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Palla Pharma LimitedNutrition. Performance. Growth.
ANNUAL REPORT 2017
CONTENTS
01 About the Company
01 2017 Features
02 Five Year Summary
05 Ridley Locations and Sectors
06 Chairman’s Address
08 Managing Director’s Review
19 Financial Review
24 Safety, People and Innovation
30 Board of Directors
32 Financial Report
92
Independent Audit Report
97 Shareholder Information
99 Glossary
101 Corporate Directory
Ridley AgriProducts
As one of the largest domestic consumers of Australian
grown cereal grains and a significant employer in
farming communities, Ridley is continually providing
support to primary producers and rural Australia.
The Ridley AgriProducts operation is a pivotal and
trusted supplier of high performance nutrition to
the major food producers in the dairy, poultry, pig,
aquaculture, sheep and beef industries, to the
laboratory animals in the research sector, and to the
equine and canine markets in the recreational sector.
Ridley’s product range includes finished products, in
bulk or in bags, and mostly in pellet form, the exception
being a mash offering in certain markets, raw materials,
additives and supplements, and animal meals. The
Ridley animal meals, which include meat and bone
meal, poultry meal, hydrolysed feather meal, blood
meal, fish meal and animal fats, are an important and
valuable source of protein produced from otherwise
surplus raw materials that are subjected to a process
called rendering.
With major brands including Barastoc, Rumevite,
Cobber and Primo, and with a product range to
accommodate starter feed solutions, Ridley has
developed a portfolio that provides a first-class
lifecycle solution.
ABN 33 006 708 765
INTRODUCTION
ABOUT THE COMPANY
Ridley Corporation proudly stands as
an Australian-based agribusiness focused
on being the country’s leading producer
of premium quality, high performance
animal nutrition solutions.
2017 FEATURES
• Resilient core business operating result of $45.8 million EBIT in light
of Dairy, Aquafeed and energy headwinds.
• Worldwide licence secured for Novacq™ for all non-human
and non-crustacean species, with previously unlicensed crustacean
markets also secured.
• Minimum five-year strategic alliance formed with CSIRO for further
Novacq™ development.
• Long term lease secured at Chanthaburi, Thailand, for overseas
production of Novacq™.
• Commercial dispute settlement reached with Huon for full
net debt recovery.
• Commitment to aquafeed restructure comprising new Tasmanian
aquafeed mill, divestment of interest in CME, and major capital
works at Narangba.
• Completion of Wasleys feedmill rebuild from fire devastation.
01
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORY FIVE YEAR SUMMARY
A$’000 unless otherwise stated
Operating results
Revenue
Other income
Earnings before interest, tax, depreciation and amortisation (EBITDA) 1
Earnings Before Interest and Tax (EBIT) 1
Net interest expense/finance charge
Operating profit before tax 1
Tax expense 1
Net profit after tax and significant items 1
Profit/(loss) from discontinued operation (net of tax)
Profit/loss attributable to members
Financial position
Ridley shareholders’ funds
Intangible assets
Total assets
Total liabilities
Net debt
Market capitalisation
Enterprise value
Operating cash flow
Closing share price (cents)
Weighted average number of shares on issue – non-diluted (thousands)
Number of employees (number) 4
Key profitability ratios
Return on shareholders’ funds (%) 1
Earnings per share (EPS) (cents) 1
Total shareholder returns (%)
EPS growth (%)
EBIT growth (%)
Operating cash flow/EBITDA (times)
Operating cash flow per share (cents)
Share price/operating cash flow (times)
EBIT per employee (A$’000)
Capital market and structure ratios
EBITx (market cap/EBIT) (times) 1
EBITDA per share (cents) 1
EBITDA growth (%) 1
EBITDAx (market cap/EBITDA) (times) 1
Enterprise value/EBITDA (times) 1
P/E ratio (times) 1
Net debt/shareholders’ equity (%)
Equity/total assets (%)
Net debt/EBITDA (times) 1
EBIT/net interest (times) 1
Net tangible asset backing per share (cents)
Dividends per share (cents)
Dividend payout ratio (%)
Percentage franked (%)
2017
Actual
2016
Actual
2015
Actual
2014
Actual
2013
Actual
852,923
8,581
54,484
39,264
4,977
34,287
8,472
25,815
-
25,815
259,823
79,284
490,603
230,780
51,544
426,327
477,871
29,655
138.50
307,817
697
912,561
12,121
60,723
45,734
5,419
40,315
13,112
27,203
4033
27,606
909,850
4,649
51,061
41,1083
5,059
36,0493
10,3063
25,7433
(4,572)3
21,1713
247,884
76,355
484,850
236,966
40,967
430,944
471,911
17,612
140.00
307,817
676
229,834
78,194
476,553
246,719
32,702
384,771
417,473
47,059
125.00
307,817
685
873,625
5,972
41,012
27,436
5,392
22,043
4,430
17,613
-
17,613
219,774
80,491
423,091
203,317
36,343
244,715
281,058
31,349
79.50
307,817
658
783,226
321
1,252
(13,272)
7,737
(21,009)
(4,423)
(16,586)
(5,108)
(21,694)
207,553
77,979
410,626
203,073
17,835
230,863
248,698
52,583
75.00
307,817
649
10.2
8.4
1.8
(6.6)
(14.1)
0.5
9.6
14.4
56.3
10.9
17.7
(10)
7.8
8.8
16.5
19.8
53.0
0.9
7.9
58.7
4.00
48
100
11.4
8.8
15.2
28.5
11.3
0.3
5.7
24.5
67.7
9.4
19.7
19
7.1
7.8
15.8
16.5
51.1
0.7
8.4
55.7
4.00
44
100
9.4
6.9
61.6
20.2
31.7
0.9
15.3
8.2
52.8
10.6
16.6
25
7.5
8.2
18.1
14.2
48.2
0.6
7.1
49.3
3.50
51
100
7.8
5.7
8.0
(181.2)
306.7
0.8
10.2
7.8
41.7
8.9
13.3
3,175
6.0
6.9
13.9
16.5
51.9
0.9
5.1
45.2
3.50
61
50
(6.8)
(7.0)
(19.1)
(212.7)
(137.2)
42.0
17.1
4.4
(20.5)
(17.4)
0.4
(97)
184.4
198.6
(10.6)
8.6
50.5
14.2
(1.7)
42.1
7.50 2
-2
-2
1. Before discontinued operation.
2. Capital return of 7.5 cents per share brought to account in FY13 and paid in FY14.
3. FY16 Dry Creek operations prior to sale and FY15 comparative reflected as a discontinued operation.
4. Continuing operations only and therefore excluding Cheetham Salt Ltd employees.
02
Ridley Corporation Limited Annual Report 2017 INTRODUCTION
EBIT from continuing
operations*
Consolidated
net profit^
50
40
s
n
o
i
l
l
i
M
$
30
20
10
0
3
7
.
5
4
1
1
.
1
4
0
2
.
9
3
4
4
.
7
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
4
2
.
6
1
3
1
0
2
s
n
o
i
l
l
i
M
$
30
20
10
0
-10
-20
-30
9
6
.
1
2
-
3
1
0
2
0
6
.
7
2
.
1
8
5
2
7
1
.
1
2
1
6
.
7
1
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
* 2013 before business restructuring.
^ 2013 after restructure including sale
of Cheetham Salt Ltd.
Dividends and distributions
per share#
Ridley AgriProducts
volume
0
5
.
7
s
t
n
e
C
8
6
4
2
0
0
5
3
.
0
5
3
.
0
0
4
.
0
0
4
.
s
e
n
n
o
T
n
o
i
l
l
i
M
2.0
1.5
1.0
0.5
0
9
8
.
1
0
9
.
1
3
9
.
1
3
9
.
1
3
6
.
1
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
# 2013 distribution to shareholders by way
of 7.50 cents capital return.
Ridley AgriProducts
operating EBIT
s
n
o
i
l
l
i
M
$
60
50
40
30
20
10
0
0
7
.
3
5
0
4
0
5
.
0
8
5
4
.
0
1
.
0
4
.
7
0
8
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
03
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORY
04
Ridley Corporation Limited Annual Report 2017 LOCATIONS
& SECTORS
RIDLEY LOCATIONS AND SECTORS
From field to food
Ridley is a proud partner of Australian agriculture, driving productivity and performance in response to the needs of an ever-growing
population and the welfare of our agriculture community.
Ridley Locations and Sectors
Thailand
3
1
Australia
Business Unit Structure
Monogastric
Pellets, meals, concentrates and
pre-mixes for poultry and pigs
Ruminant
Packaged
Products
Aquafeeds
Pellets, meals, blends, concentrates
and pre-mixes for dairy cattle, beef
cattle and sheep
Bagged poultry, dairy, dog, horse
and lifestyle animal feed
Extruded and steam pelleted
products for all major finfish and
prawns, and novel feed ingredients
7
4
Supplements Block and loose lick supplements
Rendering
Rendered poultry, red meat and
fish products for the pet food,
stock feed and aquaculture sectors
5
6
5
2
9
6
2
3
4
4
1
1
8
2
7
2
1
s
t
e
s
s
A
y
e
d
R
i
l
Monogastric
Ruminant
Packaged
Aquafeeds
Supplements
Rendering
1 Toowoomba
1 Toowoomba
1 Toowoomba
1 Narangba
1 Townsville
1 Maroota
Business Unit
2 Mooroopna
2 Tamworth
2 Tamworth
3 Pakenham
3 Pakenham
3 Pakenham
4 Murray Bridge
4 Maffra
4 Murray Bridge
5 Bendigo
5 Gunbower
6 St Arnaud
6 Terang
7 Wasleys
7 Taree
8 Clifton
9 Lara
2 Yamba –
Novacq™
production site
3 Chanthaburi –
49% interest
4 Westbury
(intention
to build)
2 Laverton
05
Ridley Corporation Limited Annual Report 2017CHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION
CHAIRMAN’S ADDRESS
“Despite the challenges
arising from these conditions,
our core business Earnings
Before Interest and tax
(EBIT) result for the year of
$45.8 million excluding non-
recurring insurance proceeds
is our third highest on record.“
Dr Gary Weiss
Chair
Wasleys – post rebuild.
The 2017 financial year has been another
productive year for Ridley in terms of
milestones achieved and progress made,
despite the strong headwinds experienced
in two of our main sectors of operation,
namely the Dairy and Aquafeed sectors.
The severe curtailing of demand for dry
season blocks due to the abundant natural
pasture across northern Australia, plus
soaring energy prices, also placed
additional strain on the business as it
follows its long term growth trajectory.
Despite the challenges arising from
these conditions, our core business
Earnings Before Interest and Tax (EBIT)
result for the year of $45.8 million
excluding non-recurring insurance
proceeds, is our third highest on record.
The important contributors to the
operating performance are covered in
the Managing Director’s Review, so I will
again reflect on some of the other features
of another successful year for Ridley.
The second half of the financial year saw
the commissioning of the new, state-of-
the-art poultry and pig feedmill at Lara,
near Geelong in Victoria. We are starting
to consistently reach the targeted
production performance for the new mill
and the Commercial Feed team is actively
pursuing new business in the region
armed with a compelling value proposition.
The partial rebuild of the Wasleys feedmill
in South Australia was also completed
during the year, with significant
improvements in site layout and
operating efficiency achieved through
the new for old replacement of damaged
plant funded by the $3.6 million of
insurance claim proceeds received
in the year.
During the year we also received total
sales proceeds of $3.5 million from the
sale of our investment in the CME
feedmilling operation at Inverell in NSW
and the sale of the storage facility at
Noorat. The Noorat storage facility
located close to the Terang feedmill in
western Victoria was no longer required
following the prior year upgrade of the
Terang feedmill. The CME overspill
extrusion production facility at Inverell will
continue to manufacture certain products
for Ridley through an arm’s length toll
manufacturing agreement until such
time as the new Aquafeed mill in
Tasmania is commissioned, at which
time all Ridley feed products will be
manufactured in-house.
The proposed new feedmill in Tasmania,
announced in January 2017, is an exciting
development and demonstrates the
commitment of Ridley to the future
growth of the Tasmanian salmon industry
and our capability to provide salmon feed
of the highest quality from the hatchery to
the grow out pens. We are continuing to
work through the development process,
the conclusion of which in the coming
months will enable us to complete the
land acquisition transaction, place firm
orders for plant and equipment, which
has a delivery lead time of several months,
and commence the infrastructure works
required for the greenfield site.
06
Ridley Corporation Limited Annual Report 2017 CHAIRMAN’S &
MD’S MESSAGES
I would like to express my appreciation
to my fellow Board members for their
dedication and support throughout the
year, not only through our routinely
scheduled meetings, but also whenever the
need has arisen to arrange Board meetings
at short notice to address important and
unforeseen issues as they have arisen.
I would also like to particularly
acknowledge the efforts of the Ridley
team in delivering another productive
result for the year. We have an
outstanding group of people at Ridley
and, on behalf of the Board, I thank them
for their commitment not only to the
Company, but also to delivering our
value proposition to customers and other
stakeholders to the highest standards.
Outlook
The Managing Director’s Review provides
a sector by sector outlook, so I shall limit
my comments to a high level.
I believe the future for Ridley is very bright,
as we continue to strive for excellence
in our day-to-day operations to provide
the best value for money nutrition
performance solutions in the marketplace.
We are very excited at the prospects for
Novacq™, and are keen to understand its
performance potential not only in prawns,
but also in other species now that we
have secured the extended licence.
As well as focusing our attention on
Novacq™ and organic growth, including a
number of potential feedmill opportunities,
a small but dedicated team is always
considering and evaluating a significant
number of acquisition opportunities to
identify strategic targets to assist with
the implementation of the Ridley strategy.
Dr Gary Weiss
Chair
The Aquafeed team has worked hard
during the year to restructure its operations
and replace the sales volumes to Huon,
which were terminated by Ridley in July
2016 and followed by action to recover
the outstanding debt. Reaching an agreed
solution through mediation, followed
by the receipt of the full $17.7 million
receivable owing to Ridley on 20 July 2017
(offset by full usage of the $1.0 million
provision for non-recovery) is a positive
outcome to the dispute, which enables
both parties to refocus their attention
on core business growth.
Having secured a 10-year lease over 14
ponds in Chanthaburi, Thailand, in June
2017, Ridley is now moving swiftly towards
local production of Novacq™ in Thailand
to service the feedmill in which we
acquired a 49% ownership interest in
the prior year. In the meantime, we have
shipped over 100kg of Novacq™
produced at Yamba to Chanthaburi for
inclusion in feed used to conduct local
trials at our feedmill partner’s prawn farm,
adjacent to the feedmill. We expect to
have trial data to release to the market
by the end of the September 2017 quarter.
Ridley is also looking to secure formal
Thailand Board of Investment approval
in the coming year to manufacture and
operate two plants in Thailand to enable
the blending of locally produced Novacq™
with other key feed ingredients to provide
a ‘Coca Cola’-style pre-mix to which the
staple raw material ingredients will be
added in order to produce a prawn feed.
An ever-decreasing component of our
overall business – and with annualised
holding costs reduced to just under
$1.0 million – surplus land activity for the
year has centred around the hand back
of expired Crown leased land at Lara and
a subdivision of the lower-valued portion
of the Ridley-owned land to generate
opportunities for the establishment of a
small aquaculture hub. The Nelson Cove
project at Moolap has been in a holding
pattern for most of the year as we
awaited the delayed outcomes from the
regional review being conducted by the
State Government of Victoria. Together
with our development partner, Sanctuary
Living, we are now exploring our options
following the release of a draft framework
plan in which our proposed development
concept was not addressed positively.
Our value proposition remains one of
economic stimulus for the region with
the generation of jobs and increased
overall prosperity, plus a privately funded
solution for the regional inundation and
stormwater treatment issues that are
expected to increase in severity over
time as a result of sea level rise.
The $10.0 million of proceeds from the prior
year sale of Ridley Dry Creek Pty Ltd were
received on schedule during the 2017
financial year, with the final $6.0 million
instalment due by 31 December 2017.
The production and harvesting process
for Novacq™ at Yamba has come a
long way in the last 18 months, with
the focus now centred on dewatering
and drying technologies as well as
continuous improvement to lift yield
and drive down the operating costs
through further innovation.
The two Novacq™ licence agreement
extensions executed during the year
represent a decisive step forward in
securing all previously unlicensed
commercial opportunities for the project.
With the crustacean application already
licensed in China and Vietnam, Ridley
has been able to secure the rest of the
world licence for crustacean and the
entire world for every other non-human
species. Although there is no currently
available data to support the efficacy
of Novacq™ in species other than
crustacean, there is a reasonable
likelihood that it may have additional
applications and we intend to prioritise
and test its application in the other
species where we have expertise and its
application is considered prospective.
To assist with the worldwide and species
expansion for the Novacq™ project, we
have secured a minimum five-year
strategic alliance with the CSIRO, which
discovered the benefits of Novacq™ and
was the first to produce Novacq™ outside
of its natural estuarine environment at
its Bribie Island facility. The 2018 annual
program of work between the parties
has been prepared and approved at the
second meeting of the Management
Committee held in Brisbane in July 2017.
Although presently a somewhat distant
and highly speculative outcome, it is worth
noting that under the alliance agreement,
Ridley and CSIRO are tenants in common
of any new intellectual property that may
emerge from the alliance and would
share equally in any licensing or royalty
arrangement should there be a human
application for Novacq™.
07
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION
MANAGING DIRECTOR’S REVIEW
After three successive years of record
earnings, the core business earnings
have dipped below the long term trend
line, with core business Earnings Before
Interest and Tax (EBIT) of $45.8 million
reported for the year. The average
operating EBIT for the last three years
is $50.0 million. This result has been
achieved in challenging trading
conditions for two of our main sectors,
being Dairy and Aquafeed, while the
Supplements business unit has
contributed to overhead recovery
but generated an operating loss on low
volumes caused by a wet dry season
in northern Australia, which delivered
an abundance of natural pasture. The
significant energy price increases and
the challenge of not being able to pass
through all of these costs has also
impacted the operating result for the
year and may similarly influence the
years ahead absent any government
intervention.
Five years ago such a strong result would
not have been achievable in similar trading
conditions and the business is now far
more resilient and able to navigate the
seasonal and cyclical variations of a
manufacturing operation exposed to
agribusiness. Sector by sector performance
is provided later in my report.
The strength and resilience of a business
can be measured in many ways, but I
believe that how well it performs under
adverse conditions is a key measure, and
it is for this reason that I am very proud
of the performance of the Ridley team
in FY17. In addition, as I will discuss later
in this report, we have made significant
progress on a number of key strategic
initiatives that are headlined by our
potentially game-changing Novacq™
development project.
Safety
Our number one focus at Ridley will always
be the safety of all persons associated with
Ridley, whether employees, contractors,
suppliers, customers, service providers
or simply visitors to Ridley sites.
Our Medically Treated Injuries, or MTI,
count of four for FY17 is the lowest we
have achieved to date and is encouraging
in our drive towards zero injuries. Our
reporting of hazards and near misses for
the year was our highest on record and,
with a positive spread across all Ridley
operating sites, is an indicator of the
progress we are making in instilling a
cultural mindset where safety always
comes first. All logs are reviewed and
actions taken as appropriate to address
the issues giving rise to safety concerns.
The Long Term Injury Frequency Rate,
or LTIFR, measured as the number of
injuries incurring lost time for every
million hours worked, was 4.43 for FY17.
This is an unfavourable increase from the
2.20 recorded for FY16, the 2.26 recorded
for FY15, and the 3.29 and 3.65 recorded
in the two prior years, that we will work
hard to reverse in the year ahead.
The Total Recordable Frequency Rate,
or TRFR, represents our total injury rate,
and at 7.38 for FY17, is a favourable
decrease from the 9.52 recorded for FY16
and is our second lowest result on record.
The levels of LTIFR and TRFR in FY17
are a timely reminder that we must
remain diligent at all times and cannot
afford to have even momentary lapses
of concentration when it relates to the
safety and wellbeing of all Ridley and
associated persons.
“Five years ago such a strong
result would not have been
achievable in similar trading
conditions and the business
is now far more resilient.”
Tim Hart
Managing Director and
Chief Executive Officer
08
Ridley Corporation Limited Annual Report 2017 CHAIRMAN’S &
MD’S MESSAGES
“The strength and resilience of a business can
be measured in many ways, but I believe that
how well it performs under adverse conditions
is a key measure, and it is for this reason that
I am very proud of the performance of the
Ridley team in FY17.”
09
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION MANAGING DIRECTOR’S REVIEW CONTINUED
Core business operating
performance for the 2017
financial year
The core business performance of
$45.8 million of EBIT for FY17, excluding
non-recurring items, comprises a strong
performance in Poultry, Pig and Packaged
Products, a small improvement in the
aggregate Rendering performance,
and a decline in the Dairy, Aquafeed
and Supplements business units.
The non-recurring items comprise
$3.6 million of pre-tax insurance
proceeds attributable to the Wasleys
insurance claim, which was finalised
during FY17, plus $0.7 million pre-tax
profit on disposal of the joint venture
accounted investment in CME. The
combined tax effect on these two items
is $1.1 million.
(i) Dairy, beef and sheep
The Dairy sector started the year on the
back foot, with farmers trying to make
sense of their cash flows and understand
the loan repayment plans being offered
by their existing milk processors. Herd
management strategies were also
affected, with a number of farms drying
off their herds earlier than planned and
realigning herd numbers based on
expected production requirements for
the coming year. The focus for our
Ruminant team throughout this difficult
period was to support our customer base
and continue to deliver a meaningful
value proposition to optimise the farmers’
margin over their feed cost.
As a result of the significant contraction
of the market, overall FY17 Dairy sales
volumes were down on the prior year
and margins also affected. There was
some relief for the farmers in the form
of continuing low raw material prices
and the availability of on-farm forage, but
the retrospective adjustment to the milk
price at the end of the prior year created
uncertainty and a focus on short term
cash flows.
There are positive signs for the year ahead,
with a number of milk processors offering
higher prices in the year ahead in an
endeavour to recover lost processing
volume. Farmer sentiment remains very
cautious, with initiatives to increase herds
and milk production slowly recovering in
the dairy heartland of Victoria.
10
Lara feedmill.
Lara feedmill storage silos.
Lara feedmill pre-mix addition area.
Lara feedmill warehouse.
Sales of supplementary feed for beef
and sheep are generally driven by the
availability of forage and finishing prices.
FY17 volumes were down on the prior
year as a function of generally improved
levels of pasture coverage and the
absence of any extreme regional weather
patterns to significantly influence
demand one way or the other.
(ii) Poultry and pig
The compounding 2% to 3% increase
in domestic consumption of poultry
products has been a consistent trend for
many years now, and our sales volumes
increased by 10.6% over the prior year.
Broiler and layer volumes for the first time
represented 60% of all Ridley traded
volumes (2016: 54%). Consumers
continue to support poultry products
for their health benefits and being the
cheapest source of animal protein.
The new poultry and pig feedmill at
Lara was commissioned on schedule
in mid FY17 to service the Geelong
and neighbouring livestock production
regions. It has taken several months to
transfer all of the appropriate tonnages
across from the Pakenham mill, however
the manufacturing costs per tonne
targeted in the capital expenditure
approval submission are now being
achieved on a regular basis.
The Commercial Feed team has activated
its plan to secure new volume for the
Lara feedmill, which can provide a very
competitive product range for the region
with its operating efficiency and plentiful
supply of local raw materials.
FY17 Pig sector volume increased by 9%,
over the prior year as the reinvestment
in technical experts and resources in this
sector started to deliver the anticipated
returns. The outlook for the Pig industry
remains positive, with continued
investment by producers to service
the increasing requirement for fresh
pork. Consumption of fresh pork is on
a strong growth path, with a positive
exposure from the various television
cooking series, the marketing of lean
cuts, and the ability to infuse the meat
with a wide variety of flavours.
The poultry layer sector (as opposed to
broilers, which are reared for their meat)
has continued its resurgence, with the
rise in prominence of eggs as a positive
source of protein and the retraction from
health professionals of claims linking
egg consumption to high cholesterol.
Producers have continued to invest to
meet the changing and growing demand
for egg consumption. We continue
to work with our layer customers to
provide a compelling value proposition
and meet their expanding nutrition
solution requirements.
Ridley Corporation Limited Annual Report 2017
CHAIRMAN’S &
MD’S MESSAGES
“Novacq™ produced at our Yamba site was
used in the feed trials at Mackay, which
delivered a 37% uplift in survival rate.”
(iii) Aquafeed
The prawn, barramundi and kingfish
components of the business performed
well, despite the outbreak of White Spot
Disease in certain prawn farms located
in the Logan River region. The reduction
in salmon volume following the cessation
of supply to Huon in July 2016 has
impacted production recoveries and
sales volumes significantly, and the
implementation of plans to replace
this volume will take some time.
The industry outlook remains one of
continuing growth in domestic salmon
consumption and investment in biomass
by the Tasmanian salmon producers,
thereby increasing animal feed
requirements in the years ahead. Ridley
is committed to supporting this industry
growth and has executed a contract to
acquire land located at Westbury, in
northern Tasmania just west of
Launceston and south of Burnie, upon
which to construct a new feedmill. The
new mill will manufacture and supply
feed primarily to Tasmania’s salmon
industry, as well as other aquaculture
species on the mainland and in New
Zealand. Based on committed and
anticipated volume from existing
customers, the proposed new feedmill
has passed internal financial hurdle
return rates with upside in the form
of spare capacity, which will be available
to target new and returning customers
and general industry growth.
The relocation of salmon feed
manufacture from the existing plant at
Narangba, Brisbane, will provide significant
supply chain savings and bring Ridley
much closer to its Tasmanian customers,
who will benefit from the shorter delivery
lead times and from being able to
collaborate more closely on new product
development and dietary enhancements.
