment with the Group for 3 years from the grant date.
Prior to the reinstated LTI Plan with new vesting conditions, the Group had issued the following performance rights:
• 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. The
performance rights are subject to an earnings per share (“EPS”) performance condition (non-market based condition)
and a share-price growth (“SPG”) performance condition (market based 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 2019, certain employees previously granted performed rights forfeited 57,956
(EPS performance condition) and 57,956 (SPG performance condition) performance rights when performance
conditions were not achieved.
20. Share based payments (continued)
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 and on issue during the
year ended 30 June 2019 was estimated on the grant date using the following assumptions:
Valuation model
Dividend yield
Expected volatility
Risk-free interest rate
Previous KMP
Valentina Tripp
George Haggar
One-off
retention
EPS
SPG
LTI
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%
90.0%
2.12%
0.0%
90.0%
2.12%
Expected life of performance rights
2.54 years
2.54 years
2.54 years
3.0 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
$0.054
$0.062
Information with respect to the number of performance rights granted is as follows:
2019
Balance at 1 Jul 18
Granted
Exercised
Forfeited
Balance at 30 Jun 19
LTI (Current KMP)
-
3,226,563
LTI – Retention (Previous KMP)
LTI – EPS (Previous KMP)
LTI – SPG (Previous KMP)
384,615
57,956
57,956
-
-
-
Total
500,527
3,226,563
2018
Balance at 1 Jul 17
Granted
Exercised
-
-
57,956
57,956
115,912
3,226,563
384,615
-
-
3,611,178
Forfeited
Balance at 30 Jun 18
LTI (KMP – George Haggar)
-
681,818
LTI – Retention (Previous KMP)
1,153,845
LTI – EPS (Previous KMP)
LTI – SPG (Previous KMP)
LTI – Other employees
250,264
250,264
153,845
-
-
-
-
681,818
769,230
192,308
192,308
138,461
15,384
Total
1,808,218
681,818
138,461
1,851,048
-
384,615
57,956
57,956
-
500,527
-
-
-
-
-
-
-
-
-
The weighted average fair value of the performance rights granted during the year ended 30 June 2019 was $0.19
(2018: $0.418).
The weighted average remaining contractual life of performance rights outstanding as at 30 June 2019 was 2.14 year
(2018: 1.00 years).
88
89
2019 annual report 20. Share based payments (continued)
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
2019
Number
2018
Number
6,000,000
-
24,825,000
12,000,000
(6,000,000)
(6,000,000)
-
-
-
-
Outstanding balance at the end of the year
24,825,000
6,000,000
The weighted average fair value of the share options granted during the year ended 30 June 2019 was
$0.044 (2018: $0.11).
The weighted average remaining contractual life of share options outstanding as at 30 June 2019 was 2.68 years
(2018: 3.79 years).
20. Share based payments (continued)
Share options
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. Prior to the 2018 Annual General Meeting, the Retention Incentive options with a grant date of 16 April 2018
were forfeited and replaced with new Retention Incentive options following the capital raise dated 24 October 2018. These
new Retention Incentive options were approved and granted at the 2018 Annual General Meeting on 22 November 2018.
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.
Capital Raise - Director Options
On completion of the capital raise dated 24 October 2018, subject to shareholder approval, each Non-Executive Director
at the time of the capital raise (Andrew Monk, Keith Mentiplay and Michael Porter) were to receive 1,000,000 options for
nil consideration with an exercise price of $0.10 cents per option and expiring on 22 November 2021. These options were
approved and granted at the 2018 Annual General Meeting on 22 November 2018, vesting immediately.
