More annual reports from Ridley Corporation Ltd:
2023 ReportPeers and competitors of Ridley Corporation Ltd:
Huon AquacultureNutrition.
Performance.
Growth.
Annual Report 2018
Contents
About the Company
2018 Features
Five Year Summary
Ridley Locations and Sectors
Chairman’s Address
Managing Director’s Review
Financial Review
1
1
2
5
6
10
19
Safety, People, Innovation and Community 24
Board of Directors
Financial Report
Independent Auditor’s Report
Shareholder Information
Glossary
Corporate Directory
32
34
93
97
99
101
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 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
exceptions 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 bi-products 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.
2018 Features
• Yamba-produced Novacq™
included in domestic
commercial prawn feed trials.
• Thailand Novacq™ production
facility established and
production commenced.
• Growth in Ruminant and
Poultry, with uplift in drought
feeding for beef and sheep.
• Improved Laverton Rendering
result, but Maroota impacted
by financial distress of major
raw material supplier.
• Another solid performance
in Packaged Products, while
a return to a traditional dry
season restored profitability
for Supplements.
• Consistent underlying
Aquafeed performance
masked by non-recurring
Huon inventory legacy issues.
• Commencement of capital
works for new extrusion plant
in Tasmania and awaiting final
approvals to proceed with new
feedmill for Central Victoria.
• Property segment recorded
a net pre-tax profit of
$4.2 millon from three
property sales at Lara.
• Corporate and Finance
costs contained to prior
year levels, with reduction
in effective tax rate reflective
of increased R&D activity
throughout the business.
1
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYRidley Corporation Limited Annual Report 2018 Five Year Summary
A$’000 unless otherwise stated
Operating results
Revenue
Other income
EBITDA
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net interest expense / finance charge
Operating profit before tax
Tax expense
Net profit after tax and significant items
Loss from discontinued operation (net of tax)
Other comprehensive income
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)
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 (%)
1. Before discontinued operations.
2
2018
Actual
2017
Actual
2016
Actual
2015
Actual
2014
Actual
917,660
6,248
43,629
17,262
26,367
4,648
21,719
4,310
17,409
-
520
17,929
263,107
82,485
510,319
247,212
52,781
423,248
476,029
50,900
137.50
852,923
8,581
54,484
15,220
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
912,561
12,121
60,723
14,989
45,734
5,419
40,315
13,112
27,203
403
-
27,606
247,884
76,355
484,850
236,966
40,967
430,944
471,911
17,612
140.00
909,850
4,649
51,061¹
14,920¹
41,108¹
5,059¹
36,049¹
10,306¹
25,743¹
(4,572)
-
21,171
229,834
78,194
476,553
246,719
32,702
384,771
417,473
47,059
125.00
307,817
713
307,817
697
307,817
676
307,817
685
6.7
5.8
2.3
(32.6)
(32.8)
1.2
16.5
8.3
37.1
16.1
14.2
(19.9)
9.7
10.9
23.6
20.1
51.6
1.2
5.7
58.7
4.25
73.0
100.0
10.2
8.4
1.8
(6.6)
(14.1)
0.5
9.6
14.4
56.3
10.9
17.7
(10.3)
7.8
8.8
16.5
19.8
53.0
0.9
7.9
58.7
4.0
48.0
100.0
11.4
8.8
15.2
28.5
11.3
0.3
5.7
24.5
67.7
9.4
19.7
18.9
7.1
7.8
15.8
16.5
51.1
0.7
8.4
55.7
4.0
44.0
100.0
9.4
6.9
61.6
20.2
31.7
0.9
15.3
8.2
52.8
10.6
16.6
24.5
7.5
8.2
18.1
14.2
48.2
0.6
7.1
49.3
3.5
51.0
100.0
873,625
5,972
41,012
13,576
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
7.8
5.7
8.0
(181.2)
306.7
0.8
10.2
7.8
41.7
8.9
13.3
3,175.3
6.0
6.9
13.9
16.5
51.9
0.9
5.1
45.2
3.5
61.0
50.0
Ridley Corporation Limited Annual Report 2018 INTRODUCTION
EBIT from continuing
operations 1
Consolidated
net profit
Dividends per share
3
7
.
5
4
1
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.
1
4
6
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9
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1
0
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1. Inclusive of non-recurring items.
Ridley AgriProducts
volume
Ridley AgriProducts
operating EBIT
9
8
.
1
0
9
.
1
3
9
.
1
3
9
.
1
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$
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3
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYRidley Corporation Limited Annual Report 2018
4
Ridley Corporation Limited Annual Report 2018 LOCATIONS
& SECTORS
Ridley Locations and Sectors
Ridley Locations and Sectors
Thailand
2
1
Australia
Business Unit Structure
Monogastric Pellets, meals, concentrates and pre-mixes
for poultry and pigs
Ruminant
Packaged
Products
Extrusion
Plants
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 specialist pet foods
7
4
Supplements Block and loose lick supplements
Rendering
Ingredients
Rendered poultry, red meat and fish products for
the pet food, stock feed and aquaculture sectors
Unique and sustainable value adding raw material
ingredients for stock feed and animal wellbeing
5
6
5
2
9
6
2
3
4
3
1
1
8
1
7
2
1
s
t
e
s
s
A
y
e
d
R
i
l
Ingredients
Monogastric
Ruminant
Packaged
Extrusion Plants
Supplements
Rendering
1 Yamba*
1 Toowoomba
1 Toowoomba
1 Toowoomba
1 Narangba
1 Townsville
1 Maroota
2 Chanthaburi #
2 Mooroopna
2 Tamworth
2 Tamworth
2 Chanthaburi*
2 Laverton
Business Unit
3 Pakenham
3 Pakenham
3 Pakenham
3 Westbury #
4 Murray Bridge
4 Maffra
4 Murray Bridge
5 Bendigo*
5 Gunbower
6 St Arnaud
6 Terang
7 Wasleys
7 Taree
* Novacq™
production site.
# 100% interest
in Novacq™
production site.
8 Clifton
9 Lara
* Existing and under
construction.
* 49% interest.
# Under
construction.
5
CHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018
Chairman’s Address
Dr Gary Weiss
Chair
“The new plant at Westbury will be a world class extrusion facility,
capable of effectively servicing all aquafeed species, targeting
new and returning salmon customers and industry growth,
while also expanding Ridley’s in-house pet food capability.”
The 2018 financial year saw positive
contributions from the Poultry, Dairy,
Laverton Rendering, Supplements and
Beef and Sheep sectors and sales volume
growth for the first time in several years in
Packaged Products while we experienced
significant challenges in the Aquafeed
and Maroota Rendering sectors. Our Pig
sector held up well in the face of a cyclical
industry downturn.
The combination of the above, plus the
impacts on margin arising from significant
second half year increases in raw material
prices, generated Earnings Before
Interest and Tax (EBIT) for the 2018 year of
$43.3 million (m) before non-recurring items.
The Managing Director’s Review sets out
the details of the performance drivers for
the year, so I will again reflect on some
of the other features of what I consider
to be a satisfactory year for Ridley.
Feedmill portfolio
In September 2017, we announced our
intention to build a new feedmill at
Bendigo in Central Victoria. Underpinned
by a 10-year supply agreement with
Hazeldene’s Chickens, our key customer
in the region, the new feedmill is located
at the Wellsford Industrial Estate near
Bendigo Airport and will, on completion,
be the largest feedmill in the Ridley
portfolio. With an annual 24/7 production
capacity in excess of 350,000 tonnes,
the new feedmill will be nearly twice the
size of the Lara mill commissioned in
6
January 2017. The latest technological
advancements are being incorporated
into the mill design, with a strong focus
on efficiency and low running costs and
with sufficient on-site bulk storage and
warehousing facilities to accommodate
the anticipated long term poultry and
pig growth for the region.
Total budgeted capital outlay will be
between $45m–$50m.
Upon commissioning of the new mill, there
will be a period of transition of production
tonnes from the existing Bendigo feedmill
to the new mill. The existing Bendigo mill
will be closed following this transition of
production and the site remediated as
appropriate in preparation for conducting
a sale process. We are currently working
through the development approvals
process for the new feedmill and are
seeking to lock in the engineering
contracts and begin construction.
During the year, Ridley commenced
construction of the new extrusion plant
at Westbury in northern Tasmania. This is
another major project for Ridley, with a
capital cost of between $45m–$50m
and an annual capacity of 50,000 tonnes
based on a five day shift structure. The
plant is a clear demonstration of Ridley’s
commitment to the Tasmanian salmon
industry, and follows the prior year
restructure of the Aquafeed operations
which saw the sale of the 25% interest
in the extrusion plant at Inverell.
The transfer of salmon production from
the existing Narangba plant in Brisbane
to the Westbury plant will significantly
improve the supply chain, lead times and
collaboration with the local customer base,
as well as enhance our trial testing capability.
Without a local presence in Tasmania
in the medium to long term, our current
salmon business would face an uncertain
future. The new plant will affirm Ridley’s
position as a significant and competitive
supplier to the Tasmanian aquaculture
industry and our intention to participate
in the industry’s strong growth prospects
The new plant at Westbury will be a
world class extrusion facility, capable of
effectively servicing all aquafeed species,
targeting new and returning salmon
customers and industry growth, while
also expanding Ridley’s in-house pet food
capability. We have set a challenging target
to commission the new facility by the end
of the 2019 financial year and we are
currently on track to deliver against this
key performance metric.
Pleasingly, agreement was reached with
Tassal in June 2018 for Ridley to participate
in salmon feed trials. These trials will
provide Ridley with the opportunity to
further demonstrate its capability to
consistently produce high performance
diets to the salmon industry. The trials will
utilise approximately 3,300 tonnes of the
full range of Ridley salmon feed from the
hatchery through to the grow out stage
Ridley Corporation Limited Annual Report 2018
CHAIRMAN &
MD’S MESSAGES
with an expected harvest in late calendar
2020. Tassal will manage the trials and pay
full market value for the trial feed.
In addition to the new Tasmanian extrusion
plant, we have installed a dedicated R&D
and small feeds production line at
Narangba which will enable us to run small
production run trial diets and R&D projects
without disrupting the operating capacity
of the main production line.
Another significant capital project
concluded during the year at Narangba
has been the installation of a new Fat
Coater and new Pellet Cooler which utilise
the latest technological developments.
These projects are expected to deliver
marked improvements in quality, reliability
and consistency of pellets manufactured
using the latest aquaculture diets, many
of which incorporate levels of fats and oils
not previously witnessed in the industry.
The upgraded extrusion plant at Narangba
will continue to service the domestic prawn
industry, pet food and fin fish production
following the transition of salmon volume
to the new Tasmanian plant.
Rendering developments
The progressive reduction and ultimate
loss of the Red Lea raw material supply
to the Maroota rendering site presented a
major challenge during the year given that
it had been such a reliable and significant
source of poultry raw material for many
years. Management is seeking to develop
The transfer of salmon production
from the existing Narangba plant in
Brisbane to the Westbury plant will
significantly improve the supply chain,
lead times and collaboration with
the local customer base, as well as
enhance our trial testing capability.
new earnings streams to replace this loss
of supply, while also reducing costs at the
site to reflect lower input volumes.
export markets for this product which
attracts a pricing premium by virtue
of the whole fish being processed.
Work is taking place on several projects
to recover the loss of Maroota earnings
attributable to the cessation of Red Lea
raw material supply. A rendering solution
has now been developed for processing
whole birds which addresses both the
issue of the birds being supplied without
having had their feathers removed and
the digestibility concerns over the saleable
product. The rendered product is being
tested and trialled to determine the
market positioning for this new product.
The first sales of fish meal and oil derived
from the processing of whole mackerel
caught under strict quota requirements
off the coast of southern New South Wales
have been made in the first quarter of
FY19. We are actively seeking the external
accreditation required to open up new
Extending the reach of the raw material
supply chain through refrigeration and/or
preservation of the raw material to manage
degradation prior to processing will not
only improve the quality of the finished
product but will open up access to new
sources of supply.
The Laverton Rendering site has been
very proactive during the last 12 months
in engaging with raw material suppliers
to segregate their bi-products and thereby
enable Ridley to pay more for the raw
materials and produce higher value end
products in a ‘win-win’ outcome. One such
example of segregation is the removal of
the bovine paunch, which significantly
improves the quality of the raw material
input and rendered product output to the
benefit of both the supplier and Ridley.
7
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Chairman’s Address continued
Our partnership
with CSIRO
has enjoyed a
positive first year
of operation and
has developed
a combination
of sequential and
concurrent work
packages for
the foreseeable
future.
The absence of proper commercial trial
conditions generated a high degree
of variation in the results across the three
farms and prevented any firm conclusions
being drawn from the arrangements.
Nevertheless, some record biomass
results were achieved and two of the
farmers have indicated their intention
to utilise the Novacq™-inclusive diets in
the upcoming domestic prawn growing
season, with the third farmer deferring
any feeding decision pending the outcome
of a process to sell the family business.
With the shift from an R&D operation
to a commercial operation for the Yamba
site effective from 1 July 2018, negotiations
are currently underway to establish an
appropriate selling price for the inclusion
of Novacq™ in domestic prawn feed diets
at a 5% inclusion rate.
Novacq™ Thailand
Thailand trial results released to the
market in September 2017 showed a 33%
improvement in prawn biomass for prawns
fed with the Novacq™-inclusive diet in a
dedicated trial pond with 48 suspended
trial cages. The study was conducted
over a 50 day trial period using the same
Ridley trial diet with and without a 5%
Novacq™-inclusion rate, and was managed
exclusively by Ridley personnel on site
in Chanthaburi. Twice daily testing was
Novacq™
We have had a busy and positive year
in respect of the Novacq™ project, with
a number of key milestones achieved as
Ridley moved towards commercialisation
in Australia and in Thailand.
The Yamba, New South Wales Novacq™
production site was effectively an R&D
site for FY18, conducting numerous tests
and making countless modifications to
its processes as part of a process of
continuous improvement to lift yield
and drive down operating costs through
further innovation.
A number of dewatering and drying
technologies and techniques were
trialled prior to selection of the preferred
technology which is now being installed
at Yamba and shipped to Thailand.
Our partnership with CSIRO has enjoyed
a positive first year of operation and has
developed a combination of sequential
and concurrent work packages for the
foreseeable future, the platform for which
revolves around identification and timely
and accurate prediction of the level of
bioactivity of the Novacq™ produced
and used in the various studies and diets.
Significant and unknown variation of the
level of bioactivity of the Novacq™ being
used has the potential to distort not only
the data derived from the numerous
ongoing studies but also the conclusions
drawn from the studies and direction of
future development activity. This work
package was a large focus for FY18 and
is continuing in FY19 until solved.
The results of the domestic profit share
arrangements with three major domestic
prawn farmers were announced in June 2018.
8
Ridley Corporation Limited Annual Report 2018 CHAIRMAN &
MD’S MESSAGES
of these parties. Ridley anticipates
announcing the outcome of this process
before the end of the year.
Property
It was pleasing to receive the final $5 million
payment of deferred consideration from
Dry Creek in December 2017 and thereby
reach a positive conclusion to the
transaction to divest this former asset.
There were a number of land sale
transactions completed during the year
and also subsequent to year end in respect
of the former salt field and adjacent land
at Lara. Should the Purchase Option to
acquire the final remaining parcel of land
for $1.5m be exercised in FY19 by the
land-based aquaculture operator, then
the divestment of all surplus land at Lara
will be complete.
Sale of this final remaining parcel of land
at Lara would mean that Ridley will have
generated aggregate sales proceeds of
$17.1m and c.$13.6m of EBIT over the 2018
and 2019 financial years from the disposal
of surplus properties.
Management will focus its attention in
FY19 on developing a strategy to extract
value from the surplus land at Moolap
which is incorporated into the Nelson
Cove master planned community
concept designed with development
partner Sanctuary Living.
People
On behalf of the Board, I would like to take
this opportunity to thank our shareholders,
suppliers and customers for their support
throughout the year.
I would also like to acknowledge and thank
all members of our team for their dedication
and hard work over the last 12 months
and look forward to their continuing
contribution to the long term success
of Ridley.
Dr Gary Weiss
Chair
9
conducted of water quality, including
water temperature, salinity, acidity and
alkalinity, and levels of dissolved oxygen.
Pellet durability and stability were also
monitored for each of the two sizes
of feed adopted for the trial.
Following the harvest of the trial biomass,
the prawns were tested for growth rate,
survival rate and biomass gain, and this
data was analysed against the total
quantities of feed fed to each cage and
the resulting Feed Conversion Ratios
calculated for each cage.
With such a high level of control and
data capture, and in almost identical
conditions across all 48 cages within
a single pond, the 33% combined
improvement in biomass and productivity
was particularly encouraging.
The 14 former prawn ponds secured
under long term lease adjacent to the
feedmill in which Ridley has a 49%
ownership interest, have all now been
converted for the production of Novacq™ .
The aeration and harvesting equipment
was purchased and delivered to the
Chanthaburi site during the year, and
is being progressively installed in the
first quarter of FY19. The dewatering and
drying equipment solution was identified
and tested during the year at the Yamba
site and is being shipped to Thailand
with installation targeted by the end
of the calendar year.
Having secured formal Thailand Board
of Investment (BoI) approval for its
Novacq™ operations during the year,
Ridley is continuing to work with the BoI
to determine the extent of its ability to hold
land in Thailand under a wholly-owned
Ridley subsidiary and, secondly, to conduct
Novacq™ dewatering and drying activities
within the existing approvals granted for
the feedmill site. The outcome of these
discussions will help to formulate the next
stage of expansion in Thailand, with the
ideal location being adjacent or in close
proximity to the existing feedmill and
leased ponds.
Novacq™ Monetisation
As announced in May 2018, Ridley has
appointed Investec to explore options
to accelerate the growth of Novacq™.
A broad range of flexible options is
currently being pursued, including the
potential for third party investment in
Novacq™. The process to date has
involved communication with a number
of strategic and complementary third
parties who are seen to have the capacity
to accelerate the roll out of Novacq™ in a
number of overseas jurisdictions through
their existing networks and relationships.
A detailed Information Memorandum has
been prepared and released to selected
parties under confidentiality arrangements,
with discussions continuing with a number
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Managing Director’s Review
Tim Hart
Managing Director and
Chief Executive Officer
“Our number one focus at Ridley will always be safety: making
sure that all persons associated with Ridley, whether employees,
contractors, suppliers, customers, service providers or simply
visitors, are able to leave Ridley sites in the same state of physical
health as when they entered.”
The operating business has recorded
Earnings Before Interest and Tax (EBIT) and
before non-recurring items of $43.3 million
(m) for the 2018 financial year (FY18), a
reduction of $2.5m from the prior year.
An abnormal, non-recurring pre-tax loss
of $11.6m (tax effect of c.$3.4m) has been
brought to account in respect of the
processing, storage, disposal and write
down of inventory manufactured and
purchased in prior years to service the
supply agreement with Huon, which was
terminated as a result of a legal dispute,
which was settled in July 2017.
The ongoing operations have been
adversely affected by the cessation of raw
material poultry supply to the Maroota
rendering plant caused by major supplier
Red Lea Chickens Pty Ltd (Red Lea)
entering voluntary administration on
29 March 2018. The appointment of an
administrator followed a dramatic drop
in processing volumes received from Red
Lea in the six months leading up to the
announcement, and there have been no
further volumes of raw material received
from Red Lea at Maroota during the final
quarter of FY18. The full year impact on
Maroota FY18 earnings was estimated
on 16 April 2018 to be between $6m–$7m,
with the full year impact proving to be
slightly above this range at c.$7.3m.
The two downsides noted above mask an
otherwise positive year in our other major
operating sectors. There have been positive
year on year earnings uplifts in the Poultry,
Dairy, Beef and Sheep, Laverton Rendering
and Supplements sectors. The Packaged
Products sector has seen an easing of
margins due to higher raw material input
prices, but for the first time in several years
has recorded an increase in sales volumes.