In addition to committing to a new
Tasmanian feedmill, a major upgrade
and restructure of the Narangba
operations is in progress and will facilitate
the transition over time of products
manufactured externally and through
our former 25% interest in CME, the
divestment of which was announced on
31 January 2017. The CME extruder plant
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION MANAGING DIRECTOR’S REVIEW CONTINUED
located at Inverell, NSW, was for a number
of years an ideal and cost-effective
overflow outlet for aquafeed and pet food
and will continue to assist Ridley on a toll
manufacturing basis until such time as
the new Tasmanian feedmill is fully
operational, whereupon all aquafeed
and packaged product volumes are
expected to be manufactured in-house.
(iv) Rendering or proteins
The rebuilding of dairy herds following
the prior year profit taking when carcass
prices were at a high point in the cycle
has restricted red meat raw material
supply throughout FY17. The competition
to secure processing volumes has been
intense, and prices paid for raw materials
have risen to record levels accordingly.
Selling prices for meat and bone meal
(MBM) rendered products have also
risen, but not to the same extent when
the effective processing yields are taken
into account, and this has squeezed the
MBM operating margins at the Laverton
plant in Victoria.
With Maroota operations restricted to
the processing and trading of white meat
and fish, a different dynamic exists
whereby processing volumes have risen
but the selling prices have fallen on a
prior year comparison.
The overall impact when aggregating
both rendering sites is a slight increase in
FY17 earnings compared to the prior year.
Although a number of profit
improvement projects have been
successfully implemented during FY17
and in the second half of the prior year,
the energy intensive nature of rendering
operations is such that the efficiency
savings have been consumed by the
material increases in energy prices
experienced during the last 18 months.
12
“The Packaged
Products business
unit has delivered a
fourth successive year
of earnings growth.”
Ridley Corporation Limited Annual Report 2017 CHAIRMAN’S &
MD’S MESSAGES
The outlook is for further energy price
rises, which heightens the requirement
for continuous improvement in all
aspects of the operations at both sites.
(v) Packaged products
The Packaged Products business unit
has delivered a fourth successive year
of earnings growth. Although sales
volumes have been eroded during this
period, improved understanding of
market dynamics and margin
management, product refreshes and
SKU rationalisation, and entry into long
term supply agreements with stronger
store presence have all combined to
deliver sustained earnings growth. The
focus for the year ahead is for volume
stabilisation and then growth of our
realigned and repositioned product
range while sustaining the margin
improvement of the last four years.
(vi) Supplements
There are two primary operating
seasons for the Supplements business,
a wet and a dry season, with its product
range designed to specifically cater for
each. With one of the wettest dry seasons
on record experienced in FY17, the
demand for dry season blocks was very
low. A number of plant improvement
initiatives implemented in the lead-up
period successfully generated a
stockbuild of high-quality product,
however with demand severely curtailed,
this product remains unsold and carried
forward for sale in the coming season.
While still of merchantable quality, the
existence of this carry over product will
affect the stockbuild and plant operating
requirements in the year ahead.
Nevertheless, after the restructuring
of recent years, the Supplements
business is now in a position to deliver
positive earnings in a financial year of
traditional wet and dry seasons.
Investment in Thailand
feedmill
In January 2016, Ridley announced the
acquisition of a 49% joint venture interest
in Pen Ngern Feed Mill Co., Ltd. (PNFM),
an entity domiciled in Thailand that owns
and operates a dedicated aquafeed
manufacturing facility, for an investment
of AUD$1.3 million. With an existing
capacity of 30,000 tonnes per annum
and the infrastructure in place to expand
to 55,000 tonnes per annum for a
relatively low capital outlay, the mill is
ideally placed to service the Chanthaburi
region’s prawn feed requirements.
The biomass losses of recent years in
Thailand due to the widespread outbreaks
of the serious disease of prawn known
as Early Mortality Syndrome have drained
the prawn farmers of not only their cash
flow, but also their confidence to restock
their ponds. Consequently, many of the
region’s prawn ponds are lying fallow and
the farmers are looking for inspiration and
cash flow support. Production and sales
for the PNFM feedmill since its acquisition
have been sporadic, and the positive
harvest results emerging from our
partner’s prawn farm, coupled with the
benefits derived from Novacq™ inclusion
in the diets, are expected to provide the
catalyst for a gradual recovery of a
nationwide industry approximately 100
times larger than the Australian market.
Commercialisation
of Novacq™
We are now more than half way through
a five-year program of applied research
and development (R&D) for the
commercialisation of Ridley’s investment
in Novacq™. Novacq™ is a prawn feed
additive that has the capability of
transforming the prawn feed industry
through the substantial acceleration
of growth rates, improvement in feed
conversion rates, enhancement of animal
wellbeing and survival rates through an
increased resistance to viral and bacterial
attacks, and reduction in nitrogen
emissions from the prawn biomass.
During FY17, we have secured the long
term supply arrangements for the set
of equipment required to effectively
manage the production of Novacq™,
comprising the aeration and continuous
cycle harvesting equipment. The process
to test the available technologies for
dewatering and drying the Novacq™
prior to transportation to the feedmill has
been extensive, and we expect to make
a final technology selection in the coming
weeks. Once fully tested at Yamba, the
technology can be transported to
Thailand, where we are undertaking
the final preparations to 14 ponds to
commence production of Novacq™
adjacent to our feedmill interest in
Chanthaburi.
While there have been no significant
changes to the images of the site at
Yamba as provided in last year’s Annual
Report, a great deal of progress has been
made during the year in terms of testing
and improving the day-to-day production
and harvesting processes. Product from
the site was used in the feed trials from
which a 37% uplift in prawn survival rate
was reported on 3 April 2017. Over 100kgs
of product has already been shipped to
Thailand to conduct trials ahead of
commencement of local Novacq™
production. The results of these trials
are expected by the end of the first
quarter of FY18.
On 22 June 2017 we announced the
execution of a 10-year lease (six plus four
years at Ridley’s option) over 14 ponds and
adjacent infrastructure land located within
the Sureerath Prawn Farm commencing
on 1 July 2017. The ponds, covering an
area of 10.9 hectares in total and adjacent
to the PNFM feedmill, have previously
been used for growing prawns. The
ponds are being converted for the
production of commercial quantities
of Novacq™, a process that involves
levelling and lining of the pond floor and
the introduction of dedicated production,
harvesting, dewatering and drying
equipment, which is being developed
at Ridley’s domestic Novacq™ production
site in Yamba, NSW.
For each of the 14 ponds we are targeting
approximately 50 metric tonnes of pure
(dry weight) Novacq™ production per
annum. With annual Novacq™ production
in the vicinity of 700 metric tonnes and
assuming a 5% feed inclusion rate, the
leased area would be able to supply
enough Novacq™ to produce c.14,000
tonnes of prawn feed. The estimated
committed spend for these initial 14
ponds is AUD$7.5 million.
The local production, harvesting and
drying of Novacq™ and its sale to the
Chanthaburi feedmill for inclusion in the
diets will be at arm’s length, i.e. will be
100% owned and controlled by Ridley.
Sales of Novacq™-inclusive prawn feed
by the feedmill joint venture to the local
prawn farmers, including the Sureerath
Prawn Farm, will be on a full commercial
basis, thereby preserving the maximum
value for Ridley shareholders.
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION MANAGING DIRECTOR’S REVIEW CONTINUED
The securing of our Novacq™ production
site in Chanthaburi is a very positive
development for us in the execution of
our strategy to service the Asian prawn
feed market. Using Ridley diets and
knowhow, we are targeting a full product
offering incorporating locally produced
Novacq™ in the feed manufactured at
the PNFM feedmill. We have partnered
with the region’s most prominent and
renowned local prawn farmer, with whom
we can conduct the required scientific
trial studies.
We will update the market as soon as
we have reliable and validated data from
the Thailand trials, and expect them to
demonstrate the efficacy and commercial
benefits of feeding the prawn biomass a
range of Ridley-formulated diets, including
an appropriate percentage of Novacq™ in
the bill of material. A Novacq™-inclusion
range of 5-10% is currently thought to be
appropriate, however further work is still
to be conducted to fully understand the
optimum inclusion rate from a growth,
health, protein substitution and nitrogen
reduction perspective.
The results of the above trials will be
important in encouraging local prawn
farmers to restock their ponds, many
of which are currently lying fallow
following the disease issues experienced
in recent years.
The pictures above show the 14 leased
ponds, the second of which shows the
proximity to the feedmill whose tower is
visible in the background. The first picture
also shows in the foreground the
construction of a concrete pad where the
necessary infrastructure will be located.
CSIRO alliance
On 27 March 2017 Ridley announced
through the ASX Announcements Platform
the extension of the existing CSIRO
Novacq™ licence and the formation
of a strategic alliance with CSIRO.
Under the new licence, the territory
licensed to Ridley for crustacean
application was extended to include
the whole world excluding China and
Vietnam, which are already licensed
by CSIRO to other parties. Ridley does,
however retain its entitlement to market
and sell Australian made diets
incorporating Novacq™ into China
and Vietnam. The extended territory
under the amended licence agreement
14
Leased ponds and infrastructure pad.
Leased ponds with feedmill in the distance.
is exclusive to Ridley except in respect
of India, which converts to an exclusive
entitlement on 1 January 2018.
The superseded 20-year licence
agreement (which was refreshed
on 27 June 2016 to include Thailand
as a licensed territory in addition to
the pre-existing territories of Australia,
Indonesia, Malaysia and the Philippines,)
has been extended in time by resetting
the 20-year term and also in its scope.
The amended scope now covers
improvements to the Novacq™
technology and new applications,
including potentially using Novacq™
as a feed additive for species other
than prawn and crustaceans, but
excluding any human application.
The same 27 March 2017 ASX release
included the formation of a minimum
five-year strategic Alliance Agreement
with CSIRO with the objective of
conducting collaborative research
that will maximise the development
of new Novacq™ applications beyond
the existing application for prawn and
crustaceans.
Under the terms of the Alliance
Agreement, Ridley will contribute annual
cash funding of AUD$1.0 million to CSIRO
for the parties to work together for the
purpose of further advancing
collaborative research relating to the
existing Novacq™ technology. Under the
Alliance Agreement, Ridley has the option
to extend the term of the relationship for
an additional period of up to five years.
Managed through a Management
Committee of equal representation,
an annual program of research will be
established, which will be designed to
target the potential applications most
likely to improve the application of
Novacq™ as a stock feed additive
potentially in a range of species.
The strategic research alliance with
CSIRO will be looking to develop a
comprehensive platform of Novacq™
data, to establish rapid bio-test assays
to demonstrate Novacq™ activity, to
understand this activity spectrum and
mechanisms of prawn growth, and
ultimately determine the bioactive(s)
within Novacq™. All of these activities
will contribute to a characterisation
profile that will then be used to identify
those species most likely to be positively
impacted by the inclusion of Novacq™
into their feed.
It was agreed that any human application
developed from the alliance was beyond
Ridley’s expertise and would be licensed
to an appropriate third party with the
skills and networks to optimise the
commercial opportunity. As tenants in
common of the Intellectual Property (IP)
from the Alliance Agreement, Ridley and
CSIRO will share in equal proportion
any licensing fees and royalties applicable
to such an application.
While there is limited technical data
available to date, there is a logical
extension for Novacq™ to have a positive
application in other species, not only
in the most likely application for fin fish,
but also potentially for land-based
animals. Improvement in growth and
survival rates at a fraction of what has
been demonstrated to date in prawns,
could similarly revolutionise the poultry
industry for example, where very small
improvements in Feed Conversion Ratios
(FCRs) lead to significant commercial
returns due to the sheer volume of
birds being processed on a daily basis.
The first two meetings of the Management
Committee have been held and the plan
for FY18 approved in accordance with the
strategic objectives as stated above.
Ridley Corporation Limited Annual Report 2017 CHAIRMAN’S &
MD’S MESSAGES
“Under the terms of the Alliance Agreement, Ridley will
contribute annual cash funding of AUD$1.0 million to
CSIRO for the parties to work together for the purpose
of further advancing collaborative research relating to
the existing Novacq™ technology.
15
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION MANAGING DIRECTOR’S REVIEW CONTINUED
Property
By 30 June 2017, we had banked
$29.0 million of the $35.0 million
proceeds from the June 2016 divestment
of Dry Creek, with the final instalment
due by 31 December 2017.
The Nelson Cove project has been in a
holding pattern for most of FY17 as we
have awaited the release of the Victorian
State Government’s plan and vision for
the region. The release of the draft
MOOLAP coastal strategic framework
PLAN (MCSFP) was delayed to April 2017,
and divided the review area into several
precincts, with Ridley’s interest being
reflected as the ‘Saltworks and
Wetlands Precinct’, referred to in this
report as the SWP.
The SWP comprises Ridley-owned land
plus land managed by Ridley under Crown
lease. The recommended land use for
the Crown owned part of the land is stated
as ‘Environmental with complementary
tourism,’ while the primary direction for the
Ridley-owned land is ‘Environmental/
tourism investigation’. Potential land uses
are listed as:
• the management and conservation
of environment and heritage assets;
• coastal inundation;
• coastal protection structures;
• drainage outlets and retarding basins;
• wetland habitats;
• low impact water, heritage and nature-
based tourism and commercial facilities;
• recreation areas and public access; and
• interpretive information facilities and
viewing paths and platforms.
In response to the MCSFP, Ridley and
development partner Sanctuary Living,
have formulated and submitted a
development concept for the Ridley-
owned land only, and are currently
awaiting feedback on this concept
from the Victorian State Government.
Depending upon the nature of the
feedback received, Ridley and Sanctuary
Living will review the realistic short term
options for the site and develop an
appropriate plan and budget for the
year ahead.
On a more positive note, the Crown leases
at Lara expired during the year and the
land was handed back to the Victorian
State Government, with whom a cost
sharing arrangement has been entered
16
Pinery bushfire approaching Wasleys feedmill.
Same view of Wasleys feedmill post rebuild.
into to manage the Crown land and
Ridley-owned land. The Ridley-owned
land other than the two major plots
available for sale has been subdivided
during the year to provide flexibility for
future activity.
An assessment is underway to evaluate
the potential net returns from undertaking
a second stage subdivision that could
facilitate the creation of an aquaculture
precinct in proximity to Corio Bay.
Wasleys
During the year the rebuild of the Wasleys
feedmill in South Australia was completed.
From the aftermath of the initial
devastation caused by the Pinery bushfire
in November 2015, the Wasleys story has
been a very positive one. We were able to
successfully engage the Disaster Recovery
Plan and ensure the continuity of supply
to all of our customers, acknowledging
the help we received from our existing
customer base and industry relationships.
The adequacy of the insurance policy
coverage was stress tested and the
overall insurance claim process well
managed to secure new for old
replacement of damaged items. With
insurance proceeds treated as income
items under the accounting standards
and the purchase of fixed assets being
recorded on the balance sheet and
subsequently depreciated, there has
been a net, non-recurring gain in the
profit and loss for the year of $3.6 million.
In addition, the rebuild has facilitated a
more effective site layout and an effective
modernisation of many components of
the feedmill.
Shown above are two photographs,
the first showing the fire approaching
the site and the second showing the
rebuilt feedmill.
Our people and communities
There have been two changes to the
executive lead team in FY17, the first being
for the Information Technology Services
group to report to the General Manager
Safety, People and Technical Development
following the July 2016 departure of the
CIO, and the second being the promotion
of senior nutritionist Briannon Avery to the
role of General Manager Product Strategy
and Communications. Briannon is
co-managing the development of the
Ridley Corporation Limited Annual Report 2017 CHAIRMAN’S &
MD’S MESSAGES
Ridley Ingredients Strategy to secure novel
and value adding raw materials and is
Ridley’s point of contact for government
and regulatory body liaison.
The management team has worked
diligently and energetically to deliver
the reported operating result within a
safe and harmonious working environment.
We have continued our bi-annual training
program for the next level of management
to provide succession planning and career
development, and to foster internal
relationships and business understanding.
We remain committed to our chosen
community programs with the Garvan
Institute and Aussie Helpers, and our
continuing contribution was again
recognised at the Garvan Institute annual
general meeting and awards ceremony.
More details of each of these initiatives,
and of our community influence and
sustainability programs, are provided
in the Safety, People and Innovation
section of this 2017 Annual Report.
Outlook
As previously reported, difficult trading
conditions were experienced throughout
the 2017 financial year in the Dairy,
Aquafeed and, to a lesser extent, the
Supplements sectors, and this pulled the
operating result back from last year’s third
successive record operating result.
Continued growth was experienced in
the Poultry and Pig and Packaged
Products sectors, with positive rendered
poultry growth offset by reductions in
red meat raw material supply providing
a counterbalance of overall performance
in the Rendering business sector.
The 12-month outlook for the Dairy sector
is more positive this year than last year,
when the industry was still reeling from
the imposition of retrospective reductions
in milk price payments. With a return to
more conventional milk pricing policies
and a stronger milk price forecast, coupled
with the prospect of continuing low grain
prices as a result of last year’s record
harvest, Dairy farmer sentiment is more
positive as we start the new financial year,
but understandably fragile and not helped
by the recent fluctuations witnessed in
local grain prices driven by market
speculation on the outlook for rain and
its impact on the coming harvest cycle.
17
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION MANAGING DIRECTOR’S REVIEW CONTINUED
The securing of the Novacq™ production
ponds at Chanthaburi as announced on
23 June 2017 is a significant milestone in
moving the project forward in Thailand,
and we are expeditiously preparing the
ponds for commencement of local
production. The inclusion of locally
produced Novacq™ in prawn feed
manufactured at our 49% owned
feedmill in Chanthaburi to be trialled
at our partner’s on-site prawn farm
is the next stage gate for the project
in Thailand.
At our Novacq™ production site at Yamba,
NSW, we are looking to finalise testing
and select our preferred dewatering
and drying technologies and to export
them to Thailand to complete the entire
production cycle. We will be conducting
further product development in the
coming domestic prawn season as we
continue to frame up the overall value
proposition for the industry.
While great progress has already been
made in improving efficiency and driving
down costs of production and harvesting
of Novacq™ from a daily process of
continuous improvement, we are still in
the third quarter of a five-year program
of applied R&D and there is a body of
work still to be conducted prior to full
scale commercial launch of the Novacq™
inclusive range of diets.
To complement the expected organic
growth for the core business, we are
continuing to develop the concepts
and plans for the modernisation of our
feedmills in a number of key regions, and
to identify and secure the combination
of incremental volume and freight/
logistics savings or arbitrages needed
for any new feedmill to pass the internal
Ridley project hurdle rates.
In addition to organic growth through
a program of mill modernisation, Ridley
is continually looking for acquisition
opportunities consistent with its long
term strategy to be Australia’s leading
producer of premium quality, high
performance animal nutrition solutions.
Tim Hart
Managing Director and
Chief Executive Officer
While the replacement of Huon salmon
sales volumes is a longer term prospect,
the existing and potential salmon
customer base continues to grow at
a healthy rate. Ridley’s commitment to
invest in aquaculture in Tasmania and
restructure its operations at Narangba
provides a strong signal of support to
the salmon industry following a stressful
period of warm water, El Nino and
environmental and oxygenation issues
in Macquarie Harbour.
The Supplements business unit trading
volumes were severely impacted by the
effective absence in FY17 of a dry season
in northern Australia. The consequent
abundance of natural pasture effectively
closed the seasonal trading window for
dry season lick blocks compared to the
prior year. A return to a more traditional
dry season weather pattern is expected
to return the Supplements business unit
to profitability.
All of our other core business sectors are
expected to move forward in a positive
manner, with a full year of operation
from the new Lara feedmill and
conversion of opportunities to secure
new volumes and customers by virtue
of the location and efficiency of the new,
state-of-the-art plant.
18
Ridley Corporation Limited Annual Report 2017 FINANCIAL
REVIEW
FINANCIAL REVIEW
“The consolidated group has
recorded Earnings Before
Interest and Tax (EBIT) of
$34.9 million, comprising
an operating result of $45.8
million, less corporate costs
of $9.9 million and property
costs of $1.0 million.”
Alan Boyd
Chief Financial Officer
and Company Secretary
Table 1
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations after tax
Profit from discontinued operation after tax
Net profit attributable to members of Ridley
Corporation Limited
2017
$’000
34,287
(8,472)
25,815
-
2016
$’000
40,315
(13,112)
27,203
403
25,815
27,606
Operating result
For statutory reporting purposes, the
consolidated profit and loss (Table 1)
reports a net consolidated after tax profit
of $25.8 million and a pre-tax profit from
continuing operations of $34.3 million.
From an investor and analytical
perspective, the consolidated group has
recorded Earnings Before Interest and Tax
(EBIT) of $34.9 million (Table 2), comprising
an operating result of $45.8 million, less
corporate costs of $9.9 million and
property costs of $1.0 million.
The reported operating EBIT of
$45.8 million is $7.9 million below last
year’s $53.7 million record as a result of
the previously reported weakness in the
Dairy and Aquafeed sectors combined
with the absence of a northern Australia
dry season, which affected the
performance of the Supplements
business unit. The significant energy
price increases and the challenge of not
being able to pass through all of these
costs has also impacted the operating
result for the year and may similarly
influence the years ahead absent any
government intervention.
Corporate costs have been contained
to be comparable with last year’s result
despite expensing $1.1 million in legal
costs to resolve the Huon legal dispute,
which was settled on 23 June 2017 and
the funds remitted after balance date
on 20 July 2017.
sale of Dry Creek, for which deferred
consideration proceeds of $10.0 million
were received in FY17, with the final
$6.0 million due by 31 December 2017.
Net finance costs for the year of
$5.0 million reflect interest on bank debt
and the trade payables facility and the
amortisation of establishment and other
fees, offset by $0.6 million for the
unwinding of the discount on deferred
consideration from the sale of Dry Creek.
The $7.3 million expense and 24.4%
effective tax rate for FY17 continuing
operations reflect an overprovision in the
prior year and a significant increase in
research and development (R&D) activity,
much of which is associated with the
Novacq™ project and a full year of applied
R&D activities at Yamba in NSW.
The pre-tax non-recurring items of
$4.3 million comprises $3.6 million of
non-recurring, taxable sundry income
generated through the finalisation of the
Wasleys insurance claim, plus $0.7 million
profit on disposal of the investment in
CME. The tax effect of these two
transactions is $1.1 million.
During FY17, $3.6 million of proceeds
were received to replace on a ‘new for
old’ basis the feedmill assets damaged
by the Pinery, South Australia, bushfire
at Ridley’s Wasleys feedmill. The new
assets are reflected in the balance sheet
and are being depreciated over their
effective lives.
The $1.0 million reduction in property
costs compared to the prior year reflects
a combination of the scale back of
activity at Moolap and the June 2016
The sale of the equity accounted joint
venture investment in CME generated
a non-recurring, pre-tax profit during
the year of $0.7 million.
19
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION
FINANCIAL REVIEW CONTINUED
Profit and loss
Table 2 in $ million
Earnings before finance income and expense and tax expense (EBIT):
2017
2016 Movement
Ridley AgriProducts operations
Corporate
Property – other than Dry Creek
EBIT before non-recurring costs
Net finance costs
Income tax expense – continuing
Net profit after tax before non-recurring items
Discontinued operation – Dry Creek after tax
Other non-recurring items before tax
Tax on other non-recurring items
Reported net profit
Earnings per share (cents):
(i) continuing
(ii) reported
45.8
(9.9)
(1.0)
34.9
(5.0)
(7.3)
22.6
-
4.3
(1.1)
25.8
8.4
8.4
53.7
(9.6)
(2.0)
42.1
(5.4)
(12.6)
24.1
0.4
3.6
(0.5)
27.6
8.8
9.0
(7.9)
(0.3)
1.0
(7.2)
0.4
5.3
(1.5)
(0.4)
0.7
(0.6)
(1.8)
(0.4)
(0.6)
The profit and loss summary with a prior period comparison provided in Table 2 above has been sourced from the audited accounts but has not been
subject to separate review or audit. The Directors believe that the presentation of the unaudited non-IFRS profit and loss summary in Table 2 is useful
for users as it reflects the underlying profits of the business.
Balance Sheet
There have been the following material
movements in the Balance Sheet over
the last 12 months:
(i) An increase of $10.5 million in net
debt for the year as explained in the
following section.
(ii) An increase in current receivables
of $5.1 million to $117.5 million, which
includes the non-payment during
the year of $17.7 million of Huon
debt, which was received in full on
21 July 2017, with a corresponding
payment of $1.0 million being made
by Ridley which fully utilised the
provision for non-recovery.
(iii) A $4.0 million reduction in inventory,
which is a result of an ongoing effort
to reduce the number and ageing
of inventory items.
(iv) A $4.7 million reduction in non-current
receivables that reflects the
transfer of the final Dry Creek deferred
consideration payment of $5.5 million
from non-current to current, offset
by the $0.8 million prepayment of
long term pond lease rental in Thailand.
(v) A $22.6 million increase in property,
plant and equipment, which reflects
completion of the new Lara feedmill
at north east Geelong and a number
of profit maintaining and improving
projects across a number of Ridley
sites, including Narangba and
Yamba and completion of the
rebuild at Wasleys.
20
Cash flow and working capital
The operating cash inflow for the year
(Table 3) after working capital movements
and maintenance capital expenditure
was $37.1 million, an improvement of
$17.8 million on last year’s $19.3 million.
Maintenance capital expenditure of
$14.2 million continues to be managed
below the $15.2 million aggregate charge
for depreciation and amortisation. Ridley
has invested $19.6 million in development
projects during the year, the largest of
which reflects completion of the new
state-of-the-art feedmill at Lara.
Payments for intangible assets of
$3.6 million reflect the capitalisation
of Novacq™ development costs.
Dividends paid comprise the 2016 final
dividend of 2.5 cents per share paid on
31 October 2016 and the interim FY17
dividend of 1.5 cents per share, which
was paid on 1 May 2017.
$10.0 million of the $35.0 million proceeds
from the prior year sale of Dry Creek were
received during the year and the final
$6.0 million of proceeds are scheduled
to be received by 31 December 2017.
Proceeds from the sale of property assets
comprise the disposal of the equity
accounted investment in CME ($2.8 million)
and sale of Noorat storage site in western
Victoria ($0.7 million).