Capital Raise - Advisor Options
EM Advisory was granted 3,825,000 options for nil consideration on 1 November 2018 after the successful completion
of the capital raised dated 24 October 2018, vesting immediately. Each option entitles EM Advisory to subscribe for one
share at an exercise price of $0.10 per option prior to the expiry date which is 3 years after their grant date being
1 November 2021.
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 and on issue during the year ended 30
June 2019 was estimated using the following assumptions:
Valentina Tripp (Granted 16 April 2018) (i)
Valentina Tripp (Granted 22 November 2018)
Tranche A
Tranche B
Tranche C
Tranche A
Tranche B
Tranche C
Non-
Executive
Directors
Advisor
Options
Valuation model
Binomial
Binomial
Binomial
Binomial
Binomial
Binomial
Binomial
Binomial
Dividend yield
Expected volatility
Risk-free interest
rate
Expected life of
share options
0.0%
47.5%
2.21%
0.0%
47.5%
2.26%
0.0%
47.5%
2.35%
0.0%
90%
0.0%
90%
0.0%
90%
0.0%
90%
0.0%
90%
2.08%
2.17%
2.27%
2.12%
2.12%
3.0 years
4.0 years
5.0 years
3.0 years
4.0 years
5.0 years
3.0 years
3.0 years
Exercise share price
$0.60
$0.70
$0.80
$0.10
$0.18
$0.27
$0.10
$0.12
Fair value of share
options at
grant date (per
share option)
$0.0702
$0.0764
$0.0830
$0.0429
$0.0397
$0.0401
$0.0478
$0.0539
(i) The Retention Incentive options with a grant date of 16 April 2018 have been forfeited and replaced with new Retention
Incentive options (grant date of 22 November 2018) following the capital raised dated 24 October 2018.
90
91
2019 annual report
21. Notes to the cash flow statement (continued)
(c) Reconciliation of liabilities arising from financing activities
1 July 2018
1 July 2018
Financing cash
inflows / (outflows)
Non-cash changes
30 June 2019
Borrowings – bank loans and deferred
borrowing costs
Lease liabilities - equipment loans
Total liabilities from financing activities
35,122
5,944
41,066
2,664
(745)
1,919
46
-
46
37,832
5,199
43,031
1 July 2017
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
22. 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).
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.
21. 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:
Cash and cash equivalents
Bank Overdraft
Total
2019
$‘000
2018
$‘000
1,214
-
1,214
4
(3,806)
(3,802)
(b) Reconciliation of profit/ (loss) for the year to net cash flows from operating activities
Loss for the year
Adjustment for items not involving the outlay of cash:
Bad and doubtful debts
(Profit) / loss on sale of assets
Fair value gain of agricultural produce
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 provision for group reorganisation costs
Capitalisation of borrowing costs
Non-cash finance 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
2019
$‘000
2018
$‘000
(12,036)
(59,607)
(31)
(140)
174
-
-
306
(28)
4,457
-
(1,335)
661
(3,731)
(6,075)
327
393
-
(3,277)
-
(149)
42
51
(158)
7,030
21,169
96
(547)
6,198
(1,040)
(1,286)
43
1,142
10,875
2,867
1,575
(1,817)
852
(946)
213
Net cash used in operating activities
(20,484)
(13,248)
92
93
2019 annual report
22. Financial instruments (Continued)
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.
22. Financial instruments (Continued)
(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.
2019
$‘000
2018
$‘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
(b) Categories of financial instruments
68,215
41,982
193%
119%
35,436
69,290
44,868
347%
225%
19,975
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.
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Trade and other payables
Borrowings
2019
$‘000
2018
$‘000
1,214
10,518
99
8,741
69,429
4
6,729
169
11,825
69,294
(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.
(d) Market risk
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 22(c) and 22(e)).
Currency of USA
Currency of Europe
Currency of Canada
Forward foreign currency contracts
Assets
Liabilities
2019
$’000
2018
$’000
2019
$’000
2018
$’000
274
-
-
46
1
-
114
-
12
1,275
38
75
The Group enters into forward foreign currency contracts to hedge a proportion of anticipated inventory purchase
commitments denominated in foreign currencies, principally US Dollars (“USD”) expected in each month. Forward foreign
currency contracts are timed to mature when payments are scheduled to be made. These derivatives have met the
requirements to qualify for hedge accounting with movements recorded in other comprehensive income accordingly.