While market share has been maintained,
Pig volumes have fallen 8,000 tonnes
year on year as the industry adjusts to
the oversupply, which is causing price
weakness and a period of instability.
Mid-year increases in energy prices have
been felt throughout the business and
challenged the Operations team to find
efficiencies to neutralise the overall
impact on production costs per tonne.
We have had a very active year in respect
of the surplus land holdings at Lara, which
has culminated in the pre-year end sale
of Lot B for $5m and post-year end sale
of Lots A and C for combined proceeds
of $9.5m. A 12-month option agreement
has also been executed after year end for
a land-based aquaculture company to
purchase the entire residual Lara holding
of 97.8 Ha, referred to as Lot D. The
purchaser has 12 months in which to
conduct its due diligence and determine
whether or not it wishes to exercise its
option to purchase the land for total
consideration of $1.5m.
10
There have
been positive
year on year
earnings uplifts
in the Poultry,
Dairy, Beef and
Sheep, Laverton
Rendering and
Supplements
sectors.
Ridley Corporation Limited Annual Report 2018 CHAIRMAN &
MD’S MESSAGES
11
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Managing Director’s Review continued
Unfortunately businesses do not operate
with a straight line upward earnings profile,
and for the last two years we have fallen
below our target growth path, largely due
to the breakdown of the Huon feed supply
relationship and cessation of poultry raw
material supply at Maroota. We have taken
a proactive position at year end with
regard to the non-recurring Huon legacy
issue. We have also changed our pro forma
contract templates and inventory
management processes to ensure we do
not have a similar exposure to inventory
overhang in the future. The Maroota site
has been restructured to accommodate
the foreseeable lower raw material intake
volumes and we have embarked on a
number of initiatives at our Maroota site
to seek to help replace the lost earnings
attributable to the cessation of Red Lea
supply and, if successful, these projects
may make a positive contribution in FY19.
Safety
Our number one focus at Ridley will always
be safety: making sure that all persons
associated with Ridley, whether employees,
contractors, suppliers, customers, service
providers or simply visitors to Ridley sites,
are able to leave the Ridley site(s) in the
same state of physical health as when
they entered the site(s).
Our Medically Treated Injuries (MTI)
count of four for FY18 (FY17: four) is the
equal 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, with 2,954 reported logs for
the year (FY17: 2,679). Our strategy is to
report and rectify potential hazards before
they cause any personal harm and thereby
reduce the incidence of actual injury.
It is apparent that the message is
permeating the business with a positive
spread of hazard reporting received across
all Ridley operating sites. As previously
noted, all logs are reviewed and actions
taken as appropriate to address the
issues giving rise to safety concerns.
The Long Term Injury Frequency Rate
(LTIFR), measured as the number of injuries
incurring lost time for every million hours
worked, was 4.2 for FY18 (FY17: 4.4). This
is an improvement from last year, but
marginally above our internal target.
The Total Recordable Frequency Rate
(TRFR) represents our total injury rate,
and at 7.1 for FY18 (FY17: 7.4) is a favourable
decrease from the prior year and the
9.5 recorded for FY16.
By maintaining the focus on prevention
through hazard reporting rather than
treatment of actual incidents, we shall
continue our endeavours to drive our LTIFR
and TRFR even lower in FY19 and beyond.
Core business operating
performance for the
2018 financial year
The core business performance of $43.3m
of EBIT for FY18, excluding non-recurring
items, comprises strong performances in
Poultry, Dairy, Beef and Sheep, Laverton
Rendering and Supplements, and volume
growth for Packaged Products. Maroota
Rendering has been adversely impacted
by the loss of Red Lea poultry raw material
during the year, and Packaged Products
margins have been impacted by the
increase in grain prices.
(i) Dairy, Beef and Sheep
The Dairy, Beef and Sheep sector has
recorded a year on year increase in sales
volume of 68.6 thousand tonnes (kt),
with significant increases in Dairy sales
in Victoria and Tasmania and in sales of
beef and sheep feeds in drought-affected
New South Wales (NSW) and Queensland.
12
Ridley Corporation Limited Annual Report 2018 CHAIRMAN &
MD’S MESSAGES
Average milk prices received by dairy
farmers in FY18 were above those paid
in FY17 and were well signalled by the
milk processors, enabling farmers to
determine their herd strategies and capital
requirements. Throughout the last three
years of turmoil within the Dairy sector,
the Ridley Ruminant team’s focus has
been steadfast in supporting and staying
close to our farmer base, being as flexible
as possible, and delivering a meaningful
and value-adding proposition to optimise
the farmers’ margin over their feed cost.
Forage shortages and the passing
through of raw material price increases
to the cost of feed will have some impact
on feed sales and margins in the coming
year, however, the opening milk prices
for FY19 are generally marginally above
those paid in FY18. Taking all factors into
consideration, the outlook for the Dairy
sector remains positive.
Higher feed costs and shortages of
home-grown forage for pasture-based
beef and sheep farmers are expected
to lead to increased livestock sales as
farmers look to de-stock, and this may
have an impact on sales of beef and
sheep feeds in the year ahead.
(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 Poultry sales
volumes increased by 52kt (4.5%) over
the prior year. Broiler and layer volumes for
the second successive year represented
60% of all Ridley traded volumes as
domestic consumers continue to
support poultry products for their health
benefits and being the cheapest source
of animal protein.
The poultry layer sector (as opposed to
broilers, which are reared for their meat)
volumes have increased year on year in a
period of egg price instability. There is an
expectation that the current low egg price
will not substantially recover until the
second half of FY19 as a result of the
traditional influx of eggs reaching the
market in spring.
After two consecutive years of growth,
Pig sector volumes have retracted by
8kt from last year, and this is reflective
of a current industry oversupply which
is causing price weakness and financial
stress throughout the industry. In recent
years the Pig sector has flourished, and this
has led to significant investment in
increased production capacity, which has
now resulted in an oversupply of domestic
product. The fundamental economic
forces of supply versus demand are now
prevailing, with reductions in product
prices, supply outstripping demand for
the foreseeable future, and a number of
producers contemplating exit strategies.
The outlook is not entirely gloomy as
the Pig sector is cyclical and there will
be consolidation opportunities for the
most efficient producers. The FY17-
commissioned Lara feedmill in particular,
can provide a very cost–effective product
range for the region’s pig farmers, with
its operating efficiency and access to
local raw materials.
(iii) Aquafeed
The Aquafeeds result for FY18 comprises
the ongoing operations and the non-
recurring treatment of the Huon inventory
legacy. The financial impact associated
with the latter has been reported as a
non-recurring item of $11.6m before tax
and tax effected impact of $8.2m.
All residual stock on hand at balance
date has been written off to a nil value
at 30 June 2018.
The ongoing core Aquafeeds business
has faced challenging salmon growing
conditions midway through the financial
year, with high water temperatures
experienced off the coast of Tasmania.
These higher than usual temperatures
had an immediate impact on the appetite
of the salmon, and this flowed through
to Ridley as a reduction in feed demand.
While the water cooled down to normal
seasonalised water temperatures in the
fourth quarter, the lost volume was not
recovered when normal feed consumption
patterns were resumed, and consequently
the sales volume has fallen by 3kt year
on year.
The prawn, barramundi and kingfish
components of the Aquafeeds business
performed well, despite the prior year
outbreak of White Spot Disease in certain
prawn farms located in the Logan River
region. Three of the four major prawn farm
customers trialled Ridley feed with a 5%
Novacq™ inclusion on a profit share
arrangement, whereby the incremental
earnings derived from the Novacq™
feed were to be shared equally between
Ridley and the farmer. The results of
the commercial trials are covered in
the following section of this report.
In addition to committing to a new
Tasmanian extrusion plant, a major
upgrade and restructure of the Narangba
operations was concluded during the
year at the Aquafeeds extrusion plant
at Narangba. Ridley has invested in new
fat coater and pellet cooler equipment
capable of managing the increasingly
high fat contents required in the modern
salmon diets, and has purchased and
installed a trial extrusion facility capable
of testing new diets on small runs without
disrupting the main production line.
(iv) Rendering
The loss of the Red Lea poultry raw
material supply at Maroota has been
progressively reported through the ASX
announcements platform during the year,
with the full year result calculated at
c.$7.3m. This value is a combination of the
reduction and subsequent loss of Red Lea
raw material supply, plus all the related
follow-on supply chain, processing costs
and overhead recovery ramifications for
the Maroota site.
Management has worked through an
effective realignment of operations at the
Maroota site to downscale processing shifts
to anticipated ongoing processing volumes,
with the site now reconfigured to a two shift
roster. In addition, management is working
on a number of initiatives to seek to develop
new revenue streams for the Maroota site
to start to replace the lost earnings. These
initiatives are discussed further in the
Outlook section of this report.
While the competition to secure red meat
offal processing volumes in Victoria has
remained intense throughout FY18, raw
material receival volumes at the Laverton
site have increased by 30kt as the prior
year herd rebuilding process approaches
a sustainable equilibrium. Further
improvements in plant processing
efficiency and reliability have
counterbalanced the impact of higher
energy prices and a slight softening of
average sell prices for an improved year
on year Laverton operating result.
13
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018
Managing Director’s Review continued
(v) Packaged Products
Commercialisation of Novacq™
FY18 was the fourth year of a five-year
program of Applied Research and
Development (R&D) for the
commercialisation of Ridley’s investment
in Novacq™, a prawn feed additive capable
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,
and reduction in nitrogen emissions
from the prawn biomass.
During FY18, we extensively tested the
available technologies for dewatering
and drying the Novacq™, and made a
final technology selection, which is now
being implemented at our site at Yamba
and also at Chanthaburi, Thailand.
Production of Novacq™ has commenced
in Thailand in the 14 ponds under long
term lease adjacent to our feedmill
interest in Chanthaburi.
Through a process of continuous
improvement, we continue to develop and
refine the Novacq™ production, harvesting
and drying process and are currently
targeting approximately 50 metric tonnes
of pure (dry weight) Novacq™ production
per annum from each 0.7 Hectare (Ha)
pond in Thailand and each 1.1 Ha pond
at Yamba. The differential in expected
production output is reflective of the
highly stable temperature and weather
conditions in Chanthaburi versus the four
seasons experienced at Yamba through
a full 12-month cycle.
By way of recapitulation, with annual
Thailand 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.14kt of prawn feed. The
committed spend for these initial 14 ponds
is A$7.5m. The local production, harvesting
and drying of Novacq™ in Thailand 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 our
joint venture partner’s Sureerath Prawn
Farm, will be on a full commercial basis,
thereby preserving the maximum value
for Ridley shareholders.
After four successive years of earnings
growth, the Packaged Products result was
impacted by increases in raw material input
prices. The lag between input price rises
and sale price adjustments, and/or inability
to pass through the full extent of these
increases, has resulted in an inevitable
shrinkage of product margin. A positive
component of the annual performance is
that sales volumes have increased, and this
is an indication that the strategy to improve
our understanding of market dynamics
and margin management, and to
implement product refreshes and SKU
rationalisation, is starting to deliver against
its performance metrics.
(vi) Supplements
The Supplements business enjoyed a
return to a more traditional dry season
in northern Australia, and this led to a
resurgence in dry block sales in the first
half of FY18. This seasonal impact was a
strong contributor to annual sales volumes
of all products increasing from the FY17
low of 11kt to the 20kt recorded for FY18.
The year on year improvement in earnings
returned Supplements to a trading profit
from its prior year loss.
(vii) Thailand feedmill
Thailand prawn production continues to
be widely exposed to disease, and this is
generating a vicious cycle in terms of the
farmers’ confidence and access to working
capital to restock idle ponds. The granting
and receipt of credit terms is a significant
risk for the feed producer and farmer
respectively, and this creates a delicate
dynamic that has to be carefully managed
and closely monitored.
Production and domestic sales for the
Pen Ngem Feed Mill Co., Ltd (PNFM)
feedmill in FY18 have continued to be
sporadic and largely centred around our
joint venture partner’s prawn farm, the
performance of which has been erratic
in terms of prawn harvest survival rates.
Export accreditation has been secured
during the year for the Thai feedmill,
and the first export sales to Fiji occurred
in June 2018 with the prospect of repeat
business and further export sales in other
markets in the year ahead.
The equity accounted Ridley 49% share
of the Thai feedmill operations for FY18
is a loss of A$0.2m.
14
First commercial trials
of Novacq™
For the Australian prawn growing season,
which covers the middle six months of
the financial year, three of Ridley’s four
largest prawn farm customers undertook
commercial scale trials of Novacq™-
inclusive feed on a 50:50 profit share
arrangement.
The objective of the trials was to compare
two nutritionally identical steam-pelleted
prawn diets on each farm with the
exception that one diet contained 5%
Novacq™ and the other did not. Both
commercial diets were manufactured at
the Ridley Narangba extrusion plant using
Novacq™ produced at Ridley facilities in
Yamba, NSW.
Each farm began its trial in commercial-
sized ponds in January 2018, and harvested
their biomass in late April/May 2018 using
standard commercial procedures managed
by the prawn farm operators. Ridley
personnel inspected the sites on a
regular basis to oversee the stocking
and harvesting processes.
Overall, the commercial trials demonstrated
a positive response to Novacq™, with all
three farm operators delivering on average
growth rate outcomes in line with previous
Novacq™ disclosed commercial trials.
Other significant observations from the
trials include:
• Some operators reported record
biomass (determined by growth and
survival) harvests per hectare.
• There was a high degree of variation in
the survivability of prawns on the various
farms, in both treatments.
• A low protein Novacq™ diet was
successfully trialled at one farm. This
lower than usual protein content
potentially enables Australian farmers to
increase their biomass by up to 25% if
they are at or reaching maximum
nitrogen farming limits set by the EPA.
• Two operators intend to purchase
Novacq™ in 2018/19. The third operator
is restructuring its business and intends
to defer a decision on 2018/19 feed
requirements until a new owner is in place.
Ridley Corporation Limited Annual Report 2018
CHAIRMAN &
MD’S MESSAGES
Through a process
of continuous
improvement
we continue to
develop and refine
the Novacq™
production,
harvesting and
drying process.
With these positive results and testimonials
from participating farmers, together with
statements of intent to order Novacq™-
inclusive feed ahead of the coming prawn
farming season, the results reinforce our
confidence in pushing ahead with the
commercialisation of Novacq™ here in
Australia in FY19.
Options to accelerate
the growth of Novacq™
As announced on 25 May 2018, having
received some preliminary and exploratory
stage expressions of interest from a number
of parties and in order to accelerate the
roll-out of Novacq™, Ridley has engaged
Investec to assist it to explore its options
to accelerate the growth and maximise
the value of Novacq™ for the benefit of
Ridley shareholders. A broad range of
options is currently being considered,
including the potential for a third party
investment in Novacq™, and an outcome
from this engagement will be released to
the market at the appropriate time in FY19.
CSIRO alliance
In March 2017, Ridley and CSIRO formed a
strategic alliance to conduct collaborative
research that will maximise the
development of new Novacq™ applications
beyond the existing application for prawns
and crustaceans. Under the terms of the
alliance, Ridley contributes annual cash
funding of $1.0m to CSIRO for the parties
to work together for the purpose of further
advancing collaborative research relating
to the existing Novacq™ technology.
The first year of operation of the alliance
has been very positive, with the building
of a comprehensive platform of Novacq™
data and significant progress being made
in developing rapid bio-test assays to
demonstrate Novacq™ activity and in
understanding how Novacq™ works and
how it impacts prawn growth and wellbeing.
We are working towards determining the
bioactive(s) within Novacq™ and
establishing a characterisation profile,
which will then be used to identify those
species most likely to be positively
impacted by the inclusion of Novacq™
into their feed.
Property
With the sales we have achieved in FY18
and in July 2018, and subject to selling
the final Lara land holding following a
successful outcome to the purchaser’s
due diligence program currently in
progress, Ridley will be able to complete
its exit from the Lara site in FY19. With total
proceeds from all Lara land sales of $17.1m,
a cost base of $1.9m, and after legal and
sales commission costs, aggregate pre-tax
profits of c.$13.6m will be brought to
account in FY18 and FY19. We believe this
is an excellent return for our shareholders
and vindicates our strategy to be a patient
seller and wait for the right market
conditions to eventuate.
15
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Managing Director’s Review continued
Our focus can now turn to the Moolap land
holdings, where the Nelson Cove project
has been in a holding pattern for most of
FY17 and all of FY18 given the lack of
positive response to the project received
from the Victorian State Government.
The project is currently in a minimum
cost holding pattern and together with
our development partner Sanctuary Living,
we shall endeavour in the year ahead to
find creative ways of unlocking shareholder
value from this former salt field.
Our people and communities
There has been a change to the executive
lead team in FY18 following the mid-year
departure of our General Manager
Commercial Feeds, Mrs Anne-Marie
Mooney. Following an extensive recruitment
process, Mrs Jody Scaife was appointed
as General Manager Commercial Feeds
in late June 2018.
The management team continues to
apply itself to the execution of the long
term strategy and is focusing its attention
on delivering shareholder value for the
new initiatives commenced in the second
half of FY18 and on innovation that will
maintain Ridley’s position as the nation’s
leading provider of high performance
animal nutrition solutions.
We have enjoyed another successful year
with 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,
Innovation and Community section
of this 2018 Annual Report.
Outlook
Despite the setback of losing the largest
source of poultry raw material supply
at Maroota, management continues to
review the prospects for three new
rendering initiatives in progress, which,
if successful, have the potential to provide
new revenue streams for the Maroota site,
which has been restructured to
accommodate the reduction in raw
material processing volumes.
The first of the initiatives referred to
above is the processing of whole mackerel
caught off the NSW coast under strict and
sustainable quota requirements, with the
16
Westbury extrusion plant
aim of producing high quality fish meal
and oil for the aquafeed and petfood
industries. The second initiative is to
develop an effective supply chain and
process for the manufacture of a high-
protein and digestible poultry meal from
whole birds at the end of their life. The
third initiative is to stabilise raw material
to avoid degradation prior to processing
and thereby improve the quality and
performance of the rendered product
and increase the reach of the raw material
supply chain. Each of these initiatives
has the prospect of generating earnings
in FY19 and thereafter.
The focus for the Laverton Rendering
site for the coming year is to segregate
raw material intake to isolate sources of
higher value protein meals, and to maintain
its process of continuous improvement
to improve the Overall Equipment
Effectiveness (OEE) of the plant and
reduce energy consumption. Successful
execution of this strategy will facilitate
the adoption of an aggressive raw
material purchase price strategy to
secure incremental processing volumes
in a highly competitive marketplace.
The long term outlook for the domestic
salmon industry remains positive, with
sustainable fishery solutions being
Wellsford feedmill
developed for Macquarie Harbour,
continuing growth in domestic salmon
consumption, and further investment
in biomass by the Tasmanian salmon
producers. Ridley is committed to playing
an important role in supplying feed to the
industry having announced its intention
to construct and operate a new extrusion
plant in Tasmania on 20 January 2017.
$12.4m of capital has been expended in
FY18 on the project at Westbury, Tasmania,
with a challenging target for commissioning
set for the end of FY19.
In June 2018, Ridley and Tassal announced
that two salmon trials will be conducted as
part of Tassal’s research and development
program. All feed required for the trials
will be purchased from Ridley at market
rates, commencing with an appropriate
range of hatchery diets and then moving
through the seawater transfer diets to
the 4mm – 9mm pellet size salmon
grow-out feed. The expected total
Aquafeeds volume for the trials is c.3.3kt
commencing in late June 2018 and
concluding in December 2020.
The trials with Tassal will not only provide
additional sales volume, but will also test
and look to reconfirm, after a period of
absence of several years, Ridley’s
nutritional and production expertise
Ridley Corporation Limited Annual Report 2018 CHAIRMAN &
MD’S MESSAGES
when benchmarked against the equivalent
diets provided by Tassal’s existing supplier.
Prior to segregation of Tasmanian salmon
feed supply allegiances, Ridley had
performed strongly in similar trials and
further improvement in feed quality is
anticipated through the adoption of the
latest technology at the new extrusion
plant under construction at Westbury.