Tax payments of $14.7 million were made
during the year compared to $13.9 million
in the prior year. The reduction in the
effective tax rate for FY17, combined with
the cumulative tax instalment payments,
will generate a lower final tax payment
to be made by 1 December 2017.
“Ridley has invested
$19.6 million in
development projects
during the year, the
largest of which
reflects completion
of the new state-of-
the-art feedmill at Lara.”
Ridley Corporation Limited Annual Report 2017 FINANCIAL
REVIEW
Cash flows for the year
Table 3 in $ million
EBIT from operations after transaction costs and before discontinued operation and non-recurring costs
Net cash flow from discontinued operation and non-recurring items
Depreciation and amortisation
Consolidated Group EBITDA
(Increase)/decrease in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles
Dividends paid
Share-based payments
Proceeds from sale of discontinued operation (Dry Creek)
Proceeds from sale of property assets and associate
Payment for investment in Thailand joint venture
Net finance cost payments
Net tax payments
Other items
Cash flow for the period
Opening net debt balance at 1 July
Closing net debt balance at 30 June
Year ended
30 June 2017 30 June 2016
42.1
4.0
15.0
61.1
(19.3)
(14.9)
26.9
(19.3)
(0.7)
(10.6)
(1.0)
19.0
3.0
(1.3)
(5.4)
(13.9)
(5.0)
(8.3)
(32.7)
(41.0)
34.9
4.3
15.2
54.4
(2.6)
(14.2)
37.6
(19.6)
(3.6)
(12.2)
(4.2)
10.0
3.5
-
(5.5)
(14.7)
(1.8)
(10.5)
(41.0)
(51.5)
The cash flow summary with a prior period comparison provided in Table 3 above has been sourced from the audited accounts but has not been
subject to separate review or audit. The Directors believe that the presentation of the unaudited non-IFRS cash flow summary in Table 3 is useful for
users as it reflects the underlying cash flows of the business.
21
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION 22
Ridley Corporation Limited Annual Report 2017 FINANCIAL
REVIEW
FINANCIAL REVIEW CONTINUED
Earnings Per Share
Capital movements
The continuing earnings per share of
8.4 cents reflects the result on a stable
equity platform. The prior year earnings
per share of 9.0 cents reflects the impact
of the discontinued operation from the
sale of Dry Creek in FY16.
Basic earnings per share
– continuing
Basic earnings per share
2017 2016
8.4c
8.4c
8.8c
9.0c
Gearing
Gearing is reported as debt to equity in
accordance with the covenants of the
Group banking facility.
Gearing
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
2016
$’000
69,435
(28,468)
40,967
247,884
16.5%
During FY17, a total of 3,023,250 (FY16:
735,552) shares were acquired by the
Company on market for an outlay of
$4.2 million (FY16: $1.0 million) in
satisfaction of:
(i) the issue of 2,400,000 (FY16: 59,649)
shares allocated to Ridley employees
under the Ridley Long Term Incentive
Plan; and
(ii) 623,250 (FY16: 675,903) shares
allocated under the Ridley Employee
Share Scheme.
There were no new issues of capital
during either financial year.
Dividend
The Board paid a 2016 final dividend
of 2.5 cents per share, fully franked,
on 31 October 2016 and a 2017 interim
dividend of 1.5 cents per share, fully
franked, on 1 May 2017. Ridley does not
have a formal dividend policy but its
intention is to adopt a consistent
dividend profile in the future that reflects
the earnings and cash flow conversion of
the business and the growth opportunities
prevalent and foreseeable at the time of
dividend declaration.
After the Balance Sheet date, a 2017
final dividend of 2.75 cents per share fully
franked and payable on 31 October 2017
was declared by the Directors. The financial
effect of this dividend has not been
brought to account in the consolidated
financial statements for the year ended
30 June 2017 and will be recognised in
subsequent financial reports.
Alan Boyd
Chief Financial Officer
and Company Secretary
23
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION SAFETY, PEOPLE AND INNOVATION
LTIFR and TRFR history and trend
20
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LTIFR
TRFR
Linear (LTIFR)
Linear (TRFR)
LTIFR = Lost Time Injuries expressed as a ratio of hours worked.
TRFR = aggregate of [Lost Time Injuries + Medically Treated Injuries] expressed as a ratio
of hours worked.
100% on the prior year. These logs are
evidence of our people proactively
embracing safety as a core part of their
daily roles, and of course it also gives
us the chance to eliminate or mitigate
the hazards identified.
Our three other key lead indicators are
Monthly Good Manufacturing Practice
Audits, Close-out of Priority Actions and
Safety Training, which recorded positive
results for the year of 100%, 98% and
98% respectively.
As a further exercise in establishing safety
as a core part of our workplace culture,
we ran a dedicated safety awareness
campaign over the summer months of
2016–17, including the Christmas and new
year holiday period. These months were
selected as our analysis showed a historical
tendency for injuries to peak during the
holiday season. The campaign received
very positive feedback from our staff and,
most importantly, saw a significant
reduction in injuries over this period.
Finally, as noted above, FY17 was also
notable for a substantial reduction in
MTI. This reduction was achieved in large
part due to a focus on head and hand
protection following a review of historical
data, which revealed a disproportionate
number of injuries to hands and fingers.
After a period of consultation with our
workers, we recently invested in the latest
range of dedicated gloves and other hand
and head protection, and this investment
has improved the comfort of our workers
in performing their roles while reducing
the risk of injury.
People
It has been a particularly busy year on the
people front, not least the welcoming of
three new teams to the wider Ridley family:
•
In December 2016, we were delighted
to confirm our investment in the local
economy in Geelong with the
recruitment of the Operations team
(plus contractors) at our new Lara
feedmill. The Lara team has since
responded superbly by getting the
new mill up and running and hitting
its targets in the first six months
of operation.
• Around the same time as we were
recruiting for the Lara feedmill, we also
started to recruit a small team at our
dedicated Novacq™ production site
at Yamba, NSW, which now comprises
six full-time employees.
• At the time of writing, we are also
starting to welcome our first employees
to our wholly owned Thai subsidiary
Ridley Corporation (Thailand) Co., Ltd.,
which is an exciting development in
the Chanthaburi prawn growing region
of eastern Thailand.
Outside of our recruitment activities,
FY17 saw us invest in a number of internal
communication programs to help drive
the engagement and alignment of our
people. This investment included the
refresh and publication of our Vision and
Mission Statement, together with focused
daily stand-up meetings at our operational
sites, covering all key metrics such as
safety, quality and production targets.
“FY17 has been another
solid year of progress on
the safety front, both in the
number of injuries/incidents
recorded, and in the extent
to which safety is now
embedded as a core part of
our day-to-day operations
and culture.”
Michael Murphy
General Manager Safety, People
and Technical Development
Safety
As the following chart illustrates, the
downward trend in both our Lost Time
Injury Frequency Rate (LTIFR) and Total
Recordable Frequency Rate (TRFR)
continued during FY17. It was particularly
gratifying to see the TRFR hit a record
low of 7.4, driven by a significant reduction
in Medically Treated Injuries (MTI).
Whilst LTIFR and TRFR are obviously critical
metrics to monitor, it is important to
remember that these are ‘lag indicators’
(measuring historical injury rates), and
that it is equally critical to establish and
monitor ‘lead indicators’ (such as hazards
and near misses) because ultimately
these lead indicators allow us to help
prevent injuries occurring in the first place.
In this context, I am pleased to report a
substantial improvement in the number
of hazards and near misses identified
and reported during FY17, which
represented an increase of approximately
24
Ridley Corporation Limited Annual Report 2017
SAFETY, PEOPLE
& INNOVATION
Furthermore, a dedicated Continuous
Improvement (CI) program is now in the
third year of its existence, and it is very
pleasing to see the results of this program
come to fruition in a number of innovative
and valuable operational improvements
at our sites, for the most part designed
by the employees themselves.
Finally, the training and development
of our people is a fundamental part of
our strategy to build a business with
sustainable profits and growth prospects
well into the future and, in this context,
it was pleasing to see a number of senior
vacancies filled by internal candidates
this year.
We are also currently sponsoring three
employees as PhD candidates, this being
in addition to the number of completed
PhD doctorates already held within the
business and to the external PhDs that
Ridley is sponsoring as part of its
Aquaculture Research Initiative with
Deakin University.
Technical development
Technical development consists of
our activities in applied research and
development (R&D) and innovations in
our products, technology and
Information Technology Services (ITS).
The flagship project in our R&D portfolio
is of course Novacq™ (covered in the
Managing Director’s Review section of
this 2017 Annual Report), but it is by no
means our only successful project. FY17
was notable for the launch of a new ‘sow
block’, designed to improve animal health
and behaviour in the pork industry, as well
as a novel Poultry Protein Concentrate
(PPC) in our Rendering business.
PPC is a high-protein, high-digestibility
ingredient, which importantly, can act
as a substitute for fishmeal in diets. This
is a major advantage given the declining
global stocks of fishmeal and the
imperative to find a more sustainable
solution. The launch of PPC can be
considered as a particular milestone in
that it was developed 100% within the
business, and required the collaboration
of a number of internal commercial
teams and business functions.
25
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION SAFETY, PEOPLE AND INNOVATION CONTINUED
The Rendering business unit is not only
a recycler of animal by-products to
produce a range of red meat, poultry
and fish meal and oil products, it is also
a recycler of water and plant waste.
• Toowoomba: 100% of cardboard,
plastic and scrap metal is segregated
and recycled, while spilt grain,
sweepings and old out of date stock
is captured and mulched.
• Tamworth: plastic, cardboard and bulka
bags are recycled by Challenge
Recycling, a local business providing
training and employment opportunities
for people with disabilities.
• Yamba: the inclusion of the ground-
breaking novel feed ingredient Novacq™
that acts as a metabolic stimulant
enhancing the prawn’s ability to utilise
the feed more efficiently, will help reduce
the reliance on scarce fishery resources
such as fish meal in prawn diets, which
is important for consumers, retailers
and overall industry sustainability.
Energy
Ridley is constantly reviewing its
operations with the objective of reducing
the consumption of energy. Ridley is
continually replacing and upgrading
old equipment, machinery and motors
with significantly more energy
efficient equipment.
During the year, a number of mills
installed power factor correction
equipment to reduce their electricity
energy costs.
Ridley regularly conducts energy audits
across our sites and we have found
opportunities for improvement in boiler
efficiency, pellet presses and compressors.
We submit reports to the National
Greenhouse and Energy Reporting
Authority and report our annual energy
usage as required. From this we are able
to develop baseline data, which will help
us benchmark our performance and
ultimately establish targets for energy
and emissions reductions.
Water
Ridley is always looking for opportunities
to reduce water usage. We have
implemented water management plans
at key sites, identifying and implementing
effective solutions to reduce water
consumption.
From a water perspective, Ridley’s water
bioremediation system at its rendering
plant at Maroota, NSW, is an industry-
leading recycling solution comprising two
covered anaerobic ponds that allow the
site to recycle all of its water requirements
and function on a 100% self-sufficient
basis in terms of water supply. In addition,
gas is generated and used as a source of
energy for the on-site boilers and cookers.
Waste
Sustained efforts are being made
throughout the Ridley organisation to
minimise waste, and we are continually
reviewing site practices to establish if
there are further opportunities to reduce
our waste. Segregated waste streams
are operative across all manufacturing
facilities, and innovative schemes are
in place to recycle and reuse
commercial waste.
Some examples of sustainability
initiatives by site are listed below:
• Maroota: a bulka bag waste compactor
allows the bulka bags to be recycled
rather than go to landfill.
• Mooroopna: our organic waste is
recycled through a local business that
turns this waste by-product into
compost for sale.
• Pakenham: in conjunction with a local
worm farm operator, the worm farm
utilises an estimated 160 tonnes of
biodegradable waste stream products
per annum, such as non-conforming
feed, out of date packaged products
and waste screenings.
Following on from the success of Novacq™
in prawns, the extension of our alliance
with CSIRO to explore applications in
other species was a logical and exciting
step, and we are developing relationships
with universities and recognised experts
in other species to ensure that our diets
and feed products remain at the forefront
of the latest learnings and technologies.
Finally with respect to ITS, in FY17 we
have successfully launched a number
of exciting new applications across the
Ridley business, ranging from state-of-
the-art sales tools to enable our sales staff
to identify and execute sales in the field,
to best in class upgrades to our software
to look after our diet formulations and
production technologies. In this
fascinating period of the digital age, we
are also starting to explore the potential
application of the latest analytics and
predictive modelling tools to drive further
efficiencies in our operations.
Sustainability
In addition to generating returns for our
shareholders, at Ridley we also understand
the importance of our responsibilities from
a social and environmental perspective.
Ridley has a framework of ‘Water, Waste
and Energy’ as a focus for its efforts to
achieve more sustainable practices and
outcomes. By the nature of our business,
energy consumption and water use is
unavoidable, but we strive to utilise these
precious resources responsibly and to
minimise our impact on the environment.
26
Ridley Corporation Limited Annual Report 2017 SAFETY, PEOPLE
& INNOVATION
a range of roles and business units
within Ridley. Significant steps forward
in sustainability often start with small
changes across multiple sites and
locations, and this is exactly the
approach Ridley has taken this year
with the formation of the SWG.
Some of the achievements of the
SWG include:
•
Introduction of the commitment for all
sites to buy only 100% recycled paper.
• Purchasing of 100% recycled toilet
paper, paper towels and tissues
whereby 50% of profits are donated
to build toilets in the developing world.
• Recycling of all electronic waste.
• Participation in Business Clean Up
Australia Day at a local community
reserve in Pakenham, Victoria, with
over 80kg of household refuse such as
plastic bags, containers, paper, bottles
and cans removed in just over an hour.
Community
Ridley is proud to support employees,
suppliers, customers and the
communities where we operate. Our
support of the Garvan Institute and
Aussie Helpers continued in FY17 and is
now entering its fifth year, with the focus
on providing assistance to rural Australia
as detailed in the following pages.
Garvan Institute – promoting
‘Healthy Families, Healthy
Communities’ in regional
Australia
In 2012, the Garvan Institute of Medical
Research (Garvan) and Ridley joined
forces to raise awareness about health
and wellbeing in regional and rural
Australia through the establishment
of the Healthy Families, Healthy
Communities program. This program
continues to:
• advocate the importance of medical
research to rural and regional Australia;
• share important health messages with
rural and regional Australia; and
• convey messages supporting healthy
living and risk mitigation.
Ridley supports improving the health
outcomes of Australians in regional and
remote areas, and in the coming years,
Healthy Families, Healthy Communities
will continue to focus on delivering health
and awareness messages in regional and
rural communities.
27
Business Clean Up Australia Day team at Pakenham.
Australian Packaging
Covenant signatory
The Australian Packaging Covenant
(APC) is a sustainable packaging initiative
that aims to change business culture
to design more sustainable packaging,
increase recycling rates and reduce
packaging litter. Since 2012, Ridley has
been a signatory of the APC and has
committed to developing and
implementing an action plan that will
see the business contribute to the APC
objective and goals of ‘Design, Recycling
and Product Stewardship’.
Each year Ridley is required to submit a
report on our achievements throughout
the year. This year’s commendable
achievements include a recycling rate
of over 60% for both the Pakenham and
St Arnaud sites, as well as development
of new and innovative products such as
Novacq™, which, through its commercial
use, will reduce the reliance on scarce
fishery resources.
Ridley is recognised as an APC High
Performer due to our consistent and
strong progress over the last five years,
with the efforts of the business in the
sustainability space recognised by
receipt of the 2016 Australian Packaging
Covenant High Performer award.
Sustainability Working Group
In 2017, an employee-led Sustainability
Working Group (SWG) was established
to increase and maintain awareness within
Ridley and to engage and motivate
employees in the conduct of their daily
business activities. The SWG comprises
a passionate employee group representing
“Our support of the Garvan Institute and Aussie
Helpers continued in FY17 and is now entering
its fifth year, with the focus on providing
assistance to rural Australia.”
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION SAFETY, PEOPLE AND INNOVATION CONTINUED
Garvan Institute – promoting
‘Healthy Families, Healthy
Communities’ in regional
Australia continued
In FY17, the Healthy Families, Healthy
Communities program was showcased
at the National Farmers’ Federation (NFF)
National Congress 2016. At the Congress,
Ridley was awarded the Life Governor’s
Award by Garvan. This award applauds
the support of leading philanthropists,
both individuals and businesses, who
have contributed more than $500,000
towards advancing medical research
at the Garvan and acknowledges our
investment into building healthy and
sustainable communities across rural
and regional Australia.
Our Ridley site at Tamworth hosted its
second community Healthy Families,
Healthy Communities free forum at the
Ibis Tamworth on 20 November 2016.
The focus was on osteoporosis in the
rural community and was presented
by the Garvan’s Dr Paul Baldock.
The Healthy Families, Healthy Communities
program also contributes content for a
regular health awareness column in the
QantasLink Spirit Magazine, and as
Australia’s largest regional airline, this
provides 5.2 million passengers per
annum access to information on various
health awareness topics.
In October 2016, Garvan released a
new Garvan Rural Health Report titled
‘A Rural Perspective: Cancer and Medical
Research’. This new report provides
Australians, rural stakeholders and policy
makers with a consolidation of data into
the incidence and impact of cancer in
rural Australia. It offers an insight into
how our understanding and treatment
of cancer can be transformed and the
role medical research can play. It also
supports evidence that improvements
that are being experienced in major
cities are often not seen in the rural
communities.
28
Dr Wolfgang Jarolimek, Megan Gourlay (Ridley), Dr Thomas Cox (Garvan).
Importantly, the various Garvan reports
consider the role that medical research
and, in particular, personalised medicine
can play in the health of all Australians.
Moving forward, Garvan will extend its
purpose into rural and regional Australia
by launching a series of reports and
round tables on each of the national
health priorities.
The Ridley Ken Davies Award
The Ridley Ken Davies Award is an annual
award presented to a Garvan researcher
with a $50,000 prize. Ridley has also
established a Workplace Giving program
to establish ongoing support for the
Ridley Ken Davies Award.
The 2017 Ridley Ken Davies Award was
awarded to Dr Thomas Cox, Leader of
Garvan’s Matrix and Metastasis Group
within the Cancer Division. Dr Cox will
use the funding, in collaboration with
Sydney-based pharmaceutical company
Pharmaxis Pharmaceutical Ltd, to examine
the level of two enzymes that have been
linked to the development and progression
of breast cancer.
“This pilot study will allow us to assess
whether these two enzymes, which
have been linked to the presence of,
and poor outcomes in, breast cancer,
can be used as an early indicator of the
disease, allowing for earlier diagnosis
and treatment,” explained Dr Cox.
“Thankyou to Ridley for this award. It
allows my team and me to ask a question
that would otherwise not be possible.
While we know that these enzymes are
detected when a patient has breast
cancer, nobody has asked whether
they can be used as early indicators,
i.e. before clinical signs develop.”
Ridley Corporation Limited Annual Report 2017 Aussie Helpers
Aussie Helpers supports farmers who are
experiencing real hardship. The majority
of these people would not ask for help
nor expect it. Originally started by a
husband and wife team, the organisation
has expanded over the years and remains
unique in its aim to not only encourage
financial support for struggling farmers,
but also in respect of donations of time.
Aussie Helpers is a direct link to the rural
communities where Ridley operates.
Aussie Helpers visits to farming families
are not meant or able to resolve major
problems, however at times just knowing
that someone cares about them and their
difficult and often remote situation offers
a little hope of better days ahead.
Aussie Helpers has helped thousands of
farmers who have been affected by fire,
flood, drought and rising costs of living.
We have been actively helping Aussie
Helpers since becoming a sponsor and
believe that this organisation is very well
placed and committed to assist farmers.
Ridley’s relationship with Aussie Helpers
is consistent with our strategy of working
closely with the communities where our
staff, suppliers and customers live. During
the year, Ridley donated cash and many
tonnes of animal feed directly to Aussie
Helpers to distribute to struggling
farmers. Ridley also donates surplus
computer equipment to farming families
and holds an annual Christmas collection
drive at our Bourke Street Head Office
and at some of our sites to donate gifts
to embattled farming families.
Local community
Ridley is also proud when employees
support a range of charitable activities.
By way of example, Ridley employees
Robin Campbell and Vaughan Chenoweth,
supported in part through Ridley’s site
donation program, actively championed
and participated in the 2016 and 2017
Tour de Cure. The Tour de Cure is a bike
ride for charity that promotes the key
messages around health and wellbeing,
as well as raising precious funds to fund
research against cancer.
A group of employees also completed
the Run Melbourne Fun Run in July 2017,
which gives participants the opportunity
to raise a significant amount of funds
for Garvan.
SAFETY, PEOPLE
& INNOVATION
Robin Campbell on the Tour de Cure.
Ridley Run Melbourne Fun Run team.
Ridley are proudly helping the Heart of our Country
www.aussiehelpers.org.au
29
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION BOARD OF DIRECTORS
Tim Hart
BSc, MM(T), MMkting, MEd
(Melb), PGDIPSI (Oxon),
FAICD, FIML
Chief Executive Officer and
Managing Director
Mr Hart commenced employment
with Ridley on 2 April 2013 as CEO
Designate, was appointed a Director
on 24 June 2013, and was formally
appointed as Chief Executive Officer
and Managing Director on 1 July 2013.
Tim was previously CEO of Sugar
Australia and Sugar New Zealand,
being joint ventures between Wilmar/
CSR and Mackay Sugar Limited.
Prior to that, Tim held management
positions with SCA Hygiene Australasia,
Carter Holt Harvey, ACI Plastics
Packaging, Amcor Limited and
Pasminco Limited.
Other current listed company
directorships
iSignthis Limited.
Former listed company
directorships in the last
three years
None.
Patria M Mann
BEc CA FAICD
Independent Non-Executive
Director
Appointed in March 2008, Mrs Mann
is currently a Non-Executive Director
of Event Hospitality & Entertainment
Limited and Allianz Australia Limited.
Formerly a partner at KPMG and an
experienced director, Patria brings
strong audit, investigation, risk
management and governance
experience to the Board. Patria is a
Chartered Accountant and a Fellow
of the Institute of Company Directors.
Other current listed company
directorships
Event Hospitality & Entertainment
Limited from October 2013.
Former listed company
directorships in the last
three years
Bellamy’s Australia Limited from
10 March 2016 to 18 May 2017.
Dr Gary H Weiss
LLB (Hons) LLM (NZ) JSD
(Cornell, NY)
Independent Non-Executive
Director and Chair
Appointed in June 2010, Dr Weiss
is an Executive Director of Ariadne
Australia Ltd and a former executive
director with Guinness Peat Group plc
(now Coats plc). Gary has LLB (Hons)
and LLM (Dist) degrees from Victoria
University of Wellington, New Zealand,
and a JSD from Cornell University, New
York. Gary has extensive experience
in international capital markets and
is a Director of a number of public
and private companies. Gary was
appointed Ridley Chair on 1 July 2015.
Other current listed company
directorships
Ariadne Australia Limited from 1989.
Premier Investments Limited from 1994.
Tag Pacific Limited from 1988.
Pro-Pac Packaging Limited from 2012.
Thorney Opportunities Limited
from 2013.
The Straits Trading Company Limited
from 2014.
Estia Health Ltd from 24 February 2016.
Former listed company
directorships in the last
three years
Clearview Wealth Limited from
October 2012 until May 2016.
Mercantile Investment Company
Limited from 2012 until February 2015.
Dr Weiss resigned as a non-executive
director and acts as an Alternate
Director for Mr Daniel Weiss.
30
Ridley Corporation Limited Annual Report 2017 BOARD OF
DIRECTORS
Professor Robert J van
Barneveld
B.Agr.Sc. (Hon), PhD,
R.An.Nutr., FAICD
Independent Non-Executive
Director
Appointed in June 2010, Professor
van Barneveld is a registered animal
nutritionist, has a Bachelor of
Agricultural Science with a major in
Animal Production and a PhD from the
University of Queensland. Rob brings
to the Board a wealth of experience
in the agricultural sector, and is the
Group CEO and Managing Director
of the Sunpork Group, which includes
farms, abattoirs, value-adding and
food businesses. Rob also serves
on the Boards of Pork CRC Ltd and
Roseworthy Piggery Pty Ltd, is Deputy
Chair of Autism CRC Ltd and Chairman
of Social Skills Training Pty Ltd. Rob
is an adjunct Professor in the School
of Environmental and Rural Science
at the University of New England.
Other current listed company
directorships
None.
Former listed company
directorships in the last
three years
None.
Ejnar Knudsen
CFA
Mr Knudsen represents
the interests of 19.73%
shareholder AGR Agricultural
Investments LLC (formerly
known as Insitor Holdings,
LLC) and AGR Partners, LLC.
Appointed in June 2013, Mr Knudsen
is the CEO of AGR Partners, LLC, an
associated entity of Ridley’s largest
shareholder, AGR Agricultural
Investments LLC (formerly known as
Insitor Holdings, LLC). Ejnar has more
than 20 years of experience investing
in and operating food and agriculture
companies. Ejnar was Executive Vice
President of Western Milling, a start-up
California grain and feed milling
company that grew to over $1 billion
in sales. Ejnar spent 10 years as Vice
President for Rabobank in New York
managing a loan portfolio, equity
investments, and corporate advisory
services. Prior to founding AGR
Partners, Ejnar was Co-Portfolio
Manager of Passport Capital’s
Agriculture Fund and Craton Capital.
Other current listed company
directorships
None.
Former listed company
directorships in the last
three years
None.
David Lord
MBA (Executive) MBS,
Grad. Dip. Bus (Management)
(Monash) MAICD
Independent Non-Executive
Director
Appointed in April 2016, Mr Lord has
enjoyed a senior management career
primarily in consumer products and
agribusiness, most recently as
President and Chief Operating Officer
of Saputo Dairy Division (Australia)
and as CEO and Managing Director
of Warrnambool Cheese and Butter
Factory Company Limited (WCB)
from 2010 to 2015. Between the
years 2002 and 2009, David was CEO
and Managing Director of Parmalat
Australia, a national dairy food
manufacturing company known for
its Pauls, Ice Break, Vaalia and Smarter
White brands. David has extensive
experience in supply chain and in
the domestic markets for consumer
and industrial food products, and
the marketing of Australian dairy
products in the international
commodity marketplace.