The following table sets out the details of forward foreign currency contracts for highly probable forecast transactions
of the Group that are recorded as ‘other financial assets’ in the statement of financial position.
Weighted average
exchange rate
Foreign currency
FC’000
Contract value
$’000
Fair value gain/(loss)
$’000
2019
2018
2019
2018
2019
2018
2019
2018
Buy USD – less than
one year
0.7118
0.7595
6,256
4,690
8,790
6,175
99
169
During the years ended 30 June 2018 and 2019, the unrealised gains/(losses) have been recorded in the Hedging Reserve
to the extent the hedge is effective. There was no hedge ineffectiveness arising from the Group’s foreign currency hedging
strategy during the year ended 30 June 2019 (2018: nil). This is due to inventory purchases in USD exceeding the notional
amount of forward currency contracts taken out and maturing when payments are scheduled.
The total hedging gain/(loss) recognised in other comprehensive income during the year ended 30 June 2019 was
$0.099 million (2018: $0.169 million). The total amount reclassified from other comprehensive income to ‘raw materials,
consumables used and farming input costs’ in profit or loss during the year ended 30 June 2019 was $0.169 million
(2018: nil).
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
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
Profit
Equity
26
11
4
109
-
-
4
-
1
0
4
-
94
95
2019 annual report 22. Financial instruments (Continued)
(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.
2019
Financial assets
Variable interest rate instruments:-
Cash
Non-interest bearing:
Trade receivables
Financial liabilities
Variable interest rate instruments:
Bank overdraft
Financial liabilities
Equipment loan and leases
Colignan finance leases
Borrowings
Non-interest bearing:
Trade creditors
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
96
Weighted average
interest rate
Less than
1 year $’000
1-5 years
$’000
5+ years
$’000
Total
$’000
Floating
1,214
-
10,518
11,732
5.08%
11.63%
5.45%
-
1,968
2,492
2,072
8,741
15,273
-
-
-
3,694
10,593
40,943
-
-
-
-
-
64,062
-
-
1,214
10,518
11,732
5,662
77,147
43,015
-
8,741
55,230
64,062
134,565
Weighted average
interest rate
Less than
1 year $’000
1-5 years
$’000
5+ years
$’000
Total
$’000
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
-
-
-
-
-
-
62,994
4
6,729
6,733
4,113
14,638
6,557
75,026
21,106
-
-
11,825
-
-
11,825
38,532
31,739
62,994
133,265
22. Financial instruments (Continued)
Interest rate sensitivity
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 $0.190 million (2018: $0.195 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 remained consistent to the prior year with
all bank borrowings (excluding equipment leases) being 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.
(h) Liquidity risk management
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
recordedin the financial statements approximate their fair values.
The fair values and net fair values of financial assets and liabilities are
determined as follows:
• 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.
97
2019 annual report
23. Key management personal compensation
The compensation made to Directors and other members of key management personnel of the Group is set out below:
27. Earnings per share
(a) Basic earnings per share
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Termination payments
Equity settled share-based payments
Total
24. Remuneration of auditor
Audit or review of the financial report
Transaction services
Other services
Total
2019
$
2018
$
1,136,288
1,003,175
65,113
112,372
-
-
150,560
-
461,494
(87,486)
1,351,961
1,489,555
2019
$
2018
$
222,500
114,000
162,032
150,000
-
-
498,532
150,000
The auditor of Murray River Organics Group Limited is Ernst & Young. During the year ended 30 June 2019, services other
than the ‘audit or review of the financial report’ predominately included investigating accountants report in relation to
capital raise dated 24 October 2018 and strategic review assistance.
25. Contingent liabilities
Contingent liabilities include guarantees totalling $1.285 million (2018: $1.514 million) provided in respect of
property leases.