Volume growth across all of its major
species, strong performance in the Tassal
trials and other anticipated hatchery trials,
and the operation of the new test extruder
line to develop innovative solutions to
industry farming issues, are a focus for
Aquafeeds for FY19. Effective management
of working capital and preparation for the
transfer of feed volumes and rationalisation
to a twin site production model at Westbury
and Narangba are also significant key
performance metrics for Aquafeeds
management.
The outlook for FY19 for Dairy is mixed,
with a positive milk price forecast being
tempered by a lack of on-farm forage and
high raw material prices. The FY19 outlook
for Beef and Sheep is positive, with new
business won in south east Queensland
and some drought-related beef and sheep
feeding expected to continue throughout
the first quarter.
Ingham’s announced intention to become
a fully integrated poultry producer and
not renew its existing supply arrangements
with Ridley, which expire in October 2018,
will have feed volume and financial
implications for the Murray Bridge and
Clifton sites and the Poultry earnings for
FY19 and thereafter. The Commercial
Feeds team is working to secure other
sources of new business and sales tonnes
to replace this volume, the FY19 EBIT
impact of which in isolation would be
in the vicinity of $1.5m–$2.0m depending
on timing and the plan of transition.
In Victoria, we are working diligently to
secure the necessary approvals to finalise
the purchase of the land at Wellsford in
Central Victoria and commence
construction of the new Monogastric
feedmill to service key customer
Hazeldene’s Chickens and other poultry
and pig farmers in the region. Currently
Ridley manufactures and supplies a
significant volume of poultry feed from
its East Bendigo facility. This facility has
reached capacity at 160,000 tonnes
and will be retired once the new feedmill
is commissioned and fully operational.
The new facility will be similar in design
Ridley’s commitment to a new state-of-
the-art feedmill in Central Victoria and
to a new extrusion plant in Tasmania
supports our focus on growing with
our customers and capitalising on
opportunities to expand our presence in
key livestock animal production regions.
and construction to our new feedmill
commissioned last financial year at Lara,
Geelong. With an annual production
capacity in excess of 350kt, the Wellsford
feedmill will be the largest in the Ridley
network at nearly twice the size of the
Lara feedmill.
Ridley’s commitment to a new state-of-the-
art feedmill in Central Victoria and to a new
extrusion plant in Tasmania supports our
focus on growing with our customers and
capitalising on opportunities to expand our
presence in key livestock animal production
regions. The new facility investment
strategy reinforces the importance of the
animal production industry to Victoria and
Tasmania and reflects the confidence we
have in our team to consistently produce
high quality animal nutrition solutions that
are capable of outperforming our
competitors. The equipment selected for
the new feedmill will reflect all the latest
technological advancements, with a strong
focus on efficiency and low running costs.
We are expecting and managing towards
another year of growth and consolidation
in both Packaged Products and
Supplements, through a new range and
product mix, improved store coverage and
presence, a focus on raising the profile of
our Dog and Equine products, and on the
assumption that we experience a traditional
12-month dry and wet season weather
pattern in northern Australia.
The rising cost of energy continues to
be a challenge across all business units,
but in particular for the Rendering and
Monogastric sectors of our business,
where the consumption levels are highest
and the ability to pass on cost increases
can be limited. Our capital maintenance
and continuous improvement programs
need to be operating throughout the
business in order to contain our
production costs per tonne in the face
of continuing energy price rises.
In addition to organic growth through
the program of mill modernisation, Ridley
is continually looking for investment
opportunities consistent with its long term
strategy to be Australia’s leading producer
of premium quality, high performance
animal nutrition solutions. Novel and value
adding feed ingredients that have the
potential to reduce the cost of feed
and/or improve the returns of the livestock
farmer are a key focus of attention in our
acquisition discussions and research.
Novacq™ is one such ingredient that
has the potential to make a fundamental
change to prawn farming throughout the
world, and potentially for other species as
well. The activities of the strategic alliance
with CSIRO in FY19 will continue to be
focused on identifying the most likely
applications for Novacq™ in other species.
17
LOCATIONS & SECTORSFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018
Managing Director’s Review continued
Ridley has
engaged Investec
to assist it to
explore its options
to accelerate
the growth and
maximise the
value of Novacq™.
With regard to the net pre-tax profit of
$4.2m for Property for the year, we received
offers for all three of the available lots which
we believe represents excellent value for
our shareholders. The first lot sale was
achieved during the year and the second
and third lots were sold in July 2018. An
option agreement has also been executed
after balance date for the sole remaining lot,
Lot D, which is subject to a 12-month period
of purchaser due diligence. The sale of Lot
D in FY19 would complete the divestment
of the surplus land at Lara, leaving the
Nelson Cove development at Moolap as
the sole remaining Property segment asset.
With so many projects in progress and
opportunities to develop, the year ahead
promises to be a challenging and exciting
one for everyone at Ridley, and we look
forward to a productive and rewarding
year for our employees, customers,
suppliers and shareholders.
Tim Hart
Managing Director and
Chief Executive Officer
As announced on 25 May 2018, having
received some preliminary and exploratory
stage expressions of interest from a number
of parties and in order to accelerate the
roll-out of Novacq™, Ridley has engaged
Investec to assist it to explore its options
to accelerate the growth and maximise
the value of Novacq™ for the benefit of
Ridley shareholders. A broad range of
options is currently being considered,
including the potential for a third party
investment in Novacq™, and an outcome
from this engagement will be released
to the market at the appropriate time.
From 1 July 2018, the Novacq™ operations
at Yamba transition from a development
site to an operational site, with Novacq™-
inclusive feed to be available for the next
domestic prawn season. Our 14 ponds
under long term lease at Chanthaburi,
Thailand, were secured and converted
to Novacq™ production in FY18. With all
the trialling, testing and selection of the
production and harvesting processes
conducted at Yamba, the Thailand
operations are effectively one year
behind the domestic operations.
The harvesting, dewatering and drying
equipment has already been purchased
for Chanthaburi, with installation to be
completed in the first half of FY19
and commercialisation targeted for
commencement on 1 July 2019.
18
Ridley Corporation Limited Annual Report 2018 CHAIRMAN &
MD’S MESSAGES
FINANCIAL
REVIEW
Financial Review
Alan Boyd
Chief Financial Officer
and Company Secretary
“Sales revenue for FY18 of $917.7m was up $64.7m (7.5%)
on last year’s $852.9m, and reflects 2.05m (2017: 1.93m)
tonnes of stockfeed and rendered product sold.”
Operating result
For statutory reporting purposes, the
Consolidated Profit and Loss (Table 1)
reports total comprehensive income for
the year of $17.9 million (m) and a pre-tax
profit from continuing operations of $21.7m.
The consolidated Group has recorded
Earnings Before Interest and Tax (EBIT) of
$38.0m (Table 2), comprising an operating
result before non-recurring items of
$43.3m, including net profit on property
of $4.2m less corporate costs of $9.5m.
Sales revenue for FY18 of $917.7m was
up $64.7m (7.5%) on last year’s $852.9m,
and reflects 2.05m (2017: 1.93m) tonnes
of stockfeed and rendered product sold.
The reported operating EBIT of $43.3m
is $2.5m below last year’s $45.8m as a
result of the loss of Red Lea poultry raw
material supply at Maroota. Positive year
on year earnings improvements have
been recorded in Dairy, Beef and Sheep,
Laverton Rendering, Supplements and
Poultry, while the result for Packaged
Products has been impacted by some
margin shrinkage arising from the
absorption of increased raw material
prices. Mid-year increases in energy
costs have again challenged the business
and impacted the cost structure for the
second half year.
Corporate costs have been contained
to be consistent with prior years.
Net finance costs for the year of $4.6m
reflect interest on bank debt, the trade
payables facility and the amortisation
of establishment and other fees, offset
by $0.2m for the unwinding of the
discount on the final payment of $6.0m
of deferred consideration from the sale
of Dry Creek received in December 2017.
Table 1
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations after income tax
Other comprehensive income, net of income tax
Total comprehensive income for the year
2018
$’000
21,719
(4,310)
17,409
520
17,929
2017
$’000
34,287
(8,472)
25,815
-
25,815
19
LOCATIONS & SECTORSSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Financial Review continued
The $4.4m income tax expense and 19.8%
effective tax rate for FY18 includes a $3.4m
tax benefit for non-recurring items. The
low rate reflects an overprovision in the
prior year and a tax benefit from 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 $11.6m
comprise the incremental costs associated
with the management, storage, processing,
fumigation, freight and inventory write
down of raw materials and finished goods
purchased and manufactured respectively
to service the former Huon supply
agreement, which was terminated in the
prior year following a legal dispute that
was resolved in June 2017. The tax effected
impact of this item is c.$8.2m.
A pre-tax mark to market uplift of $0.7m for
the investment in a UK-listed specialist
ingredients business has contributed
$0.5m of other comprehensive income,
post-tax, for the year.
The $4.2m net profit recorded for the
Property segment in Table 2 above reflects
Table 3 – Lara land
the sale of Lot B plus two other smaller lots
during the year for total proceeds of $6.1m
offset by the relevant property cost bases
and by the ongoing landholding costs at
the former salt field sites at Lara and
Moolap.
Subsequent to balance date, sales contracts
were executed to sell Lots A and C for total
proceeds of $9.5m, with a 12-month option
agreement also executed for a land-based
aquaculture business to acquire Lot D, the
only remaining Ridley land at Lara (Table 3).
Deferred consideration for the sales of Lots
A, B and C is receivable at 12-month
intervals over the coming four years.
Profit and loss
Table 2 – Profit and loss account in $ million
Earnings from operations before net interest and tax expense (EBIT)
Ridley operations
Corporate costs
Property net profit/(costs)
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
Other non-recurring items before tax
Tax on other non-recurring items
Reported net profit
Other comprehensive income, net of tax
Total comprehensive income for the year
Earnings per share (cents)
(i) continuing
(ii) reported
2018
2017
Movement
43.3
(9.5)
4.2
38.0
(4.6)
(7.8)
25.6
(11.6)
3.4
17.4
0.5
17.9
5.7
5.7
45.8
(9.9)
(1.0)
34.9
(5.0)
(7.3)
22.6
4.3
(1.1)
25.8
-
25.8
8.4
8.4
(2.5)
0.4
5.2
3.1
0.4
(0.5)
3.0
(15.9)
4.5
(8.4)
0.5
(7.9)
(2.7)
(2.7)
20
Ridley Corporation Limited Annual Report 2018 FINANCIAL
REVIEW
Balance Sheet
There have been the following material
movements in the Balance Sheet over
the last 12 months:
(i)
(ii)
A $1.2m increase in net debt for
the year from $51.7m to $52.8m.
A $12.2m decrease in current
receivables to $104.0m, which
includes the payment in July 2017
of the $17.7m receivable following the
resolution of the Huon legal dispute.
(iii) A $7.0m reduction in inventory to
$76.7m, which reflects a $8.4m write
off of all Huon legacy inventory at
balance date.
(iv) A new current assets held for sale
(v)
classification of $1.1m, which reflects
the residual historical cost base of
Lara land either sold in July 2018
or subject to an option agreement
to sell in FY19 subject to purchaser
due diligence. For FY17, this asset
was reported within non-current
investment properties.
A $7.8m increase in non-current
receivables to $8.6m to comprise
(i) the net present value of the $3.0m
of gross deferred consideration
receivable more than 12 months
after balance date in respect of
the $5.0m Lara property sale, which
was completed and reported on
28 June 2018; and (ii) an unsecured
loan of $5.3m to the Thailand
feedmill joint venture.
(vi) A $1.9m reduction in non-current
investment properties to $1.3m, which,
following the reclassification under
(iv) above and property sales during
the year, now only represents the
Nelson Cove development site at
Moolap, carried at historical cost.
(vii) A $19.8m increase in non-current
property, plant and equipment to
$202.6m, which reflects another
significant year of investment and
the first $12.4m of activity for the
new extrusion plant at Westbury.
There have been several other
significant profit improvement
and capital maintenance projects
conducted during the year, notably
the establishment of the Novacq™
production ponds at Chanthaburi
and the installation of a new test
extruder line, fat coater and pellet
cooler at Narangba.
(viii) A $0.2m reduction in non-current
investments accounted for using
the equity method to $1.1m, which
comprises the carrying value of
the 49% ownership interest in the
Pen Ngern Feed Mill in Thailand and
reflects Ridley’s share of its operating
loss for the financial year.
(ix) A $1.0m increase in non-current
other investments to $2.3m, which
reflects (i) the write off of the Bluewave
Pty Ltd investment, and (ii) the
purchase of a 1.2% equity interest
in a UK-listed specialist ingredients
business, uplifted to reflect the last
traded value for that stock prior to
30 June 2018.
Dividend
The Board paid a 2017 final dividend
of 2.75 cents per share, fully franked,
on 31 October 2017 and a 2018 interim
dividend of 1.5 cents per share, fully
franked, on 30 April 2018.
After the balance sheet date, a 2018 final
dividend of 2.75 cents per share, fully
franked and payable on 31 October 2018
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 2018 and will be recognised in
subsequent financial reports.
Cash flow and working capital
The operating cash inflow for the year
(Table 4) after working capital movements
and maintenance capital expenditure
was $43.9m, an improvement of $6.3m
on last year’s $37.6m.
EBITDA before non-recurring items has
risen from $50.1m in the prior year to
$55.3m in FY18, an improvement of $5.2m.
Maintenance capital expenditure of $15.1m
was below the $17.3m aggregate charge
for depreciation and amortisation on
property, plant and equipment. Ridley has
invested a further $21.1m in development
projects during the year, the largest
of which reflects commencement of
activity for the new extrusion plant at
Westbury, Tasmania.
Payments for intangible assets of $4.3m
comprise the capitalisation of Novacq™
development costs.
The Board paid a
2017 final dividend
of 2.75 cents per
share, fully franked,
on 31 October 2017
and a 2018 interim
dividend of
1.5 cents per share,
fully franked,
on 30 April 2018.
Dividends paid for the year of $12.9m
comprise the 2017 final dividend of 2.75
cents per share paid on 31 October 2017
and the interim FY18 dividend of 1.5 cents
per share, which was paid on 30 April 2018.
Proceeds from the sale of the discontinued
operation of $6.0m reflect the receipt of
the final instalment in respect of the Dry
Creek property sale. The $1.2m sale of
property assets represents the aggregate
proceeds from two of the properties sold
during the year at Lara, with the deposit of
$0.5m relating to the third 28 June 2018
property sale in transit at balance date and
banked on 2 July 2018.
The payment for the other investment of
$1.8m represents the on-market purchase
of a 1.2% shareholding in a UK-listed
specialist ingredients business.
Tax payments of $5.9m were made during
the year (FY17: $14.7m) and are considered
to be sufficient to cover the full year
liability for FY18.
21
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Financial Review continued
Table 4 – Statement of Cash Flows in $ million
Cash flows for the year ended
EBIT from operations before non-recurring costs
Depreciation and amortisation
EBITDA before non-recurring items
EBITDA from non-recurring items
EBITDA after non-recurring items
Add back non-cash write off of Huon inventory legacy
(Increase)/decrease in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles (software and assets under development)
Dividends paid
Share-based payments
Proceeds from sale of discontinued operation (Dry Creek)
Proceeds from sale of property assets and associate
Payment for other investment
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
Earnings per share
Basic earnings per share – continuing
Basic earnings per share
2018
38.0
17.3
55.3
(11.6)
43.7
8.4
6.9
(15.1)
43.9
(21.1)
(4.3)
(12.9)
(4.2)
6.0
1.2
(1.8)
(4.6)
(5.9)
2.6
(1.2)
(51.6)
(52.8)
2018
5.7c
5.7c
2017
34.9
15.2
50.1
4.3
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)
(41.1)
(51.6)
2017
8.4c
8.4c
Gearing
Capital movements
Segments
Gearing is reported as net debt to equity
in accordance with the covenants of the
Group banking facility.
Gearing
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
2018
$’000
76,222
(23,441)
52,781
263,107
20.1%
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
During FY18, a total of 3,116,507 (FY17:
3,023,250) shares were acquired by
the Company on market for an outlay
of $4.2m (FY17: $4.2m) in satisfaction of:
(i) the issue of 2,430,232 (FY17: 2,400,000)
shares allocated to Ridley employees
under the Ridley Long Term Incentive
Plan; and
(ii) 686,275 (FY17: 623.250) shares
allocated under the Ridley Employee
Share Scheme.
There were no new issues of capital
during either financial year.
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. At the date
of this report, the residual sites are now
the former salt field at Moolap and a
single residual lot, Lot D, at Lara.
22
Ridley Corporation Limited Annual Report 2018
FINANCIAL
REVIEW
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, Aquafeed,
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 several 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
a degree of confidence in order 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. The ongoing
commercial viability of key customers
and suppliers is generally beyond the
control of Ridley, as evidenced by the
FY18 appointment of an administrator
to the Red Lea poultry producer, which
was a major supplier of poultry raw
material to Ridley’s Maroota rendering
site. The potential for disputes to arise
with customers over feed performance
is a significant risk.
• Surplus property holdings – Ridley
currently utilises its in-house finance and
legal resources, supported when needed
by external experts and its development
partner for the Nelson Cove project at
Moolap, to manage the orderly disposal
of its surplus land holdings.
• 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 managed through the
Company’s risk management framework,
which includes review and monitoring
by the executive lead team.
Alan Boyd
Chief Financial Officer
and Company Secretary
23
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Safety, People, Innovation
and Community
Michael Murphy
General Manager Safety,
People and Technical
Development
“We are lucky at Ridley to enjoy the services of a talented and
committed employee group, endeavouring to deliver the best
solutions to our customers, on time, every time.”
Safety
The safety and wellbeing of our people
is our number one priority when
conducting business at Ridley, reflected
in the fact that safety is identified both
as one of our five core values, and as
one of our six strategic platforms.
Our commitment to improving Health,
Safety & Environment (HSE) at Ridley is of
course continuous, and there should always
remain scope for potential improvement.
Nonetheless, our annual reporting
commitments do provide an opportunity
to step back and reflect on the progress
of our journey to date, and to refocus
on the direction and priorities ahead.
In this context, as the following chart
illustrates, the long term downward trend
in both our Lost Time Injury Frequency Rate
(LTIFR) and Total Recordable Frequency
Rate (TRFR) continued during FY18, with
a notable achievement being a record
low TRFR of 7.1 recorded at year end.
In arriving at the overall HSE result, there
is no single factor that we can identify
as being responsible for the improvement.
In reality, a healthy HSE environment is only
achieved thanks to a confluence of factors
across people, processes and physical
equipment. That said, it was particularly
gratifying to see the lower incidences
24
LTIFR and TRFR history and trend
20
16
12
8
4
0
2
1
0
2
l
u
J
2
1
0
2
t
c
O
3
1
0
2
n
a
J
3
1
0
2
r
p
A
3
1
0
2
l
u
J
3
1
0
2
t
c
O
4
1
0
2
n
a
J
4
1
0
2
r
p
A
4
1
0
2
l
u
J
4
1
0
2
t
c
O
5
1
0
2
n
a
J
5
1
0
2
r
p
A
5
1
0
2
l
u
J
5
1
0
2
t
c
O
6
1
0
2
n
a
J
6
1
0
2
r
p
A
6
1
0
2
l
u
J
6
1
0
2
t
c
O
7
1
0
2
n
a
J
7
1
0
2
r
p
A
7
1
0
2
l
u
J
7
1
0
2
t
c
O
8
1
0
2
n
a
J
8
1
0
2
r
p
A
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.
of Medically Treated Injuries being driven
by a marked reduction in head and hand
injuries. This improvement was the result
of a sustained program whereby we firstly
examined in detail the head and hands
protection being worn by our people,
and identified a number of improvements,
which, together with a targeted awareness
campaign and additional training, has
had a real impact in the number of times
our workers sustain injuries to their head
or hands.