Other current listed company
directorships
None.
Former listed company
directorships in the last
three years
Managing Director Warrnambool
Cheese and Butter Factory Company
Holdings Limited until May 2014.
31
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION FINANCIAL REPORT
Directors’ Report
Remuneration Report – Audited
Lead Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Index of Notes
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
33
42
51
52
53
54
55
56
57
91
92
32
Ridley Corporation Limited Annual Report 2017 DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
The Directors of Ridley Corporation Limited (Ridley or the Company) present their report for the Group (the Group), being the
Company and its subsidiaries, and the Group’s interest in equity accounted investments at the end of, or during, the financial year
(FY) ended 30 June 2017.
1. Directors
The following persons were Directors of Ridley Corporation Limited during the whole of the financial year and up to the date of this
report unless otherwise stated:
GH Weiss
TJ Hart
PM Mann
RJ van Barneveld
E Knudsen
DJ Lord
2. Principal activities
The principal continuing activities of the Group during the year were the production of premium quality, high performance animal
nutrition solutions.
3. Results
For statutory reporting purposes, the Consolidated Statement of Comprehensive Income (page 52) reports a net consolidated after
tax profit of $25.8 million and a pre-tax profit from continuing operations of $34.3 million.
Table 1
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations after tax
Profit from discontinued operation after tax
Net profit attributable to members of Ridley Corporation Limited
4. Review of operations
2017
$’000
34,287
(8,472)
25,815
-
25,815
2016
$’000
40,315
(13,112)
27,203
403
27,606
Operating result
The consolidated Group has recorded Earnings Before Interest and Tax (EBIT) of $34.9 million (Table 2 overleaf), comprising a Ridley
operating result of $45.8 million, less corporate costs of $9.9 million and property costs of $1.0 million.
The Ridley operating EBIT of $45.8 million is $7.9 million below last year’s $53.7 million record as a result of the previously reported
challenges in the Dairy and Aquafeed sectors combined with the absence of a northern Australia dry season, which affected the
performance of the Supplements business unit. The significant energy price increases and the challenge of not being able to pass
through all of these costs have also impacted the operating result for the year and may similarly influence the years ahead absent
any government intervention.
Corporate costs have been contained to be comparable with last year’s result despite expensing $1.1 million in legal costs to resolve
the Huon legal dispute, which was settled on 23 June 2017 and the funds remitted after balance date on 20 July 2017.
The $1.0 million reduction in property costs compared to the prior year reflects a combination of the scale back of activity at Moolap
and the June 2016 sale of Dry Creek, for which deferred consideration proceeds of $10.0 million were received in FY17, with the final
$6.0 million due by 31 December 2017.
Net finance costs for the year of $5.0 million reflect interest on bank debt and the trade payables facility and the amortisation
of establishment and other fees, offset by $0.5 million for the unwinding of the discount on deferred consideration from the sale
of Dry Creek.
The $7.3 million tax expense and 24.4% effective tax rate for FY17 continuing operations reflect an overprovision in the prior year and a
significant increase in research and development (R&D) activity, much of which is associated with the Novacq™ project and a full year
of applied R&D activities at Yamba in NSW.
33
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2017
4. Review of operations continued
Other non-recurring items before tax of $4.3 million comprise $3.6 million of non-recurring, taxable sundry income generated
through the finalisation of the Wasleys insurance claim plus $0.7 million profit on disposal of the investment in Consolidated
Manufacturing Enterprise (CME), an equity accounted joint venture investment. The tax effect of these two transactions is $1.1 million.
The insurance proceeds income was received to replace on a ‘new for old’ basis the feedmill assets damaged by the Pinery, South
Australia, bushfire at Ridley’s Wasleys feedmill. The new assets are reflected in the balance sheet and are being depreciated over their
effective lives.
Profit and loss
Table 2 in $ million
Earnings from operations before finance income and expense and tax expense (EBIT):
2017
2016 Movement
Ridley AgriProducts operations
Corporate
Property – other than Dry Creek
EBIT from operations before non-recurring costs
Net finance costs
Income tax expense – continuing
Net profit from continuing operations after tax before non-recurring items
Discontinued operation – Dry Creek after tax
Other non-recurring items before tax
Tax on other non-recurring items
Reported net profit
Earnings per share (cents):
(i) continuing
(ii) reported
45.8
(9.9)
(1.0)
34.9
(5.0)
(7.3)
22.6
-
4.3
(1.1)
25.8
8.4
8.4
53.7
(9.6)
(2.0)
42.1
(5.4)
(12.6)
24.1
0.4
3.6
(0.5)
27.6
8.8
9.0
(7.9)
(0.3)
1.0
(7.2)
0.4
5.3
(1.5)
(0.4)
0.7
(0.6)
(1.8)
(0.4)
(0.6)
The profit and loss summary with a prior period comparison provided in Table 2 above has been sourced from the audited accounts but has not been
subject to separate review or audit. The Directors believe that the presentation of the unaudited non-IFRS profit and loss summary in Table 2 is useful
for users as it reflects the underlying profits of the business.
Core business operations
Sales revenue for FY17 of $852.9 million was down $59.7 million (6.5%) on last year’s $912.6 million, and reflects 1.93 million
(2016: 1.94 million) tonnes of stockfeed and rendered product sold.
The core business recorded an operating result for the full year of $45.8 million, which is a resilient result achieved in a difficult trading
period for two of Ridley’s major sectors, Dairy and Aquafeed. Furthermore, the absence of a dry season in northern Australia adversely
impacted demand for dry season blocks and caused a significant turnaround in performance for the Supplements business unit from
the prior year.
The earnings performance of the Poultry, Pig, and Packaged Products sectors for FY17 were strong, while a positive aggregate
Rendering result was achieved with the reduction in red meat raw material supply to the Laverton plant compensated by strong
poultry processing and trading volumes.
Poultry and Pig volumes were both up on the prior year and enjoy the prospect of further growth in the future. The lower
manufacturing cost per tonne achieved by switching volume to the newly commissioned Lara feedmill is expected to generate
margin improvement in the year ahead, and the commercial team will continue execution of its customer plan to attract new
business to the Lara feedmill.
Rendering raw material intake volumes were down at Laverton but average selling prices up, whereas raw material intake was up
but selling prices were down at Maroota compared to the equivalent prior period. The variation in performance drivers reflects the
different markets for red and white meat and fish, with the overall Rendering result for the year up on the prior year. Improved plant
reliability and reduced operating costs have been a feature for the year at Laverton, however much of the gains have been consumed
by significant increases in energy costs. The challenge for the year ahead is to continue to generate processing efficiencies to offset
further rises in energy costs and to maintain pricing and improve raw material intake volumes in a highly competitive market.
Margin management and product range remain the keys to a fourth successive performance improvement for Packaged Products,
with a number of new product ranging and brand refresh campaigns successfully run to consolidate sales volumes and build a
platform for future growth.
34
Ridley Corporation Limited Annual Report 2017 In the previous year, Ridley’s Dairy earnings were at a historical high on the back of a high milk price and low raw material grain prices
for the first 10 months and despite a sudden collapse of confidence in May and June 2016 as a result of the imposition of retrospective
reductions to the milk price offered by the industry’s largest milk processors.
In FY17, Dairy sector volumes were down 58,000 tonnes on last year, with a corresponding impact recorded in the manufacturing
cost per tonne arising from the underutilisation of Dairy feedmill capacity. Positive sentiment for a Dairy sector recovery has carried
through to create a far more positive outlook at the start of the new year compared to 12 months ago.
Without the Huon salmon sales volumes, the full year Aquafeed volumes were 18,000 tonnes down on last year, with a
commensurate reduction in earnings. Ridley remains positive on the medium to long term outlook for aquaculture, and announced
on 20 January 2017 its intention to build a new aquafeed mill in Tasmania. Since the announcement date, Ridley has executed a
contract to acquire its feedmill site at Westbury, situated between Burnie and Launceston in northern Tasmania, and is working
through the development approval process to complete the contract and commence construction in the coming year.
The Supplements business was severely impacted in FY17 by the absence of a dry season in northern Australia, with the abundance
of natural pasture resulting in significantly lower demand for the lick blocks compared to the prior year. The year ended on a more
positive note due to the second half year focus on a strategic pricing and marketing strategy for wet season blocks and loose mix
products and on sourcing new markets for the sale of magnesium capsules.
Balance Sheet
There have been the following material movements in the Balance Sheet over the last 12 months:
(i)
An increase of $10.5 million in net debt for the year as explained in the following section.
(ii) An increase in current receivables of $5.1 million to $117.5 million, which includes the non-payment during the year of $17.7 million
of Huon debt, which was recovered in full on 20 July 2017, with Ridley making a payment, net of insurance, to Huon of $1.0 million
which fully utilised the provision for non-recovery.
(iii) A $4.0 million reduction in inventory, which is a result of an ongoing effort to reduce the number and ageing of inventory items.
(iv) A $4.7 million reduction in non-current receivables that reflects the transfer of the final Dry Creek deferred consideration payment
of $5.5 million from non-current to current, offset by the $0.8 million prepayment of long term pond lease rental in Thailand.
(v) A $22.6 million increase in property, plant and equipment, which reflects completion of the new Lara feedmill at north east
Geelong and a number of profit maintaining and improving projects across a number of Ridley sites, including Narangba and
Yamba and completion of the rebuild at Wasleys.
Cash flow and working capital
The operating cash inflow for the year (Table 3) after working capital movements and maintenance capital expenditure was
$37.6 million, an improvement of $10.7 million on last year’s $26.9 million.
Maintenance capital expenditure of $14.2 million continues to be managed below the $15.2 million aggregate charge for depreciation
and amortisation.
Ridley has invested $19.6 million in development projects during the year, the largest of which reflects completion of the new
state-of-the-art feedmill at Lara.
Payments for intangible assets of $3.6 million reflect the capitalisation of Novacq™ development costs.
Dividends paid comprise the 2016 final dividend of 2.5 cents per share paid on 31 October 2016 and the interim FY17 dividend
of 1.5 cents per share, which was paid on 1 May 2017.
$10.0 million of the $35.0 million proceeds from the prior year sale of Dry Creek were received during the year and the final
$6.0 million of proceeds is scheduled to be received by 31 December 2017.
Proceeds from the sale of property assets comprise the disposal of the equity accounted investment in CME and sale of Noorat
storage site in western Victoria.
Tax payments of $14.7 million were made during the year compared to $13.9 million in the prior year. The reduction in the effective
tax rate for FY17, combined with the cumulative tax instalment payments, will generate a lower final tax payment to be made by
1 December 2017.
35
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2017
4. Review of operations continued
Cash flows for the year
Table 3 in $ million
EBIT from operations after transaction costs and before discontinued operation and non-recurring costs
Net cash flow from discontinued operation and non-recurring items
Depreciation and amortisation
Consolidated Group EBITDA
(Increase)/decrease in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles
Dividends paid
Share-based payments
Proceeds from sale of discontinued operation (Dry Creek)
Proceeds from sale of property assets and associate
Payment for investment in Thailand joint venture
Net finance cost payments
Net tax payments
Other items
Cash flow for the period
Opening net debt balance at 1 July
Closing net debt balance at 30 June
Year ended
30 June 2017 30 June 2016
42.1
4.0
15.0
61.1
(19.3)
(14.9)
26.9
(19.3)
(0.7)
(10.6)
(1.0)
19.0
3.0
(1.3)
(5.4)
(13.9)
(5.0)
(8.3)
(32.7)
(41.0)
34.9
4.3
15.2
54.4
(2.6)
(14.2)
37.6
(19.6)
(3.6)
(12.2)
(4.2)
10.0
3.5
-
(5.5)
(14.7)
(1.8)
(10.5)
(41.0)
(51.5)
The cash flow summary with a prior period comparison provided in Table 3 above has been sourced from the audited accounts but has not been
subject to separate review or audit. The Directors believe that the presentation of the unaudited non-IFRS cash flow summary in Table 3 is useful
for users as it reflects the underlying cash flows of the business.
Segments
The ongoing reportable segments are as follows:
AgriProducts Australia’s leading supplier of premium quality, high performance animal nutrition solutions.
Property
Realisation of opportunities in respect of surplus property assets and sales of residual property site assets.
The residual sites are now the former salt fields at Moolap and Lara.
Risks
The following is a summary of the key continuing significant operational risks facing the business and the way in which Ridley
manages these risks:
• Cyclical fluctuations impacting the demand for animal nutrition products – by operating in several business sectors within the
domestic economy (namely Poultry and Pig, Dairy, Aqua, Beef and Sheep, Packaged Products and Rendering), some of which have
a positive or negative correlation with each other, Ridley is not dependent upon a single business sector and is able to spread the
sector and adverse event risk across a diversified portfolio.
• Influence of the domestic grain harvest – through properly managed procurement practices and many of our customers
retaining responsibility for the supply of raw materials, the impact of fluctuations in raw material prices associated with domestic
and world harvest cycles is mitigated.
• Influence of natural pasture on supplementary feed decision making – whilst not being able to control the availability of natural
pasture, Ridley believes there is a compelling commercial justification for supplementary feeding in each of its sectors of operation,
whether that be measured in terms of milk yield and herd wellbeing or feed conversion ratios in poultry, pig and aquafeed.
• Impact on domestic and export markets in the event of disease outbreak – Ridley has a strategy of mill segregation in place
to effectively manage its own risk of product contamination across the various species sectors. Ridley also has a footprint of mills
dispersed across the eastern states of Australia that provides a geographical segregation of activities. The risk to Ridley is therefore
more of a third party market risk, such as what happened with the outbreaks of Avian Influenza three years ago, which effectively
closed most of the export markets for poultry meal products.
• Customer concentration and risk of regional consolidation – Ridley endeavours to enter into long term sales and supply contracts
with its customers and suppliers. This provides surety of volumes required to plan appropriate shift structures, procurement and
supply chain activities in the short term and capital expenditure programs in the long term, while actively managing the risk of
stranded assets and backward integration into feed production by significant customers.
36
Ridley Corporation Limited Annual Report 2017 • Surplus property holdings – following the realisation of the majority of its surplus land assets, Ridley has released its dedicated
property team. Ridley has retained in-house legal resources supported when needed by external experts to manage the maintenance
of existing and potential new operating sites. Ridley continues to engage with the State Government and alongside its development
partner to secure appropriate redevelopment approvals to optimise the realisation of shareholder value from the remaining surplus
property at Lara and Moolap.
• Corporate – risks such as safety, recruitment and retention of high-calibre employees, inadequate innovation and new product
development, customer credit risk, interest rate, foreign exchange and inappropriate raw material purchases are all actively managed
through the Company’s risk management framework, which includes review and monitoring by the executive lead team.
Earnings per share
The continuing earnings per share of 8.4 cents reflects the result on a stable equity platform. The prior year earnings per share
of 9.0 cents reflects the impact of the discontinued operation from the sale of Dry Creek in FY16.
Basic earnings per share – continuing
Basic earnings per share
Gearing
Gearing is reported as debt to equity in accordance with the covenants of the Group banking facility.
Gearing
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
2017
8.4c
8.4c
2016
8.8c
9.0c
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
2016
$’000
69,435
(28,468)
40,967
247,884
16.5%
Capital movements
During FY17, a total of 3,023,250 (FY16: 735,552) shares were acquired by the Company on-market for an outlay of $4.2 million
(FY16: $1.0 million) in satisfaction of:
(i) the issue of 2,400,000 (FY16: 59,649) shares allocated to Ridley employees under the Ridley Long Term Incentive Plan; and
(ii) 623,250 (FY16: 675,903) shares allocated under the Ridley Employee Share Scheme.
There were no new issues of capital during either financial year.
Dividend
The Board paid a 2016 final dividend of 2.5 cents per share, fully franked, on 31 October 2016 and a 2017 interim dividend of 1.5 cents
per share, fully franked, on 1 May 2017. Ridley does not have a formal dividend policy, but its intention is to adopt a consistent dividend
profile in the future that reflects the earnings and cash flow conversion of the business and the growth opportunities prevalent
and foreseeable at the time of dividend declaration.
After the balance sheet date, a 2017 final dividend of 2.75 cents per share fully franked and payable on 31 October 2017 was declared
by the Directors. The financial effect of this dividend has not been brought to account in the consolidated financial statements for
the year ended 30 June 2017 and will be recognised in subsequent financial reports.
Property
A two-stage application for subdivision is in progress for the southern section of the Lara site, which excludes the two large plots
of Ridley-owned land at Lara, which remain available for purchase. The first stage of the subdivision was approved during the year
and the new land titles are expected to be issued after balance date. The expected net returns will be examined in the coming year
to determine whether or not to proceed to stage two of the plan, which will provide opportunity for further small lot sales and
development of a local aquaculture precinct for the region.
With regard to the proposed Nelson Cove development at Moolap, the Victorian State Government’s published vision for the leased
and Ridley-owned land at Moolap was disappointing and a missed opportunity to generate jobs and prosperity for the region. Ridley
and its development partner’s endeavour to engage with the government in meaningful discussion on value creation will continue
in the year ahead, but with property holding costs restricted to only essential and value-adding activities.
37
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2017
4. Review of operations continued
Outlook
As previously reported, difficult trading conditions were experienced throughout the 2017 financial year in the Dairy, Aquafeed and, to
a lesser extent, the Supplements sectors, and this pulled the operating result back from last year’s third successive record operating
result. Continued growth was experienced in the Poultry and Pig and Packaged Products sectors, with positive poultry growth offset
by reductions in red meat raw material supply providing a counterbalance of overall performance in the Rendering business sector.
The 12-month outlook for the Dairy sector is a lot more positive this year than last year, when the industry was still reeling from the
imposition of retrospective reductions in milk price payments. With a return to more conventional milk pricing policies and a stronger
milk price forecast, coupled with the prospect of continuing low grain prices as a result of a record harvest, dairy farmer sentiment is
more positive as we start the new financial year.
While the replacement of Huon salmon sales volumes is a longer term prospect, the existing and potential salmon customer base
continues to grow at a healthy rate. Ridley’s commitment to invest in aquaculture in Tasmania and restructure its operations at
Narangba provides a strong signal of support to the salmon industry following a stressful year of warm water, El Nino and
environmental and oxygenation issues in Macquarie Harbour.
The Supplements business unit trading volumes were severely impacted by the absence in FY17 of a dry season in northern
Australia. The consequent abundance of natural pasture effectively closed the seasonal trading window for dry season lick blocks
compared to the prior year. A return to a more traditional dry season weather pattern is expected to return the Supplements
business unit to profitability.
Our other core business sectors are expected to move forward in a positive manner, with a full year of operation from the new Lara
feedmill and conversion of opportunities to secure new volumes and customers by virtue of the location and efficiency of the new,
state-of-the-art plant.
The securing of the Novacq™ production ponds at Chanthaburi as announced on 23 June 2017 is a significant milestone in moving
the project forward in Thailand, and we are expeditiously preparing the ponds for commencement of local production. The inclusion
of locally produced Novacq™ in prawn feed manufactured at our 49% owned feedmill in Chanthaburi to be trialled at our partner’s
on-site prawn farm is the next stage gate for the project in Thailand.
At our Novacq™ production site at Yamba, NSW, we are looking to select our preferred dewatering and drying technologies and to
export them to Thailand to complete the entire production cycle. We will be conducting further feed trials in the coming prawn
season as we continue to develop the overall value proposition for the industry.
While great progress has already been made in improving efficiency and driving down costs of production and harvesting from a
daily process of continuous improvement, we are still in the third quarter of a five-year program of applied R&D and there is a body
of work still to be conducted prior to full scale commercial launch of the Novacq™ inclusive range of diets.
To complement the expected organic growth, we are continuing to develop the concepts and plans for the modernisation of our
feedmills in a number of key regions, and to identify and secure the combination of incremental volume and freight/logistics savings
or arbitrages needed for a new feedmill to pass the internal Ridley project hurdle rates.
In addition to organic growth through a program of mill modernisation, Ridley is continually looking for acquisition opportunities
consistent with its long term strategy to be Australia’s leading producer of premium quality, high performance animal nutrition solutions.
5. Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the year ended 30 June 2017.
38
Ridley Corporation Limited Annual Report 2017 6. Dividends and distributions to shareholders
Dividends paid to members during the financial year were as follows:
Interim dividend
In respect of the 2017 financial year paid on 1 May 2017 of 1.5 cents, 100% franked
Final dividend
In respect of the 2016 financial year paid on 31 October 2016 of 2.5 cents, 100% franked
2017
$’000
4,618
7,695
12,313
7. Environmental regulation
The Group’s manufacturing activities are subject to environmental regulation. Management ensures that any registrations, licences
or permits required for the Group’s operations are obtained and observed.
Ridley has environmental risk management reporting processes that provide senior management and the Directors with periodic
reports on environmental matters, including rectification actions for any issues as discovered. In accordance with its environmental
procedures, the Group monitors environmental compliance of all of its operations on an ongoing basis. The Directors are not aware
of any environmental matters likely to have a material financial impact.
Greenhouse gas reporting requirements
The Group is subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER), which
governs the reporting and dissemination of information about greenhouse gas emissions, greenhouse gas projects and energy use
and production. Ridley has submitted its Annual Report in compliance with its reporting requirements.
8. Directors’ and executives’ remuneration
Refer to the Remuneration Report.
9. Share options and performance rights
Unissued ordinary shares of Ridley Corporation Limited and controlled entities under options and performance rights at the date of
this report are as follows:
Ridley Corporation Long Term Incentive Plan (performance rights)
Ridley Employee Share Scheme (options)*
* The share grant and supporting loan together in substance comprise a share option.
Number
7,925,000
4,625,847
Expiry date
Various
Various
No holder has any right under the above plan and scheme to participate in any other share issue of the Company or of any other
entity. The Company will issue shares when the options and performance rights are exercised. Further details are provided in note 24
in the Notes to the Financial Statements and in the Remuneration Report.
The names of all persons who currently hold options granted under the option plans are entered in the register kept by the Company,
pursuant to section 215 of the Corporations Act 2001. The register is available for inspection at the Company’s registered office.
10. Information on Directors
Particulars of shares and options in the Company held by Directors, together with a profile of the Directors, are set out in the Board
of Directors section in the Annual Report and in the Remuneration Report.
39
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2017
11. Post balance date events
The amount of $17.7 million owing from Huon was the subject of legal recovery proceedings that commenced in August 2016.
The legal proceedings were settled by mediation in June 2017 and the receivable was recovered in full on 20 July 2017. As part of
the settlement, Ridley made a payment, net of insurance, of $1.0 million to Huon, which fully utilised its provision for non-recovery.
No other matters or circumstances have arisen since 30 June 2017 that have significantly affected, or may significantly affect:
(i) the Group’s operations in future financial years, or
(ii) the results of those operations in future financial years, or
(iii) the Group’s state of affairs in future financial years.
12. Company Secretary
The Company Secretary during the year was Mr Alan Boyd, who was appointed on 27 July 2009. Mr Boyd is the Group’s Chief
Financial Officer and is a fellow of the Governance Institute of Australia and a member of the Chartered Accountants Australia and
New Zealand.
13. Insurance
Regulation 113 of the Company’s Constitution indemnifies officers to the extent now permitted by law.
A Deed of Indemnity (Deed) was approved by shareholders at the 1998 Annual General Meeting. Subsequent to this approval,
the Company has entered into the Deed with all the Company’s Directors, the secretary of the Company, and the Directors of all
the subsidiaries.
The Deed requires the Company to maintain insurance to cover the Directors in relation to liabilities incurred while acting as a
Director of the Company or a subsidiary and costs involved in defending proceedings.
During the year the Company paid a premium in respect of such insurance covering the Directors and secretaries of the Company
and its controlled entities, and the general managers of the Group.
14. Meetings of Directors
The number of Directors’ meetings and meetings of committees of Directors held during the financial year, and the number of meetings
attended by each Director as a committee member, are as follows:
Directors
Board
Audit and Risk
Committee
Remuneration
Committee
Ridley Innovation and
Operational Committee
GH Weiss
TJ Hart
PM Mann
RJ van Barneveld
E Knudsen
DJ Lord
H
13
13
13
13
13
13
A
13
13
13
12
11
13
H
4
-
4
4
-
-
A
4
-
4
4
-
-
H
4
-
-
-
-
4
A
4
-
-
-
-
4
H
-
4
-
4
4
-
A
-
4
-
4
4
-
H: Number of meetings held during period of office.
A: Number of meetings attended.
40
Ridley Corporation Limited Annual Report 2017 15. Non-audit services
The Company may decide to employ the auditor (KPMG) on assignments in addition to the statutory audit function where the
auditor’s expertise and experience with the Company and/or the Group are important and valuable.
The Board has considered the non-audit services and, in accordance with the advice received from the Audit and Risk Committee,
is satisfied that the provision of such expertise on separately negotiated fee arrangements is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit
services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001
for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making
capacity for the Company, acting as advocate for the Company, or jointly sharing economic risk and rewards.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 51
and forms part of this report.
During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity and its
related practices:
Tax services
Transaction advisory and other services
Total
$
107,950
5,000
112,950
16. Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by
the Australian Securities and Investments Commission relating to the ‘rounding off’ of amounts in the Directors’ Report and financial
statements. Amounts in the Directors’ Report and the consolidated financial statements have been rounded off to the nearest
thousand dollars in accordance with that legislative instrument, unless otherwise indicated.
Signed in Melbourne on 23 August 2017 in accordance with a resolution of the Directors.
G H Weiss
Director
T J Hart
Director
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
REMUNERATION REPORT – AUDITED
The Directors of Ridley Corporation Limited (Ridley or Company) present the Remuneration Report
prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the
Group, being the Company and its subsidiaries (Group), and the Group’s interest in equity accounted
investments, for the financial year ended 30 June 2017. This report forms part of the Directors’ Report
for the year ended 30 June 2017.