26. Segment information
The Group operates in one industry being the production of food and food products within Australia. All of the Group’s
revenue is attributable to this group of products. Approximately 89% of the Group’s revenue is attributed to domestic
customers, and the remainder relates to exports to USA (4%), Asia (6%) and others (1%).
Basic earnings per share (“EPS”) is determined by dividing profit for the year after income tax attributable to members
of the Group, excluding any costs of servicing equity other than share, by the weighted average number of share
outstanding during the period.
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit attributable to security holders by the weighted average
number of ordinary shares outstanding during the period (adjusted for the effects of performance rights issued). Prior
year earnings per share was adjusted for current year share splits.
Basic earnings per share
Diluted earnings per share
Earnings used to calculate basic and diluted earnings per share
2019
Cents Per Share
2018
Cents Per Share
(4)
(4)
-
(49)
(49)
Loss for the year attributable to equity holders of Murray River Organics Group: $`000
(12,036)
(59,607)
Weighted average number of share outstanding during the year used in calculating basic earnings per
share
Weighted average number of performance rights and options on issue
2019
Number Per Share
2018
Number Per Share
330,581,136
120,530,282
17,574,799
1,620,879
Weighted average number of share outstanding during the year used in calculating dilutive earnings per
share
348,155,935
122,151,161
28. Obligations under operating leases
The Group leases property assets and short term temporary water entitlements under operating leases.
2019
$‘000
2018
$‘000
2,004
5,173
1,866
9,043
1,612
3,056
1,696
6,364
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.
Not later than one year
Later than one year and not later than five years
Later than five years
Certain property assets under operating leases contain renewal options which are not included in Note 28.
98
99
2019 annual report 29. Related party transactions
31. Parent entity financial information
The compensation to key management personnel of the Group is set out in Note 23 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 2019, $83,200 (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.
During the year ended 30 June 2018, former Directors, Erling Sorensen and Jamie Nemtsas, hold units in the Arrow
Primary Infrastructure Fund and were considered a related party. In the 2018 financial year the Group received
$4,429,108 from Arrow Primary Infrastructure Fund (Arrow) as funding for capital expenditure incurred on the Colignan
vineyard. 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. In the 2018 financial year, the Group paid $2,142,232 in relation to lease payments as lessee of the Colignan
vineyard. 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. Former
Directors, Erling Sorensen and Jamie Nemtsas are no longer considered a related party in relation to the 2019
financial year.
During the year ended 30 June 2018, the Group paid $69,631 (at a rate of $400.00 per megalitre) 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. Former Director Jamie Nemtsas is no longer considered a related party in
relation to the 2019 financial year.
30. Controlled entities
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
2019
$‘000
2018
$‘000
-
33,936
-
-
-
18,615
-
-
33,936
18,615
150,888
123,832
940
427
(117,892)
(105,644)
33,936
18,615
(12,248)
(105,033)
-
-
(12,248)
(105,033)
Parent entity:
Murray River Organics Group Limited (i)
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 (iv)
Sornem Capital Pty Ltd (iv)
Country of incorporation
Percentage owned (%)
2019
2018
32. Events subsequent to reporting date
Other than the renegotiation of the banking facilities as described in Note 16 – Borrowings, there has not been any other
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.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
(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.
(iv) Dormant entities deregistered on 15 April 2019.
100
101
2019 annual report Additional Australian Securities Exchange
as at 25 July 2019
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in
this report is set out below.