Aligned with the programs around physical
protection, FY18 also saw us trial some
behavioural-type programs whereby we
invited our people at certain sites to identify
the five things that really matter to them.
They were then encouraged to use these
five important things as a permanent visual
reminder of why they come to work and,
consequently, the importance of remaining
vigilant from a safety perspective at all
times. Feedback from these sessions was
uniformly positive, and we will look to do
more of the same as part of our ongoing
HSE Strategy.
Ridley Corporation Limited Annual Report 2018
SAFETY, PEOPLE,
INNOVATION &
COMMUNITY
People
We are lucky at Ridley to enjoy the services
of a talented and committed employee
group, endeavouring to deliver the best
solutions to our customers, on time,
every time.
To achieve this outcome, our people
contribute high level expertise and skill
sets across a range of fields and business
functions, from expert nutritional advice
delivered directly on farm, through
consistent manufacturing of high quality
pellets across the seasonal raw material
basket, to reliable and efficient back office
support providing our people with the
data and processes they require to excel
in the performance of their daily roles.
Ridley is well known as a major employer
in many regional communities in Australia,
a role it has played for many years. From
this solid base at the heart of our agricultural
sector, it is therefore exciting to now be
rolling out our model as an employer in
a new country, namely Thailand.
Whilst our Novacq™ product is an exciting
technology, it can ultimately only be a
success if we have the right people in place
to deliver it to market. To this end, FY18 saw
us connect our people on the ground in
Thailand, with two members of Australian
senior management relocating to the
Chanthaburi region of Thailand, plus the
recruitment of permanent Thai nationals
to form the nucleus of the team to establish
the product in the local Thai market.
This year as part of our ongoing
engagement with employees, we
conducted our biennial Employee Opinion
Survey, which provides up-to-date
information on the ideas and issues
which are front of mind for our people.
It was pleasing to successfully lodge
seven site-based Enterprise Agreements
with the Fair Work Commission during
FY18, and these agreements will continue
to provide us with a solid platform for our
manufacturing footprint across Australia.
Finally, as recognition of the breadth and
diversity of our people, we are pleased this
year to include in this Annual Report for
the first time a specific Diversity section,
which provides some data around the
diversity of our people in respect of gender,
geographical location, age and working
arrangements. This data complements our
Diversity Policy and provides an interesting
new lens into our business, which we will
maintain in future Annual Reports.
Ridley is well
known as a major
employer
in many regional
communities in
Australia, a role
it has played for
many years.
25
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Safety, People, Innovation and Community continued
Diversity
At Ridley, in addition to the important
commercial and operational role that
we play in the Australian food and supply
chain, we also take great pride in the fact
that we are a truly diverse organisation,
providing employment to nearly 700
people from a wide range of backgrounds,
beliefs and personal experiences.
Our Diversity Policy and commitment to
non-discrimination on grounds of gender,
age, ethnicity, sexuality, cultural beliefs
or other personal circumstances is an
active and core part of how we recruit
our people. A copy of our Diversity Policy
is provided below.
Ridley understands the importance of
evaluating the reality of its workplace
environment, and conducts an Employee
Opinion Survey every two years to
generate feedback and improvement
opportunities from its employees.
In the Employee Opinion Survey of April
2018, amongst other data:
Female representation
Board member
Management reports to CEO
All staff
• 77% of surveyed employees agreed that
Ridley has a clear set of organisational
values and behaviours that guide their
everyday actions; and
Regional vs metro
Regional
Metropolitan
• 71% of surveyed employees agreed that
Ridley capitalises on the potential of all
employees regardless of gender, ethnicity
or disability.
Finally, as part of its annual reporting
requirements, Ridley is dedicated to
publishing the following data by way
of providing transparency on its
commitment to being a diverse
and inclusive organisation.
Diversity Policy
At Ridley we strive to foster a working
environment that is not only exciting
and challenging, but is also flexible,
inclusive and supportive. That means
a place where everyone is treated with
respect and dignity, and can work in
an environment where they can achieve
their maximum potential.
We respect diversity in our people, in
their ideas, work styles and perspectives.
Diversity recognises and values the
contribution of people with differences in
background, experience and perspective.
Diversity includes, but is not limited to,
gender, age, ethnicity and cultural
background.
26
Age
<30
30–39
40–49
50–59
60+
Working arrangements
Part time
The Policy applies to all casual, part time
and full time employees of Ridley.
To achieve the objective of creating
a culture that is flexible, inclusive and
supportive, the Ridley Board expects
each manager employed at Ridley to take
responsibility for the following, where:
1. all employees are treated fairly and
with respect and dignity;
2. the ability to contribute and access
career development opportunities
is based solely on merit;
3. individual differences are embraced
in the workplace;
4. the workplace is free from discriminatory
behaviours and practices;
Number of
employees
Proportion of
category
1
2
147
20.0%
20.0%
20.6%
Number of
employees
Proportion of
total workforce
381
332
77
151
201
184
100
32
53.4%
46.6%
10.8%
21.2%
28.2%
25.8%
14.0%
4.5%
5. equitable frameworks and policies,
practices and processes limit the
potential for bias;
6. equal employment opportunities exist
based on capability and performance;
7. there is awareness of the different
needs and circumstances of employees;
8. there is provision for flexible working
practices and policies to support
employees; and
9. a diverse range of talented people
can be attracted and retained.
To achieve a diverse and inclusive working
environment, Ridley will provide equal
opportunity in respect of employment and
employment conditions, and specifically
with regard to the following six topics.
Ridley Corporation Limited Annual Report 2018
SAFETY, PEOPLE,
INNOVATION &
COMMUNITY
1. Recruitment, selection and
promotion
Equal opportunity forms an integral part
of the Recruitment and Selection Policy
and at Ridley we recognise the value
of recruiting and promoting employees
with different backgrounds, knowledge
and experiences. This principle also
applies to the selection of contractors.
All recruitment and selection
documentation, procedures and practices
will be non-discriminatory, and Ridley
undertakes to recruit employees and
Directors impartially and from a diverse
field of suitably qualified candidates.
The recruitment process will focus on
predetermined criteria designed to ensure
that the most appropriate candidate is
selected for each position, recognising
the importance of the inherent value that
diverse perspectives, experiences and
approaches can bring to the business
as a whole.
Documentation, including job descriptions,
job advertisements, application forms, and
contracts, will include no direct or indirect
discrimination.
Company procedures, including interviews,
reference checking and testing, will be
undertaken in such a way so as to ensure
the absence of discriminatory practices.
2. Talent and succession planning
Employees throughout Ridley are
encouraged to continually develop and
progress their skills and capability through
involvement in formal training programs
and other work experience opportunities
that may become available within the
organisation. Ridley will undertake a review
of high potential and high performance
employees on an annual basis. This review
will be based on the performance of the
individual and identifying their potential
for further career development.
A formal performance review will also
be undertaken at least annually between
each employee and their manager to
review past performance, identify further
training and development needs and set
new performance targets for the year.
The outcome of these reviews will be
used to develop/refine the Ridley Learning
and Development Strategy, ensuring that
all training is aligned to diversity and equal
opportunity principles.
In considering individual needs, Ridley
appreciates that it may be appropriate
to develop or implement more targeted
practices relating to skills development
in order to promote a diverse workplace
at all levels of the organisation.
3. Career development
Ridley actively encourages employees to
develop their careers through opportunities
that build capability and by providing
relevant experience to individual employees.
At Ridley, all available opportunities for
internal promotion will be advertised
to all employees to enable individuals
to apply for roles to develop their career
paths. Employees are assessed for
suitability for the role based on their
capability and performance within the
organisation.
4. Flexibility
Ridley will actively work with individual
employees to provide flexible work
arrangements, particularly employees
with parenting, disability, family and carer
commitments. These arrangements will be
assessed based on business requirements
to ensure that job or business performance
is not compromised as a result of the
flexible work practice.
The flexible work practices that Ridley
may implement include working from
home, reduced hours from full time to part
time for women returning to the workforce
from maternity leave, and in unforeseen
circumstances where an employee is
required to care for a dependent on a
temporary basis.
5. Gender diversity
Gender diversity is a key element for
ensuring that Ridley creates a flexible,
inclusive and supportive environment.
Through the implementation of this
policy, Ridley embraces diversity when
determining the composition and further
development of employees, senior
management and the Board.
6. Employee consultation
Ridley will conduct an Employee Opinion
Survey every two years to gain employee
feedback on a range of cultural factors.
All employees will be invited to participate
on an anonymous basis.
Technical development
Technical development consists of our
activities in research and development
(R&D), innovations in our product portfolio
and operations, plus the maintenance
and improvement of our Information
Technology (IT) environment.
From an IT perspective, FY18 saw a number
of milestone achievements, including a
world-first deployment of Format Solutions’
leading edge diet formulation software
‘Indigo’. Other successfully implemented
projects included (i) deployment of a
new, best-in-class Customer Relationship
Management platform, (ii) launch of an
online portal for use by our raw material
suppliers, which delivers significantly
reduced administration costs, (iii) more
applications moved to the cloud and
made available on our employees’ mobile
devices, and (iv) in-house development
of some proprietary applications (apps)
which are delivering real value either as
part of our internal processes or as tools
in the hands of our salespeople in the field.
With regard to R&D, clearly the main focus
remains on execution of our Novacq™
technology in the prawn industry; however,
the extension of our alliance with CSIRO
to explore potential applications in other
species is a logical and exciting step to
be taken in the years ahead.
Outside of Novacq™, work continued on
some other, mostly earlier stage initiatives
in the diet and ingredients field, and we
continue to target universities and other
experts in order to ensure that our diets
and feed products remain at the forefront
of the latest learnings and technologies.
The highlight amongst these other
initiatives was the commercial production
of our novel Poultry Protein Concentrate
(PPC) in our Rendering business, and its
subsequent successful inclusion in selected
barramundi diets in our Aquafeed division.
PPC is a high-protein, high-digestibility
ingredient, which, importantly, can act as a
substitute for fishmeal in diets. Substitution
of fishmeal represents a major commercial
advantage given the declining stocks
of fishmeal globally and the imperative
to find a more sustainable solution.
27
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Safety, People, Innovation and Community continued
Finally, innovation is of course not
confined to our nutritional assets. It also
has a role to play across all our business
functions, including manufacturing.
In this context, FY18 saw us really leverage
some of the emerging and latest world-
class operational technologies at our
new feedmill in Lara, near Geelong, and
we will be sure to extract further value
from these technologies as we construct
our new extrusion plant in Tasmania
and feedmill in Bendigo.
Community
Ridley is proud to support employees,
suppliers, customers, and the communities
where we operate. We are entering our
sixth consecutive year of support for
the Garvan Institute and Aussie Helpers,
where the focus is on providing assistance
to rural Australia.
Garvan Institute
In 2012, the Garvan Institute (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.
During the past six years the Healthy
Families, Healthy Communities program
has consistently:
• advocated the importance of medical
research to rural and regional Australia;
• shared important health messages
with rural and regional Australia; and
• conveyed messages supporting
healthy living and risk mitigation.
Ridley has supported and continues
to support improvement in the health
outcomes of Australians in regional and
remote areas, and in particular in the
regions where we operate. In the years
ahead, the Healthy Families, Healthy
Communities program intends to
continue to focus on delivering health
and awareness messages about key
health issues affecting regional and
rural communities.
Pursuant to the above objectives, in
late 2016 Garvan issued a report titled
‘A Rural Perspective: Cancer and Medical
Research’, which provides data on the
incidence and impact of cancer in rural
28
Australia. The report highlights the need
to make available the same standard of
care in rural communities as is available
in the larger cities. The report is still
relevant today and provides an
understanding into the main health issues
facing rural and regional communities
today, identifying who in those communities
are affected, explaining why the challenges
exist and what is the outlook and way
forward to rectify some of these major
health issues.
Importantly, the Garvan reports considered
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.
In support of Garvan, two teams of
Ridley runners participated in the 10km
and 5km distances respectively for the
Run Melbourne event held in Melbourne
on Sunday the 29 July 2018, raising
money for Garvan. On a sunny but windy
morning, the 10km run was completed
by all team members in under one hour,
with the 5km team cheering them home
after successfully completing their event.
The Ridley Ken Davies Award
Ridley established the Ridley Ken Davies
Award to honour our former colleague
and to make a positive difference to
support medical research and make
a positive contribution to change the
direction of medicine that will have
major impacts on human health.
The Ridley Ken Davies Award is an
annual award presented to a Garvan
Institute researcher with a $75,000 prize
as part of the Healthy Families, Healthy
Communities program. Ridley has a
Workplace Giving program to assist
with ongoing support for the Ridley
Ken Davies Award.
The 2018 Ridley Ken Davies Award was
awarded to Dr Liz Caldon, Group Leader
Replication and Genome Stability –
Cancer Division. Dr Liz Caldon plans to
work on a project with Dr Nicole Verrills
at the University of Newcastle, using
phosphoproteomics for discovery of
biomarkers and therapeutic targeting of
CDK4/6 inhibitor resistant breast cancer.
CDK4/6 inhibitors are emerging as the
standard of care to halt the spread of
advanced breast cancer; however, breast
cancers are becoming resistant to these
drugs. The means by which cancers escape
CDK4/6 inhibitors is unknown, and these
Ridley Corporation Limited Annual Report 2018
SAFETY, PEOPLE,
INNOVATION &
COMMUNITY
Megan Gourlay (Ridley) presenting
the award to Dr Liz Caldon (Garvan)
cancers then become incurable.
At the Garvan Institute, Dr Liz Caldon
and Associate Professor Elgene Lim
have analysed breast cancer cells that are
resistant to these drugs. In collaboration
with Dr Nikki Verrills of the University of
Newcastle, they will analyse which proteins
change with resistance. The outcome of
this project will be the identification of
potential diagnostic markers of resistance
and drug targets, with the aim of
developing new clinical tools for the
treatment of advanced breast cancer.
Aussie Helpers supports farmers who are
going through really tough times. Aussie
Helpers is unique in its aim to not only
encourage financial support for struggling
farmers, but also in respect of donations
of food, stock feed, time and most
importantly emotional support. Brian
Egan and his network of volunteers spend
time on each farm talking to the families
and, where needed, will call in paid
psychologists to assist families in dealing
with the strains and pressures of looking
after their farms and livestock.
Dr Caldon commented: “Thank you so
much to Ridley. We have been trying to
find funding for this research for a number
of years. This project capitalises on
Garvan’s strengths in cellular genomics
in combination with the strengths at the
University of Newcastle in proteomics.
Both Garvan and the Newcastle research
precincts are hubs for breast cancer
research, but with relatively few current
links. This project will establish new
collaborations that will significantly
improve the exchange of resources
and ideas between these centres.”
The funds are dedicated to the Ridley
Ken Davies Award to continue Garvan’s
work in helping to build strong, healthy
and sustained communities. It is Garvan
and Ridley’s hope that the funding of
researchers will lead to better outcomes
for those faced with chronic disease
and terminal illness.
Aussie Helpers
As NSW is now declared 100% in drought,
the work of organisations like Aussie
Helpers is absolutely critical in helping
to support our nation’s farming families.
Ridley has been supporting Aussie Helpers
since 2012, and is proud of the work that
Brian Egan and his team are doing to
support our rural communities.
Aussie Helpers is currently receiving more
than 50 calls for assistance per day, plus
the Aussie Helpers psychologist telephone
program is taking about 70 calls a week
from farmers suffering depression and
anxiety. Aussie Helpers is now trucking in
stock water to areas where water supplies
are short, and has introduced a farmer
feed program delivering boxed meat,
vegetables and supplies to farms in need.
Aussie Helpers is a direct link to the rural
communities where Ridley operates and
our relationship with Aussie Helpers is a
reflection of our strategy to work closely
with the communities where our staff,
customers and suppliers live. They have
helped thousands of farmers who have
been affected by fire, flood, drought and
rising costs of living.
In addition to NSW, other regions of rural
Australia are in the grip of severe drought
conditions, where the help and support
provided to local farmers by the Aussie
Helpers network has been able to provide
some relief and comfort. Aussie Helpers
is currently assisting farming families
not only in NSW, where it has bases in
Gunnedah, Dubbo, Orange, Bathhurst,
Mathoura, Gundy, Merrima, Kempsey and
Aussie Helpers founder Brian Egan
Mulgrave, but also in Queensland and
Victoria, where there is significant distress
from the effects of this severe drought.
Each year Ridley donates cash and many
tonnes of animal feed directly to Aussie
Helpers. Ridley also works with Aussie
Helpers to donate old laptops and office
supplies that are of great value to farmers,
particularly those in remote regional areas.
The provision of supplementary feed
has become critical as hay supplies have
reached critically low levels in these
regions. Ridley is also engaging with
select customers and suppliers to
encourage further support of Aussie
Helpers and our employees are running
non-perishable food collection drives
at our feedmill sites around Australia.
For anyone wishing to support Aussie
Helpers help the heart of our country,
they can be contacted via telephone
on 1300 665 232 or through their website
at www.aussiehelpers.org.au.
29
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Safety, People, Innovation and Community continued
2017 Cobber Challenge winner Flow with proud owner Brad MacDonald
The 2017 Cobber Challenge winner was a
six year old kelpie called Flow. Flow works
on a sheep and beef property in Tasmania
and recorded a total of 716 kilometres (km)
travelled in 19 days, which at an average
of 37.7km per day, equates to almost a full
marathon every day. In the final week of
the competition, Flow recorded 54.1km,
57.8km and 50.8km over three consecutive
days. The formulation of Ridley’s Cobber
Working Dog feed provides working dogs
like Flow with the nutrients and energy
required to manage such an incredible
workload. By the time this 2018 Annual
Report is released, we will have a new
winner, and details can be found on the
website www.cobberchallenge.com.au.
Barastoc partnerships
In 2018, we have celebrated our 21st
anniversary of the partnership between
Barastoc and the Joyce family. In 1996,
a young family of passionate equine
enthusiasts, based in a small town called
Jumbunna in Victoria, joined the Barastoc
horse feed sponsored rider team,
affectionately referred to as Team Joyce.
The family team comprises father Wesley,
mother Trisha, and daughters Sarah and
Tiffany. With a combination of enthusiasm,
talent and commitment, Team Joyce
makes an impact in everything they are
involved in, whether it be in championship
showjumping, breeding and, more
recently, mentoring the blossoming
Barastoc Junior Squad team.
Details of Team Joyce can be found on
the dedicated sponsored riders website
at http://www.barastochorse.com.au/
sponsored-riders/.
Wesley Joyce courtesy of Gone
Riding Media, Geoffrey McClean
Barastoc Junior Squad
member Emma Plitz
The Barastoc Junior Squad was launched
in 2016 and each month for two years,
a young rider was selected to become
part of the Barastoc Junior Squad team.
The winners don’t need to be champions,
or the best in their field, they just need
to be passionate about horses and our
Barastoc brand. We now have over 20 riders
as part of the squad and a dedicated
website, which can be viewed at http://
www.barastochorse.com.au/junior-squad/.
Cobber Challenge
For the third successive year, Ridley
is engaging with rural communities
across Australia in launching the 2018
Cobber Challenge.
The Cobber Challenge is the equivalent
of State of Origin competition for working
dogs, whereby 12 working dogs from
six states are provided with GPS collar
trackers which capture the speed,
distance and duration travelled by the
dogs on a daily basis over a three-week
period in August 2018.
The importance of the working dog to rural
Australia has been highlighted by the data
generated in the first two years of the
competition.
Courtesy of © Bec Sneath,
Rural Love Photography
30
Ridley Corporation Limited Annual Report 2018
SAFETY, PEOPLE,
INNOVATION &
COMMUNITY
Horse of the Year
From 8-10 February 2019, we will be
celebrating the 50th anniversary of the
Barastoc Horse Of The Year Show. Our
long-standing partnership with Equestrian
Victoria has been highly successful, such
that this is one of the most prestigious
horse events in Australia, expected to
attract over 1,000 competitors to the
Werribee Park National Equestrian Centre.