Remuneration Committee
The Remuneration Committee (throughout the Remuneration Report referred to as the Committee), consisting of at least two
independent Non-Executive Directors, advises the Ridley Board of Directors (Board) on remuneration policies and practices generally
and makes specific resolutions in its own right and recommendations to the Board on remuneration packages and other terms of
employment for the Managing Director, other senior executives and Non-Executive Directors. The Committee is not responsible for
evaluating the Board’s performance, reviewing Board size and composition and setting the criteria for membership and candidates
to fill vacancies; these responsibilities are managed by the Ridley Board.
Executive remuneration and other terms of employment are reviewed annually by the Committee, having regard to performance
against goals set at the start of the year, relevant comparative information and independent expert advice.
The number of meetings held during the year is shown as item 14 of the Directors’ Report.
Services from remuneration consultants
The Committee has previously engaged both the Godfrey Remuneration Group (GRG) and Hay Group (Hay) as remuneration
consultants to the Board. GRG and Hay were engaged to provide remuneration recommendations relating to key management
personnel (KMP) of the Group, to provide advice outlining retention strategies for key senior managers in the event of a change
in control event for the Group, and to provide recommendations in relation thereto. The Board adopted these recommendations
in prior years and have continued to apply the existing policies and practices throughout the 2017 financial year.
Remuneration of Directors and executives
Principles used to determine the nature and amount of remuneration
Remuneration packages are set at levels that are intended to attract and retain Directors and executives capable of directing and
managing the Group’s operations and achieving the Group’s strategic objectives.
Executive remuneration is thoroughly benchmarked against a Comparator Group of Companies comprised of ASX, globally listed
and private companies of similar function and size to Ridley.
Executive remuneration is structured to align reward with the achievement of annual objectives, successful business strategy
implementation and shareholder returns. The remuneration strategy is to:
(i) offer a base Total Employment Package (TEP) that can attract talented people;
(ii) provide short term performance incentives to encourage personal performance;
(iii) provide long term incentives to align the interests of executives more closely with those of Ridley shareholders; and
(iv) reward sustained superior performance, foster loyalty and staff retention.
The overall level of executive reward takes into account the performance of the Group primarily for the current year.
42
Ridley Corporation Limited Annual Report 2017 Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for creation of shareholder wealth, the Committee has regard for the following
indices in respect of the current financial year and the previous four financial years.
Profit/(loss) attributable to members of Ridley
Corporation Ltd
Earnings Before Interest, Tax, Depreciation and
Amortisation
Earnings Before Interest and Tax
Cash flow from operating activities
Return on shareholders’ funds before significant
items and discontinued operations
Dividends paid
TSR#
Short term incentive to KMP
2017
2016
$’000
25,815
27,606
$’000
$’000
$’000
%
$’000
%
$’000
54,484
39,264
29,655
10.2
12,313
1.8
-
61,125
45,734
17,612
11.4
10,774
15.0
1,322
2015
21,171
51,456
36,141
47,059
9.4
10,774
62.0
1,559
2014
2013
17,613
(21,694)
41,011
27,435
31,349
7.8
4,617
8.0
1,142
(3,856)
(13,272)
52,583
(6.8)
11,543
(19.1)
862
# Total shareholder returns (TSR) is calculated as the change in share price for the year plus dividends paid per share for the year, divided by the
opening share price.
Non-Executive Directors
Directors’ fees
Non-Executive Directors’ fees are determined within an aggregate Non-Executive Directors’ fee pool limit, which is reviewed periodically
with proposed amendments recommended to shareholders for approval. The maximum currently stands at $700,000 as approved
at the 2003 Annual General Meeting. The Chair receives incremental fees, and the Chair of the Audit and Risk Committee and Ridley
Innovation and Operational Committee each receive $10,000 of incremental fees, in addition to the base Director fees. The total
amount paid to Non-Executive Directors in FY17 was $535,000 (FY16: $601,133).
Executives
The executive pay and reward framework comprises the three components of base pay and benefits, short term incentives and long
term incentives.
Base pay and benefits
Executives receive a base package that may be delivered as a mix of cash and, at the executive’s discretion, certain prescribed
non-financial benefits, including superannuation in excess of the superannuation contribution guarantee payments.
External consultants provide analysis and advice to ensure the base package and benefits for non-executive staff are set to reflect
the market rate for a comparable role. An executive’s pay may also be reviewed on promotion.
The Group sponsors the Ridley Superannuation Plan – Australia (the Fund), and contributes to other employee nominated
superannuation plans. The Fund provides benefits on a defined contribution basis for employees or their dependants on
retirement, resignation, total and permanent disability, death and, in some cases, on temporary disablement.
Short term incentives
Executives and employees in senior positions are eligible for short term incentive (STI) payments based on two components, being
the financial performance of the Group (60%) and the overall performance of the individual (40%) as measured against personal key
performance indicators (KPIs) (FY16: financial to personal split 60%:40%).
Each year, appropriate KPIs are set to align the STI plan with the priorities of the Group through a process that includes setting stretch
target and minimum performance levels required to be achieved prior to any payment of an STI. KPIs are initially set by the Board for
the Managing Director based on the adopted business strategy, and then these are cascaded down to the KMPs, CEO Direct Reports
and then throughout the business, recognising the relative contributions required of each role within the organisation.
The Group financial performance component of the STI is assessed against budgeted Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA) and against Net Profit After Tax (NPAT). The measures of personal performance include targets on safety,
training, operational excellence, customer focus, sustainability and community, and people values and development.
Following the end of the 2017 financial year, the financial results and each individual’s performance against KPIs have been reviewed
to determine STI payments for each executive. For FY17, the Committee assessed the financial performance hurdles as being 83%.
43
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
REMUNERATION REPORT – AUDITED CONTINUED
Short term incentives continued
Given the shortfall in consolidated financial performance to budget and to the prior year for the reasons as outlined In the Review
of Operations Section 4 of the Directors’ Report, the Committee recommended that no STI be awarded In respect of FY17. The
Committee’s recommendations were adopted by the Board. When awarded, the STI is ordinarily payable in cash in September,
after the release of the full year financial results.
STI incentives by role range from 100% of the base package for the CEO down to 10% of the base package for the least senior
participants in the plan. The KPIs are designed to incentivise successful and sustainable financial outcomes, instil a culture where
safety is paramount, and encourage excellence, innovation and behaviour in compliance with the Ridley Code of Conduct.
Long term incentives
In the year ended 30 June 2017, executives’ and employees’ long term incentives were provided by way of participation in the Company-
wide Ridley Employee Share Scheme. There was also an annual issue of performance rights to senior executives and officers under
the Ridley Long Term Incentive Plan with an effective grant date of 1 July 2016 and standard terms and conditions as stated below.
The long term incentive programs align the interests of executives more closely with those of Ridley shareholders in rewarding
sustained superior performance, whilst also fostering Company-wide loyalty and staff retention through the Ridley Employee Share
Scheme. Company policy prohibits employees from entering into any transaction that is designed or intended to hedge any
exposure to Ridley securities.
Current long term incentive plans
Ridley Corporation Long Term Incentive Plan (LTIP)
The purpose of the LTIP is to provide long term rewards through the delivery of long term, sustainable business objectives that are
directly linked to the generation of shareholder returns.
Under the LTIP, which was introduced in October 2006, selected executives and the Managing Director may be offered a number
of performance rights (Right). Each Right provides the entitlement to acquire one Ridley share at nil cost.
Rights vest subject to continued employment (with an exclusion for cessation of employment for a Qualifying Reason such as death,
disability or redundancy) and to TSR performance relative to the companies ranked from 101 to 300 in the ASX/S&P 300 as defined at
the date of grant. Performance is measured over the three-year period from the effective date of grant. 50% of the Rights vest if
Ridley ranks at the 50th percentile, and 100% vest if Ridley ranks at the 75th percentile or above. There is straight line proportionate
vesting of the balance from 50% to 100% between the 51st percentile and 75th percentiles. The TSR of Ridley and the comparator
companies is measured at the end of the performance test period by an independent third party which submits a report detailing
the extent of any vesting in accordance with the above rules. To the extent that the performance criteria are met, the Rights are
automatically exercised to acquire shares. If the performance criteria are not satisfied, the Rights lapse.
TSR is the Company’s preferred performance measure as it provides a comprehensive measure of Company performance against
a comparator peer group from the perspective of value delivered to shareholders through a combination of share price growth,
dividends and capital returns.
If Ridley is subject to a change of control during the vesting period, the Rights may vest to participants at that time, subject to
performance testing and the discretion of the Board.
If a participant ceases employment prior to the end of the vesting period due to retirement, redundancy, permanent disability or
death any unvested Rights may vest to that participant, subject again to performance testing and the discretion of the Board. If a
participant ceases employment prior to the end of the vesting period due to resignation, dismissal or any other reason that makes
the participant no longer eligible to participate under the rules of the plan, any unvested Rights will lapse.
The shares to satisfy awards under the plan may be newly issued or purchased on-market, with the practice in recent years being
to purchase the shares on-market.
During the year ended 30 June 2017, 2,825,000 (2016: 2,800,000) Rights were issued under the LTIP, of which 1,300,000 (2016:
1,350,000) were granted as remuneration to KMP and the balance issued to other, non-KMP senior executives within the organisation.
44
Ridley Corporation Limited Annual Report 2017
Summary of Ridley TSR performance
The following table provides a summary of Ridley TSR performance for each tranche of the LTIP Rights on issue at year end measured
against the median percentage rankings amongst competitors and using 30 June 2017 as the hypothetical end date. TSR calculations
use a 30-day average period rather than a single day start date for the commencement of each vesting period.
Start date
1 July 2014
1 July 2015
1 July 2016
TSR Ridley
85.6%
21.8%
1.9%
Median TSR
comparison
3.5%
7.0%
4.3%
Percentile
83.0
60.7
46.7
Number of
rights on issue
2,450,000
2,675,000
2,800,000
Hypothetically
vested at
30 Jun 2017
2,450,000*
1,878,073
-
Hypothetically
vested at
30 Jun 2017
100%
70.2%
-
* All 2,450,000 Rights vested and 2,450,000 shares awarded after balance date.
Graph: Ridley share price performance (last three years)
Comparison of growth of Ridley (RIC) share price to the ASX Small Ords and ASX 200 Accumulation Index for FY17:
$2.00
Ridley TSR
Ridley Share Price
ASX 200 Accumulation Index (based to Ridley)
Small Ords Accumulation Index (based to Ridley)
$1.75
$1.50
$1.25
$1.00
$0.75
$0.50
91%
74%
23%
21%
4
1
n
u
J
0
3
4
1
p
e
S
0
3
4
1
c
e
D
1
3
5
1
r
a
M
1
3
5
1
n
u
J
0
3
5
1
p
e
S
0
3
5
1
c
e
D
1
3
6
1
r
a
M
1
3
6
1
n
u
J
0
3
6
1
p
e
S
0
3
6
1
c
e
D
1
3
7
1
r
a
M
1
3
7
1
n
u
J
0
3
Ridley Corporation Special Retention Plan
The Ridley Corporation Special Retention Plan (SRP) was developed specifically to retain and motivate key executives. Under the SRP,
selected executives and the Managing Director may be offered a number of performance rights (SRP Rights). The Plan offer is made
in accordance with the rules of the Ridley Long Term Incentive Plan except that there are no disposal restrictions and the cessation
of employment has been superseded, such that the SRP Rights under this offer vest in full on the earlier occurrence of either
completion of two years of service from the date of grant; ceasing to be an employee of Ridley because of a sale of a subsidiary
entity; and occurrence of a change of control event. Each SRP Right provides the entitlement to acquire one Ridley share at the end
of the service period. During the year ended 30 June 2017, 150,000 (2016: nil) SRP Rights were issued under the SRP, of which nil
(2016: nil) were granted as remuneration to KMP but to employees critical to the success of the Novacq™ project.
Ridley Employee Share Scheme (Scheme)
Under the Scheme, shares are offered to all permanent Australian employees with a minimum of 12 months’ service prior to the offer
date, at a discount of up to 50%, and financed by an interest-free loan secured against the shares. The maximum discount per
employee is limited to $1,000 annually in accordance with current Australian taxation legislation. Dividends on the Scheme shares are
applied against any loan balance until such balance is fully extinguished. The amount of the discount and number of shares allocated
is at the discretion of the Board. The purpose of the Scheme is to align employee and shareholder interests. 623,250 (2016: 675,903)
shares were acquired on-market and allocated to participating employees under the Scheme during the year. The total value of the
shares purchased on-market was $885,000 (2016: $962,000).
45
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
REMUNERATION REPORT – AUDITED CONTINUED
Current long term incentive plans continued
Shares purchased on-market
The following table reflects the number and total market value of shares that were acquired on-market and allocated to participating
employees under the incentive plans during the financial year.
Incentive plan
Employee Share Scheme
Long Term Incentive Plan*
Total
Number of shares
Market value
2017
623,250
2,400,000
3,023,250
2016
675,903
59,649
735,552
2017
$’000
885
3,392
4,277
2016
$’000
962
88
1,050
* Shares awarded under the Long Term Incentive Plan are issued on a pro-rata basis in respect of employees whose departure from the Ridley Group
is for a qualifying reason as defined In the Plan rules.
Directors and key management personnel
The following persons were the Directors and executives with the greatest authority for the strategic direction and management
of the Group (Key Management Personnel or KMP) throughout the current financial year unless otherwise stated.
Name
Directors
GH Weiss
TJ Hart
PM Mann
RJ van Barneveld
E Knudsen
DJ Lord
Executives
AM Boyd
M Murphy
CW Klem
AI Lochland
AM Mooney
S Butler
Position
Status
Chair
Managing Director and CEO
Director
Director
Director
Director
Chief Financial Officer and Company Secretary
General Manager Safety, People and Technical Development
General Manager Rendering
General Manager Packaged Products, Aqua-Feed & Supplements
General Manager Commercial Feed
General Manager Ridley Land Corporation Pty Ltd
Made redundant on 1 July 2016
46
Ridley Corporation Limited Annual Report 2017
Details of remuneration
Details of the remuneration of each Director of Ridley Corporation Limited and each of the KMP of the Group during the financial
year are set out below. In accordance with the requirements of Section 300A of the Corporations Act 2001 and Regulation 2M.3.03,
the remuneration disclosures for the 2016 and 2017 financial years only include remuneration relating to the portion of the relevant
periods that each individual was considered a KMP.
All values are in A$ unless otherwise stated. The salary package may be allocated at the executive’s discretion to cash,
superannuation (subject to legislative limits), motor vehicle and certain other benefits.
2017
Name
Directors
GH Weiss – Chair
TJ Hart – Managing Director
PM Mann
RJ van Barneveld 3
E Knudsen 3
DJ Lord
Total Directors
Executives
AM Boyd
M Murphy
CW Klem
AI Lochland
AM Mooney
S Butler 4
Total executives
Total
Short term
benefits
Directors’
fees and
cash salary
$
159,091
730,101
86,364
95,000
85,000
77,273
1,232,829
431,879
300,447
310,785
310,785
339,778
-
1,693,674
2,926,503
Post-
employment
benefits
STI
$
Other
benefits
$
Super-
annuation
$
Share-based
payments
Performance
rights/
options
$
Total
$
175,000
1,146,077
95,000
95,000
85,000
85,000
15,909
34,808
8,636
-
-
7,727
-
381,168
-
-
-
-
-
-
-
-
-
-
-
67,080
381,168
1,681,077
-
-
-
-
-
193,961
193,961
193,961
25,000
24,353
31,078
31,078
30,000
-
127,835
50,585
80,335
80,335
79,167
-
584,714
375,385
422,198
422,198
448,945
193,961
141,509
208,589
418,257
799,425
2,447,401
4,128,478
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Percentage remuneration consisting of performance rights/options.
2. Percentage remuneration performance related.
3. Director fee paid to a Company or Family Trust.
4. Made redundant on 1 July 2016.
%1
%2
-
33%
-
-
-
-
22%
13%
19%
19%
18%
-
-
33%
-
-
-
-
22%
13%
19%
19%
18%
-
47
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT REMUNERATION REPORT – AUDITED CONTINUED
Details of remuneration continued
2016
Name
Directors
GH Weiss – Chair 3
TJ Hart – Managing Director
AL Vizard 4,5
PM Mann
RJ van Barneveld 4
E Knudsen 4
DJ Lord 6
Total Directors
Executives
AM Boyd
M Murphy 7
M Robbins 8
CW Klem
AI Lochland
AM Mooney
S Butler 9
J Murray10
Total executives
Total
Short term
benefits
Directors’
fees and
cash salary
$
Post-
employment
benefits
Other
benefits
$
Super-
annuation
$
STI
$
Share-based
payments
Performance
rights/
options
$
159,091
692,630
95,000
86,364
96,979
85,000
13,473
-
594,104
-
-
-
-
-
-
-
35,178
-
-
-
-
15,909
50,000
-
8,636
4,156
-
1,347
-
323,257
-
-
-
-
-
Total
$
175,000
1,659,991
130,178
95,000
101,135
85,000
14,820
1,228,537
594,104
35,178
80,048
323,257
2,261,124
418,572
234,073
132,439
301,732
301,732
329,018
196,988
36,364
184,552
76,800
-
75,782
80,834
92,900
216,686
-
-
-
186,354
-
-
-
-
153,774
727,554
1,950,918
3,179,455 1,321,658
340,128
375,306
25,000
23,567
18,866
30,173
30,173
29,990
19,699
3,636
181,104
261,152
108,590
28,090
24,167
67,083
68,340
67,083
1,257
-
736,714
362,530
361,826
474,770
481,079
518,991
434,630
193,774
364,610
687,867
3,564,314
5,825,438
%1
%2
-
19%
-
-
-
-
-
15%
8%
7%
14%
14%
13%
-
-
-
55%
-
-
-
-
-
40%
29%
7%
30%
31%
31%
50%
-
1. Percentage remuneration consisting of performance rights/options.
2. Percentage remuneration performance related.
3. Appointed Chair 1 July 2015 after JM Spark resigned on 1 July 2015.
4. Director fee paid to a Company or Family Trust. Remuneration includes back pay for chairing the Ridley Innovation and Operational Committee.
5. Resigned on 31 March 2016. Other benefits reflect the payment of the 2003 retirement allowance scheme.
6. Appointed on 29 April 2016.
7. Appointed to a General Manager, KMP role on 11 January 2016.
8. Resigned on 4 December 2015. Other benefits reflect benefits paid on departure.
9. Made redundant on 1 July 2016.
10. Resigned on 31 December 2015. Other benefits reflect payment of preserved leave entitlements.
48
Ridley Corporation Limited Annual Report 2017 Contracts of employment
Remuneration and other terms of employment for the Managing Director are formalised in a service agreement that includes
provision of performance related bonuses and other benefits, eligibility to participate in the Ridley Corporation LTIP, STI and Ridley
Employee Share Scheme. Other major provisions of the agreements relating to remuneration are set out below:
TJ Hart, CEO and Managing Director
• Base remuneration, inclusive of superannuation and any elected benefits, of $764,909 for FY17, increasing by 3% to $787,856 on
1 July 2017.
• Full scheme participation up to 100% of total base package based on the achievement of certain agreed KPIs as approved by the
Board. The 60% of Ridley financial performance measures for FY17 included a mix of performance against budgeted EBITDA and
Net Profit After Tax, excluding property. The measures of personal performance include targets on safety, training, operational
excellence, customer focus, sustainability and community, and people values and development.
• Eligible to participate in the Ridley LTIP and Ridley to use its best endeavours to obtain shareholder approval for the issue of equity
securities under the scheme. Shareholder approval was received on 29 November 2016 for the 600,000 performance rights issued
to Mr Hart in FY17 with a three-year performance test period commencing on 1 July 2016.
• Ridley may terminate the contract immediately for cause and with a 12-month period of notice without cause, being inclusive of
any redundancy benefits payable to the executive. Payment of termination benefits on early termination by the employer is not to
exceed the threshold above which shareholder approval is required under the Corporations Act 2001, and comprises any amount
of the total remuneration package accrued but unpaid at termination, plus accrued but unpaid leave entitlements, and any other
entitlements accrued under applicable legislation.
• The Managing Director may resign at any time and for any reason by giving Ridley three months’ notice in writing.
Other senior executives have individual contracts of employment but with no fixed term of employment.
Notice periods
The notice period for terminating employment of KMP ranges from three months to six months for executives and 12 months for the
Managing Director.
For each STI and grant of options and performance rights included in the above remuneration tables, the percentage of the available
STI or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not
meet the service and performance criteria, are set out in the following table.
Name
TJ Hart
AM Boyd
M Murphy
CW Klem
AI Lochland
AM Mooney
S Butler
STI percentage
range of TEP %
STI payment in $
2017
Paid % Forfeited %
2016
Paid % Forfeited %
0–100
0–50
0–30
0–30
0–30
0–30
(i)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
-
80
82
80
76
81
85
100
20
18
20
24
19
15
-
(i) Mr Butler had individual STI targets based on the achievement of property management and realisation objectives. Mr Butler was made redundant
on 1 July 2016.
49
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT REMUNERATION REPORT – AUDITED CONTINUED
Equity instrument disclosures relating to Directors and executives
Performance rights provided as remuneration
Details of Rights over ordinary shares in the Company provided as remuneration to the Managing Director of Ridley Corporation
Limited and each of the other key management personnel of the Group are set out below. When exercisable, each Right is
convertible into one ordinary share of Ridley Corporation Limited. Non-Executive Directors do not participate in the LTIP and
are therefore ineligible to receive Rights.
Long Term Incentive Plan (LTIP)
Recipients of LTIP rights
Directors
TJ Hart
Key management personnel
AM Boyd
M Murphy
CW Klem
AI Lochland
AM Mooney
S Butler
Total issued to Directors and
key management personnel
Balance at
1 July 2016
Granted 1
Vested 2
Balance at
30 June 2017 3
1,800,000
600,000
(600,000)
1,800,000
600,000
150,000
375,000
375,000
375,000
-
200,000
125,000
125,000
125,000
125,000
-
(200,000)
(50,000)
(125,000)
(125,000)
(125,000)
-
600,000
225,000
375,000
375,000
375,000
-
3,675,000
1,300,000
(1,225,000)
3,750,000
1. The fair value per option at the grant date of 1 July 2016 was $0.71 per share.
2. Vested at the end of the performance period on 1 July 2016. The value at the date of exercise was $1.40 per share.
3. Performance rights are due to vest between July 2017 through to July 2019.
Shareholdings
The numbers of shares in the parent entity held during the financial year by each Director of Ridley Corporation Limited and each
of the KMP of the Group who hold shares, including their personally related entities, are set out in the table below.
Number of shares held in Ridley Corporation Limited
GH Weiss
TJ Hart
PM Mann
RJ van Barneveld
E Knudsen
DJ Lord
Total Directors
A M Boyd
M Murphy
CW Klem
AI Lochland
AM Mooney
S Butler
Balance at
1 July 2016
150,000
28,262
96,625
58,900
703,286
18,200
1,055,273
900,145
8,063
329,329
3,262
370,324
-
Received
during
the year 1
-
601,385
-
-
-
-
601,385
201,385
51,385
126,385
126,385
125,000
-
Acquired/
(disposed)
during
the year
120,000
32,242
-
24,153
-
-
Balance at
30 June 2017
270,000
661,889
96,625
83,053
703,286
18,200
176,395
1,833,053
-
-
-
-
-
-
1,101,530
59,448
455,714
129,647
495,324
-
Total executives
Total key management personnel
1,611,123
2,666,396
630,540
1,231,925
-
176,395
2,241,663
4,074,716
1. Received from the vesting of performance rights and/or through the Ridley Employee Share Scheme.
50
Ridley Corporation Limited Annual Report 2017 LEAD AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To the directors of Ridley Corporation Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Ridley Corporation Limited for the financial year ended
30 June 2017 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Chris Sargent
Partner
Melbourne
23 August 2017
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
51
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Revenue from continuing operations
Cost of sales
Gross profit
Finance income
Other income
Expenses from continuing operations:
Selling and distribution
General and administrative
Finance costs
Share of net profits from equity accounted investments
Profit from continuing operations before income tax expense
Note
4
4
5(d)
5(b)
13
2017
$’000
852,923
(781,826)
71,097
49
8,581
(12,863)
(27,559)
(5,026)
2016
$’000
912,561
(832,329)
80,232
183
12,121
(13,400)
(33,235)
(5,602)
8
16
34,287
40,315
Income tax expense
6
(8,472)
(13,112)
Profit from continuing operations after income tax expense
25,815
27,203
Profit/(loss) from discontinued operation (net of tax)
30
-
403
Net Profit After Tax attributable to members of Ridley Corporation Limited
25,815
27,606
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Ridley Corporation Limited
Earnings per share
Basic earnings per share – continuing
Basic earnings per share
Diluted earnings per share – continuing
Diluted earnings per share
-
-
25,815
27,606
25,815
27,606
1
1
1
1
8.4c
8.4c
8.4c
8.4c
8.8c
9.0c
8.8c
9.0c
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
52
Ridley Corporation Limited Annual Report 2017 CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2017
Current assets
Cash and cash equivalents
Receivables
Inventories
Tax asset
Total current assets
Non-current assets
Receivables
Investment properties
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Tax liability
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
Note
2017
$’000
2016
$’000
7
8
9
14
8
10
11
12
13
14
15
16
14
17
16
18
19
19
16,535
117,491
83,717
380
218,123
840
3,181
182,794
79,284
1,324
5,057
272,480
490,603
148,580
13,540
-
162,120
68,079
581
68,660
230,780
28,468
112,352
87,683
-
228,503
5,537
3,140
160,209
76,355
3,663
7,443
256,347
484,850
145,916
12,909
8,260
167,085
69,435
446
69,881
236,966
259,823
247,884
214,445
2,895
42,483
259,823
214,445
2,170
31,269
247,884
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
53
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Balance at 1 July 2016
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners recorded directly in equity
Dividends paid
Share-based payment transactions
Total transactions with owners recorded directly in equity
Share
capital
$’000
214,445
-
-
Share-based
payment
reserve
$’000
2,170
-
-
Retained
earnings
$’000
31,269
25,815
-
-
25,815
Total
$’000
247,884
25,815
-
25,815
-
-
-
-
-
725
(12,313)
(2,288)
(12,313)
(1,563)
725
(14,601)
(13,876)
Balance at 30 June 2017
214,445
2,895
42,483
259,823
Balance at 1 July 2015
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners recorded directly in equity
Dividends paid
Share-based payment transactions
Total transactions with owners recorded directly in equity
Share
capital
$’000
214,445
-
-
Share-based
payment
reserve
$’000
853
-
-
Retained
earnings
$’000
14,536
27,606
-
Total
$’000
229,834
27,606
-
-
-
-
-
-
27,606
27,606
-
1,317
(10,774)
(99)
(10,774)
1,218
1,317
(10,873)
(9,556)
Balance at 30 June 2016
214,445
2,170
31,269
247,884
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
54
Ridley Corporation Limited Annual Report 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other income received
Interest and other costs of finance paid
Income tax payment
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from sale of discontinued operation
Proceeds from sale of non-current assets
Acquisition of investment in joint venture entity
Net cash (outflow) from investing activities
Cash flows from financing activities
Share-based payment transactions
(Repayment)/drawdown of borrowings
Dividends paid
Net cash (outflow) from financing activities
Net (decrease) in cash held
Cash at the beginning of the financial year
Note
2017
$’000
2016
$’000
938,609
(897,361)
49
8,581
(5,499)
(14,724)
29,655
1,007,469
(979,510)
183
8,926
(5,484)
(13,972)
17,612
(33,779)
(3,593)
10,000
3,520
-
(23,852)
(4,221)
(1,356)
(12,159)
(17,736)
(34,170)
(698)
19,000
3,000
(1,324)
(14,192)
(1,050)
1,742
(10,635)
(9,943)
(11,933)
(6,523)
28,468
34,991
7
30
13
2
Cash at the end of the financial year
7
16,535
28,468
There were no non-cash financing and investing activities during the current or prior years.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
55
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT INDEX OF NOTES
TO AND FORMING PART OF THE FINANCIAL REPORT
1. Earnings per share
2. Dividends
3. Operating segments
4. Revenue and other income
5. Expenses
6.