5. Distribution Schedule of Shares
Spread of Holdings
Holders
Securities
%
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
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 over
Totals
128
309
297
712
274
47,218
933,946
2,345,020
27,456,428
402,978,479
1,720
433,761,091
0.01%
0.22%
0.54%
6.33%
92.90%
100.00%
2. Substantial Shareholders
The following holders are registered by MRG as a substantial holder, having declared a relevant interest in accordance with
the Corporations Act 2001 (Cth), in the voting shares below:
Holder Name
Date of interest
Number of ordinary shares ¹
% of issued capital ²
TIGA Trading Pty Ltd / Thorney Opportunities
Ltd
1 November 2018
138,823,512
32.00%
Class
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. Number of Security Holders
Ordinary Shares
Performance Rights
Unlisted Options (Options)
4.Voting Rights
Securities
Voting Rights
Date
Number of holders
1,720
3
5
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:
(a) each shareholder is entitled to vote and may vote in person or by proxy, attorney or representative;
(b) 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
(c) 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.
Options
Options do not carry any voting rights.
Performance Rights
Performance Rights do not carry any voting rights.
6. Holders of Non-Marketable Parcels
Date
25 July 2019
Closing price of shares
Number of holders
$0.09
457
Number of securites
Number of
Holders
Unlisted Performance Rights (subject to vesting conditions)
500,527
1
7. Top 20 Shareholders
The top 20 largest fully paid ordinary shareholders together hold 74.96% of the securities in this class and are listed below:
Rank
Holder Name
Securities
%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
UBS Nominees Pty Ltd
Netwealth Investments Limited
Sargon CT Pty Ltd
Citicorp Nominees Pty Limited
Archerfield Airport Corporation Pty Ltd
J P Morgan Nominees Australia Pty Limited
CS Third Nominees Pty Limited
Kim Sorensen
Melanie Alderton
Miengrove Pty Ltd
Urban Land Nominees Pty Ltd
Blbd Pty Ltd
Lj & K Thomson Pty Ltd
BNP Paribas Noms (Nz) Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
Meredith Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Melbourne Management Group Pty Ltd
David Doyle Investments Pty Ltd
Floc Pty Ltd
Total
136,510,418
88,181,266
15,000,000
14,938,515
12,250,000
7,799,088
6,762,323
6,331,794
4,796,995
4,400,000
4,316,341
4,120,295
4,000,000
3,408,272
2,756,711
2,752,710
2,106,900
2,000,000
1,629,000
1,514,547
31.47
20.33
3.46
3.44
2.82
1.80
1.56
1.46
1.11
1.01
1.00
0.95
0.92
0.79
0.64
0.63
0.49
0.46
0.38
0.35
325,575,175
75.07
102
8. Restricted Securities
There are no shares on issue that are subject to voluntary escrow restrictions or mandatory escrow restrictions under ASX
Listing Rules Chapter 9.
103
2019 annual report 9. Performance Rights
The following unlisted performance rights are on issue:
Date
Closing price of shares
Number of holders
Unlisted Performance Rights (subject to vesting conditions)
3,611,178
10. Distribution Schedule of Performance Rights
Spread of Holdings
Holders
Securities
%
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
11. Unlisted Options
-
-
-
-
3
3
3
-
-
-
-
-
-
-
-
3,611,178
3,611,178
100.00%
100.00%
Class
Date of Issue
Date of Expiry
Exercise Price
Number of Options
Unlisted Options
Unlisted Options
01/11/2018
01/11/2021
13/12/2018
16/04/2021
Unlisted Options (subject to vesting conditions)
13/12/2018
16/04/2022
Unlisted Options (subject to vesting conditions)
13/12/2018
16/04/2023
Unlisted Options
13/12/2018
22/11/2021
$0.12
$0.10
$0.18
$0.27
$0.10
3,825,000
6,000,000
6,000,000
6,000,000
3,000,000
24,825,000
12. Distribution Schedule of Options
Spread of Holdings
Holders
Securities
%
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
0
0
0
0
5
5
0
0
0
0
0
0
0
0
24,825,000
24,825,000
100.00%
100.00%
The following holder holds more than 20% of the Options on issue:
Holder Name
Number of ordinary shares 1
% of issued capital 2
Melbourne Management Group Pty Ltd
18,000,000
72.51%
13. Share Buy-Backs
There is no current on-market buy-back scheme.
104
105
2019 annual report 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