A special celebratory event is being held
on the evening of Saturday 9 February
2019, which all past winners from 1970
to 2018 have been invited to attend.
Past champions will be invited to attend
the show to help celebrate the 50 years
of memorable moments and achievements
from the Barastoc-sponsored show.
Details can be found at
http://www.barastochorse.com.au
Sustainability
In addition to generating returns for its
shareholders, Ridley also understands
the importance of its responsibilities from
a social and environmental perspective.
Australian Packaging Covenant
signatory
The Australian Packaging Covenant (APC)
is a sustainable packaging initiative, which
aims to change the culture of businesses
to design more sustainable packaging,
increase recycling rates and reduce
packaging litter. Since 2012, Ridley has
been a signatory of the APC, and Ridley
has committed to developing and
implementing an action plan that will
see the business contribute to the APC’s
objective and goals of ‘Design, Recycling
and Product Stewardship’.
Each year we are required to submit a
report on our achievements throughout
the year, and this year’s commendable
Anna and John Muys
achievements include (i) reductions in
electricity use by 28% and gas by over
50% at the new Lara feedmill when
compared to Ridley’s older style mills,
and (ii) the development of the Ridley
Sustainability Working Group.
Sustainability Working Group
Ridley’s employee-led Sustainability
Working Group (SWG) was voluntarily
established with the objectives to increase
and maintain awareness of the importance
of the environment and sustainability
throughout the Ridley Group through
actions and communications and a
process of continuous improvement.
Employees are being encouraged to
engage and promote awareness of
environmental responsibility into their daily
business activities.
The SWG comprises an employee group
across a range of roles, departments and
locations. Significant steps forward in
sustainability often start with small changes
across multiple sites and locations, and
this is exactly the approach the group has
taken this year. While the tangible changes
may appear to be somewhat small, they
are helping to improve awareness and
ultimately change behaviour and culture.
Some of the achievements of the SWG
in FY18 include:
• requirement for all sites to buy only
100% recycled paper;
• donation of surplus unused 20kg feed
bags to local Boomerang Bag groups;
• establishment of Reusable Feed Bag
recycling fundraising pack;
• recycling of all electronic waste;
• business Clean Up Australia Day at a
local community reserve in Pakenham,
Victoria, with over 80kg of household
rubbish such as plastic bags, containers,
paper, bottles and cans removed in just
over an hour.
Ridley Reusable Feed Bags
At Ridley, we are always looking for
innovative ways to reduce our impact on
the environment. Everyone needs reusable
bags now that the big supermarkets are
removing the single use plastic bag from
the checkout area, and what better way
to ‘reduce, reuse, recycle’ than to use
bags that may have ended up in landfill.
In response to a Ridley request for
sustainably produced bags for Equitana,
which is the largest event in Australia
for the equestrian community held at
the Melbourne Show Grounds, this year
the senior generation of Team Joyce
came to the rescue with an innovation
to produce general purpose bags made
from discarded Barastoc stockfeed bags.
Using the ideas provided by Trish Joyce’s
parents, Anna and John, Ridley has created
a Reusable Feed Bag recycling fundraising
pack. Single use plastic bags are on the
way out and reusable bags are here to
stay. The Ridley Reusable Feed Bag kit
includes unused 20kg surplus feed bags
and allows schools, sporting clubs and
community groups to create their own
reusable bags and sell them throughout
their local community as part of their
fundraising activities.
More details of the fundraising initiative
can be viewed at https://www.ridley.com.
au/fundraising-with-ridley
31
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018
Board of Directors
Dr Gary H Weiss
LLB (Hons) LLM (NZ) JSD (Cornell, NY)
Tim Hart
BSc, MM(T), MMkting, MEd (Melb),
PGDipSI, PGDDipOL (Oxon), FAICD, FIML
Patria M Mann
BEc CA FAICD
Independent Non-Executive
Director and Chair
Chief Executive Officer and
Managing Director
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 LL.B (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.
Mr Hart commenced employment with
Ridley on 2 April 2013, 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
Other current listed company
directorships
Ariadne Australia Limited from 1989.
iSignthis Limited.
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
Former listed company directorships
in the last three years
Bellamy’s Australia Limited from
10 March 2016 to 18 May 2017.
None.
Thorney Opportunities Limited from 2013.
The Straits Trading Company Limited
from 2014.
Estia Health Ltd from 24 February 2016.
Ardent Leisure Limited from
3 September 2017.
Former listed company directorships
in the last three years
Clearview Wealth Limited from
October 2012 until May 2016.
Tag Pacific Limited from 1988 until
31 August 2017
Premier Investments Limited from 1994
until July 2018.
Pro-Pac Packaging Limited from 2012
until November 2017.
32
Ridley Corporation Limited Annual Report 2018 BOARD OF
DIRECTORS
Professor Robert J van Barneveld
B.Agr.Sc. (Hon), PhD, R.An.Nutr., FAICD
Ejnar Knudsen
CFA
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 Australasian
Pork Research Institute Ltd and Pork CRC
Ltd and is Chairman of Autism CRC 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.
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.
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
Other current listed company
directorships
None.
None.
Former listed company directorships
in the last three years
None.
Former listed company directorships
in the last three years
Managing Director Warrnambool Cheese
and Butter Factory Company Holdings
Limited until May 2014.
33
LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018
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
35
44
53
54
55
56
57
58
59
92
93
Ridley Corporation Limited
34
Annual Report 2018
Directors’ Report
For the Year Ended 30 June 2018
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 2018.
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:
G H Weiss
T J Hart
P M Mann
R J van Barneveld
E Knudsen
D J 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 Profit and Loss (Table 1) reports total comprehensive income for the year
of $17.9 million (m) and a pre-tax profit from continuing operations of $21.7m.
Table 1
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations after income tax
Other comprehensive income, net of income tax
Total comprehensive income for the year
4. Review of operations
Operating result
2018
$’000
21,719
(4,310)
17,409
520
17,929
2017
$’000
34,287
(8,472)
25,815
–
25,815
The consolidated Group has recorded Earnings Before Interest and Tax (EBIT) of $38.0m (Table 2), comprising an Operating result
before non-recurring items of $43.3m, including net profit on property of $4.2m less corporate costs of $9.5m.
Sales revenue for FY18 of $917.7m was up $64.7m (7.5%) on last year’s $852.9m, and reflects 2.05m (2017: 1.93m) tonnes of stockfeed
and rendered product sold.
The reported operating EBIT of $43.3m is $2.5m below last year’s $45.8m as a result of the loss of Red Lea poultry raw material
supply at Maroota. Positive year on year earnings improvements have been recorded in Dairy, Beef and Sheep, Laverton Rendering,
Supplements and Poultry, while the result for Packaged Products has been impacted by some margin shrinkage arising from the absorption
of increased raw material prices. Mid-year increases in energy costs have again challenged the business and impacted the cost structure
for the second half year.
Corporate costs have been contained to be consistent with prior years.
Net finance costs for the year of $4.6m reflect interest on bank debt, the trade payables facility and the amortisation of establishment
and other fees, offset by $0.2m for the unwinding of the discount on the final payment of $6.0m of deferred consideration from the sale
of Dry Creek received in December 2017.
The $4.4m income tax expense and 19.8% effective tax rate for FY18 includes a $3.4m tax benefit for non-recurring items. The low rate
reflects an overprovision in the prior year and a tax benefit from 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.
35
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Directors’ Report continued
For the Year Ended 30 June 2018
4. Review of operations continued
The pre-tax non-recurring items of $11.6m comprise the incremental costs associated with the management, storage, processing,
fumigation, freight and inventory write down of raw materials and finished goods purchased and manufactured respectively to service
the former Huon supply agreement which, was terminated in the prior year following a legal dispute that was resolved in June 2017.
The tax effected impact of this item is c.$8.2m.
A pre-tax mark to market uplift of $0.7m for the investment in a UK-listed specialist ingredients business has contributed $0.5m
of other comprehensive income, post-tax, for the year.
Profit and loss
Table 2 – Profit and loss account in $ million
Earnings from operations before net interest and tax expense (EBIT):
2018
2017
Movement
Ridley operations
Corporate costs
Property net profit/(costs)
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
Other non-recurring items before tax
Tax on other non-recurring items
Reported net profit
Other comprehensive income, net of tax
Total comprehensive income for the year
Earnings per share (cents)
(i) continuing
(ii) reported
43.3
(9.5)
4.2
38.0
(4.6)
(7.8)
25.6
(11.6)
3.4
17.4
0.5
17.9
5.7
5.7
45.8
(9.9)
(1.0)
34.9
(5.0)
(7.3)
22.6
4.3
(1.1)
25.8
–
25.8
8.4
8.4
(2.5)
0.4
5.2
3.1
0.4
(0.5)
3.0
(15.9)
4.5
(8.4)
0.5
(7.9)
(2.7)
(2.7)
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.
The $4.2m net profit recorded for the Property segment in Table 2 above reflects the sale of Lot B plus two other smaller lots during the
year for total proceeds of $6.1m offset by the relevant property cost bases and by the ongoing landholding costs at the former salt field
sites at Lara and Moolap.
Subsequent to balance date, sales contracts were executed to sell Lots A and C for total proceeds of $9.5m, with a 12-month option
agreement also executed for a land-based aquaculture business to acquire Lot D, the only remaining Ridley land at Lara (Table 3).
Deferred consideration for the sales of Lots A, B and C is receivable at 12-month intervals over the coming four years.
Table 3 – Lara land
36
Ridley Corporation Limited Annual Report 2018 Balance Sheet
There have been the following material movements in the Balance Sheet over the last 12 months:
(i) A $1.2m increase in net debt for the year from $51.7m to $52.8m.
(ii) A $12.2m decrease in current receivables to $104.0m, which includes the payment in July 2017 of the $17.7m receivable following
the resolution of the Huon legal dispute.
(iii) A $7.0m reduction in inventory to $76.7m, which reflects a $8.4m write off of all Huon legacy inventory at balance date.
(iv) A new current assets held for sale classification of $1.1m, which reflects the residual historical cost base of Lara land either sold in
July 2018 or subject to an option agreement to sell in FY19 subject to purchaser due diligence. For FY17, this asset was reported within
non-current investment properties.
(v) A $7.8m increase in non-current receivables to $8.6m to comprise (i) the net present value of the $3.0m of gross deferred consideration
receivable more than 12 months after balance date in respect of the $5.0m Lara property sale, which was completed and reported
on 28 June 2018; and (ii) an unsecured loan of $5.3m to the Thailand feedmill joint venture.
(vi) A $1.9m reduction in non-current Investment properties to $1.3m, which, following the reclassification under (iv) above and property
sales during the year, now only represents the Nelson Cove development site at Moolap, carried at historical cost.
(vii) A $19.8m increase in non-current property, plant and equipment to $202.6m, which reflects another significant year of investment
and the first $12.4m of activity for the new extrusion plant at Westbury. There have been several other significant profit improvement
and capital maintenance projects conducted during the year, notably the establishment of the Novacq™ production ponds at
Chanthaburi and the installation of a new test extruder line, fat coater and pellet cooler at Narangba.
(viii) A $0.2m reduction in non-current investments accounted for using the equity method to $1.1m, which comprises the carrying
value of the 49% ownership interest in the Pen Ngern Feed Mill in Thailand and reflects Ridley’s share of its operating loss for the
financial year.
(ix) A $1.0m increase in non-current other investments to $2.3m, which reflects (i) the write off of the Bluewave Pty Ltd investment, and
(ii) the purchase of a 1.2% equity interest in a UK-listed specialist ingredients business, uplifted to reflect the last traded value for that
stock prior to 30 June 2018.
Dividend
The Board paid a 2017 final dividend of 2.75 cents per share, fully franked, on 31 October 2017 and a 2018 interim dividend of 1.5 cents
per share, fully franked, on 30 April 2018.
After the balance sheet date, a 2018 final dividend of 2.75 cents per share, fully franked and payable on 31 October 2018 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 2018 and will be recognised in subsequent financial reports.
Cash flow and working capital
The operating cash inflow for the year (Table 4) after working capital movements and maintenance capital expenditure was $43.9m,
an improvement of $6.3m on last year’s $37.6m.
EBITDA before non-recurring items has risen from $50.1m in the prior year to $55.3m in FY18, an improvement of $5.2m.
Maintenance capital expenditure of $15.1m was below the $17.3m aggregate charge for depreciation and amortisation on property, plant
and equipment. Ridley has invested a further $21.1m in development projects during the year, the largest of which reflects commencement
of activity for the new extrusion plant at Westbury, Tasmania.
Payments for intangible assets of $4.3m comprise the capitalisation of Novacq™ development costs.
Dividends paid for the year of $12.9m comprise the 2017 final dividend of 2.75 cents per share paid on 31 October 2017 and the interim
FY18 dividend of 1.5 cents per share, which was paid on 30 April 2018.
Proceeds from the sale of the discontinued operation of $6.0m reflect the receipt of the final instalment in respect of the Dry Creek
property sale. The $1.2m sale of property assets represents the aggregate proceeds from two of the properties sold during the year
at Lara, with the deposit of $0.5m relating to the third 28 June 2018 property sale in transit at balance date and banked on 2 July 2018.
The payment for the other investment of $1.8m represents the on-market purchase of a 1.2% shareholding in a UK-listed specialist
ingredients business.
Tax payments of $5.9m were made during the year (FY17: $14.7m) and are considered to be sufficient to cover the full year liability for FY18.
37
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Directors’ Report continued
For the Year Ended 30 June 2018
4. Review of operations continued
Table 4 – Statement of cash flows in $ million
Cash flows for the year ended
EBIT from operations before non-recurring costs
Depreciation and amortisation
EBITDA before non-recurring items
EBITDA from non-recurring items
EBITDA after non-recurring items
Add back non-cash write off of Huon inventory legacy
(Increase)/decrease in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles (software and assets under development)
Dividends paid
Share-based payments
Proceeds from sale of discontinued operation (Dry Creek)
Proceeds from sale of property assets and associate
Payment for other investment
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
30 June 2018
38.0
17.3
55.3
(11.6)
43.7
8.4
6.9
(15.1)
43.9
(21.1)
(4.3)
(12.9)
(4.2)
6.0
1.2
(1.8)
(4.6)
(5.9)
2.6
(1.2)
(51.6)
(52.8)
30 June 2017
34.9
15.2
50.1
4.3
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)
(41.1)
(51.6)
The cash flow summary with a prior period comparison provided in Table 4 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 4 is useful for users as it reflects the underlying cash
flows of the business.
Earnings per share
Basic earnings per share – continuing
Basic earnings per share
Gearing
Gearing is reported as net debt to equity in accordance with the covenants of the Group banking facility.
Gearing
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
Capital movements
2018
5.7c
5.7c
2017
8.4c
8.4c
2018
$’000
76,222
(23,441)
52,781
263,107
20.1%
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
During FY18, a total of 3,116,507 (FY17: 3,023,250) shares were acquired by the Company on market for an outlay of $4.2m (FY17: $4.2m)
in satisfaction of:
(i)
the issue of 2,430,232 (FY17: 2,400,000) shares allocated to Ridley employees under the Ridley Long Term Incentive Plan; and
(ii) 686,275 (FY17: 623,250) shares allocated under the Ridley Employee Share Scheme.
There were no new issues of capital during either financial year.
38
Ridley Corporation Limited Annual Report 2018 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. At the date
of this report, the residual sites are now the former salt field at Moolap and a single residual lot, Lot D, at 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 several 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 a degree of confidence in order 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. The ongoing commercial viability
of key customers and suppliers is generally beyond the control of Ridley, as evidenced by the FY18 appointment of an administrator
to the Red Lea poultry producer, which was a major supplier of poultry raw material to Ridley’s Maroota rendering site. The potential
for disputes to arise with customers over feed performance is a significant risk.
• Surplus Property holdings – Ridley currently utilises its in-house finance and legal resources, supported when needed by
external experts and its development partner for the Nelson Cove project at Moolap, to manage the orderly disposal of its surplus
land holdings.
• 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 managed through
the Company’s risk management framework, which includes review and monitoring by the executive lead team.
Outlook
Despite the setback of losing the largest source of poultry raw material supply at Maroota, management continues to review the prospects
for three new rendering initiatives in progress, which, if successful, have the potential to provide new revenue streams for the Maroota
site, which has been restructured to accommodate the reduction in raw material processing volumes.
The first of the initiatives referred to above is the processing of whole mackerel caught off the NSW coast under strict and sustainable
quota requirements, with the aim of producing high quality fish meal and oil for the aquafeed and petfood industries. The second
initiative is to develop an effective supply chain and process for the manufacture of a high-protein and digestible poultry meal from
whole birds at the end of their life. The third initiative is to stabilise raw material to avoid degradation prior to processing and thereby
improve the quality and performance of the rendered product and increase the reach of the raw material supply chain. Each of these
initiatives has the prospect of generating earnings in FY19 and thereafter.
The focus for the Laverton Rendering site for the coming year is to segregate raw material intake to isolate sources of higher value protein
meals, and to maintain its process of continuous improvement to improve the Overall Equipment Effectiveness (OEE) of the plant and
reduce energy consumption. Successful execution of this strategy will facilitate the adoption of an aggressive raw material purchase
price strategy to secure incremental processing volumes in a highly competitive marketplace.
The long term outlook for the domestic salmon industry remains positive, with sustainable fishery solutions being developed for Macquarie
Harbour, continuing growth in domestic salmon consumption, and further investment in biomass by the Tasmanian salmon producers.
Ridley is committed to playing an important role in supplying feed to the industry having announced its intention to construct and operate
a new extrusion plant in Tasmania on 20 January 2017. $12.4m of capital has been expended in FY18 on the project at Westbury, Tasmania,
with a challenging target for commissioning set for the end of FY19.
39
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Directors’ Report continued
For the Year Ended 30 June 2018
4. Review of operations continued
In June 2018, Ridley and Tassal announced that two salmon trials will be conducted as part of Tassal’s research and development program.
All feed required for the trials will be purchased from Ridley at market rates, commencing with an appropriate range of hatchery diets
and then moving through the seawater transfer diets to the 4mm – 9mm pellet size salmon grow-out feed. The expected aggregate
Aquafeeds volume for the trials is c.3.3kt in total commencing in late June 2018 and concluding in December 2020. The trials with
Tassal will not only provide additional sales volume, but will also test and look to reconfirm, after a period of absence of several years,
Ridley’s nutritional and production expertise when benchmarked against the equivalent diets provided by Tassal’s existing supplier. Prior
to segregation of Tasmanian salmon feed supply allegiances, Ridley had performed strongly in similar trials and further improvement
in feed quality is anticipated through the adoption of the latest technology at the new extrusion plant under construction at Westbury.
Volume growth across all of its major species, strong performance in the Tassal trials and other anticipated hatchery trials, and the
operation of the new test extruder line to develop innovative solutions to industry farming issues are a focus for Aquafeeds for FY19.
Effective management of working capital and preparation for the transfer of feed volumes and rationalisation to a twin site production
model at Westbury and Narangba are also significant key performance metrics for Aquafeeds management.
The outlook for FY19 for Dairy is mixed, with a positive milk price forecast being tempered by a lack of on-farm forage and high raw
material prices.
The FY19 outlook for Beef and Sheep is positive, with new business won in south east Queensland and some drought-related beef
and sheep feeding expected to continue throughout the first quarter.
Ingham’s announced intention to become a fully integrated poultry producer and not renew its existing supply arrangements with
Ridley, which expire in October 2018, will have feed volume and financial implications for the Murray Bridge and Clifton sites and the
Poultry earnings for FY19 and thereafter. The Commercial Feeds team is working to secure other sources of new business and sales
tonnes to replace this volume, the FY19 EBIT impact of which in isolation would be in the vicinity of $1.5m–$2.0m depending on timing
and the plan of transition.