Income tax expense
7. Cash and cash equivalents
8. Receivables
9.
Inventories
10. Investment properties
11. Property, plant and equipment
12. Intangible assets
13. Investments accounted for using the equity method
14. Tax assets and liabilities
15. Payables
16. Provisions
17. Borrowings
18. Share capital
19. Reserves and retained earnings
20. Investment in controlled entities
21. Parent entity
22. Deed of Cross Guarantee
23. Related party disclosures
24. Share-based payments
25. Retirement benefit obligations
26. Financial risk management
27. Commitments for expenditure
28. Contingent liabilities
29. Auditor’s remuneration
30. Discontinued operations
31. Events occurring after the balance sheet date
32. Corporate information and accounting policy summary
56
Ridley Corporation Limited Annual Report 2017 NOTES TO THE FINANCIAL STATEMENTS
Note 1 – Earnings per share
Basic earnings per share – continuing
Basic earnings per share
Diluted earnings per share – continuing
Diluted earnings per share
Earnings used in calculating earnings per share:
Profit after income tax – continuing operations
Profit after income tax – discontinued operation
Total
Weighted average number of shares
Weighted average number of shares used in calculating
basic and diluted earnings per share
2017
Cents
8.4
8.4
8.4
8.4
2016
Cents
8.8
9.0
8.8
9.0
2017
Earnings per share
Diluted
Basic
$’000
$’000
2016
Earnings per share
Diluted
Basic
$’000
$’000
25,815
-
25,815
25,815
-
25,815
27,203
403
27,606
27,203
403
27,606
Basic
Diluted
Basic
Diluted
307,817,071 307,817,071
307,817,071
307,817,071
Options
There are 7,925,000 (2016: 7,650,000) performance rights outstanding that have been excluded from the determination of diluted
earnings per share calculation as the Group purchases shares on-market to satisfy vesting performance rights. Details relating to the
performance rights are set out in note 24.
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares on issue during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
57
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 2 – Dividends
Dividends paid during the year
Franking
Interim dividend in respect of the current financial year
Fully franked
Final dividend in respect of the prior financial year
Fully franked
Payment date
1 May 2017
(2016: 29 April 2016)
31 October 2016
(2016: 30 October 2015)
Per share (cents)
1.5
(2016: 1.5)
2.5
(2016: 2.0)
Paid in cash
Non-cash dividends paid on employee
in-substance options
Since the end of the financial year, the Directors declared the following dividend:
2017 final dividend of 2.75 cents per share, fully franked, payable on 31 October 2017
2017
$’000
2016
$’000
4,618
4,618
7,695
12,313
6,156
10,774
12,159 10,635
154
12,313
139
10,774
8,465
7,695
Dividend franking account
Amount of franking credits available at 30 June to shareholders of Ridley Corporation Limited for subsequent
financial years
20,934
11,487
Note 3 – Operating segments
The Group determines and presents operating segments based on information that internally is provided to and used by the Managing
Director, who is the Group’s Chief Operating Decision Maker. An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Group’s other components. The financial results of each operating segment are regularly reviewed by the Group’s
Managing Director in order to make decisions about resources to be allocated to the segment and assess its performance, and
for which discrete financial information is available.
Segment results that are reported to the Managing Director include items directly attributable to a segment, as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and income tax
assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment and intangible assets other than goodwill.
The Group has two reportable segments, as described below, which are the Group’s strategic business units until such time as all
surplus property assets have been realised, whereupon the property segment will cease to exist. The operating segments identified
by management are consistent with the manner in which products are sold or how future economic benefits will be realised.
The following summary describes the operations in each of the Group’s reportable segments:
AgriProducts
Australia’s leading supplier of premium quality, high performance animal nutrition solutions.
Property
Realisation of opportunities in respect of surplus property assets and sales of residual property site assets.
The basis of inter-segmental transfers is market pricing. Results are calculated before consideration of net borrowing costs and tax
expense. Segment assets exclude deferred tax balances and cash, which have been included as unallocated assets.
58
Ridley Corporation Limited Annual Report 2017
Geographical segments
The Group predominantly operates in Australasia.
2017 financial year
$’000
Total sales revenue – external (note 4)
Other revenue (note 4)
Total revenue
Share of profits of equity accounted investments (note 13)
Depreciation and amortisation expense (note 5)
Interest income
Finance costs (note 5)
AgriProducts
852,923
7,738
860,661
8
(14,967)
-
-
Property
-
213
213
Unallocated
-
630
Consolidated
total
852,923
8,581
630
861,504
-
(18)
-
-
-
(235)
49
(5,026)
8
(15,220)
49
(5,026)
Reportable segment profit/(loss) before income tax
50,131
(789)
(15,055)
34,287
Segment assets
Investments accounted for using the equity method
Total segment assets
Segment liabilities
Acquisitions of property, plant and equipment,
intangibles and other non-current segment assets
(excluding the impact of business combinations)
452,300
1,324
453,624
160,826
3,181
-
3,181
-
33,798
-
33,798
69,954
489,279
1,324
490,603
230,780
40,972
-
-
40,972
2016 financial year
$’000
Total sales revenue – external (note 4)
Other revenue (note 4)
Total revenue
Share of profits of equity accounted
investments (note 13)
Depreciation and amortisation
expense (note 5)
Interest income
Finance costs (note 5)
Reportable segment profit/(loss)
before income tax
Segment assets
Investments accounted for using
the equity method
Total segment assets
Segment liabilities
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets (excluding
the impact of business combinations)
AgriProducts Property Unallocated
-
1,068
1,068
912,561
8,415
920,976
-
2,638
2,638
Property
(discontinued
operations)
-
381
381
Consolidated
total
912,561
12,502
925,063
Total
912,561
12,121
924,682
16
(14,611)
(1,053)
-
-
-
(13)
-
-
-
-
16
(364)
-
183
(5,602)
(14,988)
(1,053)
183
(5,602)
-
-
-
-
-
16
(14,988)
(1,053)
183
(5,602)
55,168
(2,060)
(12,793)
40,315
2,597
42,912
425,867
3,140
52,180
481,187
3,663
429,530
156,181
-
3,140
-
-
52,180
80,785
3,663
484,850
236,966
34,868
-
-
34,868
-
-
-
-
-
481,187
3,663
484,850
236,966
34,868
59
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 4 – Revenue and other income
Revenue from continuing operations
Sale of goods
Other income from continuing operations
Business services
Rent received
Insurance proceeds – note 5(d)
Profit on sale of associate
Profit on sale of land
Foreign exchange gains – net
Other
2017
$’000
2016
$’000
852,923
912,561
630
330
4,156
717
92
-
2,656
8,581
917
567
7,832
-
2,242
121
442
12,121
Revenue recognition
Revenue from the sale of goods in the course of ordinary business is measured at the fair value of the consideration received or
receivable, net of returns, trade allowances and duties and taxes paid. Sales revenue is recognised when the significant risks and
rewards of ownership have been transferred to the customer. The Group recognises revenue when pervasive evidence exists, usually
in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no
continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that
discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as
the sales are recognised.
Interest income is recognised using the effective interest rate method. Dividend income is recognised as revenue when the right
to receive payment is established.
Note 5 – Expenses
Profit from continuing operations before income tax is arrived at after charging the following items:
(a) Depreciation and amortisation (i)
Buildings
Plant and equipment
Software
Intangible assets
2017
$’000
1,516
11,889
1,064
751
15,220
(i) The depreciation and amortisation charge is included within general and administrative expenses in the Consolidated Statement
of Comprehensive Income.
(b) Finance costs
Interest expense
Amortisation of borrowing costs
Unwind of discount on deferred consideration
Capitalisation of borrowing costs
5,414
144
(499)
(33)
5,026
2016
$’000
1,314
11,078
1,846
750
14,988
5,405
317
-
(120)
5,602
Finance costs include interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing
costs are expensed as incurred unless they relate to qualifying assets, being assets that normally take more than 12 months from
commencement of activities necessary to prepare for their intended use or sale to the time when substantially all such activities are
complete. Where funds are borrowed specifically for the production of a qualifying asset, the interest on those funds is capitalised,
net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a
weighted average interest rate.
60
Ridley Corporation Limited Annual Report 2017 (c) Other expenses
Employee benefits expense
Operating lease expense#
Bad and doubtful debt expense – net of recoveries
Research and development (note 12)
2017
$’000
2016
$’000
76,623
3,947
33
9,030
78,633
3,583
371
5,875
# A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits of
ownership of leased non-current assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Statement of
Comprehensive Income on a straight line basis over the period of the lease.
(d) General and administrative expenses include, in respect of the Wasleys feedmill
Incremental operating costs, clean up and removal of debris
Impairment loss on property, plant and equipment
Inventory write-offs and write-downs
556
-
-
556
4,466
1,053
910
6,429
On 25 November 2015, the Pinery Bushfire in South Australia caused significant damage to Ridley’s feedmill at Wasleys, giving
rise to an impairment of damaged assets. The assets, plus the lost profits and Additional Increased Costs of Working (AICW) to
accommodate customer commitments, subject to a deductible of $250,000, are covered by insurance, the claim for which was
concluded during the 2017 financial year.
Based on the damaged assets, lost profits and AICW, total insurance revenue of $11,988,000 (2017: $4,156,000; 2016: $7,832,000
has been received and brought to account (refer other income – insurance claim proceeds in note 4).
There is a net Consolidated Statement of Comprehensive Income gain for the year (before income tax) of $3,600,000 (2016: $1,403,000)
between insurance claim proceeds income and incremental general and administrative expenses incurred. The income tax on the
insurance proceeds received has been brought to account within the income tax expense for the 2016 and 2017 financial years.
61
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 6 – Income tax expense
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the financial statements, and by unused tax losses.
Ridley Corporation Limited and its wholly owned Australian controlled entities are part of a tax consolidated group. The entities in the
tax consolidated group are party to a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in
the case of a default by the head entity, Ridley Corporation Limited. The agreement provides for the allocation of income tax liabilities
between the entities should Ridley Corporation Limited default on its tax payment obligations. At balance date the possibility of
default is considered to be remote.
(a) Income tax expense
Current tax
Deferred tax
(Over)/under provided in prior year
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operation
(b) Reconciliation of income tax expense and pre-tax accounting profit
Profit from continuing operations before income tax expense
Profit from discontinued operation before income tax expense
Income tax using the Group’s tax rate of 30%
Tax effect of amounts that are not deductible/(taxable) in calculating taxable income:
Share-based payments
Non-deductible expenses
(Over)/under provision in prior year
Research and development allowance
Disposal of discontinued operation
Disposal of non-current assets
Other
Income tax expense
(c) Income tax recognised directly in equity
Aggregate current and deferred tax arising in the period and not recognised
in net comprehensive income but directly debited or (credited) to equity
2017
$’000
7,207
2,386
(1,121)
8,472
8,472
-
8,472
34,287
-
34,287
2016
$’000
14,633
221
453
15,307
13,112
2,195
15,307
40,315
2,597
42,912
10,286
12,874
23
396
(1,121)
(1,191)
-
118
(39)
8,472
36
343
453
(238)
2,476
(381)
(256)
15,307
-
-
62
Ridley Corporation Limited Annual Report 2017 Note 7 – Cash and cash equivalents
Cash and cash equivalents comprise cash balances in Australian dollars and foreign currencies.
Cash at bank
Reconciliation of net cash inflow from operating activities to profit after income tax
2017
$’000
16,535
2016
$’000
28,468
Net profit after tax for the year
25,815
27,606
Adjustments for non cash items:
Depreciation and amortisation (note 5(a))
Net profit from discontinued operation
Net profit on sale of non-current assets
Non-cash insurance proceeds receivable (note 5(d))
Share of profit from equity accounted investment
Non-cash share-based payments
Non-cash finance movements
Bad debts expense
Foreign exchange losses/(gains)
Other non-cash movements
Change in operating assets and liabilities, net of effects from purchase and sale
of controlled entities and businesses:
Decrease/(increase) in receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade creditors
Increase/(decrease) in provisions
Increase/(decrease) in net income tax liability
Increase/(decrease) in deferred income tax
Net cash inflow from operating activities
Note 8 – Receivables
Current
Trade debtors
Less: Allowance for doubtful debts (a)
Prepayments and other receivables
Other receivable – joint venture entity (b)
Dry Creek deferred consideration receivable
Insurance income receivable
Non-current
Prepayments
Dry Creek deferred consideration receivable
15,220
-
(789)
-
(8)
2,210
(355)
33
441
260
(9,933)
4,702
2,318
766
(8,639)
(2,386)
29,655
14,988
(4,469)
(2,242)
(832)
(16)
2,049
317
339
(121)
(546)
(1,765)
(5,980)
(12,809)
202
1,112
(221)
17,612
103,808
(1,000)
102,808
100,904
(1,000)
99,904
4,363
4,487
5,833
-
117,491
840
-
840
1,819
-
9,797
832
112,352
-
5,537
5,537
63
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 8 – Receivables continued
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for doubtful
debts. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off.
The allowance for doubtful debts is established when there is objective evidence that the Group may not be able to collect all
amounts owing in accordance with the original terms of the receivable and where suitable insurance arrangements or collateral do
not cover any uncollected amounts. In determining the recoverability of the receivables, the Group considers any material changes
in the credit quality of the receivable on an ongoing basis. The allowance for doubtful debts and the receivables written off are
included in ‘general and administrative’ expense in the Consolidated Statement of Comprehensive Income.
The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the effective interest rate. When a trade receivable for which an impairment allowance had been
recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited in the Consolidated Statement of Comprehensive Income.
(a) Movement in the allowance for doubtful debts:
Balance brought forward at 1 July
Provision for impairment movement during the year
Receivables written off during the year
Balance carried forward at 30 June
2017
$’000
1,000
33
(33)
1,000
2016
$’000
32
1,339
(371)
1,000
As at 30 June 2017, trade receivables against which a provision for doubtful debts has been raised totals $17,707,000 (2016:
$5,563,000). This is considered to be adequate provision against the balance of any overdue receivables to the extent they are not
covered by collateral and/or credit insurance. Based on historic default rates and having regard to the ageing analysis referred to
immediately below, the Group believes that, apart from those trade receivables that have been impaired, no further impairment
allowance is necessary in respect of trade receivables not past due or past due by up to 30 days, as receivables relate to customers
that have a good payment record with the Group.
Ageing analysis
At 30 June 2017, the age profile of trade receivables that were past due amounted to $23,188,000 (2016: $11,157,000) as shown in
the following table. As at the date of this report, the value of an overdue receivable relating to one major customer, Huon, totals
$17,707,000, which was the subject of legal recovery proceedings which commenced in August 2016. The legal proceedings were
settled by mediation in June 2017 and the receivable was recovered in full on 20 July 2017. As part of the settlement, Ridley made
a payment, net of insurance, of $1.0 million to Huon, which fully utilised its provision for non-recovery.
The ageing analysis of trade receivables is shown as follows:
Past due by 1–30 days
Past due by 31–60 days
Past due by 61–90 days
Past due by greater than 90 days
2017
$’000
2016
$’000
4,544
590
138
17,916
23,188
9,068
1,729
178
182
11,157
(b) Other receivable – joint venture entity
During the year the parent entity provided an unsecured loan to the Pen Ngern Feed Mill Co., Ltd. joint venture entity in order to
secure the release from its banking arrangements with Bangkok Bank Ltd. The amount utilised at 30 June 2017 was $4,487,000
(2016: nil). The loan has a two-year term commencing on 1 July 2017 and is capped at 120 million Baht, or approximately
AUD$4.8 million at an exchange rate of 25 Baht:AUD$1. Interest on the loan is charged at 5% and capitalised for the first 12 months
of the loan.
64
Ridley Corporation Limited Annual Report 2017 Note 9 – Inventories
Current
Raw materials and stores – at cost
– at cost
Finished goods
– at net realisable value
2017
$’000
2016
$’000
46,116
36,733
868
83,717
48,573
39,110
-
87,683
Write-downs of inventories to net realisable value of $0.1 million (2016: nil) has been recognised as an expense during the year.
Inventories are valued at the lower of cost and net realisable value. Costs are determined on the first in, first out and weighted
average cost methods. Costs included in inventories consist of materials, labour and manufacturing overheads which are related
to the purchase and production of inventories. Net realisable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses.
Note 10 – Investment properties
Investment property is property held either to earn rental income, for capital appreciation or for both, but not for sale in the ordinary
course of business, for use in the production or supply of goods or services, or for administrative purposes.
Investment property is measured at cost on initial recognition. Cost includes expenditure that is directly attributable to the acquisition
of the investment property. Expenditure capitalised to investment properties includes the cost of acquisition, capital and remediation
additions. Any gain or loss on disposal and impairments of an investment property are recognised in the Consolidated Statement of
Comprehensive Income. Depreciation is calculated using the straight line method to allocate deemed cost, net of residual values,
over the estimated useful lives of the assets, and for buildings over a 40-year period.
Movement in investment properties
Carrying amount at cost at 1 July
Additions
Depreciation expense
Carrying amount at cost at 30 June
2017
$’000
2016
$’000
3,140
59
(18)
3,181
3,153
-
(13)
3,140
Investment properties comprise former salt field sites at Lara and Moolap that have ceased operating and are held for the purpose
of property realisation.
A fair value range for the sites at Lara and Moolap cannot be determined reliably at the present time given that the respective
locations do not have local established industrial or residential infrastructure, which would enable a reliable valuation benchmark
to be determined. Furthermore, the value of each site also varies significantly depending upon which stage of the progressive
regulatory approvals required for redevelopment has been attained at balance date. Consequently, the value of these sites has
been recorded at cost less impairment and depreciation.
Amounts recognised in profit and loss for investment properties:
Direct operating expenses that did not generate rental income
2017
$’000
2016
$’000
546
965
65
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 11 – Property, plant and equipment
Land and
buildings
Plant and
equipment
Total
$’000
60,509
(6,050)
54,459
170
(98)
-
3,811
(1,516)
56,826
222,903
(117,153)
105,750
37,209
(140)
(1,151)
(3,811)
(11,889)
125,968
283,412
(123,203)
160,209
37,379
(238)
(1,151)
-
(13,405)
182,794
64,345
(7,519)
56,826
254,181
(128,213)
125,968
318,526
(135,732)
182,794
57,815
(4,988)
52,827
257
(5)
-
2,694
(1,314)
54,459
202,071
(115,355)
86,716
33,913
(1,048)
(59)
(2,694)
(11,078)
105,750
259,886
(120,343)
139,543
34,170
(1,053)
(59)
-
(12,392)
160,209
60,509
(6,050)
54,459
222,903
(117,153)
105,750
283,412
(123,203)
160,209
2017
Cost at 1 July 2016
Accumulated depreciation
Carrying amount at 1 July 2016
Additions
Disposals
Transfers to intangible assets
Transfers from plant under construction
Depreciation
Carrying amount at 30 June 2017
At 30 June 2017
Cost
Accumulated depreciation
Carrying amount at 30 June 2017
2016
Cost at 1 July 2015
Accumulated depreciation
Carrying amount at 1 July 2015
Additions
Impairment
Transfers to intangible assets
Transfers from plant under construction
Depreciation
Carrying amount at 30 June 2016
At 30 June 2016
Cost
Accumulated depreciation
Carrying amount at 30 June 2016
66
Ridley Corporation Limited Annual Report 2017 Property, plant and equipment
Land and buildings, plant and equipment are stated at cost, or deemed cost, less accumulated depreciation and impairment.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All repairs
and maintenance are charged to the Consolidated Statement of Comprehensive Income during the financial period in which
they are incurred.
Land is not depreciated. Depreciation of other assets is calculated using the straight line method to allocate their cost or revalued
amounts, net of their residual values, over their estimated useful lives, as follows:
Buildings
13 to 40 years
Plant and equipment
2 to 30 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses
on disposals are determined by comparing proceeds with carrying amounts and are included in the Consolidated Statement of
Comprehensive Income.
Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in
comprehensive income over the period necessary to match them with the costs that they are intended to compensate. The value
of government grants relating to the purchase of property, plant and equipment is deducted from the carrying amount of the asset.
The grant is recognised in comprehensive income over the life of the depreciable asset as a reduced depreciation expense.
A Victorian Government Grant of $800,000 was awarded by, and $529,000 (2016:$191,000) received in the current year from, the
Geelong Region Innovation & Investment Fund (GRIIF) as a contribution to plant and equipment purchased for Ridley’s new feedmill
at Lara, Geelong, Victoria. The balance of the grant was received in July 2017 upon satisfaction of the final project milestone and
commissioning of the new feedmill that services poultry and pig customers in the region.
Note 12 – Intangible assets
2017
Carrying amount at 1 July 2016
Transfer from property, plant and equipment/additions
Amortisation charge
Carrying amount at 30 June 2017
At 30 June 2017
Cost
Accumulated amortisation/ impairment losses
Carrying amount at 30 June 2017
Software
$’000
Goodwill
$’000
Contracts
$’000
Assets under
development
$’000
3,558
1,151
(1,064)
3,645
68,950
-
-
68,950
2,250
-
(751)
1,499
1,597
3,593
-
5,190
Total
$’000
76,355
4,744
(1,815)
79,284
15,213
(11,568)
3,645
69,903
(953)
68,950
4,500
(3,001)
1,499
5,190
-
5,190
94,806
(15,522)
79,284
The amortisation charge is included within general and administrative expenses in the Consolidated Statement
of Comprehensive Income.
67
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 12 – Intangible assets continued
2016
Carrying amount at 1 July 2015
Transfer from property, plant and equipment/additions
Amortisation charge
Carrying amount at 30 June 2016
At 30 June 2016
Cost
Accumulated amortisation/impairment losses
Carrying amount at 30 June 2016
Intangible assets
Software
$’000
Goodwill
$’000
Contracts
$’000
Assets under
development
$’000
5,345
59
(1,846)
3,558
68,950
-
-
68,950
14,062
(10,504)
3,558
69,903
(953)
68,950
3,000
-
(750)
2,250
4,500
(2,250)
2,250
Total
$’000
78,194
757
(2,596)
76,355
899
698
-
1,597
1,597
-
1,597
90,062
(13,707)
76,355
(i) Software
Software has a finite useful life and is carried at cost less accumulated amortisation and impairment losses. The cost of system
development, including purchased software, is capitalised and amortised over the estimated useful life, being three to eight years.
Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
(ii) 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 subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in investments in associates, accounted for using the equity method.
Goodwill acquired in business combinations 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. Goodwill is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill
is allocated to Cash Generating Units for the purpose of impairment testing.
$56.6 million of goodwill has been recognised in the Rendering Cash Generating Unit (CGU), whilst the balance has been
accumulated from a combination of other CGUs over many years as summarised below:
Rendering
AgriProducts
Total goodwill
2017
$’000
56,616
12,334
68,950
2016
$’000
56,616
12,334
68,950
(iii) Contracts
The Contracts Intangible asset represents acquired contractual legal rights that have a finite useful life and that are amortised over a
period of six years, according to the period of the contractual legal rights. Amortisation methods, useful lives and residual values are
reviewed at each financial year end and adjusted if appropriate.
(iv) Assets under development
Assets under development include the applied R&D activities being conducted at Yamba in NSW and Chanthaburi in Thailand in
respect of the novel feed ingredient Novacq™ project. Items of plant and equipment purchased as part of the project are being
separately capitalised as capital work in progress. Both sites are expected to remain in the development stage of the Novacq™
project throughout FY18.
68
Ridley Corporation Limited Annual Report 2017 Research and development expenditure
Research and development expenses of $9,030,000 have been incurred in the current year (2016: $5,875,000), which have been
included as eligible research and development in the R&D Tax Incentive schedule.