In Victoria, we are working diligently to secure the necessary approvals to finalise the purchase of the land at Wellsford in Central Victoria
and commence construction of the new Monogastric feedmill to service key customer Hazeldene’s Chickens and other poultry and pig
farmers in the region. Currently Ridley manufactures and supplies a significant volume of poultry feed from its East Bendigo facility. This
facility has reached capacity at 160,000 tonnes and will be retired once the new feedmill is commissioned and fully operational. The new
facility will be similar in design and construction to our new feedmill commissioned last financial year at Lara, Geelong. With an annual
production capacity in excess of 350kt, the Wellsford feedmill will be the largest in the Ridley network at nearly twice the size of the
Lara feedmill.
Ridley’s commitment to a new state-of-the-art feedmill in Central Victoria and to a new extrusion plant in Tasmania supports our focus
on growing with our customers and capitalising on opportunities to expand our presence in key livestock animal production regions.
The new facility investment strategy reinforces the importance of the animal production industry to Victoria and Tasmania and reflects
the confidence we have in our team to consistently produce high quality animal nutrition solutions that are capable of outperforming
our competitors. The equipment selected for the new feedmill will reflect all the latest technological advancements, with a strong focus
on efficiency and low running costs.
We are expecting and managing towards another year of growth and consolidation in both Packaged Products and Supplements, through
a new range and product mix, improved store coverage and presence, a focus on raising the profile of our Dog and Equine products,
and on the assumption that we experience a traditional 12-month dry and wet season weather pattern in northern Australia.
The rising cost of energy continues to be a challenge across all business units, but in particular for the Rendering and Monogastric sectors
of our business, where the consumption levels are highest and the ability to pass on cost increases can be limited. Our capital maintenance
and continuous improvement programs need to be operating throughout the business to contain our production costs per tonne in the
face of continuing energy price rises.
In addition to organic growth through the program of mill modernisation, Ridley is continually looking for investment opportunities
consistent with its long term strategy to be Australia’s leading producer of premium quality, high performance animal nutrition solutions.
Novel and value adding feed ingredients that have the potential to reduce the cost of feed and/or improve the returns of the livestock
farmer are a key focus of attention in our acquisition discussions and research.
Novacq™ is one such ingredient that has the potential to make a fundamental change to prawn farming throughout the world, and
potentially for other species as well. The activities of the strategic alliance with CSIRO in FY19 will continue to be focused on identifying
the most likely applications for Novacq™ in other species.
40
Ridley Corporation Limited Annual Report 2018 As announced on 25 May 2018, having received some preliminary and exploratory stage expressions of interest from a number of parties
and in order to accelerate the roll-out of Novacq™, Ridley has engaged Investec to assist it to explore its options to accelerate the growth
and maximise the value of Novacq™ for the benefit of Ridley shareholders. A broad range of options is currently being considered,
including the potential for a third party investment in Novacq™, and an outcome from this engagement will be released to the market
at the appropriate time.
From 1 July 2018, the Novacq™ operations at Yamba transition from a development site to an operational site, with Novacq™-inclusive
feed to be available for the next domestic prawn season. Our 14 ponds under long term lease at Chanthaburi, Thailand were secured
and converted to Novacq™ production in FY18. With all the trialling, testing and selection of the production and harvesting processes
conducted at Yamba, the Thailand operations are effectively one year behind the domestic operations.
The harvesting, dewatering and drying equipment has already been purchased and delivered on site at Chanthaburi, with installation
to be completed in the first half of FY19 and commercialisation targeted for commencement on 1 July 2019.
With regard to the net pre-tax profit of $4.2m for the Property segment for the year, we have sold three of the available lots, which we
believe represents excellent value for our shareholders. The first lot sale was achieved during the year and the second and third lots were
sold in July 2018. An option agreement has also been executed after balance date for the sole remaining lot, Lot D, which is subject to a
12-month period of purchaser due diligence. The sale of Lot D in FY19 will complete the divestment of the surplus land at Lara, leaving the
Nelson Cove development at Moolap as the sole remaining Property segment asset.
With so many projects in progress and opportunities to develop, the year ahead promises to be a challenging and exciting one for everyone
at Ridley, and we look forward to a productive and rewarding year for our employees, customers, suppliers and shareholders.
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 2018.
6. Dividends and distributions to shareholders
Dividends paid to members during the financial year were as follows:
Interim dividend
In respect of the 2018 financial year paid on 30 April 2018 of 1.5 cents, 100% franked
Final dividend
In respect of the 2017 financial year paid on 31 October 2017 of 2.75 cents, 100% franked
2018
$’000
4,618
8,465
13,083
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. 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.
41
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Directors’ Report continued
For the Year Ended 30 June 2018
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 and Special Retention Incentive Plan (Performance Rights)
Ridley Employee Share Scheme (Options) *
* The share grant and supporting loan together in substance comprise a share option.
Number
7,725,000
4,681,155
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 25 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 performance rights 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.
11. Post balance date events
On 24 July 2018, Ridley announced the completion of contracts for the sale of two of the residual lots at Lara for total proceeds of
$9.5m and a pre-tax profit of approximately $8.2m. A 12-month option agreement was also signed after balance date for a land-based
aquaculture company to acquire the sole remaining lot of surplus land at Lara for $1.5m subject to satisfactory completion of its due
diligence program.
On 20 August 2018, Ridley advised the market of proceedings having been commenced against it by a customer, Baiada, in respect
of stockfeed manufactured by Ridley for Baiada at its Wasleys feedmill in South Australia ‘between about 2014 until about October 2017’.
Baiada, through its operating entities Baiada Poultry Pty Limited and BPL Adelaide Pty Limited, is, and has been for many years, a significant
customer of Ridley, and one which Ridley is continuing to supply.
The Baiada claim does not specify the quantum of damages, or other compensation, that Baiada is seeking. Ridley believes the claim
is not of merit, and as such it will be vigorously defended. Ridley’s insurers have been notified of the claim and, if required, Ridley believes
insurance cover exists in respect of the claim.
No other matters or circumstances have arisen since 30 June 2018 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.
42
Ridley Corporation Limited Annual Report 2018 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
G H Weiss
T J Hart
P M Mann
R J van Barneveld
E Knudsen
D J Lord
Board
Audit and Risk
Committee
Remuneration
Committee
Ridley Innovation and
Operational Committee
H
12
12
12
12
12
12
A
12
12
12
11
10
12
H
4
–
4
4
–
–
A
3
–
4
4
–
–
H
3
–
–
–
–
3
A
3
–
–
–
–
3
H
–
4
–
4
4
–
A
–
4
–
4
3
–
H: Number of meetings held during period of office.
A: Number of meetings attended.
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 provided during FY18 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 53
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
$
75,577
20,800
96,377
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 2017/191 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 22 August 2018 in accordance with a resolution of the Directors.
G H Weiss
Director
T J Hart
Director
43
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION 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 2018. This report forms part of
the Directors’ Report for the year ended 30 June 2018.
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 has continued to apply
the existing policies and practices throughout the 2018 financial year.
During the 2018 financial year, Morrow Sodali was engaged by the Board to conduct a review of Ridley’s executive remuneration
and diversity disclosure policies in the context of current Australian corporate governance best practice, and specifically to conduct:
• external benchmarking of Ridley’s short term incentive and long term incentive policies and mechanisms;
• a review of the relative total shareholder return concept as the most meaningful measure of shareholder performance; and
• a recommendation in relation to Diversity Policy disclosure.
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.
44
Ridley Corporation Limited Annual Report 2018 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 last five 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
2018
2017
2016
$’000
17,409
25,815
27,606
$’000
$’000
$’000
%
$’000
%
$’000
43,629
26,368
50,900
6.7
13,083
2.3
–
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
17,613
41,011
27,435
31,349
7.8
4,617
8.0
1,142
# 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 FY18 was $535,000 (FY17: $535,000).
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, which 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 three components, being
the financial performance of the Group (60%), the safety performance of the Group (10%), and the overall performance of the individual
(30%) as measured against personal key performance indicators (KPIs) (FY17: Group 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. The STI policy stipulates that no STI is
payable for financial performance below 70% of budgeted EBIT. KPIs for the Managing Director are initially considered and recommended
by the Committee and then approved by the Board based on the adopted business strategy. These approved KPI are then cascaded
down to the KMPs, CEO Direct Reports and throughout the business, recognising the relative contributions required of each role within
the organisation to achieve the stated objectives.
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.
45
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Remuneration Report – Audited continued
Short-term incentives continued
Following the end of the 2018 financial year, the financial results and each individual’s performance against KPIs have been reviewed to
determine STI payments for each executive. For FY18, the Committee assessed the financial performance hurdles as being 75.0% for EBITDA
after non-recurring items and 70.5% for NPAT after comprehensive income. Given the shortfall in consolidated financial performance to
budget and to the prior year for the reasons as outlined in the Review of operations in Section 4 of the Directors’ Report, the Committee
recommended that no STI be awarded in respect of FY18. The Committee’s recommendations were adopted by the Board. When awarded,
the STI is ordinarily payable through the payroll function 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 2018, 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 2017 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 a company’s 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 2018, 2,700,000 (2017: 2,825,000) Rights were issued under the LTIP, of which 1,300,000 (2017: 1,300,000)
were granted as remuneration to KMP and the balance issued to other, non-KMP senior executives within the organisation.
46
Ridley Corporation Limited Annual Report 2018 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 of the comparator group and using 30 June 2018 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 2015
1 July 2016
1 July 2017
TSR Ridley
24.8%
4.4%
0.4%
Median TSR
comparison
Percentile
Number of
rights on issue
19.6%
14.7%
9.9%
55.0
37.5
33.8
2,425,000
2,600,000
2,550,000
Hypothetically
vested at
30 Jun 2018
1,408,925 *
–
–
%
Hypothetically
vested at
30 Jun 2018
58.1%
–
–
* 1,408,925 Rights vested to be settled through the payment of $33,000 plus an allocation of 1,384,802 shares awarded and purchased on-market 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 FY18:
$2.00
Ridley TSR
Ridley Share Price
ASX 200 Accumulation Index (based to Ridley)
Small Ords Accumulation Index (based to Ridley)
$1.90
$1.80
$1.70
$1.60
$1.50
$1.40
$1.30
$1.20
$1.10
$1.00
52%
30%
20%
10%
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
7
1
p
e
S
0
3
7
1
c
e
D
1
3
8
1
r
a
M
1
3
8
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 2018, nil (2017: 150,000) SRP Rights were issued under the SRP, of which nil (2017: 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 sole
discretion of the Board. The purpose of the Scheme is to align employee and shareholder interests. 686,275 (2017: 623,250) 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 $945,000 (2017: $885,000).
47
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION
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
2018
686,275
2,430,232
3,116,507
2017
623,250
2,400,000
3,023,250
2018
$’000
945
3,382
4,327
2017
$’000
885
3,392
4,277
* Shares awarded under the Long Term Incentive Plan are issued on a pro-rata basis in respect of employees whose departure from the Ridley Group is for a
qualifying reason as defined in the Plan rules.
Directors and Key Management Personnel
The following persons were the Directors and executives with the greatest authority for the strategic direction and management of the
Group (Key Management Personnel or KMP) throughout the current financial year unless otherwise stated.
Name
Directors
G H Weiss
T J Hart
P M Mann
R J van Barneveld
E Knudsen
D J Lord
Executives
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney
J C Scaife
Position
Status
Chair
Managing Director and CEO
Director
Director
Director
Director
Chief Financial Officer and Company Secretary
General Manager Safety, People and Technical Development
General Manager Rendering
General Manager Packaged Products, Aquafeed & Supplements
General Manager Commercial Feeds
General Manager Commercial Feeds
Resigned 16 March 2018
Appointed 25 June 2018
48
Ridley Corporation Limited Annual Report 2018 Details of remuneration
Details of the remuneration of each Director of Ridley Corporation Limited and each of the KMP of the Group during the financial year are
set out below. In accordance with the requirements of Section 300A of the Corporations Act 2001 and Regulation 2M.3.03, the remuneration
disclosures for the 2017 and 2018 financial years only include remuneration relating to the portion of the relevant periods that each
individual was considered a KMP.
All values are in A$ 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.
2018
Name
Directors
G H Weiss – Chair
T J Hart – Managing Director
P M Mann
R J van Barneveld3
E Knudsen3
D J Lord
Total Directors
Executives
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney4
J C Scaife5
Total executives
Total
Short term
benefits
Directors’
fees and
cash salary
$
159,091
767,807
86,364
95,000
85,000
77,273
1,270,535
445,586
312,236
327,118
327,118
249,239
–
1,661,297
2,931,832
Post-
employ-
ment
benefits
Super-
annuation
$
STI
$
Other
benefits
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,909
20,049
8,636
–
–
7,727
52,321
25,000
22,308
25,000
25,000
18,241
–
115,549
167,870
–
–
–
–
–
–
–
–
–
–
111,439
–
111,439
111,439
Share-
based
payments
Perfor-
mance
rights/
options
$
–
403,193
–
–
–
–
403,193
134,000
63,326
85,776
85,776
–
–
368,878
772,071
Total
$
175,000
1,191,049
95,000
95,000
85,000
85,000
1,726,049
604,586
397,870
437,894
437,894
378,919
–
2,257,163
3,983,212
1. Percentage remuneration consisting of performance rights/options.
2. Percentage remuneration performance related.
3. Director fee paid to a Company.
4. Resigned on 16 March 2018. Other benefits comprises solely the pay-out of accrued leave entitlements.
5. Appointed on 25 June 2018.
%1
%2
–
34%
–
–
–
–
22%
16%
20%
20%
0%
–
–
34%
–
–
–
–
22%
16%
20%
20%
0%
–
49
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Remuneration Report – Audited continued
Details of remuneration continued
2017
Name
Directors
G H Weiss – Chair
T J Hart – Managing Director
P M Mann
R J van Barneveld3
E Knudsen3
D J Lord
Total Directors
Executives
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney
S Butler4
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-
employ-
ment
benefits
Other
benefits
$
Super-
annuation
$
STI
$
Share-
based
payments
Perfor-
mance
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
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
193,961
193,961
141,509
208,589
418,257 2,447,401
4,128,478
799,425
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%1
%2
–
33%
–
–
–
–
22%
13%
19%
19%
18%
–
–
33%
–
–
–
–
22%
13%
19%
19%
18%
–
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.
Contracts of employment
Remuneration and other terms of employment for the Managing Director are formalised in a service agreement, which 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:
T J Hart, CEO and Managing Director
• Base remuneration, inclusive of superannuation and any elected benefits, of $787,856 for FY18, increasing by 2.17% to $804,952 on
1 July 2018. A further increase of 2.17% will be payable effective from 1 January 2019, which will align the annual remuneration review
for the CEO with all other salaried employees and which equates to an annualised 3% increase over the effective 18-month period
of alignment.
• 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 FY18 included a mix of performance against budgeted EBITDA and Net Profit
After Tax, excluding property. The 10% of Ridley safety performance included measures of LTIFR, TRFR, Training, Good Manufacturing
Practice (GMP) audits, hazard reporting, and Safety Walks. The measures of personal performance included targets on training,
operational excellence, customer focus, 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 30 November 2017 for the 600,000 performance rights issued
to Mr Hart in FY18 with a three-year performance test period.
• 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.
50
Ridley Corporation Limited Annual Report 2018 Notice periods
The notice period for terminating employment of KMP ranges from between three and six months for executives to 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 service and performance
criteria were not achieved, are set out in the following table, together with the maximum amount of $1,458,814 payable to KMP had all STI
performance targets been achieved.
Name
T J Hart
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney
J C Scaife1
STI
percentage
range of TEP
0%–100%
0%–50%
0%–30%
0%–30%
0%–30%
0%–30%
0%–30%
STI maximum
potential
award
787,856
238,770
101,846
107,196
107,196
115,950
–
2018 STI
payment in
$
–
–
–
–
–
–
–
1. Mrs Scaife was appointed on 25 June 2018.
2018
2017
Paid
%
–
–
–
–
–
–
–
Forfeited
%
100
100
100
100
100
100
–
Paid
%
–
–
–
–
–
–
–
Forfeited
%
100
100
100
100
100
100
–
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 KMP of the Group are set out below. When exercisable, each Right is convertible into one ordinary share of Ridley
Corporation Limited, which can be satisfied either through the issue of new Ridley shares or, as has been the practice to date, through
the acquisition of Ridley shares purchased on market by an independent broker. Non-Executive Directors do not participate in the LTIP
and are therefore ineligible to receive Rights.
Long Term Incentive Plan (LTIP)
The ‘Balance at 30 June 2018’ holdings of Rights in the following table represent the maximum number of Ridley shares that the members
of the KMP would receive if Ridley were to have performed at the 75th percentile or above at the end of each three-year performance
testing period.
Recipients of LTIP Rights
Directors
T J Hart
Key Management Personnel
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney4
J C Scaife
Balance at
1 July 2017
Granted1
Vested2
Forfeited
Balance at
30 June
20183
1,800,000
600,000
(600,000)
–
1,800,000
600,000
225,000
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)
–
–
–
–
–
(375,000)
–
600,000
300,000
375,000
375,000
–
–
(375,000) 3,450,000
Total issued to Directors and Key Management Personnel
3,750,000 1,300,000 (1,225,000)
1. The fair value per option at the grant date was $0.69 per share. Shareholder approval was received on 30 November 2017 for the 600,000 performance rights
granted to Mr Hart on 30 November 2017.
2. Vested at the end of the performance period on 1 July 2017. The value as at the date of exercise was $1.39 per share. The first $1,000 of value is provided by way
of taxable income and the balance satisfied through the allocation of Company shares purchased on-market.
3. Performance rights are due to vest between July 2018 through to July 2020.
4. Forfeited upon termination of employment on 16 March 2018.
51
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Remuneration Report – Audited continued
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
G H Weiss
T J Hart
P M Mann
R J van Barneveld
E Knudsen
D J Lord
Total Directors
A M Boyd
M Murphy
C W Klem
A I Lochland
A M Mooney
J C Scaife
Balance at
1 July 2017
270,000
661,889
96,625
83,053
703,286
18,200
1,833,053
1,101,530
59,448
455,714
129,647
495,324
–
Received
during the
year1
–
600,709
–
–
–
–
600,709
199,294
50,709
125,709
125,709
124,294
–
Total executives
Total Key Management Personnel
2,241,663
4,074,716
625,715
1,226,424
1. Received from the vesting of performance rights and/or through the Ridley Employee Share Scheme.
Holding at
date of
termination
–
–
–
–
–
–
Acquired/
(disposed)
during the year
–
7,518
–
–
–
55,000
–
62,518
Balance at
30 June 2018
270,000
1,270,116
96,625
83,053
703,286
73,200
2,496,280
–
–
–
–
(613,240)
–
(613,240)
(613,240)
(350,824)
–
–
–
(6,378)
–
(357,202)
(294,684)
950,000
110,157
581,423
255,356
–
–
1,896,936
4,393,216
52
Ridley Corporation Limited Annual Report 2018 Lead Auditor’s Independence Declaration
53
Liability limited by a scheme approved under Professional Standards Legislation.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.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 2018 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 22 August 2018 LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2018
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 (losses)/profits from equity accounted investments
Note
4
4
5(d)
5(b)
14
2018
$’000
917,660
(848,914)
68,746
465
6,248
(13,246)
(35,193)
(5,113)
2017
$’000
852,923
(781,826)
71,097
49
8,581
(12,863)
(27,559)
(5,026)
(188)
8
Profit from continuing operations before income tax expense
21,719
34,287
Income tax expense
6
(4,310)
(8,472)
Profit from continuing operations after income tax expense
17,409
25,815
Net profit after tax attributable to members of Ridley Corporation Limited
17,409
25,815
Other comprehensive income
Items that are or may be reclassified to profit or loss
Available for sale financial assets – net change in fair value
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
520
520
–
–
17,929
25,815
17,929
25,815
1
1
1
1
5.7c
5.7c
5.6c
5.6c
8.4c
8.4c
8.2c
8.2c
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
54
Ridley Corporation Limited Annual Report 2018 Consolidated Balance Sheet
As at 30 June 2018
Current assets
Cash and cash equivalents
Receivables
Inventories
Tax asset
Assets held for sale
Total current assets
Non-current assets
Receivables
Investment properties
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Available-for-sale financial assets
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
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
Note
7
8
9
15
10
8
11
12
13
14
27(e)
15
16
17
18
17
19
20
20
2018
$’000
23,441
104,005
76,666
3,019
1,133
208,264
8,644
1,275
202,596
82,485
1,136
2,300
3,619
302,055
510,319
155,897
14,592
170,489
76,222
501
76,723
247,212
2017
$’000
16,535
116,223
83,717
380
–
216,855
840
3,181
182,794
79,284
1,324
1,268
5,057
273,748
490,603
148,580
13,540
162,120
68,079
581
68,660
230,780
263,107
259,823
214,445
3,760
44,902
263,107
214,445
2,895
42,483
259,823
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
55
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2018
Balance at 1 July 2017
Profit for the year
Other comprehensive income
Available-for-sale financial assets
– net change in fair value, net of tax
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
2,895
–
Fair value
reserve
$’000
–
–
Retained
earnings
$’000
42,483
17,409
Total
$’000
259,823
17,409
–
–
–
–
–
–
–
520
520
–
17,409
520
17,929
–
345
345
–
–
–
(13,083)
(1,907)
(13,083)
(1,562)
(14,990)
(14,645)
Balance at 30 June 2018
214,445
3,240
520
44,902
263,107
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
(12,313)
(12,313)
–
–
–
–
725
(2,288)
(1,563)
725
(14,601)
(13,876)
–
–
–
–
–
–
Balance at 30 June 2017
214,445
2,895
42,483
259,823
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
56
Ridley Corporation Limited Annual Report 2018 Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
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 from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for financial investments
Proceeds from sale of discontinued operation
Proceeds from sale of non-current assets
Net cash from investing activities
Cash flows from financing activities
Purchase of shares for share-based payments
Proceeds/(repayment) of borrowings
Dividends paid
Loans to related parties
Net cash from financing activities
Net movement in cash held
Cash at the beginning of the financial year
Note
7
2
2018
$’000
1,031,925
(972,277)
465
1,820
(5,087)
(5,946)
50,900
(36,131)
(4,292)
(1,256)
6,000
1,170
(34,509)
(4,182)
8,143
(12,918)
(528)
(9,485)
2017
$’000
938,609
(897,361)
49
8,581
(5,499)
(14,724)
29,655
(33,779)
(3,593)
–
10,000
3,520
(23,852)
(4,221)
(1,356)
(12,159)
–
(17,736)
6,906
(11,933)
16,535
28,468
Cash at the end of the financial year
7
23,441
16,535
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.
57
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION 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. Assets held for sale
11. Investment properties
12. Property, plant and equipment
13. Intangible assets
14. Investments accounted for using the equity method
15. Tax assets and liabilities
16. Payables
17. Provisions
18. Borrowings
19. Share capital
20. Reserves and retained earnings
21. Investment in controlled entities
22. Parent entity
23. Deed of Cross Guarantee
24. Related party disclosures
25. Share-based payments
26. Retirement benefit obligations
27. Financial risk management
28. Commitments for expenditure
29. Contingent liabilities
30. Auditor’s remuneration
31. Events occurring after the balance sheet date
32. Corporate information and accounting policy summary
58
Ridley Corporation Limited Annual Report 2018 Notes to the Financial Statements
30 June 2018
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
Weighted average number of shares used in calculating
Basic earnings per share
Basic earnings per share
2018
Cents
5.7
5.7
5.6
5.6
2017
Cents
8.4
8.4
8.2
8.2
2018
2017
Basic
$’000
Diluted
$’000
Basic
$’000
Diluted
$’000
17,409
17,409
25,815
25,815
2018
2017
307,817,071
307,817,071
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.
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.
The Group has historically purchased shares on-market to satisfy vesting performance rights. Details relating to the performance rights
are set out in Note 25. There are 1,408,925 (2017: 4,328,073) performance rights outstanding that have been included in the determination
of diluted earnings per share; however, if the Group purchases shares on-market to satisfy any vesting performance rights, there would
be no dilution.
Diluted earnings per share
Note 2 – Dividends
Dividends paid during the year
Interim dividend in respect
of the current financial year
Final dividend in respect
of the prior financial year
Franking
Fully franked
Fully franked
Payment date
30 April 2018
(2017: 1 May 2017)
31 October 2017
(2017: 31 October 2016)
Per share
(cents)
1.5 (2017: 1.5)
2.75 (2017: 2.5)
Paid in cash
Non-cash dividends paid on employee in-substance options
2018
310,685,570
2017
313,410,014
2018
$’000
4,618
8,465
13,083
12,918
165
13,083
2017
$’000
4,618
7,695
12,313
12,159
154
12,313
Since the end of the financial year, the Directors declared the following dividend:
2018 final dividend of 2.75 cents per share, fully franked, payable on 31 October 2018
8,465
8,465
Dividend franking account
Amount of franking credits available at 30 June to shareholders of Ridley Corporation Limited
for subsequent financial years
21,273
20,934
59
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
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. At the
date of this report and following the recent property sales at Lara, the residual sites are now the former salt field
at Moolap and a single residual lot, Lot D, at Lara.
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.
Geographical segments
The Group predominantly operates in Australasia.
2018 financial year
$’000
Total sales revenue – external (Note 4)
Other revenue (Note 4)
Total revenue
Share of (losses) of equity accounted investments (Note 13)
Depreciation and amortisation expense (Note 5)
Aquafeed inventory legacy expenses (Note 5)
Interest income
Finance costs (Note 5)
AgriProducts
917,660
1,045
918,705
Property
–
4,713
4,713
Unallocated
–
490
490
Consolidated
total
917,660
6,248
923,908
(188)
(17,112)
(11,658)
–
–
–
(11)
–
–
–
–
(139)
–
465
(5,113)
(188)
(17,262)
(11,658)
465
(5,113)
Reportable segment profit/(loss) before income tax
31,682
4,166
(14,129)
21,719
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)
464,309
1,136
465,445
168,834
2,408
–
2,408
–
42,466
–
42,466
78,378
509,183
1,136
510,319
247,212
40,423
–
–
40,423
60
Ridley Corporation Limited Annual Report 2018 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
Property
–
213
213
Unallocated
–
630
Consolidated
total
852,923
8,581
630
861,504
8
(14,967)
–
–
–
(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)
Note 4 – Revenue and other income
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
Revenue from continuing operations
Sale of goods
Other income from continuing operations
Business services
Rent received
Insurance proceeds
Profit on sale of associate
Profit on sale of land
Foreign exchange gains – net
Other
Revenue recognition
2018
$’000
2017
$’000
917,660
852,923
68
197
–
–
4,696
302
985
6,248
630
330
4,156
717
92
–
2,656
8,581
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.
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30 June 2018
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
2018
$’000
1,665
13,712
1,134
751
17,262
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
2018
$’000
5,136
144
(167)
–
5,113
2017
$’000
5,414
144
(499)
(33)
5,026
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 which 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.
(c) Other expenses
Employee benefits expense
Operating lease expense#
Bad and doubtful debt expense – net of recoveries
Research and development (Note 12)
2018
$’000
80,528
4,116
505
19,200
2017
$’000
76,623
3,947
33
19,674
# 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:
Incremental operating costs, Wasleys feedmill bushfire
Aquafeed inventory legacy costs
2018
$’000
–
11,658
11,658
2017
$’000
556
–
556
Material volumes of raw material and finished goods inventory purchased, stored, reprocessed and manufactured to service the former
Huon supply agreement, which was terminated in the prior year following a legal dispute, have been progressively utilised wherever
possible during FY18. The remaining carrying value of this inventory has been written off to nil at 30 June 2018. The total cost for the year
in dealing with this non-recurring legacy issue is $11,658k before income tax.
62
Ridley Corporation Limited Annual Report 2018 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
(b) Reconciliation of income tax expense and pre-tax accounting profit
Profit from continuing operations 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 non-current assets
Other
Income tax expense
2018
$’000
3,681
1,215
(586)
4,310
2017
$’000
7,207
2,386
(1,121)
8,472
4,310
8,472
21,719
6,516
28
78
(586)
(1,940)
232
(18)
4,310
34,287
10,286
23
396
(1,121)
(1,191)
118
(39)
8,472
(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
223
–
63
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 7 – Cash and cash equivalents
Cash and cash equivalents comprise cash balances in Australian dollars and foreign currencies.
Cash at bank
2018
$’000
23,441
2017
$’000
16,535
Reconciliation of net cash inflow from operating activities to profit after income tax
Net profit after tax for the year
17,409
25,815
Adjustments for non-cash items:
Depreciation and amortisation (Note 5(a))
Net profit on sale of non-current assets
Share of profit from equity accounted investment
Non-cash share-based payments
Non-cash finance movements
Bad debts expense
Foreign exchange movements
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 from operating activities
Note 8 – Receivables
Current
Trade debtors
Less: Allowance for doubtful debts (a)
Prepayments and other receivables
Lara land sale deferred consideration receivable
Other receivable – joint venture entity (b)
Dry Creek deferred consideration receivable
Non-current
Prepayments
Other receivable – joint venture entity (b)
Lara land sale deferred consideration receivable
64
17,262
(4,696)
188
2,308
(283)
505
(302)
3,340
3,904
7,051
7,319
972
(2,639)
(1,438)
50,900
2018
$’000
96,150
–
96,150
5,976
1,879
–
–
104,005
713
5,275
2,656
8,644
15,220
(789)
(8)
2,210
(355)
33
441
260
(9,933)
4,702
2,318
766
(8,639)
(2,386)
29,655
2017
$’000
103,808
(1,000)
102,808
3,095
–
4,487
5,833
116,223
840
–
–
840
Ridley Corporation Limited Annual Report 2018 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 during the year
Receivables written off during the year
Balance carried forward at 30 June
2018
$’000
1,000
505
(1,505)
–
2017
$’000
1,000
33
(33)
1,000
As at 30 June 2018, trade receivables against which a provision for doubtful debts has been raised is nil (2017: $17,707,000). 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 2018, the age profile of trade receivables that were past due amounted to $8,752,000 (2017: $23,188,000) as shown in the
following table. In the prior year, an overdue receivable of $17,707,000 relating to one major customer, Huon, was recovered in full on
20 July 2017. As part of the settlement, Ridley made a payment, net of insurance, of $1.0m 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
2018
$’000
7,334
858
319
241
8,752
2017
$’000
4,544
590
138
17,916
23,188
(b) Other receivable – joint venture entity
The parent entity has 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 2018 was $5,275,000 (2017: $4,487,000). The loan
was extended for a two-year term commencing on 1 May 2018 and is capped at 140 million Baht, or approximately A$5.6m 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.
65
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 9 – Inventories
Current
Raw materials and stores – at cost
– at cost
Finished goods
– at net realisable value
2018
$’000
35,952
36,286
4,428
76,666
2017
$’000
46,116
36,733
868
83,717
Write downs of inventories to net realisable value of $0.6m (2017: $0.1m) have been recognised as an expense during the year.
Material volumes of raw material and finished goods inventory purchased, reprocessed and manufactured to service the former Huon
supply agreement, which was terminated in the prior year, have been progressively utilised during FY18. The remaining carrying value
of this inventory with an accumulated cost of $8.4m has been written off to nil at 30 June 2018.
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 – Assets held for sale
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell. Assets (including those that are
part of a disposal group) are not depreciated or amortised while they are classified as held for sale.
Assets held for sale
2018
$’000
1,133
2017
$’000
–
The Group classified $1,133,000 of assets as being held for sale, which related to the remaining parcels of surplus land at Lara referred
to as Lots A, C and D. Lots A and C were sold on 24 July 2018 for total consideration of $8.0m and $1.5m respectively, with an aggregate
cost base of $0.95m and estimated pre-tax profit of approximately $8.2m.
The terms of the two separate sale agreements for Lots A and C include the combined payment of $1.15 million at the 24 July 2018 date
of sale, with the balance to be received in four instalments with amounts and dates comprising:
(i) $2.35m by no later than 30 June 2019;
(ii) $2.35m by no later than 30 June 2020;
(iii) $2.30m by no later than 30 June 2021; and
(iv) $1.35m by no later than 30 June 2022.
In respect of the residual surplus land holding at Lara, a 12-month option agreement was executed on 2 July 2018 for a land-based
aquaculture company to purchase the entire residual holding of 97.8 hectares. The purchaser has 12 months in which to conduct its due
diligence and determine whether or not it wishes to exercise its option to complete the contract of sale for total consideration of $1.5m.
66
Ridley Corporation Limited Annual Report 2018
Note 11 – 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
Sale in part of Lara site
Transfer of Lara site to assets held for sale (Note 10)
Additions
Depreciation expense
Carrying amount at cost at 30 June
2018
$’000
3,181
(762)
(1,133)
–
(11)
1,275
2017
$’000
3,140
–
–
59
(18)
3,181
In the prior year, investment properties comprised former salt field sites at Lara and Moolap that have ceased operating and are held for
the purpose of property realisation. In FY18, the Lara site has been sold in part and the remaining Lara land parcels have been reclassified
to assets held for sale (Note 10) at 30 June 2018.
A fair value range for the site at Moolap cannot be determined reliably at the present time given that the location does not have local
established industrial or residential infrastructure, which would enable a reliable valuation benchmark to be determined. Furthermore, the
value of the site may also vary significantly depending upon which stage of the progressive regulatory approvals required for redevelopment
has been attained at balance date. Consequently, the value of this site 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
2018
$’000
547
2017
$’000
546
67
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 12 – Property, plant and equipment
$’000
2018
Cost at 1 July 2017
Accumulated depreciation
Carrying amount at 1 July 2017
Additions
Disposals
Transfers from plant under construction to intangible assets
Transfers from plant under construction
Depreciation
Carrying amount at 30 June 2018
At 30 June 2018
Cost
Accumulated depreciation
Carrying amount at 30 June 2018
2017
Cost at 1 July 2016
Accumulated depreciation
Carrying amount at 1 July 2016
Additions
Disposals
Transfers from plant under construction 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
Property, plant and equipment
Land and
buildings
Plant and
equipment
64,345
(7,519)
56,826
1,632
(12)
–
857
(1,665)
57,638
254,181
(128,213)
125,968
34,499
(146)
(794)
(857)
(13,712)
144,958
Total
318,526
(135,732)
182,794
36,131
(158)
(794)
–
(15,377)
202,596
66,812
(9,174)
57,638
285,535
(140,577)
144,958
352,347
(149,751)
202,596
60,509
(6,050)
54,459
170
(98)
–
3,811
(1,516)
56,826
64,345
(7,519)
56,826
222,903
(117,153)
105,750
37,209
(140)
(1,151)
(3,811)
(11,889)
125,968
254,181
(128,213)
125,968
283,412
(123,203)
160,209
37,379
(238)
(1,151)
–
(13,405)
182,794
318,526
(135,732)
182,794
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.
68
Ridley Corporation Limited Annual Report 2018 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 Tasmanian Government Grant of $2,000,000 was awarded by Tasmania Development and Resources, and nil (2017:$1,000,000) received
in the current year, as a contribution to plant and equipment purchased for Ridley’s new extrusion plant at Westbury, Tasmania. The balance
of the grant will be received no later than the 2022 financial year upon satisfaction of the final project milestone and commissioning of
the new feedmill.
A Victorian Government Grant of $800,000 was awarded by the Geelong Region Innovation & Investment Fund (GRIIF), and the balance
of the grant of $80,000 (2017: $529,000) received in the current year upon satisfaction of the final project milestone and commissioning
of the new feedmill, which services poultry and pig customers in the region at Ridley’s new feedmill at Lara, Geelong, Victoria.
Note 13 – Intangible assets
$’000
2018
Carrying amount at 1 July 2017
Transfer from property, plant and equipment/additions
Amortisation charge
Carrying amount at 30 June 2018
At 30 June 2018
Cost
Accumulated amortisation/impairment losses
Carrying amount at 30 June 2018
Software
Goodwill
Contracts
Assets under
development
3,645
794
(1,134)
3,305
68,950
–
–
68,950
16,007
(12,702)
3,305
69,903
(953)
68,950
1,499
–
(751)
748
4,500
(3,752)
748
5,190
4,292
–
9,482
9,482
–
9,482
Total
79,284
5,086
(1,885)
82,485
99,892
(17,407)
82,485
The amortisation charge is included within general and administrative expenses in the Consolidated Statement of Comprehensive Income.
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
Intangible assets
3,558
1,151
(1,064)
3,645
68,950
–
–
68,950
15,213
(11,568)
3,645
69,903
(953)
68,950
2,250
–
(751)
1,499
4,500
(3,001)
1,499
1,597
3,593
–
5,190
5,190
–
5,190
76,355
4,744
(1,815)
79,284
94,806
(15,522)
79,284
(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.
69
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 13 – Intangible assets continued
(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.
$56.6m 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
2018
$’000
56,616
12,334
68,950
2017
$’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. The Yamba site became operational from 1 July 2018, while the Chanthaburi site is scheduled to become
operational from 1 July 2019.
Research and development expenditure
Research and development expenses of $19,200,000 have been incurred in the current year (2017: $19,674,153), 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.
70
Ridley Corporation Limited Annual Report 2018 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 FY19 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% (2017: 2%). A growth rate of 2% is applied to the
terminal value (2017: 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% (2017: 8.1%).
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 has eroded the CGU’s 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.
Note 14 – Investments accounted for using the equity method
Name of company
Joint venture entities:
Ridley Bluewave Pty Ltd1
Nelson Landholdings Pty Ltd as Trustee
for Nelson Landholdings Trust2
Pen Ngern Feed Mill Co., Ltd3
Investments accounted for using the equity method
1. Ridley Bluewave Pty Ltd was deregistered on 15 February 2018.
Principal activity
Country of
incorporation
2018
%
2017
%
2018
$’000
2017
$’000
Ownership
interest
Carrying
amount
Animal protein production Australia
Property realisation
Aquafeed production
Australia
Thailand
–
50
49
50
50
49
–
–
–
1,136
1,136
–
1,324
1,324
2. 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.
3. On 28 January 2016, the Group acquired a 49% interest in Pen Ngern Feed Mill Co., Ltd (PNFM) for an investment of $1.3m. PNFM is an entity domiciled in Thailand,
which owns and operates a dedicated aquafeed manufacturing facility at Chanthaburi. Movements in the carrying amount reflect Ridley’s equity accounted share
of the operating result for PNFM.
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 joint venture entities are accounted for in the consolidated financial statements using the equity method of accounting.
The balance date of the Nelson Landholdings Pty Ltd joint venture entity is 30 June, whereas the balance date for PNFM is 31 December.
71
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 14 – Investments accounted for using the equity method continued
Carrying amount of investments accounted for using the equity method
Opening carrying amount at 1 July
Share of operating (losses)/profits after income tax
Disposal of Consolidated Manufacturing Enterprise Pty Ltd and Swanbrook Road Holding Trust
Closing carrying amount at 30 June
2018
$’000
1,324
(188)
–
1,136
2017
$’000
3,663
8
(2,347)
1,324
Summarised financial information of 100% of the equity accounted investees (i.e. not adjusted for the percentage ownership held by the
Ridley Group), is provided following.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net (liabilities)/assets
Revenue
Net (loss)/profit after tax
There are no material reserves or contingent liabilities of the equity accounted investees.