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the Consolidated Statement of Comprehensive Income as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically
and commercially feasible, future economic benefits are probable, and the Group intends, and has sufficient resources, to complete
development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs
that are directly attributable to preparing the asset for its intended use. Capitalised development expenditure is measured at cost less
accumulated depreciation and accumulated impairment losses as part of either intangibles or property, plant and equipment.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently
if events or changes in circumstances indicate that the carrying amount may no longer be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows, which are largely independent of the cash inflows from other assets or groups of assets (Cash Generating Units). Non-financial
assets other than goodwill that have previously suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
Impairments during the year
There were no impairments of intangible assets during the year.
Impairment testing
The recoverable amount of a CGU is based on value-in-use calculations. The following describes each key assumption on which
management has based its cash flow projections to undertake impairment testing. These assumptions have been used for the
analysis in each CGU.
(i) Cash flow forecasts are based on the Board approved FY18 budget, projected for four years plus a terminal value.
(ii) Forecast growth rates are based on management’s expectations of future performances. The growth rate represents a steady
indexation rate that does not exceed the Group’s expectations of the long term average growth rate for the business in which
each CGU operates. The growth rates applied to cash flows beyond one year were 2% (2016: 2%). A growth rate of 2% is applied
to the terminal value (2016: 2%).
(iii) Discount rates used are the weighted average cost of capital for the Group. The post-tax discount rate applied to cash flows
was 8.1% (2016: 9.2%).
A sensitivity analysis was undertaken to examine the effect of a change in each key variable on each CGU. For all CGUs, excluding
supplements, a reasonably possible change in these inputs would not cause the recoverable amount to be below the carrying
amount.
Impact of possible changes in key assumptions
Whilst all CGUs in the Group have been tested for impairment and have met their required hurdle rates to support the current
carrying values, the reduction in earnings for the year for the Supplements CGU (part of the AgriProducts CGU) has eroded the
CGUs impairment assessment headroom. Return to a more traditional dry season weather pattern combined with improvements
in manufacturing efficiencies and waste and water management are expected to improve the outlook for this sector, however
any deterioration in the discount rate or earnings profile for the Supplements CGU will raise impairment concerns in the future.
69
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 13 – Investments accounted for using the equity method
Name of Company
Associate:
Consolidated Manufacturing
Enterprise Pty Ltd and
Swanbrook Road Holding Trust 1
Joint venture entities:
Ridley Bluewave Pty Ltd 2
Nelson Landholdings Pty Ltd
as Trustee for Nelson
Landholdings Trust 3
Pen Ngern Feed Mill Co. Ltd4
Investments accounted for
using the equity method
Principal activity
Country of
incorporation
Ownership interest
2016
%
2017
%
Carrying amount
2016
2017
$’000
$’000
Feed production
Australia
Animal protein production Australia
Property realisation
Aquafeed production
Australia
Thailand
-
50
50
49
25
50
50
49
-
-
-
1,324
2,339
-
-
1,324
1,324
3,663
1. Interest disposed of on 1 February 2017. Ridley’s 25% of the cash proceeds was $3.3 million with a pre-tax accounting profit of $0.7 million.
2. Ridley Bluewave Pty Ltd is an incorporated joint venture established to produce animal proteins but has not traded to date.
3. The Company and unit trust are the corporate structure through which any ultimate development of the Moolap site will be managed. There are a
number of restrictions for this entity to protect the interests of each party, being Ridley and development partner Sanctuary Living, which cause the
entity to be reported as a joint venture rather than controlled entity. Despite this classification for reporting purposes, Ridley retains full control of the
value and use of the land at Moolap until such time as Ridley resolves to commit the land to the project.
4. On 28 January 2016, the Group acquired a 49% interest in Pen Ngern Feed Mill Co., Ltd. (PNFM) for an investment of $1.3 million. PNFM is an entity
domiciled in Thailand that owns and operates a dedicated aquafeed manufacturing facility. PNFM operations had been suspended prior to the
investment by Ridley. Ridley’s share of the start-up activities conducted prior to balance date is not material, and its cumulative share of profits or
losses since acquisition of the investment will be brought to account within its joint venture accounted share of the PNFM operating result for FY18.
The 49% ownership interest in PNFM, rather than an equal or controlling equity stake, is a reflection of Thai law, which can impose certain
restrictions on Thai businesses whose shares owned by non-Thai nationals exceed 49%. The pertinent contracts have been structured, however
such that governance and management of the business will be effectively on a 50:50 basis between Ridley and the other party.
Investments in associates and joint venture entities are accounted for in the consolidated financial statements using the equity
method of accounting, and are carried at cost by the respective parent entity. The common balance date of the associate and
joint venture entities is 30 June, except for PNFM, which is 31 December.
Carrying amount of investments accounted for using the equity method
Opening carrying amount at 1 July
Share of operating profits after income tax
Disposal of Consolidated Manufacturing Enterprise Pty Ltd and Swanbrook Road Holding Trust
Acquisition of Pen Ngern Feed Mill Co. Ltd.
Closing carrying amount at 30 June
2017
$’000
3,663
8
(2,347)
-
1,324
2016
$’000
2,323
16
-
1,324
3,663
Summarised financial information of equity accounted investees, not adjusted for the percentage ownership held by the Group,
is provided following.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Revenue
Net profit after tax
There are no material reserves or contingent liabilities of the equity accounted investees.
70
2017
$’000
148
5,401
5,549
184
4,905
5,089
460
1,757
32
2016
$’000
3,985
8,387
12,372
4,051
4,733
8,784
3,588
12,505
64
Ridley Corporation Limited Annual Report 2017 Note 14 – Tax assets and liabilities
Current
Tax asset
Tax liability
Non-current
Deferred tax asset
2017
$’000
2016
$’000
380
-
-
8,260
5,057
7,443
Movement in deferred tax asset:
Opening balance at 1 July
Credited/(charged) to the Statement of Comprehensive Income (note 6)
Disposal of subsidiary
Closing balance at 30 June
Recognised deferred tax assets and liabilities
7,443
(2,386)
-
5,057
Consolidated
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Other
Tax assets/(liabilities)
Assets
Liabilities
Net
2017
$’000
-
-
3,183
4,262
-
105
7,550
2016
$’000
-
-
3,748
5,057
81
293
9,179
2017
$’000
(2,293)
-
(789)
-
-
589
(2,493)
2016
$’000
(1,627)
-
(109)
-
-
-
(1,736)
2017
$’000
(2,293)
-
2,394
4,262
-
694
5,057
1,476
(221)
6,188
7,443
2016
$’000
(1,627)
-
3,639
5,057
81
293
7,443
Movement in net deferred tax assets and liabilities
Consolidated
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Other
Tax assets/(liabilities)
Balance
1 July 2015
$’000
Recognised
in profit
or loss
$’000
Disposal of
subsidiary
$’000
Balance
30 June 2016
$’000
Recognised
in profit
or loss
$’000
Balance
30 June 2017
$’000
(1,917)
10
(3,084)
5,152
291
1,024
1,476
290
(10)
535
(95)
(210)
(731)
(221)
-
-
6,188
-
-
-
6,188
(1,627)
-
3,639
5,057
81
293
7,443
(666)
-
(1,245)
(795)
(81)
401
(2,386)
(2,293)
-
2,394
4,262
-
694
5,057
71
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 14 – Tax assets and liabilities continued
Income tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted for each jurisdiction. The
relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred
tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable comprehensive income.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously. Deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Note 15 – Payables
Current
Trade creditors and accruals
2017
$’000
2016
$’000
148,580
145,916
Trade payable facility
The Group has a trade payable facility which is an unsecured funding arrangement for the purposes of funding trade related
payments associated with the purchase of various raw materials from approved suppliers. Trade bills of exchange are paid by
the facility direct to the importer and the Group pays the facility on 180-day terms within an overall facility limit of $50,000,000
(2016: $50,000,000). The amount utilised and recorded within trade creditors at 30 June 2017 was $48,639,345 (2016: $36,004,244).
Note 16 – Provisions
Current
Employee entitlements
Non-current
Employee entitlements
2017
$’000
2016
$’000
13,540
12,909
581
446
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability.
Provision for employee entitlements
Current liabilities for wages and salaries, including non-monetary benefits, short term incentive payments, annual leave, accumulating
sick leave and long service leave expected to be settled within 12 months of the reporting date, are recognised in accruals and
provisions for employee entitlements in respect of employees’ services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken
and measured at the rates paid or payable. Employee benefit on-costs, including payroll tax, are recognised and included in both
employee benefit liabilities and costs.
72
Ridley Corporation Limited Annual Report 2017 The non-current liability for long service leave expected to be settled more than 12 months from the reporting date is measured as
the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on national government bonds with terms
to maturity and currency that match, as closely as possible, the timing of estimated future cash outflows.
Note 17 – Borrowings
Non-current
Bank loans
2017
$’000
2016
$’000
68,079
69,435
The bank loans are subject to bank covenants based on financial ratios of the Group. As at 30 June 2017, and throughout all relevant
times during the financial year ended 30 June 2017, the Group was in compliance with these covenants. The bank loans are
unsecured.
Total loan facilities available to the Group in Australian dollars
Long term loan facility (a)
Cash
2017
2016
Limits
$’000
160,000
-
160,000
Utilised
$’000
68,500
(16,535)
51,965
Limits
$’000
160,000
-
160,000
Utilised
$’000
70,000
(28,468)
41,532
(a) Long term loan facility
The Group’s dual bank long term loan facility is a combination of floating core debt funding of $80 million plus an additional $80
million of fixed term project funding with a maturity date of 18 April 2021. The borrowing facility comprises unsecured bank loans with
floating interest rates subject to negative pledge arrangements which require the Group to comply with certain minimum financial
requirements. The key covenant ratios under the facility remain interest cover, debt cover, gearing and consolidated net worth. The
Group is in compliance with all facility covenants.
Offsetting of financial instruments
The Group does not set off financial assets with financial liabilities in the consolidated financial statements. Under the terms of the
loan facility agreement, if the Group does not pay an amount when due and payable, the bank may apply any credit balance in any
currency in any account that the Group has with the bank, in or towards satisfaction of that amount.
As at 30 June 2017, the value of legally enforceable cash balances, which upon default or bankruptcy would be applied to the loan
facility, is $16,535,000 (2016: $28,468,000).
Note 18 – Share capital
Fully paid up capital:
307,817,071 ordinary shares with no par value (2016: 307,817,071)
Parent entity
2017
$’000
2016
$’000
214,445
214,445
There were no movements in issued capital or the number of shares on issue in either of the financial years.
Ordinary shares
Ordinary shares are classified as share capital. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds. Ordinary shares entitle the holder to receive dividends and the proceeds on
winding up the interest in proportion to the number of shares held. On a show of hands, every shareholder present at a shareholders’
meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote.
73
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 18 – Share capital continued
Capital risk management
The Group manages capital to ensure it maintains optimal returns to shareholders and benefits for other stakeholders. The Group
also aims to maintain a capital structure that ensures the optimal cost of capital available to the Group.
The Group reviews and, where appropriate, adjusts the capital structure to take advantage of favourable costs of capital or high
returns on assets. The Group may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt. The Group monitors capital through the gearing ratio (net debt/total equity). The gearing
ratios as at 30 June are as follows:
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
Note 19 – Reserves and retained earnings
Reserves
Share-based payments reserve
Opening balance at 1 July
Options and performance rights expense
Share-based payment transactions
Retained earnings transfer
Closing balance at 30 June
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
2016
$’000
69,435
(28,468)
40,967
247,884
16.5%
2017
$’000
2016
$’000
2,170
2,210
(3,773)
2,288
2,895
853
2,049
(831)
99
2,170
The share-based payments reserve is used to recognise the fair value of performance rights and options issued to employees in
relation to equity settled share-based payments.
Retained earnings
Opening balance at 1 July
Net profit for the year
Dividends paid
Share-based payments reserve transfer
Closing balance at 30 June
Note 20 – Investment in controlled entities
The ultimate parent entity within the Group is Ridley Corporation Limited.
Name of entity
Ridley AgriProducts Pty Ltd and its controlled entity
CSF Proteins Pty Ltd
Barastoc Stockfeeds Pty Ltd
Ridley Corporation (Thailand) Co. Ltd 1
RCL Retirement Pty Limited
Ridley Land Corporation Pty Ltd and its controlled entities
Lara Land Development Corporation Pty Ltd
Moolap Land Development Corporation Pty Ltd
Country of
incorporation Class of shares
Australia
Australia
Australia
Thailand
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
1. Entity incorporated during the year in Thailand to manage the Novacq™ Thailand operations.
74
31,269
25,815
(12,313)
(2,288)
42,483
14,536
27,606
(10,774)
(99)
31,269
Ownership interest
2016
2017
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ridley Corporation Limited Annual Report 2017 Note 21 – Parent entity
As at 30 June 2017 and throughout the financial year ending on that date, the parent company of the Group was Ridley Corporation
Limited.
Result of the parent entity
Profit for the year
Comprehensive income for the year
Total comprehensive income for the year
Financial position of the parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Share capital
Share-based payment reserve
Retained earnings
Total equity
2017
$’000
2016
$’000
29,506
-
29,506
15,808
314,594
330,402
1,699
68,156
69,855
260,547
214,445
2,895
43,207
260,547
11,147
-
11,147
15,938
310,398
326,336
11,892
69,530
81,422
244,914
214,445
2,170
28,299
244,914
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees the debts of certain of its
subsidiaries which are party to the deed.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in note 22.
Note 22 – Deed of Cross Guarantee
Ridley Corporation Limited, Ridley AgriProducts Pty Ltd and CSF Proteins Pty Ltd are parties to a Deed of Cross Guarantee under
which each company guarantees the debts of the other entities.
The above companies represent a Closed Group for the purposes of the ASIC Class Order, which governs the operation and
establishment of the Deed of Cross Guarantee. As there are no other parties to the Deed of Cross Guarantee that are controlled but
not wholly owned by Ridley Corporation Limited, they also represent the Extended Closed Group.
(a) Summarised Consolidated Statement of Comprehensive Income
Profit before income tax
Income tax expense
Profit from discontinued operation (net of tax)
Profit after income tax
2017
$’000
34,287
(8,472)
-
25,815
2016
$’000
40,315
(13,112)
403
27,606
75
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2017
$’000
2016
$’000
16,535
117,491
83,717
380
218,123
840
182,794
79,284
1,324
5,057
269,299
487,422
145,399
-
13,540
158,939
68,079
581
68,660
227,599
259,823
214,445
2,895
42,483
259,823
28,468
112,352
87,683
-
228,503
5,537
160,209
76,355
3,663
7,443
253,207
481,710
142,776
8,260
12,909
163,945
69,435
446
69,881
233,826
247,884
214,445
2,170
31,269
247,884
Note 22 – Deed of Cross Guarantee continued
(b) Balance sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Tax asset
Total current assets
Non current assets
Receivables
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
76
Ridley Corporation Limited Annual Report 2017 Note 23 – Related party disclosures
Investments
Information relating to investments accounted for using the equity method is set out in note 13.
Transactions with associated entities are on normal commercial terms and conditions in the ordinary course of business, unless
terms and conditions are covered by shareholder agreements.
Other related parties
Contributions to superannuation funds on behalf of employees are disclosed in note 25.
Transactions with related parties
Transactions with related parties were as follows:
Sales of products – associate
Purchases of products/services – associate
– joint venture entity
Outstanding balances with related parties were as follows:
Current receivable – joint venture entity (note 8(b))
Current payable – associate
Outstanding balances are unsecured and repayable in cash.
Key management personnel compensation
Short term employee benefits
Post-employment benefits
Other benefits
Share-based payments
Total key management personnel compensation
Note 24 – Share-based payments
Share-based payment expense
Shares issued under the Employee Share Scheme
Performance rights issued under Long Term Incentive Plan
Total share-based payment expense
Share-based payment arrangements
2017
$’000
2016
$’000
2,622
6,716
21
4,487
-
4,407
12,994
-
-
375
2017
$’000
2,926,503
208,589
193,961
799,425
4,128,478
2016
$’000
4,501,113
261,152
375,306
687,867
5,825,438
2017
$’000
525
1,685
2,210
2016
$’000
575
1,474
2,049
Ridley Corporation Long Term Incentive Plan
The purpose of the Ridley Corporation Long Term Incentive Plan (LTIP) is to provide long term rewards that are linked to shareholder
returns. Under the LTIP, selected executives and the Managing Director may be offered a number of performance rights (Right). Each
Right provides the entitlement to acquire one Ridley share at nil cost subject to the satisfaction of performance hurdles.
The fair value of performance rights granted is recognised as an employee benefit expense with a corresponding increase in equity.
The fair value is measured by an independent third party expert at grant date and recognised over the three-year vesting period
during which the employees become unconditionally entitled to the performance rights.
The fair value at grant date is determined using a binomial option pricing model that takes into account the exercise price, term of
the option, vesting and performance criteria, impact of dilution, non-tradeable nature of the performance rights, share price at grant
date and expected price volatility of the underlying share, expected dividend yield and the risk-free interest rate for the term of the
performance rights.
77
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 24 – Share-based payments continued
Ridley Corporation Special Retention Plan
The Ridley Corporation Special Retention Plan was developed specifically to retain and motivate key executives. Under the Special
Retention Plan, selected executives and the Managing Director may be offered a number of performance rights (SRP Rights).
The Plan offer is made in accordance with the rules of the Ridley Long Term Incentive Plan except that there are no Disposal
restrictions and the cessation of employment has been superseded, such that the SRP Rights under this offer vest in full on the earlier
occurrence of (i) completion of two years of service from the date of grant; (ii) ceasing to be an employee of Ridley because
of a sale of a subsidiary entity; and (iii) occurrence of a change of control event. Each SRP Right provides the entitlement to acquire
one Ridley share at the end of the service period.
(i) Current year issues under the Ridley Corporation Long Term Incentive Plan and Special Retention Plan
The model inputs for the performance rights granted during the reporting period under the LTIP included:
Grant date
Expiry date
Share price at grant date
Fair value at grant date
Expected price volatility of the Company’s shares
Expected dividend yield
Risk-free interest rate
Rights
1 July 2016
30 June 2019
$1.40
$0.71
25%
3.6%
1.5%
SRP Rights
1 January 2017
1 January 2020
$1.25
$1.13
25%
3.4%
2.0%
The expected share price volatility is based on the historic volatility (based on the remaining life of the performance rights), adjusted
for any expected changes to future volatility due to publicly available information.
Details of performance rights outstanding under the plans at balance date are as follows:
2017
Grant date
Long Term Incentive Plan
1 July 2013
1 July 2014
1 July 2015
1 July 2016
Expiry date
1 July 2016
1 July 2017
1 July 2018
1 July 2019
Balance at
start of
the year
Granted
during
the year
Cancelled
during
the year
Vested
during
the year
Balance at
end of
the year
2,400,000
2,575,000
2,675,000
-
7,650,000
-
-
-
2,825,000
2,825,000
-
(125,000)
-
(25,000)
(150,000)
(2,400,000)
-
-
-
(2,400,000)
-
2,450,000
2,675,000
2,800,000
7,925,000
1 January 2020
-
150,000
-
-
150,000
7,650,000
2,975,000
(150,000)
(2,400,000)
8,075,000
Balance at
start of the
year
Granted
during the
year
Cancelled
during the
year
Vested
during the
year
Balance at
end of the
year
2,400,000
2,700,000
-
5,100,000
-
-
2,800,000
2,800,000
-
(65,351)
(125,000)
(190,351)
-
(59,649)
-
(59,649)
2,400,000
2,575,000
2,675,000
7,650,000
Special Retention Plan
1 January 2017
2016
Grant date
Long Term Incentive Plan
1 July 2013
1 July 2014
1 July 2015
Expiry date
1 July 2016
1 July 2017
1 July 2018
78
Ridley Corporation Limited Annual Report 2017
Ridley Employee Share Scheme
At the 1999 Annual General Meeting, shareholders approved the introduction of the Ridley Employee Share Scheme. Under the
scheme, shares are offered to all permanent Australian employees with a minimum of 12 months’ service as at the date of offer and
at a discount of up to 50%. The maximum discount per employee is limited to $1,000 annually in accordance with relevant Australian
taxation legislation. The amount of the discount and number of shares allocated is at the discretion of the Directors. The purpose
of the scheme is to align employee and shareholder interests.
Shares issued to employees under the Ridley Employee Share Scheme vest immediately on grant date. Employees can elect to
receive an interest free loan to fund the purchase of the shares. Dividends on the shares are allocated against the balance of any loan
outstanding. The shares issued are accounted for as ‘in-substance’ options, which vest immediately. The fair value of these ‘in-
substance’ options is recognised as an employee benefit expense with a corresponding increase in equity. The fair value at grant date
is independently determined using a binomial option pricing model.
The fair value at grant date of the options issued during the year through the Ridley Employee Share Scheme was measured based
on the binomial option pricing model using the following inputs:
Grant date
Restricted life
Fair value at grant date
Expected price volatility of the Company’s shares
Expected dividend yield
Risk-free interest rate
Ridley Employee Share Scheme movements
2017 Number of shares
19 May 2017
3 years
$0.84
25%
3.4%
2.5%
Grant date
29 January 2002
28 January 2003
5 April 2005
10 April 2006
13 April 2007
11 April 2008
3 April 2009
30 April 2010
30 April 2011
30 April 2012
26 April 2013
23 May 2014
31 May 2015
20 May 2016
19 May 2017
Date shares become
unrestricted
29 January 2005
28 January 2006
5 April 2008
10 April 2009
13 April 2010
11 April 2011
3 April 2012
30 April 2013
30 April 2014
30 April 2015
26 April 2016
23 May 2017
31 May 2018
20 May 2019
19 May 2020
Weighted
average
exercise price
$0.82
$0.74
$0.77
$0.66
$0.57
$0.56
$0.34
$0.61
$0.66
$0.61
$0.41
$0.48
$0.66
$0.85
$0.84
Balance at
start of
the year
35,000
63,450
88,740
113,700
131,925
175,714
298,556
227,920
242,788
284,488
683,111
829,500
700,719
675,903
-
Granted
during
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
623,250
Exercised
during
the year
(5,000)
(6,750)
(10,440)
(15,160)
(14,072)
(25,102)
(32,516)
(30,932)
(39,208)
(38,042)
(109,395)
(101,910)
(64,188)
(56,202)
-
Balance at
end of
the year
30,000
56,700
78,300
98,540
117,853
150,612
266,040
196,988
203,580
246,446
573,716
727,590
636,531
619,701
623,250
Exercisable
at end of
the year
30,000
56,700
78,300
98,540
117,853
150,612
266,040
196,988
203,580
246,446
573,716
727,590
-
-
-
4,551,514
623,250
(548,917)
4,625,847
2,746,365
Weighted average exercise price
$0.59
$0.84
$0.57
$0.63
$0.52
The ‘Exercisable at end of the year’ column in the above and following tables reflects the fact that the options outstanding have
a weighted average contractual life of three years (2016: three years).
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 24 – Share-based payments continued
2016 Number of shares
Grant date
29 January 2002
28 January 2003
5 April 2005
10 April 2006
13 April 2007
11 April 2008
3 April 2009
30 April 2010
30 April 2011
30 April 2012
26 April 2013
23 May 2014
31 May 2015
20 May 2016
Date shares become
unrestricted
29 January 2005
28 January 2006
5 April 2008
10 April 2009
13 April 2010
11 April 2011
3 April 2012
30 April 2013
30 April 2014
30 April 2015
26 April 2016
23 May 2017
31 May 2018
20 May 2019
Weighted
average
exercise price
$0.82
$0.74
$0.77
$0.66
$0.57
$0.56
$0.34
$0.61
$0.66
$0.61
$0.41
$0.48
$0.66
$0.85
Balance at
start of
the year
37,000
68,850
97,875
122,796
147,756
200,816
345,852
280,016
295,568
352,302
773,058
912,450
770,256
-
Granted
during
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
675,903
Exercised
during
the year
(2,000)
(5,400)
(9,135)
(9,096)
(15,831)
(25,102)
(47,296)
(52,096)
(52,780)
(67,814)
(89,947)
(82,950)
(69,537)
-
Balance at
end of
the year
35,000
63,450
88,740
113,700
131,925
175,714
298,556
227,920
242,788
284,488
683,111
829,500
700,719
675,903
Exercisable
at end of
the year
35,000
63,450
88,740
113,700
131,925
175,714
298,556
227,920
242,788
284,488
683,111
-
-
-
4,404,595
675,903
(528,984)
4,551,514
2,345,392
Weighted average exercise price
$0.54
$0.85
$0.55
$0.59
$0.53
Note 25 – Retirement benefit obligations
Superannuation
The Group sponsors the Ridley Superannuation Plan – Australia, which is administered by Mercer. The fund provides available benefits
on a defined contribution basis for employees or their dependents on retirement, resignation, total and permanent disability, death
and in some cases on temporary disablement. The members and the Group make contributions as specified in the rules of the plan.
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are
recognised as an employee benefit expense in comprehensive income in the periods during which services are rendered by employees.
Group contributions in terms of awards and agreements are legally enforceable and, in addition, contributions for all employees
have to be made at minimum levels for the Group to comply with its obligations. Other contributions are in the main not legally
enforceable, with the right to terminate, reduce or suspend these contributions upon giving written notice to the trustees.
Benefits are based on an accumulation of defined contributions. The amount of contribution expense recognised in the Consolidated
Statement of Comprehensive Income for the year is $5,398,000 (2016: $5,180,000).
Note 26 – Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk including currency, interest rate, commodity, credit and
liquidity risk. The Group’s overall financial risk management policy focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. The Group may use derivative financial instruments,
such as foreign exchange contracts and interest rate swaps, to manage certain risk exposures.
Risk management is carried out by management under policies approved by the Board. Management evaluates and hedges financial
risks where appropriate. The Board approves written principles for overall risk management, as well as written policies covering
specific areas, such as mitigating foreign exchange, interest rate and credit risks and investing excess liquidity.
80
Ridley Corporation Limited Annual Report 2017 (a) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the relevant entity’s functional currency. The Group is exposed to foreign exchange risk through the purchase
and sale of goods in foreign currencies.