Note 15 – Tax assets and liabilities
Current
Tax asset
Non-current
Deferred tax asset
2018
$’000
259
5,088
5,347
29
5,670
5,699
(352)
290
(376)
2017
$’000
148
5,401
5,549
184
4,905
5,089
460
1,757
32
2018
$’000
2017
$’000
3,019
380
3,619
5,057
Movement in deferred tax asset:
Opening balance at 1 July
Credited/(charged) to the Statement of Comprehensive Income (Note 6)
Closing balance at 30 June
Recognised deferred tax assets and liabilities
5,057
(1,438)
3,619
Assets
Liabilities
Net
2018
$’000
–
–
2,866
4,544
–
162
7,572
2017
$’000
–
–
3,183
4,262
–
105
7,550
2018
$’000
(3,052)
–
(678)
–
–
(223)
(3,953)
2017
$’000
(2,293)
–
(789)
–
–
589
(2,493)
2018
$’000
(3,052)
–
2,188
4,544
–
(61)
3,619
Consolidated
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Other
Tax assets/(liabilities)
72
7,443
(2,386)
5,057
2017
$’000
(2,293)
–
2,394
4,262
–
694
5,057
Ridley Corporation Limited Annual Report 2018 Movement in net deferred tax assets and liabilities
$’000
Consolidated
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Other
Tax asset/(liability)
Income tax
Balance
1 July 2016
Recognised in
profit or loss
Balance
30 June 2017
Recognised in
profit or loss
Balance
30 June 2018
(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
(759)
–
(206)
282
–
(755)
(1,438)
(3,052)
–
2,188
4,544
–
(61)
3,619
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 16 – Payables
Current
Trade creditors and accruals
Trade payable facility
2018
$’000
2017
$’000
155,897
148,580
The Group has a trade payable facility that 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 (2017:$50,000,000).
The amount utilised and recorded within trade creditors at 30 June 2018 was $42,462,143 (2017: $48,639,345).
Note 17 – Provisions
Current
Employee entitlements
Non-current
Employee entitlements
2018
$’000
2017
$’000
14,592
13,540
501
581
73
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 17 – Provisions continued
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.
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 18 – Borrowings
Non-current
Bank loans
2018
$’000
2017
$’000
76,222
68,079
The bank loans are subject to bank covenants based on financial ratios of the Group. As at 30 June 2018, and throughout all relevant
times during the financial year ended 30 June 2018, 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
(a) Long term loan facility
2018
2017
Limits
$’000
160,000
–
160,000
Utilised
$’000
76,500
(23,441)
53,059
Limits
$’000
160,000
–
160,000
Utilised
$’000
68,500
(16,535)
51,965
The Group’s dual bank long term loan facility is a combination of floating core debt funding of $80m plus an additional $80m 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 2018, the value of legally enforceable cash balances, which, upon default or bankruptcy, would be applied to the loan
facility is $23,441,000 (2017: $16,535,000).
74
Ridley Corporation Limited Annual Report 2018 Note 19 – Share capital
Fully paid up capital:
307,817,071 ordinary shares with no par value (2017: 307,817,071)
Parent entity
2018
$’000
2017
$’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.
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 20 – 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
2018
$’000
76,222
(23,441)
52,781
263,107
20.1%
2017
$’000
68,079
(16,535)
51,544
259,823
19.8%
2018
$’000
2017
$’000
2,895
2,308
(3,870)
1,907
3,240
2,170
2,210
(3,773)
2,288
2,895
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.
Fair value reserve
Opening balance at 1 July
Available-for-sale financial assets – net change in fair value, net of tax
Closing balance at 30 June
2018
$’000
–
520
520
2017
$’000
–
–
–
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets are
derecognised or impaired.
75
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 20 – Reserves and retained earnings continued
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 21 – 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
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
2018
$’000
42,483
17,409
(13,083)
(1,907)
44,902
2017
$’000
31,269
25,815
(12,313)
(2,288)
42,483
Ownership interest
2018
100%
100%
100%
100%
100%
100%
100%
100%
2017
100%
100%
100%
100%
100%
100%
100%
100%
Note 22 – Parent entity
As at 30 June 2018, 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
76
2018
$’000
14,275
520
14,795
5,916
333,155
339,071
2,008
76,366
78,374
260,697
214,445
3,240
43,012
260,697
2017
$’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
Ridley Corporation Limited Annual Report 2018 Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee (see Note 23 below) 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 23.
Note 23 – 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 after income tax
Other comprehensive income
Available-for-sale financial assets – net change in fair value
Total comprehensive income for the year
(b) Summary of movements in retained profits
Opening balance at 1 July
Comprehensive income for the year
Dividends paid
Share-based payment reserve transfer
Closing balance at 30 June
2018
$’000
21,719
(4,310)
17,409
520
17,929
2018
$’000
42,483
17,929
(13,083)
(1,907)
45,422
2017
$’000
34,287
(8,472)
25,815
–
25,815
2017
$’000
31,269
25,815
(12,313)
(2,288)
42,483
77
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION 2018
$’000
2017
$’000
23,441
104,005
76,666
3,019
207,131
8,644
202,596
82,485
1,136
3,619
2,300
300,780
507,911
153,489
14,592
168,081
76,222
501
76,723
244,804
263,107
214,445
3,240
45,422
263,107
16,535
116,223
83,717
380
216,855
840
182,794
79,284
1,324
5,057
1,268
270,567
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
Notes to the Financial Statements continued
30 June 2018
Note 23 – Deed of Cross Guarantee continued
(c) 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
Available-for-sale financial asset
Total non-current assets
Total assets
Current liabilities
Payables
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
78
Ridley Corporation Limited Annual Report 2018 Note 24 – Related party disclosures
Investments
Information relating to investments accounted for using the equity method is set out in Note 14.
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 26.
Transactions with related parties
Transactions with related parties were as follows:
Sales of products
Purchases of products/services
– associate
– associate
– joint venture entity
Outstanding balances with related parties were as follows:
Current receivable – joint venture entity (Note 8(b))
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 25 – 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
2018
$’000
–
–
–
2017
$’000
2,622
6,716
21
5,275
4,487
2018
$
2,931,832
167,870
111,439
772,071
3,983,212
2017
$
2,926,503
208,589
193,961
799,425
4,128,478
2018
$’000
579
1,729
2,308
2017
$’000
525
1,685
2,210
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.
79
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION
Notes to the Financial Statements continued
30 June 2018
Note 25 – 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
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
1 July 2017
30 June 2020
$1.39
$0.69
23%
3.1%
1.9%
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:
Grant date
2018
Long Term Incentive Plan
1 July 2014
1 July 2015
1 July 2017
1 July 2018
Expiry date
Balance at
1 July 2017
Granted during
the year
Cancelled
during the year
Vested during
the year
Balance at
30 June 2018
1 July 2018
1 July 2018
1 July 2019
1 July 2020
2,450,000
2,675,000
2,800,000
–
7,925,000
–
–
–
2,700,000
2,700,000
–
(250,000)
(200,000)
(150,000)
(600,000)
(2,450,000)
–
–
–
(2,450,000)
–
2,425,000
2,600,000
2,550,000
7,575,000
Special Retention Plan
1 January 2018
1 January 2020
2017
Long Term Incentive Plan
1 July 2013
1 July 2014
1 July 2015
1 July 2017
1 July 2017
1 July 2018
1 July 2018
1 July 2019
150,000
8,075,000
–
2,700,000
–
(600,000)
–
(2,450,000)
150,000
7,725,000
2,400,000
2,575,000
2,675,000
–
–
–
–
2,825,000
–
(125,000)
–
(25,000)
(2,400,000)
–
–
–
–
2,450,000
2,675,000
2,800,000
7,650,000
2,825,000
(150,000)
(2,400,000)
7,925,000
Special Retention Plan
1 January 2018
1 January 2020
–
150,000
–
–
150,000
7,650,000
2,975,000
(150,000)
(2,400,000)
8,075,000
80
Ridley Corporation Limited Annual Report 2018 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
2018 Number of shares
31 May 2018
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
31 May 2018
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
31 May 2021
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
$0.84
Balance at
start 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
–
4,625,847
Granted
during
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
686,275
686,275
Exercised
during
the year
(8,000)
(14,850)
(15,660)
(13,644)
(22,867)
(21,516)
(35,472)
(17,908)
(33,176)
(36,388)
(89,947)
(123,240)
(60,622)
(41,412)
(33,240)
–
(567,942)
Balance at
end of
the year
22,000
41,850
62,640
84,896
94,986
129,096
230,568
179,080
170,404
210,058
483,769
604,350
575,909
578,289
590,010
686,275
4,744,180
Exercisable
at end of
the year
22,000
41,850
62,640
84,896
94,986
129,096
230,568
179,080
170,404
210,058
483,769
604,350
575,909
–
–
–
2,889,606
Weighted average exercise price
$0.63
$0.84
$0.58
$0.66
$0.55
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 (2017: three years).
81
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 25 – Share-based payments continued
2017 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
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
–
4,551,514
Granted
during
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
623,250
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)
–
(548,917)
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
4,625,847
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
–
–
–
2,746,365
Weighted average exercise price
$0.59
$0.84
$0.57
$0.63
$0.52
Note 26 – 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 $5,555,000 (2017: $5,398,000).
82
Ridley Corporation Limited Annual Report 2018 Note 27 – 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.
(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, Thai Baht 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
The Group holds foreign currency bank accounts in US dollars, New Zealand dollars, Thai Baht 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.
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
Gross debt
Cash
Assets
Payables
Net balance sheet exposure
USD
NZD
3,315
–
–
3,315
1,176
–
–
1,176
2018
EUR
2,982
–
–
2,982
THB
GBP
USD
NZD
2017
EUR
2,121
5,275
(3,533)
3,863
–
2,300
–
2,300
4,356
258
476
–
4,356
–
258
–
476
THB
GBP
510
4,487
(1,526)
3,471
–
1,268
–
1,268
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 $1,068,000 (2017: $465,000) or increased by $1,305,000 (2017: $567,000) 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% (2017: 4.0%).
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Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 27 – Financial risk management continued
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
Interest rate
–
4.0%
2018
$’000
23,441
76,500
Interest rate
–
4.0%
2017
$’000
16,535
68,500
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 $534,000 (2017: $477,000).
(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. Wherever possible, the Group mitigates credit
risk through securing of 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
2018
$’000
96,150
13,410
23,441
133,001
2017
$’000
102,808
11,821
16,535
131,164
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.
84
Ridley Corporation Limited Annual Report 2018 The following tables disclose the contractual maturities of financial liabilities, including estimated interest payments:
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
2018
Non-derivative financial liabilities
Trade and other payables
Bank loans
2017
Non-derivative financial liabilities
Trade and other payables
Bank loans
155,897
76,222
232,119
155,897
5,715
161,612
148,580
68,079
216,659
148,580
5,959
154,539
–
5,715
5,715
–
5,959
5,959
–
81,937
81,937
–
5,715
5,715
–
5,715
5,715
155,897
104,796
260,693
–
5,959
5,959
–
74,038
74,038
–
5,959
5,959
148,580
97,874
246,454
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.
(e) Other financial assets
Fair value through other comprehensive income
Equity securities – available for sale
The fair value is a Level 1 valuation (see Note 27(g)).
(f) Financial instruments
2018
$’000
2017
$’000
2,300
1,268
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.
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Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 27 – Financial risk management continued
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.
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.
(g) Fair values
Fair values versus carrying amounts
The carrying amount of financial assets and liabilities approximates their fair value.
For financial assets and liabilities carried at fair value, the Group uses the following to categorise the method used:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices). Valuation inputs include forward curves, discount
curves and underlying spot and futures prices.
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
Note 28 – Commitments for expenditure
Expenditure contracted for but not recognised as liabilities:
Capital Plant and equipment (a)
CSIRO Novacq™ Research Alliance (b)
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.
2018
$’000
51,493
3,750
55,243
4,855
3,470
3,475
1,202
13,002
2017
$’000
15,901
4,750
20,651
4,644
3,545
4,162
1,485
13,836
86
Ridley Corporation Limited Annual Report 2018 (a) Capital Plant and equipment
Capital Plant and equipment includes a new extrusion plant and a new feedmill in development as announced on the following
respective dates.
• On 20 January 2017, the Group announced its intention to build a new state-of-the-art, fit for purpose extrusion plant at Westbury,
Northern Tasmania. The plant will have a 50,000 tonne annual production capacity on a five-day shift structure and will cost between
$45m–$50m.
• On 7 September 2017, the Group announced its intention to build a new state-of-the-art, fit for purpose feedmill in the Greater Bendigo
region of Victoria. The plant will have an annual production capacity in excess of 350,000 tonnes and will cost between $45m–$50m.
(b) CSIRO Novacq™ Research Alliance
On 24 March 2017, a five-year strategic alliance was executed with CSIRO to collaborate in order 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 $1m, and Ridley has the option to extend the relationship for a further five years. The quarterly payments are being capitalised into the
Novacq™ Project reflected in the Balance Sheet as a non-current intangible asset.
Note 29 – 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
Litigation
2018
$’000
954
2017
$’000
954
At the time of preparing this Financial Report, some companies included in the Group are parties to pending legal proceedings, including
the claim received after balance date as detailed in Note 31. The outcome of these proceedings is not known and 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 30 – Auditor’s remuneration
(a) Audit and review of Financial Reports
Auditor 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 auditor
2018
$
2017
$
349,513
344,020
96,377
112,950
445,890
456,970
87
Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 31 – Events occurring after the balance sheet date
On 24 July 2018, Ridley announced the completion of contracts for the sale of two of the residual lots at Lara for total proceeds of
$9.5m and a pre-tax profit of approximately $8.2m. A 12-month option agreement was also signed after balance date for a land-based
aquaculture company to acquire the sole remaining lot of surplus land at Lara for $1.5m subject to satisfactory completion of its due
diligence program.
On 20 August 2018, Ridley advised the market of proceedings having been commenced against it by a customer, Baiada, in respect of
stockfeed manufactured by Ridley for Baiada at its Wasleys feedmill in South Australia ‘between about 2014 until about October 2017’.
Baiada, through its operating entities Baiada Poultry Pty Limited and BPL Adelaide Pty Limited, is, and has been for many years, a significant
customer of Ridley, and one which Ridley is continuing to supply. The claim does not specify the quantum of damages, or other compensation,
that Baiada is seeking. Ridley believes the claim is not of merit, and as such it will be vigorously defended. Ridley’s insurers have been
notified of the claim and, if required, Ridley believes insurance cover exists in respect of the claim.
No other matters or circumstances have arisen since 30 June 2018 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 2018
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 22 August 2018.
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.
Basis of preparation
Statement of compliance
The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by
the International Accounting Standards Board (IASB).
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.
Application of new and revised accounting standards and interpretations
A number of new standards are effective for annual periods beginning 1 July 2018 and earlier application is permitted; however, the Group
has not early adopted the new or amended standards in preparing these consolidated financial statements.
88
Ridley Corporation Limited Annual Report 2018 The following standards are applicable to the Group’s financial statements in the period of initial application.
• 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 2019.
For the sale of products, revenue is currently recognised when the goods are either collected from the Ridley premises or delivered to the
customers’ premises, which are taken to be the points in time at which the customer accepts the goods and the related risks and rewards
of ownership transfer. Revenue is recognised at these points, depending on agreed terms, 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.
The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers at
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The model
features a contract based five-step analysis of transactions to determine whether, how much and when revenue is recognised. This
standard becomes mandatory for the Group’s 30 June 2019 financial statements.
Under AASB 15, revenue will be recognised when a customer obtains control of the goods. Based on management’s analysis of the
requirements of this standard and the Group’s contractual relationships, control of the goods is deemed to pass to the customer at
the same time as the risks and rewards are deemed to transfer under the current accounting standard (AASB 118).
Given the above, management has concluded that the adoption of this standard will not have a material impact on the reported financial
performance of position of the Group.
• AASB 9 Financial Instruments
AASB 9 Financial Instruments sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts
to buy or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement.
AASB 9 introduces changes in the classification and measurement of financial assets and financial liabilities, including a new expected
credit loss model for impairment. The standard also introduces new requirements for hedge accounting that align hedge accounting
more closely with risk management. This standard becomes mandatory for the Group’s 30 June 2019 financial statements. Management
has assessed the impact of this standard and has determined that adopting AASB 9 will have no material impact on the reported financial
position or performance of the Group.
• AASB 16 Leases (applies from years commencing 1 January 2019)
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 AASB 16 for the year ending
30 June 2020. 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.
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:
• available for sale financial assets; 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.
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Ridley Corporation Limited Annual Report 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Notes to the Financial Statements continued
30 June 2018
Note 32 – Corporate information and accounting policy summary continued
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2017/191 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. 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.
90
Ridley Corporation Limited Annual Report 2018 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 2018LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION 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 54 to 91 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 2018 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 23 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 2018.
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
G H Weiss
Director
T J Hart
Director
Melbourne
22 August 2018
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Ridley Corporation Limited Annual Report 2018 Independent Auditor’s Report
93
Liability limited by a scheme approved under Professional Standards Legislation.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.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 2018 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated balance sheet as at 30 June 2018 • 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. The Group consists of Ridley Corporation Limited (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. Key Audit Matters The Key Audit Matters we identified are: •Valuation of goodwill and capitalised development costs •Accounting for inventory, including consideration of valuation risks Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Independent Auditor’s Report continued
94
Valuation of goodwill and capitalised development costs Refer to Note 13 Intangible assets to the financial report The key audit matter How the matter was addressed in our audit The valuation of goodwill and capitalised development costs is a key audit matter due to the: •complexity in auditing the assumptions applied to the Group’s discounted cash flow models for each Cash Generating Unit (CGU), given the potential variability in demand from customers operating in the agriculture industry. We focused on the key assumptions the Group applied in preparing the “value in use” cash flow models, including the terminal value, annual growth rates and discount rates; and •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 relating to the timing and amount of future benefits from 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 for products. We focused on 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 inspection of 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 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 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 to challenge the Group’s cash flow assumptions and the Group’s assessment of the impacts of technology, market and regulatory changes on those assumptions; and −involving our valuation specialists to assess the discount rate by comparing the economic assumptions relating to cost of debt and cost of equity to published reports of industry commentators on a group of comparable companies. •comparing recoverable values of CGUs by assessing earnings multiples against a group of comparable companies; •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 related disclosures in the financial report against accounting standard requirements. Ridley Corporation Limited Annual Report 2018 95
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 Inventory valuation is a key audit matter due to the audit effort arising from the extent of judgement applied by the Group in determining the net realisable value. In particular, there is judgement in relation to any slow moving or excessive 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 judgement applied by the Group in assessing the valuation of inventory. Such judgements may have a significant impact on the net realisable value due to inventory obsolescence (including slow moving or excessive inventory), and therefore the overall valuation of inventories, necessitating our audit effort thereon. Our procedures included: •assessing the inventory balance by testing inventory controls and performance of physical counts at a sample of locations including variance approval ; •examining processes and testing controls relating to standard costing and valuation; •assessing the Group’s accounting policies relevant to inventory valuation against the requirements of accounting standards; •evaluating the completeness of at-risk slow moving or excessive inventory items identified by the Group. To do so, we compared inventory listings against the following to identify any additional at-risk items: −historical sales information; and −our observations of inventory condition at the physical counts we attended at key locations; •comparing a sample of inventory values against current selling prices for products to identify any items selling for less than their carrying value; and •challenging the Group's judgements relating to the determination of net realisable value (including slow moving or excess inventory), by comparing current inventory levels to forecast sales. We assessed the level of write-down in light of our knowledge of the industry the Group operates in, and from challenge of key personnel. 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 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. LOCATIONS & SECTORSCHAIRMAN & MD’S MESSAGESFINANCIAL REVIEWSAFETY, PEOPLE, INNOVATION & COMMUNITYBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2018 Independent Auditor’s Report continued
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Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with 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 • assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. 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 and Company 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 the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Ridley Corporation Limited for the year ended 30 June 2018, 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 2018. 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 22 August 2018 Ridley Corporation Limited Annual Report 2018 Shareholder Information
Holdings of securities – ordinary shares
Each fully paid
Distribution of holdings – ordinary shares
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
holders
Number of
securities
% Held by 20 largest
shareholders
6,582
307,817,071
76.6%
Number of ordinary
shareholders
1,181
2,370
1,248
1,692
91
Number of ordinary
shares held
502,644
7,128,031
9,518,266
41,878,968
248,789,162
6,582
307,817,071
There are 553 holders of unmarketable parcels (comprising shareholdings less than 348 shares at $1.44 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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