Forward contracts and foreign currency bank balances are used to manage foreign exchange risk. Management is responsible for
managing exposures in each foreign currency by using external forward currency contracts and purchasing foreign currency that is held
in US dollar, New Zealand dollar and Euro bank accounts. Where possible, borrowings are made in the currencies in which the assets are
held in order to reduce foreign currency translation risk. The Group does not hedge account on forward foreign currency contracts.
Foreign currency cash and forward exchange contracts
The Group holds foreign currency bank accounts in US dollars, New Zealand dollars and Euros, which are translated into AUD using
spot rates. These foreign currency bank accounts, and at times forward foreign exchange contracts, are entered into for purchases
and sales denominated in foreign currencies. The Group classifies forward foreign exchange contracts as financial assets and
liabilities and measures them at fair value. At 30 June 2017, the net fair value of forward exchange contracts resulting in a liability of nil
(2016: nil) has been recognised by the Group for the fair value of forward foreign exchange contracts.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
$’000 Australian dollars
Cash
Payables
Net balance sheet exposure
USD
4,356
-
4,356
2017
NZD
258
-
258
EUR
476
-
476
THB
510
(1,526)
(1,016)
USD
12,338
-
12,338
2016
NZD
945
-
945
EUR
4,512
(953)
3,559
Foreign currency sensitivity
A change of a 10% strengthening or weakening in the closing exchange rate of the foreign currency bank balances at the reporting
date for the financial year would have decreased by $465,000 (2016: $1,618,000) or increased by $567,000 (2016: $1,977,000) the
Group’s reported comprehensive income and the Group’s equity. A sensitivity of 10% has been selected as this is considered
reasonable taking into account the current level of exchange rates and the volatility observed both on a historical basis and on
market expectations for future movements. The Directors cannot and do not seek to predict movements in exchange rates.
(b) Interest rate risk
As the Group has no significant interest bearing assets, the Group’s income and operating cash inflows are substantially independent
of changes in market interest rates.
The Group’s main interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group policy is to ensure
that the interest cover ratio does not fall below the ratio limit set by the Group’s financial risk management policy. At balance date,
bank borrowings of the Group were incurring an average variable interest rate of 4.0% (2016: 4.0%).
Interest rate risk exposures
The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial
liabilities is set out below. Exposures arise predominantly from assets and liabilities bearing variable interest rates as the Group intends
to hold fixed rate assets and liabilities to maturity.
Variable rate instruments
Cash
Bank loans
2017
2016
Interest rate
$’000
Interest rate
$’000
-
4.0%
16,535
68,500
-
4.0%
28,468
70,000
Interest rate sensitivity
A change of 100 basis points in interest rates at the reporting date annualised for the financial year would have increased or decreased
the Group’s reported comprehensive income and equity by $477,000 (2016: $486,000).
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 26 – Financial risk management continued
(c) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and the risk arises principally from the Group’s receivables from customers.
Refer to Note 8 and Note 31 in respect of actions initiated by Ridley since balance date to recover overdue debts. The Group has no
other significant concentrations of credit risk that are not covered by collateral and/or credit insurance. The Group has policies in
place to ensure that sales of products and services are made to customers with an appropriate credit history. The Group holds
collateral and/ or credit insurance over certain trade receivables.
Derivative counterparties and cash transactions are limited to financial institutions with a high credit rating. The Group has policies
that limit the amount of credit exposure to any one financial institution.
The maximum exposure to credit risk at the reporting date was:
Trade receivables
Other receivables
Cash and cash equivalents
2017
$’000
102,808
11,821
16,535
131,164
2016
$’000
99,904
15,920
28,468
144,292
Further credit risk disclosures on trade receivables are disclosed in note 8.
(d) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset.
The ultimate responsibility for liquidity risk management rests with the Board, which has established an appropriate risk management
framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The
Group’s corporate treasury function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities, and by monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Details of finance facilities are set out in note 17.
The following tables disclose the contractual maturities of financial liabilities, including estimated interest payments:
2017
Non-derivative financial liabilities
Trade and other payables
Bank loans
2016
Non-derivative financial liabilities
Trade and other payables
Bank loans
Carrying
amount
$’000
Less than
1 year
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
Total
contractual
cash flows
$’000
148,580
68,079
216,659
148,580
5,959
154,539
-
5,959
5,959
-
5,959
5,959
-
74,038
74,038
-
5,959
5,959
148,580
97,874
246,454
145,916
69,435
215,351
145,916
5,382
151,298
-
5,382
5,382
-
5,382
5,382
-
5,382
5,382
-
74,817
74,817
145,916
96,345
242,261
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.
82
Ridley Corporation Limited Annual Report 2017
(e) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans, receivables and deposits on the date that they are originated. All other financial assets (including
assets designated at fair value through comprehensive income) are recognised initially on the trade date at which the Group becomes
a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash
flows from the asset expire, or when it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other
financial liabilities (including liabilities designated at fair value through comprehensive income) are recognised initially on the trade
date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability
when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount
presented in the balance sheet when, and only when, the Group has a legal right to offset the amounts and intends either to settle on
a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: loans, borrowings, trade and other payables. Such financial liabilities
are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial
liabilities are measured at amortised cost using the effective interest rate method.
(iii) Derivative financial instruments
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. The resulting gain or loss is recognised in the Consolidated Statement of Comprehensive Income.
(f) Fair values
Fair values versus carrying amounts
The carrying amount of financial assets and liabilities approximates their fair value.
Note 27 – Commitments for expenditure
Expenditure contracted for but not recognised as liabilities:
Capital Plant and equipment
CSIRO Novacq™ Research Alliance (a)
Total Group commitments for non-cancellable operating leases:
Due within one year
Due within one to two years
Due within two to five years
Due after five years
The Group has leases for land, buildings and equipment under operating leases.
2017
$’000
2016
$’000
15,901
4,750
20,651
4,644
3,545
4,162
1,485
13,836
14,512
-
14,512
4,431
3,407
5,214
657
13,709
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 27 – Commitments for expenditure continued
(a) CSIRO Novacq™ Research Alliance
On 24 March 2017, a five-year strategic alliance was executed with CSIRO to conduct collaborative research to maximise the
development of new Novacq™ applications beyond the former application for prawn and crustacean species. Ridley’s annual cash
commitment to the alliance is $1 million, and Ridley has the option to extend the relationship for a further five years. Having paid the
first instalment for the fourth quarter of FY17, a total outstanding commitment of $4.75 million prevailed at year end. The quarterly
payments are being capitalised into the Novacq™ project reflected in the Balance Sheet as a non-current intangible asset.
Note 28 – Contingent liabilities
Guarantees
The Group is, in the normal course of business, required to provide certain guarantees and letters of credit on behalf of controlled
entities, associates and related parties in respect of their contractual performance obligations. These guarantees and letters of credit
only give rise to a liability where the entity concerned fails to perform its contractual obligations.
Bank guarantees
2017
$’000
954
2016
$’000
954
Litigation
At the time of preparing this Financial Report, some companies included in the Group are parties to pending certain legal proceedings,
the outcome of which is not known. The entities are defending, or prosecuting, these proceedings as they are entitled to do. The
Directors have assessed the impact on the Group from the individual actions to be immaterial. No material losses are anticipated in
respect of any of the above contingent liabilities. There were no other material contingent liabilities in existence at balance date.
Note 29 – Auditor’s remuneration
(a) Audit and review of Financial Reports
Auditors of the Company
KPMG Australia
(b) Other services
Auditors of the Company
KPMG Australia – in relation to other assurance, taxation and due diligence services
Total remuneration of auditors
2017
$’000
2016
$’000
344,020
342,058
112,950
456,970
109,522
451,580
84
Ridley Corporation Limited Annual Report 2017
Note 30 – Discontinued Operations
Discontinued operations in the year ended 30 June 2016
On 6 November 2015, the Group announced the signing of a Share Sale Agreement (SSA) to divest 100% of the share capital of
Ridley Dry Creek Pty Ltd for gross proceeds of $35 million, the net present value of which at completion was $34.3 million.
Completion occurred on 2 June 2016.
$19 million of proceeds relating to the SSA were received during the 2016 financial year, $10 million of proceeds were received during
the 2017 financial year, with the balance of $6 million receivable by 31 December 2017.
(a) Statement of profit or loss for discontinued operation
The financial performance and cash flow information presented are for the period 1 July 2015 to 2 June 2016.
Results of discontinued operation
Other income
Expenses – General and administrative
Loss before income tax
Income tax benefit:
Current tax
Deferred tax
Loss after income tax
Profit on sale before income tax and transaction expenses
Transaction related expenses
Capital gain on disposal
Utilisation of brought forward tax losses
Net income tax payable on disposal of discontinued operation
Profit on sale of discontinued operation after income tax
Profit/(loss) from discontinued operation after income tax
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
$’000
381
(4,351)
(3,970)
1,293
1,399
2,692
(1,278)
7,067
(499)
6,568
(8,601)
3,714
(4,887)
1,681
403
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Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 30 – Discontinued Operations continued
(b) Effect of disposal on the financial position of the Group
The carrying amounts of assets and liabilities as at the date of sale completion (2 June 2016) were:
Assets
Assets held for sale: Property, plant and equipment
Deferred tax
Total assets
Liabilities
Deferred tax
Carrying amount of net assets sold
Cash consideration received
Deferred consideration receivable
Discount on deferred consideration
Total consideration
Profit on carrying amount of net assets sold before transaction costs
(c) Cash flows from discontinued operation
Net cash (outflow) from ordinary activities
Net cash inflow from investing activities*
Net cash inflow
* Comprises cash consideration received of $10 million (2016: $19 million).
Note 31 – Events occurring after the balance sheet date
2017
$’000
-
-
-
-
-
-
-
-
-
-
2017
$’000
-
10,000
10,000
2016
$’000
33,456
857
34,313
(7,045)
27,268
19,000
16,000
(665)
34,335
7,067
2016
$’000
(4,018)
19,000
14,982
The amount of $17.7 million owing from Huon was the subject of legal recovery proceedings which commenced in August 2016.
The legal proceedings were settled by mediation in June 2017 and the receivable was recovered in full on 20 July 2017. As part
of the settlement, Ridley made a payment, net of insurance, of $1.0 million to Huon, which fully utilised its provision for non-recovery.
No other matters or circumstances have arisen since 30 June 2017 that have significantly affected, or may significantly affect:
(i) the Group’s operations in future financial years; or
(ii) the results of those operations in future financial years; or
(iii) the Group’s state of affairs in future financial years.
Note 32 – Corporate information and accounting policy summary
Ridley Corporation Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia, and whose
shares are publicly traded on the Australian Securities Exchange. The consolidated financial statements as at, and for the year
ended, 30 June 2017 comprise Ridley Corporation Limited, the ‘parent entity’’, its subsidiaries and the Group’s interest in equity
accounted investments. Ridley Corporation Limited and its subsidiaries together are referred to in this Financial Report as
‘the Group’. The Group is a for-profit entity and is primarily involved in the manufacture of animal nutrition solutions.
The Financial Report was authorised for issue by the Directors on 23 August 2017.
The principal accounting policies adopted in the preparation of the financial report are set out in either the relevant note to the
accounts or below. These policies have been consistently applied to all the years presented. Certain comparative amounts have
been reclassified to conform with the current year’s presentation.
86
Ridley Corporation Limited Annual Report 2017
Basis of preparation
Statement of compliance
These consolidated financial statements are general purpose Financial Statements prepared in accordance with Australian
Accounting Standards (AASBs) (including Interpretations) adopted by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards
(IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).
Application of new and revised accounting standards and interpretations
The Group has adopted all of the new and revised standards and interpretations issued by the AASB that are relevant to its operations
and effective for the current year. New and revised standards and amendments thereof, and interpretations effective for the current
year that are relevant to the Group, include:
• AASB 2016-3 Withdrawal of AASB 1031 Materiality
The application of the new and revised standards has had no material impact on the disclosures or on the amounts recognised in the
current or prior period, and are not likely to affect future periods.
The following standards, amendments and interpretations, are effective for annual periods beginning after 1 July 2017 and have been
identified as those which may impact the Group in the period of initial application. They have not been applied in preparing this
consolidated Financial Report.
• AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
In July 2014, the International Accounting Standards Board issued the final version of IFRS 9 Financial Instruments. IFRS 9 is effective
for annual periods beginning on or after 1 January 2018. The Group plans to adopt IFRS 9 for the year ending 30 June 2018.
IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets
are managed and their cash flow characteristics. Financial assets will either be measured at amortised cost, fair value through other
comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL). Financial assets are measured at amortised cost or
FVTOCI if certain restrictive conditions are met. All other financial assets are measured at FVTPL. All investments in equity instruments
will be measured at fair value. For those investments in equity instruments that are not held for trading, there is an irrevocable
election to present gains and losses in OCI. Dividends are recognised in profit or loss.
A new impairment model which is now based on an ‘expected loss’ model rather than an ‘incurred loss’ model. A simplified
impairment model applies to trade receivables and lease receivables.
Hedging changes reflect new principles which are less complex, with the removal of the strict 80–125% highly effectiveness
threshold. While the Group currently does not apply hedge accounting, the new standard makes it easier to apply hedge accounting
and also expands the type of instruments that can be easily used (for example, options are now a more effective hedging instrument).
IFRS 9 will require extensive new disclosures, in particular about hedge accounting, credit risk and expected credit losses.
The actual impact of adopting IFRS 9 on the Group’s consolidated financial statements in 2018 is not known and cannot be reliably
estimated because it will be dependent on the financial instruments that the Group holds and economic conditions at that time as
well as accounting elections and judgements that it will make in the future.
Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as described
below. The Group plans to take advantage of the exemption allowing it not to restate comparative information for prior periods with
respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and
financial liabilities resulting from the adoption of IFRS 9 generally will be recognised in retained earnings and reserves as at 1 July 2017.
87
Ridley Corporation Limited Annual Report 2017LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE & INNOVATIONBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 32 – Corporate information and accounting policy summary continued
• AASB 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programmes. IFRS 15 is effective for annual periods beginning on or after 1 January 2018. The Group plans to adopt IFRS 15 for the
year ending 30 June 2018.
The Group has completed an initial assessment of the potential impact of the adoption of IFRS 15 on its consolidated financial
statements, however this assessment has not progressed to the stage of modelling financial outcomes.
For the sale of products, revenue is currently recognised when the goods are delivered to the customers’ premises, which is taken to
be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is
recognised at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable
and there is no continuing management involvement with the goods.
Under IFRS 15, revenue will be recognised when a customer obtains control of the goods. IFRS 15 states that “control of an asset
refers to the ability to direct the use of and obtain substantially all of the remaining benefits from the asset”.
A customer must have the present right to direct the use of, and obtain substantially all of the remaining benefits from, an asset for an
entity to recognise revenue. For example, in a contract that requires a manufacturer to produce an asset for a customer, it might be
clear that the customer will ultimately have the right to direct the use of, and obtain substantially all of the remaining benefits from,
the asset. However, the entity should not recognise revenue until the customer has actually obtained that right which can only occur
once the feed is available for the customer to access, which depending on the structure of the contract, can be the point in time the
goods are delivered to the customers’ premises.
The Group plans to apply the new standard using the modified retrospective approach. The Group plans to use the practical
expedients for completed contracts. This means that completed contracts that began and ended in the same comparative reporting
period, as well as the contracts that are completed contracts at the beginning of the earliest period presented, are not restated.
The Group is currently performing a detailed assessment of the impact resulting from the application of IFRS 15, including the
implications for rebates and other existing contractual arrangements.
• AASB 16 Leases
IFRS 16 introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are
optional exemptions for short term leases and leases of low value items.
The standard is effective for annual periods beginning on or after 1 January 2019. The Group plans to adopt IFRS 16 for the year
ending 30 June 2019. The Group has started an initial assessment of the potential impact on its consolidated financial statements. So
far, the most significant impact identified is that the Group will recognise new assets and liabilities for its operating leases of some
sites and machinery/forklifts.
In addition, the nature of expenses related to those leases will now change as IFRS 16 replaces the straight line operating lease
expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. The Group has not yet decided
whether it will use the optional exemptions as part of transition.
As a lessee, the Group can either apply the standard using a retrospective approach or a modified retrospective approach with
optional practical expedients. The lessee applies the election consistently to all of its leases. The Group has not yet determined which
transition approach to apply.
88
Ridley Corporation Limited Annual Report 2017 Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis (unless otherwise stated) except for the
following items in the balance sheet:
• derivative financial instruments at fair value through comprehensive income; and
• cash settled share-based payment arrangements, which are measured at fair value.
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by
the Australian Securities and Investments Commission relating to the ‘rounding off’ of amounts in the Directors’ Report and financial
statements. Amounts in the Directors’ Report and the consolidated financial statements have been rounded off to the nearest
thousand dollars in accordance with that legislative instrument, unless otherwise indicated.
Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with AASBs requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods affected. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
(i) Estimated impairment of goodwill and other non-current assets
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy for intangible
assets. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units, or
CGUs). Refer to note 12 for further details on impairment testing.
(ii) Investment properties
The Group measures investment properties at cost. A fair value range cannot be determined reliably given that the respective
locations do not have local established industrial or residential infrastructure which would enable a reliable valuation benchmark
to be determined. Furthermore, the value of each site also varies significantly depending upon which stage of the progressive
regulatory approvals required for redevelopment has been attained at balance date. Where reliable estimates of fair value are
obtainable, they are factored into the annual assessment of the property’s carrying value. The valuation of investment properties
requires judgement to be applied in selecting appropriate valuation techniques and setting valuation assumptions. The Group
periodically engages independent valuers to provide an indicative value for its material investment properties in the context of
assessing for impairment. Refer to note 10 for further details on investment properties.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-
financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. When applicable, further information about the assumptions in determining fair values is disclosed in the notes specific to
that asset or liability.
(i) Derivative financial instruments
The fair values of forward exchange contracts are estimated using listed market prices if available. If a listed market price is not
available, then the fair value is estimated by discounting the contractual cash flows at their forward price and deducting the current
spot rate. The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting
estimated cash flows based on the terms and maturity of each contract and using market interest rates for similar instruments at the
measurement date.
(ii) Non-derivative financial assets and liabilities
The net fair value of cash and non-interest bearing monetary financial assets and liabilities of the Group approximates their
carrying amounts.
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Note 32 – Corporate information and accounting policy summary continued
Basis of consolidation – Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The
consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment. Any gain on bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred
does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or
loss. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration
that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until
the date on which control ceases.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.
Interests in equity-accounted investees
Associates are those entities where the Group has significant influence, but not control or joint control, over the financial and
operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net
amounts of the arrangement, rather than rights to its assets and obligations for liabilities. Investments in associates and joint venture
entities are accounted for in the consolidated financial statements using the equity method of accounting, after initially being
recognised at cost. The Group’s investment in associates and joint venture entities includes goodwill identified on acquisition,
net of any accumulated impairment losses.
The Group’s share of its associates’ and joint venture entities’ post-acquisition profits or losses is recognised in the Consolidated
Statement of Comprehensive Income, and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable reduce
the carrying amount of the investment.
Unrealised gains on transactions between the Group and its associates and joint venture entities are eliminated to the extent of the
Group’s interests in the associates and joint venture entities. Accounting policies of associates and joint venture entities have been
changed where necessary to ensure consistency with the policies adopted by the Group.
Foreign currency
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated
Statement of Comprehensive Income.
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Ridley Corporation Limited Annual Report 2017
DIRECTORS’ DECLARATION
1.
In the opinion of the Directors of Ridley Corporation Limited (the Company):
(a) The consolidated financial statements and notes set out on pages 52 to 90 and the Remuneration Report are in accordance
with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001, and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2017 and its performance for the financial year
ended on that date.
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2.
In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe the members of the
Extended Closed Group identified in note 22 will be able to meet any obligations or liabilities to which they are or may be become
subject, by virtue of the Deed of Cross Guarantee, between the Company and those group entities pursuant to ASIC Class Order
98/1418.
3.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001 for the financial year ended 30 June 2017.
4. The financial statements also comply with International Financial Reporting Standards as disclosed in note 32.
This declaration is made in accordance with a resolution of the Directors.
GH Weiss
Director
Melbourne
23 August 2017
TJ Hart
Director
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INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Ridley Corporation Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Ridley Corporation Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Group’s financial position as at 30
June 2017 and of
financial
performance for the year ended on
that date; and
its
•
•
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2017
• Consolidated statement of comprehensive income,
consolidated statement of changes in equity, and
consolidated statement of cash flows for the year then
ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
complying with Australian Accounting
the Corporations
Standards and
Regulations 2001.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
92
Ridley Corporation Limited Annual Report 2017 Key Audit Matters
The Key Audit Matters we identified are:
• Recoverability of non-current assets
including goodwill and capitalised
development costs
• Accounting for inventory, including
consideration of valuation risks
Key Audit Matters are those matters that,
in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Recoverability of non-current assets including goodwill and capitalised development costs
Refer to Note 12 Intangible assets to the financial report.
The key audit matter
How the matter was addressed in our audit
assets
Recoverability of non-current
including
capitalised
goodwill
development costs is a key audit matter
due to the:
and
•
•
the potential variability
complexity in auditing the forward-
looking assumptions applied to the
Group’s discounted cash flow models
for each Cash Generating Unit (CGU)
in
given
demand from customers operating in
industry, which
the
increases
inaccurate
forecasting. We focused on the key
assumptions the Group applied in the
cash flow models including terminal
value calculations, annual growth
rates and discount rates; and
agriculture
risk of
the
complexity in auditing the Group’s
forecasts relating to the recoverability
of capitalised development costs for
new products due to the judgement
applied by the Group for the timing
and amount of future benefits from
ultimate commercialisation of the
product. The industry is evolving
through technology advancements by
the Group and its competitors, which
can lead to shifts in market demand
focused on
for products. We
gathering evidence for the critical
judgements in the forecast being the
timing and amount of future benefits.
Our procedures included:
•
testing the key controls over the cash flow models,
including review and Board approval of key assumptions
and budgets which form the basis of the cash flow
forecasts;
•
assessing the Group’s discounted cash flow models and
key assumptions by:
− assessing the appropriateness of the discounted
cash flow model against accounting standard
requirements;
− checking the relevant cash flow forecasts to the
Board approved budgets;
− comparing cash flows to signed customer contracts
continuing into the forecast cash flow period (where
relevant);
− checking the accuracy of previous Group forecasts
to
inform our evaluation of current forecasts
incorporated in the model. We considered previous
trends where volatility in earnings in the agriculture
industry existed and how this volatility impacted the
business;
− using our industry knowledge and information
published by regulatory and other bodies, we
challenged the Group’s cashflow assumptions and
the impacts of technology, market and regulatory
changes on those assumptions; and
− involving our valuation specialists to assess the
the economic
rate by comparing
discount
assumptions relating to cost of debt and cost of
equity to publicly available market data of a group of
comparable companies.
•
comparing recoverable values of CGUs to available
market data, such as implied earnings and asset
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•
•
•
multiples of comparable entities;
considering the sensitivity of the model by varying key
assumptions, such as annual growth rates, terminal
valuations and discount rates, within a reasonably
possible range to identify those assumptions at higher
risk of bias or inconsistency in application and to focus
our further procedures;
using our industry knowledge to challenge forecasts
relating to new products, including the timing and
amount of future benefits for new products. This
involved giving consideration to the outcome of
commercial trials, licencing approvals, market analysis
and development timetables; and
assessing the appropriateness of the related disclosures
in the financial report against accounting standard
requirements.
Accounting for inventory, including consideration of valuation risks
Refer to Note 9 Inventories to the financial report.
The key audit matter
How the matter was addressed in our audit
Our procedures included:
•
•
•
•
•
•
assessing the completeness and accuracy of the inventory
balance via testing controls and performance of physical
counts at key locations;
examining processes and testing controls relating to
inventory movements, standard costing and valuation;
assessing the appropriateness of inventory valuation
accounting policies applied by the Group against the
requirements of accounting standards;
items
evaluating the completeness of at-risk slow moving or
identified by the Group by
excessive stock
comparing
listings against historical sales
information, and against our observations of inventory
condition at the physical counts we attended at key
locations, to identify any additional at-risk items;
inventory
comparing a sample of inventory values against current
selling prices for products to identify any items selling for
less than their carrying value; and
judgements relating to the
challenging the Group's
provision for stock obsolescence (including slow moving or
excess stock), by comparing current inventory levels to
forecast sales. We assessed the level of provision in light
of our knowledge of the industry the Group operates in,
and from discussions with key personnel.
Inventory valuation is a key audit matter
due to the audit effort arising from the
extent of judgement involved by the
Group in determining the recoverable
value, particularly in relation to any slow
moving or excessive stock or inventory
items which may require reprocessing
prior to sale.
The Group has a diverse and broad
product range, and sells to different
market segments, which increases the
amount of
in
required
judgement
assessing the valuation of inventory.
Such judgements may have a significant
impact on the calculation of the provision
for stock obsolescence (including slow
moving or excessive stock), and therefore
the overall valuation of
inventories,
necessitating our audit effort thereon.
94
Ridley Corporation Limited Annual Report 2017 Other Information
Other Information is financial and non-financial information in Ridley Corporation Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other
Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration
Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so,
we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based
on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s
Report we have nothing to report.
Responsibilities of Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
•
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and
fair view and is free from material misstatement, whether due to fraud or error; and
assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial
Report.
A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms
part of our Auditor’s Report.
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96
Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of Ridley Corporation Limited for the year ended 30 June 2017, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2017. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Chris Sargent Partner Melbourne 23 August 2017 Ridley Corporation Limited Annual Report 2017 SHAREHOLDER INFORMATION
Holdings of securities – ordinary shares
Each fully paid
Number of holders
Number of
securities
% Held by 20
largest shareholders
6,936
307,817,071
76.0%
Number held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Total
Number of ordinary
share holders
1,256
2,464
1,369
1,757
90
Number of ordinary
shares held
553,486
7,515,386
10,587,596
43,119,019
246,041,584
6,936
307,817,071
There are 580 holders of unmarketable parcels (comprising shareholdings less than 363 shares at $1.38 per share) of ordinary shares.
20 Largest fully paid shareholders
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
BNP Paribas Nominees Pty Ltd
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